<PAGE>
As filed with the Securities and Exchange Commission on May 7, 1999
Registration No. 333-74553
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 5
TO
FORM S-1
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 (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Number) Number)
organization)
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)
---------------
Mr. Charles C. Green, III
Executive Vice President and Chief Financial Officer
Crown Castle International Corp.
510 Bering Drive
Suite 500
Houston, Texas 77057
(713) 570-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Stephen L. Burns, Esq. Kirk A. Davenport, Esq.
Cravath, Swaine & Moore Latham & Watkins
825 Eighth Avenue 885 Third Avenue
New York, New York 10019 New York, New York 10022
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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(c)
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. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Title of each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Unit(a) Offering Price Fee
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 31,822,554(b) $18.8125 $598,661,797(c) $166,428(d)
- -------------------------------------------------------------------------------------
% Senior Notes due
2011.................. $150,000,000 100% $150,000,000(c) $ 41,700(e)
- -------------------------------------------------------------------------------------
% Senior Discount Notes
due 2011.............. $491,600,000 $610.27 $300,000,000 $ 83,400(e)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) promulgated under the Securities
Act of 1933.
(b) Includes 3,298,043 shares of common stock that may be purchased by the U.S.
Underwriters and 824,511 shares of common stock that may be purchased by
the international underwriters to cover over-allotments.
(c) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 promulgated under the Securities Act
of 1933.
(d) Registration fees of $132,050 and $19,440 were paid on March 16, 1999 and
on April 21, 1999, respectively, in connection with the common stock.
(e) Previously paid.
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 Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This registration statement contains alternate sections, paragraphs,
sentences or phrases which will be contained in two forms of prospectus covered
by this registration statement, one to be used in connection with an offering
of shares of our common stock and the other to be used in connection with a
concurrent offering of our senior discount notes and senior cash-pay notes.
Those sections, paragraphs, sentences or phrases that will appear only in the
equity prospectus are marked at the beginning of such section, paragraph,
sentence or phrase by the symbol [E] and those appearing only in the debt
prospectus are designated by the symbol [D]. Unless so indicated with a [D] or
[E], the language therein will appear in both forms of prospectus.
We have also included a separate set of front and back cover pages and
section entitled "Underwriting" designated with the label [International
Prospectus] to be used in connection with an offering of shares of our common
stock outside the United States and Canada.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[D]
Subject to Completion. Dated May 7, 1999.
[CROWN CASTLE INTERNATIONAL CORP. LOGO APPEARS HERE]
Crown Castle International Corp.
$150,000,000 % Senior Notes due 2011
$300,000,000 (Gross Proceeds)
% Senior Discount Notes due 2011
-----------
<TABLE>
<S> <C>
Terms of the Senior Notes
Terms of the Senior
. Maturity Discount Notes
, 2011.
. Maturity
. Interest , 2011.
Fixed Annual Rate of %.
. Interest
Paid every six months on Fixed Annual Rate of %.
and , beginning
, 1999. Paid every six months on
and , beginning
, 2004.
</TABLE>
See "Risk Factors" beginning on page 17 to read about factors you should
consider before buying the notes.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per
Per Senior
Senior Discount
Note Total Note Total
------ ----- -------- -----
<S> <C> <C> <C> <C>
Initial public offering price....................... $ $ $ $
Underwriting discount............................... $ $ $ $
Proceeds, before expenses, to CCIC.................. $ $ $ $
</TABLE>
-----------
The underwriters expect to deliver the notes in book-entry form only through
the facilities of The Depository Trust Company in New York, New York on ,
1999.
Goldman, Sachs & Co. Salomon Smith Barney
Joint Book-Running Joint Book-Running Manager
Manager
Lehman Brothers
Joint Lead Manager
Credit Suisse First Boston
BancBoston Robertson Stephens
McDonald Investments Inc.
-----------
Prospectus dated , 1999.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell nor does it seek an offer to buy these securities in +
+any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[E]
Subject to Completion. Dated May 7, 1999.
27,700,000 Shares
[CROWN CASTLE INTERNATIONAL CORP. LOGO APPEARS HERE]
Crown Castle International Corp.
Common Stock
-----------
This is an offering of shares of common stock of Crown Castle International
Corp. This prospectus relates to an offering of 22,160,000 shares in the United
States. In addition, 5,540,000 shares are being offered outside the United
States in an international offering. CCIC is offering 23,357,664 of the shares
to be sold in the offering and selling stockholders are offering an additional
4,342,336 shares.
CCIC's common stock is listed on the Nasdaq National Market under the symbol
"TWRS". The last reported sale price of the common stock on May 6, 1999 was
$20.563 per share.
See "Risk Factors" beginning on page 17 to read about factors you should
consider before buying the shares.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial price to public......................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to CCIC.............................. $ $
Proceeds, before expenses, to the selling stockholders.......... $ $
</TABLE>
The U.S. underwriters may, under certain circumstances, purchase up to an
additional 3,298,043 shares from the selling stockholders at the initial price
to public less the underwriting discount. The international underwriters may
similarly purchase up to an aggregate of an additional 824,511 shares.
-----------
The underwriters expect to deliver the shares in New York, New York on ,
1999.
Goldman, Sachs & Co. Salomon Smith Barney
Joint Book-Running Joint Book-Running
Manager Manager
Lehman Brothers
Joint Lead Manager
Credit Suisse First Boston Legg Mason Wood Walker
Incorporated
-----------
Prospectus dated , 1999.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell nor does it seek an offer to buy these securities in +
+any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[E] [International Prospectus]
Subject to Completion. Dated May 7, 1999.
27,700,000 Shares
[CROWN CASTLE INTERNATIONAL CORP. LOGO APPEARS HERE]
Crown Castle International Corp.
Common Stock
-----------
This is an offering of shares of common stock of Crown Castle International
Corp. This prospectus relates to an offering of 5,540,000 shares in an
international offering outside the United States. In addition, 22,160,000
shares are being offered in an United States offering. CCIC is offering
23,357,664 of the shares to be sold in the offering and selling stockholders
are offering an additional 4,342,336 shares.
CCIC's common stock is listed on the Nasdaq National Market under the symbol
"TWRS". The last reported sale price of the common stock on May 6, 1999 was
$20.563 per share.
See "Risk Factors" beginning on page 17 to read about factors you should
consider before buying the shares.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial price to public......................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to CCIC.............................. $ $
Proceeds, before expenses, to the selling stockholders.......... $ $
</TABLE>
The international underwriters may, under certain circumstances, purchase up
to an additional 824,511 shares from the selling stockholders at the initial
public offering price less the underwriting discount. The U.S. underwriters may
similarly purchase up to an aggregate of an additional 3,298,043 shares.
-----------
The underwriters expect to deliver the shares in New York, New York on ,
1999.
Goldman Sachs International Salomon Smith Barney International
Joint Book-Running Joint Book-Running Manager
Manager
Lehman Brothers
Joint Lead Manager
Credit Suisse First Boston Legg Mason Wood Walker
Incorporated
-----------
Prospectus dated , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 17
Use of Proceeds..................... 30
[E] Price Range of Common Stock..... 30
[E] Dividend Policy................. 31
[E] Dilution........................ 32
Capitalization...................... 33
Unaudited Pro Forma Condensed
Consolidated Financial Statements.. 34
Selected Financial and Other Data of
CCIC............................... 44
Selected Financial and Other Data of
CTSH............................... 46
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 48
Industry Background................. 64
Business............................ 72
Recent and Proposed Transactions.... 97
Management.......................... 107
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Relationships and Related Transactions.......................... 119
Principal and Selling Stockholders...................................... 128
Description of Capital Stock............................................ 133
Description of Certain Indebtedness..................................... 141
[D] Description of the Notes............................................ 149
[E] Shares Eligible for Future Sale..................................... 185
[D] Certain U.S. Federal Income Tax Considerations...................... 187
[E] Certain U.S. Federal Income Tax Considerations to Non-U.S. Holders.. 192
[D] Legal Matters....................................................... 194
[E] Legal Matters....................................................... 194
Independent Auditors.................................................... 194
Certain Currency Translations........................................... 195
Available Information................................................... 195
Index to Financial Statements........................................... F-1
[D] Underwriting........................................................ U-1
[E] Underwriting........................................................ U-1
</TABLE>
----------------
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It may not contain all the information that is important to you. We encourage
you to read this entire prospectus carefully.
The Company
We are a leading owner and operator of towers and transmission networks for
wireless communications and broadcast companies. After giving effect to the
completion of the recent and proposed transactions we describe in this
prospectus, as of December 31, 1998, we owned or managed 6,136 towers,
including 4,450 towers in the United States and Puerto Rico and 1,686 towers in
the United Kingdom. Our customers currently include many of the world's major
wireless communications and broadcast companies, including Bell Atlantic
Mobile, BellSouth Mobility, AT&T Wireless, Nextel and the British Broadcasting
Corporation.
Our strategy is to use our leading domestic and international position to
capture the growing opportunities to consolidate ownership of existing towers
and to build new towers created by:
. the transfer to third parties, or outsourcing, of tower ownership and
management by major wireless carriers;
. the need for existing wireless carriers to expand coverage and improve
capacity;
. the additional demand for towers created by new entrants into the
wireless communications industry;
. the privatization of state-run broadcast transmission networks; and
. the introduction of new digital broadcast transmission technology and
wireless technologies.
Our two main businesses are leasing antenna space on wireless and broadcast
towers that can accommodate multiple tenants and operating networks that
transmit analog and digital broadcast signals, or broadcast transmission
networks. We also provide related services to our customers. We believe that
our full service capabilities are a key competitive advantage in forming
strategic partnerships to acquire large concentrations of towers, or tower
clusters, and in winning contracts for new tower construction.
Our primary business in the United States is the leasing of antenna space
to wireless carriers. After completion of the recent and proposed transactions
we describe in this prospectus, we will have tower clusters in 26 of the 50
largest U.S. metropolitan areas, 23 of which are east of the Mississippi river.
Our primary business in the United Kingdom is the operation of television
and radio broadcast transmission networks. We also lease antenna space to
wireless operators in the United Kingdom on the towers we acquired from the BBC
and from various wireless carriers. After completion of the One2One transaction
described in this prospectus, we will have nationwide broadcast and wireless
coverage in the United Kingdom.
Our principal executive offices are located at 510 Bering Street, Suite
500, Houston, Texas 77057, and our telephone number is (713) 570-3000.
1
<PAGE>
Growth Strategy
Our objective is to become the premier global owner and operator of towers
and transmission networks for wireless communications and broadcast companies.
Our experience in expanding and marketing our tower clusters, as well as our
experience in operating analog and digital broadcast transmission networks,
positions us to accomplish this objective. The key elements of our growth
strategy are to:
. Maximize utilization of our tower capacity.
. Utilize the expertise of our U.S. and U.K. personnel to capture global
growth opportunities.
. Partner with wireless carriers to assume ownership of their existing
towers.
. Build new towers for wireless carriers and broadcasters.
. Acquire existing broadcast transmission networks.
. Continue to decentralize our management functions.
Recent and Proposed Transactions
We have recently completed or entered into agreements to complete the
transactions described below. Completion of these transactions will result in
a significant increase in the size of our operations and the number of towers
that we own and manage. In addition, we are issuing a significant number of
shares of our common stock to partially fund some of these transactions. The
agreements governing the transactions that have not yet been closed include a
number of important conditions. Therefore, we cannot guarantee that we will
close any of the proposed transactions on the terms described in this
prospectus or at all. See "Recent and Proposed Transactions".
Bell Atlantic Joint Venture
On March 31, 1999, we completed the formation of a joint venture with Bell
Atlantic Mobile to own and operate approximately 1,458 towers. These towers
represent substantially all the towers in Bell Atlantic's wireless network in
the eastern and southwestern United States, including markets such as New
York, Philadelphia, Boston, Washington, D.C. and Phoenix. The joint venture
will also build and own the next 500 towers to be built for Bell Atlantic's
wireless communications business. Bell Atlantic leases antenna space on the
1,458 towers transferred to the joint venture and will lease antenna space on
the towers that the joint venture builds for Bell Atlantic.
Proposed BellSouth Transaction
On March 8, 1999, we entered into a preliminary agreement with BellSouth to
control and operate approximately 1,850 towers. These towers represent
substantially all the towers in BellSouth's wireless network in the
southeastern and midwestern United States, including markets such as Miami,
Atlanta, Tampa, Nashville and Indianapolis. We will be responsible for
managing and leasing the available space on BellSouth's towers. We will have
the right to build, control and operate the next 500 towers to be built for
BellSouth's wireless communications business. BellSouth will lease antenna
space on the 1,850 towers, as well as on the towers we build for BellSouth.
2
<PAGE>
Proposed Powertel Acquisition
On March 15, 1999, we entered into an agreement with Powertel Inc. to
purchase approximately 650 towers. These towers represent substantially all of
Powertel's owned towers in its wireless network in the southeastern and
midwestern United States, including such markets as Atlanta, Birmingham,
Jacksonville, Memphis and Louisville, and a number of major connecting highway
corridors in the southeast. These towers are complementary to BellSouth's
towers in the southeast and have minimal coverage overlap. Powertel will lease
antenna space on the 650 towers we acquire in the acquisition.
Proposed One2One Transaction
On March 5, 1999, we entered into an agreement with One2One, under which
Castle Transmission International Ltd, or Castle Transmission, our U.K.
operating subsidiary, has agreed to manage, develop and, at its option, acquire
up to 821 towers. These towers represent substantially all the towers in
One2One's nationwide wireless network in the United Kingdom. We will be
responsible for managing and leasing available space on the towers and will
receive all the income from any such third party leases.
Recent Developments
On May 4, 1999, we announced our results for the first quarter of 1999. We
reported revenues of $55.1 million and earnings before interest, taxes,
depreciation, amortization and a $1.8 million one-time restructuring charge of
$20.4 million.
3
<PAGE>
Corporate Structure
We operate our business through our subsidiaries. Crown Communication and
the Bell Atlantic joint venture are our principal U.S. operating subsidiaries
and Castle Transmission is our principal U.K. operating subsidiary. We will
also use subsidiaries to hold the assets we will acquire or control in the
proposed transactions we describe in this prospectus. [[D] The subsidiaries
through which we conduct our U.K. operations and our Bell Atlantic joint
venture are not restricted by the covenants in our high yield debt
instruments.] The following chart illustrates our organizational structure
assuming the proposed transactions described in this prospectus are completed.
See "Capitalization" and "Recent and Proposed Transactions".
- -------------------------------------------------------------------------------
Crown Castle International Corp.
("CCIC")
- -------------------------------------------------------------------------------
| | |
|100% |100% |80%(a)
| | |
- ----------------------------------------- ---------- ------------------
Crown CCA Castle
Communication Inc. Investment Transmission
("Crown Corp. Services
Communication") (Holdings) Ltd
- ----------------------------------------- ---------- -----------------
- -
| | | |
|100% |100% |61.5%(b) |100%
| | | |
---------- ---------- ---------- ------------------
Proposed Proposed Castle
Powertel BellSouth Bell Atlantic Transmission
Subsidiary Subsidiary Joint Venture International Ltd
("CTI")
- ------------------ ---------- ------------------
________________________________________
(a) The remaining 20% equity interest in Castle Transmission Services (Holdings)
Ltd, or CTSH, our U.K. holding company, is held by affiliates of France
Telecom. Under agreements that we have entered into with such affiliates, in
certain instances, this 20% equity interest may be exchanged for shares of
our Class A common stock at a specified exchange ratio.
(b) Bell Atlantic will hold the remaining 38.5% interest in the joint venture
along with a nominal interest in the joint venture's operating subsidiary.
4
<PAGE>
[D] The Offering
Issuer...................... Crown Castle International Corp.
The cash-pay notes
Total amount offered........ $150.0 million in aggregate principal amount of
% Senior Notes due 2011.
Maturity.................... , 2011.
Issue price................. , plus accrued interest, if any, from ,
1999.
Interest....................
Annual rate-- %. Payment frequency--every six
months on and . Cash interest on these
cash-pay notes is payable beginning on , 1999.
The discount notes
Total amount offered........ $300.0 million in initial accreted value of %
Senior Discount Notes due 2011.
Maturity.................... , 2011.
Issue price................. , plus accreted value, if any, from ,
1999.
Interest....................
Annual rate-- %. Payment frequency--every six
months on and . First payment-- ,
2004. Cash interest on these discount notes will
not accrue prior to , 2004.
Original issue discount..... We will sell the discount notes at a substantial
discount to their principal amount at maturity.
The discount notes will accrete in value through
, 2004 at an annual rate of %, compounding
every six months. Cash interest will not be
payable on the discount notes until , 2004.
Additional terms of the notes
Ranking..................... These notes are senior debts. They rank equally
in right of payment with all of our existing and
future senior debt, but will be effectively
junior in right of payment to the extent of the
assets securing our other senior debt. Our only
significant assets are the capital stock of our
subsidiaries, and the notes will not be
guaranteed by our subsidiaries. As a result, the
notes will be structurally subordinated to all
debt and other liabilities of our subsidiaries,
including borrowings under their credit
facilities.
5
<PAGE>
Optional redemption......... On or after , 2004, we may redeem some or all
of the notes at any time at the redemption prices
listed in the "Description of Notes" section
under the heading "Optional Redemption".
Before , 2002, we may redeem up to 35% of the
notes with the proceeds of public offerings of
equity or strategic investments in us at the
prices listed in the "Description of Notes"
section under the heading "Optional Redemption".
Mandatory offer to If we sell certain assets, or experience specific
repurchase................. kinds of changes of control, we must offer to
repurchase the notes at the prices listed in the
"Description of Notes" section under the heading
"Repurchase at the Option of Holders".
Basic covenants of We will issue the notes under two indentures with
indenture.................. the United States Trust Company of New York. Each
indenture will, among other things, restrict our
ability and the ability of our subsidiaries to:
. borrow money;
. pay dividends on stock or repurchase stock;
. make investments;
. use assets as security in other transactions;
and
. sell assets or merge with or into other compa-
nies.
For more details, see the "Description of the
Notes" section under the heading "Certain
Covenants".
Concurrent equity Concurrently with this offering, we are offering
offering................... 27,700,000 shares of our common stock in an
underwritten public offering. The closing of this
offering is conditioned on the closing of the
equity offering.
Use of proceeds............. We expect to use the proceeds of the equity and
debt offerings:
. to repay indebtedness incurred to finance a
portion of the BellSouth transaction and the
Powertel acquisition;
. to finance the balance of these transactions;
and
. for general corporate purposes, including the
payment of interest on the cash-pay notes.
For more details, see "Use of Proceeds".
Risk Factors
You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors under "Risk Factors"
for a discussion of certain risks involved with an investment in the notes.
6
<PAGE>
[E] The Offering
Common stock offered by
CCIC:
U.S. offering........
International 18,686,131 shares
offering............
4,671,533 shares
Total............. 23,357,664 shares
---------
Common stock offered by the
selling stockholders(a):
U.S. offering........
3,473,869 shares
International 868,467 shares
offering.......
4,342,336 shares
Total........ ---------
Common stock to be
outstanding after the
offering(b):
Common stock(c)...... 122,635,680 shares
Class A common 11,340,000 shares
stock...............
Voting rights............... Under our certificate of incorporation,
stockholder approval generally will require the
affirmative vote of the holders of a majority of
all classes of our common stock, with the holders
of both classes voting together as a single
class. However, some actions will require the
separate approval of the holders of a majority of
our Class A common stock. In addition, the
holders of our Class A common stock, voting as a
separate class, have the right to elect up to two
members of our board of directors and will not
vote in the election of directors by the holders
of our other voting stock entitled to vote in the
election of directors. See "Description of
Capital Stock".
Concurrent debt offering.... Concurrently with this offering, we are offering
by a separate prospectus:
. $150.0 million in aggregate principal amount
of cash-pay notes; and
. $300.0 million in initial accreted value of
discount notes.
The closing of this offering is conditioned on
the closing of the debt offering.
Use of proceeds............. We expect to use the net proceeds of the equity
and debt offerings:
. to repay indebtedness incurred to finance a
portion of the BellSouth transaction and the
Powertel acquisition,
. to finance the balance of these transactions,
and
. for general corporate purposes, including the
payment of interest on the cash-pay notes. See
"Use of Proceeds".
Nasdaq stock symbol......... "TWRS".
- --------
(a) Does not include 4,122,554 shares of common stock that will be offered if
the underwriters' over-allotment option is exercised in full.
(b) Does not include 489,392 shares of common stock issuable upon the exercise
of stock options held by some of the selling stockholders that will be
exercised if the underwriter's over-allotment option is exercised in full.
(c) Does not include (1) 1,294,990 shares of common stock reserved for issuance
upon exercise of warrants outstanding prior to the offering, nor (2)
21,250,364 shares of common stock reserved for issuance under our various
stock option plans, which includes 18,591,173 shares issuable under stock
options outstanding after the offering.
7
<PAGE>
[D] 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 included under "Unaudited Pro
Forma Condensed Consolidated Financial Statements". The pro forma statement of
operations data and other data for the year ended December 31, 1998, give
effect to the transactions detailed under "Unaudited Pro Forma Condensed
Consolidated Financial Statements" as if they had occurred on January 1, 1998.
The pro forma balance sheet data give effect to such transactions occurring in
1999 as if they had occurred on December 31, 1998. Where we present data for
the restricted group, we are presenting the data for CCIC and its subsidiaries
that are restricted by the covenants in our U.S. high yield debt instruments.
This restricted group data is not intended as an alternative measure 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 CTSH", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
CCIC Restricted Group
Pro Forma Pro Forma
------------ ----------------
Year Ended Year Ended
December 31, December 31,
1998 1998
------------ ----------------
(Dollars in thousands)
<S> <C> <C>
Statement of Operations Data:
Net revenues:
Site rental and broadcast transmission........ $ 251,679 $ 72,286
Network services and other.................... 50,299 32,217
--------- ---------
Total net revenues.......................... 301,978 104,503
--------- ---------
Costs of operations:
Site rental and broadcast transmission........ 94,663 23,684
Network services and other.................... 29,480 17,329
--------- ---------
Total costs of operations................... 124,143 41,013
--------- ---------
Expected incremental operating expenses for
proposed transactions(a)....................... 21,054 15,917
General and administrative...................... 28,571 21,153
Corporate development(b)........................ 4,633 4,625
Non-cash compensation charges(c)................ 16,589 9,907
Depreciation and amortization................... 148,155 61,066
--------- ---------
Operating income (loss)......................... (41,167) (49,178)
Other income (expense):
Interest and other income (expense)........... 4,945 1,101
Interest expense and amortization of deferred
financing costs.............................. (104,783) (66,332)
--------- ---------
Income (loss) before income taxes and minority
interests...................................... (141,005) (114,409)
Provision for income taxes...................... (374) (374)
Minority interests.............................. 1,307 --
--------- ---------
Net income (loss)............................... (140,072) (114,783)
Dividends on preferred stock.................... (26,745) (26,745)
--------- ---------
Net income (loss) after deduction of dividends
on preferred stock............................. $(166,817) $(141,528)
========= =========
Other Data:
Site data(d):
Towers and revenue producing rooftop sites at
end of period................................ 6,270 3,073
========= =========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
CCIC Restricted Group
Pro Forma Pro Forma
------------ ----------------
Year Ended Year Ended
December 31, December 31,
1998 1998
------------ ----------------
(Dollars in thousands)
<S> <C> <C>
EBITDA(e):
Site rental and broadcast transmission......... $ 148,581 $ 46,823
Network services and other..................... 683 (4,486)
Expected incremental operating expenses for
proposed transactions (a)..................... (21,054) (15,917)
Corporate development expenses(b).............. (4,633) (4,625)
--------- ---------
Total EBITDA................................. $ 123,577 $ 21,795
========= =========
Adjusted EBITDA(e)............................... -- $ 23,073
Capital expenditures............................. $ 202,553 88,535
Summary cash flow information:
Net cash provided by (used for) operating
activities.................................... 98,203 (177)
Net cash used for investing activities......... (212,763) (88,535)
Net cash provided by financing activities...... 1,188,618 1,156,138
Ratio of earnings to fixed charges(f)............ -- --
Ratio of EBITDA to cash interest expense(g)...... 2.29x 1.27x
</TABLE>
<TABLE>
<CAPTION>
CCIC Pro Forma Restricted Group Pro Forma
As of December 31, 1998 As of December 31, 1998
------------------------------------ ---------------------------------------
Pro Forma for Pro Forma for
Offerings and Offerings and
Pro Forma Recent and Pro Forma Recent and
Historical for Proposed Historical for Proposed
CCIC Offerings Transactions CCIC Offerings Transactions
---------- ---------- ------------- ---------- ---------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 296,450 $1,108,450 $ 195,458 $ 41,785 $ 853,785 (h) $ 149,168 (h)
Property and equipment,
net.................... 592,594 592,594 2,067,969 165,205 165,205 1,048,100
Total assets............ 1,523,230 2,350,230 2,919,269 1,130,685 1,957,685 2,334,994
Total debt.............. 429,710 879,710 1,059,710 173,599 623,599 623,599
Net debt(i)............. 133,260 (228,740) 864,252 131,814 (230,186) 474,431
Redeemable preferred
stock.................. 201,063 201,063 201,063 201,063 201,063 201,063
Total stockholders'
equity................. 737,562 1,114,562 1,491,562 737,562 1,114,562 1,491,562
</TABLE>
- --------
(a) We expect that we will incur incremental operating expenses as a result of
the Bell Atlantic joint venture and the proposed transactions described in
this prospectus. Such incremental expenses are currently estimated to
amount to approximately $5.2 million per year for the Bell Atlantic joint
venture and approximately $15.9 million per year for the BellSouth
transaction and the Powertel acquisition. We have included the effect of
these incremental expenses in the accompanying summary pro forma financial
data in order to more accurately present the effect of these transactions
on our consolidated results of operations. The effect of these incremental
expenses has not been reflected in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations included elsewhere in this prospectus.
See "Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations."
(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) Represents charges related to the issuance of stock options to employees
and executives.
(d) Represents our aggregate number of sites at the end of the period, assuming
we had completed the Bell Atlantic joint venture, the BellSouth transaction
and the Powertel acquisition. A revenue producing rooftop represents a
rooftop where we have arranged a lease and are receiving payments.
9
<PAGE>
(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 (1) annualized site rental and broadcast transmission EBITDA
before corporate development for the most recent calendar quarter and (2)
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 our 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, our 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:
(1)income (loss) before income taxes,
(2)minority interests, and
(3)fixed charges.
Fixed charges consist of:
(1)interest expense,
(2)the interest component of operating leases, and
(3)amortization of deferred financing costs.
For the year ended December 31, 1998, our earnings were insufficient to
cover our fixed charges by $141.0 million. For the year ended December 31,
1998, earnings were insufficient to cover fixed charges of the restricted
group by $114.4 million.
(g) Total interest expense for the year ended December 31, 1998 includes
amortization of deferred financing costs and discount of $49.1 million for
CCIC, $0.9 million for CTSH and $0.7 million for the Bell Atlantic joint
venture.
(h) Pro forma balances of cash and cash equivalents for the restricted group
exclude $248.1 million of proceeds from our initial public offering and our
offering of exchangeable preferred stock, along with interest earned on
such amounts since the completion of these transactions, that were
contributed to the Bell Atlantic joint venture.
(i) Net debt represents total debt less cash and cash equivalents.
10
<PAGE>
[E] 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 included under "Unaudited Pro
Forma Condensed Consolidated Financial Statements". The pro forma statement of
operations data and other data for the year ended December 31, 1998, give
effect to the transactions detailed under "Unaudited Pro Forma Condensed
Consolidated Financial Statements" as if they had occurred on January 1, 1998.
The pro forma balance sheet data give effect to such transactions occurring in
1999 as if they had occurred on December 31, 1998. 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 CTSH", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Year Ended
December 31,
1998
-------------------------
(Dollars in thousands,
except per share amounts)
<S> <C>
Statement of Operations Data:
Net revenues:
Site rental and broadcast transmission............ $ 251,679
Network services and other........................ 50,299
---------
Total net revenues.............................. 301,978
---------
Costs of operations:
Site rental and broadcast transmission............ 94,663
Network services and other........................ 29,480
---------
Total costs of operations....................... 124,143
---------
Expected incremental operating expenses for proposed
transactions(a).................................... 21,054
General and administrative.......................... 28,571
Corporate development(b)............................ 4,633
Non-cash compensation charges(c).................... 16,589
Depreciation and amortization....................... 148,155
---------
Operating income (loss)............................. (41,167)
Other income (expense):
Interest and other income (expense)............... 4,945
Interest expense and amortization of deferred
financing costs.................................. (104,783)
---------
Income (loss) before income taxes and minority
interests.......................................... (141,005)
Provision for income taxes.......................... (374)
Minority interests.................................. 1,307
---------
Net income (loss)................................... (140,072)
Dividends on preferred stock........................ (26,745)
---------
Net income (loss) after deduction of dividends on
preferred stock.................................... $(166,817)
=========
Loss per common share--basic and diluted............ $ (1.17)
=========
Common shares outstanding--basic and diluted (in
thousands)......................................... 142,213
=========
Other Data:
Site data (d):
Towers and revenue producing rooftop sites at end
of period........................................ 6,270
=========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
----------------------
Year Ended
December 31,
1998
----------------------
(Dollars in thousands)
<S> <C>
EBITDA(e):
Site rental and broadcast transmission................ $ 148,581
Network services and other............................ 683
Expected incremental operating expenses for proposed
transactions(a)...................................... (21,054)
Corporate development expenses(b)..................... (4,633)
---------
Total EBITDA........................................ $ 123,577
=========
Capital expenditures.................................... $ 202,553
Summary cash flow information:
Net cash provided by operating activities............. 98,203
Net cash used for investing activities................ (212,763)
Net cash provided by financing activities............. 1,188,618
Ratio of earnings to fixed charges(f)................... --
Ratio of EBITDA to total interest expense(g)............ 1.18x
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
As of December 31, 1998
-------------------------------------
Pro Forma for
Offerings and
Pro Forma Recent and
Historical for Proposed
CCIC Offerings Transactions
---------- ----------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............. $ 296,450 $ 1,108,450 $ 195,458
Property and equipment, net............ 592,594 592,594 2,067,969
Total assets........................... 1,523,230 2,350,230 2,919,269
Total debt............................. 429,710 879,710 1,059,710
Net debt(h)............................ 133,260 (228,740) 864,252
Redeemable preferred stock............. 201,063 201,063 201,063
Total stockholders' equity............. 737,562 1,114,562 1,491,562
</TABLE>
12
<PAGE>
- -------
(a) We expect that we will incur incremental operating expenses as a result of
the Bell Atlantic joint venture and the proposed transactions described in
this prospectus. Such incremental expenses are currently estimated to
amount to approximately $5.2 million per year for the Bell Atlantic joint
venture and approximately $15.9 million per year for the BellSouth
transaction and the Powertel acquisition. We have included the effect of
these incremental expenses in the accompanying summary pro forma financial
data in order to more accurately present the effect of these transactions
on our consolidated results of operations. The effect of these incremental
expenses has not been reflected in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations included elsewhere in this prospectus.
See "Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations."
(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) Represents charges related to the issuance of stock options to employees
and executives.
(d) Represents our aggregate number of sites at the end of the period, assuming
we had completed the Bell Atlantic joint venture, the BellSouth transaction
and the Powertel acquisition. A revenue producing rooftop represents a
rooftop where we have arranged a lease and are receiving payments.
(e) 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 our 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, our 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, 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, 1998, our earnings were insufficient to cover our
fixed charges by $141.0 million.
(g) Total interest expense for the year ended December 31, 1998 includes
amortization of deferred financing costs and discount of $49.1 million for
CCIC, $0.9 million for CTSH and $0.7 million for the Bell Atlantic joint
venture.
(h) Net debt represents total debt less cash and cash equivalents.
13
<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 four years in the period ended December 31, 1998,
and as of December 31, 1995, 1996, 1997 and 1998, have been derived from the
consolidated financial statements of CCIC, which have been audited by KPMG LLP,
independent certified public accountants. The results of operations for the
year ended December 31, 1998 are not comparable to the year ended December 31,
1997, and the results for the year ended December 31, 1997 are not comparable
to the year ended December 31, 1996 as a result of business acquisitions
completed in 1997 and 1998. Results of operations of these acquired businesses
are included in CCIC's consolidated financial statements for the periods after
the respective dates of acquisition. [D] The summary historical financial and
other data for the restricted group under our high yield debt instruments 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 related notes of CCIC included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1995 1996 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 $ 75,028
Network services and other......... 6 592 20,395 38,050
------- ------- -------- --------
Total net revenues............... 4,058 6,207 31,405 113,078
------- ------- -------- --------
Costs of operations:
Site rental and broadcast
transmission...................... 1,226 1,292 2,213 26,254
Network services and other......... -- 8 13,137 21,564
------- ------- -------- --------
Total costs of operations........ 1,226 1,300 15,350 47,818
------- ------- -------- --------
General and administrative........... 729 1,678 6,824 23,571
Corporate development(a)............. 204 1,324 5,731 4,625
Non-cash compensation charges(b) .... -- -- -- 12,758
Depreciation and amortization........ 836 1,242 6,952 37,239
------- ------- -------- --------
Operating income (loss).............. 1,063 663 (3,452) (12,933)
Other income (expense):
Equity in earnings (losses) of
unconsolidated affiliate.......... -- -- (1,138) 2,055
Interest and other income
(expense)(c)...................... 53 193 1,951 4,220
Interest expense and amortization
of deferred financing costs....... (1,137) (1,803) (9,254) (29,089)
------- ------- -------- --------
Loss before income taxes and minority
interests........................... (21) (947) (11,893) (35,747)
Provision for income taxes........... -- (10) (49) (374)
Minority interests................... -- -- -- (1,654)
------- ------- -------- --------
Net loss............................. (21) (957) (11,942) (37,775)
Dividends on preferred stock......... -- -- (2,199) (5,411)
------- ------- -------- --------
Net loss after deduction of dividends
on preferred stock.................. $ (21) $ (957) $(14,141) $(43,186)
======= ======= ======== ========
Loss per common share--basic and di-
luted............................... $ (0.01) $ (0.27) $ (2.27) $ (1.02)
======= ======= ======== ========
Common shares outstanding--basic and
diluted (in thousands).............. 3,316 3,503 6,238 42,518
======= ======= ======== ========
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Other Data:
Site data (at period end)(d):
Towers owned.......................... 126 155 240 1,344
Towers managed........................ 7 7 133 129
Rooftop sites managed (revenue
producing)........................... 41 52 80 135
------- ------- -------- ---------
Total sites owned and managed....... 174 214 453 1,608
======= ======= ======== =========
EBITDA(e):
Site rental........................... $ 2,697 $ 3,555 $ 7,682 $ 44,661
Network services and other............ (594) (326) 1,549 (2,972)
Corporate development expenses(a)..... (204) (1,324) (5,731) (4,625)
------- ------- -------- ---------
Total EBITDA........................ $ 1,899 $ 1,905 $ 3,500 $ 37,064
======= ======= ======== =========
[D] Restricted Group EBITDA............. $ 1,899 $ 1,905 $ 3,500 $ 5,799
Capital expenditures.................... 161 890 18,035 138,759
Summary cash flow information:
Net cash provided by (used for)
operating activities................. 1,672 (530) (624) 44,976
Net cash used for investing
activities........................... (16,673) (13,916) (111,484) (149,248)
Net cash provided by financing
activities........................... 15,597 21,193 159,843 345,248
Ratio of earnings to fixed charges(f)... -- -- -- --
Balance Sheet Data (at period end):
Cash and cash equivalents............... $ 596 $ 7,343 $ 55,078 $ 296,450
Property and equipment, net............. 16,003 26,753 81,968 592,594
Total assets............................ 19,875 41,226 371,391 1,523,230
Total debt.............................. 11,182 22,052 156,293 429,710
Redeemable preferred stock(g)........... 5,175 15,550 160,749 201,063
Total stockholders' equity (deficit).... 619 (210) 41,792 737,562
</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 (1) nonrecurring cash bonuses of $0.9 million paid to certain
executive officers in connection with our initial investment in Castle
Transmission and (2) a nonrecurring cash charge of $1.3 million related to
our purchase of shares of our common stock from our former chief executive
officer in connection with our initial Castle Transmission investment. See
"Certain Relationships and Related Transactions".
(b) Represents charges related to the issuance of stock options to certain
employees and executives.
(c) Includes a $1.2 million fee received in March 1997 as compensation for
leading an investment consortium that provided the equity financing in
connection with our initial Castle Transmission investment.
(d) Represents our aggregate number of sites as of the end of each period.
(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 our 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, our measure of
EBITDA may not be comparable to similarly titled measures of other
companies.
15
<PAGE>
(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, 1997 and 1998, earnings were insufficient to cover fixed
charges by $21,000, $0.9 million, $10.8 million and $37.8 million,
respectively.
(g) The 1995, 1996 and 1997 amounts represent (1) the senior convertible
preferred stock we privately placed in August 1997 and October 1997, all of
which has been converted into shares of common stock, and (2) Series A
convertible preferred stock, Series B convertible preferred stock and
Series C convertible preferred stock we privately placed in April 1995,
July 1996 and February 1997, respectively, all of which has been converted
into shares of common stock in connection with the completion of our
initial public offering in August 1998. The 1998 amount represents our 12
3/4% exchangeable preferred stock.
16
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, as well as the
other information included in this prospectus, when evaluating an investment in
our [E] common stock [D] notes.
Failure to Properly Manage Our Growth--If we are unable to successfully
integrate acquired operations or to manage our existing operations as we grow,
our business will be adversely affected and we may not be able to continue our
current business strategy.
We cannot guarantee that we will be able to successfully integrate acquired
businesses and assets 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 have grown significantly over the past
two years through acquisitions, and such growth continues to be an important
part of our business plan. The addition of over 4,700 towers to our operations
through our recent and proposed transactions will increase our current business
considerably and will add operating complexities. Successful integration of
these transactions will depend primarily on our ability to manage these
combined operations and to integrate new management and employees with and into
our existing operations.
Implementation of our acquisition strategy may impose significant strains
on our management, operating systems and financial resources. We regularly
evaluate potential acquisition and joint venture opportunities and are
currently evaluating potential transactions that could involve substantial
expenditures, possibly in the near term. 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 and joint venture opportunities will
require substantial attention from our senior management, which will limit the
amount of time they are able to devote to our existing operations.
We May Not Complete the Proposed Transactions--If we fail to complete any or
all of the proposed transactions described in this prospectus, we may lose
funds that we have placed in escrow and we will not recognize some of the
benefits that we describe in this prospectus.
If one or more of the proposed transactions we describe in this prospectus
is not completed or is completed on significantly different terms than those
described in this prospectus, it could substantially affect the implementation
of our business strategy. If we fail to close these transactions, our ability
to offer tower clusters in major U.S. markets will be impaired. As a result,
our future site rental revenue would be adversely affected. We cannot guarantee
that we will complete any or all of these transactions. The agreements relating
to these transactions contain many conditions that must be satisfied before we
can close these transactions.
In addition, we cannot assure you that the transactions, if and when
completed, will be done so on the terms described in this prospectus. For
example, each of the agreements relating to these proposed transactions
includes provisions that could result in our purchasing fewer towers at
closing.
When we entered into the acquisition agreement with Powertel, we made a
$50.0 million escrow payment, which we may have to forfeit if the Powertel
acquisition does not close because of our inability or unwillingness to deliver
the balance of the purchase price at the scheduled closing date. When we
entered into the agreement for the BellSouth transaction, we placed $50.0
million into an escrow fund. We could be forced to pay this amount to BellSouth
if we do not enter into definitive agreements for the BellSouth transaction, or
if we fail to comply with all conditions, covenants and representations we are
required to fulfill under our agreement with BellSouth. The loss of these
escrow payments, alone or together, would significantly affect our available
working capital and could have a material adverse effect on our ability to
implement our business strategy. See "Recent and Proposed Transactions".
17
<PAGE>
Substantial Level of Indebtedness--Our substantial level of indebtedness could
adversely affect our ability to react to changes in our business. We may also
be limited in our ability to use debt to fund future capital needs.
We have a substantial amount of indebtedness. The following chart sets
forth certain important credit information and is presented as of December 31,
1998, (1) assuming we had completed our offerings and (2) assuming we had
completed our offerings and the recent and proposed transactions described in
this prospectus, each as of December 31, 1998.
<TABLE>
<CAPTION>
Pro Forma
for
Offerings
and
Pro Forma Recent and
for Proposed
Offerings Transactions
--------- ------------
(Dollars in thousands)
<S> <C> <C>
Total indebtedness............................... $ 879,710 $1,059,710
Redeemable preferred stock....................... 201,063 201,063
Stockholders' equity............................. 1,114,562 1,491,562
Debt and redeemable preferred stock to equity
ratio........................................... 0.97x 0.85x
</TABLE>
In addition, assuming we had completed these transactions on January 1,
1998, our earnings for the twelve months ended December 31, 1998, would have
been insufficient to cover fixed charges by $141.0 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 companies
with less debt in our industry.
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. 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.
As a Holding Company, We Require Dividends from Subsidiaries to Meet Cash
Requirements or Pay Dividends--If our subsidiaries are unable to dividend cash
to us when we need it, we may be unable to pay dividends or satisfy our
obligations under our debt instruments, including interest payments under the
notes.
Crown Castle International Corp., or CCIC, is a holding company with no
business operations of its own. CCIC's only significant asset is the
outstanding capital stock of its subsidiaries. CCIC conducts all its business
operations through its subsidiaries. Accordingly, CCIC's only source of cash to
pay dividends or make other distributions on its capital stock or to pay
interest on its outstanding
18
<PAGE>
indebtedness is distributions relating to its ownership interest in its
subsidiaries from the net earnings and cash flow generated by such
subsidiaries. We currently expect that the earnings and cash flow of CCIC's
subsidiaries will be retained and used by such subsidiaries in their
operations, including to service their respective debt obligations. Even if we
did determine to make a distribution in respect of the capital stock of CCIC's
subsidiaries, there can be no assurance that CCIC's subsidiaries will generate
sufficient cash flow to pay such a dividend or distribute such funds, or that
applicable state law and contractual restrictions, including negative covenants
contained in the debt instruments of such subsidiaries, would permit such
dividends or distributions. Furthermore, the terms of our U.S. and U.K. credit
facilities place restrictions on our principal subsidiaries' ability to pay
dividends or to make distributions, and in any event, such dividends or
distributions may only be paid if no default has occurred under the applicable
instrument. Moreover, CCIC's subsidiaries are permitted under the terms of
their existing debt instruments to incur additional indebtedness that may
restrict or prohibit the making of distributions, the payment of dividends or
the making of loans by such subsidiaries to CCIC. See "--Our Substantial Level
of Indebtedness Could Adversely Affect Our Financial Condition", "--Ability to
Service Debt" and "Description of Certain Indebtedness".
Ability to Service Debt--To service our indebtedness, we will require a
significant amount of cash from our subsidiaries. An inability to access our
subsidiaries' cash flow may lead to an acceleration of our indebtedness,
including the notes. Currently, the instruments governing our subsidiaries'
indebtedness do not allow sufficient funds to be distributed to CCIC to service
its indebtedness.
If CCIC is unable to refinance its subsidiary debt or renegotiate the terms
of such debt, CCIC may not be able to meet its debt service requirements,
including interest payments on the notes, in the future. The cash-pay notes
will require annual cash interest payments of approximately $ million. Prior
to May 15, 2003 and 2004, the interest expense on our 10 5/8% discount
notes and the discount notes offered in the debt offering, respectively, will
be comprised solely of the amortization of original issue discount. Thereafter,
the 10 5/8% discount notes and the discount notes offered in the debt offering
will require annual cash interest payments of approximately $26.7 million and
$ million, respectively. Prior to December 15, 2003, we do not expect to pay
cash dividends on our exchangeable preferred stock or, if issued, cash interest
on the exchange debentures. Thereafter, assuming all dividends or interest have
been paid-in-kind, our exchangeable preferred stock or, if issued, the exchange
debentures will require annual cash dividend or interest payments of
approximately $47.8 million.
As we described above, the terms of the indebtedness of CCIC's subsidiaries
significantly limit such subsidiaries' ability to distribute cash to CCIC. As a
result, CCIC will be required to apply a portion of the net proceeds from the
offerings to fund interest payments on the cash-pay notes. If CCIC does not
retain sufficient funds from the offerings or any future financings, CCIC may
not be able to make its interest payments on the cash-pay notes.
Restrictive Debt Covenants--The terms of our debt instruments impose
significant restrictions on our ability to take a number of actions that our
management might otherwise believe to be in your best interests. In addition,
if we fail to comply with our covenants our debt could be accelerated.
Currently we have debt instruments in place that restrict our ability to
incur more indebtedness, pay dividends, create liens, sell assets and engage in
certain mergers and acquisitions. Some of our subsidiaries, under their 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 fail to
comply with the debt restrictions, we will be
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in default under those instruments, which in some cases would cause the
maturity of substantially all of our long-term indebtedness to be accelerated.
See "Description of Certain Indebtedness" and "Description of Capital Stock--
Senior Exchangeable Preferred Stock".
We May Have Broad Discretion in the Application of Proceeds from Our
Offerings--If we don't close the BellSouth transaction or the Powertel
acquisition, we would have the ability to utilize some or all of the proceeds
of the offerings to fund as yet unidentified acquisitions, investments or joint
ventures.
We will allocate a substantial portion of the estimated net proceeds from
our equity and debt offerings to fund the BellSouth transaction and the
Powertel acquisition. If either or both of these transactions are not
completed, we cannot determine now how we would reallocate such proceeds. In
addition, we would have broad discretion in allocating these net proceeds from
the offerings without any action or approval of our stockholders. Moreover, the
indenture governing the issuance of the notes will not contain any restrictions
on the use of proceeds from the offerings. Accordingly, investors may not have
the opportunity to evaluate the economic, financial and other relevant
information that we will consider in determining the application of the net
proceeds.
Our Agreements with TdF Give TdF Substantial Governance and Economic Rights--
The exercise of these rights by TdF could have a material adverse effect on our
business.
We have entered into agreements with TeleDiffusion de France International
S.A., or TdF, an affiliate of France Telecom, that give TdF substantial rights.
The agreements were entered into in order to induce TdF to participate in the
roll-up of our U.K. business, the transaction in which we exchanged shares of
our common stock for shares of CTSH common stock, held by CTSH stockholders
and, as a result, increased our ownership in CTSH to 80%. The TdF agreements
give TdF significant rights relating to the governance of CCIC and our U.K.
business. Our U.K. business currently accounts for a substantial majority of
our revenues. See "Certain Relationships and Related Transactions--Agreements
with TdF--Governance Agreement".
TdF's Governance Rights May Restrict Us From Taking Actions Our Board of
Directors Consider to Be in Your Best Interests.
We have granted TdF the ability to govern some of our activities, including
the ability to:
. prohibit us from entering into material acquisitions, issuing new
equity securities and incurring significant indebtedness;
. elect up to two members of our board of directors; and
. elect at least one director to the executive and nominating and
corporate governance committees of our board of directors.
In addition, TdF has significant governance rights over our U.K. business.
Although TdF currently has only a 20% equity interest in CTSH, TdF has the
right to restrict a number of corporate actions at CTSH.
TdF's exercise of these rights could be contrary to your interests.
TdF Will Be Able to Buy Our Interest, or Require Us to Buy Their Interest, in
Our U.K. Business in Connection with a Sale of CCIC.
Under the circumstances described below, TdF will 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;
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. 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% 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 or
digital transmission contracts 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 our U.K. business and would lose all the benefits of owning such business
that we describe in this prospectus. 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 at the time under our debt
instruments. If we did not have sufficient funds, we would have to seek
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 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.
TdF Has an Option to Put to Us Its Interest in Our U.K. Business Following the
Second Anniversary of the Roll-Up of Our U.K. Business. This Could Result in A
Default Under Our Debt Instruments or Substantial Dilution to Our Other
Stockholders.
If TdF has not exchanged its interest in CTSH for an interest in CCIC by
the second anniversary of the roll-up of our U.K. business, 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. We cannot guarantee that we will have
sufficient funds to purchase such shares for cash if TdF were to require us to
purchase their shares of capital stock of CTSH. If we did not have sufficient
funds, we would either need to seek additional financing or purchase the shares
with our common stock. We cannot guarantee that we could obtain such financing
on terms acceptable to us. In addition, the purchase of these shares for cash
could result in an event of default under our debt instruments. If we were to
issue shares of common stock to effect the purchase, this
. would result in substantial dilution to our other stockholders;
. could adversely affect the market prices of the common stock; and
. could impair our ability to raise additional capital through the sale
of our equity securities.
TdF Has Preemptive Rights to Acquire Our Common Stock When We Otherwise Issue
Common Stock. This Could Result in Substantial Dilution to Our Other
Stockholders.
Except in limited circumstances, if we issue any equity securities to any
person, including the equity offering, the formation of the Bell Atlantic joint
venture and the closing of the BellSouth transaction, we must offer TdF the
right to purchase, at the same cash price, up to an amount of
such equity securities as would be necessary for TdF and its affiliates to
maintain their consolidated ownership percentage in us before such issuance.
TdF will be able to exercise these preemptive rights as a result of our
acquisition of Millennium Communications Limited in the United Kingdom on
October 8, 1998 and as a result of our contribution of shares of our common
stock to the Bell Atlantic
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joint venture on March 31, 1999. If TdF exercises its preemptive rights, it
will be able to acquire up to 125,000 shares of our common stock at a price of
$13.00 per share as a result of the Millennium acquisition and up to 5.42
million shares at a price of $12.65 per share in connection with the Bell
Atlantic joint venture. TdF will also have these preemptive rights if we
complete the BellSouth transaction. The exercise of these rights by TdF could
result in substantial dilution to our other stockholders.
We Require Significant Capital to Fund Our Operations and Make Acquisitions--If
we are unable to raise capital in the future, we will be unable to achieve our
currently contemplated business strategy and may not be able to fund our
operations.
We will require substantial capital (1) as we increase the number of towers
we own and manage by partnering with wireless carriers to assume ownership or
control of their existing towers, by pursuing opportunities to build new
towers, or build-to-suit opportunities, for wireless carriers and by pursuing
other tower acquisition opportunities and (2) to acquire existing transmission
networks globally as opportunities arise. If we are unable to raise capital
when our needs arise, we will be unable to pursue our current business strategy
and may not be able to fund our operations.
To fund the execution of our business strategy, including the proposed
transactions described in this prospectus and the construction of new towers
that we have agreed to build, we expect to use the net proceeds of our
offerings and borrowings available under our U.S. and U.K. credit facilities.
We will have additional cash needs to fund our operations in the future. We may
also have additional cash needs in the near term if additional tower
acquisitions or build-to-suit opportunities arise. Some of the opportunities
that we are currently pursuing could require significant additional capital. If
we do not otherwise have cash available, or borrowings under our credit
facilities have otherwise been utilized, when our cash need arises, we would be
forced to seek additional debt or equity financing or to forego the
opportunity. In the event we determine 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 our
existing indebtedness. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".
We May Not Be Able to Construct New Towers at the Pace and in the Locations
that We Desire--If we are unable to do so, we may not be able to satisfy our
current agreements to build new towers and we may have difficulty finding
tenants to lease space on our new towers.
Our growth strategy depends in part on our ability to construct and operate
towers in conjunction with expansion by wireless carriers. If we are unable to
build new towers when wireless carriers require them, or we are unable to build
new towers where we believe the best opportunity to add tenants exists, we
could fail to meet our contractual obligations under build-to-suit agreements,
and we could lose opportunities to lease space on our towers.
As of December 31, 1998, we had 72 towers under construction. We currently
have plans to commence construction on approximately 900 to 1,200 additional
towers during fiscal 1999. Our ability to construct these new towers can be
affected by a number of factors beyond our control, including:
. zoning and local permitting requirements and national regulatory
approvals;
. 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;
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. 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 carriers complete their
tower networks.
Our Business Depends on the Demand for Wireless Communications--We will be
adversely affected by any slowdown in the growth of, or reduction in demand
for, wireless communications.
Demand for our site rentals depends on demand for communication sites from
wireless carriers, which, in turn, depends on the demand for wireless services.
The demand for our sites depends on many 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 relating to owning or leasing communication
sites;
. changes in telecommunications regulations; and
.general economic conditions.
A slowdown in the growth of, or reduction in, demand in a particular
wireless segment could adversely affect the demand for communication sites.
Moreover, wireless carriers often operate with substantial indebtedness, 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. Finally,
advances in technology, such as the development of new satellite systems, could
reduce the need for land-based, or terrestrial, transmission 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 May Reduce the Predictability of Our
Results--Our network services business has historically experienced significant
volatility in demand. As a result, the operating results of our network
services business for any particular period may vary significantly, and should
not be considered as necessarily being indicative of longer-term results.
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 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.
Furthermore, as wireless carriers complete their build-outs, the need for the
construction of new towers and the demand for our network services could
decrease significantly and could result in fluctuations and, possibly,
significant declines in our operating performance.
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We Operate our Business in an Increasingly Competitive Industry and Many of Our
Competitors Have Significantly More Resources--As a result of this competition,
we may find it more difficult to achieve favorable lease rates on our towers
and we may be forced to pay more for future tower acquisitions.
We face increasing competition for site rental customers from various
sources, including:
. other large independent tower owners;
. wireless carriers that own and operate their own towers and lease
antenna space to other carriers;
. site development companies that acquire antenna space on existing
towers for wireless carriers and manage new tower construction; and
. traditional local independent tower operators.
Wireless carriers that own and operate their own tower portfolios generally
are substantially larger and have greater financial resources than we have. As
competition for tenants on towers increases, lease rates could be adversely
affected.
In addition, 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 wireless carriers, broadcasters
and site developers. 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.
A Substantial Portion of Our Revenues Is Dependent Upon Agreements with the BBC
and NTL--If we were to lose our contracts with the BBC or our site sharing
agreement with NTL, we would likely lose a substantial portion of our revenues.
Assuming we had completed the roll-up of our U.K. subsidiary from 34.5% to
80% ownership and the recent and proposed transactions described in this
propectus, each as of January 1, 1998, the BBC would have still accounted for
approximately 25.1% of our revenues for the twelve month period ended December
31, 1998.
Our broadcast business is substantially dependent on our contracts with the
BBC. See "Business--U.K. Operations--Significant Contracts". We cannot
guarantee that the BBC will renew our contracts or that they will not attempt
to negotiate terms that are not as favorable to us as those in place now. If we
were to lose these BBC contracts, our business, results of operations and
financial condition would be materially adversely affected. 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.
A substantial portion of our U.K. broadcast transmission operations are
conducted using sites owned by National Transmission Limited, or NTL, our major
competitor in the United Kingdom. NTL also utilizes our sites for their
broadcast operations. See "Business--U.K. Operations--Significant Contracts".
This site sharing arrangement with NTL may be terminated with five years'
notice by either us or NTL, and may be terminated sooner upon a continuing
breach of the agreement. The agreement is set to expire on December 31, 2005.
We cannot guarantee that this agreement will not be terminated, which could
have a material adverse effect on our business, results of operations and
financial condition.
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Extensive Regulations Which Could Change at Any Time and Which We Could Fail to
Comply With Regulate Our Business--If we fail to comply with applicable
regulations, we could be fined or even lose our right to conduct some of our
business.
A variety of foreign, federal, state and local regulations apply to our
business. Failure to comply with applicable requirements may lead to civil
penalties or require us to assume costly indemnification obligations. 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 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 our analog transmission contract with the BBC, the BBC has
increased its service requirements to include 24-hour broadcasting on our
transmission network for the BBC's two national television services and a
requirement for us to add a number of additional stations to our network to
extend existing BBC services. The BBC has agreed to increases of approximately
(Pounds)800,000 ($1,330,240) per year in the charges payable by the BBC to us
for these service enhancements. The additional charges, however, may
necessitate an amendment to Castle Transmission's transmission
telecommunications license. We are discussing with OFTEL, the relevant
regulatory authority in the United Kingdom, 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. There can be no assurance
that we will achieve a favorable resolution of these issues with OFTEL.
Emissions from Our Antennas May Create Health Risks--We could suffer from
future claims if the radio frequency emissions from equipment on our towers is
demonstrated to cause negative health effects.
The government imposes requirements and other guidelines on our towers
relating to radio frequency emissions. The potential connection between radio
frequency 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. We cannot guarantee that claims relating to radio frequency
emissions will not arise in the future.
Our International Operations Expose Us to Changes in Foreign Currency Exchange
Rates--If we fail to properly match or hedge the currencies in which we conduct
business, we could suffer losses as a result of changes in currency exchange
rates.
We conduct business in countries outside the United States, which exposes
us to fluctuations in foreign currency exchange rates. We also intend to expand
our international operations in the future. For the twelve month period ended
December 31, 1998, assuming we had completed the roll-up of our U.K. operations
on January 1, 1998, but without giving effect to the recent and proposed
transactions we describe in this prospectus, approximately 74.3% 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 relating to our non-U.S. dollar operations, and we could suffer
losses as a result of changes in currency exchange rates.
We Are Heavily Dependent on Our Senior Management--If we lose members of our
senior management, we may not be able to find appropriate replacements on a
timely basis and our business could be adversely affected.
Our existing operations and continued future development are dependent to a
significant extent upon the performance and active participation of certain key
individuals, including our chief executive officer and the chief operating
officers of our principal U.S. and U.K. subsidiaries. We cannot guarantee that
we will be successful in retaining the services of these, or other key
personnel. None
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of our employees have signed noncompetition agreements. If we were to lose any
of these individuals, we may not be able to find appropriate replacements on a
timely basis and our financial condition and results of operations could be
materially adversely affected.
[D] The Notes Are Subject to the Risk of Fraudulent Conveyance Liability--
Federal and state statutes allow courts, under specific circumstances, to void
the notes and require noteholders to return payments received from us.
Various laws enacted for the protection of creditors may apply to our
incurrence of indebtedness, including the issuance of the notes in this
offering. If these laws are held by a court to apply to the notes, you could be
required to return payments you receive on the notes, and the notes could be
voided. If a court were to find in a lawsuit by an unpaid creditor or
representative of creditors that we did not receive fair consideration or
reasonably equivalent value for incurring such indebtedness or obligation and,
at the time of such incurrence, we
. were insolvent;
. were rendered insolvent by reason of such incurrence;
. were engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or
. intended to incur or believe we would incur obligations beyond our
ability to pay such obligations as they mature,
such court could, subject to statutes of limitations, determine to invalidate
such indebtedness and obligations as fraudulent conveyances or subordinate such
indebtedness and obligations to existing or future creditors.
[D] Original Issue Discount Will Accrue on the Discount Notes and Create a Tax
Liability for Noteholders--Because the discount notes will be issued at a
substantial discount to their stated principal amount at maturity, holders of
the discount notes will be taxed as though they were receiving cash interest
during the period before they actually begin to receive cash interest.
The discount notes will be issued at a substantial discount from their
stated principal amount at maturity. Consequently, although cash interest on
the discount notes generally will not be payable prior to , 2004, original
issue discount will be includable in the gross income of a holder of such notes
for U.S. federal income tax purposes in advance of the receipt of such cash
payments on such notes. This may result in a holder having to pay income taxes
on amounts such holder has yet to receive in cash. See "Certain United States
Federal Income Tax Considerations" for a more detailed discussion on the U.S.
federal income tax consequences of purchase, ownership and disposition of the
discount notes.
[D] Original Issue Discount on the Notes May Limit the Claim of a Holder of
Discount Notes in a Bankruptcy Case Against Us--If a bankruptcy case is
commenced before the discount notes have fully accreted, you may not be able to
recover the portion of the original issue discount that has not yet accrued.
If a bankruptcy case is commenced by or against us under the U.S.
Bankruptcy Code after the issuance of the discount notes, the claim of a holder
of such notes relating to the principal amount thereof may be limited to an
amount equal to the sum of (1) the initial offering price and (2) that portion
of the original issue discount that is not deemed to constitute "unmatured
interest" for purposes of the U.S. Bankruptcy Code. Any original issue discount
that was not accrued as of any such bankruptcy filing would constitute
"unmatured interest." See "Certain United States Federal Income Tax
Considerations".
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We Could Lose Certain Tax Benefits Due to the Equity Offering--If, as a result
of any transaction involving our equity securities, an ownership change occurs
for federal income tax purposes, our ability to use our net operating losses to
reduce our tax liability would be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, an
ownership change would be deemed to have occurred if on any testing date the
ownership of stock by one or more 5-percent shareholders had increased by more
than 50 percentage points during the preceding three years. The need to
preserve our net operating losses by complying with the limitations imposed by
Section 382 may limit our ability to raise equity financing in the future.
The common stock sold in the equity offering will be deemed, for purposes
of Section 382, to have been acquired by a separate public group treated as a
new 5% shareholder which had an increase in ownership. The ownership increase
by this new public group, as well as any ownership increase by other 5%
shareholders, must be taken into account in determining whether we have
undergone an ownership change under Section 382.
It is unclear whether the equity offering will result in an ownership
change. However, we have taken and must continue to take into account the
public group ownership increase resulting from the common stock sold in the
offering for three years after the sale in computing the change in ownership
for future transactions, including the issuance of additional common stock or
equity-related instruments.
Year 2000 Compliance Problems Could Affect Our Business--If we are unable to
remedy our year 2000 compliance problems, we may suffer business interruptions,
as well as financial loss and reputational harm.
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 dates after December 31, 1999, which is known as the
year 2000 problem. The failure to correct a material year 2000 problem could
result in a system failure, such as the failure of tower lighting or security
monitoring systems, or miscalculations causing disruption of operations
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
We cannot assure you that we will be able to resolve all year 2000
compliance issues without any future disruption or that we will not incur
significant additional expense in attempting to do so. In addition, if some of
our major suppliers and customers fail to address their own year 2000
compliance issues, their non-compliance could have a material adverse effect on
us and our operations.
[E] Anti-Takeover Provisions in Our Certificate of Incorporation Could Have
Effects That Conflict with the Interests of Our Stockholders--Certain
provisions of our certificate of incorporation, by-laws and operative
agreements could make it more difficult for a third party to acquire control of
us even if such a change in control would be beneficial to you.
We have a number of anti-takeover devices in place that will hinder
takeover attempts and could reduce the market value of our common stock. Our
anti-takeover provisions include:
. the right of the holders of our Class A common stock to elect up to two
members of the board of directors;
. a staggered board of directors;
. the authority of the board of directors to issue preferred stock
without approval of the holders of common stock, other than the holders
of our Class A common stock;
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. the establishment of advance notice requirements for director
nominations and actions to be taken at annual meetings; and
. the requirement that the holders of our Class A common stock approve
certain changes to our certificate of incorporation or by-laws.
In addition, our by-laws permit special meetings of the stockholders to be
called only upon the request of a majority of the board of directors, and deny
stockholders the ability to call such meetings. Under our governance agreement
with TdF, TdF generally will have the right to purchase our equity interest in
CTSH upon the occurrence of an acquisition of us that is not approved by TdF.
In addition, our BBC contracts may be terminated upon the occurrence of certain
change of control events described in such contracts. Such provisions, as well
as the provisions of Section 203 of the Delaware General Corporation Law, could
impede a merger, consolidation, takeover or other business combination or
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of us. See "--Our agreements with TdF Give TdF
Substantial Governance and Economic Rights" and "Description of Capital Stock".
[E] Shares Eligible For Future Sale--Sales of a substantial number of shares of
common stock after the equity offering could adversely affect the market price
of the common stock.
Future sales of a substantial number of shares of our common stock could
adversely affect the market price of our common stock. Upon completion of the
equity offering, we will have 133,975,680 shares of common stock outstanding.
In addition, we have reserved for issuance 18,591,173 shares of common stock
upon exercise of outstanding stock options, 1,294,990 shares of common stock
upon exercise of outstanding warrants and 17,443,500 shares of common stock for
the conversion of the outstanding Class A common stock. The 27,700,000 shares
sold in the offering will be freely transferable without restriction under the
Securities Act, unless they are held by our "affiliates" as that term is used
under the Securities Act. See "Shares Eligible for Future Sale".
[E] Dilution--This offering and other existing arrangements will result in
substantial dilution to the value of our common stock.
Persons purchasing shares of common stock in the equity offering will incur
immediate and substantial dilution in net tangible book value per share.
Purchasers of shares in the equity offering will experience dilution of $12.51
per share. In addition, under our agreements with TdF, TdF has rights which, in
some cases, could result in our issuing shares of our common stock to TdF at
below then market prices. Any such below market issuances could result in
substantial dilution to our other stockholders. See "--Our Agreements with TdF
Give TdF Substantial Governance and Economic Rights" and "Dilution". Moreover,
to the extent that outstanding options and warrants to purchase common stock
are exercised, there could be substantial additional dilution.
[D] There is Currently No Market for the Notes--If an active trading market for
the notes does not develop, the liquidity and value of the notes could be
harmed.
The discount notes and the cash-pay notes are new issues of securities for
which there is currently no trading market. The underwriters have advised us
that they intend to make a market in the notes, although the underwriters are
not obligated to do so and may discontinue such market making at any time. We
do not intend to apply for listing of the notes on any domestic securities
exchange or to seek approval for quotation through an automated quotation
system. Accordingly, there can be no assurance that an active market will
develop upon completion of the debt offering or, if developed, that such market
will be sustained or as to the liquidity of any market.
28
<PAGE>
This Document Includes Forward-Looking Statements--If our expectations
reflected in these forward-looking statements prove to be incorrect, our actual
results could differ materially from these expectations.
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 prospectus 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. In light of these risks, uncertainties and assumptions, the forward-
looking events discussed in this document might not occur.
29
<PAGE>
USE OF PROCEEDS
[D] The net proceeds from the debt offering are estimated to be $435.0
million, after deducting estimated fees and expenses. Concurrently with the
debt offering, we are offering 23,357,664 shares of our common stock. The
closing of the debt offering is conditioned upon the closing of the equity
offering.
[E] The net proceeds from the equity offering are estimated to be
approximately $380.0 million, after deducting estimated fees and expenses,
assuming an offering price to public of $17.125 per share. Concurrently with
the equity offering, we are offering $300.0 million in initial accreted value
of discount notes and $150.0 million in aggregate principal amount of cash-pay
notes. The closing of the equity offering is conditioned upon the closing of
the debt offering.
We expect to use the total net proceeds of the debt and equity offerings,
which are estimated to be approximately $815.0 million,
. to repay a term loan facility incurred to finance a portion of the
BellSouth transaction and the Powertel acquisition;
. to finance the balance of the BellSouth transaction and the Powertel
acquisition; and
. for general corporate purposes, including paying interest on the cash-
pay notes.
The lenders under the term loan facility are affiliates of certain underwriters
in the debt and equity offerings. See "Description of Certain Indebtedness--
CCIC Term Loan Facility" and "Underwriting." The loans under the term loan
facility were used to finance and/or refinance a portion of the BellSouth
transaction and the Powertel acquisition. The term loans mature on November 30,
2007 and bear interest at an increasing rate on LIBOR, not to exceed 16.0%.
However, the closing of the offerings is not contingent on the completion
of the BellSouth transaction or the Powertel acquisition. If the BellSouth
transaction or the Powertel acquisition does not occur, or if either or both
occurs on terms different from those described in this prospectus, we would be
able to use the net proceeds from the offerings that were allocated to finance
these transactions for working capital and general corporate purposes,
including to finance as yet unidentified acquisitions, investments or joint
ventures in the United States or abroad. See "Risk Factors--We May Have Broad
Discretion in the Application of Proceeds of Our Offerings".
[E] PRICE RANGE OF COMMON STOCK
Our common stock is listed and traded on the Nasdaq National Market under
the symbol "TWRS". The following table sets forth for the periods indicated the
high and low sale prices of the common stock as reported by Nasdaq:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998
Third Quarter............................................ $13.31 $ 6.00
Fourth Quarter........................................... 23.50 9.87
1999
First Quarter............................................ $23.50 $16.63
Second Quarter (through May 6, 1999)..................... 20.88 16.38
</TABLE>
On May 6, 1999, the last reported sale price of the common stock as
reported by Nasdaq was $20.563. As of May 6, 1999, there were approximately 299
holders of record of the common stock.
30
<PAGE>
[E] DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying cash dividends on our capital stock in the foreseeable
future. It is our current policy to retain earnings to finance the expansion of
our operations. Future declaration and payment of dividends, if any, will be
determined in light of the then-current conditions, including:
. our earnings;
. our operations;
. our capital requirements;
. our financial condition; and
. other factors deemed relevant by our board of directors.
In addition, our ability to pay dividends is limited by the terms of our
debt instruments and the terms of the certificate of designations in respect of
our exchangeable preferred stock. See "Description of Certain Indebtedness" and
"Description of Capital Stock".
31
<PAGE>
[E] DILUTION
Dilution is the amount by which the offering price paid by the purchasers
of the common stock will exceed the net tangible book value per share of common
stock after the offerings. Net tangible book value per share is determined at
any date by subtracting our total liabilities and minority interests from the
total book value of our tangible assets and dividing the difference by the
number of shares of common stock deemed to be outstanding, including shares
issuable upon conversion of outstanding shares of Class A common stock, at such
date.
Our net tangible book value on December 31, 1998, after subtracting the
interests of our preferred shareholders, was approximately $167.8 million or
$1.78 per share. After giving effect to the receipt of approximately $380.0
million of estimated net proceeds from our sale of 23,357,664 shares of common
stock in the offering, our pro forma net tangible book value at December 31,
1998 would have been approximately $544.8 million, or $4.62 per share. This
represents an immediate increase in pro forma net tangible book value of $2.84
per share to our existing stockholders and an immediate dilution of $12.51 per
share to new investors purchasing shares of common stock in the offering. The
following table illustrates the substantial and immediate per share dilution to
new investors:
<TABLE>
<CAPTION>
Per Share
------------
<S> <C> <C>
Public offering price per share (a).......................... $17.13
Pro forma net tangible book value before the offering...... $1.78
Increase per share attributable to new investors........... 2.84
-----
Pro forma net tangible book value after the offerings........ 4.62
------
Dilution per share to new investors (b)...................... $12.51
======
</TABLE>
--------
(a) Before deducting underwriting discounts and estimated transaction
fees and expenses of $20.0 million to be paid by us in connection
with the offering.
(b) Dilution is determined by subtracting net tangible book value per
share after the offering from the amount assumed paid by a new
investor per share of common stock.
All of the foregoing computations include the 11,340,000 shares of Class A
common stock owned by an affiliate of TdF, which are convertible into an
aggregate of 11,340,000 shares of common stock. See "Certain Relationships and
Related Transactions--Agreements with TdF". The foregoing tables and discussion
assume no exercise of stock options or warrants after December 31, 1998 and
exclude:
(1) 16,585,197 shares issuable upon exercise of stock options outstanding
as of December 31, 1998 having a weighted average exercise price of
$7.06 per share under our various stock option plans;
(2) warrants to purchase 1,314,990 shares of common stock at an exercise
price of $7.50 per share; and
(3) 17,443,500 additional shares of common stock issuable upon exercise
of the TdF's put right or our call right.
Since December 31, 1998, we have granted options to purchase an additional
2,763,589 shares of common stock at various exercise prices ranging from
$17.125 to $25.62 per share. To the extent that outstanding stock options or
warrants are exercised, there will be further dilution to new investors. In
addition, under the terms of our agreements with TdF, in some cases TdF may
have the right to acquire, or we may elect to satisfy obligations to TdF by
issuing to TdF, shares of our common stock at below then market prices. See
"Risk Factors--Our Agreements with TdF Give TdF Substantial Governance and
Economic Rights", "--Dilution", "Capitalization", "Management--Executive
Compensation--Stock Option Plan" and Notes 8 and 9 of Notes to Consolidated
Financial Statements.
32
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1998:
. our historical capitalization;
. our pro forma capitalization after giving effect to our offerings; and
. our pro forma capitalization after giving effect to such offerings and
the recent and proposed transactions we describe in this prospectus.
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 related notes included elsewhere in
this document. The proposed transactions are not contingent upon our offerings.
See "Unaudited Pro Forma Condensed Consolidated Financial Statements" for
detail regarding the pro forma adjustments.
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------
Pro Forma
for Offerings
and
Recent and
Pro Forma Proposed
Actual for Offerings Transactions
---------- ------------- -------------
(Dollars in thousands, except share
amounts)
<S> <C> <C> <C>
Cash and cash equivalents(a)........... $ 296,450 $1,108,450 $ 195,458
========== ========== ==========
Notes payable and current maturities of
long-term debt........................ $ -- $ -- $ --
========== ========== ==========
Long-term debt (less current
maturities):
Senior Credit Facility(b)............. $ 5,500 $ 5,500 $ 5,500
Castle Transmission Credit
Facility(b).......................... 55,177 55,177 55,177
Bell Atlantic Joint Venture Credit
Facility............................. -- -- 180,000
10 5/8% Senior Discount Notes due
2007................................. 168,099 168,099 168,099
9% Guaranteed Bonds due 2007.......... 200,934 200,934 200,934
Notes offered [D] hereby [E]
concurrently......................... -- 450,000 450,000
---------- ---------- ----------
Total long-term debt(a).............. 429,710 879,710 1,059,710
---------- ---------- ----------
Minority interests..................... 39,185 39,185 50,915
Redeemable preferred stock:
Exchangeable Preferred Stock ($.01 par
value; 400,000 shares authorized;
200,000 shares issued)(a)............ 201,063 201,063 201,063
Stockholders' equity:
Common stock ($.01 par value;
690,000,000 shares authorized):
Common stock (83,123,873 shares
issued, actual; 106,590,968 shares
issued, pro forma for offerings; and
131,272,778 shares issued, pro forma
for the offerings and the proposed
transactions)....................... 831 1,066 1,313
Class A common stock (11,340,000
shares issued)...................... 113 113 113
Additional paid-in capital............ 795,153 1,174,918 1,551,671
Cumulative foreign currency
translation adjustment............... 1,690 1,690 1,690
Accumulated deficit................... (60,225) (63,225) (63,225)
---------- ---------- ----------
Total stockholders' equity(a)........ 737,562 1,114,562 1,491,562
---------- ---------- ----------
Total capitalization(a)............. $1,407,520 $2,234,520 $2,803,250
========== ========== ==========
</TABLE>
- --------
(a) [D] On a pro forma basis for our offerings and the recent and proposed
transactions we describe in this prospectus, the restricted group, which is
made up of CCIC and its subsidiaries that are restricted by the covenants
in our high yield debt instruments, would have cash and cash equivalents,
total long-term debt, redeemable preferred stock, total stockholders'
equity and total capitalization of $149.2 million, $623.6 million, $201.1
million, $1,491.6 million, and $2,316.2 million, respectively. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements--Notes to
Unaudited Pro Forma Condensed Consolidated Balance Sheet".
(b) As of March 1, 1999 Crown Communication had unused borrowing availability
under its senior credit facility of approximately $54.0 million, and Castle
Transmission had approximately (Pounds)24.0 million ($39.9 million) of
unused borrowing availability under its credit facility. See "Description
of Certain Indebtedness".
33
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of CCIC and the
historical financial statements of the entities acquired by CCIC during the
period presented, adjusted to give effect to the following transactions:
(1) the roll-up of our U.K. subsidiary to an 80% ownership interest in
August 1998;
(2) CCIC's initial public offering in August 1998;
(3) the conversion of CCIC's senior convertible preferred stock into
common stock, all of which had been converted as of July 17, 1998;
(4) the issuance of CCIC's 12 3/4% Exchangeable Preferred Stock due 2010
in December 1998;
(5) the debt and equity offerings;
(6) the Bell Atlantic joint venture;
(7) the proposed BellSouth transaction; and
(8) the proposed Powertel acquisition.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1998 gives effect to these transactions as if they
had occurred as of January 1, 1998. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet gives effect to the (1) debt and equity offerings
and (2) the recent and proposed transactions described in clauses (6), (7) and
(8) above as if they had occurred as of December 31, 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.
[D] 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 subsidiaries that are restricted by covenants in
our high yield debt instruments. These subsidiaries exclude our U.K.
subsidiaries and the Bell Atlantic joint venture, both of which are designated
as unrestricted subsidiaries under our high yield debt instruments.
The pro forma financial statements do not purport to represent what CCIC's
results of operations or financial condition would actually have been had these
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 related notes included elsewhere in this prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
The roll-up, the Bell Atlantic joint venture and the proposed Powertel
acquisition are accounted for under the purchase method of accounting. The
total purchase price for the roll-up, the Bell Atlantic joint venture and the
Powertel acquisition 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 may be revised when additional information concerning asset and
liability valuations is obtained; however, we do not expect that any such
revisions will have a material effect on our consolidated financial position or
results of operations. We have recorded the purchase price for the roll-up
based on (1) the number of shares of our common stock and Class A common stock
exchanged for shares of CTSH's capital stock and (2) the price per share
received by us in our initial public offering.
34
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Historical
for 1998 Bell
Adjustments Pro Forma Adjustments Transactions Atlantic Adjustments
Historical Historical for 1998 for 1998 for and Joint for Joint
CCIC(a) CTSH(b) Transactions Transactions Offerings Offerings Venture(j) Venture
---------- ---------- ------------ ------------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.... $ 75,028 $84,714 $ -- $159,742 $ -- $ 159,742 $ 11,183 $31,009(k)
Network services
and other....... 38,050 12,514 (265)(c) 50,299 -- 50,299 -- --
-------- ------- -------- -------- -------- --------- -------- -------
Total net
revenues........ 113,078 97,228 (265) 210,041 -- 210,041 11,183 31,009
-------- ------- -------- -------- -------- --------- -------- -------
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 26,254 35,901 -- 62,155 -- 62,155 14,941 -- (l)
Network services
and other....... 21,564 7,916 -- 29,480 -- 29,480 -- --
General and
administrative.. 23,571 5,265 (265)(c) 28,571 -- 28,571 -- -- (l)
Corporate
development..... 4,625 8 -- 4,633 -- 4,633 -- --
Non-cash
compensation
charges......... 12,758 3,831 -- 16,589 -- 16,589 -- --
Depreciation and
amortization.... 37,239 25,684 11,463 (d) 74,386 -- 74,386 6,278 23,346 (m)
-------- ------- -------- -------- -------- --------- -------- -------
126,011 78,605 11,198 215,814 -- 215,814 21,219 23,346
-------- ------- -------- -------- -------- --------- -------- -------
Operating income
(loss).......... (12,933) 18,623 (11,463) (5,773) -- (5,773) (10,036) 7,663
Other income
(expense):
Equity in
earnings of
unconsolidated
affiliate....... 2,055 -- (2,055)(e) -- -- -- -- --
Interest and
other income
(expense)....... 4,220 725 -- 4,945 -- 4,945 -- --
Interest expense
and amortization
of deferred
financing
costs........... (29,089) (13,378) 3,689 (f) (38,778) (48,294)(i) (87,072) -- (17,711)(n)
-------- ------- -------- -------- -------- --------- -------- -------
Income (loss)
before income
taxes and
minority
interests....... (35,747) 5,970 (9,829) (39,606) (48,294) (87,900) (10,036) (10,048)
Provision for
income taxes.... (374) -- -- (374) -- (374) -- --
Minority
interests....... (1,654) -- (1,194)(g) (2,848) -- (2,848) -- 4,155 (o)
-------- ------- -------- -------- -------- --------- -------- -------
Net income
(loss).......... (37,775) 5,970 (11,023) (42,828) (48,294) (91,122) (10,036) (5,893)
Dividends on
preferred
stock........... (5,411) -- (21,334)(h) (26,745) -- (26,745) -- --
-------- ------- -------- -------- -------- --------- -------- -------
Net income (loss)
after deduction
of dividends on
preferred
stock........... $(43,186) $ 5,970 $(32,357) $(69,573) $(48,294) $(117,867) $(10,036) $(5,893)
======== ======= ======== ======== ======== ========= ======== =======
Loss per common
share--basic and
diluted ........ $ (1.02) $ (0.74) $ (1.00)
======== ======== =========
Common shares
outstanding--
basic and
diluted (in
thousands)...... 42,518 94,064 117,531
======== ======== =========
<CAPTION>
Pro Forma
for 1998 Adjustments Adjustments
Transactions, for for
Offerings Proposed Proposed Pro Forma
and Joint BellSouth Historical Powertel for the
Venture Transaction Powertel(s) Acquisition Transactions
------------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.... $ 201,934 $33,840(p) $ 1,865 $14,040(t) $ 251,679
Network services
and other....... 50,299 -- -- -- 50,299
------------- --------------- ----------- ------------- ------------
Total net
revenues........ 252,233 33,840 1,865 14,040 301,978
------------- --------------- ----------- ------------- ------------
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 77,096 11,400(l)(q) 6,167 -- (l) 94,663
Network services
and other....... 29,480 -- -- -- 29,480
General and
administrative.. 28,571 -- (l) -- -- (l) 28,571
Corporate
development..... 4,633 -- -- -- 4,633
Non-cash
compensation
charges......... 16,589 -- -- -- 16,589
Depreciation and
amortization.... 104,010 30,500 (r) 7,534 6,111 (u) 148,155
------------- --------------- ----------- ------------- ------------
260,379 41,900 13,701 6,111 322,091
------------- --------------- ----------- ------------- ------------
Operating income
(loss).......... (8,146) (8,060) (11,836) 7,929 (20,113)
Other income
(expense):
Equity in
earnings of
unconsolidated
affiliate....... -- -- -- -- --
Interest and
other income
(expense)....... 4,945 -- -- -- 4,945
Interest expense
and amortization
of deferred
financing
costs........... (104,783) -- -- -- (104,783)
------------- --------------- ----------- ------------- ------------
Income (loss)
before income
taxes and
minority
interests....... (107,984) (8,060) (11,836) 7,929 (119,951)
Provision for
income taxes.... (374) -- -- -- (374)
Minority
interests....... 1,307 -- -- -- 1,307
------------- --------------- ----------- ------------- ------------
Net income
(loss).......... (107,051) (8,060) (11,836) 7,929 (119,018)
Dividends on
preferred
stock........... (26,745) -- -- -- (26,745)
------------- --------------- ----------- ------------- ------------
Net income (loss)
after deduction
of dividends on
preferred
stock........... $(133,796) $(8,060) $(11,836) $ 7,929 $(145,763)
============= =============== =========== ============= ============
Loss per common
share--basic and
diluted ........ $ (1.01) $ (1.02)
============= ============
Common shares
outstanding--
basic and
diluted (in
thousands)...... 133,129 142,213
============= ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of
Operations
35
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(Dollars in thousands)
(a) The historical results of operations for our U.K. business are included in
CCIC's historical results of operations for the period from the date of the
roll-up, August 21, 1998, through December 31, 1998.
(b) Reflects the historical results of operations of our U.K. business (under
U.S. GAAP) for the periods prior to the completion of the roll-up on August
21, 1998. Such results have been translated from pounds sterling to U.S.
dollars at the average noon buying rate for the period.
(c) Reflects the elimination of management fees payable to CCIC from Castle
Transmission.
(d) Reflects the incremental amortization of goodwill as a result of the roll-
up. Goodwill is being amortized over twenty years.
(e) Reflects the elimination of equity accounting adjustments to include CCIC's
percentage in our U.K. business' earnings and losses.
(f) Reflects decrease in interest expense attributable to the repayment of
borrowings under CCIC's senior credit facility from a portion of the net
proceeds from the issuance of our 12 3/4% exchangeable preferred stock.
(g) Reflects the minority interest in dividends accrued on CTSH's redeemable
preference shares.
(h) Reflects (1) decrease in dividends of $4,348 attributable to the conversion
of the outstanding shares of senior convertible preferred stock into shares
of common stock and (2) increase in dividends of $25,682 attributable to 12
3/4% exchangeable preferred stock.
(i) Reflects:
(1) increase in interest expense of $44,044 as a result of the issuance of
the notes in the debt offering;
(2) amortization of deferred financing costs related to the notes of
$1,250; and
(3) nonrecurring financing fees of $3,000 related to the term loans
incurred to fund the escrow payments in connection with the proposed
BellSouth transaction and the proposed Powertel acquisition.
(j) Reflects the historical results of operations of the tower operations
contributed to the Bell Atlantic joint venture.
(k) Reflects additional revenues to be recognized by the Bell Atlantic joint
venture under the global lease and the formation agreement.
(l) We expect that the Bell Atlantic joint venture will incur incremental
operating expenses as a stand-alone entity. Such incremental expenses are
currently estimated to amount to approximately $5,137 per year. In
addition, we expect that we will incur incremental operating expenses as a
result of the BellSouth transaction and the Powertel acquisition. Such
incremental expenses are currently estimated to amount to approximately
$15,917 per year. These incremental operating expenses are based on
management's best estimates rather than any contractual obligations; as
such, these amounts have not been presented as adjustments in the
accompanying pro forma financial statement.
(m) Reflects the incremental depreciation of property and equipment as a result
of the Bell Atlantic joint venture. Property and equipment is being
depreciated over twenty years.
(n) Reflects additional interest expense attributable to borrowings under the
credit facility entered into by the Bell Atlantic joint venture. Such
borrowings are initially estimated to incur interest at a rate of 9.25% per
annum.
(o) Reflects the minority partner's 38.5% interest in the joint venture's
operations.
(p) Reflects additional revenues to be recognized by CCIC in connection with
the BellSouth transaction for the sublease of tower space by BellSouth.
This amount includes $26,640 in
36
<PAGE>
revenues to be received from BellSouth and $7,200 in revenues to be received
from other tenants.
(q) Reflects additional costs to be incurred for ground rents in connection
with the preliminary BellSouth agreement.
(r) Reflects the incremental depreciation of property and equipment as a result
of the BellSouth transaction. Property and equipment is being depreciated
over twenty years.
(s) Reflects the historical results of operations of the tower operations to be
acquired in the Powertel acquisition.
(t) Reflects additional revenues to be recognized by CCIC in connection with
the Powertel acquisition under the master site agreements.
(u) Reflects the incremental depreciation of property and equipment as a result
of the Powertel acquisition. Property and equipment is being depreciated
over twenty years.
37
<PAGE>
[D] The following tables summarize the unaudited pro forma results of
operations for the restricted group under our high yield debt instruments. Such
information is not intended as an alternative measure of the operating results
as would be determined in accordance with generally accepted accounting
principles.
<TABLE>
<CAPTION>
Year Ended December 31, 1998
------------------------------------------------------------------------------------------------
Restricted Adjustments Adjustments Restricted
Exclusion of Group for for Group Pro
Pro Forma Exclusion of Certain Pro Forma Proposed Proposed Forma for
for Unrestricted Adjustments for BellSouth Historical Powertel the
Offerings Subsidiaries for Roll-Up Offerings Transaction Powertel Acquisition Transactions
--------- ------------ ------------ ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.......... $ 159,742 $(137,201) $ -- $ 22,541 $33,840 $ 1,865 $14,040 $ 72,286
Network services and
other................. 50,299 (18,082) -- 32,217 -- -- -- 32,217
--------- --------- ------- --------- ------- -------- ------- ---------
Total net revenues.... 210,041 (155,283) -- 54,758 33,840 1,865 14,040 104,503
--------- --------- ------- --------- ------- -------- ------- ---------
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission......... 62,155 (56,038) -- 6,117 11,400 6,167 -- 23,684
Network services and
other................ 29,480 (12,151) -- 17,329 -- -- -- 17,329
General and
administrative........ 28,571 (7,683) 265 21,153 -- -- -- 21,153
Corporate development.. 4,633 (8) -- 4,625 -- -- -- 4,625
Non-cash compensation
charges............... 16,589 (6,682) -- 9,907 -- -- -- 9,907
Depreciation and
amortization.......... 74,386 (46,002) (11,463) 16,921 30,500 7,534 6,111 61,066
--------- --------- ------- --------- ------- -------- ------- ---------
215,814 (128,564) (11,198) 76,052 41,900 13,701 6,111 137,764
--------- --------- ------- --------- ------- -------- ------- ---------
Operating income
(loss)................ (5,773) (26,719) 11,198 (21,294) (8,060) (11,836) 7,929 (33,261)
Other income (expense):
Interest and other
income (expense)...... 4,945 (3,844) -- 1,101 -- -- -- 1,101
Interest expense and
amortization of
deferred financing
costs................. (87,072) 20,740 -- (66,332) -- -- -- (66,332)
--------- --------- ------- --------- ------- -------- ------- ---------
Income (loss) before
income taxes and
minority interests.... (87,900) (9,823) 11,198 (86,525) (8,060) (11,836) 7,929 (98,492)
Provision for income
taxes................. (374) -- -- (374) -- -- -- (374)
Minority interests..... (2,848) 1,654 1,194 -- -- -- -- --
--------- --------- ------- --------- ------- -------- ------- ---------
Net income (loss)...... (91,122) (8,169) 12,392 (86,899) (8,060) (11,836) 7,929 (98,866)
Dividends on preferred
stock................. (26,745) -- -- (26,745) -- -- -- (26,745)
--------- --------- ------- --------- ------- -------- ------- ---------
Net income (loss) after
deduction of dividends
on preferred stock.... $(117,867) $ (8,169) $12,392 $(113,644) $(8,060) $(11,836) $ 7,929 $(125,611)
========= ========= ======= ========= ======= ======== ======= =========
</TABLE>
38
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical for for
Adjustments Pro Forma Bell Atlantic Adjustments Offerings Proposed
Historical for for Joint for Joint and Joint BellSouth Historical
CCIC Offerings Offerings Venture(e) Venture Venture Transaction Powertel(o)
---------- ----------- ---------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents..... $ 296,450 $812,000(a) $1,108,450 $ -- $(208,375)(f) $ 900,075 $(430,000)(l) $ --
Receivables...... 36,420 -- 36,420 -- -- 36,420 -- --
Inventories...... 6,599 -- 6,599 -- -- 6,599 -- --
Prepaid expenses
and other
current assets.. 2,647 -- 2,647 -- -- 2,647 -- 2,031
---------- -------- ---------- ------- --------- ---------- --------- --------
Total current
assets......... 342,116 812,000 1,154,116 -- (208,375) 945,741 (430,000) 2,031
Property and
equipment, net.. 592,594 -- 592,594 83,557 508,923 (g) 1,185,074 610,000 (m) 121,490
Investments in
affiliates...... 2,258 -- 2,258 -- -- 2,258 -- --
Goodwill and
other intangible
assets, net..... 569,740 -- 569,740 -- -- 569,740 -- --
Deferred
financing costs
and other
assets, net..... 16,522 15,000(b) 31,522 -- 4,625 (h) 36,147 -- --
---------- -------- ---------- ------- --------- ---------- --------- --------
$1,523,230 $827,000 $2,350,230 $83,557 $305,173 $2,738,960 $180,000 $123,521
========== ======== ========== ======= ========= ========== ========= ========
Liabilities and
Stockholders'
Equity:
Current
liabilities:
Accounts
payable......... $ 46,020 $ -- $ 46,020 $ -- $ -- $46,020 $ -- $ --
Other current
liabilities..... 46,867 -- 46,867 -- -- 46,867 -- 309
Long-term debt,
current
maturities...... -- -- -- -- -- -- -- --
---------- -------- ---------- ------- --------- ---------- --------- --------
Total current
liabilities.... 92,887 -- 92,887 -- -- 92,887 -- 309
Long-term debt,
less current
maturities...... 429,710 450,000(c) 879,710 -- 180,000 (i) 1,059,710 -- --
Other
liabilities..... 22,823 -- 22,823 -- -- 22,823 -- --
---------- -------- ---------- ------- --------- ---------- --------- --------
Total
liabilities.... 545,420 450,000 995,420 -- 180,000 1,175,420 -- 309
---------- -------- ---------- ------- --------- ---------- --------- --------
Minority
interests....... 39,185 -- 39,185 -- 11,730 (j) 50,915 -- --
Redeemable
preferred
stock........... 201,063 -- 201,063 -- -- 201,063 -- --
Stockholders'
equity.......... 737,562 377,000(d) 1,114,562 83,557 113,443 (k) 1,311,562 180,000 (n) 123,212
---------- -------- ---------- ------- --------- ---------- --------- --------
$1,523,230 $827,000 $2,350,230 $83,557 $305,173 $2,738,960 $ 180,000 $123,521
========== ======== ========== ======= ========= ========== ========= ========
<CAPTION>
Adjustments
for
Proposed Pro Forma
Powertel for the
Acquisition Transactions
-------------- ------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents..... $(274,617)(p) $ 195,458
Receivables...... -- 36,420
Inventories...... -- 6,599
Prepaid expenses
and other
current assets.. -- 4,678
-------------- ------------
Total current
assets......... (274,617) 243,155
Property and
equipment, net.. 151,405 (q) 2,067,969
Investments in
affiliates...... -- 2,258
Goodwill and
other intangible
assets, net..... -- 569,740
Deferred
financing costs
and other
assets, net..... -- 36,147
-------------- ------------
$(123,212) $2,919,269
============== ============
Liabilities and
Stockholders'
Equity:
Current
liabilities:
Accounts
payable......... $ -- $ 46,020
Other current
liabilities..... -- 47,176
Long-term debt,
current
maturities...... -- --
-------------- ------------
Total current
liabilities.... -- 93,196
Long-term debt,
less current
maturities...... -- 1,059,710
Other
liabilities..... -- 22,823
-------------- ------------
Total
liabilities.... -- 1,175,729
-------------- ------------
Minority
interests....... -- 50,915
Redeemable
preferred
stock........... -- 201,063
Stockholders'
equity.......... (123,212)(r) 1,491,562
-------------- ------------
$(123,212) $2,919,269
============== ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
39
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Dollars in thousands)
<TABLE>
<C> <S> <C>
(a) Reflects the following adjustments to cash and cash
equivalents:
(1) Increase resulting from the receipt of proceeds from
the offerings........................................ $ 850,000
(2) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the offerings............................. (35,000)
(3) Decrease resulting from the payment of nonrecurring
financing fees related to the term loans used to
finance the BellSouth and Powertel escrow payments... (3,000)
---------
Total adjustments to cash and cash equivalents....... $ 812,000
=========
(b) Reflects deferred financing costs resulting from the
payment of underwriting discounts and commissions and
other fees and expenses related to the debt offerings.
(c) Reflects the increase resulting from the receipt of
proceeds from the debt offering.
(d) Reflects the following adjustments to stockholders'
equity:
(1) Increase resulting from the receipt of proceeds from
the equity offering.................................. $ 400,000
(2) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the equity offering....................... (20,000)
(3) Decrease resulting from payment of nonrecurring
financing fees related to the term loans used to
finance the BellSouth and Powertel escrow payments... (3,000)
---------
Total adjustments to stockholders' equity................ $ 377,000
=========
(e) Reflects the historical amounts from the statement of net
assets for the tower operations contributed to the Bell
Atlantic joint venture.
(f) Reflects the following adjustments to cash and cash
equivalents:
(1) Increase resulting from borrowings under the credit
facility entered into by the Bell Atlantic joint
venture.............................................. $ 180,000
(2) Decrease resulting from distribution to minority
partner.............................................. (380,000)
(3) Decrease resulting from payment of deferred financing
costs for the credit facility entered into by the
Bell Atlantic joint venture.......................... (4,625)
(4) Decrease resulting from payment of fees and expenses
related to the Bell Atlantic joint venture........... (3,750)
---------
Total adjustments to cash and cash equivalents........... $(208,375)
=========
(g) Reflects the increase in basis of property and equipment
contributed to the Bell Atlantic joint venture by the minority
partner.
(h) Reflects the deferred financing costs for the credit facility
entered into by the Bell Atlantic joint venture.
(i) Reflects the borrowings under the credit facility entered into by
the Bell Atlantic joint venture.
(j) Reflects the 38.5% minority interest in the Bell Atlantic joint
venture.
(k) Reflects the following adjustments to stockholders' equity:
(1) Increase resulting from increase in basis of property
and equipment contributed to the Bell Atlantic joint
venture by the minority partner...................... $ 508,923
(2) Decrease resulting from distribution to minority
partner.............................................. (380,000)
(3) Decrease resulting from minority interest............ (11,730)
(4) Decrease resulting from payment of fees and expenses
related to the Bell Atlantic joint venture........... (3,750)
---------
Total adjustments to stockholders' equity................ $ 113,443
=========
</TABLE>
40
<PAGE>
<TABLE>
<C> <S> <C> <C>
(l) Reflects the payment of the cash portion of the purchase price
for the proposed BellSouth transaction.
(m) Reflects the basis of property and equipment recorded in
connection with the proposed BellSouth transaction.
(n) Reflects the increase resulting from the issuance of common
stock for a portion of the purchase price for the proposed
BellSouth transaction.
(o) Reflects the historical amounts from the statement of net
assets for the tower operations to be acquired in the
proposed Powertel acquisition.
(p) Reflects the payment of the closing price for the proposed
Powertel acquisition.
(q) Reflects the increase in basis of property and equipment
acquired in the proposed Powertel acquisition.
(r) Reflects the elimination of the historical basis of the net
assets acquired in the proposed Powertel acquisition.
</TABLE>
The following table summarizes the adjustments for the offerings, with
increases to liabilities and stockholders' equity balances shown as negative
amounts:
<TABLE>
<CAPTION>
Adjustment Reference
-------------------------------------------------
(a)(1),(c),(d)(1) (a)(2),(b),(d)(2) (a)(3),(d)(3) Totals
----------------- ----------------- ------------- ---------
<S> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 850,000 $(35,000) $(3,000) $ 812,000
Deferred financing cost
and other assets, net.. -- 15,000 -- 15,000
Long-term debt, less
current maturities..... (450,000) -- -- (450,000)
Stockholders' equity.... (400,000) 20,000 3,000 (377,000)
--------- -------- ------- ---------
$ -- $ -- $ -- $ --
========= ======== ======= =========
</TABLE>
The following table summarizes the adjustments for the Bell Atlantic joint
venture, with increases to liabilities and stockholders' equity balances shown
as negative amounts:
<TABLE>
<CAPTION>
Adjustment Reference
------------------------------------------------------------------------
(f)(1),(i) (f)(2),(k)(2) (f)(3),(h) (f)(4),(k)(4) (g),(j),(k)(1),(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.................... -- -- -- -- 508,923 508,923
Deferred financing costs
and other assets, net.. -- -- 4,625 -- -- 4,625
Long-term debt, less
current maturities..... (180,000) -- -- -- -- (180,000)
Minority interests...... -- -- -- -- (11,730) (11,730)
Stockholders' equity.... -- 380,000 -- 3,750 (497,193) (113,443)
--------- --------- ------- ------- --------- ---------
$ -- $ -- $ -- $ -- $ -- $ --
========= ========= ======= ======= ========= =========
</TABLE>
41
<PAGE>
The following table summarizes the adjustments for the BellSouth
transaction, with increases to liabilities and stockholders' equity balances
shown as negative amounts:
<TABLE>
<CAPTION>
Adjustment Reference
--------------------
(l),(m),(n)
--------------------
<S> <C>
Cash and cash equivalents............................... $(430,000)
Property and equipment, net............................. 610,000
Stockholders' equity.................................... (180,000)
---------
$ --
=========
</TABLE>
The following table summarizes the adjustments for the Powertel
acquisition, with increases to liabilities and stockholders' equity balances
shown as negative amounts:
<TABLE>
<CAPTION>
Adjustment Reference
--------------------
(p),(q),(r)
--------------------
<S> <C>
Cash and cash equivalents............................... $(274,617)
Property and equipment, net............................. 151,405
Stockholders' equity.................................... 123,212
---------
$ --
=========
</TABLE>
42
<PAGE>
[D] The following table summarizes the unaudited pro forma balance sheet for
the restricted group under our high yield debt instruments. 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 December 31, 1998
------------------------------------------------------------------------------------------------------------
Restricted
Group
Pro Forma
Restricted for Adjustments Restricted
Group Adjustments Offerings for Adjustments Group
Pro Exclusion of Pro for and Proposed for Proposed Pro Forma
Forma for Unrestricted Forma for Bell Atlantic Joint BellSouth Historical Powertel for the
Offerings Subsidiaries Offerings Joint Venture Venture Transaction Powertel Acquisition Transactions
---------- ------------ ---------- ------------- ---------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents...... $1,108,450 $(254,665) $ 853,785 $ -- $ 853,785 $(430,000) $ -- $(274,617) $ 149,168
Receivables....... 36,420 (18,733) 17,687 -- 17,687 -- -- -- 17,687
Inventories....... 6,599 (5,309) 1,290 -- 1,290 -- -- -- 1,290
Prepaid expenses
and other
current assets... 2,647 (2,039) 608 -- 608 -- 2,031 -- 2,639
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
Total current
assets......... 1,154,116 (280,746) 873,370 -- 873,370 (430,000) 2,031 (274,617) 170,784
Property and
equipment, net.... 592,594 (427,389) 165,205 -- 165,205 610,000 121,490 151,405 1,048,100
Investments in
affiliates........ 2,258 -- 2,258 -- 2,258 -- -- -- 2,258
Investments in
Unrestricted
Subsidiaries...... -- 744,941 744,941 197,000 941,941 -- -- -- 941,941
Goodwill and other
intangible assets,
net............... 569,740 (426,011) 143,729 -- 143,729 -- -- -- 143,729
Deferred financing
costs and other
assets, net....... 31,522 (3,340) 28,182 -- 28,182 -- -- -- 28,182
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
$2,350,230 $(392,545) $1,957,685 $197,000 $2,154,685 $ 180,000 $123,521 $(123,212) $2,334,994
========== ========= ========== ======== ========== ========= ======== ========= ==========
Liabilities and
Stockholders'
Equity:
Current
liabilities:
Accounts
payable.......... $ 46,020 $ (34,648) $11,372 $ -- $11,372 $ -- $ -- $ -- $ 11,372
Other current
liabilities...... 46,867 (40,586) 6,281 -- 6,281 -- 309 -- 6,590
Long-term debt,
current
maturities....... -- -- -- -- -- -- -- -- --
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
Total current
liabilities.... 92,887 (75,234) 17,653 -- 17,653 -- 309 -- 17,962
Long-term debt,
less current
maturities........ 879,710 (256,111) 623,599 -- 623,599 -- -- -- 623,599
Other liabilities.. 22,823 (22,015) 808 -- 808 -- -- -- 808
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
Total
liabilities...... 995,420 (353,360) 642,060 -- 642,060 -- 309 -- 642,369
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
Minority
interests......... 39,185 (39,185) -- -- -- -- -- -- --
Redeemable
preferred stock... 201,063 -- 201,063 -- 201,063 -- -- -- 201,063
Stockholders'
equity............ 1,114,562 -- 1,114,562 197,000 1,311,562 180,000 123,212 (123,212) 1,491,562
---------- --------- ---------- -------- ---------- --------- -------- --------- ----------
$2,350,230 $(392,545) $1,957,685 $197,000 $2,154,685 $ 180,000 $123,521 $(123,212) $2,334,994
========== ========= ========== ======== ========== ========= ======== ========= ==========
</TABLE>
43
<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 four years in the period ended December 31, 1998,
and as of December 31, 1995, 1996, 1997 and 1998, have been derived from the
consolidated financial statements of CCIC, which have been audited by KPMG LLP,
independent certified public accountants. The results of operations for the
year ended December 31, 1998 are not comparable to the year ended December 31,
1997, and the results for the year ended December 31, 1997 are not comparable
to the year ended December 31, 1996 as a result of business acquisitions
completed in 1997 and 1998. Results of operations of these acquired businesses
are included in CCIC's consolidated financial statements for the periods after
the respective dates of acquisition. [[D] The selected historical financial and
other data for the restricted group under our high yield debt instruments 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 related notes of CCIC included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1995 1996 1997 1998
-------- -------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Site rental and broadcast
transmission..................... $ 4,052 $ 5,615 $ 11,010 $ 75,028
Network services and other........ 6 592 20,395 38,050
-------- -------- --------- ----------
Total net revenues.............. 4,058 6,207 31,405 113,078
-------- -------- --------- ----------
Costs of operations:
Site rental and broadcast
transmission..................... 1,226 1,292 2,213 26,254
Network services and other........ -- 8 13,137 21,564
-------- -------- --------- ----------
Total costs of operations....... 1,226 1,300 15,350 47,818
-------- -------- --------- ----------
General and administrative......... 729 1,678 6,824 23,571
Corporate development(a)........... 204 1,324 5,731 4,625
Non-cash compensation charges(b)... -- -- -- 12,758
Depreciation and amortization...... 836 1,242 6,952 37,239
-------- -------- --------- ----------
Operating income (loss)............ 1,063 663 (3,452) (12,933)
Equity in earnings (losses) of
unconsolidated affiliate.......... -- -- (1,138) 2,055
Interest and other income
(expense)(c)...................... 53 193 1,951 4,220
Interest expense and amortization
of deferred financing costs....... (1,137) (1,803) (9,254) (29,089)
-------- -------- --------- ----------
Loss before income taxes and
minority interests................ (21) (947) (11,893) (35,747)
Provision for income taxes......... -- (10) (49) (374)
Minority interests................. -- -- -- (1,654)
-------- -------- --------- ----------
Net loss........................... (21) (957) (11,942) (37,775)
Dividends on preferred stock....... -- -- (2,199) (5,411)
-------- -------- --------- ----------
Net loss after deduction of
dividends on preferred stock...... $ (21) $ (957) $ (14,141) $ (43,186)
======== ======== ========= ==========
Loss per common share--basic and
diluted........................... $ (0.01) $ (0.27) $ (2.27) $ (1.02)
======== ======== ========= ==========
Common shares outstanding--basic
and diluted (in thousands)........ 3,316 3,503 6,238 42,518
======== ======== ========= ==========
Other Data:
Site data (at period end)(d):
Towers owned....................... 126 155 240 1,344
Towers managed..................... 7 7 133 129
Rooftop sites managed (revenue
producing)........................ 41 52 80 135
-------- -------- --------- ----------
Total sites owned and managed...... 174 214 453 1,608
======== ======== ========= ==========
EBITDA(e).......................... $ 1,899 $ 1,905 $ 3,500 $ 37,064
[D] Restricted Group EBITDA........ 1,899 1,905 3,500 5,799
Capital expenditures............... 161 890 18,035 138,759
Summary cash flow information:
Net cash provided by (used for)
operating activities............. 1,672 (530) (624) 44,976
Net cash used for investing
activities....................... (16,673) (13,916) (111,484) (149,248)
Net cash provided by financing
activities....................... 15,597 21,193 159,843 345,248
Ratio of earnings to fixed
charges(f)........................ -- -- -- --
Balance Sheet Data (at period end):
Cash and cash equivalents.......... $ 596 $ 7,343 $ 55,078 $ 296,450
Property and equipment, net........ 16,003 26,753 81,968 592,594
Total assets....................... 19,875 41,226 371,391 1,523,230
Total debt......................... 11,182 22,052 156,293 429,710
Redeemable preferred stock(g)...... 5,175 15,550 160,749 201,063
Total stockholders' equity
(deficit)......................... 619 (210) 41,792 737,562
</TABLE>
44
<PAGE>
- --------
(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 (1) nonrecurring cash bonuses of $0.9 million paid to certain
executive officers in connection with our initial investment in Castle
Transmission and (2) a nonrecurring cash charge of $1.3 million related to
our purchase of shares of our common stock from our former chief executive
officer for our initial Castle Transmission investment. See "Certain
Relationships and Related Transactions".
(b) Represents charges related to the issuance of stock options to certain
employees and executives.
(c) Includes a $1.2 million fee received in March 1997 as compensation for
leading an investment consortium that provided the equity financing for our
initial Castle Transmission investment.
(d) Represents our aggregate number of sites of CCIC as of the end of each
period.
(e) 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 our 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, our 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, 1997 and 1998, earnings were insufficient to cover fixed
charges by $21,000, $0.9 million, $10.8 million and $37.8 million,
respectively.
(g) The 1995, 1996 and 1997 amounts represent (1) the senior convertible
preferred stock we privately placed in August 1997 and October 1997, all of
which has been converted into shares of common stock, and (2) Series A
convertible preferred stock, Series B convertible preferred stock and the
Series C convertible preferred stock we privately placed in April 1995,
July 1996 and February 1997, respectively, all of which has been converted
into shares of common stock in connection with the completion of our
initial public offering in August 1998. The 1998 amount represents our 12
3/4% senior exchangeable preferred stock.
----------------
The selected quarterly historical consolidated financial data for CCIC set
forth below have been derived from the consolidated financial statements of
CCIC.
<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>
1997:
Net revenues............ $ 1,994 $ 4,771 $ 11,481 $ 13,159
Gross profit(1)......... 1,731 2,258 5,648 6,418
Net loss............... (443) (1,706) (4,001) (5,792)
Loss per common share--
basic and diluted..... (0.13) (0.51) (0.62) (0.69)
1998:
Net revenues........... $ 11,837 $ 11,530 $ 28,894 $ 60,817
Gross profit(1)........ 6,244 7,550 15,835 35,631
Net loss............... (6,606) (6,426) (17,444) (7,299)
Loss per common share--
basic and diluted..... (0.79) (0.78) (0.33) (0.09)
</TABLE>
- --------
(1) Represents net revenues less costs of operations.
45
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF CTSH
The selected historical financial data for CTSH, which was 34.3% owned by
CCIC prior to the roll-up, presents:
(1) selected historical financial data of the BBC home service
transmission business prior to its acquisition by CTSH for the year
ended March 31, 1996 and the eleven and two months ended February
27, 1997;
(2) selected historical consolidated financial data of CTSH after such
acquisition for the one month ended March 31, 1997 and for the nine
months ended December 31, 1997; and
(3) selected historical consolidated financial data of CTSH 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 BBC home service transmission business prior to its
acquisition by CTSH, 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 CTSH, 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 BBC home service transmission business, and the selected historical
financial data for the eight months ended August 31, 1998 have been derived
from the unaudited consolidated financial statements of CTSH, which include all
adjustments that CTSH 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 CTSH that may be
expected for the entire year. CCIC acquired a majority ownership interest in
CTSH and its subsidiaries upon completion of the roll-up of our U.K. business
in August 1998 and, as a result, historical financial data of CTSH for the year
ended December 31, 1998 is not presented. This information reflects financial
data for CTSH as a whole, is not limited to that portion of the financial data
attributable to CCIC's percentage ownership of CTSH before the roll-up and is
not indicative of any distributions or dividends that CCIC might receive in the
future. Our U.K. business is significantly limited in its ability to make
dividends and distributions to CCIC. See "Risk Factors--As a Holding Company,
We Require Dividends from Subsidiaries 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--CTSH" and the consolidated financial
statements and related notes of CTSH included elsewhere in this document.
46
<PAGE>
<TABLE>
<CAPTION>
BBC Home Service
Transmission Business CTSH
---------------------------------------------- ---------------------------------------------
Eleven Two One Nine Eight
Year Months Months Month Months Months
Ended Ended Ended Ended Ended Ended
March 31, February 27, February 27, March 31, December 31, August 31,
1996 1997 1997 1997 1997 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)
financing
activities...... (7,121) (6,335) (4,450) 57,706 (12,423) 9,955
<CAPTION>
CTSH
---------------------------------
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..... $10,697 $94,365 $98,160
Operating
expenses(b)..... 8,627 79,774 79,517
--------- ------------ ----------
Operating
income.......... 2,070 14,591 18,643
Interest and
other income.... 81 479 731
Interest expense
and amortization
of deferred
financing
costs........... (1,611) (20,650) (15,808)
--------- ------------ ----------
Income (loss)
before income
taxes........... 540 (5,580) 3,566
Provision for
income taxes.... -- -- --
--------- ------------ ----------
Net income (loss)
under U.K.
GAAP............ 540 (5,580) 3,566
Adjustments to
convert to U.S.
GAAP............ 130 1,440 2,483
--------- ------------ ----------
Net income (loss)
under U.S.
GAAP............ $ 670 $(4,140) $ 6,049
========= ============ ==========
Other Data:
Site data(c):
Towers and
revenue
producing
rooftop sites
at end of
period......... 801 808
============ ==========
EBITDA (under
U.S. GAAP)(d)... $ 5,095 $42,726 $48,627
Capital
expenditures
(under U.S.
GAAP)........... 1,244 23,879 60,366
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...... 8,099 42,493 45,271
Net cash used for
investing
activities...... (87,944) (24,390) (60,085)
Net cash provided
by (used for)
financing
activities...... 95,954 (20,657) 16,553
</TABLE>
- -------
(a) CTSH 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. See "Certain
Currency Translations."
(b) Included in operating expenses for the eight months ended August 31, 1998
are non-cash compensation charges for (Pounds)2.3 million ($3.9 million)
related to the issuance of stock options to certain executives and
employees.
(c) As of August 31, 1998, our U.K. business had 54 revenue producing rooftop
sites that 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 CTSH'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,
Castle Transmission'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 ($4.1 million).
47
<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 CTSH and is intended to assist in
understanding (1) CCIC's consolidated financial condition as of December 31,
1998 and its consolidated results of operations for each year in the three-year
period ended December 31, 1998 and (2) CTSH's consolidated results of
operations for each twelve-month period in the two-year period ended March 31,
1998. 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 CTSH" and the consolidated
financial statements and related notes included elsewhere in this prospectus.
Results of operations of the acquired businesses that are wholly and majority
owned are included in our consolidated financial statements for the periods
subsequent to the respective dates of acquisition. As such, our results of
operations for the year ended December 31, 1998 are not comparable to the year
ended December 31, 1997, and the results for the year ended December 31, 1997
are not comparable to the year ended December 31, 1996.
Overview
The continued growth of our business depends substantially on the condition
of the wireless communications and broadcast industries. We believe that the
demand for communications sites will continue to grow and expect that, due to
increased competition, wireless carriers will continue to seek operating and
capital efficiencies by (1) outsourcing certain network services and the build-
out and operation of new and existing infrastructure and (2) planning to use a
tower site as a common location, or "co-locating", for the placement of their
antennas and transmission equipment alongside the equipment of other
communications providers. In addition, wireless carriers are beginning to seek
to sell their wireless communications infrastructure to, or establish joint
ventures with, experienced infrastructure providers, such as CCIC, that have
the ability to manage networks.
Further, we believe that wireless carriers and broadcasters will continue
to seek to outsource the operation of their towers and, eventually, their
transmission networks, including the transmission of their signals. Management
believes that our ability to manage towers and transmission networks and our
proven track record of providing services addressing all aspects of signaling
systems from the originating station to the terminating receiver, or "end-to-
end" services, to the wireless communications and broadcasting industries
position our company to capture such business.
The willingness of wireless carriers to utilize our 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.
Our revenues that are derived from the provision of transmission services to
the broadcasting industry will be affected by:
. the timing of the roll-out of digital television broadcasts from
tower-mounted antenna systems, or "digital terrestrial television
broadcasts", in both the United Kingdom and the United States, as
well as in other countries around the world;
48
<PAGE>
. consumer demand for digital terrestrial broadcasting;
. interest rates;
. cost of capital;
. zoning restrictions on towers; and
. the cost of building towers.
As an important part of our business strategy, we will seek:
(1) to maximize utilization of our tower capacity,
(2) to utilize the expertise of U.S. and U.K. personnel to capture global
growth opportunities,
(3) to partner with wireless carriers to assume ownership of their
existing towers, and
(4) to acquire existing transmission networks globally as opportunities
arise.
Results of Operations
Our primary sources of revenues are from:
(1) renting antenna space on towers and rooftops sites,
(2) providing network services, and
(3) providing analog and digital broadcast transmission services.
CCIC
CCIC's primary sources of revenues are from (1) the rental of antenna space
on towers and rooftop sites and (2) 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 those operating in the following categories of wireless
communications:
. microwave;
. cellular;
. personal communications services, a digital service operating at a
higher frequency range than cellular and is provided by companies
such as Sprint PCS, OmniPoint and PrimeCo;
. paging;
. specialized mobile radio, a servicing operating in the frequency
range used for two-way radio communication by public safety,
trucking companies, and other dispatch service users; and
. enhanced specialized mobile radio, a service operating in the
frequency range typically used for digital communications and
provided by Nextel and others.
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:
(1) network design and site selection,
(2) site acquisition,
(3) site development and construction,
(4) antenna installation, and
(5) other services.
49
<PAGE>
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 May Reduce the Predictability of Our Results".
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 specialized mobile radio
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
specialized mobile radio). 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;
. monitoring costs; and
. 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 (1) to support its internal
operations, including construction and maintenance of its owned towers, and (2)
to maintain the employees necessary to provide end-to-end services to third
parties regardless of the level of such business at any time. We believe that
our experienced staff enables us to provide the type of end-to-end services
that enhance our ability to acquire access to the infrastructure of wireless
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 which consists primarily of towers, construction equipment and
vehicles, goodwill and other intangible assets recorded in connection with
business acquisitions. Depreciation of towers and amortization of
50
<PAGE>
goodwill are computed with a useful life of 20 years. Amortization of other
intangible assets (principally the value of existing site rental contracts at
Crown Communication) 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, we completed the acquisition of TEA and the acquisition of
TeleStructures. In August 1997, we completed the acquisition of Crown
Communication. In August 1998, we completed a share exchange with the
shareholders of CTSH, under which our ownership of CTSH increased from
approximately 34.3% to 80%. In October 1998, CTSH completed the acquisition of
Millennium. Results of operations of these acquired businesses are included in
our consolidated financial statements for the periods subsequent to the
respective dates of acquisition. As such, our results of operations for the
year ended December 31, 1998 are not comparable to the year ended December 31,
1997, and the results for the year ended December 31, 1997 are not comparable
to the year ended December 31, 1996. See "--CTSH" for a description of the
revenues and operating expenses that are included in CCIC's consolidated
results of operations subsequent to the completion of the share exchange in
August 1998.
The following information is derived from CCIC's historical Consolidated
Statements of Operations for the periods indicated.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1997 December 31, 1998
-------------------- ------------------ ------------------
Percent Percent Percent
of Net of Net of Net
Amount Revenues Amount Revenues Amount Revenues
--------- --------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.......... $ 5,615 90.5% $ 11,010 35.1% $ 75,028 66.4%
Network services and
other................. 592 9.5 20,395 64.9 38,050 33.6
--------- ------- -------- ----- -------- -----
Total net revenues... 6,207 100.0 31,405 100.0 113,078 100.0
--------- ------- -------- ----- -------- -----
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission.......... 1,292 23.0 2,213 20.1 26,254 35.0
Network services and
other................. 8 1.4 13,137 64.4 21,564 56.7
--------- -------- --------
Total costs of
operations.......... 1,300 21.0 15,350 48.9 47,818 42.3
General and
administrative........ 1,678 27.0 6,824 21.7 23,571 20.8
Corporate development.. 1,324 21.3 5,731 18.3 4,625 4.1
Non-cash compensation
charges............... -- -- -- -- 12,758 11.3
Depreciation and
amortization.......... 1,242 20.0 6,952 22.1 37,239 32.9
--------- ------- -------- ----- -------- -----
Operating income
(loss)................. 663 10.7 (3,452) (11.0) (12,933) (11.4)
Other income (expense):
Equity in earnings
(losses) of
unconsolidated
affiliate............. -- -- (1,138) (3.6) 2,055 1.8
Interest and other
income (expense)...... 193 3.1 1,951 6.2 4,220 3.7
Interest expense and
amortization of
deferred financing
costs................. (1,803) (29.0) (9,254) (29.5) (29,089) (25.7)
--------- ------- -------- ----- -------- -----
Loss before income taxes
and minority
interests.............. (947) (15.2) (11,893) (37.9) (35,747) (31.6)
Provision for income
taxes.................. (10) (0.2) (49) (0.1) (374) (0.3)
Minority interests...... -- -- -- -- (1,654) (1.5)
--------- ------- -------- ----- -------- -----
Net loss................ $ (957) (15.4)% $(11,942) (38.0)% $(37,775) (33.4)%
========= ======= ======== ===== ======== =====
</TABLE>
Comparison of Years Ended December 31, 1998 and 1997
Consolidated revenues for 1998 were $113.1 million, an increase of $81.7
million from 1997. This increase was primarily attributable to:
(1) a $64.0 million, or 581.5%, increase in site rental and broadcast
transmission revenues, of which $52.5 million was attributable to
CTSH and $11.5 million was attributable to the Crown Communication
operations;
51
<PAGE>
(2) an $11.4 million increase in network services revenues from the Crown
Communication operations; and
(3) $5.6 million in network services revenues from CTSH.
Costs of operations for 1998 were $47.8 million, an increase of $32.5
million from 1997. This increase was primarily attributable to:
(1) a $24.0 million increase in site rental and broadcast transmission
costs, of which $20.1 million was attributable to CTSH and $3.9
million was attributable to the Crown Communication operations;
(2) a $3.8 million increase in network services costs related to the
Crown Communication operations; and
(3) $4.2 million in network services costs from CTSH.
Costs of operations for site rental and broadcast transmission as a
percentage of site rental and broadcast transmission revenues increased to
35.0% for 1998 from 20.1% for 1997, primarily due to (1) higher costs
attributable to the CTSH operations which are inherent with CTSH's broadcast
transmission business, and (2) higher costs for the Crown Communication
operations. Costs of operations for network services as a percentage of network
services revenues decreased to 56.7% for 1998 from 64.4% for 1997, primarily
due to improved margins from the Crown Communication operations. Margins from
the Crown Communication network services operations vary from period to period,
often as a result of increasingly competitive market conditions.
General and administrative expenses for 1998 were $23.6 million, an
increase of $16.7 million from 1997. This increase was primarily attributable
to:
(1) an $11.3 million increase in expenses related to the Crown
Communication operations;
(2) a $2.8 million increase in expenses at our corporate office; and
(3) $2.4 million in expenses at CTSH.
General and administrative expenses as a percentage of revenues decreased
for 1998 to 20.8% from 21.7% for 1997 because of lower overhead costs as a
percentage of revenues for CTSH, partially offset by higher overhead costs as a
percentage of revenues for Crown Communication and the increase in costs at our
corporate office.
Corporate development expenses for 1998 were $4.6 million, a decrease of
$1.1 million from 1997. Corporate development expenses for 1997 included
nonrecurring compensation charges associated with the CTSH investment of (1)
$0.9 million for certain executive bonuses and (2) the repurchase of shares of
our common stock from a member of our board of directors, which resulted in
compensation charges of $1.3 million. Corporate development expenses for 1998
included discretionary bonuses related to our performance totaling
approximately $1.8 million for certain members of our management.
We have recorded non-cash compensation charges of $12.8 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 1998 was $37.2 million, an increase of
$30.3 million from 1997. This increase was primarily attributable to (1) a $9.5
million increase in depreciation and amortization related to the property and
equipment, goodwill and other intangible assets acquired in the Crown
Communication acquisition; and (2) $20.3 million of depreciation and
amortization related to the property and equipment and goodwill from CTSH.
52
<PAGE>
The equity in earnings (losses) of unconsolidated affiliate represents our
34.3% share of CTSH's net earnings (losses) for the periods from March 1997
through August 1998, at which time the share exchange with CTSH's shareholders
was completed. For the eight months ended August 31, 1998, after making
appropriate adjustments to CTSH's results of operations for such period to
conform to generally accepted accounting principles of the United States, CTSH
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 CTSH's results of
operations for such period are non-cash compensation charges for approximately
$3.8 million related to the issuance of stock options to certain members of
CTSH's management.
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 CTSH. Interest income for 1998 resulted primarily from
(1) the investment of excess proceeds from the sale of the 10 5/8% discount
notes in November 1997; and (2) the investment of the net proceeds from the
initial public offering in August 1998. See "--Liquidity and Capital
Resources".
Interest expense and amortization of deferred financing costs for 1998 was
$29.1 million, an increase of $19.8 million, or 214.3%, from 1997. This
increase was primarily attributable to amortization of the original issue
discount on the 10 5/8% notes and interest on CTSH's indebtedness.
Minority interests represent the minority shareholder's 20% interest in
CTSH's operations.
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:
(1) a $5.4 million, or 96.1%, increase in site rental revenues, of which
$4.2 million was attributable to the Pittsburgh tower operations we
acquired in 1996 and $0.7 million was attributable to the Puerto Rico
operations;
(2) $10.4 million in network services revenues from TEA; and
(3) $7.2 million in network services revenues from the Pittsburgh tower
operations.
The remainder of the increase was largely attributable to higher revenues
from specialized mobile radio and microwave radio services in Puerto Rico and
the monthly service fees received from CTSH 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:
(1) $8.5 million of network services costs related to the TEA operations;
(2) $3.9 million of network services costs related to the Pittsburgh
tower operations; and
(3) $0.9 million in site rental costs attributable to the Pittsburgh
tower 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 Pittsburgh tower operations and $1.4 million
of expenses related to the TEA operations, along with
53
<PAGE>
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 the Pittsburgh tower operations 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 CTSH investment of (1)
$0.9 million for certain executive bonuses and (2) 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:
(1) $4.7 million of depreciation and amortization related to the
property and equipment, goodwill and other intangible assets
acquired in the Pittsburgh tower operations acquisition;
(2) $0.5 million of depreciation and amortization related to the property
and equipment and goodwill acquired in the acquisitions of TEA and
TeleStructures; and
(3) $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 CTSH's net loss for the period from March through
December 1997. After making appropriate adjustments to CTSH's results of
operations for such period to conform to generally accepted accounting
principles of the United States, CTSH 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 CTSH, the impact on earnings of which was partially
offset by certain executive bonuses related to the CTSH 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:
(1) commitment fees related to an unfunded interim loan facility related
to the Pittsburgh tower operations acquisition and an unfunded
revolving credit facility;
(2) interest on notes payable to the former stockholders of the
Pittsburgh tower operations for a portion of the purchase price of
Crown Communication Inc.;
(3) amortization of the original issue discount on the 10 5/8% discount
notes;
(4) interest and fees associated with borrowings under CCIC's bank credit
facility which were used to finance the Pittsburgh tower operations
acquisition on an interim basis;
(5) interest on outstanding borrowings assumed in connection with the
Pittsburgh tower operations acquisition; and
(6) interest on borrowings under CCIC's bank credit facility which were
used to finance the acquisition of the Puerto Rico system.
54
<PAGE>
CTSH
CTSH's primary sources of revenues are from:
(1) the provision of analog and digital broadcast transmission services
to the BBC and commercial broadcasters;
(2) the rental of antenna space on towers; and
(3) 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.
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
December 31, 1998, approximately 200 companies rented space on approximately
514 of CTSH's 919 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 increasing portion of CTSH's total U.K. revenue base, and we believe
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 (1) network design and site selection,
site acquisition, site development and antenna installation and (2) site
management and other services. Network design and development and related
services are provided to:
(1) a number of broadcasting and related organizations, both in the
United Kingdom and other countries;
(2) all four U.K. cellular operators; and
(3) 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 CTSH 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. CTSH receives revenues for such
services under contracts with original terms of between three and five years.
Such contracts provide fixed prices for 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;
.telephone and utility service costs; and
.repairs and maintenance on both transmission equipment and structures.
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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 CTSH's existing lines of
business.
Depreciation and amortization charges relate to CTSH's property and
equipment, consisting primarily of towers, broadcast transmission equipment and
associated buildings, and goodwill recorded in connection with the acquisition
of the home service transmission business from the BBC. Depreciation is
computed with the following useful lives:
(1) 20 to 25 years for towers;
(2) 20 years for broadcast transmission equipment; and
(3) 20 to 50 years for buildings.
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 (1) CTSH for periods subsequent to February 28, 1997 (the date of
inception of CTSH's operations) and (2) the BBC home service transmission
business for periods prior to that date. For purposes of the following
discussion, CTSH'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 CTSH'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 CTSH 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, CTSH 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.
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CTSH 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. See "Certain Currency
Translations." The following amounts reflect certain adjustments to present the
results of operations in accordance with U.S. generally accepted accounting
principles. For the results of the BBC home service transmission business, such
adjustments affect depreciation and amortization expense as a result of
differences in the carrying amounts for property and equipment; for CTSH, such
adjustments affect (1) operating expenses as a result of differences in the
accounting for pension costs, and (2) interest expense as a result of the
capitalization of interest costs in connection with constructed assets.
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months 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 oth-
er........................ 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>
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 (1) a $1.4 million
increase in broadcast transmission services and site rental revenues and (2) 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 and related
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
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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 (1)
increases in site rental revenues from existing sites with little change in
site operating costs; and (2) 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 (1) a higher proportion of broadcast consulting revenues, which
results in higher margins than certain other network design and development and
related services, and (2) 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 CTSH 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 (1) a decrease in the estimated
useful lives for certain transmission and power plant equipment from 25 to 20
years; and (2) 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 (1) the investment of excess proceeds from amounts
drawn under CTSH's bank credit facilities in February 1997; and (2) 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:
(1) $4.9 million related to amounts drawn under the CTSH credit facility;
(2) $15.6 million related to the Castle Transmission bonds; and
(3) $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 CTSH 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.
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Liquidity and Capital Resources
Our business strategy contemplates substantial capital expenditures:
(1) in connection with the expansion of our tower portfolios by
partnering with wireless carriers to assume ownership or control of
their existing towers by pursuing build-to-suit opportunities and
by pursuing other tower acquisition opportunities and
(2) to acquire existing transmission networks globally as opportunities
arise.
Since its inception, CCIC has generally funded its activities, other than
acquisitions and investments, through excess proceeds from contributions of
equity capital. CCIC has financed acquisitions and investments with the
proceeds from equity contributions, borrowings under our senior credit
facilities, issuances of debt securities and the issuance of promissory notes
to sellers. Since its inception, CTSH has generally funded its activities,
other than the acquisition of the BBC home service transmission business,
through cash provided by operations and borrowings under CTSH's credit
facility. CTSH financed the acquisition of the BBC home service transmission
business with the proceeds from equity contributions and the issuance of the
Castle Transmission bonds.
For the years ended December 31, 1996, 1997 and 1998, our net cash provided
by (used for) operating activities was ($0.5 million), ($0.6 million) and $45.0
million, respectively. For the years ended December 31, 1996, 1997 and 1998,
our net cash provided by financing activities was $21.2 million, $159.8 million
and $345.2 million, respectively. Our primary financing-related activities in
1998 included the following:
Exchangeable Preferred Stock Offering. On December 16, 1998, we privately
placed 200,000 shares of our 12 3/4% Senior Exchangeable Preferred Stock
due 2010, with a liquidation preference of $1,000 per share, resulting in
net proceeds to us of approximately $193.0 million. We used a portion of
the net proceeds of the exchangeable preferred stock offering to repay our
outstanding indebtedness under Crown Communication's senior credit
facility. We used the remainder of the net proceeds of the exchangeable
preferred stock offering to finance a portion of our investment in the Bell
Atlantic joint venture.
Initial Public Offering. On August 18, 1998, we completed our initial
public offering at a price to the public of $13.00 per share. We sold
12,320,000 shares of our common stock and received proceeds of $151.0
million, after underwriting discounts of $9.1 million but before other
expenses of our initial public offering totaling approximately $4.1
million. We used the net proceeds from our initial public offering to
finance a portion of our investment in the Bell Atlantic joint venture.
Capital expenditures were $138.8 million for the twelve months ended
December 31, 1998, of which $3.7 million were for CCIC, $84.9 million were for
Crown Communication and $50.2 million were for CTSH. We anticipate that we will
build, through the end of 1999, between 900 and 1,200 towers at an aggregate
cost of between $170.0 million and $220.0 million. We also expect that the
capital expenditure requirements related to the roll-out of digital broadcast
transmission in the United Kingdom will be approximately (Pounds)40.0 million
($66.5 million).
In addition to capital expenditures in connection with build-to-suits, we
expect to apply a significant amount of capital to finance the cash portion of
the consideration being paid in connection with the proposed transactions.
In connection with the Bell Atlantic joint venture, we issued approximately
15.6 million shares of our common stock and contributed $250.0 million in cash
to the joint venture. The joint venture borrowed approximately $180.0 million
under a committed $250.0 million revolving credit facility, following which the
joint venture made a $380.0 million cash distribution to Bell Atlantic.
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<PAGE>
In connection with the proposed BellSouth transaction, we will issue
approximately 9.1 million shares of our common stock and pay BellSouth $430.0
million in cash. We have deposited $50.0 million in an escrow account pending
the first closing of the transaction, which we funded through a loan agreement
we entered into on March 15, 1999. We expect to use a portion of the net
proceeds of our offerings to finance this transaction.
In connection with the proposed Powertel acquisition, we will pay Powertel
$275.0 million in cash. We have deposited $50.0 million, which we funded
through the March 15, 1999 loan agreement, in an escrow account to be applied
to the purchase price at closing. We expect to use a portion of the net
proceeds of our offerings to finance this transaction.
We expect that the completion of the proposed transactions and the
execution of our new tower build, or build-to-suit program, will have a
material impact on our liquidity. We expect that once integrated, these
transactions will have a positive impact on liquidity, but will require some
period of time to offset the initial adverse impact on liquidity. In addition,
we believe that as new towers become operational and we begin to add tenants,
they should result in a long-term increase in liquidity.
Our liquidity may also be materially impacted if we fail to complete the
BellSouth transaction or the Powertel acquisition. If we complete our offerings
and subsequently fail to complete the BellSouth transaction or the Powertel
acquisition, the proceeds of the offerings would no longer be required to be
allocated to finance such transactions and would be available to us as
additional liquidity. The increase in our liquidity, however, could be somewhat
offset by any portion of the escrow payments made in connection with such
transactions that we may forfeit as a result of not closing such transactions.
See "Recent and Proposed Transactions".
To fund the execution of our business strategy, including the proposed
transactions described in this prospectus and the construction of new towers
that we have agreed to build, we expect to use the net proceeds of our
offerings and borrowings available under our U.S. and U.K. credit facilities.
We will have additional cash needs to fund our operations in the future. We may
also have additional cash needs in the near term if additional tower
acquisitions or build-to-suit opportunities arise. Some of the opportunities
that we are currently pursuing could require significant additional capital. If
we do not otherwise have cash available, or borrowings under our credit
facilities have otherwise been utilized, when our cash need arises, we would be
forced to seek additional debt or equity financing or to forego the
opportunity. In the event we determine 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 our
existing indebtedness.
As of December 31, 1998, assuming we had completed our offerings, we would
have had consolidated cash and cash equivalents of $1,108.5 million (including
$6.5 million at CTSH), consolidated long-term debt of $879.7 million,
consolidated redeemable preferred stock of $201.1 million and consolidated
stockholders' equity of $1,114.6 million. As of December 31, 1998, assuming we
had completed the offerings and the recent and proposed transactions described
in this prospectus, we would have had consolidated cash and cash equivalents of
$195.5 million (including $6.5 million at CTSH and $45.9 million at the Bell
Atlantic joint venture), consolidated long-term debt of $1,059.7 million,
consolidated redeemable preferred stock of $201.1 million and consolidated
stockholders' equity of $1,491.6 million.
As of March 1, 1999, Crown Communication and its subsidiaries had unused
borrowing availability under its senior credit facility of approximately $54.0
million, and CTSH had unused borrowing availability under its credit facility
of approximately (Pounds)24.0 million ($39.9 million). As of December 31, 1998,
Crown Communication and its subsidiaries and CTSH and its subsidiaries had
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<PAGE>
approximately $77.6 million and (Pounds)30.8 million ($51.2 million) of unused
borrowing availability, respectively, under Crown Communication's senior credit
facility and CTSH's credit facility. Upon its formation, the Bell Atlantic
joint venture borrowed $180.0 million under a committed $250.0 million credit
facility. Crown Communication's senior credit facility, CTSH's credit facility
and the joint venture's credit facility require that the respective borrowers
maintain certain financial covenants; in addition, all three credit facilities
place restrictions on the ability of the borrower 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 borrowing subsidiaries to pay
dividends to CCIC.
If CCIC is unable to refinance its subsidiary debt or renegotiate the terms
of such debt, CCIC may not be able to meet its debt service requirements,
including interest payments on the notes, in the future. The cash-pay notes
will require annual cash interest payments of approximately $ , million. Prior
to May 15, 2003 and 2004, the interest expense on our 10 5/8% discount
notes and the discount notes offered in the debt offering, respectively, will
be comprised solely of the amortization of original issue discount. Thereafter,
the 10 5/8% discount notes and the discount notes offered in the debt offering
will require annual cash interest payments of approximately $26.7 million and
$ million, respectively. Prior to December 15, 2003, we do not expect to pay
cash dividends on our exchangeable preferred stock or, if issued, cash interest
on the exchange debentures. Thereafter, assuming all dividends or interest have
been paid-in-kind, our 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 Castle
Transmission bonds are (Pounds)11.25 million ($18.7 million). In addition,
Crown Communication's senior credit facility and Castle Transmission's credit
facility will require periodic interest payments on amounts borrowed
thereunder.
As a holding company, CCIC will require distributions or dividends from its
subsidiaries, or will be forced to use capital raised in debt and equity
offerings, to fund its debt obligations, including interest payments on the
cash-pay notes and eventually the 10 5/8% discount notes and the discount notes
offered in the debt offering. The terms of the indebtedness of CCIC's
subsidiaries significantly limit such subsidiaries' ability to distribute cash
to CCIC. As a result, CCIC will be required to apply a portion of the net
proceeds from the offerings to fund interest payments on the cash-pay notes. If
CCIC does not retain sufficient funds from the offerings or any future
financing, CCIC may not be able to make its interest payments on the cash-pay
notes.
Our ability to make scheduled payments of principal of, or to pay interest
on, our debt obligations, and our ability to refinance any such debt
obligations, will depend on our future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. We anticipate that we may need
to refinance all or a portion of our indebtedness, including our 10 5/8%
discount notes and the Castle Transmission bonds, on or prior to its scheduled
maturity. There can be no assurance that we will be able to effect any required
refinancings of our indebtedness on commercially reasonable terms or at all.
Compensation Charges Related to Stock Option Grants
During the period from April 24, 1998 through July 15, 1998, we granted
options to employees and executives for the purchase of 3,236,980 shares of our
common stock at an exercise price of $7.50 per share. Of such options, options
for 1,810,730 shares vested upon completion 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, we have assigned
to two individuals, including a newly-elected director, our right to repurchase
100,000 shares of our common stock from a stockholder at a price of $6.26 per
share. Since the granting of these options and the assignment
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of these rights to repurchase shares occurred subsequent to the date of the
share exchange agreement with CTSH's shareholders and at prices substantially
below the price to the public in the initial public offering, we have 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 initial public offering. Such compensation charge
will total approximately $18.4 million, of which approximately $10.6 million
was recognized upon completion of the initial public offering for such options
and shares which vested upon completion of the initial public offering, and
the remaining $7.8 million is being recognized over five years through the
second quarter of 2003 in the approximate amount per year of $1.6 million. 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 CTSH's management prior to the completion of the share exchange.
Impact of Recently Issued Accounting Standards
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. We have 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. We 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 our financial statements for the three months ending March 31,
1999; it is currently estimated that such charge will amount to approximately
$2,300,000.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). SFAS 133 requires that derivative instruments be recognized as either
assets or liabilities in the consolidated balance sheet based on their fair
values. Changes in the fair values of such derivative instruments will be
recorded either in results of operations or in other comprehensive income,
depending on the intended use of the derivative instrument. The initial
application of SFAS 133 will be reported as the effect of a change in
accounting principle. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. We will adopt the requirements of SFAS
133 in our financial statements for the three months ending March 31, 2000. We
have not yet determined the effect that the adoption of SFAS 133 will have on
our consolidated financial statements.
Year 2000 Compliance
The year 2000 problem is the result of computer programs having been
written using two digits (rather than four) to define the applicable year. Any
of our computer programs that have date-sensitive software may recognize a
date using "00" as 1900 rather than the year 2000, or may not recognize the
date at all. This could result in a system failure or miscalculations causing
disruption of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
In 1997 we established a year 2000 project to ensure that the issue
received appropriate priority and that necessary resources were made
available. This project includes the replacement of our worldwide business
computer systems with systems that use programs primarily from J.D. Edwards,
Inc. The new systems are expected to make approximately 90% of our business
computer systems year 2000 compliant and are in production today. Remaining
business software programs, including those supplied by vendors, will be made
year 2000 compliant through the year 2000 project or they will be retired.
None of our other information technology projects has been delayed due to the
implementation of the year 2000 project.
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Our year 2000 project is divided into the following phases:
(1) inventorying year 2000 items;
(2) assigning priorities to identified items;
(3) assessing the year 2000 compliance of items determined to be
material to us;
(4) repairing or replacing material items that are determined not to
be year 2000 compliant;
(5) testing material items; and
(6) designing and implementing contingency and business continuation
plans for each organization and company location.
We have completed the inventory and priority assessment phases and are 90%
complete with the assessing compliance phase. The remaining items include
various third party assurances regarding the year 2000 status of their
operations. We are now continuing with the testing phase of the year 2000
project. All critical broadcast equipment and non-information technology
related equipment has been tested and is either year 2000 compliant, has been
designated as year 2000 ready, or will be repaired or replaced by June 1999. A
year 2000 ready designation implies the equipment or system will function
without adverse effects beyond year 2000 but may not be aware of the century.
All critical information technology systems have been designated year 2000
compliant or are scheduled to be retired or remediated by July 1999. The
testing phase is ongoing as hardware or system software is remediated, upgraded
or replaced. Testing as well as remediation is scheduled for completion in July
1999. The final phase of our year 2000 project, contingency planning, will be
completed and tested to the extent possible by September 1999.
We have expended $6.9 million on the year 2000 project through December 31,
1998, of which approximately $6.8 million related to the implementation of the
J.D. Edwards Systems and related hardware. Funds for the year 2000 project are
provided from a separate budget of $0.6 million for all items.
The failure to correct a material year 2000 problem could result in an
interruption in, or a 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 year 2000 problem, resulting in part from the uncertainty of
the year 2000 readiness of third-party suppliers and customers, we are unable
to determine at this time whether the consequences of year 2000 failures will
have a material impact on our results of operations, liquidity or financial
condition. The year 2000 project is expected to significantly reduce our level
of uncertainty about the year 2000 problem and, in particular, about the year
2000 compliance and readiness of our material business partners. We believe
that, with the implementation of new business systems and completion of the
project as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
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INDUSTRY BACKGROUND
General
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. 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 develop and
construct, or "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 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 placing their transmission equipment with the equipment
of 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, we believe that there has been a fundamental shift in strategy
among established wireless carriers relating to infrastructure ownership. We
believe 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. We believe that those infrastructure providers
with a proven track record of providing comprehensive 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 land-based, or
terrestrial, television broadcasting. In the United States, the Federal
Communications Commission has required the four major networks (ABC, CBS, NBC
and Fox) to commence digital terrestrial television broadcasts in the top ten
markets by May 1999 and in the top 30 markets by November 1999. In the United
Kingdom, under the Broadcasting Act 1996, six digital television transmission
"multiplexes", which permit the holders to transmit digital television
broadcasting services, have been allocated. We successfully began commercial
operation of the digital terrestrial television 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, over 1,000 of which will be tall
towers in the United States. In addition, state-run broadcast transmission
networks are continuing to be privatized throughout the world.
We expect these trends to continue around the world in both the wireless
communications and broadcasting industries. We believe that the next logical
step in the outsourcing of infrastructure by wireless 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 efficiencies and to focus
on management of their customer bases and
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expansion of their service offerings. Management believes that such carriers
will only entrust the transmission of their signals to those infrastructure
providers, such as us, 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 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. We believe 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, such as: personal communications services; two-way, or narrowband,
paging services; paging; and wireless local telephone and data service. 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 whose footprints comprise strategically located
clusters of towers and other communication sites in that area to efficiently
and effectively establish service coverage in a given market.
Today, towers are owned by a variety of companies, including wireless
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 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
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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.
United Kingdom. The first towers in the United Kingdom were built for the
BBC's medium frequency radio services. Additional towers were built from the
1940s on for transmission of evolving radio and television technologies and
services. 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 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. As a
result of those national footprints, 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 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. In addition, tower operators face increased "not-
in-my-backyard" 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.
We believe 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 rates of loss of new and
current tenants as a result of the high costs that would be incurred by a
wireless carrier were it to relocate an antenna to
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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 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 in
the United Kingdom, may arise if the new location is at the edge of the
wireless 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, Radiocommunications Agency 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
Our existing and future business opportunities are affected by the ongoing
trends within the two major industries we serve, 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 we believe 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, personal communications services, paging and
specialized mobile radio. The industry has benefitted in recent years from
increasing demand for its services, and industry experts expect this demand to
continue to increase.
We believe that more communication sites will be required in the future to
accommodate the expected increase in demand for wireless communications
services. Further, we see additional opportunities with the development of
higher frequency technologies, which have a reduced cell range as a result of
the inability of the relevant radio signals to travel as far as the usual
cellular signals and 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, we believe 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 "not-in-my-backyard"
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 spectra 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, we believe that these carriers are beginning to seek to move their
tower portfolios off their balance sheets through sales to, or joint
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ventures with, experienced tower operators who have the proven capability to
provide comprehensive services to the wireless communications industry.
United States. Current emerging wireless communications systems, such as
personal communications services and specialized mobile radio, 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 personal communications services and specialized mobile
radio 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 estimates that, as of June
1998, there were 57,674 antenna sites in the United States. The Personal
Communications Industry Association 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, specialized mobile radio
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, we anticipate
that demand for microwave transmission facilities that provide "backhaul," a
medium for conveying 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 distribution
services employing one local transmission point to serve multiple receiver
points, including wireless local telephone and data services, wireless cable
television, wireless data and wireless Internet access, as well as forthcoming
auctions for personal communications services and local multi-point
distribution services. 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
wireless local telephony and data services 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 personal communications services and
digital terrestrial trunked radio, the U.K. equivalent of enhanced specialized
mobile radio, provides tower operators with immediate opportunities for site
rental and new tower build out. The four existing national carriers offering
global standard for mobile communications, the European standard for digital
radio communications primarily in the 800 and 1900 MHz frequency bands, or
personal communication services continue to fill in "dead zones" and add
capacity to their networks. Also, the carrier that is using the terrestrial
trunked radio standard, which is similar to global standard for mobile
communications 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 transmission services of voice or other
signals that are comparable to the range and quality of services delivered over
the 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
terrestrial
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trunked radio standard) for the use of the U.K. emergency services and the
announced licensing in early 1999 by the U.K. Government of 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 satellite and
cable. Terrestrial technology, the most common delivery method in the United
States, the United Kingdom and many other countries, relies on signal
transmission by wireless telegraphy, a type of data transmission technique,
from a network of ground-based 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.
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 carriers.
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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 digital
terrestrial television 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 digital terrestrial television
broadcasting 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
digital terrestrial television broadcasting, 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 digital
terrestrial television, they will have fewer resources to devote to the build
out of new tower infrastructure. We believe that these circumstances, along
with the relative scarcity of suitable sites and prevalent "not-in-my-backyard"
attitudes, will allow experienced tower operators to build and operate multiple
tenant broadcast towers to transmit digital terrestrial television broadcasting
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 and satellite. The Broadcasting Act of 1996 sets
out a framework for the licensing of multiple television channels on a single
digital frequency transmission, 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 digital
terrestrial transmitters: two and one-half of these multiplexes were reserved
for the BBC, ITV, Channel 4, S4C and Channel 5, three were awarded to
ONdigital, a joint venture of Carlton Communications PLC and Granada Group PLC,
and the other one-half was awarded to S4C Digital Network. We have 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 deployment of
digital terrestrial transmission equipment, 81 analog transmission sites and
towers will be upgraded with new transmitters and associated systems required
to support digital terrestrial broadcasting. 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.
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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 digital terrestrial television, we believe 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.
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BUSINESS
We are a leading owner and operator of towers and transmission networks for
wireless communications and broadcast companies. After giving effect to the
completion of the recent and proposed transactions, as of December 31, 1998, we
owned or managed 6,136 towers, including 4,450 towers in the United States and
Puerto Rico and 1,686 towers in the United Kingdom. Our customers currently
include many of the world's major wireless communications and broadcast
companies, including Bell Atlantic Mobile, BellSouth, AT&T Wireless, Nextel and
the BBC.
Our strategy is to use our leading domestic and international position to
capture the growing opportunities to consolidate ownership of existing towers
and to build new towers created by:
. the outsourcing of ownership and management of towers by major wireless
carriers;
. the need for existing wireless carriers to expand coverage and improve
capacity;
. the additional demand for towers created by new entrants into the
wireless communications industry;
. the privatization of state-run broadcast transmission networks; and
. the introduction of new digital broadcast transmission technology and
wireless technologies.
Our two main businesses are leasing antenna space on wireless and broadcast
multi-tenant towers and operating broadcast transmission networks. We also
provide related services to our customers, including network design, radio
frequency coverage predictions, site acquisition, site development and
construction, antenna installation and network management and maintenance. We
believe that our full service capabilities are a key competitive advantage in
forming strategic partnerships to acquire tower clusters and in winning
contracts for new tower construction.
Our primary business in the United States is the leasing of antenna space
to wireless carriers. After completion of the recent and proposed transactions
we describe in this prospectus, we will have tower clusters in 26 of the 50
largest U.S. metropolitan areas, including 23 metropolitan areas east of the
Mississippi river. We believe that by owning and managing large tower clusters
we are able to offer customers the ability to fulfill rapidly and efficiently
their network expansion plans across particular markets or regions. We have
entered into agreements with Bell Atlantic and BellSouth that will allow us to
control and operate substantially all the towers in their 850 MHz networks.
Our primary business in the United Kingdom is the operation of television
and radio broadcast transmission networks. Following the 1997 acquisition of
the BBC's broadcast and tower infrastructure, we were awarded long-term
contracts to provide the BBC and other broadcasters analog and digital
transmission services. We also lease antenna space to wireless operators in the
United Kingdom on the towers we acquired from the BBC and from various wireless
carriers. After completion of the One2One transaction described in this
prospectus, we will have nationwide broadcast and wireless coverage in the
United Kingdom.
We believe our towers are attractive to a diverse range of wireless
communications industries, including personal communications services,
cellular, enhanced specialized mobile radio, specialized mobile radio, paging,
and fixed microwave, as well as radio and television broadcasting. In the
United States our major customers include AT&T Wireless, Aerial, Bell Atlantic,
BellSouth, Motorola, Nextel, PageNet and Sprint PCS. In the United Kingdom our
major customers include the BBC, Cellnet, Dolphin, NTL, ONdigital, One2One,
Orange, Virgin Radio and Vodafone.
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We have embarked on a major construction program for our customers to
enhance our tower portfolios. In 1998, we constructed 231 towers at an
aggregate cost of approximately $46.0 million, and had begun construction of an
additional 72 towers as of December 31, 1998. In 1999, we plan to construct
between 900 and 1,200 towers at an estimated aggregate cost between $170.0
million and $220.0 million for wireless carriers such as Bell Atlantic,
BellSouth and Nextel. The actual number of towers built may be outside that
range depending on acquisition opportunities and potential build-to-suit
contracts from large wireless carriers. In addition, we were selected to build
and operate the world's first digital terrestrial television system in the
United Kingdom based on our broadcast engineering expertise.
Growth Strategy
Our objective is to become the premier global owner and operator of towers
and transmission networks for wireless communications and broadcast companies.
We are uniquely positioned to capitalize on global growth opportunities because
of:
. our experience in establishing and expanding our existing tower
portfolios;
. our experience in owning and operating both analog and digital
transmission networks;
. our significant relationships with wireless carriers and broadcasters;
and
. our ability to offer customers our in-house technical and operational
expertise.
The key elements of our business strategy are to:
. Maximize Utilization of Tower Capacity. We are seeking to take advantage
of the substantial operating leverage of our site rental business by
increasing the number of antenna leases on our owned and managed
communications sites. We believe that many of our towers have
significant capacity available for additional antenna space rental and
that increased utilization of our tower capacity can be achieved at low
incremental cost. For example, prior to our 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. We believe there is substantial demand for such capacity.
In addition, we believe that the extra capacity on our tower portfolios
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 our attractive
existing tower portfolios. Further, we intend to selectively build and
acquire additional towers to improve the coverage of our existing tower
portfolios to further increase their attractiveness. We intend to use
targeted sales and marketing techniques to increase utilization of and
investment return on our existing, newly constructed and acquired
towers.
. Utilize Expertise of Our U.S. and U.K. Personnel to Capture Global
Growth Opportunities. We are seeking to leverage the skills of our
personnel in the United States and the United Kingdom. We believe that
our ability to manage networks, including the transmission of signals,
will be an important competitive advantage in our pursuit of global
growth opportunities, as evidenced by our BBC, One2One, Bell Atlantic,
BellSouth and Powertel transactions. With our wireless communications
and broadcast transmission network design and radio frequency
engineering expertise, we are well positioned to:
(1)partner with major wireless carriers to assume ownership of their
existing towers,
(2)provide new tower construction for wireless carriers and
broadcasters and
(3) acquire existing broadcast transmission networks that are being
privatized around the world.
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. Partner with Wireless Carriers to Assume Ownership of their Existing
Towers. In addition to the proposed joint venture with Bell Atlantic and
the transaction with BellSouth, we are continuing to seek to partner
with other major wireless carriers to assume ownership of their existing
towers directly or through joint ventures or control their towers
through contractual arrangements. We believe 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, we believe 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. We believe that similar opportunities
will arise globally as the wireless communications industry further
expands.
. Build New Towers for Wireless Carriers and Broadcasters. As wireless
carriers continue to expand and fill-in their service areas, they will
require additional communications sites and will have to build new
towers where multi-tenant towers are 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 to build new towers for wireless
carriers, leveraging on our ability to offer end-to-end services.
. Acquire Existing Broadcast Transmission Networks. In 1997, Castle
Transmission successfully acquired the privatized domestic broadcast
transmission network of the BBC. In addition, we are implementing the
roll-out of digital television transmission services throughout the
United Kingdom. As a result of this experience, we are 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 carriers, as well as to install
new technologies such as digital terrestrial transmission services. In
addition, our experience in broadcast transmission services allows us to
consider, when attractive opportunities arise, acquiring wireless
transmission networks as well as the acquisition of associated wireless
communications infrastructure. We are currently pursuing international
acquisition and privatization opportunities.
. Continue to Decentralize Our Management Functions. In order to better
manage our efforts to add tenants to our towers and our new tower build
programs, and in anticipation of the continued growth of our tower
portfolios throughout the United States, we have begun and plan to
continue decentralizing some management and operational functions. To
that end, in addition to our Pittsburgh operating headquarters and
regional office, we have opened and staffed five regional offices,
including Houston, Louisville, Phoenix, Albany and Puerto Rico. Upon
completion of the recent and proposed transactions we plan to open 10
additional regional offices, five in connection with the joint venture
with Bell Atlantic and five in connection with the BellSouth
transaction. The principal responsibilities of these offices are to
manage the leasing of tower space on a regional basis through a
dedicated local sales force, to maintain the towers already located in
the region and to implement our commitments to build new towers for
wireless carriers in the area. We believe that by moving a significant
amount of our operating personnel to regional offices we will be better
able to strengthen our relationship with regional carriers, serve our
customers more effectively and identify additional opportunities to
build new towers for local and regional carriers.
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CCIC
The following table indicates, as of December 31, 1998, assuming we had
completed the recent and proposed transactions, the geographic concentration of
our 6,136 owned and managed towers and 132 revenue producing rooftop sites:
U.S. Towers and Rooftop Sites
<TABLE>
<CAPTION>
% of
Crown Bell % of CCIC
Communication Atlantic BellSouth Powertel Total U.S. Total Total
------------- -------- --------- -------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Towers:
Georgia............... -- 22 341 151 514 11.3% 8.2%
Florida............... 3 -- 434 76 513 11.3 8.2
Alabama............... -- 9 179 188 376 8.3 6.0
Pennsylvania.......... 219 218(a) -- -- 332 7.3 5.3
Tennessee............. 1 1 202 113 317 6.9 5.1
Louisiana............. 51 13 162 -- 226 5.0 3.6
Mississippi........... 21 8 125 62 216 4.8 3.5
Texas................. 167 43 -- -- 210 4.6 3.4
Kentucky.............. -- -- 191 -- 191 4.2 3.1
South Carolina........ 12 148 10 19 189 4.2 3.0
Indiana............... -- -- 183 -- 183 4.0 2.9
North Carolina........ 11 141 20 -- 172 3.8 2.7
Arizona............... 12 159 -- -- 171 3.8 2.7
New Jersey............ 1 150 -- -- 151 3.3 2.4
New York.............. -- 130 -- -- 130 2.9 2.1
Maryland.............. -- 115 -- -- 115 2.5 1.8
Massachusetts......... -- 80 -- -- 80 1.8 1.3
New Mexico............ 34 37 -- -- 71 1.6 1.1
Virginia.............. 5 66 -- -- 71 1.4 1.1
Connecticut........... -- 37 -- -- 37 * *
Ohio.................. 26 -- -- -- 26 * *
New Hampshire......... -- 26 -- -- 26 * *
Delaware.............. -- 25 -- -- 25 * *
West Virginia......... 17 14(b) -- -- 19 * *
Puerto Rico........... 14 -- -- -- 14 * *
Rhode Island.......... -- 14 -- -- 14 * *
All Others............ 15 12 3 41 61 1.3 1.0
--- ----- ----- --- ----- ----- ----
Rooftops(d)............. 78 -- -- -- 78 1.7 1.2
--- ----- ----- --- ----- ----- ----
Total................... 687 1,458(c) 1,850 650 4,528 100.0% 72.2%
=== ===== ===== === ===== ===== ====
</TABLE>
- --------
(a) Includes 105 towers we currently manage.
(b) Includes 12 towers we currently manage.
(c) Includes 117 towers we currently manage.
(d) We manage an additional 1,286 rooftop sites throughout the United States
that do not currently produce revenue but are available for leasing to our
customers.
* Less than 1%.
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U.K. Towers and Rooftop Sites
<TABLE>
<CAPTION>
% of
Castle % of CCIC
Transmission One2One Total U.K. Total Total
------------ ------- ----- ---------- -----
<S> <C> <C> <C> <C> <C>
Towers:
England.......................... 492 767 1,259 72.4% 20.1%
Wales............................ 134 39 173 9.9 2.8
Scotland......................... 151 15 166 9.5 2.6
Northern Ireland................. 88 -- 88 5.1 1.4
--- --- ----- ----- ----
Rooftops........................... 54 -- 54 3.1 *
--- --- ----- ----- ----
Total.............................. 919 821 1,740 100.0% 27.8%
=== === ===== ===== ====
</TABLE>
U.S. Operations
Overview
Our primary business focus in the United States is the leasing of antenna
space on multiple tenant towers and rooftops to a variety of wireless carriers
under long-term lease contracts. Supporting our competitive position in the
site rental business, we maintain in-house expertise in, and offer our
customers, infrastructure and network support services that include network
design and communication site selection, site acquisition, site development and
construction and antenna installation.
We lease antenna space to our customers on our owned and managed towers. We
generally receive fees for installing customers' equipment and antennas on a
tower and also receive monthly rental payments from customers payable under
site rental leases that generally range in length from three to five years. Our
U.S. customers include such companies as AT&T Wireless, Aerial Communications,
AirTouch Cellular, Arch Communications, Bell Atlantic, BellSouth, Cellular One,
Federal Express, Lucent Technologies, Motorola, Nextel, Nokia, PageNet, Skytel,
Sprint PCS and TSR Wireless. We also provide tower space to private network
operators and various federal and local government agencies, such as the FBI,
the IRS and the U.S. Postal Service.
At December 31, 1998, without giving effect to the recent and proposed
transactions described in this prospectus, we owned or managed 609 towers and
78 rooftop sites in the United States and Puerto Rico. These towers and rooftop
sites 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 joint venture with Bell Atlantic controls and operates 1,458 towers.
These towers represent substantially all the towers in Bell Atlantic's 850 MHz
wireless network in the eastern and southwestern United States and provide
coverage of 11 of the top 50 U.S. metropolitan areas including New York,
Philadelphia, Boston, Washington, D.C. and Phoenix. A substantial majority of
these towers are over 100 feet tall and can accommodate multiple tenants.
After completion of the BellSouth transaction, we will control and operate
an additional 1,850 towers. These towers represent substantially all the towers
in BellSouth's 850 MHZ wireless network in the southeastern and midwestern
United States and provide coverage of 12 of the top 50 U.S. metropolitan areas,
including Miami, Atlanta, Tampa, Nashville and Indianapolis. A substantial
majority of these towers are over 100 feet tall and can accommodate multiple
tenants.
Upon completion of the Powertel acquisition, we will own and operate an
additional 650 towers. These towers represent substantially all of Powertel's
owned towers in its 1.9 GHz wireless network in the southeastern and midwestern
United States. Approximately 90% of these towers are clustered
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in seven southeastern states providing coverage of such metropolitan areas as
Atlanta, Birmingham, Jacksonville, Memphis and Louisville, and a number of
major connecting highway corridors in the southeast. These towers are
complementary to BellSouth's 850 MHZ tower portfolio in the southeast and have
minimal coverage overlap. Substantially all of these towers are over 100 feet
tall, were built within the last three years and can accommodate multiple
tenants.
We are actively seeking to enter into arrangements with other major
wireless carriers and independent tower operators to acquire additional tower
footprints. We believe that, like Bell Atlantic, BellSouth and Powertel, other
wireless carriers will seek to enter into contractual arrangements with
independent tower carriers, such as us, for the ownership or control of their
tower footprints.
We also plan to capitalize on our network design expertise to construct new
towers. We plan 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. When population density and perceived demand are
such that we believe the economics of constructing such towers are justified,
we build towers that can accommodate multiple tenants. The multiple tenant
design of these 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. 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.
Our existing contracts for construction of new towers include an agreement
with Nextel, under which we have already constructed 67 sites and have an
option to construct up to 96 additional sites. In connection with the joint
venture, Bell Atlantic and the joint venture entered into a master build-to-
suit agreement under which the joint venture will build and own the next 500
towers to be built for Bell Atlantic's wireless communications business over
the next five years. Further, we have agreed to enter into a similar agreement
with BellSouth, as part of the BellSouth transaction, to construct at least 500
towers on behalf of BellSouth in the region covered by that transaction over
the next five years. See "Recent and Proposed Transactions--Bell Atlantic Joint
Venture--Build-to-Suit Agreement" and "--Proposed BellSouth Transaction--Build-
to-Suit Agreement".
Site Rental
In the United States, we rent antenna space on our owned and managed towers
and rooftops to a variety of carriers operating cellular, personal
communications services, specialized mobile radio, enhanced specialized mobile
radio, paging and other networks.
Tower Site Rental. We lease space to our customers on our owned and managed
towers. We generally receive fees for installing customers' equipment and
antennas on a tower (as provided in our network services programs) and also
receive monthly rental payments from customers payable under site leases. In
the United States, the majority of our outstanding customer leases, and the new
leases typically entered into by us, 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.
We also provide a range of site maintenance services in order to support
and enhance our site rental business. We believe that by offering services such
as antenna, base station and tower maintenance and security monitoring, we are
able to offer quality services to retain our existing customers and attract
future customers to our communication sites. We were the first site
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management company in the United States selected by a major wireless carrier to
exclusively manage its tower network and market the network to other carriers
for multi-tenant use of their towers.
The following table describes, while excluding the results of the recent
and proposed transactions, our top ten revenue producing towers in the United
States and Puerto Rico:
<TABLE>
<CAPTION>
December
Number of 1998
Tenant Monthly
Name Location Height (ft) Leases Revenue
---- -------- ----------- --------- --------
<S> <C> <C> <C> <C>
Crane.............................. Pennsylvania 450 99 $67,372
Bluebell........................... Pennsylvania 300 110 54,555
Monroeville........................ Pennsylvania 500 63 39,315
Lexington.......................... Kentucky 500 89 38,644
Sandia Crest....................... New Mexico 140 16 26,984
Greensburg......................... Pennsylvania 375 40 26,932
Cranberry.......................... Pennsylvania 400 44 26,455
Cerro de Punta..................... Puerto Rico 220 37 24,988
Beaver............................. Pennsylvania 500 43 25,360
El Yunque.......................... Puerto Rico 200 34 23,500
--- --------
Total..................................................... 575 $354,105
=== ========
</TABLE>
We have existing master lease agreements with AT&T Wireless, Aerial
Communications, Bell Atlantic, Nextel and Sprint PCS, among others, which
provide terms (including economic terms) that govern new leases entered into by
such parties during the term of their master lease agreements. These agreements
include the lease of space on towers in the Pittsburgh major trading area,
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 us has a 10-year
master lease term through October 2006, with two 10-year renewal options. We
have also entered into an independent contractor agreement with Nextel. The
Bell Atlantic agreement has a 25-year master lease term through December 2020.
We have significant site rental opportunities arising out of our existing
agreements with Bell Atlantic and Nextel. In our existing lease agreement with
Bell Atlantic, we have exclusive leasing rights for 117 existing towers and we
currently have sublessees on 58 of these towers in the greater Pittsburgh area.
The lease agreement provides that we may sublet space on any of these towers to
another carrier subject to certain approval rights of Bell Atlantic. To date,
Bell Atlantic has never failed to approve a sublease we have proposed. Upon
completing the joint venture, those 117 towers were among the 1,458 towers
contributed to the joint venture; however, since we maintain the right to put
sublessees on those 117 towers, revenue resulting from the addition of new
tenants on those towers will continue to be realized by us rather than the
joint venture. In connection with the agreement with Nextel, as of December 31,
1998, we have the option to own and operate up to 96 additional towers.
We also have significant site rental opportunities in connection with the
recent and proposed transactions we describe in this prospectus. In connection
with the joint venture, we entered into a global lease under which Bell
Atlantic will lease antenna space on the towers transferred to the joint
venture, as well as the towers built under to the build-to-suit agreement. In
connection with the BellSouth transaction, we will be paid a monthly site
maintenance fee from BellSouth for its use of space on the towers we control.
We will also enter into a master lease agreement with the sellers in the
Powertel acquisition under which the sellers will rent space on the acquired
towers. In each of these transactions, we will be permitted to lease additional
space on the towers to third parties. See "Recent and Proposed Transactions".
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<PAGE>
Rooftop Site Rental. We are a leading rooftop site management company in
the United States. Through our subsidiary, Spectrum, we develop new sources of
revenue for building owners by effectively managing all technical aspects of
rooftop telecommunications, including two-way radio systems, microwave
facilities, fiber optics, wireless cable, paging, rooftop infrastructure
services and optimization of equipment location. We also handle billing and
collections and all calls and questions regarding the site, totally relieving
the building's management of this responsibility. In addition to the technical
aspects of site management, we provide operational support for both wireless
carriers looking to build out their wireless networks, and building owners
seeking to out source their site rental activities. We generally enter into
management agreements with building owners and receive a percentage of the
revenues generated from the tenant license agreements.
Network Services
We design, build and operate our own communication sites. We have developed
an in-house expertise in certain value-added services that we offer to the
wireless communications and broadcasting industries. Because we are a provider
of total systems with "end-to-end" design, construction and operating
expertise, we offer our 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. We have extensive experience in network
design and engineering and site selection. While we maintain sophisticated
network design services primarily to support the location and construction of
company-owned multiple tenant towers, we do from time to time provide network
design and site selection services to carriers and other customers on a
consulting contract basis. Our network design and site selection services
provide our 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 1998, we provided network design services primarily for our
own footprints and also for certain customers, including Triton Communications,
Nextel, Aerial Communications and Sprint PCS. These customers were typically
charged on a time and materials basis.
To capitalize on the growing concerns over tower proliferation, we have
developed a program called "Network Solutions" through which we will attempt to
form strategic alliances with local governments to create a single
communications network in their communities. To date our efforts have focused
on western Pennsylvania, where we have formed alliances with three
municipalities. These alliances are intended to accommodate wireless 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 carriers and wireless
customers.
Site Acquisition. In the United States, we are engaged in site acquisition
services for our 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 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 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, our construction department takes over
the process of constructing the site.
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We have provided site acquisition services to several customers, including
AT&T Wireless, Aerial Communications, AirTouch Cellular, Bell Atlantic,
BellSouth, GTE Mobilnet, Nextel, Omnipoint, Pagemart, Sprint PCS and Teligent.
These customers engage us for such site acquisition services on either a fixed
price contract or a time and materials basis.
Site Development and Construction and Antenna Installation. We have
provided site development and construction and antenna installation services to
the U.S. communications industry for over 18 years. We have extensive
experience in the development and construction of tower sites and the
installation of antenna, microwave dishes and electrical and telecommunications
lines. Our site development and construction services include clearing sites,
laying foundations and electrical and telecommunications lines, and
constructing equipment shelters and towers. We have designed and built and
presently maintain tower sites for a number of our wireless communications
customers and a substantial part of our own tower network. We can provide cost-
effective and timely completion of construction projects in part because our
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 us at our 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. We
generally set 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 we may negotiate fees on individual sites or for groups
of sites. We have the capability and expertise to install antenna systems for
our paging, cellular, personal communications services, specialized mobile
radio, enhanced specialized mobile radio, microwave and broadcasting customers.
As this service is performed, we use our technical expertise to ensure that
there is no interference with other tenants. We typically bill for our antenna
installation services on a fixed price basis.
Our construction management capabilities reflect our extensive experience
in the construction of networks and towers. For example, Crown Communication
was instrumental in launching networks for Sprint PCS, Nextel and Aerial
Communications in the Pittsburgh major trading area. In addition, Crown
Communication supplied these carriers with all project management and
engineering services which included antenna design and interference analyses.
In 1998, we provided site development and construction and antenna
installation services to approximately 33 customers in the United States,
including AT&T Wireless, Bell Atlantic, Nextel and Sprint PCS.
Broadcast Site Rental and Services
We also provide site rental and related services to customers in the
broadcasting industry in the United States. The launch of digital terrestrial
television in the United States will require significant expansion and
modification of the existing broadcast infrastructure. The television
broadcasting industry has historically been opposed to locating their equipment
on towers with other tenants and third party ownership of broadcast
infrastructure. Because of the significant cost involved in the construction or
modification of broadcast towers, and the large capital expenditures
broadcasters will incur in acquiring digital broadcast equipment, we believe
that the television broadcasting industry will begin to outsource tower
ownership. See "Industry Background".
Our objective is to become a leader in the construction of the
approximately 200 tall towers expected to be built in the United States over
the next five years. We believe that our experience in providing digital
transmission services in the United Kingdom will make us an attractive provider
of broadcast services to the major networks and their affiliates. In addition,
we will seek to partner with broadcasters and major station ownership groups
that own property zoned for tall towers, but that lack sufficient resources and
expertise to build a tower. We will then attempt to locate on the tower the
transmitters of commercial broadcast television stations and high powered FM
radio stations in that market as well as wireless carriers.
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Electronic news gathering systems benefit from the towers and services we
offer. The electronic news gathering 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. We have developed a repeater
system for such news gathering that can be used on many of our towers in
western Pennsylvania and expect to develop similar systems in other markets in
which we have or develop tower clusters. This system allows the van to send a
signal to one of our local towers where the signal is retransmitted back to the
television transmitter site. The retransmission of the signal from our tower to
the various television transmitter sites is done via a microwave link. We
charge the station for the electronic news gathering receiver system at the top
of our tower and also charge them for the microwave dish they place on our
tower. Our electronic news gathering customers are affiliates of the NBC, ABC,
CBS and Fox networks.
We also have 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. We have installed master FM and television systems on
buildings across the country. We have supervised the construction and operation
of the largest master FM antenna facility in the United States and have
engineered and installed two 2,000 foot broadcast towers with master FM
antennas. We believe that this experience may help us negotiate favorable
construction contracts for both tower and rooftop sites, and to gain an
expertise in the complex issues surrounding electronic compatibility and radio
frequency engineering.
Significant Contracts
We have many agreements with telecommunications providers in the United
States, including leases, site management contracts and independent contractor
agreements. We currently have important contracts with, among others, Bell
Atlantic, Nextel and BellSouth. While these agreements currently are important
to us, our most significant contracts in the U.S. will result from completion
of the recent and proposed transactions described in this prospectus. In
addition, we are party to a contract with the State of New York, which we
believe to be the first of its kind, to manage all State-owned real estate for
wireless communications purposes for the next 20 years. This contract includes
the rights to more than 16,000 structures and rooftops, tens of thousands of
miles of rights-of-way and millions of acres of State-owned land.
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Customers
In both our site rental and network services businesses, we work with a
number of customers in a variety of businesses including cellular, personal
communications services, enhanced specialized mobile radio, paging and
broadcasting. We work primarily with large national carriers such as Bell
Atlantic, BellSouth, Sprint PCS, Nextel and AT&T Wireless. For the year ended
December 31, 1998, no customer in the United States accounted for more than
10.0% of our U.S. revenues, other than Nextel, which accounted for
approximately 12.5% of our U.S. consolidated revenues. Nextel revenues are
expected to grow as we build out Nextel interstate corridor sites.
<TABLE>
<CAPTION>
Industry Selected Customers
-------- ------------------
<S> <C>
Cellular..................... AT&T Wireless, Bell Atlantic
Personal Communication Serv-
ices........................ Sprint PCS, Western Wireless, Powertel
Broadcasting................. Hearst Argyle Television, Trinity Broadcasting
Specialized Mobile
Radio/Enhanced Specialized
Mobile Radio................ Nextel, SMR Direct
Governmental Agencies........ FBI, INS, Puerto Rico Police
Private Industrial Users..... IBM, Phillips Petroleum
Data......................... Ardis, RAM Mobile Data
Paging....................... AirTouch, PageNet, TSR Wireless
Utilities.................... Equitable Resources, Nevada Power
Other........................ WinStar, Teligent
</TABLE>
Sales and Marketing
Our sales and marketing personnel, located in our regional offices, target
carriers expanding their networks, entering new markets, bringing new
technologies to market and requiring maintenance or add-on business. All types
of wireless carriers are targeted including broadcast, cellular, paging,
personal communications services, microwave and two-way radio. We are also
interested in attracting 9-1-1, federal, state, and local government agencies,
as well as utility and transportation companies to locate on existing sites.
Our objective is to pre-sell capacity on our towers by promoting sites prior to
construction. Rental space on existing towers is also aggressively marketed and
sold.
We utilize numerous public and proprietary databases to develop detailed
target marketing programs directed at awardees of bandwidth licenses auctioned
by the government, 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 actual signal strength measurements taken in the field and
specialized computer programs that accurately predict the service area of a
particular radio signal from any given transmission point, allows our sales and
marketing personnel to target specific carriers' needs for specific sites. To
foster productive relationships with our major existing tenants and potential
tenants, we have formed a team of account relationship managers. These managers
work to develop new tower construction, 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 our 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). Our promotional activities range from advertisements and site listings
in industry publications to maintaining a presence at national trade shows.
Potential clients are referred to our Web site, which contains information
about us as well as site listings. In addition, our 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 us via e-mail through the Web site or Cell Site Express. Our network
services capabilities are marketed in conjunction with our tower footprints.
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To follow up on targeted mailings and to cold-call on potential clients, we
have 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, we compete with other independent tower owners, some
of which also provide site rental and network services; wireless 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 carriers that own and operate
their own tower networks generally are substantially larger and have greater
financial resources than we have. We believe 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. We also compete for acquisition and new tower
construction opportunities with wireless carriers, site developers and other
independent tower operating companies. We believe 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 us.
The following is a list of the independent tower companies that we compete
with in the United States: American Tower Corporation, Pinnacle Towers,
SpectraSite, SBA Communications, WesTower, Unisite, LCC International and
Lodestar Communications.
The following companies are primarily competitors for our 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.
We believe that the majority of our 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). We offer our services nationwide and we believe
we are 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. We believe 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. We believe that
we compete favorably in these areas.
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U.K. Operations
Overview
We own and operate, through our 80% interest in Castle Transmission, one of
the world's most established television and radio transmission networks and are
expanding our leasing of antenna space on our towers to a variety of wireless
carriers. We provide transmission services for four of the six digital
terrestrial television services in the U.K., two BBC analogue 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 our 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 we own and the balance of
which are licensed to us under a site-sharing agreement with NTL, our principal
competitor in the United Kingdom. We have 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, we
also lease antenna space on our transmission infrastructure to various
communications service providers and provide telecommunications network
installation and maintenance services and engineering consulting services.
Our core revenue generating activity in the United Kingdom is the analog
terrestrial transmission of radio and television programs broadcast by the BBC.
Castle Transmission's business, which was formerly owned by the BBC, was
privatized under the Broadcasting Act 1996 and sold to Castle Transmission in
February 1997. At the time the BBC home service transmission business was
acquired, Castle Transmission 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 December 31, 1998, approximately 60.6% of Castle Transmission's
consolidated revenues were derived from the provision of services to the BBC.
At December 31, 1998, we owned, leased or licensed 861 transmission sites
on which we operated 865 towers, including the 102 towers we acquired from a
wireless carrier. In addition, as of December 31, 1998 we were constructing
eight new towers on existing sites and had 112 site acquisition projects in
process for new tower sites. We have 54 revenue producing rooftop sites that
are occupied by our transmitters but are not available for leasing to our
customers. Our sites are located throughout England, Wales, Scotland and
Northern Ireland.
We expect to significantly expand our existing tower portfolios in the
United Kingdom by building and acquiring additional towers. We believe our
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 personal communications networks) as compared to broadcast signals,
wireless communications providers require a denser portfolio of towers to cover
a given area. Therefore, in order to increase the attractiveness of our tower
portfolios to wireless communications providers, we will seek to build or
acquire new communications towers. Using our team of over 300 engineers with
state-of-the-art network design and radio frequency engineering expertise, we
locate sites and design towers that will be attractive to multiple tenants. We
seek to leverage such expertise by entering into new tower construction
contracts with various carriers, such as British Telecom, Cable & Wireless
Communications, Cellnet, Dolphin, Energis, Highway One, One2One, Orange and
Scottish Telecom, thereby securing an anchor tenant for a site before incurring
capital expenditures for the site build-out. As of December 31, 1998, we were
building eight towers that we will own. In addition, we expect to make
strategic acquisitions of existing communications sites (primarily those owned
by wireless carriers) to expand our infrastructure and to further leverage our
site management experience.
On March 5, 1999, Castle Transmission entered into an agreement with
One2One under which Castle Transmission will manage, develop and, at its
option, acquire 821 towers. These towers represent substantially all the towers
in One2One's nationwide 900 MHz wireless network in the
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United Kingdom. These towers will allow Castle Transmission to market a
nationwide network of towers to third generation wireless carriers in the
United Kingdom following the completion of the pending auction of such licenses
by the U.K. government.
We believe that we generally have significant capacity on our towers in the
United Kingdom. Although approximately 133 of our towers are poles with limited
capacity, we typically will be able to build new towers that will support
multiple tenants on these sites (subject to the applicable planning process).
We intend to upgrade these limited capacity sites where we believe we can
achieve appropriate returns to merit the necessary capital expenditure. For
example, in connection with a contract with Vodafone, we are upgrading 68 of
these sites with limited capacity. See "--Significant Contracts--Vodafone".
Approximately 59 of our sites are used for medium frequency 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,
medium frequency sites generally have substantial ground area available for the
construction of new multiple tenant towers.
Transmission Business
Analog. For the twelve months ended December 31, 1998, Castle Transmission
generated approximately 52.8% of its revenues from the provision of analog
broadcast transmission services to the BBC. Under the BBC analog transmission
contract, we provide 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 December 31, 1998, the BBC
analog transmission contract generated revenues of approximately (Pounds)49.4
million ($82.1 million) for us.
In addition to the BBC analog transmission contract, we have 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.
We own all of the transmission equipment used for broadcasting the BBC's
domestic radio and television programs, whether located on one of Castle
Transmission's sites or on an NTL or other third-party site. As of December 31,
1998, Castle Transmission had 3,465 transmitters, of which 2,196 were for
television broadcasting and 1,269 were for radio.
A few of our most powerful television 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 our analog television
transmitters:
<TABLE>
<CAPTION>
Combined
Number of sites population
(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 our 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
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security alarms connected to Castle Transmission's Technical Operations Centre
at Warwick. The site-sharing agreement provides us with reciprocal access
rights to NTL's broadcast transmission sites on which we have equipment.
Certain of our 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.
Digital. We have entered into contracts with the holders (including the
BBC) of four of the six digital terrestrial television multiplexes allocated by
the U.K. government to design, build and operate their digital transmission
networks. In connection with the implementation of digital terrestrial
television, new transmission infrastructure will be required. We have committed
to invest approximately (Pounds)100.0 million ($170.0 million) for the
construction of new infrastructure to support digital terrestrial television
over the next two years, (Pounds)55.3 million ($92.0 million) of which we had
already invested by December 31, 1998. By the year 2000, 81 transmission sites
will need to be upgraded with new transmitters and associated systems to
support digital terrestrial television. Of these sites, 49 are owned by us 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 NTL and us.
We successfully began commercial operation of the digital terrestrial
television networks from an initial 22 transmission sites on November 15, 1998.
This launch marks the first stage of the project to introduce the digital
broadcast system that will eventually replace conventional analog television
services in the United Kingdom. As the network size expands during 1999, the
number of viewers who are able to receive the service will increase
significantly. We have accepted an invitation from the U.K. television
regulator, the Independent Television Commission, to play a major role in
planning further digital terrestrial television network extensions to be built
in the year 2000 and beyond.
We are currently the sole provider of transmission services for digital
radio broadcasts in the United Kingdom. In September 1995, the BBC launched,
over our transmission network, its initial bandwidth scheme for transmission
equipment with the ability to compensate for varying data rates by
automatically adjusting the amount of frequency band used, and this service is
now broadcast to approximately 60% of the U.K. population. A license 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. We are 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 licenses will be awarded during 1999. We
believe we are well positioned to become the transmission service provider to
the winners of such licenses.
Site Rental
The BBC transmission network provides a valuable initial portfolio of
towers for the creation of wireless communications networks. As of December 31,
1998, approximately 200 companies rented antenna space on approximately 405 of
Castle Transmission's 919 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. Our largest site rental customer in the United
Kingdom is NTL under the site-sharing agreement. This agreement generated
approximately (Pounds)592,000 ($984,400) of site rental revenue in December
1998.
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As in the United States, we provide a range of site maintenance services in
the United Kingdom to support and enhance the site rental business. We
complement our U.K. transmission experience with our 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 our top ten revenue producing towers in the
United Kingdom:
<TABLE>
<CAPTION>
Number of
Tenant December 1998
Name Location Height(ft) Leases Monthly Revenue
---- ------------ ---------- --------- ------------------------
<S> <C> <C> <C> <C> <C>
Brookmans Park.......... S.E. England 147 19 (Pounds) 25,026 $ 41,613
Bow Brickhill........... S.E. England 197 13 17,479 29,064
Mendip.................. S.W. England 924 19 16,534 27,493
Hannington.............. S. England 440 15 12,267 20,398
Crystal Palace.......... London 653 14 11,638 19,352
Wrotham................. S. England 379 14 11,385 18,931
Waltham................. C. England 954 10 10,750 17,875
Redruth................. S.W. England 500 18 10,523 17,498
Heathfield.............. S. England 443 15 10,296 17,120
Oxford.................. C. England 507 14 9,973 16,583
--- --------------- --------
Total......................................... 151 (Pounds)135,871 $225,927
=== =============== ========
</TABLE>
Other than NTL, Castle Transmission's largest (by revenue) site rental
customers consist mainly of wireless carriers such as Cellnet, One2One, Orange
and Vodafone. Revenues from these non-BBC sources are expected to become an
increasing portion of Castle Transmission'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. We believe 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.
We have master lease agreements with all of the major U.K.
telecommunications site users including British Telecom, 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 our U.K. portfolio. Customers make
orders for specific sites using the standard terms included in the master lease
agreements. As of December 31, 1998, there were approximately 400 applications
in process for installations at existing sites under such agreements.
Network Services
Castle Transmission provides broadcast and telecommunications engineering
services to various customers in the United Kingdom. We retained all the BBC
home service transmission business employees when we acquired Castle
Transmission. Accordingly, we have engineering and technical staff of the
caliber and experience necessary not only to meet the requirements of our
current customer base, but also to meet the challenges of developing digital
technology. Within the United Kingdom, Castle Transmission has worked with
several telecommunications operations on design and build projects as they
roll-out their networks. Castle Transmission has had success in bidding for
broadcast consulting contracts, including, over the last four years, in
Thailand, Taiwan, Poland and Sri Lanka. With the expertise of our engineers and
technical staff, we are a provider of complete systems to the wireless
communications and broadcast industries.
Network Design and Site Selection. We have extensive experience in network
design and engineering and site selection. Our U.K. customers therefore also
receive the benefit of our sophisticated network design and site selection
services.
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Site Acquisition. As in the United States, we are involved in site
acquisition services for our own purposes and for third parties. We recognize
that the site acquisition phase often carries the highest risk for a project.
To ensure the greatest possible likelihood of success and timely acquisition,
we combine a desktop survey of potential barriers to development with a
physical site search with relevant analyses, assessments and, where necessary,
surveys. We leverage off our experience in site acquisition and co-location
when meeting with local planning authorities.
Site Development and Antenna Installation. We use a combination of external
and internal resources for site construction. Our engineers are experienced in
both construction techniques and construction management, ensuring an efficient
and simple construction phase. Selected civil contractors are managed by Castle
Transmission staff for the ground works phase. Specialist erection companies,
with whom we have a long association, are used for tower installation. Final
antenna installation is undertaken by our own experienced teams.
Site Management and Other Services. We also provide complete site
management, preventive maintenance, fault repair and system management services
to the Scottish Ambulance Service. We also maintain a mobile radio system for
the Greater Manchester Police and provide maintenance and repair services for
transmission equipment and site infrastructure.
Significant Contracts
Castle Transmission's principal analog broadcast transmission contract is
the BBC analog transmission contract. Castle Transmission also has entered into
two digital television transmission contracts, the BBC digital transmission
contract and the ONdigital digital transmission contract. Under the site-
sharing agreement, Castle Transmission also gives NTL access to facilities to
provide broadcast transmission to non-Castle Transmission customers. Castle
Transmission also has long-term service agreements with broadcast customers
such as Virgin Radio and Talk Radio. In addition, Castle Transmission has
several agreements with telecommunications providers, including leases, site
management contracts and independent contractor agreements. Castle Transmission
has entered into contracts to design and build infrastructure for customers
such as Cellnet, One2One, Orange, Scottish Telecom and Vodafone.
BBC Analog Transmission Contract
Castle Transmission 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. The BBC analog transmission
contract provides for charges of approximately (Pounds)46.5 million ($77.3
million) to be payable by the BBC to Castle Transmission 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 ($498,840) 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 ($831,400) annually to the payments made by the BBC to us.
The BBC analog transmission contract also provides for Castle Transmission
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. We
believe that Castle Transmission 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, Castle Transmission achieved a 100% "clean sheet"
performance, incurring no service credit penalties.
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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:
(1)by mutual agreement between Castle Transmission and the BBC,
(2) by one party upon the bankruptcy or insolvency of the other party
within the meaning of section 123 of the Insolvency Act 1986,
(3) upon certain force majeure events for the contract as a whole or for
any site (in which case the termination will relate to that site only),
(4) by the non-defaulting party upon a material breach by the other party
and
(5) upon the occurrence of certain change of control events.
BBC Commitment Agreement
On February 28, 1997, in connection with the acquisition of the BBC home
service transmission business, we, TdF, TeleDiffusion de France S.A., which is
the parent company of TdF and DFI, and the BBC entered into the BBC commitment
agreement, whereby we and TdF agreed (1) 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 (2) to maintain various minimum indirect ownership
interests in Castle Transmission and CTSH for periods ranging from three to
five years commencing February 28, 1997. These provisions restrict our ability
and the ability of TdF to sell, transfer or otherwise dispose of their
respective CTSH shares and, indirectly, their Castle Transmission 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 commitment agreement also required TdF's parent and us to enter
into a services agreements with Castle Transmission. The original services
agreement entered into by TdF's parent and Castle Transmission on February 28,
1997, under which TdF makes available certain technical consultants, executives
and engineers to Castle Transmission, 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 Castle Transmission to TdF after February 28, 2003. See "Certain
Relationships and Related Transactions--Agreements with TdF Related to the
Roll-Up--Castle Transmission Services 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. We bid for and won the 12 year contract from ONdigital to
build and operate its digital television transmission network. 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, we bid for and won the 12 year contract from the BBC to build and
operate its digital terrestrial television transmission network. Assuming the
BBC commits to the full digital terrestrial television roll-out contemplated by
the BBC digital transmission contract, this contract provides for approximately
(Pounds)10.5 million ($17.8 million) of revenue per year during the 12 year
period, with
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service credits repayable for performance below agreed thresholds. There is a
termination provision during the three-month period following the fifth
anniversary of our 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 digital television in the United
Kingdom does not have sufficient viewership to justify continued digital
television broadcasts. Under this provision, the BBC will pay us a termination
fee in cash that substantially recovers our 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.
BT Digital Distribution Contract
Under the BBC digital transmission contract and the ONdigital digital
transmission contract, in addition to providing digital terrestrial
transmission services, Castle Transmission has agreed to provide for the
distribution of the BBC's and ONdigital's broadcast signals from their
respective television studios to Castle Transmission's transmission network.
Consequently, in May 1998, Castle Transmission entered into a 12 year
distribution contract with British Telecommunications plc (with provisions for
extending the term), in which British Telecom 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 Castle Transmission, and NTL made arrangements to share all UHF
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:
(1) 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,
(2) on the bankruptcy or insolvency of either party and
(3) if either party ceases to carry on a broadcast transmission business
or function.
Negotiations are in progress between NTL and us 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 us,
Vodafone agreed to locate antennas on 122 of our existing communication sites
in the United Kingdom. The first 39 sites had been completed by the end of
December 1998. This included 4 sites at which a new tower had
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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 twelve months ended December 31, 1998, the BBC accounted for
approximately 60.6% of Castle Transmission's consolidated revenues. This
percentage has decreased from 64.6% for the twelve months ended March 31, 1998
and is expected to continue to decline as Castle Transmission continues to
expand its site rental business. Castle Transmission provides all four U.K.
PCN/cellular operators (Cellnet, One2One, Orange and Vodafone) with
infrastructure services and also provides fixed telecommunications operators,
such as British Telecom, Cable & Wireless Communications, Energis and Scottish
Telecom, with microwave links and backhaul infrastructure. The following is a
list of some of Castle Transmission's leading site rental customers by industry
segment.
<TABLE>
<CAPTION>
Industry Selected Customers
-------- ------------------
<S> <C>
Broadcasting.............. BBC, NTL, Virgin Radio, Talk Radio, XFM
PMR/TETRA................. National Band 3, Dolphin
Personal Communication
Network.................. Orange, One2One
Data...................... RAM Mobile Data, Cognito
Paging.................... Hutchinson, Page One
Governmental Agencies..... Ministry of Defense
Cellular.................. Vodafone, Cellnet
Public
Telecommunications....... British Telecom, Cable & Wireless Communications
Other..................... Aerial Sites, Health Authorities
Utilities................. Welsh Water, Southern Electric
</TABLE>
Sales and Marketing
We have 20 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 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 carriers in the United Kingdom. We have begun to
actively cross-sell our products and services so that, for example, site rental
customers are also offered build-to-suit services.
Competition
NTL is Castle Transmission'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 Digital Networks. It
also has been awarded the transmission contract for the new digital terrestrial
television multiplex service from Digital 3 & 4 Limited, and a similar contract
for the digital terrestrial television service for S4C. Castle Transmission 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 Castle Transmission 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.
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NTL also offers site rental on approximately 1,000 of its sites, some of
which are managed on behalf of third parties. Like Castle Transmission, NTL
offers a full range of site-related services to its customers, including
installation and maintenance. Castle Transmission 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. Castle Transmission 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 Castle
Transmission'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. British Telecom and
Cable & Wireless Communications are both major site sharing customers but also
compete by leasing their own sites to third parties. British Telecom'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, 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.
Castle Transmission 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, our interests in our tower sites are comprised of a
variety of ownership interests, leases 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 then 3,000 square feet are required for
a self-supporting tower structure of the kind typically used in metropolitan
areas. Our 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 we allow the landlord to use tower space in lieu of paying
all or part of the land rent. As of December 31, 1998, we had approximately 384
land leases. Under Crown Communication's senior credit facility, our senior
lenders have liens on a substantial number of our land leases and other
property interests in the United States.
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, 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
We are 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 our
financial condition or results of operations. We are currently in discussions
with the Department of Labor to settle an investigation it has conducted into
employment practices put into place prior to our acquisition of Crown
Communication. Upon notification by the Department of Labor of its
investigation, the practices were ceased. We anticipate the settlement to be
approximately $200,000.
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Employees
At March 1, 1999, we employed 928 people worldwide. Other than in the
United Kingdom, we are not a party to any collective bargaining agreements. In
the United Kingdom, we are 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 Castle Transmission's non-management staff. We have not
experienced any strikes or work stoppages, and management believes that our
employee relations are satisfactory.
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 determination that the
structure will not present a hazard to aviation 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 is in compliance
with the FAA's rules and is registered with the FCC, if 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 FAA and FCC standards. Tower owners may also bear the
responsibility of notifying the FAA of any tower lighting outage. We generally
indemnify our 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 limits certain state and local zoning authorities'
jurisdiction over the construction, modification and placement of towers. The
new law prohibits any action that would (1) discriminate between different
providers of personal wireless services or (2) prohibit or have the effect of
prohibiting the provision of personal wireless service. 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 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.
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Licenses Under the Communications Act of 1934. We hold, through certain of
our subsidiaries, licenses for radio transmission facilities granted by the
FCC, including licenses for common carrier microwave and commercial mobile
radio services, including specialized mobile radio and paging facilities, as
well as private mobile radio services including industrial/business radio
facilities, which are subject to additional regulation by the FCC. We are
required to obtain the FCC's approval prior to the transfer of control of any
of our FCC licenses. Completion of the initial public offering and the roll-up
of our U. K. business would have resulted in a transfer of control of us under
the FCC's rules and policies if, after such transactions, over 50% of our
voting stock would have been owned by new stockholders.
We, as the parent company of the licensees of common carrier and
commercial mobile radio services facilities, are also subject to Section
310(b)(4) of the Communications Act of 1934, as amended, which would limit us
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, 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. We are 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 us, 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. Castle Transmission 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. Castle Transmission's operations are subject to comprehensive
regulation under the laws of the United Kingdom.
Licenses under the Telecommunications Act 1984
Castle Transmission 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, a
type of data transmissions technique, of broadcasting services. This license
is for a period of at least twenty-five years from January 23, 1997, and is
Castle Transmission's principal license. Its main provisions include:
(1) a price control condition covering the provision of all analog radio
and television transmission services to the BBC under the BBC analog
transmission agreement, establishing the initial price at approximately
(Pounds)44 million for regulated elements of the services provided by
Castle Transmission under the BBC analog transmission agreement in the
year ended March 31, 1997 with 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;
(2) a change of control provision which requires notification of
acquisitions of interest in Castle Transmission 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;
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(3) a site sharing requirement requiring Castle Transmission to
provide space on its towers to analog and digital broadcast
transmission operators and including a power for 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;
(4) a fair trading provision enabling OFTEL to act against anti-
competitive behavior by the licensee; and
(5) 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 on 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 Castle Transmission's transmission
license. This procedure could result in the fees NTL pays to Castle
Transmission for site sharing facilities for Classic FM, currently calculated
under the site-sharing agreement, being determined at a reduced rate and
otherwise not being covered by the terms of any existing contract which could
lead to a diminution of Castle Transmission's income by approximately
(Pounds)300,000 per annum or approximately 0.4% of revenues and 1.0% of EBITDA
for the fiscal year ended March 31, 1997. Castle Transmission has applied for
leave to obtain a judicial review of this decision. In addition, Castle
Transmission has made a provision of approximately (Pounds)1.9 million relating
to any rate adjustment imposed by OFTEL relating to previous charges for
Classic FM under the site-sharing agreement.
Castle Transmission is discussing with OFTEL certain amendments to Castle
Transmission's Telecommunications Act transmission license to ensure that the
price control condition accommodates the provision by Castle Transmission of
additional contractually agreed upon services to the BBC in return for
additional agreed upon payments. See "Risk Factors--Extensive Regulations Which
Could Change at Any Time and Which We Could Fail to Comply With Regulate Our
Business".
The Secretary of State has designated the transmission license a public
telecommunications operator license in order to reserve to himself certain
emergency powers for the protection of national security. This designation is,
however, limited to this objective. Castle Transmission does not have a full
domestic public telecommunications operator 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 Castle Transmission
such a license. As a result Castle Transmission would gain wider powers to
provide services to third parties including public switched voice transmission
and satellite uplink and would grant Castle Transmission 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 Castle Transmission 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 transmission networks, which
would require a public telecommunications operator 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 by terrestrial facilities is
permitted.
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Licenses under the Wireless Telegraphy Acts 1949, 1968 and 1998
Castle Transmission has a number of 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 including:
(1) a broadcasting services license in relation to the transmission
services provided to the BBC, Virgin Radio and Talk Radio;
(2) a fixed point-to-point radio links license;
(3) two bandwidth test and development licenses; and
(4) digital terrestrial television test and development licenses.
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 their portion of these fees.
Environmental Matters
Our 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. As an owner and operator of real property, we are 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. We are potentially subject to
cleanup liabilities in both the United States and the United Kingdom.
We are also subject to regulations and guidelines that impose a variety of
operational requirements relating to radio frequency emissions. The potential
connection between radio frequency 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 we have not been subject to any
claims relating to radio frequency emissions, we have established operating
procedures designed to reduce employee exposures to radio frequency emissions
and are presently evaluating certain of our towers and transmission equipment
in the United States and the United Kingdom to determine whether radio
frequency emission reductions are possible.
In addition, we are 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 under the National Environmental Policy Act of 1969, which
requires federal agencies to evaluate the environmental impacts of their
decisions under certain circumstances. The FCC regulations implementing the Act
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.
We believe that we are 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 our business, results of operations, or financial condition.
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RECENT AND PROPOSED TRANSACTIONS
We have recently completed or entered into agreements to complete the
transactions described below. Completion of these transactions will result in a
significant increase in the size of our operations and the number of towers
that we own or manage. The Bell Atlantic joint venture closed on March 31,
1999, and we expect to close the Powertel acquisition and the One2One
transaction during the second quarter of 1999. The BellSouth transaction is
scheduled to close in a series of closings over eight months, beginning on May
31, 1999. There can be no assurance that the BellSouth transaction, the
Powertel acquisition or the One2One transaction will be completed on the terms
described in this prospectus or at all. See "Risk Factors--We May Not Complete
the Proposed Transactions". The descriptions of the terms of these transactions
are summaries of the material portions of the relevant agreements. These
descriptions are qualified in their entirety by reference to the complete text
of the agreements, each of which is available as described under the heading
"Available Information".
Bell Atlantic Joint Venture
On March 31, 1999, Bell Atlantic Mobile and certain of its affiliates, CCIC
and CCA Investment Corp., our wholly owned indirect subsidiary, formed a joint
venture to own and operate a significant majority of Bell Atlantic's towers. We
own approximately 61.5% of the joint venture and Bell Atlantic and certain of
its affiliates own the remaining 38.5%. Bell Atlantic also owns a 0.001%
interest in the joint venture's operating subsidiary to preserve its rights if
we later own the entire venture. For financial reporting purposes, we intend to
consolidate the joint venture's results of operations and financial condition
with our own.
We manage the day-to-day operations of the joint venture. The joint venture
will actively seek to add additional tenants to its towers in order to increase
its revenues. The joint venture will also construct and own new towers that are
needed by Bell Atlantic's wireless communications business. In addition, the
joint venture will have the right to pursue the next 300 new tower builds that
we identify for parties other than Bell Atlantic in the territories in which
the joint venture will operate. See "--Build-to-Suit Agreement" and "--Global
Lease". The joint venture will have regional offices that will be staffed
primarily with our employees to perform marketing, billing, operations and
maintenance functions.
Formation Agreement
Formation of the Joint Venture. Under the formation agreement, CCA
Investment Corp. contributed $250.0 million in cash and approximately 15.6
million shares of our common stock (valued at $197.0 million) to the joint
venture. Bell Atlantic and its affiliates transferred approximately 1,458
towers (56 of which are under construction) along with related assets and
liabilities to the joint venture. The joint venture borrowed $180.0 million
under a committed $250.0 million revolving credit facility and made a $380.0
million cash distribution to Bell Atlantic. Bell Atlantic also received certain
registration rights relating to the shares contributed to the joint venture.
Concurrently with the formation of the joint venture, Bell Atlantic and the
joint venture entered into an agreement for the joint venture to build new
towers for Bell Atlantic, or a master build-to-suit agreement, and a global
lease under which Bell Atlantic will lease space on the joint venture's towers.
Terms and Conditions. In connection with its contribution of assets and
liabilities to the joint venture, Bell Atlantic made representations and
warranties to the joint venture concerning the contributed assets and
liabilities. In general, the joint venture will have until June 30, 2000, to
raise any claims for indemnification for breaches of the representations and
warranties by Bell Atlantic. However, Bell Atlantic'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.
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Build-to-Suit Agreement
Under the build-to-suit agreement and subject to some conditions, Bell
Atlantic and the joint venture have agreed that (1) the next 500 towers to be
built for Bell Atlantic's wireless communications business will be constructed
and owned by the joint venture and (2) immediately thereafter the joint venture
will have a right of first refusal to construct the next 200 additional towers
to be built for Bell Atlantic. Bell Atlantic is required to submit these 700
site proposals to the joint venture 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
joint venture. The joint venture will be required to build towers in the
general vicinity of the locations proposed by Bell Atlantic. Upon completion of
a tower, the tower will be included as part of the global lease. Space not
leased by Bell Atlantic or its affiliates on each tower is available for lease
by the joint venture to third parties.
Global Lease
All of the 1,458 towers acquired by the joint venture from Bell Atlantic
and its affiliates, and all towers constructed by the joint venture under the
build-to-suit agreement, will be governed by the global lease. The average
monthly rent paid by Bell Atlantic on each of the 1,458 towers contributed to
the joint venture by Bell Atlantic will be approximately $1,850. Minimum
monthly rents on the towers built under the build-to-suit agreement will range
from $1,250 to $1,833 depending on the region in which the tower is located.
These rents may increase based on the amount of Bell Atlantic'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. Bell Atlantic 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 Bell
Atlantic notifies the joint venture at least six months before the then current
term expires. Space not leased by Bell Atlantic or its affiliates on each tower
is available for lease by the joint venture to third parties.
Operating Agreements
In connection with the formation of the joint venture, Bell Atlantic and
CCA Investment Corp. entered into limited liability company operating
agreements that established and govern the limited liability companies
comprising the joint venture.
Governance. The business and affairs of the joint venture will be managed
by its managers under the supervision of a board of representatives. Each
manager will be selected by CCA Investment Corp. Members of the board of
representatives will be selected by each of Bell Atlantic and CCA Investment
Corp. in proportion to their ownership interests in the joint venture. The
board of representatives initially will have six members, with two selected by
Bell Atlantic and four selected by CCA Investment Corp. So long as Bell
Atlantic maintains at least a 5% interest in the joint venture, it will
maintain the right to designate at least one member of the board of
representatives.
The managers will operate the joint venture 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 joint venture'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, a number
of material corporate actions will require the mutual consent of Bell Atlantic
and CCA Investment Corp. incuding, among others:
. engaging in any business other than the tower business in the United
States;
. voluntarily entering into a bankruptcy proceeding;
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. incurring additional non-ordinary debt;
. issuing any additional equity interests in the joint venture;
. mergers or consolidations; and
. approval of the business plan.
Restrictions on Transfers of Interests; Rights of First Refusal; Tag-Along
Rights. Except for transfers to wholly owned affiliates, neither Bell Atlantic
nor CCA Investment Corp. may transfer its interest in the joint venture 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 Bell
Atlantic or CCA Investment Corp. wishes to transfer its interest in the joint
venture 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 joint venture on the same terms and conditions, including
price. Bell Atlantic may only transfer its 0.001% nominal interest in the
operating subsidiary of the joint venture to its wholly owned affiliates or in
connection with a merger or consolidation transaction to which Bell Atlantic or
Bell Atlantic Corporation is a party.
Dissolution of the Joint Venture. We have agreed with Bell Atlantic that
upon a dissolution of the joint venture, in satisfaction of our respective
interests in the 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 and Bell Atlantic would receive all of
the shares of our common stock held by the joint venture and a payment from us,
equal to 14.0% of the fair market value of the assets and liabilities of the
joint venture (other than our common stock), to be made in cash or our common
stock at our election. In certain limited circumstances, we may elect to
participate in an increased value on the shares of our common stock held by the
joint venture. Bell Atlantic would continue to retain its 0.001% nominal
interest in the joint venture's operating subsidiary following dissolution of
the joint venture. For so long as it retains such interest, the operations
formerly included in the joint venture would remain subject to the operating
restrictions set forth above under "--Governance". A dissolution of the joint
venture may be triggered (1) by Bell Atlantic at any time following the third
anniversary of the formation of the joint venture and (2) by us at any time
following the fourth anniversary of its formation; however, if we trigger the
dissolution prior to the seventh anniversary, we may be required to make
additional cash payments to Bell Atlantic.
Transitional Services Agreement; Services Agreement
In connection with the formation of the joint venture, Bell Atlantic and
the joint venture entered into a transitional services agreement under which
Bell Atlantic will provide the joint venture with services necessary to ensure
a smooth transition of the business to the joint venture. In addition, we and
the joint venture entered into a services agreement under which we will provide
the joint venture with a number of services, including accounting and other
information technology services.
Proposed BellSouth Transaction
On March 5, 1999, we entered into a preliminary letter agreement with
BellSouth Mobility Inc., BellSouth Telecommunications Inc. and certain of its
affiliates. The letter agreement sets forth the terms of our agreement under
which BellSouth will sell to us, in a taxable sale under a master sublease
agreement, their 1,850 wireless communications towers for $610.0 million,
consisting of $430.0 million in cash and approximately 9.1 million shares of
our common stock (valued at $180.0 million), subject to adjustments. The
aggregate consideration will be subject to increase if BellSouth transfers more
than 1,850 towers to us in connection with the transaction.The letter agreement
contemplates that we will enter into a build-to-suit agreement with BellSouth
under which we will build up to 500 towers over five years for BellSouth.
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We will be responsible for managing, maintaining and leasing the available
space on BellSouth's wireless communications towers located throughout Indiana,
Kentucky, Louisiana, Mississippi, Alabama, Arkansas, Florida, Georgia and
Tennessee. While we will have complete responsibility for the towers, and their
monitoring and maintenance, BellSouth will continue to fully own its
communications components, including:
.switching equipment;
.shelters; and
.cell site facilities.
BellSouth will pay us a fee of $1,200 per month per site for its services on
existing and newly built towers.
The transaction is expected to close in a series of closings, beginning in
the second quarter of 1999, and is expected to be fully closed no later than
eight months thereafter. In connection with our entering into the letter
agreement we placed $50.0 million in an escrow account which will be returned
to us at the first stage of the multi-stage closing.
Letter Agreement
General. Under the letter agreement, a newly formed subsidiary of ours,
Crown Castle South Inc. ("CCSI"), will receive rights to lease, sublease,
design, develop, contract, operate, market and manage approximately 1,850 tower
sites owned by BellSouth, or to be constructed on behalf of BellSouth, in
Indiana, Kentucky, Louisiana, Mississippi, Alabama, Arkansas, Florida, Georgia
and Tennessee, in exchange for aggregate consideration of $610.0 million,
consisting of $430.0 million in cash and approximately 9.1 million shares of
our common stock (valued at $180.0 million), subject to adjustments.
The terms and conditions of the sublease of the 1,850 sites are set forth
in a sublease to be entered into between BellSouth, CCSI and us. Further, we
have agreed to enter into a site management agreement, under which we will
provide certain management services on sites that are not part of the 1,850
towers contemplated by the sublease. We are entering into this management
agreement because of restrictions on transfer.
The letter agreement provides that the transaction will require further
documentation including the preparation, acceptance and delivery of a
definitive acquisition agreement, the terms of which have not yet been fully
negotiated.
Consideration. Under the letter agreement, we will pay to BellSouth the sum
of $324,324.32 for each site leased or subleased to CCSI under the sublease. If
subleases covering the full 1,850 towers are transferred to CCSI as
contemplated by the letter agreement, the aggregate consideration payable to
BellSouth will consist of $430.0 million in cash and $180.0 million in our
common stock, but we will retain the option to increase the cash portion of the
aggregate consideration by up to $30.0 million and decrease the equity portion
to not less than $150.0 million. This option must be exercised by us prior to
the first closing. The approximately 9.1 million shares of our common stock
included in the consideration was determined using the average closing price of
our common stock on the 30 trading days immediately preceding March 5, 1999.
While the letter agreement contemplates the sublease by BellSouth of
approximately 1,850 sites to CCSI, in the event that additional sites are
subleased to CCSI, the consideration paid for the next 250 sites will be
payable in cash only. If CCSI subleases more than 2,100 sites from BellSouth in
connection with the sublease, consideration for any additional towers will be
payable in shares of our common stock.
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The letter agreement provides that if the average closing price of our
common stock during the 30 day period immediately preceding the first
anniversary of the final closing is less than the initial share price we
described above, then we will, at our option,
(1) pay BellSouth cash in a make-up amount of cash equal to
(x) the difference between the initial share price and this
subsequent share price multiplied by
(y) the number of shares issued as part of the consideration less
(z) the gross proceeds from all sales of such shares prior to the
first anniversary of the final closing or
(2) issue to BellSouth the number of shares of our common stock equal
to the make-up amount of cash divided by the subsequent share
price;
in each case not to exceed $50.0 million in cash or $75.0 million in common
stock.
Under the letter agreement, the consideration we pay may be adjusted based
on the amount we are required to pay in calendar year 1999 for the lease of the
land on which these towers are located, or ground rents. If a post-closing
audit demonstrates that the amount we are required to pay, in aggregate, for
such ground rents exceeds $11.4 million, BellSouth will be required to pay to
CCSI an amount equal to a certain multiple of the amount by which the rents
exceed $11.4 million, not to exceed $45.0 million.
Escrow Payment. In connection with the signing of the letter agreement, we
deposited $50.0 million into an escrow account. BellSouth is entitled to
receive the escrow payment in full in the event that:
. we and BellSouth fail to execute a definitive acquisition agreement
within 90 days of the date of the letter agreement, and BellSouth has
negotiated the operative documents in good faith, or
. the acquisition agreement is executed but the initial closing fails to
occur as a result of any breach of the acquisition agreement by us or
CCSI or any failure of us or CCSI to satisfy the closing conditions set
forth in the agreement.
Upon completion of the first closing, the escrow payment will be returned
to us.
Closings. In connection with the letter agreement, we and BellSouth have
agreed that the sublease of the sites under the sublease will be completed in a
series of closings over not more than
eight months and will include a minimum number of sites to be included in each
closing, the first of which is expected to take place on May 31, 1999.
BellSouth has agreed to use all commercially reasonable efforts to sublease
approximately 250 sites at each closing, grouped so as to be located in
contiguous regions, until all sites have been subleased prior to or at the
final closing. The sites to be included on the initial closing date will be
located in Kentucky and Indiana.
Termination Right. The letter agreement provides that in the event that any
one of the closings contemplated by the transaction is not completed due to our
or CCSI's failure to comply with all our conditions, covenants and
representations, in addition to any other remedies BellSouth may have at equity
or law, BellSouth will have the right to require us to pay to BellSouth a
termination fee of $50 million to terminate all agreements between the parties,
and at BellSouth's option, to rescind all prior closings. If BellSouth elects
to rescind the prior closings, payment of the termination fee will be made by
netting it against the amounts previously paid to BellSouth at the previous
closings, and BellSouth will return to us any amount which is in excess of the
termination fee.
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Sublease
Under the letter agreement, the parties fully and completely agreed upon
the terms of the sublease.
General. Under the terms of the sublease, BellSouth has agreed to grant a
lease to CCSI, under which CCSI will lease or sublease the land, tower and
improvements at each site other than certain space reserved by BellSouth and
space utilized by third parties under existing subleases. BellSouth has agreed
to lease to CCSI all its sites in the territories where the towers are located
except where it is legally prohibited from doing so and except for sites that
are specifically excluded from the sublease. BellSouth expects that the number
of sites available for sublease will be approximately 1,850. The sites
constructed under the build-to-suit agreement, as described below, will also be
made part of and subject to the sublease.
Under the sublease, CCSI will be entitled to use the subleased property of
each site for constructing, installing, operating, managing, maintaining and
marketing the tower and improvements on each site, including leasing space to
third party tenants. BellSouth has agreed to pay CCSI a site maintenance charge
of $1,200 per month per site, subject to an increase of five percent per year
for the first ten years following the applicable commencement date of the
sublease on such site. If, after the tenth anniversary following each
commencement date, the then current site maintenance charge is below the market
rate, then such site maintenance charge will automatically be increased on such
anniversary and each anniversary thereafter by the consumer price index. If the
then site maintenance charge is above the market rate, then such site
maintenance charge will be automatically reset at ninety percent of such agreed
upon market rate and will increase on each following anniversary by the then
current annual market rate of increase for comparable properties. CCSI has
agreed to pay as rent to BellSouth the ground rents relating to each site that
is leased by BellSouth, and rent of $1.00 per year for sites that are owned by
BellSouth. In addition, CCSI has agreed to sublease available space to any
party to existing agreements providing for the sharing of tower space, or co-
location agreements, with BellSouth. CCSI, however, will receive all rents and
other economic benefits from the parties to such co-location agreements.
Term. The term of the sublease will be one hundred years for sites owned by
BellSouth and, for sites leased by BellSouth, one day less than the term of the
underlying ground lease. CCSI will be responsible for negotiating and obtaining
extensions or renewals of the ground leases. In addition, if CCSI is able to
acquire ownership in a site, CCSI has agreed to transfer such ownership to
BellSouth for $1.00, in which event CCSI will pay no ground rent as of the date
title vests in BellSouth.
Reserved Space. Under the sublease, BellSouth has reserved space on each
site. The reserved space generally relates to the portion of the site,
including space on the tower, in use by BellSouth and its affiliates. BellSouth
has the right to increase the number of antennas on its reserved space to 12,
without increasing the related site maintenance payment, on up to 120 towers so
long as it meets certain conditions. BellSouth also has the right to substitute
the reserved space for other available space on the tower, as well as a right
of first refusal and right of substitution as to available space which CCSI
intends to sublease to any third party.
If BellSouth ceases using its reserved space on a site and elects to
transfer the interest in the reserved space on such site, CCSI will have the
right to acquire BellSouth's interest in the applicable reserved space by
paying to BellSouth consideration of (1) $5,000 (subject to increase based on
the consumer price index) plus (2) a grant to BellSouth of the right to receive
up to thirty-five percent of all gross revenues payable to CCSI for such
reserved space.
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BellSouth will have the right to put to CCSI its rights in its reserved
space relating to a site, and thereby add such space to the sublease, but the
number of sites subject to such a put right may not exceed the greater of one
and one half percent or thirty of the total sites. If this happens, BellSouth
will assign to CCSI all its rights in the reserved space on that site and will
no longer be responsible for the related site maintenance charge.
Withdrawal Right. After the tenth anniversary of the first closing,
BellSouth will have the right, subject to certain notice requirements, to
withdraw its rights on any site. In such case, BellSouth will assign to CCSI
all its rights, including the ground lease and any reserved space, for any
withdrawn site and will no longer be responsible for the related site
maintenance charge.
Termination. The sublease may be terminated by each party in the event of
certain breaches by the other party, including:
. the failure to timely make required payments under the sublease;
. breaches of covenants and other agreements in the sublease;
. breaches of representations and warranties; and
. insolvency.
In the case of BellSouth's right to terminate, BellSouth may terminate the
sublease as to an applicable site following a breach and failure to cure
relating to that particular site. BellSouth may terminate the entire sublease
upon the occurrence of unwaived defaults by CCSI on more than fifty sites
during any consecutive five-year period.
Build-to-Suit Agreement
BellSouth has agreed to enter into a build-to-suit agreement with us and
CCSI under which CCSI will develop and construct all towers built in the
territory where the 1,850 tower are located on behalf of BellSouth for a period
of five years. If CCSI has not constructed at least 500 towers over the five
year period following the signing of the build-to-suit agreement, the term of
the build-to-suit agreement will be extended for up to an additional two years
until such time as CCSI has constructed 500 towers. BellSouth will be required
to submit to CCSI all proposals to develop and construct tower sites within the
territory until CCSI has completed construction of 500 towers. CCSI will be
required to develop and construct tower sites in locations that satisfy
BellSouth's engineering requirements. Upon substantial completion of a tower
site, the site will become subject to and part of the sublease. The build-to-
suit agreement will provide that space not reserved by BellSouth on each tower
will be available for lease by CCSI to third parties.
Site Maintenance Agreement
The parties have agreed to enter into a site maintenance agreement whereby
CCSI will perform management services at those sites in the territory which are
not leased or subleased to CCSI under the management sublease and that are
designated by BellSouth for inclusion in the site maintenance agreement. Under
the letter agreement, we and BellSouth have agreed that BellSouth will pay to
us a site maintenance fee of $333.00 per site per month, increased annually by
the consumer price index, for sites designated under the site maintenance
agreement. Further, we have agreed that the total number of sites to be covered
by the site management agreement will not exceed 100 sites.
Site Marketing Agreement
On March 25, 1998, we and BellSouth entered into a site marketing agreement
under which we currently market BellSouth's tower sites located in Kentucky. In
connection with the letter agreement, we agreed to renew the site marketing
agreement, the term of which ended on February 15, 1999, and to extend the
scope of the agreement to include the entire territory where the 1,850 towers
are located.
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<PAGE>
Registration Rights Agreement
We have agreed to enter into a registration rights agreement whereby we
will grant to BellSouth certain registration rights in respect of shares of our
common stock we pay to BellSouth as consideration for the proposed BellSouth
transaction.
Proposed Powertel Acquisition
On March 15, 1999, we and a newly formed wholly owned indirect
subsidiary,CCP, entered into an asset purchase agreement with Powertel and five
of its subsidiaries, under which the parties agreed that we would purchase from
Powertel approximately 650 towers and related assets and liabilities.
We will pay to Powertel aggregate consideration of $275 million, subject to
adjustment based on the amount of towers actually tendered to us at closing,
for the 650 towers. At closing, Powertel will pay us a credit against the
purchase price in an aggregate amount of $383,000.00, as consideration for our
acceptance of certain towers containing site leases that may require revenue
received from Powertel or its affiliates to be shared with the site lessors.
See"--Asset Purchase Agreement", "--Escrow Agreement" and "Risk Factors--We May
Not Complete the Proposed Transactions".
At closing Powertel will assign and we will assume five master site
agreements, under which Powertel or its affiliates will agree to pay us monthly
rent of $1,800 per tower for continued use of space Powertel occupies on the
towers. This per tower amount is subject to increase on each fifth anniversary
of the agreement and as Powertel adds equipment to these towers.
Asset Purchase Agreement
Purchase Price. Under the asset purchase agreement, we will pay the $275
million, less the credit described above, in cash on or before June 4, 1999 to
Powertel for Powertel's tower structures, rights to tower sites, related assets
and rights under applicable governmental permits. The purchase price is subject
to adjustment up or down based on the actual number of sites tendered at
closing. The asset purchase agreement provides that sites considered defective
or incomplete, will not be tendered at closing, and consequently, the purchase
price will be reduced by an amount equal to $423,077 for each such rejected
site.
Terms and Conditions. We and Powertel are making certain representations
and warranties which must be true on the closing date in order for the
transaction to be completed. Other conditions which must be satisfied on the
closing date include:
. compliance by us and Powertel with the asset purchase agreement;
. absence of litigation;
. receipt of regulatory approvals; and
. absence of any material adverse effect relating to the Powertel assets
and assumed liabilities.
In addition, we have deposited $50 million with SunTrust Bank Atlanta as
escrow agent. At closing, this escrow deposit will be delivered to Powertel and
credited against the closing price. However, we have agreed that the escrow
deposit will be forfeited to Powertel in the event that we are unable to
receive adequate financing to complete the acquisition and thus are unable to
close the acquisition in a timely manner. As a condition to the asset purchase
agreement, we have agreed to use our reasonable best efforts to have a
registration statement relating to such financing declared effective as
expeditiously as possible. Further, upon the occurrence of the event described
below, we
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<PAGE>
are required to provide Powertel with adequate written assurance that we have
at least one alternative financing source, which in Powertel's sole judgment
provides it assurance that we will have on hand a minimum of an additional
$225.0 million in cash to apply to the purchase price at closing. Such
financing assurance must be received by Powertel within five days of the
occurrence of certain events including:
. our failure to file the registration statement before March 19, 1999;
. the withdrawal or abandonment of the registration statement or the
decision not to proceed with the offerings;
. our failure to commence presentations to institutional investors by May
15, 1999 or, after commencement of such presentations, termination or
abandonment of such presentations and failure to proceed to pricing of
the offerings.
If we are required to provide Powertel with a financing assurance, Powertel
will have five days to accept or reject it. If Powertel rejects the financing
assurance, we will have ten days from receipt of the rejection to deliver the
$225.0 million balance of the closing price to the escrow agent, who will
deliver the entire closing price to Powertel at closing. However, if we are
unable or unwilling to deliver the additional sum into escrow, Powertel will
have the right to unilaterally terminate the asset purchase agreement, and
receive, as its sole remedy, from the escrow deposit liquidated damages in the
amount of $10.0 million on or prior to May 15, 1999 or $25.0 million after May
15, 1999 but prior to June 4, 1999. If on June 4, 1999, Powertel has fulfilled
all of its obligations and conditions precedent to closing in all material
respects and has not defaulted or breached its obligations under the asset
purchase agreement, and we have failed to deliver the additional sum into
escrow or are otherwise unable or unwilling to deliver the purchase price,
Powertel will receive as liquidated damages the entire amount of the escrow
deposit.
Master Site Agreement
On the closing date, the parties to the asset purchase agreement and
certain of Powertel's affiliates will enter into master site agreements
governing all towers acquired under the asset purchase agreement. Under these
agreements, Powertel will agree to continue to lease the space it currently
occupies on the towers to be acquired by us. The monthly rent paid by Powertel
for each tower will be $1,800. Such monthly payment is subject to increase
based on an agreed upon schedule if and when Powertel adds equipment to a site.
Nonetheless, the monthly rent, including additional rents related to the
addition of certain equipment, will be increased on each fifth anniversary of
the agreement up to an amount that is 115% of the rent paid during the
preceding five year period. The master site agreements provide that space not
occupied by Powertel on the acquired towers can be leased to third parties.
Under the master site agreements, the term of each tower lease will be ten
years. Powertel has the right to extend any site lease for up to three
additional five year periods. Each site lease will automatically renew for an
option term unless Powertel notifies us of its intent not to renew at least 180
days prior to the end of the then current term.
Proposed One2One Transaction
On March 5, 1999, we entered into the framework agreement with One2One,
under which Castle Transmission has agreed to manage, develop and, at its
option, acquire up to 821 towers. These towers represent substantially all the
towers in One2One's nationwide wireless network in the United Kingdom.
Approximately one-half of these 821 towers can accommodate additional tenants.
We expect to upgrade or replace the other towers as demand for space on such
towers arises. We believe that the cost of upgrading or replacing any single
tower will not exceed $40,000.
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<PAGE>
Castle Transmission will be responsible for managing and leasing available
space on the towers, and will receive all the income from any such third party
leases. The term of the management arrangements will be up to 25 years. During
the three-year period following the closing, Castle Transmission will have the
right, at its option, to acquire for (Pounds)1.00 per site One2One's interest
in the 821 towers, to the extent such interests can be assigned. One2One has
also agreed to include as part of the framework agreement, including Castle
Transmission's right to acquire sites during the three-year period, any new
One2One towers constructed during the term of the agreement.
Framework Agreement
Terms and Conditions. The 821 existing towers will be managed by Castle
Transmission under a management contract with an initial term of 10 years,
which is extendable at Castle Transmission's option for an additional 15 years.
Castle Transmission will also assume all liabilities in connection with the 821
existing towers. During the three-year period following the closing, One2One
will assign to Castle Transmission, at Castle Transmission's option, One2One's
interest in the sites on which the 821 existing towers are located. For sites
where the underlying ground lease is not assignable, the management contract
will continue in effect. Castle Transmission also has the right during this
three-year option period to assume ownership of any new One2One towers which
are built by or for One2One during the option period.
Consideration. As consideration for the framework agreement, One2One will
receive varying rent-free periods of site use depending on the type of tower
site as follows:
. The 821 existing towers. One2One will enter into a 25 year site sharing
agreement with Castle Transmission permitting One2One to continue to occupy
the 821 existing towers. This agreement will be rent-free until March 2007
(with a retroactive adjustment to April 1998). After the expiration of this
initial period, One2One will pay to Castle Transmission an annually indexed
rental fee (based on (Pounds)3,750.0 per site index adjusted from 1999)
plus a further additional compensatory payment to Castle Transmission in
the event that Castle Transmission is chosen as the contractor for fewer
than 250 new One2One sites. See "--One2One ADC Contract".
. New One2One sites. One2One will also enter into 25 year site sharing
agreements with Castle Transmission to occupy all new One2One towers and
pay Castle Transmission an annually indexed rental fee (based on
(Pounds)4,000.0 per site index adjusted from 1999) after an initial rent-
free period of fifteen years.
. 166 Castle Transmission towers currently under lease by One2One. One2One
currently occupies 166 Castle Transmission sites under a master lease
agreement. This master lease will be modified to allow One2One to occupy
these sites rent-free from April 1998 until March 2000.
The framework agreement is conditional upon the approvals of the parties'
board of directors and senior creditors.
One2One ADC Contract
In connection with the framework agreement, Castle Transmission entered
into a separate contract with One2One under which Castle Transmission will
provide acquisition, design and construction services for up to 250 new One2One
sites. If One2One requests Castle Transmission's services for all 250 sites,
Castle Transmission will be paid aggregate fees in excess of (Pounds)7.0
million. Castle Transmission also believes that some of the new sites will be
new builds, which are known as greenfield sites, under the framework agreement,
and thus Castle Transmission will be eligible to assume ownership of these
greenfield sites following their construction, under the terms of the framework
agreement.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information, as of March 31, 1999,
for our directors or executive officers and other key personnel:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<C> <C> <S>
Ted B. Miller, Jr...... 47 Chief Executive Officer and Vice Chairman of the
Board of Directors
David L. Ivy........... 52 President and Director
Charles C. Green, III.. 52 Executive Vice President and Chief Financial
Officer
John L. Gwyn........... 51 Executive Vice President
E. Blake Hawk.......... 49 Executive Vice President and General Counsel
Wesley D. Cunningham... 39 Senior Vice President, Corporate Controller and
Chief Accounting Officer
Edward W. Wallander.... 41 Senior Vice President and Chief Information
Officer
John P. Kelly.......... 41 President and Chief Operating Officer of Crown
Communication
Alan Rees.............. 55 Chief Operating Officer and Director of CTSH
George E. Reese........ 48 Chief Financial Officer, Secretary and Director of
CTSH
Michel Azibert......... 43 Director
Bruno Chetaille........ 45 Director
Robert A. Crown........ 44 Director
Carl Ferenbach......... 56 Chairman of the Board of Directors
Randall A. Hack........ 51 Director
Robert F. McKenzie..... 55 Director
William A. Murphy...... 31 Director
Jeffrey H. Schutz...... 47 Director
</TABLE>
Under our certificate of incorporation and by-laws, our 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 1, class 2 and class 3. Messrs.
Ferenbach, Schutz and McKenzie are class 1 directors. Messrs. Crown, Murphy and
Ivy are class 2 directors, and Messrs. Hack and Miller are class 3 directors.
The terms of class 1, class 2 and class 3 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 By-laws--
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 completion 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 CCIC since 1995. Mr. Miller co-founded Castle Tower Corporation, CCIC's
predecessor company, in 1994. He was the President of CCIC and its predecessor
company from November 1996 to August 1997. Mr. Miller has been the Managing
Director, Chief Executive Officer of Castle Transmission since February 1997
and has served as Chairman of the board of Castle Transmission since August
1998. In 1986, Mr. Miller founded Interstate Realty Corporation, 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 CCIC.
David L. Ivy has been the President of CCIC since August 1997, and was
elected as a director of CCIC in June 1997. From October 1996 to August 1997,
he served as Executive Vice President and Chief Financial Officer of CCIC.
Since 1995, he has been the President of DLI, Inc., a real estate consulting
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
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<PAGE>
Goldman, Sachs & Co. that was established to acquire distressed assets. 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 CCIC.
Charles C. Green, III has been an Executive Vice President and Chief
Financial Officer of CCIC since September 1997. Mr. Green was the President and
Chief Operating Officer of Torch Energy Advisors Incorporated, 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 CCIC.
John L. Gwyn has been an Executive Vice President of CCIC since August
1997. From February to August 1997, Mr. Gwyn served as Senior Vice President of
CCIC and its predecessor company. 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.
E. Blake Hawk has been Executive Vice President and General Counsel since
February 1999. Mr. Hawk was an attorney with Brown, Parker & Leahy, LLP in
Houston, Texas from 1980 to 1999 and became a partner with the firm in 1986.
Mr. Hawk has been board certified in tax law by the Texas Board of Legal
Specialization since 1984 and has been a Certified Public Accountant since
1976.
Wesley D. Cunningham has been a Senior Vice President of CCIC since March
1999 and Chief Accounting Officer of CCIC since April 1998. He has been the
Corporate Controller of CCIC since February 1997. Mr. Cunningham was the
Assistant Corporate Controller of Drilex International Inc., an oil field
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 CCIC.
Edward W. Wallander has been Senior Vice President and Chief Information
Officer of CCIC since April 1998. From August 1990 to April 1998, Mr. Wallander
worked for PNC Bank in various capacities including Senior Vice President and
Chief Operating Officer of PNC Brokerage Corp. Prior to PNC Bank, Mr. Wallander
was a commercial real estate lender for Mellon Bank, N.A. and a Certified
Public Accountant for Ernst & Young, L.L.P.
John Kelly has been the President of Crown Communication since December
1998. From January 1990 to July 1998, Mr. Kelly was the President and Chief
Operating Officer of Atlantic Cellular Company L.P. 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.
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<PAGE>
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 CCIC 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 role in the preparation
of the Media Law enacted in France in 1986. Under 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 CCIC 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 for four years. Under the governance agreement, Mr.
Chetaille was elected as one of the two directors elected by the holders of the
Class A common stock.
Robert A. Crown founded Crown Communications in 1980 and was President from
its inception until December 1998. Mr. Crown is Chairman of the board of Crown
Communication Inc. and was elected as a director of CCIC 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 major trading area. Under the
stockholders agreement, Mr. Crown was the nominee of the Crown Parties for
election as a director of CCIC. Mr. Crown is a director of Crown Communication
and each of its wholly owned subsidiaries.
Carl Ferenbach was elected as the Chairman of the board of directors of
CCIC 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 since its formation in 1996; a Managing Director of Third Berkshire
Managers LLC, the general partner of Third Berkshire Associates Limited
Partnership, the general partner of Berkshire Fund III, A Limited Partnership,
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 the general partner of Berkshire Fund IV,
Limited Partnership 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. Under the
stockholders agreement, Mr. Ferenbach was the nominee of Berkshire group for
election as a director of CCIC.
Randall A. Hack was elected as a director of CCIC 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. Under the stockholders agreement, Mr.
Hack was the nominee of Nassau Group for election as a director of CCIC.
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<PAGE>
Robert F. McKenzie was elected as a director of CCIC 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 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 CCIC 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 CCIC 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. Under the stockholders agreement, Mr. Schutz was the
nominee of Centennial Group for election as a director of CCIC.
Board Committees
Our 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, McKenzie and Murphy, reviews our audit
policies and oversees the engagement of our independent auditors, as well as
developing financing strategies for us and approving outside suppliers to
implement these strategies. The nominating and corporate governance committee,
composed of Messrs. Azibert, Ferenbach, McKenzie and Miller, is responsible for
nominating new board members and for an annual review of board performance.
Under 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 of our non-management directors 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, our board of directors approved a fee of $150,000 per annum to
the Berkshire group (half of which is to be paid by Castle Transmission) for
general consulting services and for the services of Mr. Ferenbach as Chairman
of the board. In addition, Mr. McKenzie received approximately $10,000 in 1996
for specific consulting assignments requested by the Chief Executive Officer.
Messrs. Ferenbach and Schutz are indemnified by the respective entities which
they represent on our board of directors.
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<PAGE>
Executive Compensation
The following table sets forth the cash and non-cash compensation paid by
or incurred on behalf of us to our chief executive officer and the next four
most highly paid executive officers for each of the three years ended December
31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Number of
Securities All Other
Underlying Compen-
Options/ sation
Name and Principal Position Year Salary ($) Bonus ($) SARs (#)(a) ($)
--------------------------- ---- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Ted B. Miller, Jr........... 1998 $325,000 $300,000 3,013,000 $ --
Chief Executive Officer and 1997 281,575 626,250 625,000 --
Vice Chairman of the Board
of Directors 1996 152,600 75,000 -- --
David L. Ivy................ 1998 $225,000 $150,000 1,455,000 $ --
President and Director 1997 200,000 300,000 250,000 --
1996 37,500(b) -- 175,000 35,000(c)
Charles C. Green, III ...... 1998 $235,000 $ 56,250 940,000 $ --
Executive Vice President and 1997 75,000(d) -- 250,000 --
Chief Financial Officer 1996 -- -- -- --
John L. Gwyn................ 1998 $185,000 $131,250 250,000 $ --
Executive Vice President 1997 160,424(e) -- 225,000 --
1996 -- -- -- --
Alan Rees................... 1998 $225,722 $ -- 756,800 $ --
Chief Operating Officer and 1997 225,722(f) 84,646 -- --
Director of CTSH 1996 -- -- -- --
</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 CCIC 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. Rees began working for CTSH on February 28, 1997 at an annual salary of
$225,722.
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<PAGE>
Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of
Underlying Options/ Stock Price
Options/ SARs Appreciation
SARs Granted to Exercise for Option Term(a)
Granted Employees in or Base Expiration ----------------------
Name (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
---- ---------- ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ted B. Miller, Jr....... 700,000 5.2% $ 2.31 1/23/08 $1,016,923 $ 2,577,082
328,000 2.4 7.50 1/28/08 1,547,081 3,920,606
210,000 1.6 5.78 4/23/08 763,352 1,934,485
140,000 1.0 2.31 4/23/08 203,385 515,416
1,035,000 7.7 13.00 7/1/08 8,461,777 21,443,805
600,000 4.5 7.50 7/1/08 2,830,026 7,171,841
David L. Ivy............ 280,000 2.1% $ 2.31 1/23/08 $ 406,769 $ 1,030,833
225,000 1.7 7.50 1/28/08 1,061,260 2,689,440
70,000 0.5 2.31 4/24/08 101,692 257,708
545,000 4.1 13.00 7/1/08 4,455,718 11,291,665
335,000 2.5 7.50 7/1/08 1,580,098 4,004,278
Charles C. Green, III... 75,000 0.6% $ 7.50 1/28/08 $ 353,753 $ 896,480
350,000 2.6 7.50 7/1/08 1,650,848 4,183,574
515,000 3.8 13.00 7/1/08 4,210,450 10,670,106
John L. Gwyn............ 40,000 0.3% $ 7.50 1/28/08 $ 188,668 $ 478,123
175,000 1.3 13.00 7/1/08 1,430,735 3,625,764
35,000 0.3 7.50 7/1/08 165,085 418,357
Alan Rees............... 116,666 0.9% $ 2.31 1/30/08 $ 169,486 $ 429,511
116,666 0.9 3.00 1/30/08 220,112 557,807
116,667 0.9 3.90 1/30/08 286,148 725,155
66,801 0.5 0.00 5/19/08 251,355 400,241
90,000 0.7 7.50 7/1/08 424,504 1,075,776
250,000 1.9 13.00 7/1/08 2,043,908 5,179,663
</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 (except for
Mr. Rees's bonus share grant, where we have assumed a per-share market
price of $2.31) with an assumed rate of appreciation of 5% and 10%,
respectively, compounded annually for 10 years.
The following table details the December 31, 1998 year end estimated value
of each named executive officer's unexercised stock options. All unexercised
options are to purchase the number of shares of common stock indicated.
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<PAGE>
Aggregated Option/SAR Exercises In Last Fiscal Year
And Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/ In-the-Money Options/
SARs at Year-End(#) SARs at Year-End ($)
Shares Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise (#) Realized ($) Unexercisable (U) Unexercisable (U)(a)
---- --------------- ------------ ---------------------- ---------------------
<S> <C> <C> <C> <C>
Ted B. Miller, Jr....... -- -- 2,848,000(E) $36,644,800(E)
1,135,000(U) 5,231,875(U)
David L. Ivy............ -- -- 1,260,000(E) 15,661,500(E)
620,000(U) 2,970,000(U)
Charles C. Green, III... -- -- 675,000(E) 7,321,875(E)
515,000(U) 2,124,375(U)
John L. Gwyn............ -- -- 130,000(E) 1,564,750(E)
345,000(U) 2,787,125(U)
Alan Rees............... -- -- 118,308(E) 1,351,025(E)
638,492(U) 6,609,678(U)
</TABLE>
- --------
(a) The estimated value of exercised in-the-money stock options held at the end
of 1998 assumes a per-share fair market value of $17.125 and per-share
exercise prices ranging from $-0- to $13.00 as applicable.
Severance Agreements
We have entered into severance agreements with Messrs. Miller, Ivy, Green,
Gwyn, Rees, Reese and Hawk. Under the severance agreements, we are required to
provide severance benefits to these executives if they are terminated by us
without cause or the executives terminate with good reason. The severance
agreements provide for enhanced severance benefits if the executives incur a
termination under the circumstances described above within the two-year period
following a change in control in CCIC. Upon such a termination that does not
occur during the change in control period, an eligible executive is entitled
to:
(1) a lump sum payment equal to two times the sum of his base salary
and annual bonus;
(2) continued coverage under specified welfare benefit programs for two
years; and
(3) immediate vesting of any outstanding options and restricted stock
awards.
Upon such a termination during the change in control period, an eligible
executive is entitled to:
(1) receive a lump sum payment equal to three times the sum of his base
salary and annual bonus;
(2) continued coverage under specified welfare benefit programs for
three years; and
(3) immediate vesting of any outstanding options and restricted stock
awards.
Crown Arrangements
We have entered into a memorandum of understanding with Mr. Crown and a
related services agreement. Under the services agreement, Mr. Crown has agreed
to continue to serve in a consulting capacity to, and as Chairman of, Crown
Communication for a two-year period expiring on December 9, 2000, and we have
agreed, for such two-year period, to pay Mr. Crown cash
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compensation of $300,000 annually, along with certain executive perquisites. At
the end of such two-year period, we will pay Mr. Crown a severance benefit of
$300,000. At the time of entering into the memorandum of understanding, we 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 our initial public offering, to grant Mr. Crown
options to purchase 625,000 shares of common stock at the price to
public in the initial public offering of $13.00 per share.
Stock Option Plans
1995 Stock Option Plan
We have adopted the 1995 Stock Option Plan, which was reamended on July 1,
1998. The purpose of the 1995 stock option plan is to advance our interests by
providing additional incentives and motivations which help us 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 under the 1995 stock option plan.
Under the 1995 stock option plan, we can grant options to purchase up to
18,000,000 shares of common stock. On April 20, 1999, our board of directors
approved an amendment to the 1995 stock option plan to permit us to grant
options to purchase up to 10,000,000 additional shares of our common stock;
however, this amendment will require the approval of a majority of our
shareholders.
Options granted under the 1995 stock option plan may either be incentive
stock options, 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 determined by the board.
Our employees, directors and consultants and the employees, directors and
consultants of our subsidiaries and affiliates are eligible to receive options
under the 1995 stock option plan; however, only certain employees are eligible
to receive incentive stock options. 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
. 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 our board and stockholders. The 1995 stock
option plan will remain in effect until all options granted under it have been
exercised or expired. The board, in its discretion, may terminate the 1995
stock option
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plan at any time relating 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 our stockholders, except 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 option holder without the
approval of the holder.
Under the 1995 stock option plan, options are exercisable during the period
specified in each option agreement or certificate; except 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 us as an employee. A change in control generally accelerates the vesting
of options granted to employees and some of the options vest upon achievement
of specific business goals or objectives. An option generally must be exercised
within 12 months of a holder ceasing to be involved as our employee, director
or consultant as a result of death and within three months for other reasons;
however, these periods can be extended by decision of the board (except in the
case of an incentive stock option). 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 incentive stock option, 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.
The grant of an option will not 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. The tax basis in any shares of
common stock received under 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. We will generally have a deduction at the same level as the
amount realized by the holder. We have 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
incentive stock option is not subject to taxation as income to the employee at
the date of grant or exercise and we do not get a business deduction for an
incentive stock option as long as the stock is not sold within two years after
the incentive stock option is granted and one year after the incentive stock
option is exercised. The incentive stock option 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 incentive stock option is sold within two years of
the incentive stock option grant date or within one year of the exercise date,
then it is taxed the same as a nonqualified option. Upon the exercise of an
incentive stock option, the difference between the value of the stock and the
exercise price is recognized as a preference item for alternative minimum tax
purposes.
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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 282,750 shares have been forfeited and options
for 12,226,645 shares remain outstanding. The following table sets forth the
exercise price and number of outstanding options as well as the number of those
options which are vested and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
Amount
Exercise Amount Vested and
Price Outstanding Exercisable
-------- ----------- -----------
<S> <C> <C> <C>
$0.40 345,000 345,000(a)
1.20 43,750 43,750
1.60 50,000 50,000
2.40 175,000 175,000
3.09 5,385 --
4.03 5,385 --
4.20 1,630,625 1,463,625
4.76 23,135 23,135
5.24 5,385 --
5.97 28,000 --
6.00 107,200 107,200
7.50 5,633,030 2,805,630
7.77 28,000 --
10.08 28,000 --
11.31 75,000 --
11.50 75,000 --
11.94 125,000 --
12.50 253,750 128,750
13.00 3,590,000 90,000
----- ---------- ---------
Total N/A 12,226,645 5,232,090
===== ========== =========
</TABLE>
--------
(a) Represents options held by Mr. Miller.
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; therefore, in accordance with
the "intrinsic value based method" of accounting for stock options, we 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; therefore, we will account
for the issuance of these options in 1998 based on the 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 completion of
the initial public offering of common stock. We 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".
The options granted include incentive stock options for 627,750 shares with
an exercise price of $7.50 per share. As of December 31, 1998, incentive stock
options for 81,250 shares have been forfeited and none of the outstanding
incentive stock options are exercisable.
CTSH Stock Option Plans
CTSH has established certain stock option plans for the benefit of its
employees. Upon completion of the roll-up in August 1998, all of the
outstanding options to purchase shares of capital stock of CTSH granted under
the CTSH stock option plans were converted into and replaced by
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options to purchase shares of our common stock. Our board of directors has
adopted each of the CTSH option plans. Options granted under the CTSH stock
options plans may be adjusted at our discretion or, in the case of options
granted under the CTSH share bonus plan, by the CTSH trustee, to take into
account any variation of our share capital subject to the written confirmation
of our auditors 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.
CTSH All Employee Share Option Scheme. All outstanding options granted
under the CTSH all employee share option scheme are vested. These options may
only be exercised in full and on one occasion. Outstanding options granted
under the CTSH All Employee plan will lapse if not exercised by the earlier of:
(1) the first anniversary of the option holder's death;
(2) six months following the termination of the option holder's employment;
(3) six months following the earlier of the following corporate events:
(a) a change of control,
(b) the sanctioning by the U.K. courts of a compromise or arrangement
under the U.K. Companies Act 1985 section 425 that affects our
common stock,
(c) a person becoming bound or entitled to acquire our common stock
under U.K. Companies Act 1985 sections 428-430, or
(d) notice of a general meeting of our stockholders at which a
resolution will be proposed for the purpose of our voluntary
winding-up;
(4) the option holder being adjudicated bankrupt under U.K. law;
(5) the surrender of the option; or
(6) 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.
CTSH Management Plan. All outstanding options granted under the CTSH
unapproved share option scheme will vest on the earlier of:
(1) March 1, 2000 or, if the option holder was not an eligible employee (as
defined in the plan) on March 1, 1997, the third anniversary of the
date on which the option was granted,
(2) the death of the option holder,
(3) the termination of the option holder's employment, other than a
termination for cause or the voluntary resignation of the option
holder,
(4) the occurrence of one of the corporate events described above, or
(5) the sale of our subsidiary or business 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 under the CTSH management plan will lapse on the earlier of:
(1) the first anniversary of the option holder's death,
(2) six months after the termination of the option holder's employment,
other than a termination for cause or the voluntary resignation of the
option holder,
(3) immediately upon any other termination of employment,
(4) six months following the occurrence of one of the corporate events
described above,
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(5) the option holder being adjudicated bankrupt under U.K. law,
(6) the surrender of the option,
(7) failure to satisfy any performance condition established by the board
of directors of Castle Transmission, or
(8) 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 CTSH bonus share plan, CTSH
has executed the employee benefit trust, a discretionary settlement for the
benefit of past and present Castle Transmission employees, directors and their
families. Castle Transmission employees and directors are able to participate
in the CTSH bonus share plan by foregoing a portion of their annual bonuses
awarded by us in consideration for options to purchase shares of our 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, with each unit to be converted
into seven shares of common stock upon completion of the roll-up, and the
Castle Transmission 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 under 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:
(1) the first anniversary of the option holder's death,
(2) six months after the termination of the option holder's employment,
(3) six months following the occurrence of one of the corporate events
described above,
(4) the option holder being adjudicated bankrupt under U.K. law,
(5) the surrender of the option or
(6) the seventh anniversary of the grant of the option.
In order to satisfy the demand created by the exercise of options granted
under the CTSH bonus share plan, the CTSH trustee has been granted a call
option by us to purchase up to 149,709 shares of common stock from us 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. Castle Transmission employees and directors continue to be able
to effectively invest a proportion of their annual bonuses in our common stock
under the CTSH bonus share plan for the fiscal years 1998 and 1999. Thereafter,
no additional options will be granted under the CTSH bonus share 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. These options are vested in full and have converted into
options to purchase 1,890,000 shares of our common stock at an exercise price
of (Pounds)1.43 and 210,000 shares of our common stock at an exercise price of
(Pounds)3.57. When we completed the roll-up, the exercise prices were set in
U.S. dollars at $2.31 for the (Pounds)1.43 exercise price and $5.96 for the
(Pounds)3.57 exercise price.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1995 Investments
On January 11, 1995, Ted B. Miller, Jr., Edward C. Hutcheson, Jr.,
Centennial Fund IV, Berkshire Fund III, A Limited Partnership, and certain
trusts and natural persons which are now members of Berkshire Investors LLC and
J. Landis Martin collectively invested $8,790,000 in return for Castle Tower
Corporation's common stock or, in some cases, preferred stock or convertible
notes of Castle Tower Corporation. The proceeds received on January 11, 1995
were used by us for the acquisition of towers and ancillary assets from
Pittercrief Communications and for working capital.
Under a securities exchange agreement, dated as of April 27, 1995, such
parties effectively made CCIC the holding company of Castle Tower Corporation
and converted some of the obligations of Castle Tower Corporation into capital
stock of CCIC. As a result of the exchange of Castle Tower Corporation capital
stock for CCIC capital stock, such parties received shares of common stock, or,
in come cases, preferred stock, of CCIC.
1996 Investments
Under a securities purchase agreement, dated as of July 15, 1996, among
Berkshire Fund III Group, Centennial Fund IV, J. Landis Martin, Edward C.
Hutcheson, Jr., Robert F. McKenzie and us, we privately placed 864,568 shares
of our Series B convertible preferred stock, par value $.01 per share, 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 were used for:
(a) the purchase of the towers and microwave and specialized mobile radio
businesses from Motorola in Puerto Rico;
(b) an option payment relating to the acquisition of TEA and
TeleStructures; and
(c) working capital.
1997 Investments
Under a securities purchase agreement, dated as of February 14, 1997, among
Centennial Fund V and Centennial Entrepreneurs Fund V, L.P. Berkshire Fund IV,
Limited Partnership, and certain trusts and natural persons that are members of
Berkshire Investors LLC, PNC Venture Corp., Nassau Capital Partners II L.P.,
NAS Partners I L.L.C., Fay, Richwhite Communications Limited, J. Landis Martin,
Robert F. McKenzie and us, we privately placed 3,529,832 shares of our Series C
convertible preferred stock, par value $.01 per share for an aggregate purchase
price of $74,126,472. As a part of this transaction, 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, Nassau Group paid an aggregate of $19,499,991
for 928,571 shares, and Mr. Martin paid $999,999 for 47,619 shares. The
proceeds received on February 14, 1997 were used by us to fund a portion of our
investment in Castle Transmission.
In March 1997, Edward C. Hutcheson, Jr. exercised stock options for 345,000
shares of common stock. We repurchased these shares and 308,435 shares of his
existing Class A common stock for $3,422,118.
In May 1997, in connection with our acquisition of the stock of
TeleStructures, TEA and TeleShare, Inc., we issued 535,710 shares of common
stock to the shareholders of those companies.
In June 1997, Messrs. Miller and Ivy received special bonuses, related to
their services in structuring and negotiating our investment in Castle
Transmission, including arranging the consortium partners who participated with
us in the Castle Transmission transaction, of $600,000 and $300,000,
respectively.
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In August 1997, Robert A. Crown and Barbara Crown sold the assets of Crown
Communications to, and merged two related companies with, our subsidiaries. As
consideration for these transactions, the Crowns received a cash payment of
$25.0 million, our promissory note aggregating approximately $76.2 million,
approximately $2.3 million for the payment of certain taxes, and 7,325,000
shares of common stock. In addition, we assumed approximately $26.0 million of
indebtedness of the Crown's business. We 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.
Under a securities purchase agreement, dated as of August 13, 1997, among
American Home Assurance Company and their affiliates, New York Life Insurance
Company, The Northwestern Mutual Life Insurance Company, PNC Venture Corp., J.
Landis Martin and us, we privately placed 292,995 shares of our 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. As part of this transaction, Mr. Martin paid $200,000 for 2,000
and warrants to purchase 4,000 shares of common stock. The proceeds received
were used by us to fund a portion of the acquisition of the Pittsburgh tower
operations and working capital.
Under a securities purchase agreement, dated as of October 31, 1997, among
Berkshire Partners Group, Centennial Fund V Investors, Nassau Group, Fay
Richwhite, Harvard Private Capital Holdings, Inc., Prime VIII, L.P. and the
prior purchasers of senior convertible preferred stock, other than affiliates
of American Home Assurance, an additional 364,500 shares of senior convertible
preferred stock were issued 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 and 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 were party to a management consulting agreement beginning in
October 1997 through January 1999. Under a memorandum of understanding dated
July 3, 1998, the compensation payable under 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". We have recorded 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 connection
with the acquisition of our Pittsburgh tower operations, Mr. Coury acted as
financial advisor to the Crowns and received a fee for such services, paid by
the Crowns.
We lease office space in a building formerly owned by our Vice Chairman and
Chief Executive Officer. Lease payments for such office space amounted to
$313,008, $130,000 and $50,000 for the years ended December 31, 1998, 1997 and
1996, 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, under 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
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year or to renew at $18.40 per square foot. Interstate Realty Corporation, a
company owned by our 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, 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 CCIC
in August 1998, acquired 50,000 shares of common stock from an existing
stockholder of CCIC for $6.26 per share under a purchase right assigned to him
by CCIC. We 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, Castle Transmission and TdF's parent entered into the
Castle Transmission services agreement under which TdF's parent agreed to
provide certain consulting services to Castle Transmission in consideration for
a minimal annual fee of (Pounds)400,000 ($665,120) and reimbursement for
reasonable out-of-pocket expenses. TdF's parent has agreed to, among other
things, provide the services of ten executives or engineers to Castle
Transmission on a part-time basis and to provide an analysis of the operations
of Castle Transmission. In addition, TdF's 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 Castle
Transmission 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 Castle Transmission to TdF after February 28, 2003.
In connection with the financing arrangements relating to the joint
venture, we paid an aggregate of $100,000 to Centennial Fund IV, L.P.,
Centennial Fund V, L.P. and Centennial Entrepreneurs Fund V, L.P.
We have entered into a memorandum of understanding with Mr. Crown and a
related services agreement. Under the services agreement, Mr. Crown agreed to
continue to serve in a consulting capacity to (and as Chairman of) Crown
Communication for a two-year period ending December 9, 2000, and we have
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, we will pay Mr. Crown a severance benefit of $300,000.
Agreements with TdF Related to the Roll-Up
Governance Agreement
On August 21, 1998, we entered into a governance agreement with TdF and one
of its subsidiaries to provide for certain rights and obligations of each party
for our governance.
Super-Majority Voting Requirements
In general, until August 21, 2003, a super majority vote of our board of
directors is required for CCIC 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;
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. 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 of our
affiliates;
. the issuance of any equity securities;
. any transaction that would result in any person holding 50% or more of
our voting securities or equity interests;
. any sale of all or substantially all of our assets;
. any action by us relating to our dissolution or bankruptcy; and
. any amendments to our rights plan.
TdF Veto Rights
In general, until August 21, 2003, TdF's consent will be required for CCIC
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 CCIC or any of its subsidiaries to take any of the following
actions:
. amendments to the certificate of incorporation or by-laws;
. 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
our voting securities or equity interests;
. any sale of all or substantially all of our assets; and
. the issuance to any person of equity securities representing 25% or more
of our outstanding equity securities.
TdF Preemptive Rights
Except in limited circumstances, if we issue any equity securities to any
person, we 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 CCIC. See "Risk Factors".
TdF Standstill; Transfer Restrictions; Voting
TdF and its affiliates will not, without the prior written consent of the
board:
. acquire beneficial ownership of any of our voting securities if their
ownership interest would be greater than a specified percentage;
. propose that TdF or any of its affiliates enter into any business
combination involving us;
. make any "solicitation" of "proxies" (as such terms are used in
Regulation 14A promulgated under the Exchange Act) to vote or consent
relating to any of our voting securities in opposition to the
recommendation of a super majority vote of the board;
. 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;
. (a) solicit, seek to effect, negotiate with or provide nonpublic
information to any other person relating to, or (b) otherwise make any
public announcement or proposal relating to, any form
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<PAGE>
of business combination with any person involving a change of control of
CCIC or the acquisition of a substantial portion of the voting
securities and/or equity securities or assets of CCIC or any subsidiary
of CCIC; or
. 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
our voting securities, we 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 of our voting securities 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 our voting
securities held by it in the manner recommended by a super majority vote of the
board.
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 of an unsolicited
offer, including any offer commenced by TdF or any member of the TdF group
following such suspension, and will afterwards be reinstated.
TdF 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 to:
. acquire for cash all of the CTSH shares beneficially owned by us at
their fair market value or
. sell for cash to us all of the CTSH shares and warrants beneficially
owned by TdF at their fair market value.
Immediately before completion of any business combination or unsolicited
offer, TdF may require us 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 under the business combination or unsolicited offer.
Put and Call Rights
TdF Put Right. Until August 21, 2000, TdF has the right to require us (1)
to purchase all but one of the CTSH shares beneficially owned by TdF and its
affiliates in exchange for shares of Class A common stock at a specified
exchange ratio and (2) to issue in exchange for the TdF CTSH warrants 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.
CCIC 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, we will have the right to require TdF to transfer and
deliver to us all but one of TdF's CTSH shares and TdF's CTSH warrants in
exchange for a number of shares of Class A common stock at the exchange ratio
plus 100,000 shares of Class A common stock, subject to adjustment in certain
circumstances.
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Stockholders Agreement
On August 21, 1998, we entered into the stockholders agreement with certain
of our stockholders to provide for certain rights and obligations for our
governance and the stockholders' shares of common stock or Class A common
stock.
Governance
Board Representation.
. So long as the TdF group holds at least 5.0% of our common stock, TdF
will have the right to appoint one director and generally will have the
right to appoint two directors;
. so long as Robert A. Crown, Barbara Crown, certain trusts established by
them and their permitted transferees have beneficial ownership of at
least 555,555 shares of common stock, they will have the right to elect
one director;
. so long as Ted B. Miller, Jr. and his permitted transferees maintain an
ownership interest, they will have the right to elect one director;
. our chief executive officer will have the right to elect one director;
. 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 is at least 5.0%, they will have the
right to elect one director;
. so long as the ownership interest of the Berkshire group is at least
5.0%, they will have the right to elect one director;
. 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
is not less than the ownership interest of the Nassau group immediately
following the closing of the initial public offering the Nassau group
will have the right to elect one director; and
. all directors other than the designees will be nominated in accordance
with our certificate of incorporation and by-laws.
Solicitation and Voting of Shares. At each meeting of our stockholders at
which directors are to be elected, we will use our best efforts to solicit from
those stockholders 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 the inclusion of each director nominee in
management's slate of nominees and in the proxy statement prepared by our
management 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 under 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 director that is a TdF designee.
Registration Rights; Tag Along Rights
These stockholders have been granted piggy-back registration rights, demand
registration rights, S-3 registration rights and tag-along rights for their
shares of common stock. If at any time stockholders holding at least 2% of our
voting securities 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
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<PAGE>
these stockholders may have the opportunity and the right to sell to the
purchasers in such proposed transfer, on the same terms and conditions as the
selling stockholders, up to that number of shares owned by such stockholder
equaling the product of:
(a) 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
selling stockholders and by all stockholders exercising tag-along
rights multiplied by
(b) 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.
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 by 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 under the Castle
Transmission services agreement and/or the Castle Transmission 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
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<PAGE>
(c) cause CCIC or TdF to be in breach of the commitment agreement among
TdF, TdF's parent, the BBC and us, under which we 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 or the CCIC call right. If CCIC purchases TdF's
shares under such right of first refusal, instead of paying the consideration
in cash, it may elect 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 we elect to issue common stock
to TdF under 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
if there is a change of control of CCIC. Such right is exercisable if (a) TdF
has not exchanged its shares under 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
under the governance agreement. TdF will remain qualified under the governance
agreement unless:
. TdF and its affiliates no longer own at least 10.5% of our voting stock,
. we have sold substantially all our assets or a person acquires over 50% of
our voting stock,
. TdF's parent no longer owns at least 30% of TdF and another person does own
at least 30% of TdF, or
. France Telecom no longer owns at least 30% of Tdf's parent and another
person does own at least 30% of TdF's parent.
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 remain
qualified under 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 consideration to be paid to TdF, and the manner in which it is
calculated, upon TdF's exercise of its 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 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.
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CCIC Shotgun Right. Provided that TdF has not, under 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, 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 completion of any transfer of shares between CCIC and TdF under 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 under the shareholders' agreement. CCIC will be
qualified under the shareholders' agreement so long as it holds at least 10% of
the share capital of CTSH. TdF will be qualified under the shareholders'
agreement so long as its holds at least 10% of the share capital of CTSH, or at
least 5% of the voting stock of CCIC.
Castle Transmission Services Agreement
On February 28, 1997, Castle Transmission and TdF's parent entered into a
services agreement under which TdF's parent agreed to provide certain
consulting services to Castle Transmission in consideration for a minimum
annual fee of (Pounds)400,000 ($665,120) and reimbursement for reasonable out-
of-pocket expenses. This agreement was amended and restated on August 21, 1998.
TdF's parent has agreed to, among other things, provide the services of ten
executives or engineers to Castle Transmission on a part-time basis and to
provide a benchmarking review of Castle Transmission. In addition, TdF's 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 Castle Transmission services agreement will be
terminable on 12-month's prior notice given by Castle Transmission to TdF.
Castle Transmission Operating Agreement
The following summary of the terms of the Castle Transmission operating
agreement is subject to the negotiation of definitive documentation, although
we expect such agreement to have the general terms described herein. Under the
Castle Transmission operating agreement, we 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. Castle Transmission will be permitted to
develop such business opportunities solely in the United Kingdom.
The Castle Transmission operating agreement will also establish a framework
for the provision of business support and technical services to us and our
subsidiaries (other than Castle Transmission) in connection with the
development of any international business by us. TdF will have the right, if
called upon to do so by CTSH or us, to provide all or part of such services to
us and our subsidiaries (other than Castle Transmission) in connection with the
provision of broadcast transmission services.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table shows the beneficial ownership as of March 31, 1999 of
our capital stock by our directors, officers, selling stockholders and those
whom we know beneficially own more than 5% of any class or series of our
capital stock.
Shares that a person could acquire through options, warrants or convertible
stock within 60 days from the date of this prospectus have been considered when
calculating the number and percentage of shares beneficially owned by that
particular person but have not been included when calculating these figures for
any other stockholder. Shares of common stock convertible from Class A common
stock have been included in calculating percentage of total voting power.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially Percentage of
Owned Before the Number of Owned After the Total Voting
Equity Offering Shares Equity Offering Power After
------------------ Being ------------------ the Equity
Executive Officers and Title of Class Number Percent Offered Number Percent Offering
Directors(a) -------------- ---------- ------- --------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ted B. Miller, Jr....... Common Stock(b) 4,020,010 3.9 181,359 3,838,651 3.1 2.8
David L. Ivy............ Common Stock(c) 1,432,695 1.4 73,449 1,359,246 1.1 1.0
Charles C. Green, III... Common Stock(d) 712,695 * 46,259 666,436 * *
John L. Gwyn............ Common Stock(e) 233,291 * 19,452 213,839 * *
John P. Kelly(f)........ Common Stock 14,977 * -- 14,977 * *
E. Blake Hawk........... Common Stock(g) 16,894 * -- 16,894 * *
Alan Rees(h)............ Common Stock 215,673 * 33,027 182,646 * *
Robert A. Crown(i)...... Common Stock 5,794,888 5.8 1,982,500 3,812,388 3.1 2.8
Michel Azibert(j)....... Common Stock 60,000 * -- 60,000 * *
Bruno Chetaille(k)...... Common Stock 10,000 * -- 10,000 * *
Carl Ferenbach(l)....... Common Stock 20,740,805 20.9 -- 20,067,490 16.4 15.0
Randall A. Hack(m)...... Common Stock 5,085,080 5.1 -- 4,914,505 4.0 3.7
Robert F. McKenzie(n)... Common Stock 202,500 * 6,630 195,870 * *
William A. Murphy(o).... Common Stock 10,000 * -- 10,000 * *
Jeffrey H. Schutz(p).... Common Stock 9,842,040 9.9 -- 9,511,740 7.8 7.1
Directors and Executive
Officers as a group
(15 persons total)..... Common Stock(q) 48,391,548 46.1 3,516,866 44,874,682 34.9 32.1
Berkshire(r)
Berkshire Fund III,
A Limited Partnership.. Common Stock(s) 6,095,450 6.1 204,915 5,890,535 4.8 4.4
Berkshire Fund IV,
Limited Partnership.... Common Stock(t) 12,996,055 13.1 436,898 12,559,157 10.2 9.4
Berkshire Investors
LLC.................... Common Stock(u) 1,619,300 1.6 31,502 1,587,798 1.3 1.2
Candover(v)
Candover Investments,
plc.................... Common Stock 2,329,318 2.3 78,212 2,251,106 1.8 1.7
Candover (Trustees)
Limited................ Common Stock 208,317 * 6,995 201,322 * *
Candover Partners
Limited................ Common Stock 8,792,565 8.9 295,229 8,497,336 6.9 6.3
Centennial(w)
Centennial Fund IV,
L.P.................... Common Stock 5,965,340 6.0 330,300 5,635,040 4.6 4.2
Centennial Fund V,
L.P.................... Common Stock 3,731,285 3.8 -- 3,731,285 3.0 2.8
Centennial Entrepreneurs
Fund V, L.P............ Common Stock 115,415 * -- 115,415 * *
Crown Atlantic Holding
Company LLC(x)......... Common Stock 15,597,783 15.7 -- 15,597,783 12.7 11.6
Nassau(y)
Nassau Capital Partners
II, L.P................ Common Stock (z) 5,023,825 5.1 169,521 4,854,304 4.0 3.6
NAS Partners I, L.L.C... Common Stock (aa) 31,255 * 1,054 30,201 * *
Digital Future Class A
Investments B.V.(bb)... Common Stock 11,340,000 100.0 -- 11,340,000 100.0 8.5
</TABLE>
(table continued on next page)
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<PAGE>
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially Percentage of
Owned Before the Number of Owned After the Total Voting
Equity Offering Shares Equity Offering Power After
Title of ----------------- Being ----------------- the Equity
Other Selling Class Number Percent Offered Number Percent Offering
Stockholders -------- --------- ------- --------- --------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
George E. Reese(cc)..... Common Stock 974,121 * 46,220 927,901 * *
American Home Assurance
Company(dd)............ Common Stock 2,774,040 2.8 93,145 2,680,895 2.2 2.0
Fay, Richwhite
Communications
Limited(ee)............ Common Stock 2,793,640 2.8 93,803 2,699,837 2.2 2.0
Harvard Private Capital
Holdings, Inc.(ff)..... Common Stock 2,416,245 2.4 81,381 2,334,864 1.9 1.7
New York Life Insurance
Company(gg)............ Common Stock 1,060,180 1.1 35,598 1,024,582 * *
PNC Venture Corp.(hh)... Common Stock 2,002,210 2.0 67,227 1,934,983 1.6 1.4
Prime VIII, L.P.(ii).... Common Stock 823,765 * 27,660 796,105 * *
</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) Includes options for 2,951,908 shares of common stock. A trust for the
benefit of Mr. Miller's children holds 99,995 shares of common stock. Mr.
Miller has granted the underwriters in the equity offering an option to
purchase 475,737 shares of common stock solely to cover overallotments. If
the option is exercised, Mr. Miller will beneficially own 2.6% of the
common stock after the equity offering.
(c) Includes options for 1,312,695 shares of common stock. Mr. Ivy has granted
the underwriters in the equity offering an option to purchase 192,668
shares of common stock solely to cover overallotments. If the option is
exercised, Mr. Ivy will beneficially own less than 1% of the common stock
after the equity offering.
(d) Represents options for 712,695 shares of common stock. Mr. Green has
granted the underwriters in the equity offering an option to purchase
121,345 shares of common stock solely to cover overallotments.
(e) Includes options for 230,791 shares of common stock. Mr. Gwyn has granted
the underwriters in the equity offering an option to purchase 51,025 shares
of common stock solely to cover overallotments.
(f) Mr. Kelly's principal business address is c/o Crown Communication Inc., 375
Southpointe Blvd., Canonsburg, PA 15317. Mr. Kelly's holdings represent
options for 14,977 shares of common stock.
(g) Includes options for 2,252 shares of common stock.
(h) Mr. Rees's principal business address is c/o Castle Transmission
International Ltd., Warwick Technology Park, Heathcote Lane, Warwick
CV346TN, United Kingdom. Mr. Rees's holdings include options for 145,673
shares of common stock. Mr. Rees has granted the underwriters in the equity
offering an option to purchase 86,635 shares of common stock solely to
cover overallotments.
(i) Mr. Crown's principal business address is c/o Crown Communication Inc., 375
Southpointe Blvd., Canonsburg, PA 15317. Mr. Crown's holdings include
2,188,091 shares of common stock owned by RC Investors Corp., a Delaware
corporation of which Mr. Crown is sole stockholder; 1,873,091 shares of
common stock owned by BC Investors Corp., a Delaware corporation of which
Mr.Crown's spouse is the sole stockholder; 791,909 shares of common stock
owned by a grantor retained annuity trust for Mr. Crown; 791,909 shares of
common stock owned by a grantor retained annuity trust for Mrs. Crown; and
options for 149,888 shares of common stock. Of the 1,982,500 shares of
stock beneficially owned by Mr. Crown which are being sold in the offering,
1,053,750 shares are being offered by RC Investors Corp. and 928,750 shares
are being offered by BC Investors Corp.
(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. Mr.
Azibert's holdings include options for 10,000 shares of common stock.
(k) 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. Mr.
Chetaille's holdings represent options for 10,000 shares of common stock.
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<PAGE>
(l) Mr. Ferenbach's principal business address is c/o Berkshire Partners LLC,
One Boston Place, Suite 3300, Boston, MA 02108. Mr. Ferenbach's holdings
represent options for 30,000 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.
(m) Mr. Hack's principal business address is c/o Nassau Capital LLC, 22
Chambers St., Princeton, NJ 08542. Mr. Hack's holdings represent options
for 30,000 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.
(n) Mr. McKenzie's principal business address is P.O. Box 1133, 1496 Bruce
Creek Road, Eagle, CO 81631. Mr. McKenzie's holdings include options for
109,375 shares of common stock. Mr. McKenzie has granted the underwriters
in the equity offering an option to purchase 17,390 shares of common stock
solely to cover overallotments.
(o) Mr. Murphy's principal business address is c/o Salomon Smith Barney,
Victoria Plaza, 111 Buckingham Palace Road, London, England. Mr. Murphy's
holdings represent options for 10,000 shares of common stock.
(p) 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 Centennial Holdings IV (which is the general partner of Centennial
Fund IV) and Centennial Holdings V (which is the general partner of
Centennial Fund V and Centennial Entrepreneurs Fund). However, neither Mr.
Schutz nor any other general partner of either Holdings IV or Holdings V,
acting alone, has voting or investment power of those securities directly
beneficially held by these funds, and, as a result, Mr. Schutz disclaims
beneficial ownership of our securities directly beneficially owned by these
funds, except to the extent of his pecuniary interest therein. Mr. Schutz's
holdings represent options for 30,000 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.
(q) Includes options for 5,750,254 shares of common stock and warrants for
120,000 shares of common stock.
(r) Berkshire group will have approximately 14.9% of the total voting power of
common stock after the equity offering. Carl Ferenbach, Chairman of our
board of directors and a director of CCIC, 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.
(s) Includes warrants for 35,935 shares of common stock. Berkshire Fund III has
granted the underwriters in the equity offering an option to purchase
320,625 shares of common stock solely to cover overallotments. If the
option is exercised, Berkshire Fund III will beneficially own 4.5% of the
common stock after the equity offering.
(t) Includes warrants for 29,255 shares of common stock. Berkshire Fund IV has
granted the underwriters in the equity offering an option to purchase
683,606 shares of common stock solely to cover overallotments. If the
option is exercised, Berkshire Fund IV will beneficially own 9.6% of the
common stock after the equity offering.
(u) Includes warrants for 4,810 shares of common stock. Berkshire Investors LLC
has granted the underwriters in the equity offering an option to purchase
49,290 shares of common stock solely to cover overallotments. If the option
is exercised, Berkshire Investors LLC will beneficially own 1.3% of the
common stock after the equity offering.
(v) Candover group will have approximately 8.2% of the total voting power of
common stock after the equity offering. 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. Candover Investments, Candover (Trustees) Limited and Candover
Partners have each granted the underwriters in the equity offering an
option to purchase 122,377, 10,944
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and 461,940 shares, respectively, of common stock solely to cover
overallotments. If the option is exercised, Candover Investments, Candover
(Trustees) Limited and Candover Partners will beneficially own 1.7%,* and
6.5%, respectively, of the common stock after the equity offering.
(w) Centennial Fund IV, Centennial Fund V and Centennial Enterpreneurs Fund
collectively will have approximately 7.1% of the total voting power of
common stock after the equity offering. Centennial Holdings IV is the sole
general partner of Centennial Fund IV, and, accordingly, may be deemed to
control Centennial Fund IV and possess indirect beneficial ownership of
our securities directly beneficially held by Centennial Fund IV.
Centennial Holdings V is the sole general partner of Centennial Fund V,
and, accordingly, may be deemed to control Centennial Fund V and possess
indirect beneficial ownership of our securities directly beneficially held
by Centennial Fund V. 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 our securities directly beneficially held by Centennial Entrepreneurs
Fund V. The principal business address of each of the Centennial entities
discussed above is 1428 Fifteenth Street, Denver, Colorado 80202-1318.
Centennial Fund IV has granted the underwriters in the equity offering an
option to purchase 516,814 shares of common stock solely to cover
overallotments. If the option is exercised, Centennial Fund IV will
beneficially own 4.2% of the common stock after the equity offering.
(x) Crown Atlantic Holding Company is a joint venture 61.5% owned by our
subsidiary, CCA Investment Corp., and 38.5% owned by Bell Atlantic Mobile
and certain of its affiliates. The principal business address of Crown
Atlantic Holding Company LLC is 375 Southpointe Blvd., Canonsburg, PA
15317.
(y) Nassau group will have approximately 3.6% of the total voting power of
common stock after the equity offering. Randall Hack, a director of CCIC,
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.
(zz) Includes warrants for 49,690 shares of common stock. Nassau Capital
Partners has granted the underwriters in the equity offering an option to
purchase 265,244 shares of common stock solely to cover overallotments.
If the option is exercised, Nassau Capital Partners will beneficially own
3.7% of the common stock after the equity offering.
(aa) Includes warrants for 310 shares of common stock. NAS Partners has
granted the underwriters in the equity offering an option to purchase
1,651 shares of common stock solely to cover overallotments.
(bb) Digital Future Investments B.V. is an affiliate of TeleDiffusion de
France International S.A. TdF owns 20% of the shares of capital stock of
CTSH. TdF has the right to exchange its shares of capital stock of CTSH
for 17,443,500 shares of our Class A common stock (which is convertible
into 17,443,500 shares of common stock). DFI will have 8.5% of the total
voting power of common stock after the equity offering. Combined, TdF and
DFI would have 19.0% of the voting power of common stock after the equity
offering. 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.
(cc) Mr. Reese's principal business address is c/o Castle Transmission
International Ltd., Warwick Technology Park, Heathcote Lane, Warwick
CV346TN, United Kingdom. Mr. Reese has granted the underwriters in the
equity offering an option to purchase 121,243 shares of common stock
solely to cover overallotments.
(dd) American Home Assurance Company's principal business address is 175 Water
Street, 24th Floor, New York, NY 10038. American Home Assurance has
granted the underwriters in the equity offering an option to purchase
145,741 shares of common stock solely to cover overallotments.
(ee) Fay, Richwhite Communications Limited's principal business address is 151
Queen Street, Auckland, New Zealand. Fay, Richwhite has granted the
underwriters in the equity offering an option to purchase 146,770 shares
of common stock solely to cover overallotments.
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(ff) Harvard Private Capital Holdings, Inc.'s principal business address is
600 Atlantic Avenue, Boston, MA 02210-2203. Harvard Private Capital has
granted the underwriters in the equity offering an option to purchase
127,339 shares of common stock solely to cover overallotments.
(gg) New York Life Insurance Company's principal business address is 51 Madison
Avenue, New York, NY 10010. New York Life has granted the underwriters in
the equity offering an option to purchase 55,699 shares of common stock
solely to cover overallotments.
(hh) PNC Venture Corp.'s principal business address is 3150 CNG Tower, 625
Liberty Avenue, Pittsburgh, PA 15222. PNC Venture has granted the
underwriters in the equity offering an option to purchase 105,193 shares
of common stock solely to cover overallotments.
(ii) Prime VIII, L.P.'s principal business address is 600 Congress Avenue,
Suite 3000, Austin, TX 78701. Prime VIII has granted the underwriters in
the equity offering an option to purchase 43,278 shares of common stock
solely to cover overallotments.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 600,000,000 shares of common
stock, par value $.01 per share, 90,000,000 shares of Class A common stock, par
value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01
per share. There are 94,905,902 shares of common stock outstanding, 11,340,000
shares of Class A common stock outstanding and 201,063 shares of 12 3/4% Senior
Exchangeable Preferred Stock due 2010.
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 Delaware General Corporation Law.
All the outstanding shares of common stock are held by directors, executive
officers, other employees and our affiliates.
Dividends and Liquidation Rights
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 for that
purpose, subject to approval of certain holders of the senior convertible
preferred stock. In the event of our dissolution, after satisfaction of amounts
payable to our creditors and distribution of any preferential amounts to the
holders of outstanding senior convertible preferred stock, if any, 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 we 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 the election of
directors. The holders of the shares of Class A common stock vote, except as
provided under the Delaware General Corporation Law, together with the holders
of the common stock and any other class or series of our stock accorded such
general voting rights, as a single class.
TdF, the holders of all the shares of Class A common stock, currently has
the right to elect two directors to our board of directors; however, if TdF's
ownership interest in us changes, 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.
The holders of Class A common stock, subject to limitations, have a veto
over certain significant actions, described in "Certain Relationships and
Related Transactions--Agreements with TdF Related to the Roll-Up--Governance--
TdF Veto Rights", taken by us.
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.
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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. However, a holder of shares of Class A
common stock may pledge its shares to a lender under 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%.
Dividends and Liquidation Rights
Holders of shares of Class A common stock are entitled to the same
dividends and liquidation rights as holders of shares of common stock.
Other Provisions
Under the governance agreement, so long as TdF remains qualified under the
governance agreement, TdF has anti-dilutive rights in connection with
maintaining a certain percentage of voting power in us and, accordingly, we may
not, subject to certain exceptions relating primarily to compensation of
directors and employees, issue, sell or transfer additional securities, except
for the initial public offering, 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 CCIC.
Preferred Stock
Under our certificate of incorporation, we may issue up to 10,000,000
shares of preferred stock in one or more series. Our board of directors after
honoring any rights TdF may have under the governance agreement, has the
authority, without any vote or action by the stockholders, to create one or
more series of preferred stock up to the limit of our authorized but unissued
shares of preferred stock and to fix their designations, preferences, rights,
qualifications, limitations and restrictions, 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.
Exchangeable Preferred Stock
Each share of exchangeable preferred stock has a liquidation preference of
$1,000 per share and is exchangeable, at our option, in whole but not in part,
for our exchange debentures.
Voting Rights
The shares of exchangeable preferred stock 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 certificate of designations, the holders of
the exchangeable preferred stock will be entitled to elect two additional
members to the board of directors.
Dividends
Dividends are paid on each March 15, June 15, September 15 and December 15
commencing March 15, 1999, at an annual fixed rate of 12 3/4%. 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 exchangeable preferred stock having an
aggregate liquidation preference equal to the amount of such dividends. After
December 15, 2003, dividends will be paid only in cash.
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Mandatory Redemption
We are required to redeem all of the shares of exchangeable 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
exchangeable preferred stock at any time at certain specified redemption
prices. In addition, before December 15, 2001, we may redeem up to 35% of the
exchangeable preferred stock with the proceeds of public equity offerings or
strategic equity investments at a redemption price equal to 112.750% of the
liquidation preference of the exchangeable preferred stock, together with
accumulated and unpaid dividends.
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 exchangeable preferred stock
at a purchase price of 101% of the liquidation preference of such shares
together with all accumulated and unpaid dividends.
Certain Covenants
We issued the exchangeable preferred stock under a certificate of
designations that became part of our certificate of incorporation. The
certificate of designations contains certain covenants that, among other
things, limit our ability and the ability of our subsidiaries to borrow money;
pay dividends on stock or purchase capital stock; make investments and sell
assets or merge with or into other companies.
Ranking
The exchangeable preferred stock ranks (1) senior to all our other classes
of capital stock established after the issue date of the exchangeable preferred
stock that do not expressly provide that they rank on par with the exchangeable
preferred stock as to dividends and distributions upon our liquidation, winding
up and dissolution and (2) on par with any class of capital stock established
after the date of issuance of the exchangeable preferred stock the terms of
which provide that such class or series will rank on par with the exchangeable
preferred stock as to dividends and distributions upon our liquidation, winding
up and dissolution.
Senior Preferred Warrants
In connection with the offering of the senior convertible preferred stock
in August 1997 and October 1997, we 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 Delaware
General Corporation Law, and our certificate of incorporation and the by-laws.
Certain provisions of our 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 our 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
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stock. We believe that such provisions are necessary to enable us to develop
our business in a manner that will foster our long-term growth without
disruption caused by the threat of a takeover not deemed by our board of
directors to be in our best interests and those of our stockholders.
Classified Board of Directors and Related Provisions
Our certificate of incorporation provides that our 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, 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
2000, 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 our outstanding voting stock from obtaining control of our board of
directors until the second annual stockholders meeting following the date such
party obtains the controlling interest. Voting stock is defined in our
certificate of incorporation as the outstanding shares of our capital stock
entitled to vote in a general vote of our stockholders as a single class with
shares of common stock, 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 from taking action
by written consent in lieu of an annual or special meeting, except relating to
holders of Class A common stock on matters on which they are entitled to vote
and, thus, stockholders may only take action at an annual or special meeting
called in accordance with our by-laws. The by-laws provide that special
meetings of stockholders may only be called by our Secretary at the direction
of our board of directors under 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 our capital stock
entitled to vote from unilaterally using the written consent procedure to take
stockholder action.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our by-laws establish advance notice procedures for 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
our secretary at least 90 days but not more than 120 days prior to the first
anniversary of our preceding year's annual meeting. However, if the date of our
annual meeting is more than 30 days earlier than, or more than 90 days later
than, the anniversary date of our preceding year's annual meeting, notice by a
stockholder will be considered timely if it is delivered not earlier than the
120th day prior to such annual meeting and not later than 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
concerning the stockholder giving the notice and each nominee.
By requiring advance notice of nominations by stockholders, these
procedures will afford our board of directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the board of directors, to inform stockholders about these
qualifications. By requiring advance notice of other proposed business, these
procedures will provide
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our board of directors with an opportunity to inform stockholders of any
business proposed to be conducted at a meeting, together with any
recommendations as to the board of directors' position on action to be taken on
such business. This should allow stockholders to better decide whether to
attend a meeting or to grant a proxy for the disposition of any such business.
Dilution
Our certificate of incorporation provides that our 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 us shares of stock or other securities of us or
any of other corporation. Our board of directors is authorized to issue these
rights even though the creation and issuance of these rights could have the
effect of discouraging third parties from seeking, or impairing their right to
seek, to:
(1)acquire a significant portion of our outstanding securities;
(2) engage in any transaction which might result in a change of control
of the corporation; or
(3) enter into any agreement, arrangement or understanding with another
party to accomplish these transactions or for the purpose of
acquiring, holding, voting or disposing of any of our securities.
Amendments
Our certificate of incorporation and by-laws provide that we may amend,
alter, change or repeal any provision contained in our certificate of
incorporation or a preferred stock designation. 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 our certificate of
incorporation, including the provisions discussed above relating to the
classification of our board of directors, prohibiting stockholder action by
written consent, and prohibiting the calling of special meetings by
stockholders.
Our 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; but the board may alter,
amend or repeal or adopt new by-laws in conflict with some of these provisions
by a two-thirds vote of the entire board.
Rights Plan
Rights
Our board of directors has declared a dividend of one right for each
outstanding share of common stock and each outstanding share of Class A common
stock. Rights have been issued in connection with each outstanding share of
common stock and Class A common stock; and rights will be issued in connection
with common stock and Class A common stock issued subsequently until the
distribution date, and, in certain circumstances, for common stock and Class A
common stock issued after the distribution date referred to below. Each right,
when it becomes exercisable as described below, will entitle the registered
holder to purchase from us one one-thousandth of a share of Series A
Participating Cumulative Preferred Stock at a price of $110.00 per one one-
thousandth of a share, subject to adjustment in certain circumstances. The
description and terms of the rights are set forth in a rights agreement between
us 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, unless earlier redeemed by us. Until a right is exercised,
the holder, as such, will have no rights as our stockholder, including the
right to vote or to receive dividends.
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Distribution Date
Under the rights agreement, the "distribution date" is the earlier of:
(1) such time as we learn 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 our
outstanding voting securities (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
(2) the close of business on such date, if any, as may be designated by
our 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:
(1) 25% or 30%, as applicable, of the voting securities then
outstanding and
(2) the greater of the aggregate interest of the TdF group as of the
fifth anniversary of the rights agreement and 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
When 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 one-thousandths 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.
If we are 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 if 50% or more of our assets or assets
representing 50% or more of our revenues or cash flow are sold, leased,
exchanged or otherwise transferred 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, 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 some cases, book value of twice the purchase price. If we
are 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 if 50% or more of our assets or assets representing 50% or
more of our revenues or cash flow are sold, leased, exchanged or otherwise
transferred to an acquiring
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person or affiliate or associate of an acquiring person that is not a publicly
traded entity, each right will entitle its holder to purchase for the purchase
price, at such holder's option:
(1) that number of shares of the surviving corporation, which could be us,
in the transaction with such entity, which at the time of the
transaction would have a book value of twice the purchase price,
(2) 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
(3) if such entity has an affiliate which has publicly traded common
shares, that number of common shares of such affiliate which at the
time of the transaction would have a 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 will be unable to exercise or
transfer any such right.
Redemption
At any time prior to the earlier of (1) such time as a person or group
becomes an acquiring person and (2) the expiration date, our 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 ours deemed by our 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. Immediately upon the action of
our 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, our 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 under the terms of the rights agreement.
Amendment
At any time prior to the distribution date, we may, without the approval of
any holder of any rights, supplement or amend any provision of the rights
agreement, including 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 under certain adjustments therein.
Certain Effects of the Rights Plan
The rights plan is designed to protect our stockholders in the event of
unsolicited offers to acquire us and other coercive takeover tactics which, in
the opinion of our board of directors, could impair its ability to represent
stockholder interests. The provisions of the rights plan may render an
unsolicited takeover of us more difficult or less likely to occur or might
prevent such a takeover, even though such takeover may offer our stockholders
the opportunity to sell their stock at a price above the prevailing market rate
and may be favored by a majority of our stockholders.
Section 203 of the Delaware General Corporation Law
Section 203 of the Delaware General Corporation Law 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
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business combinations between an interested stockholder and a corporation for a
period of three years after the date the interested stockholder acquired its
stock, unless:
(1) the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder acquired
shares;
(2) 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
(3) 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 business combination is 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. A Delaware corporation, under a provision in its certificate
of incorporation or by-laws, may elect not to be governed by Section 203 of the
Delaware General Corporation Law. We are subject to the restrictions imposed by
Section 203.
Under certain circumstances, Section 203 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. Our certificate of incorporation does not exclude us from the
restrictions imposed under Section 203 of the Delaware General Corporation Law.
It is anticipated that the provisions of Section 203 of the Delaware General
Corporation Law may encourage companies interested in acquiring us 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
Our certificate of incorporation provides that none of our director will be
personally liable to us or our 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 us or our
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 Delaware General Corporation Law, or
(4) for any transaction from which the director derived an improper
personal benefit.
The effect of these provisions will be to eliminate our rights and our
stockholders (through stockholders' derivatives suits on behalf of us) 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.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Credit Facility
Under the amended and restated loan agreement dated as of July 10, 1998,
two wholly owned subsidiaries of CCIC, Crown Communication and Crown Castle
International Corp. de Puerto Rico, have entered into the senior credit
facility with a group of banks and other lenders led by Key Corporate Capital
Inc. and PNC Bank, National Association, as arrangers and agents.
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 March 1, 1999, Crown Communication and its subsidiaries had
unused borrowing availability under the senior credit facility of $54.0
million.
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:
(1) net proceeds of certain asset sales,
(2) net proceeds of certain required capital contributions to Crown
Communication by CCIC relating to the proceeds from the sale of
equity, convertible or debt securities, subject to certain exceptions,
(3) net proceeds of any unused insurance proceeds and
(4) 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 Crown Communication
and are also secured by (1) a pledge by the borrowers of all of the outstanding
capital stock of each of their respective direct subsidiaries and (2) 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 Crown
Communication).
The loans under the senior credit facility 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 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,
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. make acquisitions,
. engage in mergers or consolidations,
. make capital expenditures, and
. 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.
Under the terms of the senior credit facility, Crown Communication 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 10 5/8%
discount notes); provided that the amount of such dividends or distributions
does not exceed (1) $6.0 million in any year ending on or prior to October 31,
2002 or (2) $33.0 million in any year thereafter. The senior credit facility
also allows Crown Communication 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 10 5/8% discount notes, may not be made by Crown Communication 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,
. 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 indenture governing the 10 5/8% discount notes
will result in a default under the senior credit facility.
Castle Transmission Credit Facility
Under the loan amendment agreement dated May 21, 1997, among Castle
Transmission, as borrower, CTSH, as guarantor, Credit Suisse First Boston, as
arranger and agent, and J.P. Morgan Securities Ltd., as co-arranger, Castle
Transmission's (Pounds)162.5 million term and revolving loan facilities were
amended to a (Pounds)64.0 million revolving loan facility.
The Castle Transmission 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 March 1, 1999, Castle Transmission and its
subsidiaries had
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unused borrowing availability under the Castle Transmission credit facility of
approximately (Pounds)24.0 million ($39.9 million).
The loan commitment under the Castle Transmission 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 Castle
Transmission credit facility matures. In addition, the Castle Transmission
credit facility provides for mandatory cancellation of all or part of the loan
commitment and mandatory prepayment (1) with an amount equal to the net
proceeds of certain asset sales and (2) upon the completion of an initial
public offering or the listing on any stock exchange of the shares of Castle
Transmission, CTSH or CCIC.
Castle Transmission's and CTSH's obligations under the Castle Transmission
credit facility are secured by fixed and floating charges over all of their
respective assets. The loans under the Castle Transmission credit facility will
bear interest at a "LIBOR rate" plus 0.85% and a spread related to the lenders'
cost of making the Castle Transmission credit facility available to Castle
Transmission.
The Castle Transmission credit facility contains a number of covenants
that, among other things, restrict the ability of Castle Transmission 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 Castle Transmission credit facility will require compliance
with certain financial covenants, including requiring Castle Transmission 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 Castle Transmission
to operate its business.
The Castle Transmission 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;
. any representation or warranty being made by Castle Transmission that
is untrue or misleading on the date made;
. a default in the performance of any of its covenants under the Castle
Transmission credit facility unless, if such default is capable of
remedy, the default is cured within 14 days of Castle Transmission
becoming aware of such default;
. default in certain other indebtedness;
. certain insolvency events; and
. certain change of control events.
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On July 17, 1998, the lenders (acting through Credit Suisse First Boston,
as agent) under the Castle Transmission credit facility waived a provision in
the Castle Transmission credit facility that would have required the repayment
of the Castle Transmission credit facility concurrently with the listing of our
common stock.
The 10 5/8% Discount Notes
The 10 5/8% discount notes are our unsecured senior obligations, and will
rank equally in right of payment with all our existing and future senior
indebtedness and will be senior to our future subordinated indebtedness. The 10
5/8% discount notes mature on November 15, 2007. The 10 5/8% discount notes
will accrete in value until November 15, 2002. Thereafter, cash interest will
accrue on the 10 5/8% discount 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 10 5/8% discount notes are not redeemable prior
to November 15, 2002. Thereafter, the 10 5/8% discount notes are redeemable at
our option, 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 we complete a public equity offering or
certain strategic equity investments prior to November 15, 2000, we may, at our
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 10 5/8%
discount notes at a redemption price equal to 110.625% of the accreted value of
the 10 5/8% discount 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 10 5/8% discount notes remains
outstanding after each such redemption.
Upon the occurrence of a change of control of CCIC, each holder of 10 5/8%
discount notes has the right to require us to purchase all or a portion of such
holder's 10 5/8% discount notes at a price equal to 101% of the aggregate
principal amount, together with accrued and unpaid interest to the date of
purchase.
The 10 5/8% notes indenture contains certain covenants, including covenants
that limit:
(1) indebtedness,
(2) restricted payments,
(3) distributions from restricted subsidiaries,
(4) transactions with affiliates,
(5) sales of assets and subsidiary stock (including sale and leaseback
transactions),
(6) dividend and other payment restrictions affecting restricted
subsidiaries, and
(7) mergers or consolidations.
The Castle Transmission Bonds
On May 21, 1997, a subsidiary of Castle Transmission, issued (Pounds)125.0
million aggregate principal amount of its 9% Guaranteed Bonds due 2007. The
Castle Transmission bonds are listed on the Luxembourg Stock Exchange.
The Castle Transmission bonds constitute direct, general and unconditional
guaranteed obligations of the subsidiary of CTSH and rank equally with all
other present and future unsecured and unsubordinated obligations of such
subsidiary. The Castle Transmission bonds are guaranteed jointly and severally
by Castle Transmission and CTSH. The Castle Transmission bonds will mature on
March 30, 2007. Interest on the Castle Transmission bonds is payable annually
in arrears on March 30 in each year, the first payment having been made on
March 30, 1998.
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The Castle Transmission bonds may be redeemed at our option 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 change of control of Castle Transmission, each
holder of Castle Transmission bonds has the right to require such subsidiary to
purchase all or a portion of such holder's Castle Transmission bonds at a price
equal to 101% of the aggregate principal amount, together with accrued and
unpaid interest to the date of purchase.
The trust deed contains certain covenants, including covenants that limit:
(1) indebtedness,
(2) restricted payments,
(3) distributions from restricted subsidiaries,
(4) transactions with affiliates,
(5) sales of assets and subsidiary stock,
(6) dividend and other payment restrictions affecting restricted
subsidiaries, and
(7) mergers or consolidations.
Joint Venture Credit Facility
Under the loan agreement dated as of March 31, 1999, Crown Atlantic Holding
Sub L.L.C. entered into the joint venture credit facility with Key Corporate
Capital, Inc. The joint venture credit facility provides for revolving credit
loans in an aggregate principal amount not to exceed $250.0 million, $180.0
million of which was drawn in connection with the formation of the joint
venture, 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 joint venture
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 joint venture 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 joint venture 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 the joint venture subject to certain
significant exceptions including capital expenditures under the build-
to-suit agreement,
(3) net proceeds of any unused insurance proceeds and
(4) a percentage of the excess cash flow of the joint venture, commencing
with the calendar year ending December 31, 2001.
The joint venture's obligations under the joint venture credit facility are
secured by
(1) a pledge of the membership interest in the joint venture and
(2) a perfected first priority security interest in the joint venture's
interest in tenant leases including the global lease.
The joint venture credit facility contractually permits the joint venture 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.
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The loans under the joint venture credit facility will bear interest, at
the joint venture'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
joint venture 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 joint venture credit facility,
the loans will bear interest at the "base rate" plus 4.875%.
The joint venture credit facility will contain a number of covenants that,
among other things, restrict the ability of the joint venture 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, and
. engage in certain transactions with subsidiaries and affiliates and
otherwise restrict company activities.
In addition, the joint venture credit facility will require compliance with
certain financial covenants, including requiring the joint venture 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 joint venture does not expect that such covenants will materially
impact its ability to operate its business.
The joint venture 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;
. any representation or warranty being made by the joint venture 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
days;
. default in certain other indebtedness;
. certain insolvency events; and
. certain change of control events.
During the first two years of the joint venture credit facility, capital
contributions can cure an operating cash flow default and certain other
covenant and agreement defaults.
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CCIC Term Loan Facility
Under a term loan agreement dated as of March 15, 1999, we entered a term
loan credit facility with a group of banks and other lenders led by Goldman
Sachs Credit Partners L.P., Salomon Brothers Holding Company Inc. and Credit
Suisse First Boston. As of April 5, 1999, we had borrowed $100.0 million under
the term loan facility to fund or refinance its escrow payments made in
connection with the proposed Powertel acquisition and the proposed BellSouth
transaction. The following summary of the term loan facility does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the provisions of the term loan facility.
The term loan facility provides for term loans in an aggregate principal
amount not to exceed $100.0 million. The loans under the term loan facility
mature on November 30, 2007 and bear interest at an increasing rate based on
LIBOR as set forth in the term loan agreement, but in no event shall the
interest on such loans exceed 16%. At any time we may, at our option, prepay
the term loans without penalty or premium. Subject to limited exceptions, the
term loan facility requires us to prepay the loans without penalty or premium
with the proceeds of:
(1) any offering of debt or equity securities,
(2) the incurrence of other debt, other than debt under the senior credit
facility,
(3) asset sales for cash consideration, or with a fair market value, in
excess of $1.0 million, and
(4) any recovery of amounts deposited in escrow in connection with the
proposed Powertel acquisition and the proposed BellSouth transaction.
The term loan agreement contains covenants substantially identical to the
covenants contained in our 10 5/8% discount notes. At any time on or after
March 16, 2000, the lenders under the term loan agreement may exchange their
term loans for an equal aggregate principal amount of our Senior Exchange Notes
due 2007. These exchange notes will be issued under an indenture dated as of
March 15, 1999, between us and United States Trust Company of New York, as
trustee. These exchange notes will have the same maturity as the term loans and
will bear interest at the rate in effect for the term loans on the date of
exchange. The covenants contained in the exchange note indenture will be
substantially identical to the covenants contained in the certificate of
designations governing our exchangeable preferred stock, with additional
covenants restricting the incurrence of liens and sale-leaseback transactions.
[E] New Cash-Pay Notes and New Discount Notes
Simultaneously with the current offering, we are issuing $150.0 million
principal amount of new cash-pay notes and $300.0 million gross proceeds ($
principal amount at maturity) of new discount notes. In this section the term
"notes" refers to both the new cash-pay notes and the new discount notes. The
notes will be our unsecured senior obligations, will rank equally in right of
payment with all our existing and future senior indebtedness and will be senior
to our future subordinated indebtedness. The notes will rank equally in right
of payment with each other. The notes will mature on , 2011.
The cash-pay notes will accrue interest from the date they are issued at a
rate of %, which will be payable semiannually.
The discount notes will accrete in value from the date they are issued
through , 2004, to their principal amount at maturity. After that date,
cash interest will accrue on the discount notes at a rate of % and will be
payable semiannually commencing on , 2004.
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In the event we complete a public equity offering or certain strategic
equity investments prior to , 2002, we will be able to use all or a
portion of the proceeds from such offering or investment to redeem up to 35% of
the original aggregate principal amount of the cash-pay notes, so long as at
least 65% of the original aggregate principal amount of the cash-pay notes
remains outstanding after each such redemption. The price for this redemption
would equal % of the principal amount of the cash-pay notes to be redeemed,
plus accrued and unpaid interest, if any, to the redemption date. Except as
stated above, the cash-pay notes will not be redeemable prior to , 2004.
After that date, we will have the right to redeem the cash-pay notes, in whole
or in part, at a premium which is at a fixed percentage that declines to par on
or after , 2004, in each case together with accrued and unpaid
interest, if any, to the date of redemption.
In the event we complete a public equity offering or certain strategic
equity investments prior to , 2002, we will be able to at our option
use all or portion of the proceeds from such offering or investment to redeem
up to 35% of the original aggregate principal amount at maturity of the
discount notes, so long as at least 65% of the original aggregate principal
amount at maturity of the discount notes remains outstanding after each such
redemption. The price for this redemption would equal % of the accreted value
of the discount notes to be redeemed. Except as stated above, the discount
notes will not be redeemable prior to , 2004. After that date, we will
have the right to redeem the discount notes, in whole or in part, at a premium
which is at a fixed percentage that declines to par on or after , 2004,
in each case together with accrued and unpaid interest, if any, to the date of
redemption.
If a change of control occurs, as defined in the indentures governing the
notes, each holder of notes will have the right to require us to purchase all
or a portion of such holder's notes at a price equal to:
(1) 101% of the principal amount of any cash-pay notes repurchased, plus
accrued and unpaid interest on those cash-pay notes, if any, to the
date of repurchase;
(2) 101% of the principal amount of any discount notes repurchased after
, 2004, plus accrued and unpaid interest on those discount
notes, if any, to the date of repurchase; and
(3) 101% of the accreted value of any discount notes repurchased before
, 2004.
The indentures governing the notes will contain covenants that include,
among others, covenants that limit:
(1) restricted payments,
(2) incurrence of indebtedness and issuance of preferred stock,
(3) liens,
(4) dividend and other payment restrictions affecting subsidiaries,
(5) mergers or consolidations,
(6) transactions with affiliates,
(7) sale and leaseback transactions,
(8) issuances and sales of capital stock of restricted subsidiaries, and
(9) issuances of guarantees of indebtedness.
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[D] DESCRIPTION OF THE NOTES
General
You can find the definitions of certain terms used in the following summary
under the subheading "Certain Definitions." In this summary, the word "CCIC"
refers only to Crown Castle International Corp. and not to any of its
Subsidiaries, the word "notes" refers to both the cash-pay notes and the
discount notes and the word "series" refers to either of the cash-pay notes or
the discount notes.
CCIC will issue the cash-pay notes and the discount notes under two
separate indentures between itself and United States Trust Company of New York,
as trustee. The terms of the notes include those stated in the indentures and
those made part of the indentures by reference to the Trust Indenture Act of
1939, as amended.
The following description is a summary of the material provisions of the
indentures. It does not restate the indentures in their entirety. We urge you
to read the indentures, because they, and not this description, define your
rights as Holders of the notes. A copy of the proposed form of indentures has
been filed as an exhibit to the registration statement which includes this
prospectus and is available as set forth below under "--Additional
Information."
Brief Description of the Notes
The cash-pay notes:
. are general obligations of CCIC;
. rank equally with all existing and future senior debt of CCIC,
including the discount notes;
. accrue interest from the date they are issued at a rate of %,
which is payable semi-annually; and
. mature on , 2011.
The discount notes:
. are general obligations of CCIC;
. rank equally with all existing and future senior debt of CCIC,
including the cash-pay notes;
. accrete in value, from the date they are issued through , 2004,
to their principal amount at maturity;
. accrue interest from , 2004 at a rate of %, which is payable
semi-annually; and
. mature on , 2011.
CCIC has covenanted that it will offer to repurchase notes under the
circumstances described in the indentures upon:
. a Change of Control of CCIC; or
. an Asset Sale by CCIC or any of its Restricted Subsidiaries.
The indentures governing these notes also contains the following covenants:
. Restricted Payments;
. incurrence of Indebtedness and issuance of preferred stock;
. Liens;
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. dividend and other payment restrictions affecting Subsidiaries;
. merger, consolidation or sale of assets;
. transactions with Affiliates;
. sale and leaseback transactions;
. limitation on issuances and sales of Capital Stock of Restricted
Subsidiaries;
. limitation on issuances of Guarantees of Indebtedness;
. Business Activities; and
. Reports.
The operations of CCIC are conducted through its Subsidiaries and,
therefore, CCIC depends on the cash flow of its Subsidiaries to meet its
obligations, including its obligations under the notes. CCIC's Subsidiaries
will not be guarantors of the notes and the notes will be effectively
subordinated to all Indebtedness, including all borrowings under the Senior
Credit Facility, the Bell Atlantic joint venture credit facility, the Castle
Transmission credit facility and the Castle Transmission bonds, and other
liabilities and commitments, including trade payables and lease obligations, of
CCIC's Subsidiaries. Any right of CCIC to receive assets of any of its
Subsidiaries upon the liquidation or reorganization of the Subsidiaries, and
the consequent right of the Holders of the notes to participate in those
assets, will be effectively subordinated to the claims of that Subsidiary's
creditors, except to the extent that CCIC is itself recognized as a creditor of
such Subsidiary. If CCIC is recognized as a creditor of such Subsidiary, the
claims of CCIC would still be subordinate in right of payment to any security
in the assets of that Subsidiary and any indebtedness of that Subsidiary senior
to that held by CCIC. As of December 31, 1998, after giving pro forma effect to
the proposed and recent transactions, described in this prospectus, CCIC's
Subsidiaries would have had $441.6 million of Indebtedness outstanding, and
would have had $77.6 million, $6.2 million and $51.2 million of unused
borrowing availability, respectively, under the Senior Credit Facility, the
Bell Atlantic joint venture credit facility and the Castle Transmission credit
facility. The provisions of the Senior Credit Facility, the Bell Atlantic joint
venture credit facility, the Castle Transmission credit facility and the Castle
Transmission bonds contain substantial restrictions on the ability of those
Subsidiaries to dividend or distribute cash flow or assets to CCIC. See "Risk
Factors--As a Holding Company, We Require Dividends from Subsidiaries to Meet
Cash Requirements or Pay Dividends" and "Description of Certain Indebtedness."
As of the date of the indentures, all of CCIC's Subsidiaries will be
Restricted 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 CCIC holds its interest in the Bell
Atlantic joint venture.
However, under certain circumstances, CCIC will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the indentures.
Principal, Maturity and Interest
Cash-pay Notes
The cash-pay notes initially will be limited in aggregate principal amount
to $150.0 million and will mature on , 2011. The indenture governing
the cash-pay notes will allow CCIC to issue up to $100.0 million in aggregate
principal amount of cash-pay notes in addition to the cash-pay notes being sold
in the offering. The issuance of any of those additional cash-pay notes will be
subject to CCIC's ability to incur Indebtedness under the covenant "Incurrence
of Indebtedness and Issuance of Preferred Stock" and similar restrictions in
the instruments governing CCIC's other
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Indebtedness. Any such additional cash-pay notes will be treated as part of the
same class and series as the cash-pay notes issued in this offering for
purposes of voting under the indenture governing the cash-pay notes. CCIC will
issue the cash-pay notes in denominations of $1,000 and integral multiples of
$1,000.
Interest on the cash-pay notes will accrue at the rate of % per annum
and will be payable in U.S. dollars semiannually in arrears on and
, commencing on , 2004. CCIC will make each interest
payment to Holders of record on the immediately preceding and
.
Interest on the cash-pay notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
the indenture governing the cash-pay notes. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Discount Notes
CCIC initially will issue discount notes with an aggregate principal amount
at maturity of $ million, which will generate gross proceeds of approximately
$300.0 million. The discount notes will mature on , 2011. The
indenture governing the discount notes will allow CCIC to issue discount notes
in addition to the discount notes being sold in the offering. These additional
discount notes will be limited to an aggregate principal amount at maturity of
$ million. The issuance of any of those additional discount notes will be
subject to CCIC's ability to incur Indebtedness under the covenant "Incurrence
of Indebtedness and Issuance of Preferred Stock" and similar restrictions in
the instruments governing CCIC's other Indebtedness. Any such additional
discount notes will be treated as part of the same class and series as the
discount notes issued in this offering for purposes of voting under the
indenture governing the discount notes. CCIC will issue the discount notes in
denominations of $1,000 and integral multiples of $1,000.
CCIC will offer the discount notes at a substantial discount from their
principal amount at maturity. See "Certain United States Federal Income Tax
Considerations--U.S. Holders--Interest and Original Issue Discount."
No cash interest will accrue on the discount notes before , 2004. The
Accreted Value of the discount notes will accrete, representing the
amortization of original issue discount, between the date of original issuance
and , 2004, on a semiannual bond equivalent basis using a 360-day
year comprised of twelve 30-day months such that the Accreted Value shall be
equal to the full principal amount of the discount notes on , 2004,
the Full Accretion Date. The initial aggregate Accreted Value of the discount
notes on the date of issuance will be $300.0 million, representing the original
price at which discount notes are being offered in the debt offering. Beginning
on , 2004, interest on the notes will accrue at the rate of % per
annum and will be payable in U.S. dollars semiannually in arrears on
and , commencing on , 2004. CCIC will make
each interest payment to Holders of record on the immediately preceding
and .
Cash interest will accrue on the discount notes from the most recent date
to which interest has been paid or, if no interest has been paid, from the Full
Accretion Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to CCIC, CCIC will make
all payments of principal, premium and interest, if any, on that Holder's notes
in accordance with those instructions.
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All other payments on the notes will be made at the office or agency of the
paying agent and registrar for the notes within the City and State of New York
unless CCIC 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 Notes
The trustee under each of the indentures will initially act as the paying
agent and registrar for each series of notes. CCIC may change the paying agent
or registrar under either indenture without prior notice to the Holders of the
relevant series of notes, and CCIC or any of its Subsidiaries may act as paying
agent or registrar under either indenture.
Transfer and Exchange
A Holder may transfer or exchange notes in accordance with the applicable
indenture. The registrar and the trustee may require a Holder to furnish
appropriate endorsements and transfer documents in connection with a transfer
of notes. Holders will be required to pay all taxes due on transfer. CCIC is
not required to transfer or exchange any notes selected for redemption. Also,
CCIC is not required to transfer or exchange any notes for a period of 15 days
before a selection of notes to be redeemed.
Optional Redemption
Cash-pay Notes
During the first 36 months after the date of original issuance of the cash-
pay notes, CCIC may on any one or more occasions redeem up to 35% of the
aggregate principal amount of cash-pay notes originally issued at a redemption
price of % of the principal amount of the cash-pay notes to be redeemed on the
redemption date with the net cash proceeds of one or more Public Equity
Offerings and/or Strategic Equity Investments; provided that:
(1) at least 65% of the aggregate principal amount of cash-pay notes
originally issued remains outstanding immediately after the occurrence of
such redemption, excluding notes held by CCIC or any of its Subsidiaries;
and
(2) the redemption occurs 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 cash-pay notes will not be
redeemable at CCIC's option prior to , 2004. After 2004, CCIC
may redeem all or a part of the cash-pay notes upon not less than 30 nor more
than 60 days' notice, at the redemption prices expressed as percentages of
principal amount set forth below plus accrued and unpaid interest if any, on
the cash-pay notes redeemed to the applicable redemption date, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date, if redeemed during the twelve-month
period beginning on of the years indicated below:
<TABLE>
<S> <C>
Year Percentage
---- ----------
<CAPTION>
2004........................................ %
<S> <C>
2005........................................ %
2006........................................ %
2007 and thereafter......................... 100.000%
</TABLE>
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Discount Notes
During the first 36 months after the date of original issuance of the
discount notes, CCIC may on any one or more occasions redeem up to 35% of the
aggregate principal amount at maturity of the discount notes originally issued
at a redemption price of % of the Accreted Value of the discount notes to be
redeemed on the redemption date with the net cash proceeds of one or more
Public Equity Offerings and/or Strategic Equity Investments; provided that:
(1) at least 65% of the aggregate principal amount at maturity of
discount notes originally issued remains outstanding immediately after the
occurrence of such redemption, excluding notes held by CCIC or any of its
Subsidiaries; and
(2) the redemption occurs 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 discount notes will not be
redeemable at CCIC's option prior to , 2004. After 2004, CCIC
may redeem all or a part of the discount notes upon not less than 30 nor more
than 60 days' notice, at the redemption prices expressed as percentages of
principal amount set forth below plus accrued and unpaid interest, if any, on
the discount notes redeemed to the applicable redemption date, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date, if redeemed during the twelve-month
period beginning on of the years indicated below:
<TABLE>
<S> <C>
Year Percentage
---- ----------
<CAPTION>
2004........................................ %
<S> <C>
2005........................................ %
2006........................................ %
2007 and thereafter......................... 100.000%
</TABLE>
Selection and Notice
If less than all of the cash-pay notes or discount notes, as the case may
be, are to be redeemed at any time, the trustee under the applicable indenture
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange, if any, on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by such method as the trustee shall deem fair and
appropriate.
No notes of $1,000 of principal amount at maturity or less will be redeemed
in part. Notices of redemption will be mailed by first class mail at least 30
but not more than 60 days before the redemption date to each Holder of notes to
be redeemed at its registered address. Notices of redemption may not be
conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to such note shall state the portion of the principal amount of that
note to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note presented for redemption will be issued in the
name of the Holder thereof upon cancellation of the original note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue or accrete on notes or portions of
them called for redemption.
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Mandatory Redemption
CCIC is not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of notes will have the right to
require CCIC to repurchase all or any part, equal to $1,000 or an integral
multiple of $1,000, of such Holder's notes pursuant to the offer described
below (the "Change of Control Offer"). The offer price in any Change of Control
Offer will be payable in cash and will be 101% of the aggregate principal
amount of any cash-pay notes repurchased and any discount notes repurchased
after the Full Accretion Date, in each case plus accrued and unpaid interest on
the notes, if any (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), to
the date of purchase, and 101% of the Accreted Value of any discount notes
purchased prior to the Full Accretion Date (in either case, the "Change of
Control Payment"). Within 30 days following any Change of Control, CCIC will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the date
specified in the notice (the "Change of Control Payment Date"). The Change of
Control Payment Date will be no earlier than 30 days and no later than 60 days
from the date the notice is mailed, pursuant to the procedures required by the
applicable indenture and described in such notice.
On the Change of Control Payment Date, CCIC will, to the extent lawful:
(1) accept for payment all notes or portions of the notes 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 notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the applicable trustee the notes
so accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of the notes being purchased by CCIC.
The paying agent will promptly mail to each Holder of notes properly tendered
the Change of Control Payment for such notes, and the applicable trustee will
promptly authenticate and mail, or cause to be transferred by book entry, to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that the new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the indentures are applicable. CCIC will comply
with the requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations to the extent those laws and regulations are
applicable to any Change of Control Offer. If the provisions of any of the
applicable securities laws or securities regulations conflict with the
provisions of the covenant described above, CCIC 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 of the
compliance.
The Change of Control purchase feature is a result of negotiations between
CCIC and the underwriters. Management has no present intention to engage in a
transaction involving a Change of Control, although it is possible that CCIC
would decide to do so in the future. Subject to the limitations discussed
below, CCIC could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the indenture, but that could increase the
amount of Indebtedness outstanding at such time or
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otherwise affect CCIC's capital structure. Restrictions on the ability of CCIC
to incur additional Indebtedness are contained in the covenants described under
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," "--Certain Covenants--Liens" and "--Certain Covenants--Sale and
Leaseback Transactions." Such restrictions can only be waived with the consent
of the Holders of a majority in principal amount of the notes then outstanding.
Except for the limitations contained in the covenants, however, the indentures
will not contain any covenants or provisions that may afford Holders of the
notes protection in the event of certain highly leveraged transactions.
The credit facilities of CCIC's Subsidiaries limit CCIC's access to the
cash flow of those Subsidiaries and will, therefore, restrict CCIC's ability to
purchase any notes. Each of these credit facilities also provides that the
occurrence of certain change of control events with respect to CCIC constitutes
a default under that credit facility. In the event that a Change of Control
occurs at a time when CCIC's Subsidiaries are prohibited from making
distributions to CCIC to purchase notes, CCIC could cause its Subsidiaries to
seek the consent of the lenders under the credit facilities to allow the
distributions or could attempt to refinance the borrowings that contain the
prohibition. If CCIC does not obtain a consent or repay such borrowings, CCIC
will remain prohibited from purchasing notes. In this case, CCIC's failure to
purchase tendered notes would constitute an Event of Default under the
indentures which would, in turn, constitute a default under the credit
facilities. Future indebtedness of CCIC and its Subsidiaries may contain
prohibitions on the occurrence of certain events that would constitute a Change
of Control or require the indebtedness to be repurchased if a Change of Control
occurs. Moreover, the exercise by the Holders of their right to require CCIC to
repurchase the notes could cause a default under such indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchase on CCIC. Finally, CCIC's ability to pay cash to the Holders of notes
following the occurrence of a Change of Control may be limited by CCIC's then
existing financial resources, including its ability to access the cash flow of
its Subsidiaries. See "Risk Factors--As a Holding Company, We Require Dividends
from Subsidiaries to Meet Cash Requirements on Pay Dividends." There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases.
CCIC 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
indentures applicable to a Change of Control Offer made by CCIC and purchases
all notes properly tendered and not withdrawn under such Change of Control
Offer. The provisions under the indentures relating to CCIC's obligation to
make an offer to repurchase the notes 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 notes 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 CCIC 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 notes to require
CCIC to repurchase the notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of the assets of CCIC and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Asset Sales
CCIC will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) CCIC (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
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(2) fair market value is determined by CCIC's board of directors and
evidenced by a resolution of its board of directors set forth in an
officers' certificate delivered to the trustee under the applicable
indenture; and
(3) except in the case of a Tower Asset Exchange, at least 75% of the
consideration received in such Asset Sale by CCIC 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:
(a) any liabilities, as shown on CCIC's or such Restricted
Subsidiary's most recent balance sheet, of CCIC or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are
by their terms subordinated to the notes or any guarantee of the notes)
that are assumed by the transferee of any assets pursuant to a
customary novation agreement that releases CCIC or the Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by CCIC or
any Restricted Subsidiary from the transferee that are converted by
CCIC or the Restricted Subsidiary into cash within 20 days of the
applicable Asset Sale, to the extent of the cash received in that
conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
CCIC or the Restricted Subsidiary may apply those Net Proceeds to:
(1) reduce Indebtedness under a Credit Facility;
(2) reduce other Indebtedness of any of CCIC'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 CCIC; provided, that, after giving effect to
the acquisition, CCIC or its Restricted Subsidiary owns a majority of the
Voting Stock of that business; 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 Net Proceeds, CCIC may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
CCIC will be required to make an offer to all Holders of notes and all holders
of other senior Indebtedness of CCIC containing provisions similar to those set
forth in the indentures relating to the notes with respect to offers to
purchase or redeem with the proceeds of sales of (an "Asset Sale Offer"), to
purchase the maximum principal amount (or accreted value, as applicable) of
notes and such other senior Indebtedness of CCIC that may be purchased out of
the Excess Proceeds. The offer price in any Asset Sale Offer will be payable in
cash and will be 100% of the principal amount of any cash-pay notes or discount
notes purchased after the Full Accretion Date, plus accrued and unpaid interest
to the date of purchase, or 100% of the Accreted Value of discount notes
purchased prior to the Full Accretion Date. In the case of any other senior
Indebtedness, the offer price will be 100% of the principal amount (or accreted
value, as applicable) of the Indebtedness plus accrued and unpaid interest
thereon, if any, to the date of purchase. Each Asset Sale Offer will be made in
accordance with the procedures set forth in the indentures and the other senior
Indebtedness of CCIC. If any Excess Proceeds remain after consummation of an
Asset
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Sale Offer, CCIC may use the remaining Excess Proceeds for any purpose not
otherwise prohibited by the indentures. If the aggregate principal amount of
notes and the other senior indebtedness of CCIC tendered into the Asset Sale
Offer exceeds the amount of Excess Proceeds, the trustee will select the notes
and such other senior Indebtedness to be purchased on a pro rata basis. Upon
completion of the Asset Sale Offer, the amount of Excess Proceeds will be reset
at zero.
Certain Covenants
Restricted Payments
CCIC 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 CCIC's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving CCIC or any of its Restricted
Subsidiaries) or to the direct or indirect holders of CCIC'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 CCIC or to CCIC or a Restricted Subsidiary of CCIC);
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving CCIC) any Equity Interests of CCIC or any direct or indirect
parent of CCIC (other than any such Equity Interests owned by CCIC or any
of its Restricted Subsidiaries);
(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 notes, except a payment of interest or principal at
Stated Maturity; or
(4) make any Restricted Investment, (all such payments and other actions
set forth in these 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 has occurred and is continuing or would occur as a
consequence of the Restricted Payment; and
(2) CCIC 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 CCIC 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 CCIC and its Restricted Subsidiaries
after the date of the indentures (excluding Restricted Payments permitted
by clauses (2), (3) and (4) of the paragraph of exceptions below), is less
than the sum, without duplication, of:
(a) 100% of the Consolidated Cash Flow of CCIC for the period (taken
as one accounting period) from the beginning of the fiscal quarter
during which the indentures are executed to the end of CCIC's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if the
Consolidated Cash Flow for such period is a deficit, less 100% of the
deficit), less 1.75 times the Consolidated Interest Expense of CCIC
since the beginning of the fiscal quarter during which the indentures
are executed; plus
(b) 100% of the aggregate net cash proceeds received by CCIC since
the beginning of the fiscal quarter during which the indentures are
executed as a contribution to its common
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equity capital or from the issue or sale of Equity Interests of CCIC
(other than Disqualified Stock and except to the extent such net cash
proceeds are used to incur new Indebtedness outstanding pursuant to
clause (11) 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 CCIC that have been converted into Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of CCIC 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 date of the indentures is sold for cash or otherwise liquidated or
repaid for cash, the lesser of:
(A) the cash return of capital with respect to the Restricted
Investment (less the cost of disposition, if any), and
(B) the initial amount of the Restricted Investment; plus
(d) to the extent that any Unrestricted Subsidiary of CCIC and all of
its Subsidiaries are designated as Restricted Subsidiaries after the
date of the indentures, the lesser of:
(A) the fair market value of CCIC's Investments in such
Subsidiaries as of the date of such designation, or
(B) the sum of:
(x) the fair market value of CCIC'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 CCIC 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 CCIC'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 CCA Investment Corp. and its
Subsidiaries, the references in clauses (A) and (B) of this clause
(d) to fair market value of CCIC'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 CCIC or a Restricted Subsidiary
after the date of the indentures from an Unrestricted Subsidiary of
CCIC, to the extent that such dividends were not otherwise included in
Consolidated Net Income of CCIC for such period.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of that dividend, if at said date of declaration such payment
would have complied with the provisions of the indentures;
(2) the making of any Investment or the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of CCIC in exchange for, or out of the net
cash proceeds from the sale since the beginning of the fiscal quarter
during which the indentures are executed (other than to a Subsidiary of
CCIC) of Equity Interests of CCIC (other than any Disqualified Stock);
provided that the net cash proceeds are not used to
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incur new Indebtedness pursuant to clause (11) 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 case, the amount of any net cash proceeds that are so utilized will
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 CCIC to the
Holders of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of CCIC or any Restricted Subsidiary of CCIC
held by any member of CCIC's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement in effect as of the date of the indentures; provided
that the aggregate price paid for all of the repurchased, redeemed,
acquired or retired Equity Interests may not exceed:
(a) $500,000 in any twelve-month period, and
(b) $5.0 million in the aggregate; or
(6) the payment of scheduled dividends on CCIC's 12 3/4% Senior
Exchangeable Preferred Stock due 2010, whether paid in cash or in kind
through the issuance of additional shares of such preferred stock, all in
accordance with the certificate of designations governing such preferred
stock as in effect on the date of the indentures.
The board of directors of CCIC may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by CCIC 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 the designation and will reduce the amount available for Restricted Payments
under the first paragraph of this covenant. All of those outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of the Investments at the time of such designation. Such
designation will only be permitted if the Restricted Payment would be permitted
at the time and if the Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The board of directors of CCIC may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the designation would
not cause a Default.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued by CCIC 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 valued will be valued by the board of directors of CCIC whose resolution
with respect to the determination will be delivered to the trustee.
Incurrence of Indebtedness and Issuance of Preferred Stock
CCIC 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
CCIC will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided that
CCIC may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and CCIC's Restricted Subsidiaries may incur Indebtedness
(including Acquired Debt) or issue preferred stock if, in each case, CCIC's
Debt to Adjusted Consolidated Cash Flow Ratio at the time of incurrence of the
Indebtedness or the issuance of the preferred stock, after giving pro forma
effect to such incurrence or issuance as of such date
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and to the use of proceeds from such incurrence or issuance as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period of CCIC for which internal financial statements are available, would
have been no greater than 7.5 to 1.
The first paragraph of this covenant will not prohibit 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 CCIC or any of its Restricted Subsidiaries of
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 CCIC and its Restricted Subsidiaries
thereunder) at any one time outstanding not to exceed the product of
$150,000 times the number of Completed Towers on the date of such
incurrence;
(2) the incurrence by CCIC and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by CCIC of the Indebtedness represented by the cash-
pay notes and the discount notes issued on the date of the indentures;
(4) the issuance by CCIC of additional shares of its 12 3/4% Senior
Exchangeable Preferred Stock due 2010 solely for the purpose of paying
dividends thereon and the incurrence by CCIC of Indebtedness represented by
CCIC's 12 3/4% Senior Subordinated Exchange Debentures due 2010;
(5) the incurrence by CCIC 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 CCIC
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 (5), not to
exceed $10.0 million at any one time outstanding;
(6) the incurrence by CCIC 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 CCIC or any of its Restricted Subsidiaries or Disqualified
Stock of CCIC (other than intercompany Indebtedness) that was permitted by
the indentures to be incurred under the first paragraph of this covenant or
clauses (2), (3), (4), (5) or this clause (6) of this paragraph;
(7) the incurrence by CCIC or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among CCIC and any of its Restricted
Subsidiaries; provided, however, that:
(i) if CCIC 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 notes of such series and that:
(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
CCIC or a Restricted Subsidiary, and
(B) any sale or other transfer of any such Indebtedness to a Person
that is not either CCIC or a Restricted Subsidiary shall be deemed, in
each case, to constitute an incurrence of the Indebtedness by CCIC or
the Restricted Subsidiary, as the case may be;
(8) the incurrence by CCIC 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 indentures to be outstanding or currency
exchange risk;
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(9) the guarantee by CCIC or any of its Restricted Subsidiaries of
Indebtedness of CCIC or a Restricted Subsidiary of CCIC that was permitted
to be incurred by another provision of the indentures;
(10) the incurrence by CCIC or any of its Restricted Subsidiaries of
Acquired Debt in connection with the acquisition of assets or a new
Subsidiary and the incurrence by CCIC'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 CCIC or one of its Restricted Subsidiaries and was not
incurred in connection with, or in contemplation of, the acquisition by
CCIC or one of its Restricted Subsidiaries; and provided further that, in
the case of any incurrence pursuant to this clause (10), as a result of
such acquisition by CCIC or one of its Restricted Subsidiaries, CCIC'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 CCIC for which internal financial statements are
available, would have been less than CCIC's Debt to Adjusted Consolidated
Cash Flow Ratio for the same period without giving pro forma effect to such
incurrence;
(11) the incurrence by CCIC or any of its Restricted Subsidiaries of
Indebtedness or Disqualified Stock 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 of CCIC set forth in an
officers' certificate delivered to the trustee),
in each case, from the issuance and sale, other than to a Subsidiary,
of Equity Interests (other than Disqualified Stock) of CCIC since the
beginning of the fiscal quarter during which the indentures are
executed (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"); and
(12) the incurrence by CCIC or any of its Restricted Subsidiaries of
additional Indebtedness and/or the issuance by CCIC of Disqualified Stock
in an aggregate principal amount, accreted value or liquidation preference,
as applicable, at any time outstanding, not to exceed $25.0 million.
The indentures will also provide that:
(1) CCIC will not incur any Indebtedness that is contractually
subordinated in right of payment to any other Indebtedness of CCIC unless
such Indebtedness is also contractually subordinated in right of payment to
the notes on substantially identical terms; provided, however, that no
Indebtedness of CCIC will be deemed to be contractually subordinated in
right of payment to any other Indebtedness of CCIC solely by virtue of
being unsecured; and
(2) CCIC will not permit any of its Unrestricted Subsidiaries to incur
any Indebtedness other than Non-Recourse Debt.
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 (12) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, CCIC
will, 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.
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Indebtedness under Credit Facilities outstanding on the date of the indentures
shall be deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
Liens
CCIC will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
CCIC 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 CCIC 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 CCIC or any of its Restricted
Subsidiaries;
(3) make loans or advances to CCIC or any of its Restricted Subsidiaries;
or
(4) transfer any of its properties or assets to CCIC or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indentures, 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 as in effect on the date of the indentures;
(2) Indebtedness of any Restricted Subsidiary under any Credit Facility
that is permitted to be incurred pursuant to the covenant under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; provided that
such Credit Facility and Indebtedness contain only such encumbrances and
restrictions on such Restricted Subsidiary's ability to engage in the
activities set forth in clauses (1) through (4) of the preceding paragraph
as are, at the time such Credit Facility is entered into or amended,
modified, restated, renewed, increased, supplemented, refunded, replaced or
refinanced, ordinary and customary for a Credit Facility of that type as
determined in the good faith judgment of CCIC's board of directors (and
evidenced in a board resolution), which determination shall be conclusively
binding;
(3) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which the
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 the 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;
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(4) 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 the
Indebtedness or agreement and the encumbrance or restriction is not
materially more disadvantageous to the Holders of the notes than is
customary in comparable financings (as determined by CCIC) and CCIC
determines that any such encumbrance or restriction will not materially
affect CCIC's ability to pay interest or principal on the notes;
(5) the indentures governing the notes;
(6) applicable law;
(7) any instrument governing Indebtedness or Capital Stock of a Person
acquired by CCIC or any of its Restricted Subsidiaries as in effect at the
time that Person is acquired by CCIC (except to the extent the Indebtedness
was incurred in connection with or in contemplation of the 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, the Indebtedness was permitted by the terms of the indenture
to be incurred;
(8) customary non-assignment provisions in leases or licenses entered
into in the ordinary course of business;
(9) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (5) in the second paragraph of the covenant described above under
the caption "Incurrence of Indebtedness and Issuance of Preferred Stock" on
the property so acquired;
(10) 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";
(11) any agreement for the sale of a Restricted Subsidiary that restricts
that Restricted Subsidiary pending its sale;
(12) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(13) Liens permitted to be incurred pursuant to the provisions of the
covenant described under the caption "Liens" that limit the right of the
debtor to transfer the assets subject to such Liens;
(14) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements; and
(15) 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
CCIC may not:
(1) consolidate or merge with or into (whether or not CCIC is the
surviving corporation), or
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(2) 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:
(a) either:
(A) CCIC is the surviving corporation, or
(B) the entity or the Person formed by or surviving any such
consolidation or merger (if other than CCIC) or to which the 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;
(b) the entity or Person formed by or surviving any such
consolidation or merger (if other than CCIC) or the entity or Person to
which the sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of CCIC
under the notes and the indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the trustee;
(c) immediately after such transaction no Default exists; and
(d) except in the case of:
(A) a merger of CCIC with or into a Wholly Owned Restricted
Subsidiary of CCIC, and
(B) a merger entered into solely for the purpose of
reincorporating CCIC in another jurisdiction:
(x) in the case of a merger or consolidation in which CCIC is
the surviving corporation, CCIC's Debt to Adjusted Consolidated
Cash Flow Ratio at the time of the transaction, after giving pro
forma effect to the transaction as of such date for balance
sheet purposes and as if the transaction had occurred at the
beginning of the most recently ended four full fiscal quarter
period of CCIC for which internal financial statements are
available for income statement purposes, would have been less
than CCIC's Debt to Adjusted Consolidated Cash Flow Ratio for
the same period without giving pro forma effect to such
transaction, or
(y) 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
CCIC), or to which the sale, assignment, transfer, lease,
conveyance or other disposition shall have been made, at the
time of the transaction, after giving pro forma effect to the
transaction as of such date for balance sheet purposes and 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 for
income statement purposes, would have been less than CCIC'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 entity or Person for
purposes of this clause (y) the entity or Person will be
substituted for CCIC 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
CCIC 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,
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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
CCIC or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by CCIC or such Restricted Subsidiary
with an unrelated Person; and
(2) CCIC delivers to the 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 of CCIC set forth
in an officers' certificate certifying that the Affiliate Transaction
complies with clause (1) above and that the Affiliate Transaction has
been approved by a majority of the disinterested members of the board
of directors of CCIC; 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 the
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items will not be deemed to be
Affiliate Transactions:
(1) any employment arrangements with any executive officer of CCIC or a
Restricted Subsidiary that is entered into by CCIC 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 CCIC 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
indentures described above under the caption "--Restricted Payments";
(5) the issuance or sale of Equity Interests (other than Disqualified
Stock) of CCIC; 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 date of the
indentures.
Sale and Leaseback Transactions
CCIC will not, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that CCIC or any of its
Restricted Subsidiaries may enter into a sale and leaseback transaction if:
(1) CCIC or such Restricted Subsidiary, as applicable, could have:
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction 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";
(b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "--Liens";
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(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by
the board of directors) of the property that is the subject of the sale
and leaseback transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and CCIC applies the proceeds of such transaction in
compliance with, the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
CCIC:
(1) will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Restricted Subsidiary of CCIC to any Person (other than CCIC or a
Wholly Owned Restricted Subsidiary of CCIC); and
(2) will not permit any of its Restricted Subsidiaries 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 CCIC or a Wholly Owned Restricted Subsidiary of CCIC, 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."
Notwithstanding the foregoing, the issuance or sale of shares of Capital
Stock of any Restricted Subsidiary of CCIC will not violate the provisions
of the immediately preceding sentence if such shares are issued or sold in
connection with:
(x) the formation or capitalization of a Restricted Subsidiary, or
(y) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary
becomes a Restricted Subsidiary of CCIC by reason of the acquisition
of securities or assets from another Person.
Limitation on Issuances of Guarantees of Indebtedness
CCIC will not permit any Restricted Subsidiary, directly or indirectly, to
Guarantee or pledge any assets to secure the payment of any other Indebtedness
of CCIC unless such Subsidiary simultaneously executes and delivers a
supplemental indenture to the indentures governing the notes providing for the
Guarantee of the payment of the notes by such Subsidiary, which Guarantee shall
be senior to or pari passu with such Subsidiary's Guarantee of or pledge to
secure such other Indebtedness. Notwithstanding the foregoing, any Guarantee by
a Subsidiary of the notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person other than a Subsidiary of CCIC, of all of
the CCIC's stock in, or all or substantially all the assets of, such
Subsidiary, which sale, exchange or transfer is made in compliance with the
applicable provisions of the indentures governing the notes. The form of a
Guarantee will be attached as an exhibit to the indentures.
Business Activities
CCIC will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to the extent as would not be
material to CCIC and its Subsidiaries taken as a whole.
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Reports
Whether or not required by the Securities and Exchange Commission, so long
as any notes are outstanding, CCIC will furnish to the Holders of notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K
if CCIC 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 CCIC
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 SEC's rules and regulations:
(a) the financial condition and results of operations of CCIC and
its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of CCIC; 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 CCIC's certified independent
accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if CCIC were required to file such reports, in each case
within the time periods specified in the CCIC's rules and regulations.
In addition, whether or not required by the rules and regulations of the
SEC, CCIC will file a copy of all such information and reports with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations, unless the SEC will not accept such a filing, and make such
information available to securities analysts and prospective investors upon
request.
Events of Default and Remedies
Each of the following constitutes an Event of Default under the applicable
indenture:
(1) default for 30 days in the payment when due of interest on the
notes;
(2) default in payment when due of the principal of or premium, if any,
on the notes;
(3) failure by CCIC or any of its Subsidiaries to comply with the
provisions described under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" or failure by CCIC to consummate a Change
of Control Offer or Asset Sale Offer in accordance with the provisions of
the indentures applicable to the offers;
(4) failure by CCIC or any of its Subsidiaries for 30 days after notice
to comply with any of its other agreements in the indentures or the notes;
(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 CCIC or any of its Significant
Subsidiaries, or the payment of which is guaranteed by CCIC or any of its
Significant Subsidiaries, whether such Indebtedness or guarantee now
exists, or is created after the date of the indentures, which default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on the Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of the default (a
"Payment Default"); or
(b) results in the acceleration of the 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;
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(6) failure by CCIC 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 days; or
(7) certain events of bankruptcy or insolvency described in the
indentures with respect to CCIC or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the trustee under the
applicable indenture or the Holders of at least 25% in principal amount at
maturity of the then outstanding notes of the applicable series may declare all
the notes of such series 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 CCIC, all outstanding notes will
become due and payable without further action or notice. Holders of the notes
may not enforce the indentures or the notes except as provided in the
indentures. Subject to certain limitations, Holders of a majority in principal
amount at maturity of the then outstanding notes may direct the trustee under
the applicable indenture in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount at maturity of
either series of the notes then outstanding by notice to the trustee under the
applicable indenture may on behalf of the Holders of all of such series of
notes waive any existing Default or Event of Default and its consequences under
the applicable indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the notes.
Each of the indentures provide that if a Default occurs and is continuing
and is known to the trustee, the trustee must mail to each Holder of the
relevant series of notes 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 note, the 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 notes. In addition, CCIC is required to deliver
to the 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. CCIC is also required to deliver to the trustee, promptly
after the occurrence thereof, written notice of any event that would constitute
a Default, the status thereof and what action CCIC 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 CCIC, as
such, shall have any liability for any obligations of CCIC under the notes, the
indentures or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
CCIC may, at its option and at any time, elect to have all of its
obligations discharged with respect to either series of the notes outstanding
("Legal Defeasance") except for:
(1) the rights of Holders of outstanding notes of such series to receive
payments in respect of the principal of, premium, if any, and interest on
such notes when such payments are due from the trust referred to below;
(2) CCIC's obligations with respect to such notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
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(3) the rights, powers, trusts, duties and immunities of the trustee,
and CCIC's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the applicable indenture.
In addition, CCIC may, at its option and at any time, elect to have the
obligations of CCIC released with respect to certain covenants that are
described in the indentures ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events described under "--Events of Default and Remedies", but not
including non-payment and bankruptcy, receivership, rehabilitation and
insolvency events with respect to CCIC, will no longer constitute an Event of
Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) CCIC must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the applicable series notes, 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 on the outstanding notes on
the stated maturity or on the applicable redemption date, as the case may
be, and CCIC must specify whether the notes are being defeased to maturity
or to a particular redemption date;
(2) in the case of Legal Defeasance, CCIC shall have delivered to the
trustee under the applicable indenture an opinion of counsel in the United
States reasonably acceptable to the trustee confirming that:
(a) CCIC has received from, or there has been published by, the
Internal Revenue Service a ruling, or
(b) since the date of the indentures, 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 notes 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, CCIC shall have delivered to the
trustee under the applicable indenture an opinion of counsel in the United
States reasonably acceptable to the trustee confirming that the Holders of
the outstanding notes of such series 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
either:
(a) 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
(b) insofar as Events of Default from bankruptcy or insolvency events
with respect to CCIC 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 applicable indenture, to which
CCIC or any of its Restricted Subsidiaries is a party or by which CCIC or
any of its Restricted Subsidiaries is bound;
(6) CCIC must have delivered to the 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;
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(7) CCIC must deliver to the trustee under the applicable indenture an
officers' certificate stating that the deposit was not made by CCIC with
the intent of preferring the Holders of such series of notes over the
other creditors of CCIC with the intent of defeating, hindering, delaying
or defrauding creditors of CCIC or others; and
(8) CCIC must deliver to the trustee under the applicable indenture 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.
Amendment, Supplement and Waiver
Except as described in the two paragraphs below, the Holders of a majority
in principal amount at maturity of the notes outstanding can, with respect to
the relevant series of notes:
(1) consent to any amendment or supplement to the relevant indenture or
the related series of notes; and
(2) waive any existing default under, or the compliance with any
provisions of, the relevant indenture or the related series of notes.
Consents and waivers obtained in connection with a purchase of, or tender
offer or exchange offer for, the relevant series of notes shall be included for
purposes of the previous sentence.
Without the consent of each Holder affected, an amendment or waiver with
respect to any notes of a particular series held by a non-consenting Holder may
not :
(1) reduce the principal amount of notes of such series whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note of a
particular series 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 notes of such series;
(3) reduce the rate of or change the time for payment of interest on any
note of such series;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the notes of a particular series,
excluding a rescission of acceleration of the notes by the Holders of
at least a majority in aggregate principal amount of the notes of such
series and a waiver of the payment default that resulted from such
acceleration;
(5) make any note of a particular series payable in money other than that
stated in the notes of such series;
(6) make any change in the provisions of the applicable indenture relating
to waivers of past Defaults or the rights of Holders of notes of such
series to receive payments of principal of or premium, if any, or
interest on the notes of such series;
(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 note of a particular series;
(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 notes of a particular
series; or
(9) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of notes
of a particular series, CCIC and the trustee may amend or supplement the
applicable indenture or the notes of such series to:
(1) cure any ambiguity, defect or inconsistency,
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(2) provide for uncertificated notes in addition to or in place of
certificated notes,
(3) provide for the assumption of CCIC's obligations to Holders of notes
of such series in the case of a merger or consolidation,
(4) make any change that would provide any additional rights or benefits
to the Holders of notes of such series or that does not adversely
affect the legal rights under the indenture of any such Holder, or
(5) comply with requirements of SEC in order to effect or maintain the
qualification of the indentures under the Trust Indenture Act.
Concerning the Trustee
The indentures contain certain limitations on the rights of the trustee,
should it become a creditor of CCIC, 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 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 SEC for permission to
continue or resign.
The Holders of a majority in principal amount at maturity of the notes of a
particular series then outstanding will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the trustee under the applicable indenture, subject to certain
exceptions. The indentures provide that if an Event of Default occurs and is
not cured, the 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 these provisions, the trustee will be under no obligation to exercise any of
its rights or powers under the indentures at the request of any Holder of notes
of a particular series, unless that Holder shall have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indentures
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 indentures. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accreted Value" means, as of any date of determination the sum of:
(1) the initial Accreted Value (which is $ per $1,000 in principal
amount at maturity of notes); and
(2) the portion of the excess of the principal amount at maturity of each
note over such initial Accreted Value which shall have been amortized
through such date, such amount to be so amortized on a daily basis and
compounded semiannually on each and at the rate
of % per annum from the date of original issuance of the notes
through the date of determination computed on the basis of a 360-day
year of twelve 30-day months.
The Accreted Value of any note on or after the Full Accretion Date shall be
equal to 100% of its stated principal amount.
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"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness 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" means, as of any date of determination,
the sum of:
(1) the Consolidated Cash Flow of CCIC for the four most recent full
fiscal quarters ending immediately prior to such date for which
internal financial statements are available, less CCIC's Tower Cash
Flow for such four-quarter period; plus
(2) the product of four times CCIC's Tower Cash Flow for the most recent
fiscal quarter for which internal financial statements are available.
For purposes of making the computation referred to above:
(1) acquisitions that have been made by CCIC 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 (2) of the proviso set forth
in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the calculation date, shall be excluded; and
(3) the corporate development expense of CCIC and its Restricted
Subsidiaries calculated in a manner consistent with the audited
financial statements of CCIC included in this prospectus shall be added
to Consolidated Cash Flow to the extent it was included in computing
Consolidated Net Income.
"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 CCIC and its Subsidiaries taken
as a whole will be governed by the provisions of the indenture
described above under the caption "--Repurchase at the Option of
Holders--Change of Control" and/or the provisions described above under
the caption "--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 CCIC or any of its Restricted Subsidiaries of
Equity Interests of any of CCIC's Subsidiaries (other than directors'
qualifying shares or shares required by applicable
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law to be held by a Person other than CCIC 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 CCIC to a Restricted Subsidiary or by a
Restricted Subsidiary to CCIC or to another Restricted Subsidiary;
(2) an issuance of Equity Interests by a Subsidiary to CCIC or to another
Restricted Subsidiary;
(3) a transfer or issuance of Equity Interests of an Unrestricted
Subsidiary to an Unrestricted Subsidiary; provided, however, that such
transfer or issuance does not result in a decrease in the percentage of
ownership of the voting securities of such transferee Unrestricted
Subsidiary that are collectively held by CCIC and its Subsidiaries.
(4) a Restricted Payment that is permitted by the covenant described above
under the caption "--Certain Covenants--Restricted Payments";
(5) grants of leases or licenses in the ordinary course of business; and
(6) disposals of Cash Equivalents.
"Asset Sale Offer" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Asset Sales."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"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;
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(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.
"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 CCIC 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
CCIC;
(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 CCIC (measured by voting power rather than number of shares);
provided that transfers of Equity Interests in CCIC between or among
the beneficial owners of CCIC's Equity Interests and/or Equity
Interests in CTSH, in each case as of the date of the Indenture, 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 CCIC 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 CCIC are not Continuing Directors; or
(5) CCIC consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, CCIC, in any such
event pursuant to a transaction in which any of the outstanding Voting
Stock of CCIC is converted into or exchanged for cash, securities or
other property, other than any such transaction where:
(a) the Voting Stock of CCIC 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
(b) the Principals and their Related Parties own a majority of such
outstanding shares after such transaction.
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"Change of Control Offer" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Change of Control."
"Change of Control Payment" has the meaning set forth above under the
caption "Repurchase at the Option of Holders--Change of Control."
"Change of Control Payment Date" has the meaning set forth above under the
caption "Repurchase at the Option of Holders--Change of Control."
"Completed Tower" means any wireless transmission tower owned or managed by
CCIC or any of its Restricted Subsidiaries that, as of any date of
determination:
(1) has at least one wireless communications or broadcast tenant that has
executed a definitive lease with CCIC or any of its Restricted
Subsidiaries, which lease is producing revenue with respect to the tower as
of the date of determination; and
(2) has capacity for at least two tenants in addition to the tenant
referred to in clause (1) of this definition.
"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 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
(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.
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"Consolidated Interest Expense" means, with respect to any Person for any
period:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period determined in accordance with GAAP, 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, imputed interest with respect to
Attributable Debt, 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); plus
(2) all preferred stock dividends paid or accrued in respect of CCIC's
and its Restricted Subsidiaries' preferred stock to Persons other than CCIC
or a Wholly Owned Restricted Subsidiary of CCIC other than preferred stock
dividends paid by CCIC in shares of preferred stock that is not
Disqualified Stock.
"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 CCIC 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 CCIC or one of its Restricted
Subsidiaries.
"Consolidated Tangible Assets" means, with respect to CCIC, the total
consolidated assets of CCIC and its Restricted Subsidiaries, less the total
intangible assets of CCIC and its Restricted Subsidiaries, as shown on the most
recent internal consolidated balance sheet of CCIC 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 CCIC who:
(1) was a member of such board of directors on the date of the
indentures;
(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 of directors at the time of such nomination or election; or
(3) is a designee of a Principal or was nominated by a Principal.
"Covenant Defeasance" has the meaning set forth above under the caption
"Legal Defeasance and Covenant Defeasance."
"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.
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"Debt to Adjusted Consolidated Cash Flow Ratio" means, as of any date of
determination, the ratio of:
(1) the Consolidated Indebtedness of CCIC as of such date to
(2) the Adjusted Consolidated Cash Flow of CCIC as of such date.
"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 notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require CCIC 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 CCIC may not repurchase or redeem
any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above the caption "--Certain
Covenants--Restricted Payments."
"Eligible Indebtedness" means any Indebtedness other than:
(1) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof; and
(2) 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).
"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).
"Excess Proceeds" has the meaning set forth above under the caption
"Repurchase at the Option of Holders--Asset Sales."
"Existing Indebtedness" means Indebtedness of CCIC and its Subsidiaries
(other than Indebtedness under the Senior Credit Facility) in existence on the
date of the indentures, until such amounts are repaid.
"Full Accretion Date" means , 2004.
"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 date of the indenture.
"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.
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"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.
"Holder" means a Person in whose name a note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or 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:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) 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 CCIC or any Restricted Subsidiary of CCIC sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of CCIC or a Restricted
Subsidiary of CCIC 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 CCIC, CCIC 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 caption "--Certain Covenants--Restricted Payments."
"Legal Defeasance" has the meaning set forth above under the caption "Legal
Defeasance and Covenant Defeasance."
"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).
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"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 CCIC 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 CCIC or any
Restricted Subsidiary after such Asset Sale; and
(6) without duplication, any reserves that CCIC'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 reversed shall be deemed to be Net Proceeds
from an Asset Sale as of the date of such reversal.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither CCIC 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 CCIC or any of its Restricted
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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 CCIC 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 the date CTSH
became a Subsidiary).
"Payment Default" has the meaning set forth above under the caption "Events
of Default and Remedies."
"Permitted Business" means any business conducted by CCIC, its Restricted
Subsidiaries or CTSH and its Subsidiaries on the date of the indenture and any
other business related, ancillary or complementary to any such business.
"Permitted Investments" means:
(1) any Investment in CCIC or in a Restricted Subsidiary of CCIC;
(2) any Investment in Cash Equivalents;
(3) any Investment by CCIC or any Restricted Subsidiary of CCIC in a
Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of CCIC; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, CCIC or a Restricted Subsidiary of CCIC;
(4) 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 caption "--
Repurchase at the Option of Holders--Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of CCIC;
(6) receivables created in the ordinary course of business;
(7) loans or advances to employees made in the ordinary course of
business not to exceed $2.0 million at any one time outstanding;
(8) securities and other assets received in settlement of trade debts or
other claims arising in the ordinary course of business;
(9) purchases of additional Equity Interests in CTSH for cash pursuant
to the governance agreement as the same is in effect on the date of the
indentures for aggregate cash consideration not to exceed $20.0 million
since the beginning of the quarter during which the indentures are
executed;
(10) the Investment of up to an aggregate of $100.0 million (each such
Investment being measured as of the date made and without giving effect to
subsequent changes in value); and
(11) other Investments in Permitted Businesses not to exceed an amount
equal to $10.0 million plus 10% of CCIC'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).
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"Permitted Liens" means:
(1) Liens securing Eligible Indebtedness of CCIC under one or more
Credit Facilities that was permitted by the terms of the indentures to be
incurred;
(2) Liens securing any Indebtedness of any of CCIC's Restricted
Subsidiaries that was permitted by the terms of the indentures to be
incurred;
(3) Liens in favor of CCIC;
(4) Liens existing on the date of the indentures;
(5) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(6) Liens securing Indebtedness permitted to be incurred under clause
(5) of the second paragraph of the covenant described above under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(7) Liens incurred in the ordinary course of business of CCIC or any
Restricted Subsidiary of CCIC with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than trade credit in the
ordinary course of business); and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by CCIC or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of CCIC or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of CCIC or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or initial accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest on,
the Indebtedness 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 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 notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the notes on terms at least as favorable to the holders of
notes 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 CCIC or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
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"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 Fund III, Limited Partnership; Berkshire Fund
IV, Limited Partnership; Berkshire Investors LLC; Berkshire Partners LLC;
Centenial Fund IV, L.P.; Centenial Fund V, L.P.; Centenial Entrepreneurs Fund
V, L.P.; Nassau Capital Partners II, L.P.; NAS Partners I, L.L.C., and TdF and
any Related Party of the foregoing.
"Public Equity Offering" means an underwritten primary public offering of
common stock of CCIC pursuant to an effective registration statement under the
Securities Act.
"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.
"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.
"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 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 CCIC 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.
"Strategic Equity Investment" means a cash contribution to the common
equity capital of CCIC or a purchase from CCIC 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
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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).
"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 CCIC 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
trustee) of the Tower Assets and cash or Cash Equivalents received by CCIC 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
CCIC 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 CCIC, 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 CCIC or any of its Restricted Subsidiaries to lessees of communication
sites or revenues derived from the sale of assets.
"Unrestricted Subsidiary" means any Subsidiary of CCIC 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 CCIC or any Restricted Subsidiary of CCIC unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to CCIC or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of CCIC;
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(3) is a Person with respect to which neither CCIC nor any of its
Restricted Subsidiaries has any direct or indirect obligation:
(a) to subscribe for additional Equity Interests; or
(b) 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 CCIC 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 CCIC or any of its Restricted
Subsidiaries and has at least one executive officer that is not a
director or executive officer of CCIC or any of its Restricted
Subsidiaries.
Any such designation by the board of directors shall be evidenced to the
trustee by filing with the 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 caption "--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 Indenture and any
Indebtedness of that Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of CCIC as of such date (and, if such Indebtedness is not permitted
to be incurred as of such date under the covenant described above under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," CCIC shall be in default of such covenant). The board of
directors of CCIC may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that the designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of CCIC of any
outstanding Indebtedness of such Unrestricted Subsidiary and the designation
shall only be permitted if:
(1) such Indebtedness is permitted under the covenant described above under
the caption "--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
(2) 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
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, 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.
"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.
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[E] SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 122,635,680 shares of common
stock outstanding (123,125,072 shares if the over-allotment option is exercised
in full). Of these shares, the 27,700,000 shares of common stock (31,822,554
shares if the over-allotment option is exercised in full) sold in the offering
will be freely tradeable without restriction or further registration under the
Securities Act, unless any of these shares are held by an "affiliate" of ours
as that term is defined in Rule 144 promulgated under the Securities Act.
Shares held by our affiliates will be subject to the resale limitation of Rule
144.
We estimate that approximately 15,850,000 shares of our common stock
outstanding immediately prior to the offering are also freely tradable without
restrictions or further registration under the Securities Act. We also estimate
that approximately 1,250,000 additional shares of our common stock outstanding
prior to the offering can be sold under Rule 144 by shareholders who are not
parties to the lock-up arrangement described below. All the 11,340,000 shares
of our Class A common stock can be converted into common stock and will be
available for sale subject to the limitations of Rule 144 in August 1999. After
October 1999, substantially all other outstanding shares of our common stock,
other than 15,597,785 shares held by the Bell Atlantic joint venture, will be
available for sale pursuant to Rule 144 subject to the limitation on amounts
sold.
Finally, as of March 31, 1999, we have outstanding approximately 18,700,000
options to purchase shares of our common stock. The exercise of these options
has been registered on Form S-8 and shares sold as a result of the exercise of
these options are freely tradable, subject to Rule 144 limitations in some
cases.
We have agreed, during the period beginning from the date of this
prospectus and continuing to and including the date 90 days after the date of
this prospectus, not to offer, sell, contract to sell or otherwise dispose of
any of our securities that are substantially similar to the common stock,
including any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or any such substantially similar
securities, without the prior written consent of Goldman Sachs & Co. In
addition, the stockholders selling shares of common stock in the equity
offering, our directors, executive officers and certain other officers, who
represent in the aggregate approximately 60% of our outstanding common stock
after the offering, will be required, during the period beginning from the date
of this prospectus and continuing to and including the date 90 days after the
date of this prospectus, not to offer, pledge, sell, contract to sell or
otherwise dispose of any of our securities outstanding as of the date of this
prospectus, including any securities that are convertible into or exchangeable
for, or that represent the right to receive any common stock or substantially
similar securities, or enter into any swap or other arrangement that transfers,
in whole or in part, the economic consequences of ownership of any of our
securities, without the prior written consent of Goldman Sachs & Co. See
"Underwriting". These lock-up arrangements will restrict the sale of
approximately 62,200,000 shares of our common stock, as well as all our Class A
common stock.
The underwriters have agreed to permit officers who are parties to the
lock-up agreement and not selling shareholders to sell during the lock-up
period up to 12.5% of the shares of common stock beneficially owned or held
under options by such officers as of the date of the prospectus, so long as
such sales comply with securities laws.
In general, under Rule 144 as currently in effect, a stockholder, including
an "affiliate", who has beneficially owned his or her restricted securities (as
that term is defined in Rule 144) for at least one year from the later of the
date such securities were acquired from us or, if applicable, the date they
were acquired from an affiliate, is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of the
then outstanding shares of common stock or
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the average weekly trading volume in the common stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144.
Any sale under Rule 144 must meet certain requirements concerning the
availability of public information on us, the manner of sale and the notice of
sale. In addition, under Rule 144(k), after two years from the later of the
date restricted securities were acquired from us or, if applicable, the date
they were acquired from an affiliate of ours, a stockholder who is not an
affiliate of ours at the time of sale and has not been an affiliate of ours for
at least three months prior to the sale is entitled to sell the shares
immediately without compliance with the requirements of Rule 144 described
above.
Upon completion of the offering, including exercise of the over-allotment
option, approximately 58,400,000 shares of common stock, or approximately
62,800,000 shares including shares issuable upon conversion or exercise of
outstanding options and warrants, will be subject to demand and piggyback
registration rights.
Except as indicated above, we are unable to estimate the amount, timing and
nature of future sales of outstanding common stock. No prediction can be made
as to the effect, if any, that market sales of shares of common stock or the
availability of shares for sale will have on the market price of the common
stock prevailing from time to time. Nevertheless, sales of significant numbers
of shares of common stock in the public market could adversely affect the
market price of the common stock and could impair our ability to raise capital
through an offering of its equity securities. See "Risk Factors--Shares of a
Substantial Number of Shares of Common Stock After the Equity Offering Could
Adversely Affect the Market Price of the Common Stock" and "Underwriting."
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[D] CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes some of the material U.S.
federal income and estate tax aspects of the purchase, ownership and
disposition of the notes. This discussion is a summary for general information
only and does not consider all aspects of U.S. federal income tax that may be
relevant to your purchase, ownership and disposition of the notes. This
discussion also does not address the U.S. federal income tax consequences of
ownership of notes not held as capital assets within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended, or the U.S. federal
income tax consequences to investors subject to special treatment under the
U.S. federal income tax laws, such as:
. dealers in securities or foreign currency,
. tax-exempt entities,
. banks,
. thrifts,
. insurance companies,
. persons that hold the notes as part of a "straddle," a "hedge" against
currency risk or a "conversion transaction,"
. persons that have a "functional currency" other than the U.S. dollar,
and
. investors in pass-through entities.
In addition, this discussion is limited to the U.S. federal income tax
consequences to initial holders that purchase the notes for cash, at their
original issue price, pursuant to the offerings. It does not describe any tax
consequences arising out of the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, regulations of the Treasury
Department, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to a change (possibly on a
retroactive basis). We have not and will not seek any rulings or opinions from
the IRS or counsel regarding the matters discussed below. There can be no
assurance that the IRS will not take positions concerning the tax consequences
of the purchase, ownership or disposition of the notes which are different from
those discussed below.
Persons considering the purchase of notes should consult their own advisors
concerning the application of U.S. federal income tax laws, as well as the laws
of any state, local or foreign taxing jurisdiction, to their particular
situations.
U.S. Holders
The following discussion is limited to the U.S. federal income tax
consequences relevant to a "U.S. holder," which means a beneficial owner of a
note that is:
(1) a citizen or resident of the United States,
(2) a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions,
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its sources,
(4) a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust, or
(5) otherwise subject to U.S. federal income taxation on its worldwide
income on a net income basis.
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Certain U.S. federal income tax consequences relevant to a holder other
than a U.S. holder are discussed separately below.
Stated Interest on the Cash-Pay Notes
The stated interest on the cash-pay notes will be included in income by a
U.S. holder as ordinary income in accordance with such U.S. holder's usual
method of accounting. It is anticipated that the cash-pay notes will be issued
without any original issue discount, commonly referred to as OID, as described
below.
Interest and Original Issue Discount on the Discount Notes
The discount notes will be issued with original issue discount. OID is the
excess of (1) the stated redemption price at maturity of a debt instrument over
(2) its issue price.
The "stated redemption price at maturity" of a debt instrument is the sum
of all payments provided by the instrument. The issue price of a debt
instrument is the first price at which a substantial amount of the debt
instruments are sold to the public for cash (excluding sales to bond houses,
brokers or similar persons or organizations acting in the capacity as
underwriters, placement agents or wholesalers).
A U.S. holder is required to include OID in income as ordinary interest as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such U.S. holder's regular
method of accounting. A U.S. holder will not be required to report separately
as taxable income actual distributions of stated interest on the discount
notes. In general, the amount of OID included in income by the holder of a
discount note is the sum of the daily portions of OID for each day during the
taxable year (or portion of the taxable year) on which such holder held such
note. The "daily portion" is determined by allocating the OID for an accrual
period ratably to each day in that accrual period. The "accrual period" for a
discount note may be of any length and may vary in length over the term of a
discount note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the first or
final day of an accrual period.
The amount of OID for an accrual period is generally equal to the product
of the discount note's adjusted issue price at the beginning of such accrual
period and its yield to maturity. The "adjusted issue price" of a discount note
at the beginning of any accrual period is the sum of the issue price of the
discount note plus the amount of OID allocable to all prior accrual periods
minus the amount of any prior payments on the discount note. Under the constant
yield method of determining OID, a U.S. holder generally will have to include
in income increasingly greater amounts of OID in successive accrual periods.
Applicable High Yield Discount Obligations
If the discount notes are "applicable high yield discount obligations", the
OID on the discount notes will not be deductible until paid. An "applicable
high yield discount obligation" is any debt instrument that:
(1) has a maturity date which is more than five years from the date of
issue,
(2) has a yield to maturity which equals or exceeds the applicable Federal
rate (as set forth in Section 1274(d) of the Code) for the calendar
month in which the obligation is issued plus five percentage points and
(3) has significant original issue discount.
The applicable Federal rate is an interest rate, announced monthly by the
IRS, that is based on the yield of debt obligations issued by the U.S.
Treasury. The applicable Federal rate is 5.59% for
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April, 1999. A debt instrument generally has "significant original issue
discount" if, as of the close of any accrual period ending more than five years
after the date of issue, the excess of the interest (including OID) that has
accrued on the obligation over the interest (including OID) that is required to
be paid exceeds the product of the issue price of the instrument and its yield
to maturity. If the debt instrument's yield to maturity exceeds the applicable
Federal rate plus six percentage points, a ratable portion of the issuing
corporation's deduction for OID, based on the portion of the yield to maturity
that exceeds the applicable Federal rate plus six percentage points, will be
denied. This disqualified OID will be treated as a dividend generally eligible
for the dividends-received deduction in the case of corporate holders to the
extent it would have been so treated had such amount been distributed by the
issuing corporation on its stock.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange, retirement or other disposition of a note, a U.S.
holder will generally recognize taxable capital gain or loss equal to the
difference between (1) the amount realized on the disposition, except to the
extent that amounts received are attributable to accrued interest, which
portion of the consideration would be taxed as ordinary income if the interest
was previously untaxed, and (2) the U.S. holder's adjusted tax basis in the
note. A U.S. holder's adjusted tax basis in a cash-pay note generally will
equal the cost of the cash-pay note to the U.S. holder. A U.S. holder's
adjusted tax basis in a discount note generally will equal the cost of the
discount note to the U.S. holder increased by any OID included in income
through the date of disposition and decreased by any payments received on the
discount notes. In the case of a U.S. holder who is an individual, such capital
gain will be subject to tax at a maximum rate of 20% if the note has been held
for more than 12 months at the time of the sale, exchange, retirement or other
disposition.
A U.S. holder will not recognize any taxable gain or loss on the exchange
of notes for new notes under the exchange offer.
Information Reporting and Backup Withholding
U.S. holders of notes may be subject, under certain circumstances, to
information reporting and backup withholding at a 31% rate on cash payments of
principal and premium, if any, and interest (including OID) and on the gross
proceeds from dispositions of notes. Backup withholding applies only if the
U.S. holder:
(1) fails to furnish its social security or other taxpayer identification
number within a reasonable time after a request for such information,
(2) furnishes an incorrect taxpayer identification number,
(3) fails to report properly interest or dividends, or
(4) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the taxpayer identification
number provided is its correct number and that it is not subject to
backup withholding.
Any amount withheld from a payment to a U.S. holder under the backup
withholding rules is allowable as a credit, and may entitle such holder to a
refund, against such U.S. holder's U.S. federal income tax liability, provided
that the required information is furnished to the IRS. Certain persons are
exempt from backup withholding, including corporations and financial
institutions. U.S. holders of notes should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
We will furnish annually to the IRS, and to record holders of the notes to
whom it is required to furnish such information, information relating to the
amount of OID and interest, as applicable.
Non-U.S. Holders
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is not a U.S. holder (a "non-
U.S. holder").
189
<PAGE>
Subject to the discussion of backup withholding below, payments of interest
(including OID) on a note to any non-U.S. holder will generally not be subject
to U.S. federal income or withholding tax, provided that:
(1) the holder is not
(a) an actual or constructive owner of 10% or more of the total voting
power of all our voting stock or
(b) a controlled foreign corporation related (directly or indirectly)
to us through stock ownership or
(c) a foreign tax-exempt organization or a foreign private foundation
for U.S. federal income tax purposes,
(2) such interest payments are not effectively connected with the conduct
by the non-U.S. holder of a trade or business within the United States
and
(3) we or our paying agent receives
(a) from the non-U.S. holder, a properly completed Form W-8 (or
substitute Form W-8) under penalties of perjury which provides the
non-U.S. holder's name and address and certifies that the non-U.S.
holder of the note is a non-U.S. holder or
(b) from a security clearing organization, bank or other financial
institution that holds the notes in the ordinary course of its
trade or business (a "financial institution") on behalf of the
non-U.S. holder, certification under penalties of perjury that
such a Form W-8 (or substitute Form W-8) has been received by it,
or by another such financial institution, from the non-U.S.
holder, and a copy of the Form W-8 (or substitute Form W-8) is
furnished to the payor.
A non-U.S. holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30% (or lower applicable treaty rate) on
payments of interest (including OID) on the notes.
If the payments of interest (including OID) on a note are effectively
connected with the conduct by a non-U.S. holder of a trade or business in the
United States, such payments will be subject to U.S. federal income tax on a
net basis at the rates applicable to U.S. persons generally (and, if paid to
corporate holders, may also be subject to a 30% branch profits tax). If
payments are subject to U.S. federal income tax on a net basis in accordance
with the rules described in the preceding sentence, such payments will not be
subject to U.S. withholding tax so long as the holder provides us or the paying
agent with a properly executed Form 4224.
Non-U.S. holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax, exemption from or reduction of
branch profits tax, or other rules different from those described above.
Sale, Exchange or Redemption of Notes
Subject to the discussion of backup withholding, any gain realized by a
non-U.S. holder on the sale, exchange, retirement or other disposition of a
note generally will not be subject to U.S. federal income tax, unless:
(1) such gain is effectively connected with the conduct by such non-U.S.
holder of a trade or business within the United States,
(2) the non-U.S. holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and
certain other conditions are satisfied or
(3) the non-U.S. holder is subject to tax under provisions of U.S. federal
tax law applicable to certain U.S. expatriates.
190
<PAGE>
Federal Estate Tax
Notes held or treated as held by an individual who is a non-U.S. holder at
the time of his or her death will not be subject to U.S. federal estate tax
provided that (1) the individual does not actually or constructively own 10% or
more of the total voting power of all our voting stock and (2) income on the
note was not effectively connected with the conduct by such non-U.S. holder of
a trade or business within the United States.
Information Reporting and Backup Withholding
We must report annually to the IRS and to each non-U.S. holder any interest
(including OID) that is subject to withholding or that is exempt from U.S.
withholding tax. Copies of those information returns may also be made
available, under the provisions of a specific treaty or agreement, to the tax
authorities of the country in which the non-U.S. holder resides.
The regulations provide that backup withholding, which generally is a
withholding tax imposed at the rate of 31% on payments to persons that fail to
furnish certain required information, and information reporting will not apply
to payments made on the notes by us to a non-U.S. holder, if the holder
certifies as to its non-U.S. status under penalties of perjury or otherwise
establishes an exemption, provided that neither we nor our paying agent has
actual knowledge that the holder is a U.S. person or that the conditions of any
other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalty of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the holder is a
U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a note to or
through a non-U.S. office of a non-U.S. broker that is not a U.S. related
person will not be subject to information reporting or backup withholding. For
this purpose, a "U.S. related person" is (1) a "controlled foreign corporation"
for U.S. federal income tax purposes or (2) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment, or for such part of the period
that the broker has been in existence, is derived from activities that are
effectively connected with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
non-U.S. holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person, absent actual knowledge that
the payee is a U.S. person.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be allowed as a refund or a credit against such non-U.S.
holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general,
the final regulations do not significantly alter the substantive withholding
and information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 2000, subject to
certain transition rules. Non-U.S. holders should consult their own tax
advisors regarding the impact, if any, of the final regulations.
191
<PAGE>
[E] CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following general discussion summarizes certain of the material U.S.
federal income and estate tax aspects of the ownership and disposition of
common stock applicable to non-U.S. holders of common stock. In general, a
"non-U.S. holder" is a person other than:
(1) a citizen or resident of the United States,
(2) a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions,
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its sources or
(4) a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust.
The discussion is based upon the Internal Revenue Code of 1986, as amended,
regulations of the Treasury Department, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which are subject
to change (possibly on a retroactive basis). The discussion does not address
aspects of U.S. federal taxation other than income and estate taxation and does
not address all aspects of federal income and estate taxation. The discussion
does not consider any specific facts or circumstances that may apply to a
particular non-U.S. holder and does not address all aspects of U.S. federal
income tax law that may be relevant to non-U.S. holders that may be subject to
special treatment under such law, such as insurance companies, tax-exempt
organizations, financial institutions, broker-dealers or certain U.S.
expatriates.
Persons considering the purchase of common stock should consult their own
tax advisors concerning the application of U.S. federal income tax laws, as
well as the laws of any state, local or foreign taxing jurisdiction to their
particular situations.
Dividends
In general, the gross amount of dividends paid to a non-U.S. holder will be
subject to U.S. withholding tax at a 30% rate, or any lower rate prescribed by
an applicable tax treaty, unless the dividends are:
(1) effectively connected with a trade or business carried on by the non-
U.S. holder within the United States and a Form 4224 is filed with the
withholding agent or
(2) if a tax treaty applies, are attributable to a United States permanent
establishment of the non-U.S. holder.
If either exception applies, the dividend will be taxed at ordinary U.S.
federal income tax rates. A non-U.S. holder may be required to satisfy certain
certification requirements in order to claim the benefit of an applicable
treaty rate or otherwise claim a reduction of, or exemption from, the
withholding obligation under the above described rules. In the case of a non-
U.S. holder that is a corporation, effectively connected income may also be
subject to an additional branch profits tax, which is generally imposed on a
foreign corporation at a rate of 30% of the deemed repatriation from the United
States of "effectively connected earnings and profits" or such lower rate as an
applicable tax treaty may provide. To the extent a distribution exceeds our
current or accumulated earnings or profits, it will be treated first as a
return of the holder's basis, and then as a gain from the sale of a capital
asset. Any withholding tax on a distribution in excess of our accumulated
earnings or profits is refundable to the non-U.S. holder upon filing an
appropriate claim with the IRS.
192
<PAGE>
Disposition of Common Stock
Generally, a non-U.S. holder will not be subject to U.S. federal income tax
on any gain recognized upon the disposition of common stock unless:
(1) the gain is effectively connected with a trade or business carried on
by the non-U.S. holder within the United States, or, alternatively, if
a tax treaty applies, attributable to a United States permanent
establishment maintained by the non-U.S. holder, in which case such
gain will be subject to tax at the rates and in the manner applicable
to U.S. persons, and, if the holder is a foreign corporation, the
branch profits tax may also apply,
(2) the common stock is disposed of by an individual non-U.S. holder, who
holds the common stock as a capital asset and is present in the United
States for 183 days or more in the taxable year of the disposition and
certain other conditions are met, in which case such gain will be
subject to a flat 30% tax, which may be offset by United States source
capital losses even though the individual is not considered a resident
of the United States, or
(3) (A) we are or have been a "U.S. real property holding corporation"
within the meaning of Section 897(c)(2) of the Code at any time within
the shorter of the five-year period preceding such disposition or such
non-U.S. holder's holding period and (B) assuming that the common
stock is "regularly traded on an established securities market" for
U.S. federal income tax purposes, the non-U.S. holder held, directly
or indirectly, at any time during the applicable period from clause
(A) above, including on the date of disposition, more than 5% of the
outstanding common stock. We believe we became a U.S. real property
holding corporation in March 1999 as a result of the Bell Atlantic
joint venture.
Non-U.S. holders should consult applicable treaties, which may exempt from
U.S. taxation gains realized upon the disposition of common stock in certain
cases.
Estate Tax
Common stock owned, or treated as owned, by an individual non-U.S. holder
at the time of death will be includible in the individual's gross estate for
U.S. federal estate tax purposes, and may be subject to U.S. federal estate
tax, unless an applicable treaty provides otherwise.
Information Reporting and Backup Withholding
On October 6, 1997, the IRS issued final regulations relating to
withholding, information reporting and backup withholding that unify current
certification procedures and forms and clarify reliance standards. The final
regulations generally will be effective for payments made after December 31,
2000.
Except as provided below, this section describes rules applicable to
payments made on or before December 31, 2000. Backup withholding, which
generally is a withholding tax imposed at the rate of 31% on certain payments
to persons that fail to furnish the information required under the U.S.
information reporting and backup withholding rules, generally will not apply to
(1) dividends paid to non-U.S. holders that are subject to the 30% withholding
discussed above, or that are not so subject because a tax treaty applies that
reduces or eliminates such 30% withholding, or (2) dividends paid on the common
stock to a non-U.S. holder at an address outside the United States, unless the
payor has actual knowledge that the payee is a U.S. person. We will be required
to report annually to the IRS and to each non-U.S. holder the amount of
dividends paid to, and the tax withheld from, such holder, regardless of
whether any tax was actually withheld or whether withholding was required. This
information may also be made available to the tax authorities in the non-U.S.
holder's country of residence.
193
<PAGE>
In the case of a non-U.S. holder that sells common stock to or through a
U.S. office of a broker, the broker must backup withhold at a rate of 31% and
report the sale to the IRS, unless the holder certifies its non-U.S. status
under penalties of perjury or otherwise establishes an exemption. In the case
of a non-U.S. holder that sells common stock to or through the foreign office
of a U.S. broker, or a foreign broker with certain types of relationships to
the United States, the broker must report the sale to the IRS (but not backup
withhold) unless the broker has documentary evidence in its files that the
seller is a non-U.S. holder or certain other conditions are met, or the holder
otherwise establishes an exemption. A non-U.S. holder will generally not be
subject to information reporting or backup withholding if such non-U.S. holder
sells the common stock to or through a foreign office of a non-U.S. broker.
Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against the holder's U.S. federal income tax,
which may entitle the holder to a refund, provided that the holder furnishes
the required information to the IRS. In addition, certain penalties may be
imposed by the IRS on a holder who is required to supply information but does
not do so in the proper manner.
The final regulations eliminate the general, current legal presumption that
dividends paid to an address in a foreign country are paid to a resident of
that country. In addition, the final regulations impose certain certification
and documentation requirements on non-U.S. holders claiming the benefit, under
a tax treaty, of a reduced withholding rate on dividends.
Prospective purchasers of the common stock are urged to consult their own
tax advisors as to the effect, if any, of the final regulations on their
purchase, ownership and disposition of the common stock.
[D] LEGAL MATTERS
The legality of the notes offered hereby will be passed upon for us by
Cravath, Swaine & Moore, New York, New York. Certain legal matters in
connection with the offerings will be passed upon for the underwriters by
Latham & Watkins, New York, New York.
[E] LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Cravath, Swaine & Moore, New York, New York. Certain legal matters in
connection with the offerings will be passed upon for the underwriters by
Latham & Watkins, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements and schedule of CCIC at December 31,
1997 and 1998, and for each of the three years in the period ended December 31,
1998, 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
CTSH 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, 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.
194
<PAGE>
CERTAIN CURRENCY TRANSLATIONS
CTSH publishes its consolidated financial statements in pounds sterling.
For the convenience of the reader, this prospectus 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 on December 31, 1998, of (Pounds)1.00 = $1.6628. 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 May
6, 1999, the noon buying rate was (Pounds)1.00 = $1.6377.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and therefore we file reports and other information with the SEC.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the SEC at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC'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 SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such reports and other information concerning CCIC
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 SEC maintains an
Internet site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, including
CCIC, that file electronically with the SEC.
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.
195
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CROWN CASTLE INTERNATIONAL CORP.
Report of KPMG LLP, Independent Certified Public Accountants.............. F-2
Consolidated Balance Sheet as of December 31, 1997 and 1998............... F-3
Consolidated Statement of Operations and Comprehensive Loss for each of
the three years in the period ended December 31, 1998.................... F-4
Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1998........................................... F-5
Consolidated Statement of Stockholders' Equity (Deficit) for each of the
three years in the period ended December 31, 1998........................ F-6
Notes to Consolidated Financial Statements for each of the three years in
the period ended December 31, 1998....................................... F-7
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND THE BBC HOME SERVICE
TRANSMISSION BUSINESS
Report of KPMG, Chartered Accountants..................................... F-33
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-34
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-35
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-36
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-37
Notes to the Consolidated Financial Statements............................ F-38
BELL ATLANTIC MOBILE TOWER OPERATIONS
Report of KPMG LLP, Independent Certified Public Accountants.............. F-64
Statement of Net Assets as of December 31, 1998........................... F-65
Statements of Revenues and Direct Expenses for each of the two years in
the period ended December 31, 1998....................................... F-66
Notes to Financial Statements for each of the two years in the period
ended December 31, 1998.................................................. F-67
POWERTEL TOWER OPERATIONS
Report of KPMG LLP, Independent Certified Public Accountants.............. F-69
Statement of Net Assets as of December 31, 1998........................... F-70
Statement of Revenues and Direct Expenses for the year ended December 31,
1998..................................................................... F-71
Notes to Financial Statements for the year ended December 31, 1998........ F-72
</TABLE>
F-1
<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, 1997 and 1998,
and the related consolidated statements of operations and comprehensive loss,
cash flows and stockholders' equity (deficit) for each of the years in the
three-year period ended December 31, 1998. 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, 1997 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
Houston, Texas
February 24, 1999
F-2
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
ASSETS -------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 55,078 $ 296,450
Receivables:
Trade, net of allowance for doubtful accounts of $177
and $1,535 at December 31, 1997 and 1998,
respectively........................................ 9,264 32,130
Other................................................ 811 4,290
Inventories........................................... 1,322 6,599
Prepaid expenses and other current assets............. 681 2,647
-------- ----------
Total current assets................................. 67,156 342,116
Property and equipment, net............................. 81,968 592,594
Investments in affiliates............................... 59,082 2,258
Goodwill and other intangible assets, net of accumulated
amortization of $3,997 and $20,419 at December 31, 1997
and 1998, respectively................................. 152,541 569,740
Deferred financing costs and other assets, net of
accumulated amortization of $743 and $1,722 at December
31, 1997 and 1998, respectively........................ 10,644 16,522
-------- ----------
$371,391 $1,523,230
======== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable...................................... $ 7,760 $ 46,020
Accrued interest...................................... -- 15,677
Accrued compensation and related benefits............. 1,792 5,188
Deferred rental revenues and other accrued
liabilities.......................................... 2,398 26,002
-------- ----------
Total current liabilities............................ 11,950 92,887
Long-term debt.......................................... 156,293 429,710
Other liabilities....................................... 607 22,823
-------- ----------
Total liabilities.................................... 168,850 545,420
-------- ----------
Commitments and contingencies (Note 12)
Minority interests...................................... -- 39,185
Redeemable preferred stock, $.01 par value; 10,000,000
shares authorized:
12 3/4% Senior Exchangeable Preferred Stock; shares
issued: December 31, 1997--none and December 31,
1998--200,000 (stated at mandatory redemption and
aggregate liquidation value)......................... -- 201,063
Senior Convertible Preferred Stock; shares issued:
December 31, 1997--657,495 and December 31, 1998--
none (stated at redemption value; aggregate
liquidation value of $68,916)........................ 67,948 --
Series A Convertible Preferred Stock; shares issued:
December 31, 1997--1,383,333 and December 31, 1998--
none (stated at redemption and aggregate liquidation
value)............................................... 8,300 --
Series B Convertible Preferred Stock; shares issued:
December 31, 1997--864,568 and December 31,
1998--none (stated at redemption and aggregate
liquidation value)................................... 10,375 --
Series C Convertible Preferred Stock; shares issued:
December 31, 1997--3,529,832 and December 31, 1998--
none (stated at redemption and aggregate liquidation
value)............................................... 74,126 --
-------- ----------
Total redeemable preferred stock..................... 160,749 201,063
-------- ----------
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 December 31, 1998--none.......... 2 --
Class B Common Stock; shares issued: December 31,
1997--9,367,165 and December 31, 1998--none.......... 19 --
Common Stock; shares issued: December 31, 1997--none
and December 31, 1998--83,123,873.................... -- 831
Class A Common Stock; shares issued: December 31,
1997--none and December 31, 1998--11,340,000......... -- 113
Additional paid-in capital.............................. 58,248 795,153
Cumulative foreign currency translation adjustment...... 562 1,690
Accumulated deficit..................................... (17,039) (60,225)
-------- ----------
Total stockholders' equity........................... 41,792 737,562
-------- ----------
$371,391 $1,523,230
======== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1996 1997 1998
------ -------- --------
<S> <C> <C> <C>
Net revenues:
Site rental and broadcast transmission........... $5,615 $ 11,010 $ 75,028
Network services and other....................... 592 20,395 38,050
------ -------- --------
6,207 31,405 113,078
------ -------- --------
Operating expenses:
Costs of operations (exclusive of depreciation
and amortization):
Site rental and broadcast transmission......... 1,292 2,213 26,254
Network services and other..................... 8 13,137 21,564
General and administrative....................... 1,678 6,824 23,571
Corporate development............................ 1,324 5,731 4,625
Non-cash compensation charges.................... -- -- 12,758
Depreciation and amortization.................... 1,242 6,952 37,239
------ -------- --------
5,544 34,857 126,011
------ -------- --------
Operating income (loss)............................ 663 (3,452) (12,933)
Other income (expense):
Equity in earnings (losses) of unconsolidated
affiliate....................................... -- (1,138) 2,055
Interest and other income (expense).............. 193 1,951 4,220
Interest expense and amortization of deferred
financing costs................................. (1,803) (9,254) (29,089)
------ -------- --------
Loss before income taxes and minority interests.... (947) (11,893) (35,747)
Provision for income taxes......................... (10) (49) (374)
Minority interests................................. -- -- (1,654)
------ -------- --------
Net loss........................................... (957) (11,942) (37,775)
Dividends on preferred stock....................... -- (2,199) (5,411)
------ -------- --------
Net loss after deduction of dividends on preferred
stock............................................. $ (957) $(14,141) $(43,186)
====== ======== ========
Net loss........................................... $ (957) $(11,942) $(37,775)
Other comprehensive income:
Foreign currency translation adjustments......... -- 562 1,128
------ -------- --------
Comprehensive loss................................. $ (957) $(11,380) $(36,647)
====== ======== ========
Loss per common share--basic and diluted........... $(0.27) $ (2.27) $ (1.02)
====== ======== ========
Common shares outstanding--basic and diluted (in
thousands)........................................ 3,503 6,238 42,518
====== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (957) $(11,942) $(37,775)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization................... 1,242 6,952 37,239
Amortization of deferred financing costs and
discounts on long-term debt.................... 55 2,159 17,910
Non-cash compensation charges................... -- -- 12,758
Minority interests.............................. -- -- 1,654
Equity in losses (earnings) of unconsolidated
affiliate...................................... -- 1,138 (2,055)
Changes in assets and liabilities, excluding the
effects of acquisitions:
Increase in accounts payable................... 323 1,824 15,373
Increase (decrease) in deferred rental revenues
and other liabilities......................... 219 (240) 5,847
Increase (decrease) in accrued interest........ 306 (396) 5,835
Decrease (increase) in receivables............. (1,695) 1,353 (7,450)
Increase in inventories, prepaid expenses and
other assets.................................. (23) (1,472) (4,360)
------- -------- --------
Net cash provided by (used for) operating
activities................................... (530) (624) 44,976
------- -------- --------
Cash flows from investing activities:
Capital expenditures............................. (890) (18,035) (138,759)
Acquisitions of businesses, net of cash
acquired........................................ (10,925) (33,962) (10,489)
Investments in affiliates........................ (2,101) (59,487) --
------- -------- --------
Net cash used for investing activities........ (13,916) (111,484) (149,248)
------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of capital stock.......... 10,503 139,867 339,929
Net borrowings (payments) under revolving credit
agreements...................................... 11,000 (6,223) 9,212
Incurrence of financing costs.................... (180) (7,798) (3,010)
Purchase of capital stock........................ -- (2,132) (883)
Proceeds from issuance of long-term debt......... -- 150,010 --
Principal payments on long-term debt............. (130) (113,881) --
------- -------- --------
Net cash provided by financing activities..... 21,193 159,843 345,248
------- -------- --------
Effect of exchange rate changes on cash........... -- -- 396
------- -------- --------
Net increase in cash and cash equivalents......... 6,747 47,735 241,372
Cash and cash equivalents at beginning of year.... 596 7,343 55,078
------- -------- --------
Cash and cash equivalents at end of year.......... $ 7,343 $ 55,078 $296,450
======= ======== ========
Supplementary schedule of noncash 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
(see Note 2):
Fair value of net assets acquired, including
goodwill and other intangible assets........... 10,958 197,235 431,453
Issuance of common stock........................ -- 57,189 420,964
Issuance of long-term debt...................... -- 78,102 --
Assumption of long-term debt.................... -- 27,982 --
Amounts due to seller........................... 33 -- --
Supplemental disclosure of cash flow information:
Interest paid.................................... $ 1,442 $ 7,533 $ 6,276
Income taxes paid................................ -- 26 446
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock Common Stock Class A Common Stock Additional
---------------------- ---------------------- ---------------------- --------------------- Paid-In
Shares ($.01 Par) Shares ($.01 Par) Shares ($.01 Par) Shares ($.01 Par) Capital
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January
1, 1996.......... 1,350,000 $ 3 1,433,330 $ 3 -- $ -- -- $ -- $ 634
Issuances of
capital stock... -- -- 55,000 -- -- -- -- -- 128
Net loss........ -- -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ---------- ---- ---------- ---- --------
Balance, December
31, 1996......... 1,350,000 3 1,488,330 3 -- -- -- -- 762
Issuances of
capital stock... -- -- 8,228,835 17 -- -- -- -- 57,696
Purchase of
capital stock... (308,435) (1) (350,000) (1) -- -- -- -- (210)
Foreign currency
translation
adjustments..... -- -- -- -- -- -- -- -- --
Dividends on
preferred
stock........... -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ---------- ---- ---------- ---- --------
Balance, December
31, 1997......... 1,041,565 2 9,367,165 19 -- -- -- -- 58,248
Conversion of
preferred stock
to Common
Stock........... -- -- -- -- 38,517,865 385 -- -- 164,712
Conversion of
Class A Common
Stock and Class
B Common Stock
to Common
Stock........... (1,041,565) (2) (9,367,165) (19) 10,953,625 109 -- -- (88)
Issuances of
capital stock... -- -- -- -- 33,793,453 338 11,340,000 113 560,779
Purchase of
capital stock... -- -- -- -- (141,070) (1) -- -- (882)
Non-cash
compensation
charges......... -- -- -- -- -- -- -- -- 12,384
Foreign currency
translation
adjustments..... -- -- -- -- -- -- -- -- --
Dividends on
preferred
stock........... -- -- -- -- -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- --
---------- ---- ---------- ---- ---------- ---- ---------- ---- --------
Balance, December
31, 1998......... -- $ -- -- $ -- 83,123,873 $831 11,340,000 $113 $795,153
========== ==== ========== ==== ========== ==== ========== ==== ========
<CAPTION>
Cumulative
Foreign
Currency
Translation Accumulated
Adjustment Deficit Total
----------- ----------- ---------
<S> <C> <C> <C>
Balance, January
1, 1996.......... $ -- $ (21) $ 619
Issuances of
capital stock... -- -- 128
Net loss........ -- (957) (957)
----------- ----------- ---------
Balance, December
31, 1996......... -- (978) (210)
Issuances of
capital stock... -- -- 57,713
Purchase of
capital stock... -- (1,920) (2,132)
Foreign currency
translation
adjustments..... 562 -- 562
Dividends on
preferred
stock........... -- (2,199) (2,199)
Net loss........ -- (11,942) (11,942)
----------- ----------- ---------
Balance, December
31, 1997......... 562 (17,039) 41,792
Conversion of
preferred stock
to Common
Stock........... -- -- 165,097
Conversion of
Class A Common
Stock and Class
B Common Stock
to Common
Stock........... -- -- --
Issuances of
capital stock... -- -- 561,230
Purchase of
capital stock... -- -- (883)
Non-cash
compensation
charges......... -- -- 12,384
Foreign currency
translation
adjustments..... 1,128 -- 1,128
Dividends on
preferred
stock........... -- (5,411) (5,411)
Net loss........ -- (37,775) (37,775)
----------- ----------- ---------
Balance, December
31, 1998......... $1,690 $(60,225) $737,562
=========== =========== =========
</TABLE>
See notes to consolidated financial statements.
F-6
<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 majority and 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 owns, operates and manages wireless communications sites and
broadcast transmission networks. The Company also provides complementary
services to its customers, including network design, radio frequency
engineering, site acquisition, site development and construction, antenna
installation and network management and maintenance. The Company's
communications sites are located throughout the United States, in Puerto Rico
and in the United Kingdom. In the United States and Puerto Rico, the Company's
primary business is the leasing of antenna space to wireless operators under
long-term contracts. In the United Kingdom, the Company's primary business is
the operation of television and radio broadcast transmission networks; the
Company also leases antenna space to wireless operators in the United Kingdom.
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 an asset may not be
recoverable. SFAS 121 was
F-7
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. Broadcast
transmission revenues are recognized on a monthly basis under transmission
contracts with terms ranging from 8 years to 12 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 design, engineering, site acquisition, and
network management and maintenance 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.
F-8
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 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,
--------------------------
1996 1997 1998
------ -------- --------
(In thousands of
dollars,
except per share
amounts)
<S> <C> <C> <C>
Net loss........................................ $ (957) $(11,942) $(37,775)
Dividends on preferred stock.................... -- (2,199) (5,411)
------ -------- --------
Net loss applicable to common stock for basic
and diluted computations....................... $ (957) $(14,141) $(43,186)
====== ======== ========
Weighted-average number of common shares
outstanding during the period for basic and
diluted computations (in thousands)............ 3,503 6,238 42,518
====== ======== ========
Loss per common share--basic and diluted........ $(0.27) $ (2.27) $ (1.02)
====== ======== ========
</TABLE>
The calculations of common shares outstanding for the diluted computations
exclude the following potential common shares as of December 31, 1998: (i)
options to purchase 16,585,197 shares of common stock at exercise prices
ranging from $-0- to $17.625 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 Castle Transmission Services (Holdings) Ltd ("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 each of the three years
in the period ended December 31, 1998.
Foreign Currency Translation
CTI uses the British pound sterling as the functional currency for its
operations. The Company translates CTI's results of operations using the
average exchange rate for the period, and translates CTI's assets and
liabilities 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.
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 and the 9% Guaranteed
F-9
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Bonds is based on quoted market prices, and 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, 1997 December 31, 1998
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Cash and cash equivalents............ $ 55,078 $ 55,078 $296,450 $296,450
Long-term debt....................... (156,293) (161,575) (429,710) (443,379)
Interest rate swap agreement......... -- (97) -- (47)
</TABLE>
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 plans (see Note 9). 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 9 for the disclosures required by SFAS 123.
Recent Accounting Pronouncements
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 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 has adopted the requirements of SFAS 131 in its financial
statements for the year ended December 31, 1998 (see Note 13).
F-10
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
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 ending March 31,
1999; it is currently estimated that such charge will amount to approximately
$2,300,000.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"). SFAS 133 requires that derivative instruments be recognized as either
assets or liabilities in the consolidated balance sheet based on their fair
values. Changes in the fair values of such derivative instruments will be
recorded either in results of operations or in other comprehensive income,
depending on the intended use of the derivative instrument. The initial
application of SFAS 133 will be reported as the effect of a change in
accounting principle. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company will adopt the requirements of
SFAS 133 in its financial statements for the three months ending March 31,
2000. The Company has not yet determined the effect that the adoption of SFAS
133 will have on its consolidated financial statements.
2.Acquisitions
During the three years in the period ended December 31, 1998, 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.
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 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 $1,039,000 consisted of $1,006,000 in cash and
a $33,000 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 $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
F-11
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 8), 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
Castle Tower Corporation ("CTC," a wholly owned operating subsidiary) with and
into CCI, establishing CCI as the principal domestic operating subsidiary of
the Company.
CTI
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 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 9). The Company recognized goodwill of $344,204,000 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.
Pro Forma Results of Operations (Unaudited)
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
F-12
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
income and expenses recorded by the Company in connection with the investment
in CTI in 1997 (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,
--------------------------
1997 1998
------------ ------------
(In thousands of dollars,
except per share amounts)
<S> <C> <C>
Net revenues..................................... $ 180,936 $ 210,041
Net loss......................................... (34,601) (46,517)
Loss per common share--basic and diluted......... (0.60) (0.72)
</TABLE>
Agreement with Nextel Communications, Inc. ("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 and the
metropolitan areas of Denver, Colorado and Philadelphia, Pennsylvania. As of
February 24, 1999, the Company had purchased 49 of such towers for an aggregate
price of $11,019,000 in cash.
Millennium Communications Limited ("Millennium")
On October 8, 1998, the Company acquired all of the outstanding shares of
Millennium. 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. The purchase price of $14,473,000 consisted of $9,813,000 in cash, the
repayment of $2,396,000 in outstanding debt and 358,678 shares of the Company's
common stock valued at $2,264,000 (the market value of such common stock on
that date).
Agreement with Bell Atlantic Mobile ("BAM")
On December 8, 1998, the Company entered into an agreement with BAM to form
a joint venture ("Crown Atlantic") to own and operate a significant majority of
BAM's towers. Upon formation of Crown Atlantic (which is currently expected to
occur in March 1999), (i) the Company will contribute to Crown Atlantic
$250,000,000 in cash and approximately 15.6 million shares of its Common Stock
in exchange for a 62.3% ownership interest in Crown Atlantic, (ii) Crown
Atlantic will borrow $180,000,000 under a committed $250,000,000 revolving
credit facility, and (iii) BAM will contribute to Crown Atlantic approximately
1,427 towers in exchange for a cash distribution of $380,000,000 from Crown
Atlantic and a 37.7% ownership interest in Crown Atlantic. Upon dissolution of
Crown Atlantic, BAM would receive (i) the shares of the Company's Common Stock
contributed to Crown Atlantic and (ii) a payment (either in cash or in shares
of the Company's Common Stock, at the Company's election) equal to 14.0% of the
fair market value of Crown Atlantic's other net assets; the Company would then
receive the remaining assets and liabilities of Crown Atlantic. The Company
will account for its investment in Crown Atlantic as an acquisition using the
purchase method, and will include Crown Atlantic's results of operations and
cash flows in the Company's consolidated financial statements for periods
subsequent to formation.
F-13
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3.Property and Equipment
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
Estimated December 31,
Useful -----------------
Lives 1997 1998
---------- ------- --------
(In thousands of dollars)
<S> <C> <C> <C>
Land and buildings........................... 0-50 years $ 1,930 $ 58,767
Telecommunications towers and broadcast
transmission equipment...................... 5-20 years 76,847 532,907
Transportation and other equipment........... 3-10 years 4,379 11,452
Office furniture and equipment............... 5-7 years 3,664 12,248
------- --------
86,820 615,374
Less: accumulated depreciation............... (4,852) (22,780)
------- --------
$81,968 $592,594
======= ========
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1998 was
$2,886,000 and $20,638,000, respectively. Accumulated depreciation on
telecommunications towers and broadcast transmission equipment was $4,136,000
and $15,995,000 at December 31, 1997 and 1998, respectively. At December 31,
1998, minimum rentals receivable under existing operating leases for towers are
as follows: years ending December 31, 1999--$183,244,000; 2000--$187,311,000;
2001--$185,097,000; 2002--$179,641,000; 2003--$171,329,000; thereafter--
$667,731,000.
4.Investments in Affiliates
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 8) 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 accounted for its investment in CTI
utilizing the equity method of accounting prior to the consummation of the
share exchange agreement with CTI's shareholders in August 1998 (see Note 2).
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.
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.
F-14
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Summarized financial information for CTI is as follows (for periods in
which the Company accounted for CTI utilizing the equity method):
<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 Eight Months
December 31, Ended August
1997 31, 1998
------------ ------------
(In thousands of dollars)
<S> <C> <C>
Net revenues..................................... $103,531 $97,228
Operating expenses............................... 86,999 78,605
-------- -------
Operating income................................. 16,532 18,623
Interest and other income........................ 553 725
Interest expense and amortization of deferred
financing costs................................. (20,404) (13,378)
Provision for income taxes....................... -- --
-------- -------
Net income (loss)................................ $ (3,319) $ 5,970
======== =======
</TABLE>
5.Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
------------ ------------
(In thousands of dollars)
<S> <C> <C>
Senior Credit Facility........................... $ 4,700 $ 5,500
10 5/8% Senior Discount Notes due 2007, net of
discount........................................ 151,593 168,099
CTI Credit Facility.............................. -- 55,177
9% Guaranteed Bonds due 2007..................... -- 200,934
------------ ------------
$ 156,293 $ 429,710
============ ============
</TABLE>
Senior Credit Facility
CTC had a credit agreement with a bank (as amended, the "Bank Credit
Agreement") which 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
F-15
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 8), 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). In November 1997, 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). Upon the merger of CTC into CCI in January 1998, CCI became the primary
borrower under the Senior Credit Facility. In December 1998, the Company again
repaid all of the outstanding borrowings under the Senior Credit Facility with
a portion of the proceeds from the issuance of its 12 3/4% Senior Exchangeable
Preferred Stock (see Note 8). As of December 31, 1998, approximately
$77,570,000 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, 1998.
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 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
CCI and the Company's pledge of the capital stock of CCI and its subsidiaries.
In addition, the Senior Credit Facility is guaranteed by the Company.
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% (9.25% and 8.32%,
respectively, at December 31, 1998). 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, 1998, 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
F-16
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
certain indebtedness, including accrued interest thereon, from a prior
acquisition; 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 and $82,901,000 at
December 31, 1997 and 1998, respectively.
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 CTI Credit Facility and the CTI Bonds. 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, 1998, the Company was effectively precluded from paying dividends on its
capital stock under the terms of the Indenture.
Reporting Requirements Under the Indenture (Unaudited)
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.
F-17
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 9) 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>
December 31, 1998
----------------------------------------------------
Company and
Restricted Unrestricted Consolidation Consolidated
Subsidiaries Subsidiaries Eliminations Total
------------ ------------ ------------- ------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 41,785 $ 254,665 $ -- $ 296,450
Other current assets.... 19,585 26,081 -- 45,666
Property and equipment,
net.................... 165,205 427,389 -- 592,594
Investments in
Unrestricted
Subsidiaries........... 744,941 -- (744,941) --
Goodwill and other
intangible assets,
net.................... 143,729 426,011 -- 569,740
Other assets, net....... 15,440 3,340 -- 18,780
---------- ---------- --------- ----------
$1,130,685 $1,137,486 $(744,941) $1,523,230
========== ========== ========= ==========
Current liabilities..... $ 17,653 $ 75,234 $ -- $ 92,887
Long-term debt.......... 173,599 256,111 -- 429,710
Other liabilities....... 808 22,015 -- 22,823
Minority interests...... -- 39,185 -- 39,185
Redeemable preferred
stock.................. 201,063 -- -- 201,063
Stockholders' equity.... 737,562 744,941 (744,941) 737,562
---------- ---------- --------- ----------
$1,130,685 $1,137,486 $(744,941) $1,523,230
========== ========== ========= ==========
</TABLE>
F-18
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Three Months Ended December 31, 1998 Year Ended December 31, 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............ $ 17,030 $43,787 $60,817 $ 55,023 $58,055 $113,078
Costs of operations
(exclusive of
depreciation and
amortization).......... 7,069 18,117 25,186 23,446 24,372 47,818
General and
administrative......... 6,883 1,666 8,549 21,153 2,418 23,571
Corporate development... 1,787 -- 1,787 4,625 -- 4,625
Non-cash compensation
charges................ 523 874 1,397 9,907 2,851 12,758
Depreciation and
amortization........... 4,879 15,255 20,134 16,921 20,318 37,239
-------- ------- ------- -------- ------- --------
Operating income
(loss)................. (4,111) 7,875 3,764 (21,029) 8,096 (12,933)
Equity in earnings of
unconsolidated
affiliate.............. -- -- -- 2,055 -- 2,055
Interest and other
income (expense)....... (285) 2,212 1,927 1,101 3,119 4,220
Interest expense and
amortization of
deferred financing
costs.................. (5,823) (5,685) (11,508) (21,727) (7,362) (29,089)
Provision for income
taxes (156) -- (156) (374) -- (374)
Minority interests...... -- (1,326) (1,326) -- (1,654) (1,654)
-------- ------- ------- -------- ------- --------
Net income (loss)....... $(10,375) $ 3,076 $(7,299) $(39,974) $ 2,199 $(37,775)
======== ======= ======= ======== ======= ========
</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 December 31, 1998.... $ 3,868
========
Consolidated Cash Flow, for the twelve months ended December 31,
1998............................................................ $ 6,001
Less: Tower Cash Flow, for the twelve months ended December 31,
1998............................................................ (14,811)
Plus: four times Tower Cash Flow, for the three months ended
December 31, 1998............................................... 15,472
--------
Adjusted Consolidated Cash Flow, for the twelve months ended
December 31, 1998............................................... $ 6,662
========
</TABLE>
F-19
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CTI Credit Facility
CTI has a credit agreement with a syndicate of banks (as amended, the "CTI
Credit Facility") which consists of a (Pounds)64,000,000 (approximately
$106,419,000) secured revolving line of credit. Available borrowings under the
CTI Credit Facility are generally to be used to finance capital expenditures
and for working capital and general corporate purposes. As of December 31,
1998, approximately $51,243,000 of borrowings was available under the CTI
Credit Facility.
The loan commitment under the CTI Credit Facility will be automatically
reduced to zero in three equal semi-annual installments beginning on May 31,
2001 until May 31, 2002, when the CTI Credit Facility matures. Under certain
circumstances, CTI may be required to make principal prepayments from the
proceeds of certain asset sales.
The CTI Credit Facility is secured by substantially all of CTI's assets.
Borrowings under the CTI Credit Facility bear interest at a rate per annum
equal to a Eurodollar interbank offered rate (LIBOR) plus 0.85% (approximately
6.99% at December 31, 1998). Interest is due at the end of the period (from one
to six months) for which such LIBOR rate is in effect. The CTI Credit Facility
requires CTI to maintain certain financial covenants and places restrictions on
CTI'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.
9% Guaranteed Bonds due 2007 ("CTI Bonds")
CTI has issued (Pounds)125,000,000 (approximately $207,850,000) aggregate
principal amount of the CTI Bonds. Interest payments on the CTI Bonds are due
annually on each March 30. The maturity date of the CTI Bonds is March 30,
2007. The CTI Bonds are stated net of unamortized discount.
The CTI Bonds are redeemable, at the option of CTI, in whole or in part at
any time, at the greater of their principal amount and such a price as will
provide a gross redemption yield 0.5% per annum above the gross redemption
yield on the benchmark gilt plus, in either case, accrued and unpaid interest.
Under certain circumstances, each holder of the CTI Bonds has the right to
require CTI to repurchase all or a portion of such holder's CTI Bonds at a
price equal to 101% of their aggregate principal amount plus accrued and unpaid
interest.
The CTI Bonds are guaranteed by CTI; however, they are unsecured and
effectively subordinate to the outstanding borrowings under the CTI Credit
Facility. The trust deed governing the CTI Bonds places restrictions on CTI's
ability to, among other things, pay dividends and make capital distributions,
make investments, incur additional debt and liens, dispose of assets and
undertake transactions with affiliates.
Restricted Net Assets of Subsidiaries
Under the terms of the Senior Credit Facility, the CTI Credit Facility and
the CTI Bonds, the Company's subsidiaries are limited in the amount of
dividends which can be paid to the Company. For CCI, 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 Restricted Subsidiaries. CTI is effectively
precluded from paying dividends. The restricted net assets of the Company's
subsidiaries totaled approximately $826,321,000 at December 31, 1998.
Interest Rate Swap Agreement
The interest rate swap agreement had an outstanding notional amount of
$17,925,000 at January 29, 1997 (inception) and terminated on February 24,
1999. The Company paid a fixed rate
F-20
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of 6.28% on the notional amount and received a floating rate based on LIBOR.
This agreement effectively changed 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.
6.Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December
31,
------------------------
1996 1997 1998
----- ------- --------
(In thousands of
dollars)
<S> <C> <C> <C>
Current:
State.......................................... $ -- $ -- $ 365
Puerto Rico.................................... 10 49 9
----- ------- --------
$ 10 $ 49 $ 374
===== ======= ========
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:
<CAPTION>
Years Ended December
31,
------------------------
1996 1997 1998
----- ------- --------
(In thousands of
dollars)
<S> <C> <C> <C>
Benefit for income taxes at statutory rate....... $(322) $(4,044) $(12,154)
Stock-based compensation......................... -- -- 2,844
Amortization of intangible assets................ -- 478 604
State and foreign taxes, net of federal tax
benefit......................................... -- -- 247
Expenses for which no federal tax benefit was
recognized...................................... 5 28 151
Puerto Rico taxes................................ 10 49 9
Acquisition costs................................ -- -- (675)
Foreign earnings not subject to tax.............. -- -- (584)
Changes in valuation allowances.................. 315 3,650 9,944
Other............................................ 2 (112) (12)
----- ------- --------
$ 10 $ 49 $ 374
===== ======= ========
</TABLE>
F-21
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of the net deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
------------ -------------
(In thousands of dollars)
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment........................ $ 2,487 $ 6,045
Puerto Rico earnings.......................... 75 84
Intangible assets............................. 276 --
Other......................................... 38 --
------------ -------------
Total deferred income tax liabilities....... 2,876 6,129
------------ -------------
Deferred income tax assets:
Net operating loss carryforwards.............. 6,800 19,071
Noncompete agreement.......................... 37 464
Intangible assets............................. -- 351
Accrued liabilities........................... -- 68
Other......................................... -- 45
Receivables allowance......................... 6 41
Valuation allowances.......................... (3,967) (13,911)
------------ -------------
Total deferred income tax assets, net....... 2,876 6,129
------------ -------------
Net deferred income tax liabilities............. $ -- $ --
============ =============
</TABLE>
Valuation allowances of $3,967,000 and $13,911,000 were recognized to
offset net deferred income tax assets as of December 31, 1997 and 1998,
respectively.
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $56,000,000 which are available to offset future federal taxable
income. These loss carryforwards will expire in 2010 through 2018. The
utilization of the loss carryforwards is subject to certain limitations.
7.Minority Interests
Minority interests represent the minority stockholder's interest in CTI.
8.Redeemable Preferred Stock
Exchangeable Preferred Stock
On December 16, 1998, the Company issued 200,000 shares of its 12 3/4%
Senior Exchangeable Preferred Stock due 2010 (the "Exchangeable Preferred
Stock") at a price of $1,000 per share (the liquidation preference per share).
The net proceeds received by the Company from the sale of such shares amounted
to approximately $193,000,000 (after underwriting discounts of $7,000,000 but
before other expenses of the offering, which amounted to approximately
$8,059,000). A portion of the net proceeds was used to repay outstanding
borrowings under the Senior Credit Facility of $73,750,000, and the remaining
net proceeds are currently invested in short-term investments.
The holders of the Exchangeable Preferred Stock are entitled to receive
cumulative dividends at the rate of 12 3/4% per share, compounded quarterly on
each March 15, June 15, September 15 and
F-22
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 15 of each year, beginning on March 15, 1999. On or before December
15, 2003, the Company has the option to pay dividends in cash or in additional
shares of Exchangeable Preferred Stock. After December 15, 2003, dividends are
payable only in cash.
The Company is required to redeem all outstanding shares of Exchangeable
Preferred Stock on December 15, 2010 at a price equal to the liquidation
preference plus accumulated and unpaid dividends. On or after December 15,
2003, the shares are redeemable at the option of the Company, in whole or in
part, at a price of 106.375% of the liquidation preference. The redemption
price is reduced on an annual basis until December 15, 2007, at which time the
shares are redeemable at the liquidation preference. Prior to December 15,
2001, the Company may redeem up to 35% of the Exchangeable Preferred Stock, at
a price of 112.75% of the liquidation preference, with the net proceeds from
certain public equity offerings. The shares of Exchangeable Preferred Stock are
exchangeable, at the option of the Company, in whole but not in part, for 12
3/4% Senior Subordinated Exchange Debentures due 2010.
The Company's obligations with respect to the Exchangeable Preferred Stock
are subordinate to all indebtedness of the Company (including the Notes), and
are effectively subordinate to all debt and liabilities of the Company's
subsidiaries (including the Senior Credit Facility, the CTI Credit Facility and
the CTI Bonds). The certificate of designations governing the Exchangeable
Preferred Stock 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.
Senior 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 were entitled to receive
cumulative dividends at the rate of 12.5% per share, compounded annually. At
the option of the holder, each share of Senior Preferred Stock (plus any
accrued and unpaid dividends) was convertible, at any time, into shares of the
Company's 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 represented the estimated fair value of the common stock
on that date. In July 1998, all of the shares of Senior Preferred Stock were
converted into shares of common stock (see Note 9).
The purchasers of the Senior Preferred Stock were also issued warrants to
purchase an aggregate 1,314,990 shares of the Company's 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 represented the estimated fair value of the common stock on that date. As
such, the Company has not assigned any value to the warrants in its
consolidated financial statements.
F-23
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Series Preferred Stock
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") were
entitled to receive dividends, if and when declared, at the same rate as
dividends were declared and paid with respect to the Company's common stock.
Each of the outstanding shares of Series Preferred Stock was automatically
converted into five shares of common stock upon consummation of the Company's
initial public offering (see Note 9).
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).
9.Stockholders' Equity
Common Stock
On August 18, 1998, the Company consummated its initial public offering of
common stock at a price to the public of $13.00 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 amounted to approximately $4,116,000). 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 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.
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 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. In August 1998, the Company
repurchased, and subsequently retired, 141,070 shares of its common stock from
a former employee at a cost of approximately $883,000.
Class A Common Stock
Upon consummation of the share exchange agreement with CTI's shareholders
(see Note 2), an affiliate of CTI's remaining minority shareholder received all
of the currently outstanding shares of the Company's Class A Common Stock. Each
share of Class A Common Stock is convertible, at the
F-24
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
option of its holder at any time, into one share of Common Stock. The holder of
the Class A Common Stock is entitled to one vote per share on all matters
presented to a vote of the Company's shareholders, except with respect to the
election of directors. The holder of the Class A Common Stock, voting as a
separate class, has the right to elect up to two members of the Company's Board
of Directors. The shares of Class A Common Stock also provide certain
governance and anti-dilutive rights.
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 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 $18,400,000, of which approximately $10,600,000
was recognized upon consummation of the IPO (for such options and shares which
vested upon consummation of the IPO), and the remaining $7,800,000 is being
recognized over five years (approximately $1,600,000 per year) through the
second quarter of 2003. An additional $1,600,000 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.
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 18,000,000
shares of the Company's common stock were 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.
Upon consummation of the share exchange agreement with CTI's shareholders
(see Note 2), the Company adopted each of the various CTI stock option plans.
All outstanding options to purchase shares of CTI under such plans have been
converted into options to purchase shares of the Company's common stock. Up to
4,392,451 shares of the Company's common stock were reserved for awards granted
under the CTI plans, and these options generally vest over periods of up to
three years from the date of grant.
F-25
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of awards granted under the various stock option plans is as
follows for the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
1996 1997 1998
------------------- -------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year...... 825,000 $0.53 1,050,000 $0.89 3,694,375 $4.69
Options granted......... 225,000 2.22 3,042,500 5.46 9,024,720 10.02
Options outstanding
under CTI stock option
plans.................. -- -- -- -- 4,367,202 2.74
Options exercised....... -- -- (363,125) 0.53 (216,650) 4.89
Options forfeited....... -- -- (35,000) 1.20 (284,450) 5.72
--------- --------- ----------
Options outstanding at
end of year............ 1,050,000 0.89 3,694,375 4.69 16,585,197 7.06
========= ========= ==========
Options exercisable at
end of year............ 721,250 0.43 728,875 2.49 7,615,649 4.75
========= ========= ==========
</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. In
August 1998, certain outstanding options became fully or partially vested upon
consummation of the IPO. A summary of options outstanding as of December 31,
1998 is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Number of Remaining Number of
Exercise Options Contractual Options
Prices Outstanding Life Exercisable
-------- ----------- ----------- -----------
<S> <C> <C> <C>
$ -0- to $ 0.40 677,108 7.0 years 494,709
1.20 to 1.60 123,750 7.1 years 123,750
2.37 to 3.09 3,316,600 7.8 years 2,266,600
4.01 to 6.00 2,607,621 8.2 years 1,833,960
7.50 to 7.77 5,694,692 9.3 years 2,821,630
10.04 to 12.50 450,426 9.9 years --
13.00 3,590,000 9.6 years 75,000
17.63 125,000 10.0 years --
---------- ---------
16,585,197 9.1 years 7,615,649
========== =========
</TABLE>
F-26
<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, 1996, 1997 and 1998 was $0.50, $1.30 and $4.54, 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 was used prior to the IPO):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate..................... 6.4% 6.1% 5.38%
Expected life............................... 4.0 years 4.5 years 3.6 years
Expected volatility......................... 0% 0% 0% to 30%
Expected dividend yield..................... 0% 0% 0%
</TABLE>
The exercise prices for options granted during the years ended December
31, 1996 and 1997 were equal to or in excess of the estimated fair value of
the Company's common stock at the date of grant. As such, no compensation cost
was recognized for stock options during those years (see Note 1 and
"Compensation Charges Related to Stock Option Grants"). 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, 1996,
1997 and 1998 would have been $973,000 ($0.28 per share), $12,586,000 ($2.37
per share) and $75,660,000 ($1.91 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, 1998, the Company had the following shares reserved for
future issuance:
<TABLE>
<S> <C>
Common Stock:
Class A Common Stock........................................... 11,340,000
Shares of CTI stock which are convertible into common stock.... 17,443,500
Stock option plans............................................. 21,812,676
Warrants....................................................... 1,314,990
----------
51,911,166
==========
</TABLE>
10.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 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 and $197,000 for the years ended
December 31, 1997 and 1998, respectively.
CTI has a defined benefit plan which covers all of its employees hired on
or before March 1, 1997. Employees hired after that date are not eligible to
participate in this plan. The net periodic pension cost attributable to this
plan for the four months ended December 31, 1998 was $1,115,000. As of
December 31, 1998, (i) the accumulated benefit obligation under this plan
amounted to $13,635,000 (all of which was vested); (ii) the projected benefit
obligation amounted to $15,298,000; (iii) the fair value of the plan's assets
amounted to $15,848,000; and (iv) the prepaid pension cost attributable to
this plan amounted to $1,704,000.
F-27
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. 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 $50,000 and
$130,000 for the years ended December 31, 1996 and 1997, respectively.
Included in other receivables at December 31, 1997 and 1998 are amounts due
from employees of the Company totaling $499,000 and $368,000, respectively.
12. Commitments and Contingencies
At December 31, 1998, minimum rental commitments under operating leases are
as follows: years ending December 31, 1999--$19,721,000; 2000--$19,456,000;
2001--$19,298,000; 2002--$19,293,000; 2003--$18,996,000; thereafter--
$112,848,000. Rental expense for operating leases was $277,000, $1,712,000 and
$9,620,000 for the years ended December 31, 1996, 1997 and 1998, 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.
13. Operating Segments and Concentrations of Credit Risk
Operating Segments
The Company's reportable operating segments for 1998 are (i) the domestic
operations of CCI and (ii) the United Kingdom operations of CTI. Financial
results for the Company are reported to management and the Board of Directors
in this manner, and much of the Company's current debt financing is structured
along these geographic lines. In addition, the Company's financial performance
is evaluated by outside securities analysts based on these operating segments.
See Note 1 for a description of the primary revenue sources from these two
segments.
As discussed in Note 2, CTI's results of operations are included in the
Company's consolidated financial statements beginning in 1998. Prior to that
time, the domestic operations of CCI represented the Company's only reportable
segment.
F-28
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The measurement of profit or loss currently used to evaluate the results of
operations for the Company and its operating segments is earnings before
interest, taxes, depreciation and amortization ("EBITDA"). The Company defines
EBITDA as operating income (loss) plus depreciation and amortization and non-
cash compensation charges. EBITDA is not intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles), and the Company's measure of
EBITDA may not be comparable to similarly titled measures of other companies.
There are no significant revenues resulting from transactions between the
Company's operating segments. Total assets for the Company's operating segments
are determined based on the separate consolidated balance sheets for CCI and
CTI. The results of operations and financial position for CTI reflect
appropriate adjustments for their presentation in accordance with generally
accepted accounting principles in the United States. The financial results for
the Company's operating segments are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------------------
Corporate
Office Consolidated
CCI CTI and Other Total
-------- -------- --------- ------------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast
transmission.................... $ 22,541 $ 52,487 $ -- $ 75,028
Network services and other....... 31,471 5,568 1,011 38,050
-------- -------- -------- ----------
54,012 58,055 1,011 113,078
-------- -------- -------- ----------
Costs of operations (exclusive of
depreciation and amortization)... 23,076 24,372 370 47,818
General and administrative........ 17,929 2,418 3,224 23,571
Corporate development............. -- -- 4,625 4,625
-------- -------- -------- ----------
EBITDA............................ 13,007 31,265 (7,208) 37,064
Non-cash compensation charges..... 132 2,851 9,775 12,758
Depreciation and amortization..... 16,202 20,318 719 37,239
-------- -------- -------- ----------
Operating income (loss)........... (3,327) 8,096 (17,702) (12,933)
Equity in earnings of
unconsolidated affiliate -- -- 2,055 2,055
Interest and other income
(expense)........................ (253) 294 4,179 4,220
Interest expense and amortization
of deferred financing costs...... (4,476) (7,362) (17,251) (29,089)
Provision for income taxes........ (374) -- -- (374)
Minority interests................ -- (1,654) -- (1,654)
-------- -------- -------- ----------
Net loss.......................... $ (8,430) $ (626) $(28,719) $ (37,775)
======== ======== ======== ==========
Capital expenditures.............. $ 84,911 $ 50,224 $ 3,624 $ 138,759
======== ======== ======== ==========
Total assets (at year end)........ $332,555 $887,938 $302,737 $1,523,230
======== ======== ======== ==========
Investments in affiliates (at year
end)............................. $ -- $ -- $ 2,258 $ 2,258
======== ======== ======== ==========
</TABLE>
F-29
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1996 1997
------------------------------- ---------------------------------
Corporate Corporate
Office Consolidated Office Consolidated
CCI and Other Total CCI and Other Total
------- --------- ------------ -------- --------- ------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission......... $ 5,615 $ -- $ 5,615 $ 11,010 $ -- $ 11,010
Network services and
other................ 592 -- 592 20,066 329 20,395
------- ------- ------- -------- -------- --------
6,207 -- 6,207 31,076 329 31,405
------- ------- ------- -------- -------- --------
Costs of operations
(exclusive of
depreciation and
amortization).......... 1,300 -- 1,300 15,350 -- 15,350
General and
administrative......... 1,678 -- 1,678 6,675 149 6,824
Corporate development... 75 1,249 1,324 1,864 3,867 5,731
------- ------- ------- -------- -------- --------
EBITDA.................. 3,154 (1,249) 1,905 7,187 (3,687) 3,500
Depreciation and
amortization 1,242 -- 1,242 6,925 27 6,952
------- ------- ------- -------- -------- --------
Operating income
(loss)................. 1,912 (1,249) 663 262 (3,714) (3,452)
Equity in earnings
(losses) of
unconsolidated
affiliate.............. -- -- -- -- (1,138) (1,138)
Interest and other
income (expense)....... 22 171 193 (77) 2,028 1,951
Interest expense and
amortization of
deferred financing
costs.................. (1,803) -- (1,803) (4,660) (4,594) (9,254)
Credit (provision) for
income taxes........... (59) 49 (10) -- (49) (49)
------- ------- ------- -------- -------- --------
Net income (loss)....... $ 72 $(1,029) $ (957) $ (4,475) $ (7,467) $(11,942)
======= ======= ======= ======== ======== ========
Capital expenditures.... $ 890 $ -- $ 890 $ 17,200 $ 835 $ 18,035
======= ======= ======= ======== ======== ========
Total assets (at year
end)................... $250,911 $120,480 $371,391
======== ======== ========
Investments in
affiliates (at year
end)................... $ -- $ 59,082 $ 59,082
======== ======== ========
</TABLE>
F-30
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Geographic Information
A summary of net revenues by country, based on the location of the
Company's subsidiary, is as follows:
<TABLE>
<CAPTION>
Years Ended December
31,
-----------------------
1996 1997 1998
------ ------- --------
(In thousands of
dollars)
<S> <C> <C> <C>
United States.................................... $5,050 $29,076 $ 51,807
Puerto Rico...................................... 1,157 2,329 2,470
------ ------- --------
Total domestic operations...................... 6,207 31,405 54,277
------ ------- --------
United Kingdom................................... -- -- 58,055
Other foreign countries.......................... -- -- 746
------ ------- --------
Total for all foreign countries................ -- -- 58,801
------ ------- --------
$6,207 $31,405 $113,078
====== ======= ========
</TABLE>
A summary of long-lived assets by country of location is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1998
-------- ----------
(In thousands of
dollars)
<S> <C> <C>
United States........................................ $237,125 $ 310,953
Puerto Rico.......................................... 10,145 14,473
-------- ----------
Total domestic operations.......................... 247,270 325,426
-------- ----------
United Kingdom....................................... 56,965 855,560
Other foreign countries.............................. -- 128
-------- ----------
Total for all foreign countries.................... 56,965 855,688
-------- ----------
$304,235 $1,181,114
======== ==========
</TABLE>
Major Customers
For the years ended December 31, 1996, 1997 and 1998, CCI had revenues
from a single customer amounting to $2,634,000, $5,998,000 and
$14,168,000, respectively. For the year ended December 31, 1998,
consolidated net revenues includes $33,044,000 from a single customer of
CTI.
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 the
United Kingdom, 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.
F-31
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Quarterly Financial Information (Unaudited)
Summary quarterly financial information for the years ended December 31,
1997 and 1998 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>
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)
1998:
Net revenues................. $11,837 $11,530 $28,894 $60,817
Operating income (loss)...... (2,494) (2,197) (12,006) 3,764
Net loss..................... (6,606) (6,426) (17,444) (7,299)
Loss per common share--basic
and diluted................. (0.79) (0.78) (0.33) (0.09)
</TABLE>
15. Subsequent Events (Unaudited)
BellSouth Mobility Inc. and BellSouth Telecommunications Inc. ("BellSouth")
In March 1999, the Company entered into an agreement with BellSouth to
acquire the operating rights for approximately 1,850 of their towers. The
transaction is structured as a lease agreement and will be treated as a sale of
the towers for tax purposes. The Company will pay BellSouth consideration of
$610,000,000, consisting of $430,000,000 in cash and $180,000,000 in shares of
its common stock. The Company will account for this transaction as a purchase
of tower assets. The transaction is expected to close over a period of up to
eight months beginning in the second quarter of 1999. Upon entering into the
agreement, the Company placed $50,000,000 into an escrow account. In order to
fund this escrow deposit, the Company borrowed $45,000,000 under the Senior
Credit Facility.
Powertel, Inc. ("Powertel")
In March 1999, the Company entered into an agreement with Powertel to
purchase approximately 650 of their towers and related assets. The purchase
price for these towers will be $275,000,000 in cash. The Company will account
for this transaction as an acquisition using the purchase method. Upon entering
into the agreement, the Company placed $50,000,000 into an escrow account. The
Company funded this escrow deposit with borrowings under a $100,000,000 loan
agreement provided by a syndicate of investment banks. The remaining
$50,000,000 of borrowings under this loan agreement were used to repay the
amount drawn under the Senior Credit Facility in connection with the BellSouth
escrow deposit.
Proposed Securities Offerings
The Company intends to offer shares of its common stock and debt securities
in concurrent underwritten public offerings. The proceeds from such offerings
would be used to repay amounts drawn under the loan agreement in connection
with the BellSouth and Powertel transactions, and to pay the remaining purchase
price for such transactions. Any securities will only be offered by means of a
prospectus forming a part of a registration statement filed with the Securities
and Exchange Commission. There can be no assurance that such securities
offerings can be successfully completed.
F-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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
F-38
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 (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>
F-39
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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
F-40
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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>
F-41
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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-42
<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
machinery--rentals
payable 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-43
<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-44
<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-45
<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-46
<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-47
<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.
F-48
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-49
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-50
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-51
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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
F-52
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-53
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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-54
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THF 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>
F-55
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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>
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.
F-56
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-57
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THF BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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
F-58
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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-59
<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-60
<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) 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.
F-61
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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-62
<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
adjustment 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-63
<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 December 31, 1998, and the related statements of
revenues and direct expenses for each of the years in the two-year period ended
December 31, 1998. 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 December 31, 1998, and the related revenues and direct expenses for each of
the years in the two-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
March 4, 1998
F-64
<PAGE>
BELL ATLANTIC MOBILE
TOWER OPERATIONS
STATEMENT OF NET ASSETS
(In thousands of dollars)
December 31, 1998
<TABLE>
<S> <C>
Property and equipment, net............................................ $83,557
-------
Net Assets......................................................... $83,557
=======
</TABLE>
See notes to financial statements.
F-65
<PAGE>
BELL ATLANTIC MOBILE
TOWER OPERATIONS
STATEMENTS OF REVENUES AND DIRECT EXPENSES
(In thousands of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Site rental revenues............................... $ 6,480 $ 11,183
Costs of operations................................ 15,131 14,941
Depreciation and amortization...................... 7,221 6,278
------------ ------------
Loss from Tower Operations....................... $ (15,872) $ (10,036)
============ ============
</TABLE>
See notes to financial statements.
F-66
<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 $3,694 for the years ended December 31,
1997 and 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.
F-67
<PAGE>
BELL ATLANTIC MOBILE TOWER OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
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.
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 December 31,
1998 consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives
------------
<S> <C> <C>
Land..................................................... $ 21,798
Telecommunication towers and related equipment........... 12 years 97,035
--------
118,833
Less: accumulated depreciation........................... (35,276)
--------
$ 83,557
========
</TABLE>
3. Commitments
At December 31, 1998, minimum rental commitments under operating leases
are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1999................................................................... 12,235
2000................................................................... 10,200
2001................................................................... 8,118
2002................................................................... 5,512
2003................................................................... 2,762
</TABLE>
4. Site Rental Revenues
At December 31, 1998, minimum amounts receivable under third party lease
agreements are as follows:
<TABLE>
<S> <C>
Years ending December 31,
1999................................................................... 12,214
2000................................................................... 11,948
2001................................................................... 10,952
2002................................................................... 6,997
2003................................................................... 2,207
</TABLE>
F-68
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Crown Castle International Corp.
We have audited the accompanying statement of net assets of Powertel Tower
Operations as of December 31, 1998, and the related statement of revenues and
direct expenses 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 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 statement of net assets and the related
statement 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 statement 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 statement of revenues and direct expenses. We believe that our audits
provide 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 Powertel, Inc., the owner 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 Powertel Tower Operations as of December
31, 1998, and the related revenues and direct expenses for the year then ended
in conformity with generally accepted accounting principles.
KPMG LLP
February 5, 1999
F-69
<PAGE>
POWERTEL TOWER OPERATIONS
STATEMENT OF NET ASSETS
(In thousands of dollars)
DECEMBER 31, 1998
<TABLE>
<S> <C>
Prepaid expenses and other current assets............................. $ 2,031
Property and equipment, net........................................... 121,490
--------
Total assets........................................................ 123,521
Deferred revenues..................................................... 309
--------
Net assets.......................................................... $123,212
========
</TABLE>
See notes to financial statements.
F-70
<PAGE>
POWERTEL TOWER OPERATIONS
STATEMENT OF REVENUES AND DIRECT EXPENSES
(In thousands of dollars)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Site rental revenues................................................. $ 1,865
Cost of operations................................................... 6,167
Depreciation......................................................... 7,534
--------
Loss from tower operations......................................... $(11,836)
========
</TABLE>
See notes to financial statements.
F-71
<PAGE>
POWERTEL TOWER OPERATIONS
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
On March 15, 1999, Crown Castle International Corp. ("CCIC") and Powertel,
Inc. ("Powertel") entered into an asset purchase agreement, whereby Powertel
will sell tower structures and certain related assets to CCIC. The tower
structures and related assets consist of the tower facilities that were
previously part of Powertel's PCS and cellular operations. Their locations span
Atlanta, Georgia; Jacksonville, Florida; Memphis, Tennessee; Jackson,
Mississippi; and Birmingham, Alabama and certain areas in Kentucky and
Tennessee.
The accompanying statement of net assets reflects the assets to be sold by
Powertel to CCIC pursuant to the asset purchase agreement. The statement of net
assets reflects Powertel's historical carrying values of the tower assets,
adjusted to exclude certain assets which will not be contributed as part of the
asset purchase agreement.
The accompanying statement of revenues and direct expenses reflects
operations related to the tower assets to be sold by Powertel to CCIC per the
asset purchase agreement. The statement of revenues and direct expenses does
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 statement 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 Powertel'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
agreements. Site rental revenues represent charges for tower usage billed to
third party customers under lease arrangements. Revenue amounts received in
advance are deferred and recognized over the term of the lease agreement.
F-72
<PAGE>
POWERTEL 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 December 31,
1998 consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives
------------
<S> <C> <C>
Land..................................................... $ 859
Telecommunication towers and related equipment........... 15 years 134,757
--------
135,616
Less: accumulated depreciation .......................... (14,126)
--------
$121,490
========
</TABLE>
3. Commitments
At December 31, 1998, minimum rental commitments under operating leases
are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1999................................................................... $4,120
2000................................................................... 4,093
2001................................................................... 3,276
2002................................................................... 1,929
2003................................................................... 626
Thereafter............................................................. 185
</TABLE>
4. Site Rental Revenues
At December 31, 1998, minimum amounts receivable under third party lease
agreements are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1999................................................................... $2,690
2000................................................................... 2,677
2001................................................................... 2,610
2002................................................................... 2,131
2003................................................................... 948
Thereafter............................................................. 485
</TABLE>
F-73
<PAGE>
[D] UNDERWRITING
CCIC and the underwriters for the offering named below have entered into an
underwriting agreement with respect to the notes. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
notes indicated in the following table.
<TABLE>
<CAPTION>
Gross Proceeds
Principal Amount of Senior
Underwriters of Senior Notes Discount Notes
------------ ---------------- --------------
<S> <C> <C>
Goldman, Sachs & Co............................
Salomon Smith Barney Inc.......................
Lehman Brothers Inc............................
Credit Suisse First Boston Corporation.........
BancBoston Robertson Stephens Inc..............
McDonald Investments Inc., A KeyCorp Company...
------------ ------------
Total......................................... $150,000,000 $300,000,000
============ ============
</TABLE>
----------------
Notes sold by the underwriters to the public will initially be offered at
the initial public offering prices set forth on the cover of this prospectus.
Any notes sold by the underwriters to securities dealers may be sold at a
discount from the initial public offering price of up to % per note from the
initial public offering price. Any such securities dealers may resell any notes
purchased from the underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to % per note from the
initial public offering price. If all the notes are not sold at the initial
offering price, the underwriters may change the offering price and the other
selling terms.
The notes are a new issue of securities with no established trading market.
CCIC has been advised by the underwriters that the underwriters intend to make
a market in the notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the notes.
In connection with the offerings, the underwriters may purchase and sell
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time these transactions may be effected in the over-the-counter market or
otherwise.
Also, because a portion of the net proceeds to CCIC from the offerings will
be paid to affiliates of Goldman, Sachs & Co., Salomon Smith Barney Inc. and
Credit Suisse First Boston Corporation to repay the term loans, the offerings
are being conducted in accordance with Rule 2720 of the NASD. That rule
requires that the initial public offering price can be no higher than that
U-1
<PAGE>
recommended by a "qualified independent underwriter", as defined by the NASD.
Lehman Brothers Inc. has served in this capacity and performed due diligence
investigations and reviewed and participated in the preparation of the
registration statement of which this prospectus forms a part. Lehman Brothers
Inc. has not received any additional compensation for such role.
CCIC estimates that CCIC's share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $ .
CCIC has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
[E] UNDERWRITING
CCIC, the selling stockholders and the underwriters for the U.S. offering
named below have entered into an underwriting agreement with respect to the
shares being offered in the United States. Subject to certain conditions, each
U.S. underwriter has severally agreed to purchase the number of shares
indicated in the following table. Goldman, Sachs & Co. and Salomon Smith Barney
Inc. are the representatives of the U.S. underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co..........................................
Salomon Smith Barney Inc.....................................
Lehman Brothers Inc..........................................
Credit Suisse First Boston Corporation.......................
Legg Mason Wood Walker, Incorporated.........................
----------
Total...................................................... 22,160,000
==========
</TABLE>
----------------
If the U.S. underwriters sell more shares than the total number set forth
in the table above, the U.S. underwriters have an option to buy up to an
additional 3,298,043 shares from the selling stockholders to cover such sales.
They may exercise that option for 30 days. If any shares are purchased pursuant
to this option, the U.S. underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the U.S. underwriters by CCIC and the selling
stockholders. Such amounts are shown assuming both no exercise and full
exercise of the U.S. underwriters' option to purchase 3,298,043 additional
shares.
<TABLE>
<CAPTION>
Paid by CCIC
------------
No Exercise Full Exercise
--------------------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
<CAPTION>
Paid by the selling stockholders
--------------------------------
No Exercise Full Exercise
--------------------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
</TABLE>
Shares sold by the U.S. underwriters to the public will initially be
offered at the initial price to public set forth on the cover of this
prospectus. Any shares sold by the U.S. underwriters to securities dealers may
be sold at a discount of up to $ per share from the initial price to public.
Any such securities dealers may resell any shares purchased from the U.S.
underwriters to certain other brokers or dealers at a discount of up to $ per
share from the initial price to public. If all the shares are not sold at the
initial price to public, the representatives may change the price to public and
the other selling terms.
CCIC and the selling stockholders have entered into underwriting agreements
with the underwriters for the sale of 5,540,000 shares outside the United
States. The terms and conditions of both offerings are the same and the sale of
shares in both offerings are conditioned on each other. Goldman Sachs
International and Salomon Brothers International Limited are representatives of
the underwriters for the offering outside the United States.
U-1
<PAGE>
The underwriters for each of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters also have agreed that they may sell shares among each
of the underwriting groups.
CCIC and the selling stockholders have agreed with the underwriters not to
dispose of or hedge any of their common stock or securities convertible into or
exchangeable for shares of common stock during the period from the date of this
prospectus continuing through the date 90 days after the date of this
prospectus, except with the prior written consent of the representatives. This
agreement does not apply to any existing employee benefit plans. See "Shares
Available for Future Sale" for a discussion of certain transfer restrictions.
In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offerings are in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the in the
over-the-counter market or otherwise.
Also, because a portion of the net proceeds to CCIC from the offerings will
be paid to affiliates of Goldman, Sachs & Co., Salomon Smith Barney Inc. and
Credit Suisse First Boston Corporation to repay the term loans, the offerings
are being conducted in accordance with Rule 2720 of the NASD. That rule
requires that the initial price to public can be no higher than that
recommended by a "qualified independent underwriter", as defined by the NASD.
Lehman Brothers Inc. has served in this capacity and performed due diligence
investigations and reviewed and participated in the preparation of the
registration statement of which this prospectus forms a part. Lehman Brothers
Inc. has not received any additional compensation for such role.
CCIC and the selling stockholders estimate that their shares of the total
expenses of the offerings, excluding underwriting discounts and commissions,
will be approximately $ and $ , respectively.
CCIC and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
U-2
<PAGE>
[E] UNDERWRITING
CCIC, the selling stockholders and the underwriters for the international
offering named below have entered into an underwriting agreement with respect
to the shares being offered outside the United States. Subject to certain
conditions, each international underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman Sachs International
and Salomon Brothers International Limited are the representatives of the
international underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman Sachs International...................................
Salomon Brothers International Limited........................
Lehman Brothers International (Europe)........................
Credit Suisse First Boston (Europe) Limited...................
Legg Mason Wood Walker Incorporated...........................
---------
Total........................................................ 5,540,000
=========
</TABLE>
----------------
If the international underwriters sell more shares than the total number
set forth in the table above, the international underwriters have an option to
buy up to an additional 824,119 shares from the selling stockholders to cover
such sales. They may exercise that option for 30 days. If any shares are
purchased pursuant to this option, the international underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the international underwriters by CCIC and the
selling stockholders. Such amounts are shown assuming both no exercise and full
exercise of the international underwriters' option to purchase 824,119
additional shares.
<TABLE>
<CAPTION>
Paid by CCIC
------------
No Exercise Full Exercise
--------------------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
<CAPTION>
Paid by the selling stockholders
--------------------------------
No Exercise Full Exercise
--------------------------------
<S> <C> <C>
Per Share.............................. $ $
Total.................................. $ $
</TABLE>
Shares sold by the international underwriters to the public will initially
be offered at the initial price to public set forth on the cover of this
prospectus. Any shares sold by the international Underwriters to securities
dealers may be sold at a discount of up to $ per share from the initial
price to public. Any such securities dealers may resell any shares purchased
from the international underwriters to certain other brokers or dealers at a
discount of up to $ per share from the initial price to public. If all the
shares are not sold at the initial price to public, the representatives may
change the price to public and the other selling terms.
CCIC and the selling stockholders have entered into underwriting agreements
with the underwriters for the sale of 22,160,000 shares in the United States.
The terms and conditions of both offerings are the same and the sale of shares
in both offerings are conditioned on each other. [International Prospectus]
U-1
<PAGE>
Goldman, Sachs & Co. and Salomon Smith Barney Inc. are representatives of the
underwriters for the offering in the United States.
The underwriters for each of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters also have agreed that they may sell shares among each
of the underwriting groups.
CCIC and the selling stockholders have agreed with the underwriters not to
dispose of or hedge any of their common stock or securities convertible into or
exchangeable for shares of common stock during the period from the date of this
prospectus continuing through the date 90 days after the date of this
prospectus, except with the prior written consent of the representatives. This
agreement does not apply to any existing employee benefit plans. See "Shares
Available for Future Sale" for a discussion of certain transfer restrictions.
In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offerings are in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the in the
over-the-counter market or otherwise.
CCIC and the selling stockholders estimate that their shares of the total
expenses of the offerings, excluding underwriting discounts and commissions,
will be approximately $ and $ , respectively.
CCIC and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the notes offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 30
[E] Price Range of Common Stock.......................................... 30
[E] Dividend Policy...................................................... 31
[E] Dilution............................................................. 32
Capitalization........................................................... 33
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 34
Selected Financial and Other Data of CCIC................................ 44
Selected Financial and Other Data of CTSH................................ 46
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 48
Industry Background...................................................... 64
Business................................................................. 72
Recent and Proposed Transactions......................................... 97
Management............................................................... 107
Certain Relationships and Related Transactions........................... 119
Principal and Selling Stockholders....................................... 128
Description of Capital Stock............................................. 133
Description of Certain Indebtedness...................................... 141
[D] Description of the Notes............................................. 149
[E] Shares Eligible for Future Sale...................................... 185
[D] Certain U.S. Federal Income Tax Considerations....................... 187
[E] Certain U.S. Federal Income tax Considerations to Non U.S. Holders... 192
[D] Legal Matters........................................................ 194
[E] Legal Matters........................................................ 194
Independent Auditors..................................................... 194
Certain Currency Translations............................................ 195
Available Information.................................................... 195
Index to Financial Statements............................................ F-1
[D] Underwriting......................................................... U-1
[E] Underwriting......................................................... U-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[D]
Crown Castle
International Corp.
$150,000,000
% Senior Notes due 2011
$300,000,000 (Gross Proceeds)
% Senior Discount Notes due 2011
------------
[CROWN CASTLE LOGO APPEARS HERE]
------------
Goldman, Sachs & Co.
Salomon Smith Barney
Lehman Brothers
Credit Suisse First Boston
BancBoston Robertson Stephens
McDonald Investments Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 30
[E] Price Range of Common Stock.......................................... 30
[E] Dividend Policy...................................................... 31
[E] Dilution............................................................. 32
Capitalization........................................................... 33
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 34
Selected Financial and Other Data of CCIC................................ 44
Selected Financial and Other Data of CTSH................................ 46
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 48
Industry Background...................................................... 64
Business................................................................. 72
Recent and Proposed Transactions......................................... 97
Management............................................................... 107
Certain Relationships and Related Transactions........................... 119
Principal and Selling Stockholders....................................... 128
Description of Capital Stock............................................. 133
Description of Certain Indebtedness...................................... 141
Description of the Notes................................................. 149
[E] Shares Eligible for Future Sale...................................... 185
Certain U.S. Federal Income Tax Considerations........................... 187
[E] Certain U.S. Federal Income Tax Considerations to Non-U.S. Holders... 192
Legal Matters............................................................ 194
[E] Legal Matters........................................................ 194
Independent Auditors..................................................... 194
Certain Currency Translations............................................ 195
Available Information.................................................... 195
Index to Financial Statements............................................ F-1
[D] Underwriting......................................................... U-1
[E] Underwriting......................................................... U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[E] 27,700,000 Shares
Crown Castle
International Corp.
Common Stock
------------
[CROWN CASTLE LOGO APPEARS HERE]
------------
Goldman, Sachs & Co.
Salomon Smith Barney
Lehman Brothers
Credit Suisse First Boston
Legg Mason Wood Walker
Incorporated
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 30
[E] Price Range of Common Stock.......................................... 30
[E] Dividend Policy...................................................... 31
[E] Dilution............................................................. 32
Capitalization........................................................... 33
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 34
Selected Financial and Other Data of CCIC................................ 44
Selected Financial and Other Data of CTSH................................ 46
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 48
Industry Background...................................................... 64
Business................................................................. 72
Recent and Proposed Transactions......................................... 97
Management............................................................... 107
Certain Relationships and Related Transactions........................... 119
Principal and Selling Stockholders....................................... 128
Description of Capital Stock............................................. 133
Description of Certain Indebtedness...................................... 141
[D] Description of the Notes............................................. 149
[E] Shares Eligible for Future Sale...................................... 185
[D] Certain U.S. Federal Income Tax Considerations....................... 187
[E] Certain U.S. Federal Income Tax Considerations to Non-U.S. Holders... 192
[D] Legal Matters........................................................ 194
[E] Legal Matters........................................................ 194
Independent Auditors..................................................... 194
Certain Currency Translations............................................ 195
Available Information.................................................... 195
Index to Financial Statements............................................ F-1
[D] Underwriting......................................................... U-1
[E] Underwriting......................................................... U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[International Prospectus]
[E] 27,700,000 Shares
Crown Castle
International Corp.
Common Stock
-----------
[CROWN CASTLE LOGO APPEARS HERE]
-----------
Goldman Sachs International
Salomon Smith Barney International
Lehman Brothers
Credit Suisse First Boston
Legg Mason Wood Walker
Incorporated
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Set forth below is a table of the registration fee for the Securities and
Exchange Commission, the filing fee for the National Association of Securities
Dealers, Inc., the listing fee for the Nasdaq Stock Market and estimates of all
other expenses to be incurred in connection with the issuance and distribution
of the securities described in the Registration Statement, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee........................................... $ 291,528
NASD filing fee................................................ 30,500
Nasdaq listing fee............................................. 17,500
Printing and engraving expenses................................ 1,200,000
Legal fees and expenses........................................ 1,200,000
Accounting fees and expenses................................... 450,000
Transfer agent and registrar fees.............................. 6,000
Miscellaneous.................................................. 304,472
----------
Total........................................................ $3,500,000
==========
</TABLE>
Item 14. 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 attorneys' 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
which 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
(Exhibit 3.1) provides 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 of 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. However, 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
II-1
<PAGE>
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
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.
II-2
<PAGE>
Item 15. Recent Sales of Unregistered Securities
In each of the sales described below, unless otherwise indicated, the
Company (or the relevant predecessor) relied on Section 4(2) of the Securities
Act of 1933 for exemption from registration. No brokers or underwriters were
used in connection with any of such sales. The recipients of securities in each
such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates, warrants and notes issued in such transactions. All recipients
had adequate access, through their relationship with the Company, to
information about the Company.
Through May 31, 1998, the Company had raised approximately $367.0 million
through private sales of debt and equity securities in a series of private
placements with various institutional and other accredited investors and
certain employees of the Company as described below.
CTC Investment. On January 11, 1995, CTC, a predecessor to CCIC, sold (i)
to Ted B. Miller, Jr. and Edward C. Hutcheson, Jr. (collectively, the "Initial
Stockholders") 1,350,000 shares of Class A Common Stock, par value $.01 per
share, of CTC for $270,000 and (ii) to Centennial Fund IV, Berkshire Fund III,
A Limited Partnership (via Berkshire Fund III Investment Corp.) and certain
trusts and natural persons that are now members of Berkshire Investors LLC
(collectively, the "Berkshire Fund III Group") and J. Landis Martin
(collectively, the "CTC Purchasers"), (A) 1,350,000 shares of Class B Common
Stock, par value $.01 per share, of CTC for $270,000, (B) 730,380 shares of
Series A Convertible Preferred Stock, par value $.01 per share, of CTC for
$4,382,280 and (C) $3,867,720 principal amount of Convertible Secured
Subordinated Notes of CTC (the "CTC Notes") for $3,867,720. As of February
1997, all the CTC Notes had been converted into 644,620 shares of Series A
Convertible Preferred Stock of the Company. The proceeds received on January
11, 1995 were used by CTC 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 Notes, (ii) Berkshire Fund III Group and
J. Landis Martin converting all remaining CTC 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 five shares of similar stock of CCIC and (iv) the remaining CTC
Notes ($3,125,268 principal amount) becoming convertible into shares of Series
A Convertible Preferred Stock (all of which CTC 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, Centennial Fund IV received 1,080,000 shares of common stock and 145,789
shares of Series A Preferred Stock, Mr. Martin received 41,666 shares of Series
A Preferred Stock and Berkshire Fund III Group received 270,000 shares of
common stock and 666,667 shares of Series A 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 Investors Investment. 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
II-3
<PAGE>
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.
Berkshire Fund IV Investment. 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
Investors" and, together with Centennial Fund IV, the "Centennial Group"),
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" and, together with Nassau Capital, the "Nassau Group"), 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.
Hutcheson Investment. 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.
TEA Investment. 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.
Crown Investment. 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 partial consideration for these transactions,
the Crowns received 7,325,000 shares of common stock. Robert A. Crown and
Barbara Crown are both parties to the Stockholders Agreement and are subject to
its restrictions.
AHA Investment. 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 shares 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.
II-4
<PAGE>
Harvard Investment. 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 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.
Employee Purchases. On October 30, 1995, in connection with an employment
agreement, an employee of the Company purchased 83,330 shares of common stock
from the Company at $1.20 per share. On October 1, 1996, David L. Ivy purchased
50,000 shares of common stock from the Company at $2.40 per share. On February
3, 1997, John L. Gwyn purchased 2,500 shares of common stock from the Company
at $4.20 per share. On June 12, 1997, an employee of the Company purchased
2,500 shares of common stock from the Company at $4.20 per share.
Payment of Consultants. On January 28, 1998, in connection with the
provision of consulting services to the Company, the Company issued to two
consultants options exercisable for an aggregate of 23,135 shares of common
stock at an exercise price of $4.76 per share. On June 30, 1998, in connection
with the provision of consulting services to the Company, the Company issued to
two consultants an aggregate of 30,425 shares of common stock at a valuation of
$7.50 per share.
Option Exercises. On July 30, 1997, Robert F. McKenzie, a director of the
Company, exercised options for 6,250 shares of common stock at an exercise
price of $1.20 per share and on August 8, 1997, exercised options for 11,875
shares of common stock at an exercise price of $4.20 per share.
10 5/8% Senior Discount Notes due 2007. On November 25, 1997, the Company
privately placed under Rule 144A and Regulation S of the Securities Act $251.0
million principal amount at maturity ($150,010,150 initial accreted value) of
its 10 5/8% Senior Discount Notes due 2007, yielding net proceeds to the
Company of approximately $143.7 million after deducting discounts and estimated
fees and expenses. Lehman Brothers Inc. and Credit Suisse First Boston
Corporation were the initial purchasers of such securities.
Roll-Up. On August 21, 1998, we consummated a share exchange with certain
shareholders of CTI, which increased our ownership of CTI from approximately
34.3% to 80.0%. We issued 20,867,700 shares of our common and 11,340,000 shares
of our 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).
12 3/4% Senior Exchangeable Preferred Stock due 2010. 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. Lehman Brothers,
Salomon Smith Barney and Goldman, Sachs & Co. were the initial purchasers of
such securities.
II-5
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
1.1 Form of Equity Underwriting Agreement
1.2 Form of International Equity Underwriting Agreement
1.3 Form of Debt Underwriting Agreement
**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.
****3.2 Amended and Restated By-laws of Crown Castle International Corp.
****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 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 through 3.5)
**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)
4.8 Form of Indenture for Senior Notes
4.9 Form of Indenture for Senior Discount Notes
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
5.1 Opinion of Cravath, Swaine & Moore with respect to the validity of
the common stock being offered
5.2 Opinion of Cravath, Swaine & Moore with respect to the legality of
the notes being offered
**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
**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
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
**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 as amended by Amendment No. 1, dated as of the 12th
day of November, 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, Blake Hawk 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.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
****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 dated December 8, 1998 relating to the
formation of Crown Atlantic Company LLC, Crown Atlantic Holding
Sub LLC, and Crown Atlantic Holding Company LLC
******10.58 Letter of Agreement between Crown Castle International Corp. and
BellSouth Mobility Inc. dated March 5, 1999 (including the Form
of Sublease)
*******10.59 Asset Purchase Agreement among Crown Castle International Corp.,
CCP Inc., Powertel Atlanta Towers, LLC, Powertel Birmingham
Towers, LLC, Powertel Jacksonville Towers, LLC, Powertel Kentucky
Towers, LLC, Powertel Memphis Towers, LLC and Powertel, Inc.
dated March 15, 1999
****10.60 Framework Agreement between One2One and Castle Transmission
International Ltd. dated March 5, 1999
****10.61 Indenture between Crown Castle International Corp. and United
States Trust Company of New York dated March 15, 1999
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
****10.62 Registration Rights Agreement among Crown Castle International
Corp. and Goldman Sachs Credit Partners LP, Salomon Brothers
Holding Company Inc. and Credit Suisse First Boston dated March
15, 1999
****10.63 Escrow Agreement among Crown Castle International Corp., Goldman
Sachs Credit Partners LP, Salomon Brothers Holding Company Inc.,
Credit Suisse First Boston and United States Trust Company of
New York dated March 15, 1999
****10.64 Term Loan Agreement among Crown Castle International Corp. and
Goldman Sachs Credit Partners LP, Salomon Brothers Holding
Company Inc. and Credit Suisse First Boston dated March 15, 1999
********10.65 Amendment Number 1 to Formation Agreement dated March 31, 1999
among Crown Castle International Corp., Cellco Partnership,
doing business as Bell Atlantic Mobile, certain Transferring
Partnerships and CCA Investment Corp.
********10.66 Crown Atlantic Company LLC Operating Agreement entered into as
of March 31, 1999 by and between Cellco Partnership, doing
business as Bell Atlantic Mobile, and Crown Atlantic Holding Sub
LLC
********10.67 Amendment No. 1 to Rights Agreement dated March 31, 1999,
between Crown Castle International Corp. and ChaseMellon
Shareholder Services L.L.C.
********10.68 Global Lease Agreement dated March 31, 1999 between Crown
Atlantic Company LLC and Cellco Partnership, doing business as
Bell Atlantic Mobile
********10.69 Master Build to Suit Agreement dated March 31, 1999 between
Cellco Partnership, doing business as Bell Atlantic Mobile, and
Crown Atlantic Company LLC
********10.70 Loan Agreement dated as of March 31, 1999 by and among Crown
Atlantic HoldCo Sub LLC, as the Borrower, Key Corporate Capital
Inc., as Agent, and the Financial Institutions listed therein
+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 Consents of Cravath, Swaine & Moore (included in Exhibits 5.1
and 5.2)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New
York, as Trustee, on Form T-1, in connection with the senior
notes offering
25.2 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New
York, as Trustee, on Form T-1, in connection with the senior
discount notes offering
****27.1 Financial Data Schedule
</TABLE>
- --------
+ Previously filed.
* 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).
II-10
<PAGE>
**** 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. 333-71715).
***** Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated December 9,
1998.
****** Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated March 8, 1999.
******* Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated March 15,
1999.
******** Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated March 31, 1999
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 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, 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 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 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 and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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-11
<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 7th day of May, 1999.
CROWN CASTLE INTERNATIONAL CORP.,
/s/ Charles C. Green, III
by
-----------------------------------
Name: Charles C. Green, III
Title: Executive Vice President
and Chief Financial Officer
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 7th day of May, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Executive Officer and Vice
______________________________________ Chairman of the Board (Principal
Ted B. Miller, Jr. Executive Officer)
* President and Director
______________________________________
David L. Ivy
/s/ Charles C. Green, III Executive Vice President and Chief
______________________________________ Financial Officer (Principal
Charles C. Green, III Financial Officer)
* Senior Vice President, Chief
______________________________________ Accounting Officer and Corporate
Wesley D. Cunningham Controller (Principal Accounting
Officer)
* Chairman of the Board
______________________________________
Carl Ferenbach
* Director
______________________________________
Michel Azibert
* Director
______________________________________
Bruno Chetaille
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Director
______________________________________
Robert A. Crown
* Director
______________________________________
Randall A. Hack
* Director
______________________________________
Robert F. McKenzie
* Director
______________________________________
William A. Murphy
* Director
______________________________________
Jeffrey H. Schutz
/s/ Charles C. Green, III
______________________________________
*Charles C. Green, III
Attorney-in-Fact
</TABLE>
II-13
<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,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 53,092 $ 37,907
Receivables and other current assets................... 424 957
Advances to subsidiaries, net.......................... 2,611 13,711
--------- ----------
Total current assets................................. 56,127 52,575
Property and equipment, net of accumulated depreciation
of $27 and $875 at December 31, 1997 and 1998,
respectively........................................... 808 4,255
Investment in subsidiaries.............................. 232,229 1,041,788
Investments in affiliates............................... 59,082 2,258
Deferred financing costs and other assets, net of
accumulated amortization of $69 and $814 at December
31, 1997 and 1998, respectively........................ 7,075 7,227
--------- ----------
$ 355,321 $1,108,103
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities......... $ 1,187 $ 1,379
--------- ----------
Total current liabilities............................ 1,187 1,379
Long-term debt.......................................... 151,593 168,099
--------- ----------
Total liabilities.................................... 152,780 169,478
--------- ----------
Redeemable preferred stock, $.01 par value; 10,000,000
shares authorized:
12 3/4% Senior Exchangeable Preferred Stock; shares
issued: December 31, 1997--none and December 31,
1998--200,000 (stated at mandatory redemption and
aggregate liquidation value).......................... -- 201,063
Senior Convertible Preferred Stock; shares issued:
December 31, 1997--657,495 and
December 31, 1998--none (stated at redemption value;
aggregate liquidation value of $68,916)............... 67,948 --
Series A Convertible Preferred Stock; shares issued:
December 31, 1997--1,383,333 and December 31, 1998--
none (stated at redemption and aggregate liquidation
value)................................................ 8,300 --
Series B Convertible Preferred Stock; shares issued:
December 31, 1997--864,568 and December 31, 1998--none
(stated at redemption and aggregate liquidation
value)................................................ 10,375 --
Series C Convertible Preferred Stock; shares issued:
December 31, 1997--3,529,832 and December 31, 1998--
none (stated at redemption and aggregate liquidation
value)................................................ 74,126 --
--------- ----------
Total redeemable preferred stock................... 160,749 201,063
--------- ----------
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 December 31, 1998--none........... 2 --
Class B Common Stock; shares issued: December 31,
1997--9,367,165 and December 31, 1998--none........... 19 --
Common Stock; shares issued: December 31, 1997--none
and December 31, 1998--83,123,873..................... -- 831
Class A Common Stock; shares issued: December 31,
1997--none and December 31, 1998--11,340,000.......... -- 113
Additional paid-in capital............................. 58,248 795,153
Cumulative foreign currency translation adjustment..... 562 1,690
Accumulated deficit.................................... (17,039) (60,225)
--------- ----------
Total stockholders' equity........................... 41,792 737,562
--------- ----------
$ 355,321 $1,108,103
========= ==========
</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,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Other revenues.................................... $ -- $ 329 $ 399
Interest and other income......................... 171 2,028 1,354
General and administrative expenses............... -- (149) (2,975)
Corporate development expenses.................... (1,249) (3,867) (4,404)
Non-cash compensation charges..................... -- -- (9,775)
Depreciation and amortization..................... -- (27) (720)
Interest expense and amortization of deferred
financing costs.................................. -- (4,594) (17,251)
------- -------- --------
Loss before income taxes and equity in earnings
(losses) of subsidiaries and unconsolidated
affiliate........................................ (1,078) (6,280) (33,372)
Credit (provision) for income taxes............... 49 (49) --
Equity in earnings (losses) of subsidiaries....... 72 (4,475) (6,458)
Equity in earnings (losses) of unconsolidated
affiliate........................................ -- (1,138) 2,055
------- -------- --------
Net loss.......................................... (957) (11,942) (37,775)
Dividends on preferred stock...................... -- (2,199) (5,411)
------- -------- --------
Net loss after deduction of dividends on preferred
stock............................................ $ (957) $(14,141) $(43,186)
======= ======== ========
</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,
--------------------------
1996 1997 1998
------ -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (957) $(11,942) $(37,775)
Adjustments to reconcile net loss to net cash
used for operating activities:
Amortization of deferred financing costs and
discount on long-term debt.................... -- 1,652 17,251
Non-cash compensation charges.................. -- -- 9,775
Equity in losses (earnings) of subsidiaries.... (72) 4,475 6,458
Depreciation and amortization.................. -- 27 720
Equity in losses (earnings) of unconsolidated
affiliate..................................... -- 1,138 (2,055)
Increase (decrease) in accounts payable and
other accrued liabilities..................... 130 (103) 1,352
Decrease (increase) in receivables and other
assets........................................ (1,122) 551 (1,413)
------ -------- --------
Net cash used for operating activities....... (2,021) (4,202) (5,687)
------ -------- --------
Cash flows from investing activities:
Investment in subsidiaries....................... -- (89,989) (332,065)
Net advances to subsidiaries..................... (288) (2,223) (11,100)
Capital expenditures............................. -- (835) (3,624)
Investments in affiliates........................ (2,101) (59,487) --
------ -------- --------
Net cash used for investing activities....... (2,389) (152,534) (346,789)
------ -------- --------
Cash flows from financing activities:
Proceeds from issuance of capital stock.......... 10,503 139,867 339,929
Incurrence of financing costs.................... -- (5,908) (1,755)
Purchase of capital stock........................ -- (2,132) (883)
Proceeds from issuance of long-term debt......... -- 150,010 --
Principal payments on long-term debt............. -- (78,102) --
------ -------- --------
Net cash provided by financing activities.... 10,503 203,735 337,291
------ -------- --------
Net increase (decrease) in cash and cash
equivalents....................................... 6,093 46,999 (15,185)
Cash and cash equivalents at beginning of year..... -- 6,093 53,092
------ -------- --------
Cash and cash equivalents at end of year........... $6,093 $ 53,092 $ 37,907
====== ======== ========
Supplementary schedule of noncash investing and
financing activities:
Issuance of long-term debt in connection with
acquisitions.................................... $ -- $ 78,102 $ --
Issuance of common stock in connection with
acquisitions.................................... -- 57,189 420,964
Conversion of subsidiary's Convertible Secured
Subordinated Notes to Series A Convertible
Preferred Stock................................. -- 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 CTI Credit Facility and the
CTI Bonds, the Company's subsidiaries are limited in the amount of dividends
which can be paid to the Company. For CCI, 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 Restricted Subsidiaries. CTI is effectively precluded from paying
dividends. The restricted net assets of the Company's subsidiaries totaled
approximately $826,321,000 at December 31, 1998.
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>
1.1 Form of Equity Underwriting Agreement
1.2 Form of International Equity Underwriting Agreement
1.3 Form of Debt Underwriting Agreement
**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.
****3.2 Amended and Restated By-laws of Crown Castle International Corp.
****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 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 through 3.5)
**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)
4.8 Form of Indenture for Senior Notes
4.9 Form of Indenture for Senior Discount Notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
5.1 Opinion of Cravath, Swaine & Moore with respect to the validity of
the common stock being offered
5.2 Opinion of Cravath, Swaine & Moore with respect to the legality of
the notes being offered
**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
**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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
**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 as amended by Amendment No. 1, dated as of the 12th
day of November, 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, Blake Hawk 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
****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 dated December 8, 1998 relating to the
formation of Crown Atlantic Company LLC, Crown Atlantic Holding
Sub LLC, and Crown Atlantic Holding Company LLC
******10.58 Letter of Agreement between Crown Castle International Corp. and
BellSouth Mobility Inc. dated March 5, 1999 (including the Form
of Sublease)
*******10.59 Asset Purchase Agreement among Crown Castle International Corp.,
CCP Inc., Powertel Atlanta Towers, LLC, Powertel Birmingham
Towers, LLC, Powertel Jacksonville Towers, LLC, Powertel Kentucky
Towers, LLC, Powertel Memphis Towers, LLC and Powertel, Inc.
dated March 15, 1999
****10.60 Framework Agreement between One2One and Castle Transmission
International Ltd. dated March 5, 1999
****10.61 Indenture between Crown Castle International Corp. and United
States Trust Company of New York dated March 15, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
****10.62 Registration Rights Agreement among Crown Castle International
Corp. and Goldman Sachs Credit Partners LP, Salomon Brothers
Holding Company Inc. and Credit Suisse First Boston dated March
15, 1999
****10.63 Escrow Agreement among Crown Castle International Corp., Goldman
Sachs Credit Partners LP, Salomon Brothers Holding Company Inc.,
Credit Suisse First Boston and United States Trust Company of
New York dated March 15, 1999
****10.64 Term Loan Agreement among Crown Castle International Corp. and
Goldman Sachs Credit Partners LP, Salomon Brothers Holding
Company Inc. and Credit Suisse First Boston dated March 15, 1999
********10.65 Amendment Number 1 to Formation Agreement dated March 31, 1999
among Crown Castle International Corp., Cellco Partnership,
doing business as Bell Atlantic Mobile, certain Transferring
Partnerships and CCA Investment Corp.
********10.66 Crown Atlantic Company LLC Operating Agreement entered into as
of March 31, 1999 by and between Cellco Partnership, doing
business as Bell Atlantic Mobile, and Crown Atlantic Holding Sub
LLC
********10.67 Amendment No. 1 to Rights Agreement dated March 31, 1999,
between Crown Castle International Corp. and ChaseMellon
Shareholder Services L.L.C.
********10.68 Global Lease Agreement dated March 31, 1999 between Crown
Atlantic Company LLC and Cellco Partnership, doing business as
Bell Atlantic Mobile
********10.69 Master Build to Suit Agreement dated March 31, 1999 between
Cellco Partnership, doing business as Bell Atlantic Mobile, and
Crown Atlantic Company LLC
********10.70 Loan Agreement dated as of March 31, 1999 by and among Crown
Atlantic HoldCo Sub LLC, as the Borrower, Key Corporate Capital
Inc., as Agent, and the Financial Institutions listed therein
+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 Consents of Cravath, Swaine & Moore (included in Exhibits 5.1
and 5.2)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New
York, as Trustee, on Form T-1, in connection with the senior
notes offering
25.2 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New
York, as Trustee, on Form T-1, in connection with the senior
discount notes offering
****27.1 Financial Data Schedule
</TABLE>
- --------
+ Previously filed.
* 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>
**** 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. 333-71715).
***** Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated December 9,
1998.
****** Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated March 8, 1999.
******* Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated March 15,
1999.
******** Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated March 31, 1999
<PAGE>
EXHIBIT 1.1
Crown Castle International Corp.
Common Stock
---------------
U.S. Underwriting Agreement
, 1999
Goldman, Sachs & Co.,
Salomon Smith Barney Inc.,
Lehman Brothers Inc.,
Credit Suisse First Boston Corporation,
Legg Mason Wood Walker, Incorporated,
As representatives (the "Representatives")
of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Crown Castle International Corp., a Delaware corporation (the "Company"),
RC Investors Corp., a Delaware corporation, and BC Investors Corp., a Delaware
corporation (collectively, the "Crown Selling Stockholders"), certain executive
officers of the Company named in Schedule II hereto (the "Executive Selling
Stockholders") and certain financial sponsor stockholders, certain other
stockholders who are affiliates of such financial sponsors and certain directors
of the Company named on Schedule II hereto (collectively, the "Sponsor Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 22,160,000 shares (the "Firm Shares") of the Company's Common
Stock, par value $.01 per share ("Stock"). Of the 22,160,000 Firm Shares, the
Company is selling 18,686,131 shares, the Crown Selling Stockholders are selling
1,586,000 shares, the Executive Selling Stockholders are selling 319,813 shares
and the Sponsor Selling Stockholders are selling 1,568,056 shares. In addition,
the Executive Selling Stockholders and the Sponsor Selling Stockholders propose,
subject to the terms and conditions stated herein, to grant to the Underwriters
an option to purchase up to an additional 3,298,043 Shares of Stock on the terms
and for the purposes set forth in Section 2 hereof (the "Optional Shares").
This is to confirm the agreement concerning the purchase by the Underwriters of
the Firm Shares from the Company, the Crown Selling Stockholders, the Executive
Selling Stockholders and the Sponsor Selling Stockholders, and of the Optional
Shares, if purchased, from the Executive Selling Stockholders and the Sponsor
Selling Stockholders. The Firm Shares and the Optional Shares, if purchased,
are hereinafter collectively called the "Shares," and the Crown Selling
Stockholders, the Executive Selling Stockholders and the Sponsor Selling
Stockholders are hereinafter collectively referred to as the "Selling
Stockholders."
<PAGE>
It is understood and agreed to by all parties that the Company is and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 5,540,000 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International and Salomon
Smith Barney Inc. are acting as lead managers. Anything herein or therein to
the contrary notwithstanding, the respective closings under this Agreement and
the International Underwriting Agreement are hereby expressly made conditional
on one another. The Underwriters hereunder and the International Underwriters
are simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as mentioned below. Except as used in Sections 2, 3, 4, 11 and
13 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the U.S.
and the international versions thereof.
The Company and the Underwriters, in accordance with the requirements of
Rule 2720 ("Rule 2720") of the National Association of Securities Dealers, Inc.
(the "NASD") and subject to the terms and conditions stated herein, also hereby
confirm the engagement of the services of Lehman Brothers Inc. (the "Independent
Underwriter") as a "qualified independent underwriter" within the meaning of
Section (b)(15) of Rule 2720 in connection with the offering and sale of the
Shares.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters and the Independent Underwriter that:
(i) A registration statement on Form S-1 (File No. 333-74553) (as
amended by each pre-effective amendment thereto, the "Initial Registration
Statement") in respect of the Shares has been filed with the Securities and
Exchange Commission (the "Commission"); the Initial Registration Statement
and any post-effective amendment thereto, (each in the form heretofore
delivered to you excluding exhibits thereto) for each of the other
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus");
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including
2
<PAGE>
the information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
6(a) hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared effective,
each as amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration Statement, if
any, became or hereafter becomes effective, are hereinafter collectively
called the "Registration Statement"; and such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter called
the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. or by the Independent Underwriter expressly for use
therein or by a Selling Stockholder expressly for use in the preparation of
the answers therein to Items 7 and 11(m) of Form S-1;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. or by the Independent
Underwriter expressly for use therein or by a Selling Stockholder expressly
for use in the preparation of the answers therein to Items 7 and 11(m) of
Form S-1;
(iv) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, except such as are described in the Prospectus or
such as would not be reasonably expected, in the aggregate, to result in a
material adverse effect on the condition (financial or other), business,
prospects, properties or results of operations of the Borrower and its
"significant subsidiaries" as
3
<PAGE>
defined in Rule 405 of the rules and regulations of the Commission
promulgated under the Act, taken as a whole ("Material Adverse Effect");
(v) The Company and its subsidiaries have good and indefeasible title
to all real property and good and marketable title to all personal property
owned by them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus; and any real
property and buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases with such
exceptions as would not be reasonably expected, in the aggregate, to result
in a Material Adverse Effect;
(vi) The Company is a corporation duly incorporated and validly
existing and in good standing under the laws of the State of Delaware with
all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus, and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or to be in good
standing would not have a Material Adverse Effect; and each subsidiary of
the Company has been duly incorporated and is validly existing as a
corporation (or in the case of Crown Atlantic Holding Company LLC, as a
limited liability company) in good standing under the laws of its
jurisdiction of incorporation;
(vii) None of the subsidiaries of the Company (other than Crown
Communication, Inc. ("CCI"), Castle Transmission Services (Holdings) Ltd.
("CTSH"), Castle Transmission International, Ltd. ("CTI"), Crown Castle
Investment Corp. ("CC Investment"), Crown Castle Investment Corp. (II) ("CC
Investment II"), CCA Investment Corp. ("CCAIC"), Crown Atlantic Holding
Company LLC ("Crown Atlantic Holdings"), Crown Atlantic Holding Sub LLC
("Crown Atlantic Sub") and Crown Atlantic Company LLC ("Crown Atlantic")
(collectively, the "Significant Subsidiaries")) is a "significant
subsidiary," as such term is defined in Rule 405 of the rules and
regulations under the Act;
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except as set forth in the Prospectus;
(ix) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly
issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting
4
<PAGE>
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or (with the giving of notice or the
lapse of time or both) constitute a default under, (A) any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject, (B) the
provisions of the charter, by-laws or other constitutive documents of the
Company or any of its subsidiaries or (C) any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets except in the cases of clause (A) or (C), such breaches, violations
or defaults that in the aggregate would not have a Material Adverse Effect;
and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except (A) the registration under the
Act of the Shares and (B) such consents, approvals, authorizations,
registrations or qualifications as (1) may be required under the Exchange
Act and applicable state or foreign securities laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters, (2) as may have already been obtained or made
and (3) the failure to obtain or make would not, individually or in the
aggregate, have a Material Adverse Effect;
(xi) Neither the Company nor any of its subsidiaries (A) is in
violation of its charter, by-laws or other constitutive documents, (B) is
in default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (C) is in violation
in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business, except for, in
the cases of clause (B) or (C), such defaults, violations or failures to
obtain that in the aggregate would not have a Material Adverse Effect;
(xii) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain US Income Tax
Considerations for Non-U.S. Holders" and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xiii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
5
<PAGE>
(xiv) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xv) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xvi) KPMG LLP, who have certified certain financial statements of the
Company and its subsidiaries and of certain other business operations to be
acquired by the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(xvii) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which
the business or operations of the Company or any of its subsidiaries will
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a material adverse effect on the general affairs,
management, the current or future consolidated financial position, business
prospects, stockholders' equity or results of operations of the Company and
its subsidiaries or result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used herein
means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of dates
or time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to
January 1, 2000;
(xviii) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and
delivery by the Underwriters, constitutes the valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether in a
proceeding in equity or at law);
(xix) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company or any of its subsidiaries
and any person (other than Robert A. Crown) granting such person the right
to require the Company or any of its subsidiaries to file a registration
statement under the Act with respect to any securities of the Company and
its subsidiaries owned or to be owned by such person or to require the
Company or any of its subsidiaries to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by the Company or any of its subsidiaries under the Act;
(xx) Except as described in the Prospectus, the Company has not sold or
issued any shares of Common Stock during the six-month period preceding the
date of the Prospectus, including any sales pursuant to Rule 144A under, or
Regulation D or Regulation S of, the Act other than shares issued pursuant
to employee benefit plans or
6
<PAGE>
other employee compensation plans or pursuant to outstanding options,
rights or warrants;
(xxi) The consolidated historical and pro forma financial statements,
together with the related notes thereto filed as part of the Registration
Statement or included in the Prospectus comply as to form in all material
respects with the requirements of Regulation S-X under the Act applicable
to registration statements on Form S-1 under the Act. Such historical
financial statements fairly present the financial position of the Company
at the respective dates indicated and the results of operations and cash
flows for the respective periods indicated, in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout such periods. Such pro forma financial statements have been
prepared on a basis consistent with such historical statements, except for
the pro forma adjustments specified therein, and give effect to assumptions
made on a reasonable basis and in good faith and present fairly the pro
forma position, results of operations and the other information purported
to be shown therein at the respective dates or the respective periods
therein specified. The other financial and statistical information and
data filed as part of the Registration Statement or included in the
Prospectus, historical and pro forma, are, in all material respects, fairly
presented and prepared on a basis consistent with such financial statements
and the books and records of the Company;
(xxii) The Company and each of the Significant Subsidiaries has such
permits, licenses, franchises, certificates of need and other approvals or
authorizations of any governmental or regulatory authority ("Permits"),
including, without limitation, any permits required by the Federal
Communications Commission ("FCC"), the Federal Aviation Administration
("FAA") or the Office of Telecommunications ("OFTEL"), as are necessary
under applicable law to own their respective properties and to conduct
their respective businesses in the manner described in the Prospectus,
except to the extent that the failure to have such Permits would not have a
Material Adverse Effect. The Company and the Significant Subsidiaries have
fulfilled and performed, in all material respects, all their respective
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Prospectus and except to the
extent that any such revocation or termination would not have a Material
Adverse Effect. Except as described in the Prospectus, none of the Permits
contains any restriction that has not previously been satisfied and that is
materially burdensome to the Company or any of the Significant
Subsidiaries;
(xxiii) For each existing tower of the Company not yet registered with
the FCC where registration will be required, the FCC's grant of an
application for registration of such tower will not have a significant
environmental effect as defined under Section 1.1307(a) of the FCC's rules;
(xxiv) The consummation of the transactions contemplated by this
Agreement shall not cause any third party to have any rights of first
refusal with respect to the acquisition of towers under any agreement filed
as an exhibit to, or incorporated by reference in, the Registration
Statement (the "Material Agreements") that has not already been described
in the Prospectus as to which the Company and any of the Significant
Subsidiaries or any of their property or assets may be subject;
7
<PAGE>
(xxv) The Company and each of the Significant Subsidiaries owns or
possesses all patents, trademarks, trademark registration, service marks,
service mark registrations, trade names, copyrights, licenses, inventions,
trade secrets and rights described in the Prospectus as being owned by any
of them or necessary for the conduct of their respective businesses, and
neither the Company nor any of the Significant Subsidiaries is aware of any
claim to the contrary or any challenge by any other person to the rights of
the Company or any of the Significant Subsidiaries with respect to such
rights that, if determined adversely to the Company or any such Significant
Subsidiary, would in the aggregate have a Material Adverse Effect;
(xxvi) The descriptions in the Prospectus of all agreements,
contracts, indentures, leases or other instruments are accurate in all
material respects and fairly present the information purported to be
described therein;
(xxvii) Neither the Company nor any of its subsidiaries is involved in
any strike, job action or labor dispute with any group of employees, and,
to the knowledge of the Company and the Subsidiaries, no such action or
dispute is threatened;
(xxviii) The Company and each of its subsidiaries are in compliance in
all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification;
(xxix) The Company and each of its subsidiaries have filed all
federal, state and local income and franchise tax returns required to be
filed through the date hereof and have paid all taxes due thereon, and no
tax deficiency has been determined adversely to the Company or any of its
subsidiaries nor does the Company or any of its subsidiaries have any
knowledge of any tax deficiency which, if determined adversely to the
Company or any of its subsidiaries, would have a Material Adverse Effect;
(xxx) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Registration Statement, the Company has not (i) issued or
granted any securities, (ii) incurred any liability or obligation, direct
or contingent, or entered into any transaction, in each case not in the
ordinary course of business which is material to the Company and its
subsidiaries taken as a whole or (iii) declared or paid any dividend on its
capital stock (excluding payment in lieu of fractional shares upon
conversion of certain senior preferred convertible stock of the Company);
(xxxi) The Company (i) makes and keeps accurate books and records and
(ii) maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its
8
<PAGE>
financial statements in conformity with GAAP and to maintain accountability
for assets, (C) access to its assets is permitted only in accordance with
management's general or specific authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences;
(xxxii) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment;
(xxxiii) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or any of its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
or could not be reasonably likely to have, singularly or in the aggregate,
a Material Adverse Effect; there has been no material spill, discharge,
leak, emission, injection, escape, dumping or release of any kind onto such
property or into the environment surrounding such property of any toxic
wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or any of its subsidiaries or
with respect to which the Company or any of its subsidiaries has knowledge,
except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably likely
to have, singularly or in the aggregate, a Material Adverse Effect; and the
terms "hazardous wastes," "toxic wastes," "hazardous substances" and
"medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to
environmental protection; and
(xxxiv) The Company and each of the Significant Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of its businesses and the value of its properties
and as is customary for companies engaged in similar businesses in similar
industries.
(b) Each of the Crown Selling Stockholders represents and warrants to,
and agrees with, each of the Underwriters, the Independent Underwriter and the
Company that:
(i) Such Crown Selling Stockholder has, and immediately prior to the
First Time of Delivery (as defined in Section 5 hereof) such Crown Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Crown Selling Stockholder hereunder on such date, free and clear of
all liens, encumbrances, equities or claims; and upon delivery of such
Shares and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the several Underwriters;
9
<PAGE>
(ii) Such Crown Selling Stockholder has placed in custody under a
custody agreement (the "Custody Agreement") with the Company, as custodian
(the "Custodian"), for delivery under this Agreement, certificates in
negotiable form (with signature guaranteed by a commercial bank or trust
company having an office or correspondent in the United States or a member
firm of the New York or American Stock Exchanges) representing the Shares
to be sold by such Crown Selling Stockholder hereunder;
(iii) Such Crown Selling Stockholder has duly and irrevocably executed
and delivered a power of attorney (the "Power of Attorney") appointing the
Custodian and one or more other persons, as attorneys-in-fact, with full
power of substitution, and with full authority (exercisable by any one or
more of them) to execute and deliver this Agreement and to take such other
action as may be necessary or desirable to carry out the provisions hereof
on behalf of such Crown Selling Stockholder;
(iv) Such Crown Selling Stockholder has full right, power and authority
to enter into this Agreement, the Power of Attorney and the Custody
Agreement; the execution, delivery and performance of this Agreement, the
Power of Attorney and the Custody Agreement by such Crown Selling
Stockholder and the consummation by such Crown Selling Stockholder of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Crown Selling
Stockholder is a party or by which such Crown Selling Stockholder is bound
or to which any of the property or assets of such Crown Selling Stockholder
is subject, nor will such actions result in any violation of any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Crown Selling Stockholder or the property or
assets of such Crown Selling Stockholder; and, except for the registration
of the Shares under the Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange Act
and applicable state or foreign securities laws in connection with the
purchase and distribution of the Shares by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement, the Power of Attorney or the
Custody Agreement by such Crown Selling Stockholder and the consummation by
such Crown Selling Stockholder of the transactions contemplated hereby and
thereby;
(v) Such Crown Selling Stockholder has no actual knowledge (as defined
in Section 10(g) hereof) of (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, in each case as of its date or as of the First Time of Delivery or
(ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, in each case as of its date or as of the
First Time of Delivery, any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(vi) Such Crown Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
10
<PAGE>
(vii) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities
of the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent; provided, however, that the foregoing
provision shall not apply to transfers (A) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound by the
restrictions set forth in this subparagraph 1(b)(vii), (B) to any trust for
the direct or indirect benefit of the undersigned or the immediate family
of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth in this subparagraph 1(b)(vii), and
provided further that any such transfer shall not involve a disposition for
value, or (C) with the prior written consent of Goldman, Sachs & Co. on
behalf of the Underwriters; for purposes of this subparagraph (1)(b)(vii),
"immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin; in addition, notwithstanding
the foregoing, if the undersigned is a corporation, the corporation may
transfer the capital stock of the Company to any wholly-owned subsidiary of
such corporation; provided, however, that in any such case, it shall be a
condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding such capital stock subject to
the provisions of this subparagraph 1(b)(vii) and there shall be no further
transfer of such capital stock except in accordance with this subparagraph
1(b)(vii), and provided further that any such transfer shall not involve a
disposition for value; each Crown Selling Stockholder now has, and, except
as contemplated by clause (A), (B), or (C) above, for the duration of the
90-day lock-up period will have, good and marketable title to such Crown
Selling Stockholder's Shares, free and clear of all liens, encumbrances,
and claims whatsoever; each Crown Selling Stockholder also agrees and
consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of such Crown Selling
Stockholder's Shares except in compliance with the foregoing restrictions;
(viii) The Shares to be sold by such Crown Selling Stockholder
hereunder which are represented by the certificates held in custody for
such Crown Selling Stockholder are subject to the interest of the
Underwriters, the arrangements made by such Crown Selling Stockholder for
such custody are to that extent irrevocable, and the obligations of such
Crown Selling Stockholder hereunder shall not be terminated by any act of
such Crown Selling Stockholder, by operation of law, by the death or
incapacity of any individual Crown Selling Stockholder or, in the case of a
trust, by the death or incapacity of any executor or trustee or the
termination of such trust, or the occurrence of any other event; and
(ix) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Crown Selling Stockholder will deliver to you prior to
or at the applicable Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
11
<PAGE>
(c) Each Executive Selling Stockholder, severally and not jointly,
represents and warrants to, and agrees with, each of the Underwriters, the
Independent Underwriter and the Company as to such Executive Selling Stockholder
that:
(i) Such Executive Selling Stockholder will have, immediately prior to
each Time of Delivery (as defined in Section 5 hereof), good and valid
title to the shares of Shares to be sold by such Executive Selling
Stockholder hereunder on such date, free and clear of all liens,
encumbrances, equities or claims; and upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares, free
and clear of all liens, encumbrances, equities or claims, will pass to the
several Underwriters;
(ii) Such Executive Selling Stockholder has placed in custody under a
custody agreement (the "Custody Agreement") with the Company, as custodian
(the "Custodian"), for delivery under this Agreement, certificates in
negotiable form (with signature guaranteed by a commercial bank or trust
company having an office or correspondent in the United States or a member
firm of the New York or American Stock Exchanges) or an irrevocable
exercise notice of options representing the Shares to be sold by such
Executive Selling Stockholder hereunder;
(iii) Such Executive Selling Stockholder has duly and irrevocably
executed and delivered a power of attorney (the "Power of Attorney")
appointing one or more persons as attorneys-in-fact, with full power of
substitution, and with full authority (exercisable by any one or more of
them) to execute and deliver this Agreement and to take such other action
as may be necessary or desirable to carry out the provisions hereof on
behalf of such Executive Selling Stockholder;
(iv) Such Executive Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement; the execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement by such
Executive Selling Stockholder and the consummation by such Executive
Selling Stockholder of the transactions contemplated hereby and thereby
will not result in a material breach or violation of any of the terms or
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other similar agreement or
instrument to which such Executive Selling Stockholder is a party or by
which such Executive Selling Stockholder is bound or to which any of the
property or assets of such Executive Selling Stockholder is subject, nor
will such actions result in any material violation of any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Executive Selling Stockholder or the property
or assets of such Executive Selling Stockholder; and, except for (A) the
registration of the Shares under the Act and (B) such consents, approvals,
authorizations, registrations or qualifications (1) as may be required
under the Exchange Act and applicable state or foreign securities laws in
connection with the purchase and distribution of the Shares by the
Underwriters, (2) as may have already been obtained or made and (3) the
failure to obtain or make would not, individually or in the aggregate, have
a material adverse effect on such Selling Stockholder's ability to transfer
and sell its Shares to the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such court
or governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Power of Attorney or the Custody
Agreement by such Executive Selling Stockholder and the consummation by
such Executive Selling Stockholder of the transactions contemplated hereby
and thereby;
12
<PAGE>
(v) Such Executive Selling Stockholder has no reason to believe that
the representations and warranties of the Company contained in Section 1(a)
hereof are not materially true and correct, is familiar with the
Registration Statement and the Prospectus (as amended or supplemented) and
has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement, as of the effective date, or the
Prospectus (or any amendment or supplement thereto), as of the applicable
filing date, which has adversely affected or reasonably could be expected
to adversely affect the business of the Company and is not prompted to sell
shares of Stock by any information concerning the Company which is not set
forth in the Registration Statement and the Prospectus;
(vi) Such Executive Selling Stockholder has not taken and will not
take, directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any Shares or any security
convertible into or exchangeable or exercisable for Shares to facilitate
the sale or resale of the Shares;
(vii) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities
of the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent; provided, however, that the foregoing
provision shall not apply to transfers (A) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound by the
restrictions set forth in this subparagraph 1(c)(vii), (B) to any trust for
the direct or indirect benefit of the undersigned or the immediate family
of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth in this subparagraph 1(c)(vii), and
provided further that any such transfer shall not involve a disposition for
value, or (C) with the prior written consent of Goldman, Sachs & Co. on
behalf of the Underwriters; for purposes of this subparagraph (1)(c)(vii),
"immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin; in addition, notwithstanding
the foregoing, if the undersigned is a corporation, the corporation may
transfer the capital stock of the Company to any wholly-owned subsidiary of
such corporation; provided, however, that in any such case, it shall be a
condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding such capital stock subject to
the provisions of this subparagraph 1(c)(vii) and there shall be no further
transfer of such capital stock except in accordance with this subparagraph
1(c)(vii), and provided further that any such transfer shall not involve a
disposition for value; each Executive Selling Stockholder now has, and,
except as contemplated by clause (A), (B), or (C) above, for the duration
of the 90-day lock-up period will have, good and marketable title to such
Executive Selling Stockholder's Shares, free and clear of all liens,
encumbrances, and claims whatsoever; each Executive Selling Stockholder
also agrees and consents to the entry of stop transfer instructions with
the Company's transfer agent and registrar against the transfer of such
Executive Selling Stockholder's Shares except in compliance with the
foregoing restrictions;
13
<PAGE>
(viii) The Shares to be sold by such Executive Selling Stockholder
hereunder which are represented by the certificates or option exercise
notices held in custody for such Executive Selling Stockholder are subject
to the interest of the Underwriters, the arrangements made by such
Executive Selling Stockholder for such custody are to that extent
irrevocable, and the obligations of such Executive Selling Stockholder
hereunder shall not be terminated by any act of such Executive Selling
Stockholder, by operation of law, by the death or incapacity of such
Executive Selling Stockholder or, in the case of a trust, by the death or
incapacity of any executor or trustee or the termination of such trust, or
the occurrence of any other event; and
(ix) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholders will deliver to you prior to or at
the applicable Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
(d) Each Sponsor Selling Stockholder, severally and not jointly, represents
and warrants to, and agrees with, each of the Underwriters, the Independent
Underwriter and the Company as to such Sponsor Selling Stockholder that:
(i) Such Sponsor Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 5 hereof) such Sponsor Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Sponsor Selling Stockholder hereunder on such date, free and clear of
all liens, encumbrances, equities or claims; and upon delivery of such
Shares and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the several Underwriters;
(ii) Such Sponsor Selling Stockholder has placed in custody under a
custody agreement (the "Custody Agreement") with the Company, as custodian
(the "Custodian"), for delivery under this Agreement, certificates in
negotiable form (with signature guaranteed by a commercial bank or trust
company having an office or correspondent in the United States or a member
firm of the New York or American Stock Exchanges) or an irrevocable
exercise notice of options representing the Shares to be sold by such
Sponsor Selling Stockholder hereunder;
(iii) Such Sponsor Selling Stockholder has duly and irrevocably
executed and delivered a power of attorney (the "Power of Attorney")
appointing one or more persons as attorneys-in-fact, with full power of
substitution, and with full authority (exercisable by any one or more of
them) to execute and deliver this Agreement and to take such other action
as may be necessary or desirable to carry out the provisions hereof on
behalf of such Sponsor Selling Stockholder;
(iv) Such Sponsor Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement; the execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement by such Sponsor
Selling Stockholder and the consummation by such Sponsor Selling
Stockholder of the transactions contemplated hereby and thereby will not
result in a material breach or violation of any of the terms or provisions
of, or constitute a default under, any material indenture, mortgage, deed
of trust, loan
14
<PAGE>
agreement or other similar agreement or instrument to which such Sponsor
Selling Stockholder is a party or by which such Sponsor Selling Stockholder
is bound or to which any of the property or assets of such Sponsor Selling
Stockholder is subject, nor will such actions result in any material
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Sponsor Selling
Stockholder or the property or assets of such Sponsor Selling Stockholder;
and, except for (A) the registration of the Shares under the Act and (B)
such consents, approvals, authorizations, registrations or qualifications
(1) as may be required under the Exchange Act and applicable state or
foreign securities laws in connection with the purchase and distribution of
the Shares by the Underwriters, (2) as may have already been obtained or
made and (3) the failure to obtain or make would not, individually or in
the aggregate, have a material adverse effect on such Sponsor Selling
Stockholder's ability to transfer and sell its Shares to the Underwriters,
no consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Power of
Attorney or the Custody Agreement by such Sponsor Selling Stockholder and
the consummation by such Sponsor Selling Stockholder of the transactions
contemplated hereby and thereby;
(v) Such Sponsor Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any Shares or any security
convertible into or exchangeable or exercisable for shares of Stock to
facilitate the sale or resale of the Shares;
(vi) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities
of the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent; provided, however, that the foregoing
provision shall not apply to transfers (A) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound by the
restrictions set forth in this subparagraph 1(d)(vi), (B) to any trust for
the direct or indirect benefit of the undersigned or the immediate family
of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth in this subparagraph 1(d)(vi), and
provided further that any such transfer shall not involve a disposition for
value, or (C) with the prior written consent of Goldman, Sachs & Co. on
behalf of the Underwriters; for purposes of this subparagraph (1)(d)(vi),
"immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin; in addition, notwithstanding
the foregoing, if the undersigned is a corporation, the corporation may
transfer the capital stock of the Company to any wholly-owned subsidiary of
such corporation; provided, however, that in any such case, it shall be a
condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding such capital stock subject to
the provisions of this subparagraph 1(d)(vi) and there shall be no further
transfer of such capital stock except in accordance with this subparagraph
1(d)(vi), and provided further that any such
15
<PAGE>
transfer shall not involve a disposition for value; each Sponsor Selling
Stockholder now has, and, except as contemplated by clause (A), (B), or (C)
above, for the duration of the 90-day lock-up period will have, good and
marketable title to such Sponsor Selling Stockholder's Shares, free and
clear of all liens, encumbrances, and claims whatsoever; each Sponsor
Selling Stockholder also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of such Sponsor Selling Stockholder's Shares except in compliance
with the foregoing restrictions;
(vii) The Shares to be sold by such Sponsor Selling Stockholder
hereunder which are represented by the certificates held in custody for
such Sponsor Selling Stockholder are subject to the interest of the
Underwriters, that the arrangements made by such Sponsor Selling
Stockholder for such custody are to that extent irrevocable, and that the
obligations of such Sponsor Selling Stockholder hereunder shall not be
terminated by any act of such Sponsor Selling Stockholder, by operation of
law, by the death or incapacity of such Sponsor Selling Stockholder or, in
the case of a trust, by the death or incapacity of any executor or trustee
or the termination of such trust, or the occurrence of any other event; and
(viii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Sponsor Selling Stockholders will deliver to you prior
to or at the applicable Time of Delivery (as hereinafter defined) a
properly completed and executed United States Treasury Department Form W-9
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $_________, the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and all of the Selling Stockholders hereunder and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, each of the Executive Selling Stockholders
and each of the Sponsor Selling Stockholders agrees, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from each of the Executive Selling
Stockholders and each of the Sponsor Selling Stockholders, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
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<PAGE>
The Executive Selling Stockholders and the Sponsor Selling Stockholders, as
and to the extent indicated in Schedule II hereto, hereby grant, severally and
not jointly, to the Underwriters the right to purchase at their election up to
3,298,043 Optional Shares, at the purchase price per share set forth in the
paragraph above, for the sole purpose of covering overallotments in the sale of
the Firm Shares. Any such election to purchase Optional Shares shall be made in
proportion to the maximum number of Optional Shares to be sold by each Executive
Selling Stockholder and each Selling Stockholder as set forth in Schedule II
hereto. Any such election to purchase Optional Shares may be exercised only by
written notice from you to the Company and the attorneys-in-fact under the Power
of Attorney executed by such Selling Stockholders, given within a period of 30
calendar days after the date of this Agreement and setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by you but in no event earlier than
the First Time of Delivery (as defined in Section 5 hereof) or, unless you and
the attorneys-in-fact otherwise agree in writing, earlier than two or later than
five business days after the date of such notice.
The Company and the Selling Stockholders shall not be obligated to deliver
any of the Shares to be delivered at the Time of Delivery except upon payment
for all the Shares to be purchased at such Time of Delivery as provided herein.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Company hereby confirms its engagement of the services of the
Independent Underwriter as, and the Independent Underwriter hereby confirms its
agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Section (b)(15) of Rule 2720 with respect to
the offering and sale of the Shares.
(b) The Independent Underwriter hereby represents and warrants to, and
agrees with, the Company and the Underwriters that with respect to the offering
and sale of the Shares as described in the Prospectus:
(i) The Independent Underwriter constitutes a "qualified independent
underwriter" within the meaning of Section (b)(15) of Rule 2720;
(ii) The Independent Underwriter has participated in the preparation of
the Registration Statement and the Prospectus and has exercised the usual
standards of "due diligence" in respect thereto;
(iii) The Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act
specifically including those inherent in Section 11 thereof;
(iv) Based upon (A) a review of the Company, including an examination
of the Registration Statement, information regarding the earnings, assets,
capital structure and growth rate of the Company and other pertinent
financial and statistical data, (B) inquiries of and conferences with the
management of the Company and its counsel and independent public
accountants regarding the business and operations of the Company, (C)
consideration of the prospects for the industry in which the Company
competes, estimates of the business potential of the Company, assessments
of its management, the general condition of the securities markets, market
prices of the capital stock and debt securities of, and financial and
operating data concerning, companies believed by
17
<PAGE>
the Independent Underwriter to be comparable to the Company and the demand
for securities of comparable companies similar to the Securities, and (D)
such other studies, analyses and investigations as the Independent
Underwriter has deemed appropriate, and assuming that the offering and sale
of the Securities is made as contemplated herein and in the Prospectus, the
Independent Underwriter recommends, as of the date of the execution and
delivery of this Agreement, that the initial public offering price for each
share be not more than $...,... ;
(v) Subject to the provisions of Section 8 hereof, the Independent
Underwriter will furnish to the Underwriters at the Time of Delivery a
letter, dated the Time of Delivery, in form and substance satisfactory to
the Underwriters, to the effect of clauses (i) through (iv) above.
(c) The Independent Underwriter hereby agrees with the Company and the
Underwriters that, as part of its services hereunder, in the event of any
amendment or supplement to the Prospectus, the Independent Underwriter will
render services as a "qualified independent underwriter" within the meaning of
Section (b)(15) of Rule 2720 with respect to the offering and sale of the Shares
as described in the Prospectus as so amended or supplemented that are
substantially the same as those services being rendered with respect to the
offering and sale of the Shares as described in the Prospectus (including those
described in subsection (b) above).
(d) The Company, the Underwriters and the Independent Underwriter agree to
comply in all material respects with all of the requirements of Rule 2720
applicable to them in connection with the offering and sale of the Shares. The
Company agrees to cooperate with the Underwriters and the Independent
Underwriter to enable the Underwriters to comply with Rule 2720 and the
Independent Underwriter to perform the services contemplated by this Agreement.
(e) As compensation for the services of the Independent Underwriter
hereunder, the Company agrees to pay the Independent Underwriter $ .... at the
Time of Delivery. In addition, the Company agrees promptly to reimburse the
Independent Underwriter for all out of pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with this Agreement
and the services to be rendered hereunder.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co., for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal (same-
day) funds to the account specified by the Company and the Custodian, as their
interests may appear, to Goldman, Sachs & Co. at least forty-eight hours in
advance. The Company will cause the certificates representing the Shares to be
made available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office of
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on ............., 1999, or
such other time and date as Goldman, Sachs & Co. and the Company and may agree
upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York
City time, on the date specified by Goldman, Sachs & Co. in the written notice
given by Goldman, Sachs & Co. of the Underwriters' election to
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purchase such Optional Shares, or such other time and date as Goldman, Sachs &
Co. and the Attorneys-in-Fact may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery", such
time and date for delivery of the Firm Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and each such time and
date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 8 hereof, including the cross-receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 8 hereof, will be delivered at the offices of Latham &
Watkins, 885 Third Avenue, New York, New York 10021 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at each Time of
Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New York
City time, on the New York Business Day next preceding each Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 5, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
6. The Company agrees with each of the Underwriters and the Independent
Underwriter:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you and the Independent Underwriter, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you and the Independent Underwriter copies thereof; to advise
you and the Independent Underwriter, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
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(c) Prior to 10:00 A.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters and the Independent Underwriter with copies of the
Prospectus in New York City in such quantities as you and the Independent
Underwriter may reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after the time
of issue of the Prospectus in connection with the offering or sale of the
Shares and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Prospectus in order to comply with
the Act, to notify you and the Independent Underwriter and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without your prior written consent;
(f) To cause each of the persons listed on Schedule III hereto, to the
extent such person is not a Selling Stockholder hereunder and under the
International Underwriting Agreement, to enter into a lock-up agreement
with you, in form and substance satisfactory to you, providing that, during
the period beginning from the date hereof and continuing to and including
the date 90 days after the date of the Prospectus, such person will not
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities
of the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to
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employee stock option plans existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date of
this Agreement), without your prior written consent;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed;
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in
the manner specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
7. The Company covenants and agrees with the several Underwriters and the
Independent Underwriter that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters, the Independent Underwriter and dealers; (ii) the
cost of printing or producing any Agreement among Underwriters, this Agreement,
the International Underwriting Agreement, the Agreement between Syndicates, the
Selling Agreements, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 6(b) hereof, including the fees and disbursements of
counsel for the Underwriters (not in excess, in the aggregate, of $7,500) in
connection with such qualification and in connection with the Blue Sky surveys;
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vi) the cost of preparing stock certificates; (vii) the cost and charges of any
transfer agent or registrar; (viii) all fees and expenses of Hutchins, Wheeler &
Dittmar, counsel to the Sponsor Selling Stockholders, incurred in connection
with the public offering of the Shares; and (ix) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, except as
provided in this Section, and Sections 10 and 13 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer
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taxes on resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.
8. The respective obligations of the Underwriters and the Independent
Underwriter hereunder, as to the Shares to be delivered at each Time of
Delivery, shall be subject, in their discretion, to the condition that all
representations and warranties of the Company and of the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of its
and their obligations hereunder theretofore to be performed, the condition (in
the case of the Underwriters) that the Independent Underwriter shall have
furnished to the Underwriters the letter referred to in clause (v) of Section
4(b) hereof and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
6(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Representatives or the
Independent Underwriter, as the case may be;
(b) Latham & Watkins, counsel for the Underwriters, shall have
furnished to you or the Independent Underwriter, as the case may be, such
written opinion or opinions (a draft of which is attached as Annex II(a)
hereto), dated such Time of Delivery, with respect to the matters covered
in paragraphs (i), (ii), (vi), (vii) and (viii) and the paragraph
immediately following clause (xi) of subsection (c) below as well as such
other related matters as you or the Independent Underwriter, as the case
may be, may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;
(c) Cravath, Swaine & Moore, counsel for the Company, shall have
furnished to you or the Independent Underwriter, as the case may be, their
written opinion (a draft of which is attached as Annex II(b) hereto), dated
such Time of Delivery, in form and substance satisfactory to you or the
Independent Underwriter, as the case may be, to the effect that:
(i) Each of the Company, CCI, CC Investment, CC Investment II,
CCAIC, Crown Atlantic Holdings, Crown Atlantic Sub and Crown Atlantic
is a corporation validly existing and in good standing under the laws
of the state of its incorporation or formation (which opinion may be
based solely on a certificate of the Secretary of State of such state),
and has all requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus. Each of the Company, CCI, CC Investment, CC Investment II,
CCAIC, Crown Atlantic Holdings, Crown Atlantic Sub and Crown Atlantic
is duly registered and qualified to conduct its business and is in good
standing (which opinion may be based solely on a certificate of the
Secretary of State of such state), in each jurisdiction or place where,
based on a certificate of an officer of the Company, the nature of its
properties or the conduct of its business requires such
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registration or qualification, except where the failure so to register
or qualify or to be in good standing would not have a Material Adverse
Effect;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of
Delivery); and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) Except as described in the Prospectus, there are no
preemptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any shares of the Stock
pursuant to the Company's charter or by-laws or any agreement or other
instrument known to such counsel;
(iv) To the knowledge of such counsel, there are no agreements,
contracts, indentures, leases or other instruments to which the Company
or any of the Significant Subsidiaries is a party or to which any of
their respective properties or assets is subject that are required to
be described in, or filed as exhibits to, the Registration Statement
and the Prospectus that have not been so described or filed;
(v) The Registration Statement was declared effective under the Act
as of the date and time specified in such opinion, the Prospectus was
filed with the Commission pursuant to the subparagraph of Rule 424(b)
of the Rules and Regulations specified in such opinion on the date
specified therein and no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of such
counsel, no proceeding for that purpose is pending or threatened by the
Commission;
(vi) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder;
(vii) The statements contained (A) in the Prospectus under the
captions "Description of Capital Stock", "Shares Eligible for Future
Sale", "Underwriting" and "Certain United States Federal Tax
Consequences to Non-United States Holders" and (B) in the Registration
Statement in Items 14 and 15, in each case insofar as they are
descriptions of contracts, agreements or other legal documents, or
refer to statements of law or legal conclusions, are accurate in all
material respects and present fairly the information purported to be
described therein;
(viii) This Agreement and the International Underwriting Agreement
have each been duly and validly authorized, executed and delivered by
the Company;
(ix) None of the issuance, offer or sale of the Shares, the
execution, delivery or performance by the Company of this Agreement and
the International Underwriting Agreement or compliance by the Company
with the provisions hereof (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any
court, regulatory body, administrative agency or other governmental
body, agency or official, or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
certificate of incorporation or by-laws
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or other organizational documents of the Company or (ii) conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, any Material Agreement or violates or will violate any
law, rule or regulation of the United States, or the State of New York
or the General Corporation Law of the State of Delaware, or, to such
counsel's knowledge, any order or decree of any court or government
agency or instrumentality or will result in the creation or imposition
of any Lien upon any property or assets of the Company, CCI, CC
Investment, CC Investment II, CCAIC, Crown Atlantic Holdings, Crown
Atlantic Sub or Crown Atlantic pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them
may be bound or under any to which any of their respective property or
assets is subject, except in each case such breaches, conflicts or
defaults that, individually or in the aggregate, would not have a
Material Adverse Effect. For purposes of the foregoing opinion, such
counsel may assume that any agreements referred to in clause (ii) above
that are governed by laws other than the laws of the State of New York,
are governed by and would be interpreted in accordance with the laws of
the State of New York;
(x) The Company is not and, upon sale of the Shares to be issued and
sold thereby in accordance herewith and the application of the net
proceeds to the Company of such sale as described in the Prospectus
under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended; and
(xi) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound.
In addition, such counsel shall also state 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 Registration Statement and the Prospectus, and, although such counsel has
made certain inquiries and investigations in connection with the preparation of
the Registration Statement and the Prospectus, it is not passing upon and does
not assume any responsibility for the accuracy or completeness of the statements
contained in the Registration Statement and the Prospectus, and has not made any
independent check or verification thereof, except insofar as such statements
relate to such counsel and to clause (vii) above, 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 Registration
Statement and the Prospectus, as of its date or as of the Closing Date, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no belief or opinion with respect to the
financial statements and other financial data included therein);
The opinion of such counsel may be limited to the laws of the State of New
York, the General Corporation Law of the State of Delaware and the Federal laws
of the United States;
(d) E. Blake Hawk, general counsel to the Company, shall have furnished to
you or the Independent Underwriter, as the case may be, his written opinion, (a
draft of which is attached
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as Annex II(c) hereto), dated such Time of Delivery, in form and substance
reasonably satisfactory to you or the Independent Underwriter, as the case may
be, to the effect that:
(i) All of the issued shares of capital stock of the Company and
each Subsidiary of the Company other than CTSH and CTI have been duly
and validly authorized and issued and are fully paid, non-assessable
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except as set forth in the Registration Statement
(including the exhibits thereto) with respect to shares subject to
liens under the Company's revolving credit facility with KeyBank
National Association and PNC Bank, National Association;
(ii) To knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its Subsidiaries (other than CTSH and CTI), or to which any of
their respective properties is subject, that are not disclosed in the
Prospectus and which are reasonably likely to have a Material Adverse
Effect or to materially affect the issuance of the shares of capital
stock or the consummation of the transactions contemplated by this
Agreement; and
(iii) To the knowledge of such counsel, except as described in the
Prospectus there are no contracts, agreements or understandings between
the Company or any of its Subsidiaries (other than CTSH and CTI) and
any person granting such person the right to require the Company or any
of such Subsidiaries to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company or any of such Subsidiaries to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant
to any other registration statement filed by the Company or any of such
Subsidiaries under the Act;
The opinion of such counsel may be limited to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the Federal laws
of the United States;
(e) Norton Rose, English counsel for CTSH and CTI, shall have furnished to
you or the Independent Underwriter, as the case may be, their written opinion (a
draft of which is attached as Annex II(d) hereto), dated such Time of Delivery,
in form and substance reasonably to you or the Independent Underwriter, as the
case may be, to the effect that:
(i) CTI was duly incorporated on 9 May 1996 under the Companies Act
1985 as a private limited company; CTSH was duly incorporated on 27
August 1996 as a private limited company; a certificate of good
standing in respect of each of the Companies issued by the Companies
Registration Office on a date within three business days of the date of
this opinion is attached;
(ii) by a Certificate of Incorporation on Change of Name issued on
21 March 1997 CTI changed its name to "Castle Transmission
International Ltd."; by a Certificate of Incorporation on Change of
Name issued on 25 February 1997, CTSH changed its name to "Castle
Transmission Services (Holdings) Ltd."; and
(iii) CTI is empowered by its Memorandum of Association to conduct
its business as described in the Registration Statement and the
Prospectus;
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(f) The counsel for each of the Crown Selling Stockholders, as indicated in
Schedule II hereto, shall have furnished to you or the Independent Underwriter,
as the case may be, its written opinion with respect to each of the Crown
Selling Stockholders for whom they are acting as counsel (a draft of which is
attached as Annex II(e) hereto), dated such Time of Delivery, in form and
substance satisfactory to you or the Independent Underwriter, as the case may
be, to the effect that:
(i) Such Selling Stockholder has full right, power and authority to
enter into this Agreement, the Power of Attorney and the Custody
Agreement; the execution, delivery and performance of this Agreement,
the Power of Attorney and the Custody Agreement by such Selling
Stockholder and the consummation by such Selling Stockholder of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known to
such counsel to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such actions
result in any violation of any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property or
assets of such Selling Stockholder; and, except for the registration of
the Shares under the Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state or foreign securities laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
International Underwriters, no consent, approval, authorization or
order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Power of Attorney or the Custody
Agreement by such Selling Stockholder and the consummation by such
Selling Stockholder of the transactions contemplated hereby and
thereby;
(ii) This Agreement and the International Underwriting Agreement has
each been duly executed and delivered by or on behalf of such Selling
Stockholder;
(iii) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid
and binding agreements of such Selling Stockholder, enforceable in
accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, fraudulent transfer, reorganization,
receivership, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing;
(iv) Such Selling Stockholder has full right, power and authority to
sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder hereunder; and
(v) Upon physical delivery of the certificates representing the
Shares to be sold by such Selling Stockholder under this Agreement to
the Underwriters in the State of New York with undated stock powers
duly endorsed in blank, and upon
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payment therefor in accordance with the terms of this Agreement, the
Underwriters will become the "protected purchasers" (as defined in
Section 8-303(a) of the New York UCC) of such shares, free of any
"adverse claim" (as defined in Section 8-102(a)(1) of the New York
UCC), assuming that the Underwriters do not have notice of any adverse
claim to such shares.
In rendering such opinion, such counsel may (i) state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the State
of Delaware and that such counsel is not admitted in the State of New York and
(ii) in rendering the opinions in Section (i) and (iv) above, rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on the shares of Stock
sold by such Selling Stockholder, provided that such counsel shall furnish
copies thereof to the Representatives and state that they believe that both the
U.S. Underwriters and they are justified in relying upon such certificate.
(g) The counsel for each of the Executive Selling Stockholders, as
indicated in Schedule II hereto, shall have furnished to you or the Independent
Underwriter, as the case may be, its written opinion with respect to each of the
Executive Selling Stockholders for whom they are acting as counsel (a draft of
which is attached as Annex II(f) hereto), dated such Time of Delivery, in form
and substance satisfactory to you or the Independent Underwriter, as the case
may be, to the effect that:
(i) Such Selling Stockholder has full right, power and authority to
enter into this Agreement, the Power of Attorney and the Custody
Agreement; the execution, delivery and performance of this Agreement,
the Power of Attorney and the Custody Agreement by such Selling
Stockholder and the consummation by such Selling Stockholder of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known to
such counsel to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such actions
result in any violation of any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property or
assets of such Selling Stockholder; and, except for the registration of
the Shares under the Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state or foreign securities laws in connection with
the purchase and distribution of the Shares by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Power of
Attorney or the Custody Agreement by such Selling Stockholder and the
consummation by such Selling Stockholder of the transactions
contemplated hereby and thereby;
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder;
(iii) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid
and
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binding agreements of such Selling Stockholder, enforceable in
accordance with their respective terms;
(iv) The delivery by each Executive Selling Stockholder to the
several Underwriters of certificates for the Shares being sold under
this Agreement, with due endorsement for transfer by such Executive
Selling Stockholder, against payment therefor in accordance with this
Agreement, has transferred good and valid title to such Shares, free
and clear of all adverse claims, to each of the several Underwriters,
assuming that the Underwriters are without actual notice of any adverse
claim.
In rendering such opinion, such counsel may (i) state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of Texas and the General Corporation Law of the State of
Delaware and that such counsel is not admitted in the State of New York and (ii)
in rendering the opinion in Section 8(g)(iv) above, rely upon a certificate of
such Selling Stockholder in respect of matters of fact as to ownership of and
liens, encumbrances, equities or claims on the shares of Stock sold by such
Selling Stockholder, provided that such counsel shall furnish copies thereof to
the Representatives and state that they believe that both the Underwriters and
they are justified in relying upon such certificate.
(h) The counsel for each of the Sponsor Selling Stockholders, as indicated
in Schedule II hereto, shall have furnished to you or the Independent
Underwriter, as the case may be, its written opinion with respect to each of the
Sponsor Selling Stockholders for whom they are acting as counsel (a draft of
which is attached as Annex II(a) hereto), dated such Time of Delivery, in form
and substance satisfactory to you or the Independent Underwriter, as the case
may be, to the effect that:
(i) This Agreement has each been duly executed and delivered by or
on behalf of such Sponsor Selling Stockholder;
(ii) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Sponsor Selling Stockholder and
constitute valid and binding agreements of such Sponsor Selling
Stockholder, enforceable in accordance with their respective terms; and
(iii) The delivery by each Sponsor Selling Stockholder to the
several Underwriters of certificates for the Shares being sold under
this Agreement, with due endorsement for transfer by such Sponsor
Selling Stockholder, against payment therefor in accordance with this
Agreement, has transferred valid title to such Shares, free and clear
of all adverse claims, to each of the several Underwriters, assuming
that the Underwriters are without actual notice of any adverse claim.
In rendering such opinion, such counsel may (i) state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the Commonwealth of Massachusetts and the General Corporation Law of
the State of Delaware and that such counsel is not admitted in the State of New
York and (ii) in rendering the opinion in Section 8(h)(iii) above, rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on the shares of Stock
sold by such Selling Stockholder, provided that such counsel shall furnish
copies thereof to the
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Representatives and state that they believe that both the Underwriters and they
are justified in relying upon such certificate.
(i) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any post-
effective amendment to the Registration Statement filed subsequent to the date
of this Agreement and also at each Time of Delivery, KPMG Peat Marwick LLP shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(j)(i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(k) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities or preferred stock;
(l) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York State authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
clause (iv) in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(m) At such Time of Delivery NASDAQ shall have approved the Shares to be
sold by the Company and the Selling Stockholders for inclusion, subject only to
official notice of issuance and evidence of satisfactory distribution;
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(n) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the persons identified on Schedule III hereto to the
effect set forth in Subsection 5(f) hereof in form and substance satisfactory to
you;
(o) The Company shall have complied with the provisions of Section 6(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement;
(p) The Company and the Selling Stockholders shall have furnished or caused
to be furnished to the Representatives and the Independent Underwriter at such
Time of Delivery certificates of officers of the Company and of the Selling
Stockholders, respectively, satisfactory to the Representatives and the
Independent Underwriter as to (i) the accuracy of the representations and
warranties of the Company and the Selling Stockholders, respectively, herein at
and as of such Time of Delivery, (ii) the performance by the Company and the
Selling Stockholders of all of their respective obligations hereunder to be
performed at or prior to such Time of Delivery, (iii) in the case of the Company
and the Crown Selling Stockholders, the absence of untrue statements of material
facts or omissions of material facts required to be stated or necessary to make
statements not misleading in the Registration Statement and Prospectus, (iv) in
the case of the Company and the Crown Selling Stockholders, absence of events
since the Effective Date which should be set forth in a supplement or amendment
to the Registration Statement or the Prospectus, and (v) such other matters as
you may reasonably request; and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (j) of
this Section, and as to such other matters as the Representatives and the
Independent Underwriter may reasonably request;
(q) The Company shall have furnished to the Representatives a certificate,
in form and substance reasonably acceptable to counsel to the Representatives,
dated the First Time of Delivery, of its Chief Financial Officer with respect to
certain tower data of the Company set forth in the Prospectus;
(r) The Representatives shall have received a copy of the executed Custody
Agreement and Power of Attorney from each Selling Stockholder;
(s) The closing under the International Underwriting Agreement shall have
occurred concurrently with the closing hereunder on the First Time of Delivery;
and
(t) The closing of the public offering and sale of the Company's debt
securities pursuant to that certain underwriting agreement between the Company
and Goldman, Sachs & Co., Salomon Smith Barney Inc., Lehman Brothers Inc.,
Credit Suisse First Boston Corporation, BancBoston Robertson Stephens Inc. and
McDonald Investments Inc., A KeyCorp Company shall have occurred concurrently
with the closing hereunder on the First Time of Delivery.
9. The Independent Underwriter hereby consents to the references to it as
set forth under the caption "Underwriting" in the Prospectus and in any
amendment or supplement thereto made in accordance with Section 6(a) hereof.
10. (a) The Company, the Crown Selling Stockholders and the Executive
Selling Stockholders, jointly and severally, shall indemnify and hold harmless
each Underwriter and the Independent Underwriter, their respective officers and
employees and each person, if any, who controls any Underwriter within the
meaning of the Act, from and against any loss, claim, damage or liability, joint
or several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Shares), to which that Underwriter or Independent Underwriter, officer, employee
or controlling person may
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become subject, under the Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any breach of the
representations and warranties of such Crown Selling Stockholder or Executive
Selling Stockholder, as the case may be, contained herein; provided that the
indemnity by the Company, the Crown Selling Stockholders and the Executive
Selling Stockholders solely with respect to this clause (i) shall be several and
not joint, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto, (iii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto, any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iv) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any manner
to, the Shares or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action arising
out of or based upon matters covered by clause (ii) or (iii) above, and shall
reimburse each Underwriter or the Independent Underwriter, as the case may be,
and each such officer, employee or controlling person promptly upon demand for
any legal or other expenses reasonably incurred by that Underwriter or
Independent Underwriter, officer, employee or controlling person in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company, the Crown Selling Stockholders and the Executive
Selling Stockholders shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any such amendment or supplement, in reliance upon and in
conformity with written information concerning such Underwriter or the
Independent Underwriter furnished to the Company through the Representatives by
or on behalf of any Underwriter or the Independent Underwriter specifically for
inclusion therein or constitutes a reference to the Independent Underwriter
consented to by it pursuant to Section 9 hereof. Notwithstanding the foregoing
provisions, the indemnity and contribution obligations of the Crown Selling
Stockholders and the Executive Selling Stockholders shall be subject to the
following additional limitations: (i) the Underwriters and the Independent
Underwriter shall pursue and satisfy any and all claims arising under this
Agreement or otherwise (collectively, "Claims") by seeking recovery from the
Company prior to pursuing any Claim against the Crown Selling Stockholders or
the Executive Selling Stockholders and the Underwriters and the Independent
Underwriter shall thereafter be entitled to pursue any remaining unsatisfied
Claims by seeking recovery from the Crown Selling Stockholders and the Executive
Selling Stockholders only following the Company's failure to satisfy in full the
Claims as a result of the Company's insolvency, bankruptcy or liquidation; (ii)
the aggregate amount of any Selling Stockholder's indemnity and contribution
obligations under this paragraph 10(a) shall not exceed the net cash proceeds
received by such Selling Stockholder from its sale of Shares in the offering
after reduction for (A) taxes, (B) underwriting commissions and discounts, (C)
other fees and expenses incurred by such Selling Stockholder relating to the
offering, including legal and financial advisory fees, and (D) the aggregate
amount of any and all direct and indirect costs or expenses incurred by such
Selling Stockholder in defense or settlement of any other claim against it
relating or attributable to the offering or the sale of Shares by such Selling
Stockholder thereunder, including without limitation claims under the Act; and
(iii) the Crown Selling Stockholders and the Executive Selling Stockholders
shall be liable under this paragraph 10(a) solely with respect to any untrue
statement of material fact contained in the Registration Statement and the
Prospectus which was actually known by such Selling
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Stockholder as of the date of the Registration Statement or Prospectus (or such
amendment or supplement thereto) to be untrue, or any omission to state a
material fact which was actually known by such Selling Stockholder as of the
date of the Registration Statement or Prospectus (or such amendment or
supplement thereto) to be necessary to make the statements contained in the
Registration Statement or Prospectus (or such amendment or supplement thereto)
in the light of the circumstances under which they were made, not misleading as
of the date of the Registration Statement or Prospectus (or such amendment or
supplement thereto). The provisions of this Section 10 shall constitute the sole
and exclusive remedy available to the Underwriters and the Independent
Underwriter with respect to any claims against the Crown Selling Stockholders
and the Executive Selling Stockholders relating to the offering or sale of
Shares by such Selling Stockholders hereunder.
(b) Each Sponsor Selling Stockholder, severally and not jointly, shall
indemnify and hold harmless each Underwriter and the Independent Underwriter,
their respective officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Act, from and against any loss, claim,
damage or liability, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to purchases
and sales of Shares), to which that Underwriter or Independent Underwriter,
officer, employee or controlling person may become subject, under the Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any breach of the representations and warranties of
such Sponsor Selling Stockholder contained herein, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (iii) the omission or alleged omission to state in any
Preliminary Prospectus, Registration Statement or the Prospectus, or in any
amendment or supplement thereto, any material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission relates to information provided to
the Company or the Representatives in writing by such Selling Stockholder
specifically for use in the Registration Statement, the Preliminary Prospectus
or the Prospectus or to any breach of the representations and warranties made by
such Sponsor Selling Stockholder in Section 1(d) of this Agreement; and shall
reimburse each Underwriter or the Independent Underwriter, as the case may be,
its officers and employees and each such controlling person for any legal or
other expenses reasonably incurred by that Underwriter or Independent
Underwriter, its officers and employees or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that such Sponsor Selling Stockholder shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or omission
or alleged omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any such amendment or supplement in reliance
upon and in conformity with written information concerning such Underwriter or
the Independent Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter or the Independent Underwriter specifically
for inclusion therein or constitutes a reference to the Independent Underwriter
consented to by it pursuant to Section 9 hereof. The foregoing indemnity
agreement constitutes the sole and exclusive remedy available to the
Underwriters and the Independent Underwriter with respect to any claims against
the Sponsor Selling Stockholders relating to the offering or sale of Shares by
such Sponsor Selling Stockholders hereunder. No Sponsor Selling Stockholder
will be required to indemnify the Underwriters or the Independent
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Underwriter, their officers and employees, and each person, if any, who controls
any Underwriter or the Independent Underwriter within the meaning of the Act
pursuant to this Section 10(b) in an amount in excess of the proceeds received
by such person in respect of all Shares offered and sold by it pursuant to the
Registration Statement.
(c) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, its officers who sign the Registration Statement, each of
its directors (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company), and
each person, if any, who controls the Company within the meaning of the Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto, any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning such
Underwriter furnished to the Company through the Representatives by or on behalf
of that Underwriter specifically for inclusion therein, and shall reimburse the
Company and any such director, officer or controlling person for any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or any such
director, officer, employee or controlling person.
(d) The Independent Underwriter will indemnify and hold harmless the
Company and each Underwriter against any losses, claims, damages or liabilities
to which the Company or such Underwriter, as the case may be, may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, 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, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by the Independent Underwriter expressly for use
therein or constitutes a reference to the Independent Underwriter consented to
by it pursuant to Section 9 hereof; and will reimburse the Company or each
Underwriter, as the case may be, for any legal or other expenses reasonably
incurred by the Company or each Underwriter, as the case may be, in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(e) Promptly after receipt by an indemnified party under this Section 10 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect
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thereof is to be made against the indemnifying party under this Section 10,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 10 except to the extent it has been materially prejudiced by such
failure and, provided further, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to an indemnified
party otherwise than under this Section 10. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 10 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof; 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 in good faith
reasonably concluded that there may be 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 may be deemed to conflict with the
interests of the indemnifying party, the indemnified party shall have the right
to select a separate counsel 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, provided
further that in no event shall the foregoing proviso require the indemnifying
party to bear the fees and expenses of more than one separate counsel, in
addition to local counsel, for each of the following classes of parties hereto:
(i) the Representatives and those other Underwriters and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought under this
Section 10, (ii) the Company and its Subsidiaries, (iii) the Crown Selling
Stockholders, (iv) the Executive Selling Stockholders and (v) the Sponsor
Selling Stockholders. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, 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
to the extent provided in this Section 10.
(f) If the indemnification provided for in this Section 10 shall for any
reason be unavailable to or insufficient (other than by reason of the exceptions
provided therein) to hold harmless an indemnified party under Section 10(a),
10(b), 10(c) or 10(d) in respect of any loss, claim, damage or liability, or any
action in respect thereof, referred to therein, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such proportion as
shall be appropriate to reflect the relative benefits received by each party to
this agreement from the offering of the Shares or (ii) if the
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allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each party to
this agreement with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, the Crown Selling Stockholders, the Executive Selling Stockholder,
the Sponsor Selling Stockholders, the Underwriters or the Independent
Underwriter with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company, the
Crown Selling Stockholders, the Executive Selling Stockholders or the Sponsor
Selling Stockholders, as the case may be, the total underwriting discounts and
commissions received by the Underwriters with respect to the Shares purchased
under this Agreement as set forth in the table on the cover page of the
Prospectus and the fee payable to the Independent Underwriter pursuant to the
first sentence of Section 4(e) hereof, respectively, bear to the sum of the
total proceeds from the sale of the Securities (before deducting expenses) in
the offering and the fee payable to the Independent Underwriter pursuant to the
first sentence of Section 4(e) hereof. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company, the Crown Selling Stockholders, the Executive Selling
Stockholders, the Sponsor Selling Stockholders, the Underwriters or the
Independent Underwriter, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Crown Selling Stockholders, the Executive Selling
Stockholders, the Sponsor Selling Stockholders, the Underwriters and the
Independent Underwriter agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Underwriters and the Independent Underwriter were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 10 shall be deemed to include, for purposes of this
Section 10(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 10(e), no Underwriter
nor the Independent Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public was offered to the public, and the
Independent Underwriter shall not be required to contribute any amount in excess
of the amount by which the total price at which the Securities underwritten by
the Underwriters and distributed to the public were offered to the public,
exceeds the amount of any damages which such Underwriter or the Independent
Underwriter, as the case may be, has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No Selling Stockholder will be required to contribute any amount in
excess of the proceeds received by such person in respect of all Shares offered
and sold by it pursuant to the Registration Statement and 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 Underwriters' obligations to contribute as
provided in this Section 10(e) are several in proportion to their respective
underwriting obligations and not joint.
(g) As used herein, the phrase "actual knowledge" means, with respect to
any natural person, the actual knowledge of such person and, with respect to any
other person, the actual
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knowledge of any natural person exercising control (whether by ownership or
management) over such person, and shall not imply any duty to investigate or be
deemed to include any knowledge that might have become actually known following
investigation. The phrase "actually known" shall have a correlative meaning.
(h) The obligations of the Company under this Section 10 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter or the Independent Underwriter within the meaning of the Act; the
obligations of the Underwriters under this Section 10 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company or the Independent Underwriter within
the meaning of the Act; and the obligations of the Independent Underwriter under
this Section 10 shall be in addition to any liability which the Independent
Underwriter may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Underwriter within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
36
<PAGE>
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any non-
defaulting Underwriter, the Independent Underwriter, the Company or the Selling
Stockholders, except for the expenses to be borne by the Company and the Selling
Stockholders and the Underwriters as provided in Section 7 hereof and the
indemnity and contribution agreements in Section 10 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders, the several
Underwriters and the Independent Underwriter, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any Underwriter,
the Independent Underwriter or any controlling person of any Underwriter, the
Independent Underwriter, the Company, or any of the Selling Stockholders, or any
officer or director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of and payment for
the Shares.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter or the Independent Underwriter except as provided
in the second sentence of Section 4(e) hereof and in Sections 7 and 10 hereof;
but, if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter or the Independent Underwriter
in respect of the Shares not so delivered except as provided in the second
sentence of Section 4(e) hereof and in Sections 7 and 10 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; if to the Independent Underwriter shall be delivered
37
<PAGE>
or sent by mail, letter or facsimile transmission to the name and address of
Independent Underwriter; if to any Selling Stockholder shall be delivered or
sent by mail, telex or facsimile transmission to counsel for such Selling
Stockholder at its address set forth in Schedule II hereto; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 10(e) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by you upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof. The Company and the Selling Stockholders shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Underwriters by any of the Representatives and the Company and the
Underwriters shall be entitled to act and rely upon any request, consent, notice
or agreement given or made on behalf of the Selling Stockholders by their
respective Custodians.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Independent Underwriter, the Company and the Selling
Stockholders and, to the extent provided in Sections 10 and 12 hereof, the
officers and directors of the Company and each person who controls the Company,
any Selling Stockholder, any Underwriter or the Independent Underwriter, and
their respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day on which the New York Stock Exchange,
Inc. is open for trading.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to any provisions
relating to conflicts of law.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us 10 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters and the Independent Underwriter, this letter
and such acceptance hereof shall constitute a binding agreement among each of
the Underwriters, the Independent Underwriter, the Company and each of the
Selling Stockholders. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is pursuant to the authority set forth in a
form of U.S. Agreement among Underwriters, the form of which shall be submitted
to the Company and the Selling Stockholders for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
38
<PAGE>
Any person executing and delivering this Agreement as attorney-in-fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
attorney-in-fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such attorney-in-fact to take such
action.
Very truly yours,
Crown Castle International Corp.
By:
----------------------------------
Name:
Title:
RC Investors Corp.
BC Investors Corp.
Ted B. Miller, Jr.
David L. Ivy
Charles C. Green, III
John L. Gwyn
Alan Rees
George E. Reese
By:
----------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each of
the Crown Selling Stockholders and Executive
Selling Stockholders named in Schedule II to this
Agreement.
39
<PAGE>
Robert F. McKenzie
Berkshire Fund III, A Limited Partnership
Berkshire Fund IV, Limited Partnership
Berkshire Investors LLC
Candover Investments, plc
Candover (Trustees) Limited
Candover Partners Limited
Centennial Fund IV, L.P.
NAS Partners I, L.L.C.
American Home Assurance Company
Fay, Richwhite Communications Limited
Harvard Private capital Holdings, Inc.
New York Life Insurance Company
PNC Venture Corp.
Prime VIII, L.P.
By:
----------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each of
the Sponsor Selling Stockholders named in Schedule
II to this Agreement.
Accepted as of the date hereof
Goldman, Sachs & Co.
By:
----------------------------------
Salomon Smith Barney Inc.
By:
----------------------------------
Name:
Title:
On behalf of each of the Underwriters
Lehman Brothers Inc.
By:
----------------------------------
Name:
Title:
40
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- ----------------- --------------
<S> <C> <C>
Goldman, Sachs & Co..........................................
Salomon Smith Barney Inc.....................................
Lehman Brothers Inc..........................................
Credit Suisse First Boston Corporation.......................
Legg Mason Wood Walker, Incorporated.........................
---------------- --------------
Total.............................................. 22,160,000 3,298,043
================ ==============
</TABLE>
41
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Company................................................................. 18,686,131 0
The Crown Selling Stockholders(a):
BC Investors Corp...................................................... 843,000 0
RC Investors Corp...................................................... 743,000 0
The Executive Selling Stockholders(b):
Ted B. Miller, Jr...................................................... 145,088 380,589
David L. Ivy........................................................... 58,758 154,135
Charles C. Green, III.................................................. 37,007 97,076
John L. Gwyn........................................................... 15,562 40,820
Alan Rees.............................................................. 26,422 69,308
George E. Reese........................................................ 36,976 96,994
The Sponsor Selling Stockholders(c):
Robert F. McKenzie..................................................... 5,304 13,912
Berkshire Fund III, A Limited Partnership.............................. 163,932 256,500
Berkshire Fund IV, Limited Partnership................................. 349,518 546,885
Berkshire Investors LLC................................................ 25,202 39,432
Candover Investments, plc.............................................. 62,569 97,901
Candover (Trustees) Limited............................................ 5,596 8,756
Candover Partners Limited.............................................. 236,184 369,552
Centennial Fund IV, L.P................................................ 264,240 413,451
Nassau Capital Partners II, L.P........................................ 135,617 212,195
NAS Partners I, L.L.C.................................................. 843 1,321
American Home Assurance Company........................................ 74,516 116,593
Fay, Richwhite Communications Limited.................................. 75,042 117,416
Harvard Private Capital Holdings, Inc.................................. 65,105 101,871
New York Life Insurance Company........................................ 28,478 44,559
PNC Venture Corp....................................................... 53,782 84,154
Prime VIII, L.P........................................................ 22,128 34,623
--------------- ------------------
Total.................................................................. 22,160,000 3,298,043
=============== ==================
</TABLE>
(a) The Crown Selling Stockholders are represented by Kirkpatrick &
Lockhart LLP, 1500 Oliver Building, Pittsburgh, PA 15222, and have appointed E.
Blake Hawk and Wesley D. Cunningham and each of them, as the Attorneys-in-Fact
for each such Crown Selling Stockholder.
(b) The Executive Selling Stockholders are represented by Brown, Parker &
Leahy, L.L.P., Two Allen Center, 1200 Smith Street, Suite 3600, Houston, TX
77002 and have appointed E. Blake Hawk and Wesley D. Cunningham and each of
them, as the Attorneys-in-Fact for each such Executive Selling Stockholder.
42
<PAGE>
(c) The Sponsor Selling Stockholders are represented by Hutchins, Wheeler &
Dittmar, 101 Federal Street, Boston, Massachusetts 02110 and have appointed Carl
Ferenbach and Garth H. Greimann and each of them, as the Attorneys-in-Fact for
each such Sponsor Selling Stockholder.
43
<PAGE>
SCHEDULE III
Michel Azibert
Bruno Chetaille
Carl Ferenbach
Randall A. Hack
William A. Murphy
Jeffrey H. Schutz
E. Blake Hawk
Wesley D. Cunningham
Edward W. Wallander
John P. Kelly
Centennial Fund V, L.P.
Centennial Entrepreneurs Fund V, L.P.
The Northwestern Mutual Life Insurance Company
Crown Atlantic Holding Company LLC
Digital Future Investments B.V.
[each vice president of the Company]
[each other stockholder that is not a director or Selling Stockholder and that
beneficially owns 1,000,000 shares or more]
44
<PAGE>
ANNEX I(a)
[Form of Comfort Letter delivered by KPMG LLP
pursuant to Section 8(i) of the Underwriting Agreement]
<PAGE>
ANNEX I(b)
[Form of Comfort Letter to be delivered by KPMG LLP
as of each Time of Delivery pursuant to Section 8(i) of the Underwriting
Agreement]
<PAGE>
ANNEX II(a)
[Form of Opinion of Latham & Watkins
pursuant to section 8(b) of the Underwriting Agreement]
<PAGE>
ANNEX II(b)
[Form of Opinion of Cravath, Swaine & Moore
pursuant to section 8(c) of the Underwriting Agreement]
<PAGE>
ANNEX II(c)
[Form of Opinion of E. Blake Hawk, General Counsel
pursuant to section 8(d) of the Underwriting Agreement]
<PAGE>
ANNEX II(d)
[Form of Opinion of Norton Rose
pursuant to section 8(e) of the Underwriting Agreement]
<PAGE>
ANNEX II(e)
[Form of Opinion of Kirkpatrick & Lockhart LLP
pursuant to section 8(f) of the Underwriting Agreement]
<PAGE>
ANNEX II(f)
[Form of Opinion of Brown, Parker & Leahy
pursuant to section 8(g) of the Underwriting Agreement]
<PAGE>
ANNEX II(g)
[Form of Opinion of Hutchins, Wheeler & Dittmar
pursuant to section 8(h) of the Underwriting Agreement]
<PAGE>
EXHIBIT 1.2
Crown Castle International Corp.
Common Stock
---------------
International Underwriting Agreement
, 1999
Goldman Sachs International
Salomon Smith Barney International
Lehman Brothers International (Europe)
Credit Suisse First Boston (Europe) Ltd.
Legg Mason Limited
As representatives (the "Representatives")
of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International
Peterborough Court
133 Fleet Street
London EC4A 2BB, England
Ladies and Gentlemen:
Crown Castle International Corp., a Delaware corporation (the
"Company"), RC Investors Corp., a Delaware corporation, and BC Investors Corp.,
a Delaware corporation (the "Crown Selling Stockholders"), certain executive
officers of the Company named in Schedule II hereto (the "Executive Selling
Stockholders") and certain financial sponsor stockholders, certain other
stockholders who are affiliates of such financial sponsors and certain directors
of the Company named on Schedule II hereto (collectively, the "Sponsor Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 5,540,000 shares (the "Firm Shares") of the Company's Common Stock,
par value $.01 per share ("Stock"). Of the 5,540,000 Firm Shares, the Company
is selling 4,671,533 shares, the Crown Selling Stockholders are selling 396,500
shares, the Executive Selling Stockholders are selling 70,953 shares and the
Sponsor Selling Stockholders are selling 392,014 shares. In addition, the
Executive Selling Stockholders and the Sponsor Selling Stockholders propose,
subject to the terms and conditions stated herein, to grant to the Underwriters
an option to purchase up to an additional 824,511 Shares of Stock on the terms
and for the purposes set forth in Section 2 hereof (the "Optional Shares").
This is to confirm the agreement concerning the purchase by the Underwriters of
the Firm Shares from the Company, the Crown Selling Stockholders, the Executive
Selling Stockholders and the Sponsor Selling Stockholders and of the Optional
Shares, if purchased, from the Executive Selling Stockholders and the Sponsor
Selling Stockholders. The Firm Shares and the Optional Shares, if purchased,
are hereinafter collectively called the "Shares," and the Crown Selling
Stockholders, the Executive Selling Stockholders and the Sponsor Selling
Stockholders are hereinafter collectively referred to as the "Selling
Stockholders".
<PAGE>
It is understood and agreed to by all parties that the Company is and the
Selling Stockholders are concurrently entering into an agreement (the "U.S.
Underwriting Agreement") providing for the sale by the Company and the Selling
Stockholders of up to a total of 25,458,043 shares of Stock (the "U.S. Shares"),
including the overallotment option thereunder, through arrangements with certain
underwriters in the United States (the "U.S. Underwriters"), for whom Goldman,
Sachs & Co., Salomon Smith Barney Inc., Lehman Brothers Inc., Credit Suisse
First Boston Corporation and Legg Mason Wood Walker, Incorporated are acting as
representatives. Anything herein or therein to the contrary notwithstanding,
the respective closings under this Agreement and the U.S. Underwriting Agreement
are hereby expressly made conditional on one another. The Underwriters
hereunder and the U.S. Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting Syndicates (the "Agreement
between Syndicates") which provides, among other things, for the transfer of
shares of Stock between the two syndicates and for consultation by the Lead
Managers hereunder with Goldman, Sachs & Co. prior to exercising the rights of
the Underwriters under Section 8 of the U.S. Underwriting Agreement. Two forms
of prospectus are to be used in connection with the offering and sale of shares
of Stock contemplated by the foregoing, one relating to the Shares hereunder and
the other relating to the U.S. Shares. The latter form of prospectus will be
identical to the former except for certain substitute pages as included in the
registration statement and amendments thereto as mentioned below. Except as
used in Sections 2, 3, 4, 11 and 13 herein, and except as the context may
otherwise require, references hereinafter to the Shares shall include all the
shares of Stock which may be sold pursuant to either this Agreement or the U.S.
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and each of the several Selling Stockholders hereby make to
the Underwriters the same respective representations, warranties and agreements
as are set forth in Section 1 of the U.S. Underwriting Agreement, which Section
is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $_________, the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a
2
<PAGE>
fraction, the numerator of which is the aggregate number of Firm Shares to be
purchased by such Underwriter as set forth opposite the name of such Underwriter
in Schedule I hereto and the denominator of which is the aggregate number of
Firm Shares to be purchased by all of the Underwriters from the Company and all
of the Selling Stockholders hereunder and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional Shares as
provided below, each of the Executive Selling Stockholders and each of the
Sponsor Selling Stockholders agrees, severally and not jointly, to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from each of the Executive Selling Stockholders and each of
the Sponsor Selling Stockholders, at the purchase price per share set forth in
clause (a) of this Section 2, that portion of the number of Optional Shares as
to which such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Executive Selling Stockholders and the Sponsor Selling Stockholders, as
and to the extent indicated in Schedule II hereto, hereby grant, severally and
not jointly, to the Underwriters the right to purchase at their election up to
824,511 Optional Shares, at the purchase price per share set forth in the
paragraph above, for the sole purpose of covering overallotments in the sale of
the Firm Shares. Any such election to purchase Optional Shares shall be made in
proportion to the maximum number of Optional Shares to be sold by each Selling
Stockholder as set forth in Schedule II hereto. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company
and the attorneys-in-fact under the Power of Attorney executed by such Selling
Stockholder, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the attorneys-in-fact otherwise
agree in writing, earlier than two or later than five business days after the
date of such notice.
The Company and the Selling Stockholders shall not be obligated to deliver
any of the Shares to be delivered at the Time of Delivery except upon payment
for all the Shares to be purchased at such Time of Delivery as provided herein.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of International
Agreement among Underwriters and Selling Agreements, which have been previously
submitted to the Company by you. Each Underwriter hereby makes to and with the
Company and the Selling Stockholders the representations and agreements of such
Underwriter as a member of the selling group contained in Sections 3(d) and 3(e)
of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co., for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal (same-
day) funds to the account specified by the Company and the Custodian, as their
interests may appear, to
3
<PAGE>
Goldman, Sachs & Co. at least forty-eight hours in advance. The Company will
cause the certificates representing the Shares to be made available for checking
and packaging at least twenty-four hours prior to the Time of Delivery (as
defined below) with respect thereto at the office of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004 (the "Designated Office"). The time and
date of such delivery and payment shall be, with respect to the Firm Shares,
9:30 a.m., New York City time, on ............., 1999, or such other time and
date as Goldman, Sachs & Co. and the Company and may agree upon in writing, and,
with respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs
& Co. of the Underwriters' election to purchase such Optional Shares, or such
other time and date as Goldman, Sachs & Co. and the Attorneys-in-Fact may agree
upon in writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery", such time and date for delivery of the Firm
Optional Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein called a
"Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 8 of the U.S. Underwriting Agreement,
including the cross-receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 8 of the U.S. Underwriting
Agreement, will be delivered at the offices of Latham & Watkins, 885 Third
Avenue, New York, New York 10021 (the "Closing Location"), and the Shares will
be delivered at the Designated Office, all at each Time of Delivery. A meeting
will be held at the Closing Location at 4:00 p.m., New York City time, on the
New York Business Day next preceding each Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close.
5. The Company hereby makes with the Underwriters the same agreements as
are set forth in Section 6 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set forth
in Section 7 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company, and the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of their
respective obligations hereunder theretofore to be performed, and additional
conditions identical to those set forth in Section 8 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this reference.
8. (a) The Company, the Crown Selling Stockholders and the Executive
Selling Stockholders, jointly and severally, shall indemnify and hold harmless
each Underwriter, its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Shares), to which that Underwriter,
officer, employee or
4
<PAGE>
controlling person may become subject, under the Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any breach of the representations and warranties of such Crown Selling
Stockholder or Executive Selling Stockholder, as the case may be contained
herein; provided that the indemnity by the Company, the Crown Selling
Stockholders or the Executive Selling Stockholders solely with respect to this
clause (i) shall be several and not joint, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, (iii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, any material fact required to be stated therein or necessary
to make the statements therein not misleading, or (iv) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered by clause (ii)
or (iii) above, and shall reimburse each Underwriter and each such officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company, the Crown Selling
Stockholders and the Executive Selling Stockholders shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any such amendment or
supplement, in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein.
Notwithstanding the foregoing provisions, the indemnity and contribution
obligations of the Crown Selling Stockholders and the Executive Selling
Stockholders shall be subject to the following additional limitations: (i) the
Underwriters shall pursue and satisfy any and all claims arising under this
Agreement or otherwise (collectively, "Claims") by seeking recovery from the
Company prior to pursuing any Claim against the Crown Selling Stockholders and
the Executive Selling Stockholders, and the Underwriters shall thereafter be
entitled to pursue any remaining unsatisfied Claims by seeking recovery from the
Crown Selling Stockholders and the Executive Selling Stockholders only following
the Company's failure to satisfy in full the Claims as a result of the Company's
insolvency, bankruptcy or liquidation; (ii) the aggregate amount of any Selling
Stockholder's indemnity and contribution obligations under this paragraph 8(a)
shall not exceed the net cash proceeds received by such Selling Stockholder from
its sale of Shares in the offering after reduction for (A) taxes, (B)
underwriting commissions and discounts, (C) other fees and expenses incurred by
such Selling Stockholder relating to the offering, including legal and financial
advisory fees, and (D) the aggregate amount of any and all direct and indirect
costs or expenses incurred by such Selling Stockholder in defense or settlement
of any other claim against it relating or attributable to the offering or the
sale of Shares by such Selling Stockholder thereunder, including without
limitation claims under the Act; and (iii) the Crown Selling Stockholders or the
Executive Selling Stockholders shall be liable under this paragraph 8(a) solely
with respect to any untrue statement of material fact contained in the
Registration Statement and the Prospectus which was actually known by such
Selling Stockholder as of the date of the Registration Statement or Prospectus
(or such amendment or supplement thereto) to be untrue, or any omission to state
a material fact which was actually known by such Selling Stockholder as of the
date of the Registration Statement or Prospectus (or such amendment or
supplement thereto) to be necessary to make the statements contained in the
Registration Statement or Prospectus (or such amendment or
5
<PAGE>
supplement thereto) in the light of the circumstances under which they were
made, not misleading as of the date of the Registration Statement or Prospectus
(or such amendment or supplement thereto). The provisions of this Section 8
shall constitute the sole and exclusive remedy available to the Underwriters
with respect to any claims against the Crown Selling Stockholders or the
Executive Selling Stockholders relating to the offering or sale of Shares by
such Selling Stockholders hereunder.
(b) Each Sponsor Selling Stockholder, severally and not jointly, shall
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the Act,
from and against any loss, claim, damage or liability, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Shares), to which that Underwriter,
officer, employee or controlling person may become subject, under the Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any breach of the representations and warranties of
such Sponsor Selling Stockholder contained herein, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (iii) the omission or alleged omission to state in any
Preliminary Prospectus, Registration Statement or the Prospectus, or in any
amendment or supplement thereto, any material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission relates to information provided to
the Company or the Representatives in writing by such Selling Stockholder
specifically for use in the Registration Statement, the Preliminary Prospectus
or the Prospectus or to any breach of the representations and warranties made by
such Sponsor Selling Stockholder incorporated by reference in Section 1 of this
Agreement; and shall reimburse each Underwriter, its officers and employees and
each such controlling person for any legal or other expenses reasonably incurred
by that Underwriter, its officers and employees or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that such Sponsor Selling Stockholder shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein. The
foregoing indemnity agreement constitutes the sole and exclusive remedy
available to the Underwriters with respect to any claims against the Sponsor
Selling Stockholders relating to the offering or sale of Shares by such Sponsor
Selling Stockholders hereunder. No Sponsor Selling Stockholder will be required
to indemnify the Underwriters, their officers and employees, and each person, if
any, who controls any Underwriter within the meaning of the Act pursuant to this
Section 8(b) in an amount in excess of the proceeds received by such person in
respect of all Shares offered and sold by it pursuant to the Registration
Statement.
(c) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, its officers who sign the Registration Statement, each of
its directors (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company), and
each person, if any, who controls the Company within
6
<PAGE>
the meaning of the Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or any
such director, officer or controlling person may become subject, under the Act
or otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Representatives by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Underwriter may otherwise have to the
Company or any such director, officer, employee or controlling person.
(d) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 8. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; 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 in good faith reasonably concluded that there may be 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 may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel 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,
provided further that in no event shall the foregoing proviso require the
indemnifying party to bear the fees and expenses of more than one separate
counsel, in addition to local counsel, for each of the following classes of
parties hereto: (i) the Representatives and those other Underwriters and their
respective officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
under this Section 8, (ii) the Company and its Subsidiaries, (iii) the
7
<PAGE>
Crown Selling Stockholders, (iv) the Executive Selling Stockholders and (v) the
Sponsor Selling Stockholders. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, 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 to the extent provided in this Section 8.
(e) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient (other than by reason of the exceptions
provided therein) to hold harmless an indemnified party under Section 8(a), 8(b)
or 8(c) in respect of any loss, claim, damage or liability, or any action in
respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company, the Crown
Selling Stockholders, the Executive Selling Stockholders and the Sponsor Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the Crown Selling Stockholders, the Executive Selling
Stockholders and the Sponsor Selling Stockholders on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company, the Crown Selling Stockholders, the Executive Selling
Stockholders or the Sponsor Selling Stockholders, on the one hand and the
Underwriters on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company, the Crown Selling Stockholders, the Executive Selling Stockholders or
the Sponsor Selling Stockholders, on the one hand, and the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Shares under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company, the Crown Selling
Stockholders or the Executive Selling Stockholders and the Sponsor Selling
Stockholders or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Crown Selling Stockholders, the
Executive Selling Stockholders and the Sponsor Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 8 were to be determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein.
8
<PAGE>
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 8 shall be deemed to include, for purposes of this Section 8(e),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public was
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No Selling Stockholder will be
required to contribute any amount in excess of the proceeds received by such
person in respect of all Shares offered and sold by it pursuant to the
Registration Statement and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 8(e) are several in proportion to their respective underwriting
obligations and not joint.
(f) As used herein, the phrase "actual knowledge" means, with respect to
any natural person, the actual knowledge of such person and, with respect to any
other person, the actual knowledge of any natural person exercising control
(whether by ownership or management) over such person, and shall not imply any
duty to investigate or be deemed to include any knowledge that might have become
actually known following investigation. The phrase "actually known" shall have
a correlative meaning.
(g) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; the obligations of the Underwriters
under this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company and the Selling Stockholders shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
9
<PAGE>
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any non-
defaulting Underwriter or the Company or the Selling Stockholders, except for
the expenses to be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders pro rata (based on the number of Shares to be sold by
the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
GSI, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI. on behalf of
10
<PAGE>
you as the representatives; and in all dealings with any Selling Stockholder
hereunder, GSI and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling Stockholder
made or given by any or all of the Attorneys-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwrites in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
telex No. 94012165, facsimile transmission No. (071) 774-1550; if to any Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to counsel for such Selling Stockholder at its address set forth in Schedule II
hereto; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8 (d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholders by GSI upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof. The Company and the Selling
Stockholders shall be entitled to act and rely upon any request, consent, notice
or agreement given or made on behalf of the Underwriters by any of the
Representatives and the Company and the Underwriters shall be entitled to act
and rely upon any request, consent, notice or agreement given or made on behalf
of the Selling Stockholders by their respective Custodians.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, United States of America, without giving
effect to any provisions relating to conflicts of law.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us 10 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters, the Company and
each of the Selling Stockholders. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of International Agreement among Underwriters, the form of which
shall be submitted to the Company and the Selling Stockholders for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
11
<PAGE>
Any person executing and delivering this Agreement as attorney-in-fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
attorney-in-fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such attorney-in-fact to take such
action.
Very truly yours,
Crown Castle International Corp.
By:
----------------------------------
Name:
Title:
RC Investors Corp.
BC Investors Corp.
Ted B. Miller, Jr.
David L. Ivy
Charles C. Green, III
John L. Gwyn
Alan Rees
George E. Reese
By:
----------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each of
the Crown Selling Stockholders and Executive
Selling Stockholders named in Schedule II to this
Agreement.
12
<PAGE>
Robert F. McKenzie
Berkshire Fund III, A Limited Partnership
Berkshire Fund IV, Limited Partnership
Berkshire Investors LLC
Candover Investments, plc
Candover (Trustees) Limited
Candover Partners Limited
Centennial Fund IV, L.P.
NAS Partners I, L.L.C.
American Home Assurance Company
Fay, Richwhite Communications Limited
Harvard Private capital Holdings, Inc.
New York Life Insurance Company
PNC Venture Corp.
Prime VIII, L.P.
By:
----------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of each of
the Sponsor Selling Stockholders named in Schedule
II to this Agreement.
Accepted as of the date hereof
Goldman Sachs International
By:
----------------------------------
Salomon Smith Barney International
By:
----------------------------------
Name:
title:
----------------------------------
On behalf of each of the Underwriters
13
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
<S> <C> <C>
Goldman Sachs International.................................................
Salomon Smith Barney International..........................................
Lehman Brothers International (Europe)......................................
Credit Suisse First Boston (Europe) Ltd.....................................
Legg Mason Limited..........................................................
Total............................................................. 5,540,000 824,511
</TABLE>
14
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Company................................................................. 4,671,533 0
The Crown Selling Stockholders(a):
RC Investors Corp...................................................... 210,750 0
BC Investors Corp...................................................... 185,750 0
The Executive Selling Stockholders(b):
Ted B. Miller, Jr...................................................... 36,272 95,147
David L. Ivy........................................................... 14,690 38,534
Charles C. Green, III.................................................. 9,252 24,269
John L. Gwyn........................................................... 3,890 10,205
Alan Rees.............................................................. 6,605 17,327
George E. Reese........................................................ 9,244 24,249
The Sponsor Selling Stockholders(c):
Robert F. McKenzie..................................................... 1,326 3,478
Berkshire Fund III, A Limited Partnership.............................. 40,983 64,125
Berkshire Fund IV, Limited Partnership................................. 87,380 136,721
Berkshire Investors LLC................................................ 6,300 9,858
Candover Investments, plc.............................................. 15,642 24,475
Candover (Trustees) Limited............................................ 1,399 2,189
Candover Partners Limited.............................................. 59,046 92,388
Centennial Fund IV, L.P................................................ 66,060 103,363
Nassau Capital Partners II, L.P........................................ 33,904 53,049
NAS Partners I, L.L.C.................................................. 211 330
American Home Assurance Company........................................ 18,629 29,148
Fay, Richwhite Communications Limited.................................. 18,761 29,354
Harvard Private Capital Holdings, Inc.................................. 16,276 25,468
New York Life Insurance Company........................................ 7,120 11,140
PNC Venture Corp....................................................... 13,445 21,039
Prime VIII, L.P........................................................ 5,532 8,655
------------- --------------
Total.................................................................. 5,540,000 824,511
============= ==============
</TABLE>
(a) The Crown Selling Stockholders are represented by Kirkpatrick &
Lockhart LLP, 1500 Oliver Building, Pittsburgh, PA 15222, and have appointed E.
Blake Hawk and Wesley D. Cunningham and each of them, as the Attorneys-in-Fact
for each such Crown Selling Stockholder.
(b) The Executive Selling Stockholders are represented by Brown, Parker &
Leahy, L.L.P., Two Allen Center, 1200 Smith Street, Suite 3600, Houston, TX
77002 and have appointed E. Blake Hawk and Wesley D. Cunningham and each of
them, as the Attorneys-in-Fact for each such Executive Selling Stockholder.
15
<PAGE>
(c) The Sponsor Selling Stockholders are represented by Hutchins, Wheeler &
Dittmar, 101 Federal Street, Boston, Massachusetts 02110 and have appointed Carl
Ferenbach and Garth H. Greimann and each of them, as the Attorneys-in-Fact for
each such Sponsor Selling Stockholder.
16
<PAGE>
EXHIBIT 1.3
Crown Castle International Corp.
___% Senior Notes Due 2011 and
___% Senior Discount Notes Due 2011
Underwriting Agreement
----------------------
.......................,1999
Goldman, Sachs & Co.,
Salomon Smith Barney Inc.,
Lehman Brothers Inc.,
Credit Suisse First Boston Corporation
BancBoston Robertson Stephens
McDonald Investments Inc., A KeyCorp Company
As representatives (the "Representatives") of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Crown Castle International Corp., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of $150,000,000 principal amount of the __ % Senior Notes Due 2011 (the "Senior
Notes") and of $300,000,000 initial accreted value ($______ principal amount at
maturity) of the __% Senior Discount Notes due 2011 (the "Senior Discount
Notes" and, together with the Senior Notes, the "Securities").
The Company and the Underwriters, in accordance with the requirements of
Rule 2720 ("Rule 2720") of the National Association of Securities Dealers, Inc.
(the "NASD") and subject to the terms and conditions stated herein, also hereby
confirm the engagement of the services of Lehman Brothers Inc. (the "Independent
Underwriter") as a "qualified independent underwriter" within the meaning of
Section (b)(15) of Rule 2720 in connection with the offering and sale of the
Securities.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters and the Independent Underwriter that:
(i) A registration statement on Form S-1 (File No. 333-74553) (as
amended by each pre-effective amendment thereto, the "Initial Registration
Statement") in respect of the Securities has been filed with the Securities
and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, (each in the form
heretofore delivered to you excluding exhibits thereto) for each of the
other Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size of
the offering (a "Rule 462(b) Registration Statement"), filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or
<PAGE>
the Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Act is hereinafter called a
"Preliminary Prospectus"); the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 6(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective, each as amended at the time such part of
the Initial Registration Statement became effective or such part of the
Rule 462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, is hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. or by the Independent Underwriter expressly for use
therein;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. or by the Independent
Underwriter expressly for use therein;
(iv) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, except such as are described in the Prospectus or
such as would not be reasonably expected, in the aggregate, to result in a
material adverse effect on the condition (financial or other), business,
prospects, properties or results of operations of the
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Borrower and its "significant subsidiaries" as defined in Rule 405 of the
rules and regulations of the Commission promulgated under the Act, taken as
a whole ("Material Adverse Effect");
(v) The Company and its subsidiaries have good and indefeasible title to
all real property and good and marketable title to all personal property
owned by them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus; and any real
property and buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases with such
exceptions as would not be reasonably expected, in the aggregate, to result
in a Material Adverse Effect;
(vi) The Company is a corporation duly incorporated and validly existing
and in good standing under the laws of the State of Delaware with all
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus, and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify or to be in good
standing would not have a Material Adverse Effect; and each subsidiary of
the Company has been duly incorporated and is validly existing as a
corporation (or in the case of Crown Atlantic Holding Company LLC, as a
limited liability company) in good standing under the laws of its
jurisdiction of incorporation;
(vii) None of the subsidiaries of the Company (other than Crown
Communication, Inc. ("CCI"), Castle Transmission Services (Holdings) Ltd.
("CTSH"), Castle Transmission International, Ltd. ("CTI"), Crown Castle
Investment Corp. ("CC Investment"), Crown Castle Investment Corp. (II) ("CC
Investment II"), CCA Investment Corp. ("CCAIC"), Crown Atlantic Holding
Company LLC ("Crown Atlantic Holdings"), Crown Atlantic Holding Sub LLC
("Crown Atlantic Sub") and Crown Atlantic Company LLC ("Crown Atlantic")
(collectively, the "Significant Subsidiaries")) is a "significant
subsidiary," as such term is defined in Rule 405 of the rules and
regulations under the Act;
(viii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the description of the stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except as set forth in the Prospectus;
(ix) The Securities have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly executed, authenticated, issued and delivered and will
constitute valid and legally binding obligations of the Company and will be
entitled to the benefits provided by the respective Indentures to be dated
as of ________, 1999 (the "Indentures") between the Company and United
States Trust Company of New York, as Trustee (the "Trustee"), under which
they are to be issued, each of which is substantially in the form filed as
an exhibit to the Registration Statement, each of the Indentures has been
duly authorized and duly qualified under the Trust Indenture Act and, when
executed and delivered by the Company and the Trustee, will constitute a
valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
3
<PAGE>
relating to or affecting creditor's rights and to general equity
principles; and the Securities and the Indentures will conform to the
description thereof in the Prospectus;
(x) The issue and sale of the Securities hereunder and the compliance by
the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
(with the giving of notice or the lapse of time or both) constitute a
default under, (A) any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, (B) the provisions of the charter, by-laws or
other constitutive documents of the Company or any of its subsidiaries or
(C) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties or assets except in the cases
of clause (A) or (C), such breaches, violations or defaults that in the
aggregate would not have a Material Adverse Effect; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue and
sale of the Securities or the consummation by the Company of the
transactions contemplated by this Agreement, except (A) the registration
under the Act of the Securities and (B) such consents, approvals,
authorizations, registrations or qualifications as (1) may be required
under the Exchange Act and applicable state or foreign securities laws in
connection with the purchase and distribution of the Securities by the
Underwriters, (2) as may have already been obtained or made and (3) the
failure to obtain or make would not, individually or in the aggregate, have
a Material Adverse Effect;
(xi) Neither the Company nor any of its subsidiaries (A) is in violation
of its charter, by-laws or other constitutive documents, (B) is in default
in any material respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject or (C) is in violation
in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business, except for, in
the cases of clause (B) or (C), such defaults, violations or failures to
obtain that in the aggregate would not have a Material Adverse Effect;
(xii) The statements set forth in the Prospectus under the caption
"Description of the Notes", insofar as they purport to constitute a summary
of the terms of the Securities, under the caption "Certain US Income Tax
Considerations for Non-U.S. Holders" and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xiii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
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<PAGE>
(xiv) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company", as such term
is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xv) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xvi) KPMG LLP, who have certified certain financial statements of the
Company and its subsidiaries and of certain other business operations to be
acquired by the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(xvii) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which
the business or operations of the Company or any of its subsidiaries will
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a material adverse effect on the general affairs,
management, the current or future consolidated financial position, business
prospects, stockholders' equity or results of operations of the Company and
its subsidiaries or result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used herein
means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of dates
or time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to
January 1, 2000;
(xviii) This Agreement has been duly authorized, executed and delivered
by the Company and, assuming due authorization, execution and delivery by
the Underwriters, constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing, regardless of whether in a proceeding in
equity or at law);
(xix) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company or any of its subsidiaries
and any person (other than Robert A. Crown) granting such person the right
to require the Company or any of its subsidiaries to file a registration
statement under the Securities Act with respect to any securities of the
Company and its subsidiaries owned or to be owned by such person or to
require the Company or any of its subsidiaries to include such securities
in the securities registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other registration
statement filed by the Company or any of its subsidiaries under the
Securities Act;
(xx) The consolidated historical and pro forma financial statements,
together with the related notes thereto filed as part of the Registration
Statement or included in the Prospectus comply as to form in all material
respects with the requirements of Regulation S-X under the Act applicable
to registration statements on Form S-1 under the Act. Such historical
financial statements fairly present the financial position of the Company
at the respective dates
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<PAGE>
indicated and the results of operations and cash flows for the respective
periods indicated, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout such
periods. Such pro forma financial statements have been prepared on a basis
consistent with such historical statements, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and in good faith and present fairly the pro forma
position, results of operations and the other information purported to be
shown therein at the respective dates or the respective periods therein
specified. The other financial and statistical information and data filed
as part of the Registration Statement or included in the Prospectus,
historical and pro forma, are, in all material respects, fairly presented
and prepared on a basis consistent with such financial statements and the
books and records of the Company;
(xxi) The Company and each of the Significant Subsidiaries has such
permits, licenses, franchises, certificates of need and other approvals or
authorizations of any governmental or regulatory authority ("Permits"),
including, without limitation, any permits required by the Federal
Communications Commission ("FCC"), the Federal Aviation Administration
("FAA") or the Office of Telecommunications ("OFTEL"), as are necessary
under applicable law to own their respective properties and to conduct
their respective businesses in the manner described in the Prospectus,
except to the extent that the failure to have such Permits would not have a
Material Adverse Effect. The Company and the Significant Subsidiaries have
fulfilled and performed, in all material respects, all their respective
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Prospectus and except to the
extent that any such revocation or termination would not have a Material
Adverse Effect. Except as described in the Prospectus, none of the Permits
contains any restriction that has not previously been satisfied and that is
materially burdensome to the Company or any of the Significant
Subsidiaries;
(xxii) For each existing tower of the Company not yet registered with
the FCC where registration will be required, the FCC's grant of an
application for registration of such tower will not have a significant
environmental effect as defined under Section 1.1307(a) of the FCC's rules;
(xxiii) The consummation of the transactions contemplated by this
Agreement shall not cause any third party to have any rights of first
refusal with respect to the acquisition of towers under any agreement filed
as an exhibit to, or incorporated by reference in, the Registration
Statement (the "Material Agreements") that has not already been described
in the Prospectus as to which the Company and any of the Significant
Subsidiaries or any of their property or assets may be subject;
(xxiv) The Company and each of the Significant Subsidiaries owns or
possesses all patents, trademarks, trademark registration, service marks,
service mark registrations, trade names, copyrights, licenses, inventions,
trade secrets and rights described in the Prospectus as being owned by any
of them or necessary for the conduct of their respective businesses, and
neither the Company nor any of the Significant Subsidiaries is aware of any
claim to the contrary or any challenge by any other person to the rights of
the Company or any of the Significant Subsidiaries with respect to such
rights that, if determined adversely to the Company or any such Significant
Subsidiary, would in the aggregate have a Material Adverse Effect;
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(xxv) The descriptions in the Prospectus of all agreements, contracts,
indentures, leases or other instruments are accurate in all material
respects and fairly present the information purported to be described
therein;
(xxvi) Neither the Company nor any of its subsidiaries is involved in
any strike, job action or labor dispute with any group of employees, and,
to the knowledge of the Company and the Subsidiaries, no such action or
dispute is threatened;
(xxvii) The Company and each of its subsidiaries are in compliance in
all material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification;
(xxviii) The Company and each of its subsidiaries have filed all
federal, state and local income and franchise tax returns required to be
filed through the date hereof and have paid all taxes due thereon, and no
tax deficiency has been determined adversely to the Company or any of its
subsidiaries nor does the Company or any of its subsidiaries have any
knowledge of any tax deficiency which, if determined adversely to the
Company or any of its subsidiaries, would have a Material Adverse Effect;
(xxix) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Registration Statement, the Company has not (i) issued or
granted any securities, (ii) incurred any liability or obligation, direct
or contingent, or entered into any transaction, in each case not in the
ordinary course of business which is material to the Company and its
subsidiaries taken as a whole or (iii) declared or paid any dividend on its
capital stock (excluding payment in lieu of fractional shares upon
conversion of certain senior preferred convertible stock of the Company);
(xxx) The Company (i) makes and keeps accurate books and records and
(ii) maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements in
conformity with GAAP and to maintain accountability for assets, (C) access
to its assets is permitted only in accordance with management's general or
specific authorization and (D) the reported accountability for its assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(xxxi) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment;
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(xxxii) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or any of its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
or could not be reasonably likely to have, singularly or in the aggregate,
a Material Adverse Effect; there has been no material spill, discharge,
leak, emission, injection, escape, dumping or release of any kind onto such
property or into the environment surrounding such property of any toxic
wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or any of its subsidiaries or
with respect to which the Company or any of its subsidiaries has knowledge,
except for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably likely
to have, singularly or in the aggregate, a Material Adverse Effect; and the
terms "hazardous wastes," "toxic wastes," "hazardous substances" and
"medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to
environmental protection; and
(xxxiii) The Company and each of the Significant Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of its businesses and the value of its properties
and as is customary for companies engaged in similar businesses in similar
industries.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price of ....% of the initial accreted value thereof, plus accreted
value, if any, from . . . . . . . . . . . . . , 1999 to the Time of Delivery
hereunder, the principal amount of Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
The Company shall not be obligated to deliver any of the Securities to
be delivered at the Time of Delivery except upon payment for all the Securities
to be purchased at the Time of Delivery as provided herein.
3. Upon the authorization by the Representatives of the release of the
Securities, the several Underwriters propose to offer the Securities for sale
upon the terms and conditions set forth in the Prospectus.
4. (a) The Company hereby confirms its engagement of the services of the
Independent Underwriter as, and the Independent Underwriter hereby confirms its
agreement with the Company to render services as, a "qualified independent
underwriter" within the meaning of Section (b)(15) of Rule 2720 with respect to
the offering and sale of the Securities.
(b) The Independent Underwriter hereby represents and warrants to, and
agrees with, the Company and the Underwriters that with respect to the offering
and sale of the Securities as described in the Prospectus:
(i) The Independent Underwriter constitutes a "qualified independent
underwriter" within the meaning of Section (b)(15) of Rule 2720;
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(ii) The Independent Underwriter has participated in the preparation of
the Registration Statement and the Prospectus and has exercised the usual
standards of "due diligence" in respect thereto;
(iii) The Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act
specifically including those inherent in Section 11 thereof;
(iv) Based upon (A) a review of the Company, including an examination
of the Registration Statement, information regarding the earnings, assets,
capital structure and growth rate of the Company and other pertinent
financial and statistical data, (B) inquiries of and conferences with the
management of the Company and its counsel and independent public
accountants regarding the business and operations of the Company, (C)
consideration of the prospects for the industry in which the Company
competes, estimates of the business potential of the Company, assessments
of its management, the general condition of the securities markets, market
prices of the capital stock and debt securities of, and financial and
operating data concerning, companies believed by the Independent
Underwriter to be comparable to the Company with debt securities of
maturity and seniority similar to the Securities and the demand for
securities of comparable companies similar to the Securities, and (D) such
other studies, analyses and investigations as the Independent Underwriter
has deemed appropriate, and assuming that the offering and sale of the
Securities is made as contemplated herein and in the Prospectus, the
Independent Underwriter recommends, as of the date of the execution and
delivery of this Agreement, that the yield on the Securities be not less
than ...% (corresponding to an initial public offering price of ...%),
which minimum yield should in no way be considered or relied upon as an
indication of the value of the Securities; and
(v) Subject to the provisions of Section 8 hereof, the Independent
Underwriter will furnish to the Underwriters at the Time of Delivery a
letter, dated the Time of Delivery, in form and substance satisfactory to
the Underwriters, to the effect of clauses (i) through (iv) above.
(c) The Independent Underwriter hereby agrees with the Company and the
Underwriters that, as part of its services hereunder, in the event of any
amendment or supplement to the Prospectus, the Independent Underwriter will
render services as a "qualified independent underwriter" within the meaning of
Section (b)(15) of Rule 2720 with respect to the offering and sale of the
Securities as described in the Prospectus as so amended or supplemented that are
substantially the same as those services being rendered with respect to the
offering and sale of the Securities as described in the Prospectus (including
those described in subsection (b) above).
(d) The Company, the Underwriters and the Independent Underwriter agree to
comply in all material respects with all of the requirements of Rule 2720
applicable to them in connection with the offering and sale of the Securities.
The Company agrees to cooperate with the Underwriters and the Independent
Underwriter to enable the Underwriters to comply with Rule 2720 and the
Independent Underwriter to perform the services contemplated by this Agreement.
(e) As compensation for the services of the Independent Underwriter
hereunder, the Company agrees to pay the Independent Underwriter $ .... at the
Time of Delivery. In addition, the Company agrees promptly to reimburse the
Independent Underwriter for all out of pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with this Agreement
and the services to be rendered hereunder.
5. The Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request
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upon at least forty-eight hours' prior notice to the Company, shall be delivered
by or on behalf of the Company to Goldman, Sachs & Co., through the facilities
of The Depository Trust Company ("DTC"), for the account of such Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the account specified
by the Company to Goldman, Sachs & Co. at least forty-eight hours in advance.
The Company will cause the certificates representing the Securities to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) at the office of DTC or its designated
custodian (the "Designated Office"). The Securities to be purchased by each
Underwriter hereunder will be represented by one or more definitive global
Securities in book-entry form which will be deposited by or on behalf of the
Company with The Depository Trust Company ("DTC") or its designated custodian.
The Company will deliver the Securities to Goldman, Sachs & Co., for the account
of each Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company to Goldman, Sachs & Co. at least forty-eight
hours in advance, by causing DTC to credit the Securities to the account of
Goldman, Sachs & Co. at DTC. The time and date of such delivery and payment
shall be 9:30 a.m., New York City time, on ....................., 1999 or such
other time and date as the Representatives and the Company may agree upon in
writing. Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 8 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Underwriters
pursuant to Section 8 hereof, will be delivered at the offices of Latham &
Watkins, 885 Third Avenue, New York, New York 10022 (the "Closing Location"),
and the Securities will be delivered at the Designated Office, all at the Time
of Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New
York City time, on the New York Business Day next preceding the Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 5, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
6. The Company agrees with each of the Underwriters and with the
Independent Underwriter:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by the Representatives promptly after
reasonable notice thereof; to advise the Representatives and the
Independent Underwriter, promptly after it receives notice thereof, of the
time when the Registration Statement, or any amendment thereto, has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives and
the Independent Underwriter with copies thereof; to advise the
Representatives and the Independent Underwriter, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of
any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order
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preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, to promptly use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters and the Independent Underwriter with copies of the
Prospectus in New York City in such quantities as the Representatives and
the Independent Underwriter may reasonably request, and, if the delivery of
a prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Securities and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act or the Trust Indenture Act, to notify the
Representatives and upon the request of the Representatives to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as the Underwriters may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance; and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any of the Securities at any time nine months or more after the
time of issue of the Prospectus, upon request of the Representatives but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as the Representatives may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the later of the Time of Delivery and such earlier time as
you may notify the Company, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder any securities of the
Company that are substantially similar to the Securities;
(f) During a period of three years from the effective date of the
Registration Statement, to furnish to the Representatives copies of all
reports or other communications (financial or other) furnished to
shareholders, and to deliver to the Representatives (i) as soon as they are
available, (A) copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange on which
the Securities or any class of
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securities of the Company is listed and (B) the documents specified in
Section 4.03 of the Indentures as in effect at the Time of Delivery;
(g) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds"; and
(h) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
7. The Company covenants and agrees with the several Underwriters and the
Independent Underwriter that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters, the Independent Underwriter and dealers; (ii) the
cost of printing or producing any Agreement Among Underwriters, this Agreement,
the Indentures, the Blue Sky and Legal Investment Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 6(b) hereof, including the
fees and disbursements of counsel for the Underwriters (not in excess, in the
aggregate, of $7,500) in connection with such qualification and in connection
with the Blue Sky and legal investment surveys; (iv) any fees charged by
securities rating services for rating the Securities; (v) the filing fees
incident to any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Securities; (vi) the cost of
preparing the Securities; (vii) the fees and expenses of the Trustee and any
agent of the Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Indentures and the Securities; and (ix) all other costs
and expenses incident to the performance of its obligations hereunder which are
not otherwise specifically provided for in this Section. It is understood,
however, except as provided in this Section, and Sections 10 and 13 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
8. The respective obligations of the Underwriters and the Independent
Underwriter hereunder shall be subject, in the sole discretion of the
Representatives or the Independent Underwriter, as the case may be, to the
condition that all representations and warranties of the Company herein are, at
and as of the Time of Delivery, true and correct, the condition that the Company
shall have performed all of its obligations hereunder theretofore to be
performed, the condition (in the case of the Underwriters) that the Independent
Underwriter shall have furnished to the Underwriters the letter referred to in
clause (v) of Section 4(b) hereof and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 6
(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the
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effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information
on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Representatives or the Independent
Underwriter, as the case may be;
(b) Latham & Watkins, counsel for the Underwriters, shall have furnished
to the Representatives or the Independent Underwriter, as the case may be,
such written opinion or opinions (a draft of which is attached as Annex
II(a) hereto), dated the Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (v), (vi), (vii), (viii) and (ix) and the
paragraph following clause (xii) of subsection (c) below as well as such
other related matters as the Representatives or the Independent
Underwriter, as the case may be, may reasonably request, and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Cravath, Swaine & Moore, counsel for the Company, shall have
furnished to the Representatives or the Independent Underwriter, as the
case may be, their written opinion (a draft of which is attached as Annex
II(b) hereto), dated the Time of Delivery, in form and substance
satisfactory to the Representatives or the Independent Underwriter, as the
case may be, to the effect that:
(i) Each of the Company, CCI, CC Investment, CC Investment II,
CCAIC, Crown Atlantic Holdings, Crown Atlantic Sub and Crown Atlantic is
a corporation validly existing and in good standing under the laws of
the state of its incorporation or formation (which opinion may be based
solely on a certificate of the Secretary of State of such state), and
has all requisite corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus. Each of the Company, CCI, CC Investment, CC Investment II,
CCAIC, Crown Atlantic Holdings, Crown Atlantic Sub and Crown Atlantic is
duly registered and qualified to conduct its business and is in good
standing (which opinion may be based solely on a certificate of the
Secretary of State of such state), in each jurisdiction or place where,
based on a certificate of an officer of the Company, the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or to
be in good standing would not have a Material Adverse Effect;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery);
and the shares conform to the description of the Stock contained in the
Prospectus;
(iii) To the knowledge of such counsel, there are no agreements,
contracts, indentures, leases or other instruments to which the Company
or any of the Significant Subsidiaries is a party or to which any of
their respective properties or assets is subject that are required to be
described in, or filed as exhibits to, the Registration Statement and
the Prospectus that have not been so described or filed;
(iv) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph of
Rule 424(b) of the Rules and Regulations specified in such opinion on
the date specified therein and no stop order suspending the
effectiveness of the Registration Statement has been issued and, to the
knowledge of
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<PAGE>
such counsel, no proceeding for that purpose is pending or threatened by
the Commission;
(v) Each of the Indentures has been duly and validly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Trustee, will constitute the valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and to
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless of
whether in a proceeding in equity or at law); and each of the Indentures
is duly qualified under the Trust Indenture Act;
(vi) The Securities have been duly and validly authorized by the
Company and when duly executed by the Company in accordance with the
terms of the respective Indenture and, assuming due authentication of
the Securities by the Trustee, upon delivery to the Underwriters against
payment therefor in accordance with the terms hereof, will have been
validly issued and delivered, and will constitute valid and binding
obligations of the Company entitled to the benefits of the respective
Indenture, enforceable against the Company in accordance with their
terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, regardless of
whether in a proceeding in equity or at law); and the Securities and the
Indentures conform to the descriptions thereof in the Prospectus;
(vii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder;
(viii) The statements contained (A) in the Prospectus under the
captions "Description of the Notes", "Underwriting" and "Certain United
States Federal Tax Consequences to Non-United States Holders" and (B) in
the Registration Statement in Items 14 and 15, in each case insofar as
they are descriptions of contracts, agreements or other legal documents,
or refer to statements of law or legal conclusions, are accurate in all
material respects and present fairly the information purported to be
described therein;
(ix) This Agreement has each been duly and validly authorized,
executed and delivered by the Company;
(x) None of the issuance, offer or sale of Securities, the
execution, delivery or performance by the Company of this Agreement or
compliance by the Company with the provisions hereof (i) requires any
consent, approval, authorization or other order of, or registration or
filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official, or conflicts or will conflict
with or constitutes or will constitute a breach of, or a default under,
the certificate of incorporation or by-laws or other organizational
documents of the Company or (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, any
Material Agreement or violates or will violate any law, rule or
regulation of the United States, or the State of New
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York or the General Corporation Law of the State of Delaware, or, to
such counsel's knowledge, any order or decree of any court or government
agency or instrumentality or will result in the creation or imposition
of any Lien upon any property or assets of the Company, CCI, CC
Investment, CC Investment II, CCAIC, Crown Atlantic Holdings, Crown
Atlantic Sub or Crown Atlantic pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may
be bound or under any to which any of their respective property or
assets is subject, except in each case such breaches, conflicts or
defaults that, individually or in the aggregate, would not have a
Material Adverse Effect. For purposes of the foregoing opinion, such
counsel may assume that any agreements referred to in clause (ii) above
that are governed by laws other than the laws of the State of New York,
are governed by and would be interpreted in accordance with the laws of
the State of New York;
(xi) The Company is not and, upon sale of the Securities to be
issued and sold thereby in accordance herewith and the application of
the net proceeds to the Company of such sale as described in the
Prospectus under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of
1940, as amended; and
(xii) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
In addition, such counsel shall also state 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 Registration Statement and the Prospectus, and, although such
counsel has made certain inquiries and investigations in connection with
the preparation of the Registration Statement and the Prospectus, it is not
passing upon and does not assume any responsibility for the accuracy or
completeness of the statements contained in the Registration Statement and
the Prospectus, and has not made any independent check or verification
thereof, except insofar as such statements relate to such counsel and to
clause (vii) above, 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 Registration Statement and the
Prospectus, as of its date or as of the Closing Date, included or includes
an untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion with respect
to the financial statements and other financial data included therein);
The opinion of such counsel may be limited to the laws of the State of
New York, the General Corporation Law of the State of Delaware and the
Federal laws of the United States;
(d) E. Blake Hawk, general counsel to the Company, shall have furnished
to the Representatives or the Independent Underwriter, as the case may be,
his written opinion, (a draft of which is attached as Annex II(c) hereto),
dated such Time of Delivery, in form and substance reasonably satisfactory
to the Representatives or the Independent Underwriter, as the case may be,
to the effect that:
(i) All of the issued shares of capital stock of the Company and
each Subsidiary of the Company other than CTSH and CTI have been duly
and validly authorized and
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issued and are fully paid, non-assessable and (except for directors'
qualifying shares) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims, except as set
forth in the Registration Statement (including the exhibits thereto)
with respect to shares subject to liens under the Company's revolving
credit facility with KeyBank National Association and PNC Bank, National
Association;
(ii) To knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its Subsidiaries (other than CTSH and CTI), or to which any of
their respective properties is subject, that are not disclosed in the
Prospectus and which are reasonably likely to have a Material Adverse
Effect or to materially affect the issuance of the shares of capital
stock or the consummation of the transactions contemplated by this
Agreement; and
(iii) To the knowledge of such counsel, except as described in the
Prospectus there are no contracts, agreements or understandings between
the Company or any of its Subsidiaries (other than CTSH and CTI) and any
person granting such person the right to require the Company or any of
such Subsidiaries to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company or any of such Subsidiaries to include
such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to
any other registration statement filed by the Company or any of such
Subsidiaries under the Act;
The opinion of such counsel may be limited to the laws of the State of
Texas, the General Corporation Law of the State of Delaware and the Federal
laws of the United States;
(e) Norton Rose, English counsel for CTSH and CTI, shall have furnished
to the Representatives or the Independent Underwriter, as the case may be,
their written opinion (a draft of which is attached as Annex II(d) hereto),
dated such Time of Delivery, in form and substance reasonably to the
Representatives or the Independent Underwriter, as the case may be, to the
effect that:
(i) CTI was duly incorporated on 9 May 1996 under the Companies Act
1985 as a private limited company; CTSH was duly incorporated on 27
August 1996 as a private limited company; a certificate of good standing
in respect of each of the Companies issued by the Companies Registration
Office on a date within three business days of the date of this opinion
is attached;
(ii) by a Certificate of Incorporation on Change of Name issued on
21 March 1997 CTI changed its name to "Castle Transmission International
Ltd."; by a Certificate of Incorporation on Change of Name issued on 25
February 1997, CTSH changed its name to "Castle Transmission Services
(Holdings) Ltd."; and
(iii) CTI is empowered by its Memorandum of Association to conduct
its business as described in the Registration Statement and the
Prospectus;
(f) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at the Time of Delivery, KPMG L.L.P.
shall have furnished to the Representatives a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
the Representatives to the effect set forth in Annex I hereto (the executed
copy of the letter delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and a draft of the form of letter
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to be delivered on the effective date of any post-effective amendment to
the Registration Statement and as of each Time of Delivery is attached as
Annex I(b) hereto);
(g)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities on the
terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance
or review, with possible negative implications, its rating of any of the
Company's debt securities;
(i) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii)
a general moratorium on commercial banking activities declared by either
Federal or New York State authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of the Representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities on the terms and in the manner contemplated in
the Prospectus; or (v) the occurrence of any material adverse change in the
existing financial, political or economic conditions in the United States
or elsewhere which, in the judgment of the Representatives, would
materially and adversely affect the financial markets or the market for the
Securities and other debt securities;
(j) The Company shall have complied with the provisions of Section 6(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(k) The Company shall have furnished or caused to be furnished to the
Representatives and the Independent Underwriter at the Time of Delivery
certificates of officers of the Company satisfactory to the Representatives
and the Independent Underwriter as to the accuracy of the representations
and warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (g) of this Section and as to such other matters as
the Representatives and the Independent Underwriter may reasonably request;
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(l) The Company shall have furnished to the Representatives a
certificate, in form and substance reasonably acceptable to counsel to the
Representatives, dated the First Time of Delivery, of its Chief Financial
Officer with respect to certain tower data of the Company set forth in the
Prospectus; and
(m) The closing of the public offering and sale of the Company's common
stock pursuant to that certain U.S. underwriting agreement between the
Company, the selling stockholders named therein, and Goldman, Sachs & Co.,
Salomon Smith Barney Inc., Lehman Brothers Inc., Credit Suisse First Boston
Corporation and Legg Mason Wood Walker Incorporated and the closing under
that certain international underwriting agreement between the Company, the
selling stockholders named therein, and Goldman Sachs International,
Salomon Smith Barney Inc., Lehman Brothers International (Europe), Credit
Suisse First Boston (Europe) Ltd. and Legg Mason Limited shall have
occurred concurrently with the closing hereunder on the Time of Delivery.
9. The Independent Underwriter hereby consents to the references to it as
set forth under the caption "Underwriting" in the Prospectus and in any
amendment or supplement thereto made in accordance with Section 6(a) hereof.
10. (a) The Company will indemnify and hold harmless each Underwriter and
the Independent Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or the Independent Underwriter, as
the case may be, may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, 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 Underwriter or the Independent
Underwriter, as the case may be, for any legal or other expenses reasonably
incurred by such Underwriter or the Independent Underwriter, as the case may be,
in connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case 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 made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. or the Independent
Underwriter expressly for use therein or constitutes a reference to the
independent Underwriter consented to by it pursuant to Section 9 hereof.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Independent Underwriter, as the case may be, against any losses, claims, damages
or liabilities to which the Company may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
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reimburse the Company or the Independent Underwriter, as the case may be, for
any legal or other expenses reasonably incurred by the Company or the
Independent Underwriter, as the case may be, in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) The Independent Underwriter will indemnify and hold harmless the
Company and each Underwriter against any losses, claims, damages or liabilities
to which the Company or such Underwriter, as the case may be, may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, 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, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by the Independent Underwriter expressly for use
therein or constitutes a reference to the Independent Underwriter consented to
by it pursuant to Section 9 hereof; and will reimburse the Company or each
Underwriter, as the case may be, for any legal or other expenses reasonably
incurred by the Company or each Underwriter, as the case may be, in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above 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 under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. 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 therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 10 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by each party to this agreement from the offering of the
19
<PAGE>
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of each party to this agreement in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Underwriters and the Independent Underwriter shall be deemed to be in the same
proportion as the total net proceeds from the sale of the Securities (before
deducting expenses) received by the Company in the offering, the total
underwriting discount and commissions payable to the Underwriters as set forth
in the table on the cover page of the Prospectus and the fee payable to the
Independent Underwriter pursuant to the first sentence of Section 4(e) hereof,
respectively, bear to the sum of the total proceeds from the sale of the
Securities (before deducting expenses) in the offering and the fee payable to
the Independent Underwriter pursuant to the first sentence of Section 4(e)
hereof. The relative fault 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 either the Underwriters or the
Independent Underwriter on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Underwriters and the Independent
Underwriter agree that it would not be just and equitable if contribution
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters and the Independent Underwriter 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 above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter nor the Independent Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public, and the Independent Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by the Underwriters and distributed to the public
were offered to the public, exceeds the amount of any damages which such
Underwriter or the Independent Underwriter, as the case may be, 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 Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company under this Section 10 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter or the Independent Underwriter within the meaning of the Act; the
obligations of the Underwriters under this Section 10 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to each
person, if any, who controls the Company or the Independent Underwriter within
the meaning of the Act; and the obligations of the Independent Underwriter under
this Section 10 shall be in
20
<PAGE>
addition to any liability which the Independent Underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company (including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the
Company) and to each person, if any, who controls the Company or any Underwriter
within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, the Representatives may in
their discretion arrange for the Representatives or another party or other
parties to purchase such Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such Securities, then the Company shall be
entitled to a further period of thirty-six hours within which to procure another
party or other parties satisfactory to the Representatives to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, the Representatives notify the Company that they have so arranged for
the purchase of such Securities, or the Company notifies the Representatives
that it has so arranged for the purchase of such Securities, the Representatives
or the Company shall have the right to postpone the Time of Delivery for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in the opinion
of the Representatives may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this Agreement
with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by the Representatives
and the Company as provided in subsection (a) above, the aggregate principal
amount of such Securities which remains unpurchased does not exceed one-eleventh
of the aggregate principal amount of all the Securities, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the
principal amount of Securities which such Underwriter agreed to purchase
hereunder and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the principal amount of Securities which
such Underwriter agreed to purchase hereunder) of the Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by the Representatives
and the Company as provided in subsection (a) above, the aggregate principal
amount of Securities which remains unpurchased exceeds one-eleventh of the
aggregate principal amount of all the Securities, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter or Underwriters,
then this Agreement shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter, the Independent Underwriter or the Company,
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 7 hereof and the indemnity and contribution agreements in
Section 10 hereof; but nothing herein shall relieve a defaulting Underwriter
from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the several Underwriters and the
Independent Underwriter, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter, the Independent Underwriter or
any controlling
21
<PAGE>
person of any Underwriter, the Independent Underwriter or the Company, or any
officer or director or controlling person of the Company, and shall survive
delivery of and payment for the Securities.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
the Company shall not then be under any liability to any Underwriter or the
Independent Underwriter except as provided in the second sentence of Section
4(e) hereof and in Sections 7 and 10 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Securities, but
the Company shall then be under no further liability to any Underwriter or the
Independent Underwriter except as provided in the second sentence of Section
4(e) hereof and in and Sections 7 and 10 hereof.
14. In all dealings hereunder, the Representatives shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by the Representatives jointly or by Goldman, Sachs &
Co. on behalf of the Representatives.
All statements, requests, notices, and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Representatives in care of Goldman, Sachs & Co.,
32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; if to the Independent Underwriter shall be delivered or sent by
mail, letter or facsimile transmission to the name and address of Independent
Underwriter; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 10(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof. The Company shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Underwriters by any of the Representatives.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Independent Underwriter, the Company and, to the
extent provided in Sections 10 and 12 hereof, the officers and directors of the
Company and each person who controls the Company, any Underwriter or the
Independent Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day on which the New York Stock Exchange,
Inc. is open for trading.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to any provisions
relating to conflicts of law.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
22
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us 10 counterparts hereof, and upon the acceptance hereof by the
Representatives, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement among each of the
Underwriters and the Company. It is understood that the Representatives'
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company for examination, upon request, but
without warranty on the part of the Representatives as to the authority of the
signers thereof.
Very truly yours,
Crown Castle International Corp.
By:
--------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
By:
--------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
Lehman Brothers Inc.
By:
--------------------------------
Name:
Title:
23
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount at
Senior Notes Maturity of
to be Senior Notes
Underwriter Purchased to be Purchased
----------- --------- ---------------
<S> <C> <C>
Goldman, Sachs & Co. $
Salomon Smith Barney Inc.................................
Lehman Brothers Inc......................................
Credit Suisse First Boston Corporation...................
BancBoston Robertson Stephens............................
McDonald Investments Inc., A KeyCorp Company.............
----------------- ------------------
Total................................................ $150, 000,000 $
================= ==================
</TABLE>
24
<PAGE>
ANNEX I(a)
[Form of Comfort Letter delivered by KPMG LLP
pursuant to Section 8(f) of the Underwriting Agreement]
1
<PAGE>
ANNEX I(b)
[Form of Comfort Letter to be delivered by KPMG LLP as of each
Time of Delivery pursuant to Section 8(f) of the Underwriting Agreement]
2
<PAGE>
ANNEX II(a)
[Form of Opinion of Latham & Watkins
pursuant to section 8(b) of the Underwriting Agreement]
3
<PAGE>
ANNEX II(b)
[Form of Opinion of Cravath, Swaine & Moore
pursuant to section 8(c) of the Underwriting Agreement]
4
<PAGE>
ANNEX II(c)
[Form of Opinion of E. Blake Hawk, General Counsel
pursuant to section 8(d) of the Underwriting Agreement]
5
<PAGE>
ANNEX II(d)
[Form of Opinion of Norton Rose
pursuant to section 8(e) of the Underwriting Agreement]
6
<PAGE>
EXHIBIT 4.8
================================================================================
CROWN CASTLE INTERNATIONAL CORP.
ISSUER
__% SENIOR NOTES DUE 2011
---------------
INDENTURE
Dated as of __________, 1999
---------------
United States Trust Company of New York
Trustee
---------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)............................................................ 7.10
(a)(2)............................................................ 7.10
(a)(3)............................................................ N.A.
(a)(4)............................................................ N.A.
(a)(5)............................................................ 7.10
(b)............................................................... 7.10
(c)............................................................... N.A.
311(a)............................................................... 7.11
(b)............................................................... 7.11
(c)............................................................... N.A.
312(a)............................................................... 2.05
(b)............................................................... 11.03
(c)............................................................... 11.03
313(a)............................................................... 7.06
(b)(1)............................................................ N.A.
(b)(2)............................................................ 7.07
(c)............................................................... 7.06;11.02
(d)............................................................... 7.06
314(a)............................................................... 4.03;11.02
(b)............................................................... N.A.
(c)(1)............................................................ 11.04
(c)(2)............................................................ 11.04
(c)(3)............................................................ N.A.
(d)............................................................... N.A.
(e)............................................................... 11.05
(f)............................................................... N.A.
315(a)............................................................... 7.01
(b)............................................................... 7.05,11.02
(c)............................................................... 7.01
(d)............................................................... 7.01
(e)............................................................... 6.11
316(a) (last sentence)............................................... 2.09
(a)(1)(A)......................................................... 6.05
(a)(1)(B)......................................................... 6.04
(a)(2)............................................................ N.A.
(b)............................................................... 6.07
(c)............................................................... 2.12
317(a)(1)............................................................ 6.08
(a)(2)............................................................ 6.09
(b)............................................................... 2.04
318(a)............................................................... 11.01
(b)............................................................... N.A.
(c)............................................................... 11.01
</TABLE>
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.02. Other Definitions..................................................................................20
Section 1.03. Incorporation by Reference of Trust Indenture Act..................................................20
Section 1.04. Rules of Construction..............................................................................21
ARTICLE 2 THE NOTES
Section 2.01. Form and Dating....................................................................................21
Section 2.02. Execution and Authentication.......................................................................22
Section 2.03. Registrar and Paying Agent.........................................................................23
Section 2.04. Paying Agent to Hold Money in Trust................................................................23
Section 2.05. Holder Lists.......................................................................................23
Section 2.06. Transfer and Exchange..............................................................................23
Section 2.07. Replacement Notes..................................................................................27
Section 2.08. Outstanding Notes..................................................................................27
Section 2.09. Treasury Notes.....................................................................................28
Section 2.10. Temporary Notes....................................................................................28
Section 2.11. Cancellation.......................................................................................28
Section 2.12. Defaulted Interest.................................................................................28
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.................................................................................29
Section 3.02. Selection of Notes to Be Redeemed..................................................................29
Section 3.03. Notice of Redemption...............................................................................29
Section 3.04. Effect of Notice of Redemption.....................................................................30
Section 3.05. Deposit of Redemption Price........................................................................30
Section 3.06. Notes Redeemed in Part.............................................................................31
Section 3.07. Optional Redemption................................................................................31
Section 3.08. Mandatory Redemption...............................................................................32
Section 3.09. Offer to Purchase by Application of Excess Proceeds................................................32
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes...................................................................................33
Section 4.02. Maintenance of Office or Agency....................................................................34
Section 4.03. Reports............................................................................................34
Section 4.04. Compliance Certificate.............................................................................35
Section 4.05. Taxes..............................................................................................36
Section 4.06. Stay, Extension and Usury Laws.....................................................................36
Section 4.07. Restricted Payments................................................................................36
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.....................................39
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.........................................41
Section 4.10. Asset Sales........................................................................................44
Section 4.11. Transactions with Affiliates......................................................................46
Section 4.12. Liens..............................................................................................47
Section 4.13. Business Activities................................................................................47
Section 4.14. Corporate Existence................................................................................47
Section 4.15. Offer to Repurchase Upon Change of Control.........................................................47
</TABLE>
r1
<PAGE>
<TABLE>
<S> <C>
Section 4.16. Sale and Leaseback Transactions....................................................................49
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries......................50
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness..............................................50
ARTICLE 5 SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets...........................................................50
Section 5.02. Successor Corporation Substituted..................................................................52
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................................................................52
Section 6.02. Acceleration.......................................................................................53
Section 6.03. Other Remedies.....................................................................................54
Section 6.04. Waiver of Past Defaults............................................................................54
Section 6.05. Control by Majority................................................................................54
Section 6.06. Limitation on Suits................................................................................54
Section 6.07. Rights of Holders of Notes to Receive Payment......................................................55
Section 6.08. Collection Suit by Trustee.........................................................................55
Section 6.09. Trustee May File Proofs of Claim...................................................................55
Section 6.10. Priorities.........................................................................................56
Section 6.11. Undertaking for Costs..............................................................................56
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee..................................................................................56
Section 7.02. Rights of Trustee..................................................................................57
Section 7.03. Individual Rights of Trustee.......................................................................58
Section 7.04. Trustee's Disclaimer...............................................................................58
Section 7.05. Notice of Defaults.................................................................................58
Section 7.06. Reports by Trustee to Holders of the Notes.........................................................59
Section 7.07. Compensation and Indemnity.........................................................................59
Section 7.08. Replacement of Trustee.............................................................................60
Section 7.09. Successor Trustee by Merger, etc...................................................................61
Section 7.10. Eligibility; Disqualification......................................................................61
Section 7.11. Preferential Collection of Claims Against Company..................................................61
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...........................................61
Section 8.02. Legal Defeasance and Discharge.....................................................................61
Section 8.03. Covenant Defeasance................................................................................62
Section 8.04. Conditions to Legal or Covenant Defeasance.........................................................62
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions......64
Section 8.06. Repayment to Company...............................................................................64
Section 8.07. Reinstatement......................................................................................65
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes................................................................65
Section 9.02. With Consent of Holders of Notes...................................................................65
Section 9.03. Compliance with Trust Indenture Act................................................................67
Section 9.04. Revocation and Effect of Consents..................................................................67
Section 9.05. Notation on or Exchange of Notes...................................................................67
</TABLE>
r2
<PAGE>
<TABLE>
<S> <C>
Section 9.06. Trustee to Sign Amendments, etc....................................................................68
ARTICLE 10 NOTE GUARANTEES
Section 10.01. Guarantee.........................................................................................68
Section 10.02. Limitation on Guarantor Liability.................................................................69
Section 10.03. Execution and Delivery of Note Guarantee..........................................................69
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms................................................70
Section 10.05. Releases Following Sale of Assets.................................................................70
ARTICLE 11 MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................................................................71
Section 11.02. Notices...........................................................................................71
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.....................................72
Section 11.04. Certificate and Opinion as to Conditions Precedent................................................72
Section 11.05. Statements Required in Certificate or Opinion.....................................................73
Section 11.06. Rules by Trustee and Agents.......................................................................73
Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................73
Section 11.08. Governing Law.....................................................................................73
Section 11.09. No Adverse Interpretation of Other Agreements.....................................................74
Section 11.10. Successors........................................................................................74
Section 11.11. Severability......................................................................................74
Section 11.12. Counterpart Originals.............................................................................74
Section 11.13. Table of Contents, Headings, etc..................................................................74
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF NOTATION OF GUARANTEE
Exhibit C FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS
</TABLE>
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<PAGE>
INDENTURE dated as of May ____, 1999 between Crown Castle International
Corp., a Delaware corporation (the "Company"), and United States Trust Company
of New York, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the __% Senior Notes due
2011 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Definitions.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness 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" means, as of any date of determination,
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 fiscal quarter for which internal financial statements are
available.
For purposes of making the computation referred to above:
(1) 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 (2) of the proviso set forth
in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the calculation date, shall be excluded; and
(3) the corporate development expense of the Company and its Restricted
Subsidiaries calculated in a manner consistent with the audited financial
statements of the Company included in this prospectus shall be added to
Consolidated Cash Flow to the extent it was included in computing
Consolidated Net Income.
1
<PAGE>
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel 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 will be governed by the Section 4.15 and Article 5 hereof and
not by Section 4.10 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 transfer or issuance of Equity Interests of an Unrestricted Subsidiary
to an Unrestricted Subsidiary; provided, however, that such transfer or
issuance does not result in a decrease in the percentage of ownership of
the voting securities of such transferee Unrestricted Subsidiary that are
collectively held by the Company and its Subsidiaries.
(4) a Restricted Payment that is permitted by Section 4.07 hereof ;
(5) grants of leases or licenses in the ordinary course of business; and
(6) disposals of Cash Equivalents.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction,
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determined in accordance with GAAP) of the obligation of the lessee for net
rental payments during the remaining term of the lease included in such sale and
leaseback transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Broker-Dealer" means any broker or dealer registered under the Exchange
Act.
"Business Day" means any day other than a Legal Holiday.
"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;
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(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.
"Cedel" means Cedel Bank, S.A.
"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 the date
hereof, 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 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
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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:
(a) 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
(b) the Principals and their Related Parties own a majority of such
outstanding shares after such transaction.
"Company" means Crown Castle International Corp., and any and all
successors thereto.
"Completed Tower" means any wireless transmission tower owned or managed
by the Company or any of its Restricted Subsidiaries that, as of any date of
determination:
(1) has at least one wireless communications or broadcast tenant that has
executed a definitive lease with the Company or any of its Restricted
Subsidiaries, which lease is producing revenue with respect to the
tower as of the date of determination; and
(2) has capacity for at least two tenants in addition to the tenant
referred to in clause (1) of this definition.
"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 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
(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
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(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 Interest Expense" means, with respect to any Person for any
period:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period determined in accordance with GAAP,
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, imputed interest
with respect to Attributable Debt, 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); plus
(2) all preferred stock dividends paid or accrued in respect of the
Company's and its Restricted Subsidiaries' preferred stock to Persons
other than the Company or a Wholly Owned Restricted Subsidiary of the
Company other than preferred stock dividends paid by the Company in
shares of preferred stock that is not Disqualified Stock.
"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
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(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 who:
(1) was a member of such Board of Directors on the date hereof;
(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 of Directors at the time of such nomination or election;
or
(3) is a designee of a Principal or was nominated by a Principal.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"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 Transaction Agreements" means, collectively:
(1) the Crown Memorandum of Understanding among the Company, Robert A.
Crown and Barbara A. Crown, dated as of July 2, 1998;
(2) the Crown Services Agreement between the Company and Robert A. Crown,
dated as of July 2, 1998; and
(3) 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 tehnical services in connection
therewith.
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"CTI Services Agreement" means the amended and restates services agreement
between CTI and TdF, dated as of August 21, 1998, relating to the provisions of
certain services to CTI.
"CTSH" means Crown 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.
"Custodian" means the Trustee, as Custodian with respect to the Notes in
global form, or any successor entity thereto.
"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 Adjusted Consolidated Cash Flow of the Company as of such date.
"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.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Discount Notes" means the ___% Senior Discount Notes Due 2011 issued
pursuant to an indenture dated of even date herewith.
"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 notes 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 4.07 hereof.
"Eligible Indebtedness" means any Indebtedness other than:
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(1) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof; and
(2) 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).
"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).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date hereof, 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 date hereof.
"Global Note Legend" means the legend set forth in Section 2.06(f), which
is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means the global Notes substantially in the form of
Exhibit A hereto.
"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.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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: The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
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(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or 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:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in
a Global Note through a Participant.
"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 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place
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of payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue on such payment for the
intervening period.
"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).
"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
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(6) without duplication, any reserves that 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 reversed shall be deemed to be Net Proceeds from
an Asset Sale as of the date of such reversal.
"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 the
date CTSH became a Subsidiary).
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.04 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.04 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
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"Participant" means, with respect to the Depositary, Euroclear or Cedel,
a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means any business conducted by the Company, its
Restricted Subsidiaries or CTSH and its Subsidiaries on the date hereof and any
other business related, ancillary or complementary to any such business.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) 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;
(4) 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 4.10 hereof;
(5) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company;
(6) receivables created in the ordinary course of business;
(7) loans or advances to employees made in the ordinary course of business
not to exceed $2.0 million at any one time outstanding;
(8) securities and other assets received in settlement of trade debts or
other claims arising in the ordinary course of business;
(9) purchases of additional Equity Interests in CTSH for cash pursuant to
the governance agreement as the same is in effect on the date hereof
for aggregate cash consideration not to exceed $20.0 million since the
beginning of the quarter during which this Indenture is executed;
(10) the Investment of up to an aggregate of $100.0 million (each such
Investment being measured as of the date made and without giving effect
to subsequent changes in value); and
(11) 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
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such Investment being measured as of the date made and without giving
effect to subsequent changes in value).
"Permitted Liens" means:
(1) Liens securing Eligible Indebtedness of the Company under one or more
Credit Facilities that was permitted by the terms hereof to be
incurred;
(2) Liens securing any Indebtedness of any of the Company's Restricted
Subsidiaries that was permitted by the terms hereof to be incurred;
(3) Liens in favor of the Company;
(4) Liens existing on the date hereof;
(5) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(6) Liens securing Indebtedness permitted to be incurred under clause (5)
of the second paragraph of Section 4.09 hereof; and
(7) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that
do not exceed $5.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the
ordinary course of business); and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries 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); provided that:
(1) the principal amount (or initial accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness 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
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Weighted Average Life to Maturity of, the Indebtedness 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 Notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of
Notes 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.
"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 Fund III, Limited Partnership; Berkshire
Fund IV, Limited Partnership; Berkshire Investors LLC; Berkshire Partners LLC;
Centenial Fund IV, L.P.; Centenial Fund V, L.P.; Centenial Entrepreneurs Fund V,
L.P.; Nassau Capital Partners II, L.P.; NAS Partners I, L.L.C., and TdF and any
Related Party of the foregoing.
"Prospectus" means the prospectus included in a registration statement of
the Company relating to the offering of the Notes 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 in 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.
"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).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
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"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rights Agreements" 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 1/100th of a share of the Company's Series A Participating
Cumulative Preferred Stock, par value $.01 per share.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"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.
"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 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.
"Stockholders' Agreement" means the agreement among the Company and
certain stockholders of the Company and certain stockholders of the Company,
dates 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.
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"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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"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
Trustee) 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.
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"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.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means 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:
(a) to subscribe for additional Equity Interests; or
(b) 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
Trustee by filing with the 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 4.07 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
Indenture, and any Indebtedness of that 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 Section 4.09
hereof, the Company shall be in default of Section 4.09 hereof). The Board of
Directors may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that the designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted
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Subsidiary and the designation shall only be permitted if (1) such Indebtedness
is permitted under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the four-quarter reference
period and (2) no Default would occur or be in existence following such
designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"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 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, 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.
"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 or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- -------
<S> <C>
"Affiliate Transaction"........................................................... 4.11
"Asset Sale"...................................................................... 4.10
"Asset Sale Offer"................................................................ 3.09
"Authentication Order"............................................................ 2.02
"Change of Control Offer"......................................................... 4.15
"Change of Control Payment"....................................................... 4.15
"Change of Control Payment Date".................................................. 4.15
"Covenant Defeasance"............................................................. 8.03
"Event of Default"................................................................ 6.01
"Excess Proceeds"................................................................. 4.10
"incur"........................................................................... 4.09
"Legal Defeasance"................................................................ 8.02
"Offer Amount".................................................................... 3.09
"Offer Period".................................................................... 3.09
"Paying Agent".................................................................... 2.03
"Payment Default"................................................................. 6.01
"Permitted Debt".................................................................. 4.09
"Purchase Date"................................................................... 3.09
"Registrar"....................................................................... 2.03
"Restricted Payments"............................................................. 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by the TIA's reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
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(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.08 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
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Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of the
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, or premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes, and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note 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, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
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 Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06, or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a); however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Transfers of beneficial
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interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more of the
other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same Global
Note. No written orders or instructions shall be required to be delivered to
the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (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 another
Global Note 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 or (B) (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 cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(g) hereof.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
If any holder of a beneficial interest in a Global Note proposes to exchange
such beneficial interest for a Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of
the applicable Global Note to be reduced accordingly pursuant to Section
2.06(g) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section 2.06(c)
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
Registrar through instructions from the Depositary and the Participant or
Indirect Participant.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests
in Global Notes. A Holder of a Definitive Note may exchange such Note for a
beneficial interest in a Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest in a
Global Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Global Notes.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such requesting Holder's presenting
or surrendering to the Registrar
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<PAGE>
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing, the Registrar shall register the
transfer or exchange of Definitive Notes.
(f) Legends. Each Global Note shall bear a legend in substantially the
following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) 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 TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CROWN CASTLE
INTERNATIONAL CORP."
(g) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee 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 Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note 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 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
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(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes 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 Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
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 Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner, plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company
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shall fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Trustee in the name and at the expense of the Company) shall mail
or cause to be mailed to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (1) the clause of this Indenture pursuant to which the
redemption shall occur, (2) the redemption date, (3) the principal amount of
Notes to be redeemed and (4) the redemption price (expressed as a percentage of
the principal amount).
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed as
follows:
(1) if the Notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee shall deem fair
and appropriate.
No notes of $1,000 of principal amount or less will be redeemed in part.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption. Notices of redemption will be mailed by first class mail at least
30 but not more than 60 days before the redemption date to each Holder of notes
to be redeemed at its registered address. Notices of redemption may not be
conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to such note shall state the portion of the principal amount of that
note to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note presented for redemption will be issued in the name
of the Holder thereof upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue or accrete on notes or portions of
them called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
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The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note
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was registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and, to the extent lawful, on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as provided in clause (b) of this Section 3.07, the Notes will
not be redeemable at the Company's option prior to __________ , 2004. On or
after _____________ 2004, the Company may redeem all or a part of the Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest, if any, on the Notes redeemed to the applicable redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on ___________ of the years indicated below:
Year Percentage
- ---- ----------
2004..................................................... ______%
2005..................................................... ______%
2006..................................................... ______%
2007 and thereafter...................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time during the first 36 months after the date of the original issuance of
the Notes, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of the Notes originally issued at a redemption price
equal to __% of the aggregate principal amount of the Notes to be redeemed on
the redemption date with the net cash proceeds of one or more Public Equity
Offerings and/or Strategic Equity Investments provided that:
(1) at least 65% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption
(excluding notes held by the Company or any of its Subsidiaries); and
(2) the redemption occurs within 60 days of the date of the closing of
such Public Equity Offering or Strategic Equity Investment.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
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Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if
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appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
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The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
Section 4.03. Reports.
Whether or not required by the SEC, so long as any Notes are outstanding,
the Company shall furnish to the Holders of Notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC 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 the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
(in each case to the extent not prohibited by the SEC'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)
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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
SEC on Form 8-K if the Company were required to file such reports, in each
case within the time periods specified in the Company's rules and
regulations.
In addition, whether or not required by the rules and regulations of the
SEC, the Company shall file a copy of all such information and reports with the
SEC for public availability within the time periods specified in the SEC's rules
and regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA (S) 314(a).
Section 4.04. Compliance Certificate.
(1) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers
with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best
of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions
and conditions of this Indenture (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of
which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes
is prohibited or if such event has occurred, a description of the event and
what action the Company is taking or proposes to take with respect thereto.
(2) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied
by a written statement of the Company's independent public accountants (who
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that
the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(3) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
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Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. 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 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 of its Restricted Subsidiaries);
(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 Notes, except a payment of interest or principal at
Stated Maturity; or
(4) make any Restricted Investment, (all such payments and other
actions set forth in these 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 has occurred and is continuing or would occur as a
consequence of the Restricted Payment; and
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(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 4.09 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 date hereof (excluding Restricted Payments permitted
by clauses (2), (3) and (4) of the paragraph of exceptions below), is less
than the sum, without duplication, of:
(a) 100% of the Consolidated Cash Flow of the Company for the
period (taken as one accounting period) from the beginning of the
fiscal quarter during which this Indenture is executed 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 the Consolidated Cash Flow for such period is a
deficit, less 100% of the deficit), less 1.75 times the Consolidated
Interest Expense of the Company since the beginning of the fiscal
quarter during which this Indenture is executed; plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the beginning of the fiscal quarter during which this
Indenture is executed 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 (11) of the second paragraph of Section 4.09 hereof) or from
the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into 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 date hereof is sold for cash or otherwise liquidated or
repaid for cash, the lesser of:
(A) the cash return of capital with respect to the
Restricted Investment (less the cost of disposition, if any), and
(B) the initial amount of the 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 date hereof, 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:
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(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 date hereof 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 preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of that dividend, if at said date of declaration such payment
would have complied with the provisions of this 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 from the sale since the beginning of the fiscal
quarter during which this Indenture is executed (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than any
Disqualified Stock); provided that the net cash proceeds are not used to
incur new Indebtedness pursuant to clause (11) of the second paragraph of
Section 4.09 hereof); and provided further that, in each case, the amount
of any net cash proceeds that are so utilized will 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 Equity Interests on a pro rata basis;
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(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 date
hereof; provided that the aggregate price paid for all of the repurchased,
redeemed, acquired or retired Equity Interests may not exceed (a) $500,000
in any twelve-month period and (b) $5.0 million in the aggregate; or
(6) the payment of scheduled dividends on the Company's 123/4% Senior
Exchangeable Preferred Stock due 2010, whether paid in cash or in kind
through the issuance of additional shares of such preferred stock, all in
accordance with the certificate of designations governing such preferred
stock as in effect on the date hereof.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. 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 the designation and will reduce the amount available for Restricted
Payments under the first paragraph in this Section 4.07. All of those
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of the Investments at the time of such
designation. Such designation will only be permitted if the Restricted Payment
would be permitted at the time and if the 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 the
designation would not cause a Default.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the assets 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 valued will be valued by the Board of Directors whose resolution with respect
to the determination will be delivered to the Trustee.
Section 4.08. 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:
(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.
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The preceding restrictions shall not apply to encumbrances or restrictions
existing under or by reason of:
(1) Existing Indebtedness as in effect on the date hereof, 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 as in
effect on the date hereof;
(2) Indebtedness of any Restricted Subsidiary under any Credit
Facility that is permitted to be incurred pursuant to Section 4.09 hereof;
provided that such Credit Facility and Indebtedness contain only such
encumbrances and restrictions on such Restricted Subsidiary's ability to
engage in the activities set forth in clauses (1) through (4) of the
preceding paragraph as are, at the time such Credit Facility is entered
into or amended, modified, restated, renewed, increased, supplemented,
refunded, replaced or refinanced, ordinary and customary for a Credit
Facility of that type as determined in the good faith judgment of the Board
of Directors (and evidenced in a board resolution), which determination
shall be conclusively binding;
(3) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which the
Subsbidiary 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 the
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;
(4) any Indebtedness incurred in compliance with Section 4.09 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 the
Indebtedness or agreement and the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes 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 interest or principal on the
Notes;
(5) this Indenture;
(6) applicable law;
(7) 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 that Person is acquired by the Company (except to the extent
the Indebtedness was incurred in connection with or in contemplation of the
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, the Indebtedness was permitted by the terms hereof to
be incurred;
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(8) customary non-assignment provisions in leases or licenses entered
into in the ordinary course of business;
(9) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (5) in the second paragraph of Section 4.09 hereof on the property
so acquired;
(10) the provisions of agreements governing Indebtedness incurred
pursuant to clause (4) of the second paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock" hereof;
(11) any agreement for the sale of a Restricted Subsidiary that
restricts that Restricted Subsidiary pending its sale;
(12) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing the Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(13) Liens permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the debtor to transfer the
assets subject to such Liens;
(14) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements; and
(15) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Section 4.09. 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 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 (including Acquired Debt) or issue preferred
stock if, in each case, the Company's Debt to Adjusted Consolidated Cash Flow
Ratio at the time of incurrence of the Indebtedness or the issuance of the
preferred stock, after giving pro forma effect to such incurrence or issuance as
of such date and to the use of proceeds from such incurrence or issuance 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 4.09 shall not
prohibit 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 under Credit Facilities in an aggregate
principal amount (with letters of credit being deemed to
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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 product of $150,000 times the number of
Completed Towers on the date of such incurrence;
(2) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(3) the incurrence by the Company of the Indebtedness represented by
the Notes and the Discount Notes, each issued on the date hereof;
(4) the issuance by the Company of additional shares of its 12 3/4%
Senior Exchangeable Preferred Stock due 2010 solely for the purpose of
paying dividends thereon and the incurrence by the Company of Indebtedness
represented by the Company's 12 3/4% Senior Subordinated Exchange
Debentures due 2010;
(5) 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 (5), not to exceed $10.0 million at any one time outstanding;
(6) 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 Indenture to be incurred under the
first paragraph of this Section 4.09 or clauses (2), (3), (4), (5) or this
clause (6) of this paragraph;
(7) 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, however, 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 Notes of such series and
that:
(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 the
Indebtedness by the Company or the Restricted Subsidiary, as the case
may be;
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(8) 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 Indenture to be
outstanding or currency exchange risk;
(9) 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 Indenture;
(10) 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, the acquisition by the Company or one of its Restricted Subsidiaries;
and provided further that, in the case of any incurrence pursuant to this
clause (10), 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;
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness or Disqualified Stock 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 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 beginning of the fiscal quarter during which this
Indenture is executed (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 4.07 hereof); and
(12) 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 $25.0 million.
In addition, the Company shall not:
(1) incur any Indebtedness that is contractually subordinated in right
of payment to any other Indebtedness of the Company unless such
Indebtedness is also contractually subordinated
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in right of payment to the Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company will be deemed to be
contractually subordinated in right of payment to any other Indebtedness of
the Company solely by virtue of being unsecured; and
(2) permit any of its Unrestricted Subsidiaries to incur any
Indebtedness other than Non-Recourse Debt.
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 (12) 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
shall not be deemed to be an incurrence of Indebtedness for purposes of this
covenant. Indebtedness under Credit Facilities outstanding on the date hereof
shall be deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
Section 4.10. 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 the Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed
of;
(2) fair market value is determined by the Board of Directors and evidenced
by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee; and
(3) except in the case of a Tower Asset Exchange, at least 75% of the
consideration received in such Asset Sale 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:
(a) any liabilities, as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet, of the Company's or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any guarantee of the notes) that
are assumed by the transferee of any assets pursuant to a customary
novation agreement that releases the Company or the Restricted Subsidiary
from further liability; and
(b) any securities, notes or other obligations received by the Company
or any Restricted Subsidiary from the transferee that are converted by the
Company or the Restricted Subsidiary into cash within 20 days of the
applicable Asset Sale, to the extent of the cash received in that
conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the
Company or the Restricted Subsidiary may apply those Net Proceeds to:
(1) reduce Indebtedness under a Credit Facility;
(2) reduce other Indebtedness of any of Restricted Subsidiaries;
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(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
to the acquisition, the Company or its Restricted Subsidiary owns a majority
of the Voting Stock of that business; 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 Net Proceeds, the Company may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the preceding paragraph shall be deemed to constitute "Excess Proceeds". When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an Asset Sale Offer to all Holders of Notes, and all holders of other
senior Indebtedness of the Company containing provisions similar to those set
forth in this Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase the maximum principal amount (or
accreted value, as applicable) of Notes and such other senior Indebtedness of
the Company that may be purchased out of the Excess Proceeds. The offer price in
any Asset Sale Offer will be payable in cash and will be 100% of the principal
amount of the Notes, plus accrued and unpaid interest to the date of purchase,
if any. In the case of any other senior Indebtedness, the offer price shall be
100% of the principal amount (or accreted value, as applicable) of the
Indebtedness plus accrued and unpaid interest thereon, if any, to the date of
purchase. Each Asset Sale Offer shall be made in accordance with the procedures
set forth herein and the other senior Indebtedness of the Company. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
the remaining Excess Proceeds for any purpose not otherwise prohibited hereby.
If the aggregate principal amount of Notes and the other senior indebtedness of
the Company tendered into the Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other senior Indebtedness
to be purchased on a pro rata basis. Upon completion of the Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
Section 4.11. 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 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 the Affiliate
Transaction complies with clause (1) above and that the Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; and
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(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion to the Holders of the Notes as to
the fairness of the Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of
national standing.
Notwithstanding the foregoing, the following items shall not be deemed
Affiliate Transactions:
(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 under Section 4.07 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 date hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any Subsidiary to, engage in
any business other than Permitted Businesses, except to the extent as would not
be material to the Company and its Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect:
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(1) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of
the Company or any such Subsidiary and
(2) the rights (charter and statutory), licenses and franchises of the
Company and its Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
If a Change of Control occurs, the Company shall make an offer (a "Change
of Control Offer") to each Holder to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of each Holder's Notes at a purchase price, in
cash, equal to 101% of the aggregate principal amount of the Notes repurchased,
plus accrued and unpaid interest thereon, if any, (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest 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 a change of control and stating:
(1) that the Change of Control Offer is being made pursuant to
this covenant and that all Notes tendered will be accepted for
payment;
(2) the purchase price and the purchase date, which 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");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing his election
to have the Notes purchased; and
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(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof.
On the Change of Control Payment Date, the Company shall, to the
extent lawful,
(1) accept for payment all Notes or portions of the Notes
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 Notes or portions of the Notes so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent shall promptly mail to each Holder of Notes properly
tendered payment in an amount equal to the purchase price for the Notes (the
"Change of Control Payment"), and the Trustee shall promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered by such
Holder, if any; provided, that each such new Note shall be in a principal amount
of $1,000 or an integral multiple thereof. The Company shall publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of the Indentures are applicable. The
Company shall comply with the requirements of Section 14(e) of the Exchange Act
and any other securities laws or regulations to the extent those laws and
regulations are applicable to any Change of Control Offer. If the provisions of
any of the applicable securities laws or securities regulations conflict with
the provisions of this Section 4.15, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15 by virtue of the compliance.
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 Indentures applicable to a Change of Control Offer made by the Company
and purchases all Notes properly tendered and not withdrawn under such Change of
Control Offer. The provisions under this Indentures relating to the Company's
obligation to make an offer to repurchase the Notes as a result of a Change of
Control may be waived or modified with the written consent of the Holders of a
at least a majority in principal amount of the Notes then outstanding.
Section 4.16. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided,
however, that the Company or any of its Restricted Subsidiaries may enter into a
sale and leaseback transaction if:
(1) the Company or such Restricted Subsidiary, as applicable, could
have:
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(a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to the
Debt to Adjusted Consolidated Cash Flow Ratio test set forth in the
first paragraph of Section 4.09 hereof; or
(b) incurred a Lien to secure such Indebtedness pursuant to the
provisions of Section 4.12 hereof;
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors) of the property that is the subject of the sale and
leaseback transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, Section 4.10 hereof.
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.
The Company:
(1) shall not, and shall not permit any of its Restricted Subsidiaries
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 of its Restricted Subsidiaries 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 4.10 hereof.
Notwithstanding the foregoing, the issuance or sale of shares of Capital
Stock of any Restricted Subsidiary of the Company will not violate the
provisions of the immediately preceding sentence if such shares are issued or
sold in connection with (x) the formation or capitalization of a Restricted
Subsidiary or (y) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary becomes a
Restricted Subsidiary of the Company by reason of the acquisition of securities
or assets from another Person.
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture governing the Notes
providing for the Guarantee of the payment of the Notes by such Subsidiary,
which Guarantee shall be senior to or pari passu with such Subsidiary's
Guarantee of or pledge to secure such other Indebtedness. Notwithstanding the
foregoing, any Guarantee by a Subsidiary of the Notes shall provide
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by its terms that it shall be automatically and unconditionally released and
discharged upon any sale, exchange or transfer, to any Person other than a
Subsidiary of the Company, of all of the Company's stock in, or all or
substantially all the assets of, such Subsidiary, which sale, exchange or
transfer is made in compliance with the applicable provisions of this Indenture.
The form of such Guarantee is attached as Exhibit C hereto.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not:
(1) consolidate or merge with or into (whether or not the Company is the
surviving corporation); or
(2) 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:
(a) either (A) the Company is the surviving corporation; or (B) the
entity or the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which the 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;
(b) 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 the sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the Obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee;
(c) immediately after such transaction no Default exists; and
(d) except in the case of (A) a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company and (B) a merger entered into
solely for the purpose of reincorporating the Company in another jurisdiction:
(x) 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 the transaction, after giving pro forma effect to the
transaction as of such date for balance sheet purposes and as if the 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 for income statement purposes, 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
(y) 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 the sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, at the time of the transaction, after giving pro forma effect to the
transaction as of such date for balance sheet purposes and as if such
transaction had occurred at the beginning of the most recently
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ended four full fiscal quarter period of such entity or Person for which
internal financial statements are available for income statement purposes, 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 entity or Person for purposes of this clause (d) the entity or
Person will be substituted for the Company in the definition of Debt to Adjusted
Consolidated Cash Flow Ratio and the defined terms included therein under
Section 1.01 hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest on the Notes;
(2) default in payment when due of the principal of or premium, if any, on
the Notes;
(3) failure by the Company or any of its Subsidiaries to comply with the
provisions described under Article 5 hereof or failure by CCIC to consummate
a Change of Control Offer or Asset Sale Offer in accordance with the
provisions of this Indenture;
(4) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with any of its other agreements in the Indentures or the
notes;
(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 date of the indentures, which default:
(a) is caused by a failure to pay principal of or premium, if any, or
interest on the Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of the default (a "Payment
Default"); or
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(b) results in the acceleration of the 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 days; or
(7) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
(8) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(b) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company
or any of its Restricted Subsidiaries; or
(c) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon any such
declaration, the principal of, and accrued and unpaid interest if any, on such
Notes shall become due and payable immediately. Notwithstanding the foregoing,
if an Event of Default specified in clause (7) or (8) of Section 6.01 hereof
occurs with respect to the Company or any of its Restricted Subsidiaries, all
outstanding Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of all of the
Holders rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium, if any,
and interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(1) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(3) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
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(5) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
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(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written and oral advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S) 313(b).
The Trustee shall also transmit by mail all reports as required by TIA (S)
313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance
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with TIA (S) 313(d). The Company shall promptly notify the Trustee when the
Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding
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Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $75 million
as set forth in its most recent published annual report of condition.
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This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (1) and (2) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive solely from the
trust fund described in Section 8.04 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due;
(2) the Company's obligations with respect to such Notes under Article 2
and Section 4.02 hereof;
(3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith; and
(4) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
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Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof and clause (4) of Section
5.01 hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(3) through 6.01(b) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, 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 on the
outstanding Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(2) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the 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 date of this Indenture, 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 Notes 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;
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(3) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes 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
either:
(a) 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
(b) insofar as Sections 6.01(7) or 6.01(8) hereof 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 shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this 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 shall have delivered to the Trustee an Opinion of Counsel
to the effect that on 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 shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to
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Section 8.04 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account of
the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of Notes:
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(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of Notes; or
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof) and the Notes with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
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After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected,
an amendment or waiver under this Section 9.02 may not (with respect to any
Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(3) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, or premium, if any, or interest on the Notes;
(7) waive a redemption payment (but not any payment pursuant to Sections
3.09, 4.10 or 4.15 hereof) with respect to any Note;
(8) except as provided under Article Eight hereof or in accordance with
the terms of any Note Guarantee, release any Guarantor from any of its
obligations under its Note Guarantee or make any change in a Note Guarantee that
would adversely affect the Holders of the Notes; or
(9) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
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Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, in addition to the documents required by
Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
NOTE GUARANTEES
Section 10.01. Guarantee.
The provisions of this Article 10 shall apply only to those Subsidiaries
of the Company, if any, that execute one or more supplemental indentures to this
Indenture in the form of Exhibit C to this Indenture in compliance with the
requirements of Section 4.18 of this Indenture.
Subject to this Article 10, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid
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in full or performed, all in accordance with the terms hereof and thereof; and
(b) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any Custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
Section 10.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this
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Article 10, result in the obligations of such Guarantor under its Note Guarantee
not constituting a fraudulent transfer or conveyance.
Section 10.03. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 10.01, each Guarantor
hereby agrees that a notation of such Note Guarantee substantially in the form
included in Exhibit E shall be endorsed by an Officer of such Guarantor on each
Note authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor by its President or one of its Vice
Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.18 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Note Guarantees in accordance with Section 4.18 hereof and
this Article 10, to the extent applicable.
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 10.05, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 10.05 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set
forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so
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issued shall in all respects have the same legal rank and benefit under this
Indenture as the Note Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Note Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions) a
Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the provisions of this Indenture, including without limitation Section 4.10
hereof, the Trustee shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its Note
Guarantee.
Any Guarantor not released from its obligations under its Note Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article 10.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
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If to the Company:
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, New York 10019
Telecopier No.: (212) 474-1000
Attention: Stephen L. Burns, Esq.
If to the Trustee:
Unites States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Telecopier No.: (212) 852-1626
Attention: Gerard F. Ganey
Corporate Trust Division
The Company or the Trustee, by notice to the others, may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) 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 answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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<PAGE>
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, 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
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions; provided that no such rule shall
conflict with the terms of this Indenture or rhe TIA.
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Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE>
SIGNATURES
Dated as of ______, 1999
Crown Castle International Corp.
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------
Name:
Title:
United States Trust Company of New York
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------
Authorized Signatory
Date:
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<PAGE>
[Face of Note]
________________________________________________________________________________
CUSIP/CINS ____________
__% Senior Notes due 2011
No. ___ $____________
CROWN CASTLE INTERNATIONAL CORP.
promises to pay to _____________________________________________________________
or registered assigns, the principal sum of ____________________________________
Dollars on _____________, 2011.
Interest Payment Dates: ____________ and ____________
Record Dates: ____________ and ____________
Dated: ________, ___
CROWN CASTLE INTERNATIONAL CORP.
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
(SEAL)
This is one of the [Global] Notes referred to
in the within-mentioned Indenture:
United States Trust Company of New York,
as Trustee
By: __________________________________
Authorized Signatory
________________________________________________________________________________
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[Back of Note]
___% Senior Notes due 2011
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Crown Castle International Corp., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at ___% per annum from ________________, ____ until maturity. The Company will
pay interest semi-annually in arrears on ___________ and ___________ of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that if there is no existing Default
in the payment of interest, and if this Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be _____________,
____. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the ___________ or ___________ next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, United States Trust Company of
New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of May __, 1999 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code (S)(S) 77aaa-77bbbb) (the "Trust Indenture Act"). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the
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extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $250.0 million in aggregate
principal amount.
5. Optional Redemption.
(a) Except as provided in clause (b) of this Paragraph 5, the Notes will
not be redeemable at the Company's option prior to __________ , 2004. On or
after _____________ 2004, the Company may redeem all or a part of the Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest if any, on the Notes redeemed to the applicable redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the twelve-month period beginning on ___________ of the years indicated below:
Year Percentage
- ---- ----------
2004...................................................... ______%
2005...................................................... ______%
2006...................................................... ______%
2007 and thereafter....................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Paragraph 5, at
any time during the first 36 months after the date of the original issuance of
the Notes, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of the Notes originally issued at a redemption price
equal to __% of the aggregate principal amount of the Notes to be redeemed on
the redemption date with the net cash proceeds of one or more Public Equity
Offerings and/or Strategic Equity Investments provided that:
(1) at least 65% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption
(excluding notes held by the Company or any of its Subsidiaries); and
(2) the redemption occurs within 60 days of the date of the closing of
such Public Equity Offering or Strategic Equity Investment.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest thereon, if any, 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 setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
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(b) If the Company or a Restricted Subsidiary consummates any Asset Sales
when the aggregate amount of Excess Proceeds exceeds $10 million, the Company
shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant
to Section 3.09 of the Indenture to purchase the maximum principal amount of
Notes 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 thereof plus accrued and
unpaid interest thereon, if any, to the date fixed for the closing of such
offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company (or such Restricted
Subsidiary) may use such deficiency for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the 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 Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of Notes, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Securities and Exchange Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
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<PAGE>
12. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of principal of or premium, if any, on the Notes, (iii) failure by the
Company or any of its Subsidiaries to comply with Section 3.09, 4.10, 4.15 or
5.01 of the Indenture; (iv) failure by the Company or any of its Subsidiaries
for 30 days after notice to the Company by the Trustee or the Holders of at
least 25% in principal amount of the Notes then outstanding to comply with
certain other agreements in the Indenture or the Notes; (v) default under
certain other agreements relating to Indebtedness of the Company which default
results in the acceleration of such Indebtedness prior to its express maturity;
(vi) certain final judgments for the payment of money that remain undischarged
for a period of 60 days; and (vii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Restricted Subsidiaries. If any Event
of Default occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, all outstanding
Notes will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders.
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No representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture. Requests may be made to: Crown Castle International
Corp., 510 Bering Drive, Suite 500, Houston, Texas 77057, Attention: Chief
Financial Officer.
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<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: _____________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: _______________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$ _________________________
Date: __________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:______________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer
in in following such of
Principal Amount of Principal Amount of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ------------------- -------------------- -------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
- --------------------------------------------------------------------------------
A-9
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of CROWN CASTLE INTERNATIONAL CORP. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and UNITED STATES TRUST COMPANY OF
NEW YORK, as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of May __, 1999 providing for the
issuance of an aggregate principal amount of up to $250.0 million of ___% Senior
Notes due 2011 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
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(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand
of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all
demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Note
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
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(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any
collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Article 10 of the
Indenture shall result in the obligations of such Guarantor under
its Note Guarantee not constituting a fraudulent transfer or
conveyance.
3 Execution and Delivery. Each Guaranteeing Subsidiary agrees that the
Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or
into (whether or ot such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 10.05 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee on
the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Note Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of
the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank
and benefit under the Indenture as the Note Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as
though all of such Note Guarantees had been issued at the date of the
execution hereof.
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(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor,
or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of
the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds
of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without limitation
Section 4.10 of the Indenture. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in
accordance with the provisions of the Indenture, including without
limitation Section 4.10 of the Indenture, the Trustee shall execute
any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 10 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. 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.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
B-4
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10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:______________
[Guaranteeing Subsidiary]
By:
---------------------------------
Name:
Title:
Crown Castle International Corp.
By:
---------------------------------
Name:
Title:
[Other Guarantors]
By:
---------------------------------
Name:
Title
United States Trust Company of New York
as Trustee
By:
---------------------------------
Name:
Title:
B-5
<PAGE>
EXHIBIT C
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of May __, 1999 (the "Indenture") among
CROWN CASTLE INTERNATIONAL CORP. and UNITED STATES TRUST COMPANY OF NEW YORK, as
trustee (the "Trustee"), (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Note Guarantee. Each Holder of a Note, by accepting
the same, agrees to and shall be bound by such provisions.
[Name of Guarantor(s)]
By:
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.9
================================================================================
CROWN CASTLE INTERNATIONAL CORP.
ISSUER
__% SENIOR DISCOUNT NOTES DUE 2011
---------------
INDENTURE
Dated as of __________, 1999
---------------
United States Trust Company of New York
Trustee
---------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)............................................. 7.10
(a)(2)............................................. 7.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 7.10
(b)................................................ 7.10
(c)................................................ N.A.
311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
312(a)................................................ 2.05
(b)................................................ 11.03
(c)................................................ 11.03
313(a)................................................ 7.06
(b)(1)............................................. N.A.
(b)(2)............................................. 7.07
(c)................................................ 7.06;11.02
(d)................................................ 7.06
314(a)................................................ 4.03;11.02
(b)................................................ N.A.
(c)(1)............................................. 11.04
(c)(2)............................................. 11.04
(c)(3)............................................. N.A.
(d)................................................ N.A.
(e)................................................ 11.05
(f)................................................ N.A.
315(a)................................................ 7.01
(b)................................................ 7.05,11.02
(c)................................................ 7.01
(d)................................................ 7.01
(e)................................................ 6.11
316(a) (last sentence)................................ 2.09
(a)(1)(A).......................................... 6.05
(a)(1)(B).......................................... 6.04
(a)(2)............................................. N.A.
(b)................................................ 6.07
(c)................................................ 2.12
317(a)(1)............................................. 6.08
(a)(2)............................................. 6.09
(b)................................................ 2.04
318(a)................................................ 11.01
(b)................................................ N.A.
(c)................................................ 11.01
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.02. Other Definitions..................................................................................20
Section 1.03. Incorporation by Reference of Trust Indenture Act..................................................20
Section 1.04. Rules of Construction..............................................................................21
ARTICLE 2 THE NOTES
Section 2.01. Form and Dating....................................................................................21
Section 2.02. Execution and Authentication.......................................................................22
Section 2.03. Registrar and Paying Agent.........................................................................23
Section 2.04. Paying Agent to Hold Money in Trust................................................................23
Section 2.05. Holder Lists.......................................................................................23
Section 2.06. Transfer and Exchange..............................................................................23
Section 2.07. Replacement Notes..................................................................................27
Section 2.08. Outstanding Notes..................................................................................27
Section 2.09. Treasury Notes.....................................................................................28
Section 2.10. Temporary Notes....................................................................................28
Section 2.11. Cancellation.......................................................................................28
Section 2.12. Defaulted Interest.................................................................................28
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.................................................................................29
Section 3.02. Selection of Notes to Be Redeemed..................................................................29
Section 3.03. Notice of Redemption...............................................................................29
Section 3.04. Effect of Notice of Redemption.....................................................................30
Section 3.05. Deposit of Redemption Price........................................................................30
Section 3.06. Notes Redeemed in Part.............................................................................31
Section 3.07. Optional Redemption................................................................................31
Section 3.08. Mandatory Redemption...............................................................................32
Section 3.09. Offer to Purchase by Application of Excess Proceeds................................................32
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes...................................................................................33
Section 4.02. Maintenance of Office or Agency....................................................................34
Section 4.03. Reports............................................................................................34
Section 4.04. Compliance Certificate.............................................................................35
Section 4.05. Taxes..............................................................................................36
Section 4.06. Stay, Extension and Usury Laws.....................................................................36
Section 4.07. Restricted Payments................................................................................36
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.....................................39
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.........................................41
Section 4.10. Asset Sales........................................................................................44
Section 4.11. Transactions with Affiliates......................................................................46
Section 4.12. Liens..............................................................................................47
Section 4.13. Business Activities................................................................................47
Section 4.14. Corporate Existence................................................................................47
Section 4.15. Offer to Repurchase Upon Change of Control.........................................................47
</TABLE>
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Page
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Section 4.16. Sale and Leaseback Transactions....................................................................49
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries......................50
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness..............................................50
ARTICLE 5 SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets...........................................................50
Section 5.02. Successor Corporation Substituted..................................................................52
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................................................................52
Section 6.02. Acceleration.......................................................................................53
Section 6.03. Other Remedies.....................................................................................54
Section 6.04. Waiver of Past Defaults............................................................................54
Section 6.05. Control by Majority................................................................................54
Section 6.06. Limitation on Suits................................................................................54
Section 6.07. Rights of Holders of Notes to Receive Payment......................................................55
Section 6.08. Collection Suit by Trustee.........................................................................55
Section 6.09. Trustee May File Proofs of Claim...................................................................55
Section 6.10. Priorities.........................................................................................56
Section 6.11. Undertaking for Costs..............................................................................56
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee..................................................................................56
Section 7.02. Rights of Trustee..................................................................................57
Section 7.03. Individual Rights of Trustee.......................................................................58
Section 7.04. Trustee's Disclaimer...............................................................................58
Section 7.05. Notice of Defaults.................................................................................58
Section 7.06. Reports by Trustee to Holders of the Notes.........................................................59
Section 7.07. Compensation and Indemnity.........................................................................59
Section 7.08. Replacement of Trustee.............................................................................60
Section 7.09. Successor Trustee by Merger, etc...................................................................61
Section 7.10. Eligibility; Disqualification......................................................................61
Section 7.11. Preferential Collection of Claims Against Company..................................................61
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...........................................61
Section 8.02. Legal Defeasance and Discharge.....................................................................61
Section 8.03. Covenant Defeasance................................................................................62
Section 8.04. Conditions to Legal or Covenant Defeasance.........................................................62
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions......64
Section 8.06. Repayment to Company...............................................................................64
Section 8.07. Reinstatement......................................................................................65
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes................................................................65
Section 9.02. With Consent of Holders of Notes...................................................................65
Section 9.03. Compliance with Trust Indenture Act................................................................67
Section 9.04. Revocation and Effect of Consents..................................................................67
</TABLE>
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<TABLE>
<S> <C>
Section 9.05. Notation on or Exchange of Notes...................................................................67
Section 9.06. Trustee to Sign Amendments, etc....................................................................68
ARTICLE 10 NOTE GUARANTEES
Section 10.01. Guarantee.........................................................................................68
Section 10.02. Limitation on Guarantor Liability.................................................................69
Section 10.03. Execution and Delivery of Note Guarantee..........................................................69
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms................................................70
Section 10.05. Releases Following Sale of Assets.................................................................70
ARTICLE 11 MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................................................................71
Section 11.02. Notices...........................................................................................71
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.....................................72
Section 11.04. Certificate and Opinion as to Conditions Precedent................................................72
Section 11.05. Statements Required in Certificate or Opinion.....................................................73
Section 11.06. Rules by Trustee and Agents.......................................................................73
Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................73
Section 11.08. Governing Law.....................................................................................73
Section 11.09. No Adverse Interpretation of Other Agreements.....................................................74
Section 11.10. Successors........................................................................................74
Section 11.11. Severability......................................................................................74
Section 11.12. Counterpart Originals.............................................................................74
Section 11.13. Table of Contents, Headings, etc..................................................................74
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF NOTATION OF GUARANTEE
Exhibit C FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS
</TABLE>
iii
<PAGE>
INDENTURE dated as of May ____, 1999 between Crown Castle International
Corp., a Delaware corporation (the "Company"), and United States Trust Company
of New York, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the __% Senior Discount
Notes due 2011 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Definitions.
"Accreted Value" means, as of any date of determination the sum of:
(1) the initial Accreted Value (which is $____ per $1,000 in principal amount
at maturity of Notes); and
(2) the portion of the excess of the principal amount at maturity of each
note over such initial Accreted Value which shall have been amortized
through such date, such amount to be so amortized on a daily basis and
compounded semiannually on each _______ and _______at the rate of __% per
annum from the date of original issuance of the notes through the date of
determination computed on the basis of a 360-day year of twelve 30-day
months.
The Accreted Value of any Note on or after the Full Accretion Date shall be
equal to 100% of its stated principal amount at maturity.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness 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" means, as of any date of determination,
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 fiscal quarter for which internal financial statements are
available.
For purposes of making the computation referred to above:
(1) 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,
1
<PAGE>
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 (2)
of the proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the calculation date, shall be excluded; and
(3) the corporate development expense of the Company and its Restricted
Subsidiaries calculated in a manner consistent with the audited financial
statements of the Company included in this prospectus shall be added to
Consolidated Cash Flow to the extent it was included in computing
Consolidated Net Income.
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel 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 will be governed by the Section 4.15 and Article 5 hereof and
not by Section 4.10 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;
2
<PAGE>
(3) a transfer or issuance of Equity Interests of an Unrestricted Subsidiary
to an Unrestricted Subsidiary; provided, however, that such transfer or
issuance does not result in a decrease in the percentage of ownership of
the voting securities of such transferee Unrestricted Subsidiary that are
collectively held by the Company and its Subsidiaries.
(4) a Restricted Payment that is permitted by Section 4.07 hereof;
(5) grants of leases or licenses in the ordinary course of business; and
(6) disposals of Cash Equivalents.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Broker-Dealer" means any broker or dealer registered under the Exchange
Act.
"Business Day" means any day other than a Legal Holiday.
"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
3
<PAGE>
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.
"Cedel" means Cedel Bank, S.A.
"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 the date
hereof, 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
4
<PAGE>
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 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:
(a) 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
(b) the Principals and their Related Parties own a majority of such
outstanding shares after such transaction.
"Company" means Crown Castle International Corp., and any and all
successors thereto.
"Completed Tower" means any wireless transmission tower owned or managed
by the Company or any of its Restricted Subsidiaries that, as of any date of
determination:
(1) has at least one wireless communications or broadcast tenant that has
executed a definitive lease with the Company or any of its Restricted
Subsidiaries, which lease is producing revenue with respect to the
tower as of the date of determination; and
(2) has capacity for at least two tenants in addition to the tenant
referred to in clause (1) of this definition.
"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 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
5
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(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 Interest Expense" means, with respect to any Person for any
period:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period determined in accordance with GAAP,
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, imputed interest
with respect to Attributable Debt, 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); plus
(2) all preferred stock dividends paid or accrued in respect of the
Company's and its Restricted Subsidiaries' preferred stock to Persons
other than the Company or a Wholly Owned Restricted Subsidiary of the
Company other than preferred stock dividends paid by the Company in
shares of preferred stock that is not Disqualified Stock.
"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
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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 who:
(1) was a member of such Board of Directors on the date hereof;
(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 of Directors at the time of such nomination or election;
or
(3) is a designee of a Principal or was nominated by a Principal.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"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 Transaction Agreements" means, collectively:
(1) the Crown Memorandum of Understanding among the Company, Robert A.
Crown and Barbara A. Crown, dated as of July 2, 1998;
(2) the Crown Services Agreement between the Company and Robert A. Crown,
dated as of July 2, 1998; and
(3) the Registration Rights Crown Side Letter Agreement, among the Company,
Robert A. Crown and Barbara A. Crown, dated as of August 18, 1998.
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"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 tehnical services in connection
therewith.
"CTI Services Agreement" means the amended and restates services agreement
between CTI and TdF, dated as of August 21, 1998, relating to the provisions of
certain services to CTI.
"CTSH" means Crown 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.
"Custodian" means the Trustee, as Custodian with respect to the Notes in
global form, or any successor entity thereto.
"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 Adjusted Consolidated Cash Flow of the Company as of such date.
"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.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"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 notes 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
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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 4.07 hereof.
"Eligible Indebtedness" means any Indebtedness other than:
(1) Indebtedness in the form of, or represented by, bonds or other
securities or any guarantee thereof; and
(2) 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).
"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).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"Full Accretion Date" means ___________, 2004.
"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 date hereof.
"Global Note Legend" means the legend set forth in Section 2.06(f), which
is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means the global Notes substantially in the form of
Exhibit A hereto.
"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.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"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
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respect thereof), of all or any part of any Indebtedness."Hedging Obligations"
means, with respect to any Person, the obligations of such Person under: The
term "Guarantor" shall mean any Person Guaranteeing any obligation.
(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.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or 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:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in
a Global Note through a Participant.
"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
10
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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 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"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).
"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;
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(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 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 reversed shall be deemed to be Net Proceeds from
an Asset Sale as of the date of such reversal.
"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 the
date CTSH became a Subsidiary).
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the
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<PAGE>
treasurer or the principal accounting officer of the Company, that meets the
requirements of Section 11.04 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.04 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel,
a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means any business conducted by the Company, its
Restricted Subsidiaries or CTSH and its Subsidiaries on the date hereof and any
other business related, ancillary or complementary to any such business.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) 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;
(4) 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 4.10 hereof;
(5) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company;
(6) receivables created in the ordinary course of business;
(7) loans or advances to employees made in the ordinary course of business
not to exceed $2.0 million at any one time outstanding;
(8) securities and other assets received in settlement of trade debts or
other claims arising in the ordinary course of business;
(9) purchases of additional Equity Interests in CTSH for cash pursuant to
the governance agreement as the same is in effect on the date hereof
for aggregate cash consideration not to exceed $20.0 million since the
beginning of the quarter during which this Indenture is executed;
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(10) the Investment of up to an aggregate of $100.0 million (each such
Investment being measured as of the date made and without giving effect
to subsequent changes in value); and
(11) 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 Liens" means:
(1) Liens securing Eligible Indebtedness of the Company under one or more
Credit Facilities that was permitted by the terms hereof to be
incurred;
(2) Liens securing any Indebtedness of any of the Company's Restricted
Subsidiaries that was permitted by the terms hereof to be incurred;
(3) Liens in favor of the Company;
(4) Liens existing on the date hereof;
(5) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(6) Liens securing Indebtedness permitted to be incurred under clause (5)
of the second paragraph of Section 4.09 hereof; and
(7) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that
do not exceed $5.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the
ordinary course of business); and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries 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); provided that:
(1) the principal amount (or initial accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
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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 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 Notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of
Notes 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.
"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 Fund III, Limited Partnership; Berkshire
Fund IV, Limited Partnership; Berkshire Investors LLC; Berkshire Partners LLC;
Centenial Fund IV, L.P.; Centenial Fund V, L.P.; Centenial Entrepreneurs Fund V,
L.P.; Nassau Capital Partners II, L.P.; NAS Partners I, L.L.C., and TdF and any
Related Party of the foregoing.
"Prospectus" means the prospectus included in a registration statement of
the Company relating to the offering of the Notes 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 in 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.
"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).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
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designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"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 Agreements" 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 1/100th of a share of the Company's Series A Participating
Cumulative Preferred Stock, par value $.01 per share.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"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 Notes" means the ___% Senior Notes Due 2011 issued pursuant to an
indenture dated of even date herewith.
"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 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.
"Stockholders' Agreement" means the agreement among the Company and
certain stockholders of the Company and certain stockholders of the Company,
dates 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),
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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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"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
Trustee) of the Tower Assets and cash or Cash Equivalents received by the
Company and its
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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.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Subsidiary" means 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:
(a) to subscribe for additional Equity Interests; or
(b) 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
Trustee by filing with the 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 4.07 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
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purposes of this Indenture, and any Indebtedness of that 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
Section 4.09 hereof, the Company shall be in default of Section 4.09 hereof).
The Board of Directors may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that the 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 the designation
shall only be permitted if (1) such Indebtedness is permitted under Section 4.09
hereof, calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period and (2) no Default would
occur or be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"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 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, 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.
"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 or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
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Section 1.02. Other Definitions.
Defined in
Term Section
- ---- -------
"Affiliate Transaction"......................................... 4.11
"Asset Sale".................................................... 4.10
"Asset Sale Offer".............................................. 3.09
"Authentication Order".......................................... 2.02
"Change of Control Offer"....................................... 4.15
"Change of Control Payment"..................................... 4.15
"Change of Control Payment Date"................................ 4.15
"Covenant Defeasance"........................................... 8.03
"Event of Default".............................................. 6.01
"Excess Proceeds"............................................... 4.10
"incur"......................................................... 4.09
"Legal Defeasance".............................................. 8.02
"Offer Amount".................................................. 3.09
"Offer Period".................................................. 3.09
"Paying Agent".................................................. 2.03
"Payment Default"............................................... 6.01
"Permitted Debt"................................................ 4.09
"Purchase Date"................................................. 3.09
"Registrar"..................................................... 2.03
"Restricted Payments"........................................... 4.07
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by the TIA's reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement or successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount at maturity of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount at maturity of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount at maturity of outstanding Notes represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
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(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount at maturity stated in paragraph 4 of the
Notes. The aggregate principal amount at maturity of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.08 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
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Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of the
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, or premium, if any, or interest on the Notes, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes, and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note 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, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
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 Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06, or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a); however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Transfers of beneficial
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interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more of the
other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same Global
Note. No written orders or instructions shall be required to be delivered to
the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (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 another
Global Note 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 or (B) (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 cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount at maturity of the
relevant Global Note(s) pursuant to Section 2.06(g) hereof.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
If any holder of a beneficial interest in a Global Note proposes to exchange
such beneficial interest for a Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount at
maturity of the applicable Global Note to be reduced accordingly pursuant to
Section 2.06(g) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount at maturity. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c) 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 Registrar through instructions from the
Depositary and the Participant or Indirect Participant.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests
in Global Notes. A Holder of a Definitive Note may exchange such Note for a
beneficial interest in a Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest in a
Global Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Definitive Note and
increase or cause to be increased the aggregate principal amount at maturity
of one of the Global Notes.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such requesting Holder's presenting
or surrendering to the Registrar the Definitive Notes duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by its attorney, duly authorized in
writing, the Registrar shall register the transfer or exchange of Definitive
Notes.
(f) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issues under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) 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 TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CROWN CASTLE
INTERNATIONAL CORP."
(ii) Original Issue Discount Legend. Each Note shall bear a legend in
substantially the following form:
"THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE
UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE.
THE ISSUE DATE OF THIS NOTE IS _________, 1999. THE ISSUE PRICE OF THIS NOTE IS
$______ PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS
ISSUED WITH $______ OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL
AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS ___%".
(g) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount at maturity of Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee 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 Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
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(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note 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 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes 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 Notes during a period beginning at the opening
of business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied
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by the Holder that is sufficient in the judgment of the Trustee and the Company
to protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount at maturity of any Note is considered paid under
Section 4.01 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 Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount at
maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
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Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner, plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (1) the clause of this Indenture pursuant to which the
redemption shall occur, (2) the redemption date, (3) the principal amount at
maturity of Notes to be redeemed and (4) the redemption price (expressed as a
percentage of the principal amount at maturity).
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed as
follows:
(1) if the Notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee shall deem fair
and appropriate.
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No notes of $1,000 of principal amount at maturity or less will be
redeemed in part. Except as provided in the preceding sentence, provisions of
this Indenture that apply to Notes called for redemption also apply to portions
of Notes called for redemption. Notices of redemption will be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of notes to be redeemed at its registered address. Notices of
redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to such note shall state the portion of the principal amount at
maturity of that note to be redeemed. A new note in principal amount at
maturity equal to the unredeemed portion of the original note presented for
redemption will be issued in the name of the Holder thereof upon cancellation of
the original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue or
accrete on notes or portions of them called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal
amount at maturity of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount at
maturity equal to the unredeemed portion shall be issued upon cancellation of
the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such
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notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes, if any, to be redeemed on that date.
The Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest, if any,
on all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, Accreted Value will cease to accrete on the Notes
or the portions of the Notes called for redeemed prior to the Full Accretion
Date, or interest shall cease to accrue on the Notes or the portions of Notes
called for redemption on or after the Full Accretion Date. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Note was registered at the close of business on such
record date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and, to the extent lawful, on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount at
maturity to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as provided in clause (b) of this Section 3.07, the Notes will
not be redeemable at the Company's option prior to __________ , 2004. On or
after _____________ 2004, the Company may redeem all or a part of the Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount at maturity) set forth below plus
accrued and unpaid interest, if any, on the Notes redeemed to the applicable
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on ___________ of the years
indicated below:
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Year Percentage
- ---- ----------
2004................................................... ______%
2005................................................... ______%
2006................................................... ______%
2007 and thereafter.................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time during the first 36 months after the date of the original issuance of
the Notes, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount at maturity of the Notes originally issued at a
redemption price equal to __% of the Accreted Value of the Notes to be redeemed
on the redemption date with the net cash proceeds of one or more Public Equity
Offerings and/or Strategic Equity Investments provided that:
(1) at least 65% of the aggregate principal amount at maturity of the
Notes originally issued remains outstanding immediately after the occurrence of
such redemption (excluding notes held by the Company or any of its
Subsidiaries); and
(2) the redemption occurs within 60 days of the date of the closing of
such Public Equity Offering or Strategic Equity Investment.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the Accreted Value or principal amount, as the case
may be, of Notes required to be purchased pursuant to Section 4.10 hereof (the
"Offer Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount at maturity of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount at maturity of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select the
Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount at maturity to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the
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purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount at maturity equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
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The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
Section 4.03. Reports.
Whether or not required by the SEC, so long as any Notes are outstanding,
the Company shall furnish to the Holders of Notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC 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 the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
(in each case to the extent not prohibited by the SEC'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
SEC on Form 8-K if the Company were required to file such reports, in each
case within the time periods specified in the Company's rules and
regulations.
In addition, whether or not required by the rules and regulations of the
SEC, the Company shall file a copy of all such information and reports with the
SEC for public availability within the time periods specified in the SEC's rules
and regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA (S) 314(a).
Section 4.04. Compliance Certificate.
(1) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers
with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best
of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions
and conditions of this Indenture (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of
which he or she may have knowledge and what action the Company is taking or
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proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes
is prohibited or if such event has occurred, a description of the event and
what action the Company is taking or proposes to take with respect thereto.
(2) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied
by a written statement of the Company's independent public accountants (who
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that
the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(3) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. 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 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
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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 of its Restricted Subsidiaries);
(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 Notes, except a payment of interest or principal at
Stated Maturity; or
(4) make any Restricted Investment, (all such payments and other
actions set forth in these 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 has occurred and is continuing or would occur as a
consequence of the Restricted Payment; 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 4.09 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 date hereof (excluding Restricted Payments permitted
by clauses (2), (3) and (4) of the paragraph of exceptions below), is less
than the sum, without duplication, of:
(a) 100% of the Consolidated Cash Flow of the Company for the
period (taken as one accounting period) from the beginning of the
fiscal quarter during which this Indenture is executed 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 the Consolidated Cash Flow for such period is a
deficit, less 100% of the deficit), less 1.75 times the Consolidated
Interest Expense of the Company since the beginning of the fiscal
quarter during which this Indenture is executed; plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the beginning of the fiscal quarter during which this
Indenture is executed 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 (11) of the second paragraph of Section 4.09 hereof) or from
the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the
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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 date hereof is sold for cash or otherwise liquidated or
repaid for cash, the lesser of:
(A) the cash return of capital with respect to the
Restricted Investment (less the cost of disposition, if any), and
(B) the initial amount of the 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 date hereof, 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 date hereof 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.
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The preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of that dividend, if at said date of declaration such payment
would have complied with the provisions of this 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 from the sale since the beginning of the fiscal
quarter during which this Indenture is executed (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than any
Disqualified Stock); provided that the net cash proceeds are not used to
incur new Indebtedness pursuant to clause (11) of the second paragraph of
Section 4.09 hereof); and provided further that, in each case, the amount
of any net cash proceeds that are so utilized will 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 Equity Interests on a pro rata basis;
(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 date
hereof; provided that the aggregate price paid for all of the repurchased,
redeemed, acquired or retired Equity Interests may not exceed (a) $500,000
in any twelve-month period and (b) $5.0 million in the aggregate; or
(6) the payment of scheduled dividends on the Company's 123/4% Senior
Exchangeable Preferred Stock due 2010, whether paid in cash or in kind
through the issuance of additional shares of such preferred stock, all in
accordance with the certificate of designations governing such preferred
stock as in effect on the date hereof.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. 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 the designation and will reduce the amount available for Restricted
Payments under the first paragraph in this Section 4.07. All of those
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of the Investments at the time of such
designation. Such designation will only be permitted if the Restricted Payment
would be permitted at the time and if the 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 the
designation would not cause a Default.
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The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the assets 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 valued will be valued by the Board of Directors whose resolution with respect
to the determination will be delivered to the Trustee.
Section 4.08. 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:
(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.
The preceding restrictions shall not apply to encumbrances or restrictions
existing under or by reason of:
(1) Existing Indebtedness as in effect on the date hereof, 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 as in
effect on the date hereof;
(2) Indebtedness of any Restricted Subsidiary under any Credit
Facility that is permitted to be incurred pursuant to Section 4.09 hereof;
provided that such Credit Facility and Indebtedness contain only such
encumbrances and restrictions on such Restricted Subsidiary's ability to
engage in the activities set forth in clauses (1) through (4) of the
preceding paragraph as are, at the time such Credit Facility is entered
into or amended, modified, restated, renewed, increased, supplemented,
refunded, replaced or refinanced, ordinary and customary for a Credit
Facility of that type as determined in the good faith judgment of the Board
of Directors (and evidenced in a board resolution), which determination
shall be conclusively binding;
(3) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which the
Subsbidiary 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,
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with respect to the 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;
(4) any Indebtedness incurred in compliance with Section 4.09 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 the
Indebtedness or agreement and the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes 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 interest or principal on the
Notes;
(5) this Indenture;
(6) applicable law;
(7) 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 that Person is acquired by the Company (except to the extent
the Indebtedness was incurred in connection with or in contemplation of the
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, the Indebtedness was permitted by the terms hereof to
be incurred;
(8) customary non-assignment provisions in leases or licenses entered
into in the ordinary course of business;
(9) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (5) in the second paragraph of Section 4.09 hereof on the property
so acquired;
(10) the provisions of agreements governing Indebtedness incurred
pursuant to clause (4) of the second paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock" hereof;
(11) any agreement for the sale of a Restricted Subsidiary that
restricts that Restricted Subsidiary pending its sale;
(12) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing the Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(13) Liens permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the debtor to transfer the
assets subject to such Liens;
(14) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements; and
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(15) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Section 4.09. 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 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 (including Acquired Debt) or issue preferred
stock if, in each case, the Company's Debt to Adjusted Consolidated Cash Flow
Ratio at the time of incurrence of the Indebtedness or the issuance of the
preferred stock, after giving pro forma effect to such incurrence or issuance as
of such date and to the use of proceeds from such incurrence or issuance 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 4.09 shall not
prohibit 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 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 product of $150,000 times the number of Completed Towers on the
date of such incurrence;
(2) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(3) the incurrence by the Company of the Indebtedness represented by
the Notes and the Senior Notes, each issued on the date hereof;
(4) the issuance by the Company of additional shares of its 12 3/4%
Senior Exchangeable Preferred Stock due 2010 solely for the purpose of
paying dividends thereon and the incurrence by the Company of Indebtedness
represented by the Company's 12 3/4% Senior Subordinated Exchange
Debentures due 2010;
(5) 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 (5), not to exceed $10.0 million at any one time outstanding;
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(6) 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 Indenture to be incurred under the
first paragraph of this Section 4.09 or clauses (2), (3), (4), (5) or this
clause (6) of this paragraph;
(7) 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, however, 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 Notes of such series and
that:
(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 the
Indebtedness by the Company or the Restricted Subsidiary, as the case
may be;
(8) 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 Indenture to be
outstanding or currency exchange risk;
(9) 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 Indenture;
(10) 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, the acquisition by the Company or one of its Restricted Subsidiaries;
and provided further that, in the case of any incurrence pursuant to this
clause (10), 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;
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(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness or Disqualified Stock 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 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
beginning of the fiscal quarter during which this Indenture is executed
(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 4.07 hereof); and
(12) 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 $25.0 million.
In addition, the Company shall not:
(1) incur any Indebtedness that is contractually subordinated in right
of payment to any other Indebtedness of the Company unless such
Indebtedness is also contractually subordinated in right of payment to the
Notes on substantially identical terms; provided, however, that no
Indebtedness of the Company will be deemed to be contractually subordinated
in right of payment to any other Indebtedness of the Company solely by
virtue of being unsecured; and
(2) permit any of its Unrestricted Subsidiaries to incur any
Indebtedness other than Non-Recourse Debt.
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 (12) 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
shall not be deemed to be an incurrence of Indebtedness for purposes of this
covenant. Indebtedness under Credit Facilities outstanding on the date hereof
shall be deemed to have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
Section 4.10. 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 the Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed
of;
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(2) fair market value is determined by the Board of Directors and evidenced
by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee; and
(3) except in the case of a Tower Asset Exchange, at least 75% of the
consideration received in such Asset Sale 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:
(a) any liabilities, as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet, of the Company's or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any guarantee of the notes) that
are assumed by the transferee of any assets pursuant to a customary
novation agreement that releases the Company or the Restricted Subsidiary
from further liability; and
(b) any securities, notes or other obligations received by the Company
or any Restricted Subsidiary from the transferee that are converted by the
Company or the Restricted Subsidiary into cash within 20 days of the
applicable Asset Sale, to the extent of the cash received in that
conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the
Company or the Restricted Subsidiary may apply those Net Proceeds to:
(1) reduce Indebtedness under a Credit Facility;
(2) reduce other Indebtedness of any of 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
to the acquisition, the Company or its Restricted Subsidiary owns a majority
of the Voting Stock of that business; 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 Net Proceeds, the Company may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the preceding paragraph shall be deemed to constitute "Excess Proceeds". When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an Asset Sale Offer to all Holders of Notes, and all holders of other
senior Indebtedness of the Company containing provisions similar to those set
forth in this Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase the maximum principal amount (or
accreted value, as applicable) of Notes and such other senior Indebtedness of
the Company that may be purchased out of the Excess Proceeds. The offer price in
any Asset Sale Offer will be payable in cash and will be 100% of the Accreted
Value of the Notes redeemed prior to the Full Accretion Date, or 100% of the
principal amount of the Notes redeemed after the Full Accretion Date, plus
accrued and unpaid interest to the date of purchase, if any. In the case of any
other senior Indebtedness, the offer price shall be 100% of the principal amount
(or accreted value, as applicable) of the Indebtedness plus accrued and unpaid
interest thereon, if any, to the date of purchase. Each Asset Sale Offer shall
be made in accordance with the procedures set forth herein and the other senior
Indebtedness of the Company. If any Excess Proceeds remain after consummation of
an
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Asset Sale Offer, the Company may use the remaining Excess Proceeds for any
purpose not otherwise prohibited hereby. If the aggregate principal amount, or
Accreted Value, as applicable, of Notes and the other senior indebtedness of the
Company tendered into the Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other senior Indebtedness
to be purchased on a pro rata basis. Upon completion of the Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
Section 4.11. 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 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 the Affiliate
Transaction complies with clause (1) above and that the 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 to the Holders of the Notes as to
the fairness of the Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of
national standing.
Notwithstanding the foregoing, the following items shall not be deemed
Affiliate Transactions:
(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 under Section 4.07 hereof;
(5) the issuance or sale of Equity Interests (other than Disqualified
Stock) of the Company; and
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(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 date hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any Subsidiary to, engage in
any business other than Permitted Businesses, except to the extent as would not
be material to the Company and its Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect:
(1) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of
the Company or any such Subsidiary and
(2) the rights (charter and statutory), licenses and franchises of the
Company and its Subsidiaries; provided, however, that the Company shall not
be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
If a Change of Control occurs, the Company shall make an offer (a "Change
of Control Offer") to each Holder to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of each Holder's Notes at a purchase price, in
cash, equal to 101% of the Accreted Value of the Notes repurchased prior to the
Full Accretion Date and 101% of the aggregate principal amount at maturity of
the Notes repurchased after the Full Accretion Date, plus accrued and unpaid
interest thereon, if any, (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest 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 a change of
control and stating:
(1) that the Change of Control Offer is being made pursuant to
this covenant and that all Notes tendered will be accepted for
payment;
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(2) the purchase price and the purchase date, which 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");
(3) that any Note not tendered will continue to accrete or accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrete or accrue interest
after the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount at maturity of Notes
delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and
(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount at maturity to the
unpurchased portion of the Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount at maturity or an
integral multiple thereof.
On the Change of Control Payment Date, the Company shall, to the
extent lawful,
(1) accept for payment all Notes or portions of the Notes
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 Notes or portions of the Notes so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount at maturity of Notes or portions thereof being
purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Notes properly
tendered payment in an amount equal to the purchase price for the Notes (the
"Change of Control Payment"), and the Trustee shall promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a new Note equal
in principal amount at maturity to any unpurchased portion of the Notes
surrendered by such Holder, if any; provided, that each such new Note shall be
in a principal amount at maturity of $1,000 or an integral multiple thereof.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
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The Change of Control provisions described above shall be applicable
whether or not any other provisions of the Indentures are applicable. The
Company shall comply with the requirements of Section 14(e) of the Exchange Act
and any other securities laws or regulations to the extent those laws and
regulations are applicable to any Change of Control Offer. If the provisions of
any of the applicable securities laws or securities regulations conflict with
the provisions of this Section 4.15, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15 by virtue of the compliance.
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 Indentures applicable to a Change of Control Offer made by the Company
and purchases all Notes properly tendered and not withdrawn under such Change of
Control Offer. The provisions under this Indentures relating to the Company's
obligation to make an offer to repurchase the Notes as a result of a Change of
Control may be waived or modified with the written consent of the Holders of a
at least a majority in principal amount at maturity of the Notes then
outstanding.
Section 4.16. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided,
however, that the Company or any of its Restricted Subsidiaries may enter into a
sale and leaseback transaction if:
(1) the Company or such Restricted Subsidiary, as applicable, could
have:
(a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to the
Debt to Adjusted Consolidated Cash Flow Ratio test set forth in the
first paragraph of Section 4.09 hereof; or
(b) incurred a Lien to secure such Indebtedness pursuant to the
provisions of Section 4.12 hereof;
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors) of the property that is the subject of the sale and
leaseback transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, Section 4.10 hereof.
Section 4.17. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.
The Company:
(1) shall not, and shall not permit any of its Restricted Subsidiaries
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 of its Restricted Subsidiaries to issue any
of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to
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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 4.10 hereof.
Notwithstanding the foregoing, the issuance or sale of shares of Capital
Stock of any Restricted Subsidiary of the Company will not violate the
provisions of the immediately preceding sentence if such shares are issued or
sold in connection with (x) the formation or capitalization of a Restricted
Subsidiary or (y) a single transaction or a series of substantially
contemporaneous transactions whereby such Restricted Subsidiary becomes a
Restricted Subsidiary of the Company by reason of the acquisition of securities
or assets from another Person.
Section 4.18. Limitation on Issuances of Guarantees of Indebtedness.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture governing the Notes
providing for the Guarantee of the payment of the Notes by such Subsidiary,
which Guarantee shall be senior to or pari passu with such Subsidiary's
Guarantee of or pledge to secure such other Indebtedness. Notwithstanding the
foregoing, any Guarantee by a Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
any sale, exchange or transfer, to any Person other than a Subsidiary of the
Company, of all of the Company's stock in, or all or substantially all the
assets of, such Subsidiary, which sale, exchange or transfer is made in
compliance with the applicable provisions of this Indenture. The form of such
Guarantee is attached as Exhibit C hereto.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not:
(1) consolidate or merge with or into (whether or not the Company is the
surviving corporation); or
(2) 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:
(a) either (A) the Company is the surviving corporation; or (B) the
entity or the Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which the 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;
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(b) 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 the sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the Obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee;
(c) immediately after such transaction no Default exists; and
(d) except in the case of (A) a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company and (B) a merger entered into
solely for the purpose of reincorporating the Company in another jurisdiction:
(x) 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 the transaction, after giving pro forma effect to the
transaction as of such date for balance sheet purposes and as if the 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 for income statement purposes, 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
(y) 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 the sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, at the time of the transaction, after giving pro forma effect to the
transaction as of such date for balance sheet purposes and 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 for income statement purposes, 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
entity or Person for purposes of this clause (d) the entity or Person will be
substituted for the Company in the definition of Debt to Adjusted Consolidated
Cash Flow Ratio and the defined terms included therein under Section 1.01
hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest on the Notes;
(2) default in payment when due of the principal of or premium, if any, on
the Notes;
(3) failure by the Company or any of its Subsidiaries to comply with the
provisions described under Article 5 hereof or failure by CCIC to consummate
a Change of Control Offer or Asset Sale Offer in accordance with the
provisions of this Indenture;
(4) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with any of its other agreements in the Indentures or the
notes;
(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 date of the indentures, which default:
(a) is caused by a failure to pay principal of or premium, if any, or
interest on the Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of the default (a "Payment
Default"); or
(b) results in the acceleration of the 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 days; or
(7) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
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(8) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(b) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company
or any of its Restricted Subsidiaries; or
(c) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon any
such declaration, the principal of, and accrued and unpaid interest if any, on
such Notes shall become due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (7) or (8) of Section 6.01
hereof occurs with respect to the Company or any of its Restricted Subsidiaries,
all outstanding Notes shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate principal amount at
maturity of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium, if any,
and interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount at
maturity of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount at maturity of the then
outstanding Notes may rescind an acceleration and its consequences, including
any related payment default that resulted from such acceleration). Upon any
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such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount at maturity of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(1) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in principal amount at maturity of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount at maturity of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be
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sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount at maturity of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
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(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written and oral advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S) 313(b).
The Trustee shall also transmit by mail all reports as required by TIA (S)
313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to
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its negligence or bad faith. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount at maturity of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount at maturity of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount at
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maturity of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $75 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
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Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (1) and (2) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive solely from the
trust fund described in Section 8.04 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due;
(2) the Company's obligations with respect to such Notes under Article 2
and Section 4.02 hereof;
(3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith; and
(4) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof and clause (4) of Section
5.01 hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the
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conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(b)
hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, 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 on the
outstanding Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(2) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the 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 date of this Indenture, 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 Notes 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 an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes 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
either:
(a) 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
(b) insofar as Sections 6.01(7) or 6.01(8) hereof 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 shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to
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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 shall have delivered to the Trustee an Opinion of Counsel
to the effect that on 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 shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter look only to the
Company for payment
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thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of Notes; or
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained,
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but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof) and the Notes with the consent of the Holders of at least a majority in
principal amount at maturity of the Notes then outstanding (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount at
maturity of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes). Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount at maturity of the Notes then outstanding
may waive compliance in a particular instance by the Company with any provision
of this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment or waiver under this Section 9.02 may not (with respect
to any Notes held by a non-consenting Holder):
(1) reduce the principal amount at maturity of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
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(3) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
at maturity of the then outstanding Notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, or premium, if any, or interest on the Notes;
(7) waive a redemption payment (but not any payment pursuant to Sections
3.09, 4.10 or 4.15 hereof) with respect to any Note;
(8) except as provided under Article Eight hereof or in accordance with
the terms of any Note Guarantee, release any Guarantor from any of its
obligations under its Note Guarantee or make any change in a Note Guarantee that
would adversely affect the Holders of the Notes; or
(9) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, in addition to the documents required by
Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
NOTE GUARANTEES
Section 10.01. Guarantee.
The provisions of this Article 10 shall apply only to those Subsidiaries
of the Company, if any, that execute one or more supplemental indentures to this
Indenture in the form of Exhibit C to this Indenture in compliance with the
requirements of Section 4.18 of this Indenture.
Subject to this Article 10, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
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If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any Custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
Section 10.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10, result
in the obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 10.03. Execution and Delivery of Note Guarantee.
To evidence its Note Guarantee set forth in Section 10.01, each Guarantor
hereby agrees that a notation of such Note Guarantee substantially in the form
included in Exhibit E shall be endorsed by an Officer of such Guarantor on each
Note authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor by its President or one of its Vice
Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Guarantors.
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In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.18 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Note Guarantees in accordance with Section 4.18 hereof and
this Article 10, to the extent applicable.
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 10.05, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 10.05 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set
forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Note Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Note Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions) a
Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof. Upon delivery by the
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Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations under its
Note Guarantee.
Any Guarantor not released from its obligations under its Note Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article 10.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
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, New York 10019
Telecopier No.: (212) 474-1000
Attention: Stephen L. Burns, Esq.
If to the Trustee:
Unites States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036
Telecopier No.: (212) 852-1626
Attention: Gerard F. Ganey
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Corporate Trust Division
The Company or the Trustee, by notice to the others, may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) 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 answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
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Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, 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
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions; provided that no such rule shall
conflict with the terms of this Indenture or rhe TIA.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
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Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of ______, 1999
Crown Castle International Corp.
By:
--------------------------------
Name:
Title:
Attest:
- --------------------------------
Name:
Title:
United States Trust Company of New York
By:
--------------------------------
Name:
Title:
Attest:
- --------------------------------
Authorized Signatory
Date:
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[Face of Note]
________________________________________________________________________________
CUSIP/CINS ____________
__% Senior Discount Notes due 2011
No. ___ $____________
CROWN CASTLE INTERNATIONAL CORP.
promises to pay to______________________________________________________________
or registered assigns, the principal sum of_____________________________________
Dollars on _____________, 2011.
Interest Payment Dates: ____________ and ____________
Record Dates: ____________ and ____________
Dated: _______, ___
CROWN CASTLE INTERNATIONAL CORP.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
(SEAL)
This is one of the [Global] Notes referred to
in the within-mentioned Indenture:
United States Trust Company of New York,
as Trustee
By: __________________________________
Authorized Signatory
________________________________________________________________________________
A-1
<PAGE>
[Back of Note]
___% Senior Discount Notes due 2011
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Original Issue Discount Legend]
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR PURPOSES OF APPLYING THE
UNITED STATES FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES TO THIS NOTE.
THE ISSUE DATE OF THIS NOTE IS _________, 1999. THE ISSUE PRICE OF THIS NOTE IS
$______ PER $1000.00 OF INITIAL PRINCIPAL AMOUNT AT MATURITY. THIS NOTE IS
ISSUED WITH $______ OF ORIGINAL ISSUE DISCOUNT PER $1000.00 OF INITIAL PRINCIPAL
AMOUNT AT MATURITY. THE YIELD TO MATURITY OF THIS NOTE IS ___%.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. No cash interest will accrue on the Notes before ________,
2004. The Accreted Value of the Notes will accrete between _________, 1999 and
___________, 2004, on a semiannual bond equivalent basis using a 360-day year
comprised of twelve 30-day months such that the Accreted Value shall be equal to
the principal amount of the notes on ________, 2004. The initial Accreted Value
of the Notes will be $300.0 million. Crown Castle International Corp., a
Delaware corporation (the "Company"), promises to pay interest on the principal
amount of this Note at ___% per annum from ________________, 2004 until
maturity. The Company will pay interest semi-annually in arrears on ___________
and ___________ of each year, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date"). Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; provided that if there
is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be _____________, ____. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the ___________ or ___________ next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire
A-2
<PAGE>
transfer of immediately available funds will be required with respect to
principal of and interest, premium on, all Global Notes and all other Notes the
Holders of which shall have provided wire transfer instructions to the Company
or the Paying Agent. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. Paying Agent and Registrar. Initially, United States Trust Company of
New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of May __, 1999 ("Indenture") between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code (S)(S) 77aaa-77bbbb) (the "Trust Indenture Act"). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$___ million in aggregate principal amount at maturity.
5. Optional Redemption.
(a) Except as provided in clause (b) of this Paragraph 5, the Notes will
not be redeemable at the Company's option prior to __________ , 2004. On or
after _____________ 2004, the Company may redeem all or a part of the Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount at maturity) set forth below plus
accrued and unpaid interest if any, on the Notes redeemed to the applicable
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on ___________ of the years
indicated below:
Year Percentage
- ---- ----------
2004........................................................ ______%
2005........................................................ ______%
2006........................................................ ______%
2007 and thereafter......................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Paragraph 5, at
any time during the first 36 months after the date of the original issuance of
the Notes, the Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount at maturity of the Notes originally issued at a
redemption price equal to __% of Accreted Value of the Notes to be redeemed on
the redemption date with the net cash proceeds of one or more Public Equity
Offerings and/or Strategic Equity Investments provided that:
(1) at least 65% of the aggregate principal amount at maturity of the
Notes originally issued remains outstanding immediately after the occurrence of
such redemption (excluding notes held by the Company or any of its
Subsidiaries); and
(2) the redemption occurs within 60 days of the date of the closing of
such Public Equity Offering or Strategic Equity Investment.
A-3
<PAGE>
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the Accreted Value of the Notes repurchased prior to the
Full Accretion Date and 101% of the aggregate principal amount of the Notes
repurchased on or after the Full Accretion Date plus accrued and unpaid interest
thereon, if any, 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 setting forth the procedures governing the Change of Control
Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales
when the aggregate amount of Excess Proceeds exceeds $10 million, the Company
shall commence an offer to all Holders of Notes (as "Asset Sale Offer") pursuant
to Section 3.09 of the Indenture to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the Accreted Value of the Notes purchased before
the Full Accretion Date and 100% of the principal amount of the Notes
repurchased on or after the Full Accretion Date, plus accrued and unpaid
interest thereon, if any, to the date fixed for the closing of such offer, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Company (or such Restricted Subsidiary) may use
such deficiency for any purpose not otherwise prohibited by the Indenture. If
the Accreted Value or aggregate principal amount, as the case may be, of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the 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 Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a
A-4
<PAGE>
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount at maturity of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount at maturity of the then outstanding Notes. Without
the consent of any Holder of Notes, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Securities and Exchange Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in payment
when due of principal of or premium, if any, on the Notes, (iii) failure by the
Company or any of its Subsidiaries to comply with Section 3.09, 4.10, 4.15 or
5.01 of the Indenture; (iv) failure by the Company or any of its Subsidiaries
for 30 days after notice to the Company by the Trustee or the Holders of at
least 25% in principal amount at maturity of the Notes then outstanding to
comply with certain other agreements in the Indenture or the Notes; (v) default
under certain other agreements relating to Indebtedness of the Company which
default results in the acceleration of such Indebtedness prior to its express
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount at maturity of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount at maturity of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount at maturity
of the Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
A-5
<PAGE>
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture. Requests may be made to: Crown Castle International
Corp., 510 Bering Drive, Suite 500, Houston, Texas 77057, Attention: Chief
Financial Officer.
A-6
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: ________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:_________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-7
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$ _______________________
Date: _______________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
Signature Guarantee*:____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal amount at Signature of
Amount of decrease Amount of increase maturity of authorized officer
in in this Global Note of
Principal amount at Principal amount at following such Trustee or Note
Date of Exchange maturity of maturity of decrease Custodian
- ------------------- this Global Note this Global Note (or increase) -------------------
-------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
- --------------------------------------------------------------------------------
A-9
<PAGE>
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of CROWN CASTLE INTERNATIONAL CORP. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and UNITED STATES TRUST COMPANY OF
NEW YORK, as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of May __, 1999 providing for the
issuance of an aggregate principal amount at maturity of up to $_____ million of
___% Senior Discount Notes due 2011 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as
follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
B-1
<PAGE>
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand
of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all
demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Note
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
B-2
<PAGE>
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any
collections from, rights to receive contribution from or payments
made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Article 10 of the
Indenture shall result in the obligations of such Guarantor under
its Note Guarantee not constituting a fraudulent transfer or
conveyance.
3 Execution and Delivery. Each Guaranteeing Subsidiary agrees that the
Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge with or
into (whether or ot such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 10.05 of the Indenture, the Person formed by
or surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee on
the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Note Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of
the Notes issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All the Note
Guarantees so issued shall in all respects have the same legal rank
and benefit under the Indenture as the Note Guarantees theretofore and
thereafter issued in accordance with the terms of the Indenture as
though all of such Note Guarantees had been issued at the date of the
execution hereof.
B-3
<PAGE>
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor,
or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of
the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds
of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without limitation
Section 4.10 of the Indenture. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in
accordance with the provisions of the Indenture, including without
limitation Section 4.10 of the Indenture, the Trustee shall execute
any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 10 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. 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.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
B-4
<PAGE>
9. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated:______________
[Guaranteeing Subsidiary]
By:
-----------------------------------
Name:
Title:
Crown Castle International Corp.
By:
-----------------------------------
Name:
Title:
[Other Guarantors]
By:
-----------------------------------
Name:
Title
United States Trust Company of New York
as Trustee
By:
-----------------------------------
Name:
Title:
B-5
<PAGE>
EXHIBIT C
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of May ___, 1999 (the "Indenture") among
CROWN CASTLE INTERNATIONAL CORP. and UNITED STATES TRUST COMPANY OF NEW YORK, as
trustee (the "Trustee"), (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes (as defined in the Indenture),
whether at maturity, by acceleration, redemption or otherwise, the due and
punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest, and the due and punctual performance of all
other obligations of the Company to the Holders or the Trustee all in accordance
with the terms of the Indenture and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Note Guarantee. Each Holder of a Note, by accepting
the same, agrees to and shall be bound by such provisions.
[Name of Guarantor(s)]
By:
-----------------------------------
Name:
Title:
C-1
<PAGE>
EXHIBIT 5.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
(212) 474-1000
May 7, 1999
Crown Castle International Corp.
--------------------------------
Registration Statement on Form S-1
----------------------------------
(Registration No. 333-74553)
----------------------------
Ladies and Gentlemen:
We have acted as counsel to Crown Castle International Corp., a
Delaware corporation (the "Company"), in connection with the preparation of the
registration statement on Form S-1 (Registration No. 333-74553) and the
amendments thereto (the "Registration Statement") initially filed with the
Securities and Exchange Commission (the "Commission") on March 16, 1999 for the
registration under the Securities Act of 1933, as amended (the "Act"), of up to
an aggregate of 31,820,594 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"), to be sold in a proposed public offering (the
"Offering") (such shares being referred to herein as the "Shares"), all as set
forth in the Registration Statement.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including the following: (a) the Restated Certificate of Incorporation
of the Company (the "Restated Certificate"), (b) the Amended and Restated Bylaws
of the Company, (c) resolutions adopted by the Board of Directors of the Company
on March 15, 1999 in connection with the
<PAGE>
authorization and issuance of the Common Stock being sold by the Company and the
sale of the Shares by the Company and the selling stockholders and (d) an
officer's certificate of the Company with respect to its issued and outstanding
shares of capital stock.
Based upon the foregoing and in reliance thereon, and subject to (i)
compliance with applicable state securities laws, (ii) receipt from the
Securities and Exchange Commission of an order declaring the Registration
Statement effective and (iii) the filing with the Secretary of State of the
State of Delaware of the Restated Certificate, it is our opinion that the
Shares, when issued, delivered and paid for pursuant to and in accordance with
the Registration Statement (and pertinent exhibits thereto), will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Prospectus forming a part of said Registration
Statement. We further consent to the incorporation of this opinion by reference
as an exhibit to any Rule 462(b) Registration Statement. In giving these
consents, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission.
Very truly yours,
/s/ Cravath, Swaine & Moore
Cravath, Swaine & Moore
Crown Castle International Corp.
510 Bering Drive
Suite 500
Houston, TX 77057
<PAGE>
EXHIBIT 5.2
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
(212) 474-1000
May 7, 1999
Crown Castle International Corp.
--------------------------------
Registration Statement on Form S-1
----------------------------------
(Registration No. 333-74553)
----------------------------
Ladies and Gentlemen:
We have acted as counsel to Crown Castle International Corp., a
Delaware corporation (the "Company"), in connection with the preparation of the
registration statement on Form S-1 (Registration No. 333-74553) and the
amendments thereto (the "Registration Statement") initially filed with the
Securities and Exchange Commission (the "Commission") on March 16, 1999 for the
registration under the Securities Act of 1933, as amended (the "Act"), of up to
$150,000,000 aggregate principal amount of the Company's Senior Notes due 2011
(the "Senior Notes") and $300,000,000 initial accreted value of the Company's
Senior Discount Notes due 2011 (the "Senior Discount Notes"), to be sold in a
proposed public offering (the "Offering") (such Discount Notes and Senior Notes,
collectively, being referred to herein as the "Notes"), all as set forth in the
Registration Statement. The Senior Notes and the Senior Discount Notes will be
issued under Indentures in the form of Exhibits 4.8 and 4.9, respectively, to
the Registration Statement (together, the "Indenture") to be executed by the
Company and United States Trust Company of New York, as Trustee (the "Trustee").
<PAGE>
2
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including the following: (a) the Restated Certificate of Incorporation
of the Company (the "Restated Certificate"), (b) the Amended and Restated Bylaws
of the Company, (c) resolutions adopted by the Board of Directors of the Company
on March 15, 1999 in connection with the authorization and issuance of the
Common Stock being sold by the Company and the sale of the Shares by the Company
and the selling stockholders and (d) the Indenture.
Based upon the foregoing and in reliance thereon, and subject to (i)
compliance with applicable state securities laws, (ii) receipt from the
Securities and Exchange Commission of an order declaring the Registration
Statement effective and (iii) the filing with the Secretary of State of the
State of Delaware of the Restated Certificate, it is our opinion that when (A)
the Trustee is qualified to act as Trustee under the Indenture, (B) the Trustee
has duly executed and delivered the Indenture, (C) the Indenture has been duly
authorized and validly executed and delivered by the Company to the Trustee, (D)
the Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, (E) the Board of Directors of the Company or a duly constituted and
acting committee thereof (such Board of Directors or committee being hereinafter
referred to as the "Board") has taken all necessary corporate action to approve
the issuance and terms of such Notes, the terms of the Offering thereof and
related matters, and (F) such Notes have been duly executed, authenticated,
issued and delivered in accordance with the provisions of the Indenture, and the
applicable definitive purchase, underwriting or similar agreement approved by
the Board upon payment of the consideration therefor provided for therein, such
Notes will be validly issued and will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms
(subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors' rights
generally from time to time in effect and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law).
<PAGE>
3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Prospectus forming a part of said Registration
Statement. We further consent to the incorporation of this opinion by reference
as an exhibit to any Rule 462(b) Registration Statement. In giving these
<PAGE>
consents, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission.
Very truly yours,
/s/ Cravath, Swaine & Moore
Cravath, Swaine & Moore
Crown Castle International Corp.
510 Bering Drive
Suite 500
Houston, TX 77057
<PAGE>
EXHIBIT 23.1
The Board of Directors
Crown Castle International Corp.:
The audits referred to in our report dated February 24, 1999, related to
Crown Castle International Corp. and its subsidiaries, included the related
financial statement schedule as of December 31, 1997 and 1998, and for each of
the years in the three-year period ended December 31, 1998, 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 included herein and to the reference
to our firm under the heading "Independent Auditors" in the Prospectus.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
May 7, 1999
<PAGE>
EXHIBIT 25.1
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
__________________
Crown Castle International Corp.
(Exact name of obligor as specified in its charter)
Delaware 76-0470458
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
510 Bering Drive
Suite 500
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
__________________
_____% Senior Notes due 2011
(Title of the indenture securities)
==============================================
<PAGE>
- 2 -
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve System) Federal
Deposit Insurance Corporation, Washington, D.C. New York State
Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Crown Castle International Corp. currently is not in default under any of
its outstanding securities for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14 and 15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form T-
1 filed on September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form T-
1 filed on September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
====
As of May 5, 1999, the trustee had 2,999,020 shares of Common Stock outstanding,
all of which are owned by its parent company, U.S. Trust Corporation. The term
"trustee" in Item 2, refers to each of United States Trust Company of New York
and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of May, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:/s/ Margaret Ciesmelewski
-----------------------------
Margaret Ciesmelewski
Assistant Vice President
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
January 7, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
-----------------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1998
-----------------
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 104,220
Short-Term Investments 207,292
Securities, Available for Sale 578,874
Loans 2,061,582
Less: Allowance for Credit Losses 17,199
----------
Net Loans 2,044,383
Premises and Equipment 58,263
Other Assets 124,079
----------
Total Assets $3,117,111
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 709,221
Interest Bearing 1,908,861
----------
Total Deposits 2,618,082
Short-Term Credit Facilities 170,644
Accounts Payable and Accrued Liabilities 146,324
----------
Total Liabilities $2,935,050
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 111,402
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,623
----------
Total Stockholder's Equity 182,061
----------
Total Liabilities and
Stockholder's Equity $3,117,111
==========
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
February 1, 1999
<PAGE>
EXHIBIT 25.2
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
__________________
Crown Castle International Corp.
(Exact name of obligor as specified in its charter)
Delaware 76-0470458
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
510 Bering Drive
Suite 500
Houston, Texas 77057
(Address of principal executive offices) (Zip Code)
__________________
_____% Senior Discount Notes due 2011
(Title of the indenture securities)
==============================================
<PAGE>
- 2 -
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Crown Castle International Corp. currently is not in default under any of
its outstanding securities for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
13, 14 and 15 of Form T-1 are not required under General Instruction B.
16. List of Exhibits
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No. 33-
97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
====
As of May 5, 1999, the trustee had 2,999,020 shares of Common Stock outstanding,
all of which are owned by its parent company, U.S. Trust Corporation. The term
"trustee" in Item 2, refers to each of United States Trust Company of New York
and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 5th day
of May, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Margaret Ciesmelewski
-----------------------------
Margaret Ciesmelewski
Assistant Vice President
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
January 7, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
------------------
Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1998
-----------------
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 104,220
Short-Term Investments 207,292
Securities, Available for Sale 578,874
Loans 2,061,582
Less: Allowance for Credit Losses 17,199
----------
Net Loans 2,044,383
Premises and Equipment 58,263
Other Assets 124,079
----------
Total Assets $3,117,111
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 709,221
Interest Bearing 1,908,861
----------
Total Deposits 2,618,082
Short-Term Credit Facilities 170,644
Accounts Payable and Accrued Liabilities 146,324
----------
Total Liabilities $2,935,050
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 111,402
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,623
----------
Total Stockholder's Equity 182,061
----------
Total Liabilities and
Stockholder's Equity $3,117,111
==========
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
February 1, 1999
