<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1999
Registration No. 333-83395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
Crown Castle International Corp.
(Exact name of Registrant as specified in its charter)
Delaware 76-0470458
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) No.)
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
Worldwide Plaza 885 Third Avenue
825 Eighth Avenue New York, New York 10022
New York, New York 10019
---------------
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement, as determined by
the Registrant.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
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 or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement 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 supplement 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 29, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1999
5,000,000 SHARES
[LOGO] CROWN CASTLE
CROWN CASTLE INTERNATIONAL CORP.
COMMON STOCK
This prospectus supplement relates to an aggregate of up to 5,000,000 shares
(5,645,000 shares if the over-allotment option described in the trust
prospectus described below is exercised in full) of our common stock, par value
$.01 per share, beneficially owned by the selling stockholders identified in
this prospectus supplement under the heading "Selling Stockholders", which may
be delivered by DECS Trust V to holders of DECS securities of the trust. We
will receive no portion of the proceeds from the sale of the shares of our
common stock offered through this prospectus supplement or from the sale of the
DECS securities. The DECS securities are being sold by the trust in an offering
described in the separate prospectus of the trust. This prospectus supplement
relates only to the shares of our common stock that may be delivered upon
exchange of the DECS securities. We take no responsibility for any information
included in or omitted from the trust prospectus. The trust prospectus does not
constitute a part of, and is not incorporated by reference into, this
prospectus supplement or the accompanying prospectus.
The shares of our common stock are traded on the Nasdaq National Market under
the symbol "TWRS." On July 28, 1999, the last reported sales price for our
common stock as reported by Nasdaq was $22.8125 per share.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE S-11 OF THIS PROSPECTUS
SUPPLEMENT.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this prospectus supplement is , 1999.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus Supplement......................................... i
Summary.................................................................. S-1
Risk Factors............................................................. S-11
Price Range of Common Stock.............................................. S-22
Dividend Policy.......................................................... S-22
Capitalization........................................................... S-23
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... S-24
Selected Financial and Other Data of CCIC................................ S-32
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... S-35
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Industry Background..................................................... S-55
Business................................................................ S-63
Recent and Proposed Transactions........................................ S-84
Management.............................................................. S-88
Selling Stockholders.................................................... S-92
Description of Certain Indebtedness..................................... S-93
Certain United States Federal Tax Consequences to Non-United States
Holders of Common Stock................................................ S-102
Plan of Distribution.................................................... S-105
Certain Currency Translations........................................... S-107
</TABLE>
Prospectus
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus ..................................................... 1
Where You Can Find More Information........................................ 1
Incorporation of Information We File With the SEC.......................... 1
Forward-Looking Statements................................................. 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 4
Use of Proceeds............................................................ 4
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Description of Debt Securities............................................. 5
Description of Capital Stock............................................... 15
Description of Warrants.................................................... 23
Selling Shareholders....................................................... 24
Plan of Distribution....................................................... 24
Validity of Securities..................................................... 25
Experts.................................................................... 25
</TABLE>
----------------
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering. A
description of our capital stock is contained in the attached prospectus. This
prospectus supplement, or the information incorporated by reference in this
prospectus supplement, may add, update or change information in the attached
prospectus. If information in this prospectus supplement, or the information
incorporated by reference is this prospectus supplement, is inconsistent with
the attached prospectus, this prospectus supplement, or the information
incorporated by reference in this prospectus supplement, will apply and will
supersede that information in the attached prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus in making your
investment decision. You should also read and consider the information in the
documents we have referred you to in "Where You Can Find More Information About
the Company."
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this prospectus supplement or the prospectus and,
if given or made, such information or representations must not be relied upon
as having been authorized by the Crown Castle International Corp., the
underwriters or any other person. Neither the delivery of this prospectus
supplement and the prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in the
affairs of the Crown Castle International Corp., since the date hereof or
thereof or that the information contained herein or therin is correct as of any
time subsequent to its date. This prospectus supplement and the prospectus do
not constitute an offer or solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
i
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus
supplement. It may not contain all the information that is important to you. We
encourage you to read this entire prospectus supplement 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 supplement, as of June 30, 1999, we owned or managed 7,251 towers,
including 5,402 towers in the United States and Puerto Rico and 1,849 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
other 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 supplement, 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. Since completing the One2One transaction
described in this prospectus supplement, we now have nationwide broadcast and
wireless coverage in the United Kingdom.
Our principal executive offices are located at 510 Bering Drive, Suite 500,
Houston, Texas 77057, and our telephone number is (713) 570-3000.
S-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 has and will
continue to 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 or that are closing over a series of closings 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 supplement
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.
BellSouth Transaction
On June 1, 1999, we entered into an agreement with BellSouth to control and
operate through a sublease 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. The BellSouth
transaction will close in a series of closings which commenced on June 1, 1999.
As of July 1, 1999, BellSouth had subleased 288 towers to us.
S-2
<PAGE>
Powertel Acquisition
On June 2, 1999, we completed the purchase of 620 towers from Powertel.
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 leases antenna space on the 620 towers we acquired
in the acquisition. We will also build an additional 31 towers for Powertel.
One2One Transaction
On March 31, 1999, Castle Transmission International Ltd, or Castle
Transmission, our U.K. operating subsidiary, acquired the rights 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 are responsible for managing and leasing available space on
the towers and receive all the income from any such third party leases.
Proposed BellSouth DCS Transaction
On July 1, 1999, we entered into a preliminary agreement with BellSouth to
control and operate, through a sublease, approximately 773 personal
communications towers from BellSouth DCS. The towers are located in North
Carolina, South Carolina, east Tennessee and parts of Georgia. The terms of the
proposed BellSouth DCS transaction are substantially the same as the BellSouth
transaction described above. The towers are complementary to the towers we have
acquired or are in the process of acquiring through the BellSouth transaction
and the Powertel acquisition. BellSouth DCS will lease space from us on the
towers we acquire from them through this transaction.
Proposed Offerings
On July 27, 1999 we priced the private placement of $260.0 million
(approximately $150.5 million gross proceeds) of 11 1/4% senior discount notes
and $125.0 million of 9 1/2% senior notes. Both the 11 1/4% discount notes and
the 9 1/2% notes will be issued on substantially the same terms as the 10 3/8%
discount notes and the 9% notes, respectively, that we sold in a public
offering in May 1999. We are scheduled to close the private placement on August
3, 1999.
S-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 are also
using subsidiaries to hold the assets we acquire or control as a result of the
proposed transactions we describe in this prospectus supplement. The following
chart illustrates our organizational structure assuming the proposed
transactions described in this prospectus supplement are completed. See
"Capitalization" and "Recent and Proposed Transactions".
[CHART APPEARS HERE]
S-4
<PAGE>
Summary Unaudited Pro Forma Financial and Other Data
The unaudited pro forma financial and other data set forth below have been
derived from the pro forma financial statements 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 statement of operations data and other data for the three months
ended March 31, 1999, give effect to such transactions occurring in 1999 as if
they had occurred on January 1, 1999. The pro forma balance sheet data give
effect to such transactions occurring subsequent to March 31, 1999 as if they
had occurred on March 31, 1999. 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" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus supplement, and the consolidated
financial statements and related notes included in CCIC's Annual Report on Form
10-K and Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Three Months
Year Ended Ended
December 31, March 31,
1998 1999
------------ ------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Statement of Operations Data:
Net revenues:
Site rental and broadcast transmission............ $ 251,679 $ 70,211
Network services and other........................ 50,299 9,783
--------- --------
Total net revenues.............................. 301,978 79,994
--------- --------
Costs of operations:
Site rental and broadcast transmission............ 94,663 28,377
Network services and other........................ 29,480 6,982
--------- --------
Total costs of operations....................... 124,143 35,359
--------- --------
Expected incremental operating expenses for proposed
transactions(a).................................... 21,054 5,292
General and administrative.......................... 28,571 8,304
Corporate development(b)............................ 4,633 874
Restructuring charges............................... -- 1,814
Non-cash compensation charges(c).................... 16,589 667
Depreciation and amortization....................... 148,155 38,797
--------- --------
Operating income (loss)............................. (41,167) (11,113)
Other income (expense):
Interest and other income (expense)............... 4,945 340
Interest expense and amortization of deferred
financing costs.................................. (138,957) (38,259)
--------- --------
Income (loss) before income taxes, minority
interests and cumulative effect of change in
accounting principle............................... (175,179) (49,032)
Provision for income taxes.......................... (374) (127)
Minority interests.................................. 1,307 539
--------- --------
Income (loss) before cumulative effect of change in
accounting principle............................... (174,246) (48,620)
Cumulative effect of change in accounting principle
for costs of start-up activities................... -- (2,414)
--------- --------
Net income (loss)................................... (174,246) (51,034)
Dividends on preferred stock........................ (26,745) (6,408)
--------- --------
Net income (loss) after deduction of dividends on
preferred stock.................................... $(200,991) $(57,442)
========= ========
Per common share--basic and diluted:
Loss before cumulative effect of change in
accounting principle............................. $ (1.28) $ (0.35)
Cumulative effect of change in accounting
principle........................................ -- (0.02)
--------- --------
Net loss.......................................... $ (1.28) $ (0.37)
========= ========
Common shares outstanding--basic and diluted (in
thousands)......................................... 156,643 157,311
========= ========
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
-------------------------
Three Months
Year Ended Ended
December 31, March 31,
1998 1999
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Other Data:
Site data (d):
Towers and revenue producing rooftop sites at end
of period......................................... 7,043 7,146
========= =========
EBITDA(e):
Site rental and broadcast transmission............. $ 148,581 $ 39,693
Network services and other......................... 683 (3,362)
Expected incremental operating expenses for
proposed transactions(a).......................... (21,054) (5,292)
Corporate development expenses(b).................. (4,633) (874)
--------- ---------
Total EBITDA..................................... $ 123,577 $ 30,165
========= =========
Capital expenditures................................. $ 202,553 $ 76,363
Summary cash flow information:
Net cash provided by operating activities.......... 83,816 15,948
Net cash used for investing activities............. (212,763) (281,208)
Net cash provided by financing activities.......... 1,720,540 1,413,319
Ratio of earnings to fixed charges(f)................ -- --
Ratio of EBITDA to total interest expense(g)......... 0.89x 0.79x
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
As of March 31, 1999
---------------------------------------
Pro Forma for
Recent and
Pro Forma Proposed
for Recent and Offerings and
Historical Proposed Recent
CCIC Offerings Transactions
---------- -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............ $ 101,847 $1,345,769 $ 741,152
Property and equipment, net.......... 1,233,204 1,233,204 2,116,306
Total assets......................... 2,123,694 3,390,076 3,570,165
Total debt........................... 771,190 1,428,396 1,428,396
Net debt(h).......................... 669,343 82,627 687,244
Redeemable preferred stock........... 207,471 207,471 207,471
Total stockholders' equity........... 966,756 1,575,932 1,755,932
</TABLE>
S-6
<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 supplement. 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 Statements of Operations included elsewhere in this
prospectus supplement. See "Notes to Unaudited Pro Forma Condensed
Consolidated Statements 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, the Powertel acquisition and the proposed BellSouth DCS
transaction. 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, non-cash compensation charges and restructuring 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 and the three months ended March 31, 1999, our
earnings were insufficient to cover our fixed charges by $175.2 million and
$49.0 million, respectively.
(g) Total interest expense for the year ended December 31, 1998 includes
amortization of deferred financing costs and discount of $68.9 million for
CCIC, $0.9 million for CTSH and $0.7 million for the Bell Atlantic joint
venture. Total interest expense for the three months ended March 31, 1999
includes amortization of deferred financing costs and discount of $17.2
million for CCIC, $0.2 million for CTSH and $0.2 million for the Bell
Atlantic joint venture.
(h) Net debt represents total debt less cash and cash equivalents.
S-7
<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 summary historical consolidated
financial and other data for CCIC set forth below for the three months ended
March 31, 1998 and 1999, and as of March 31, 1999, have been derived from the
unaudited consolidated financial statements of CCIC, which include all
adjustments that CCIC considers necessary for a fair presentation of the
financial position and results of operations for those periods. Operating
results for the three months ended March 31, 1998 and 1999 are not necessarily
indicative of the results that may be expected for the entire year. The results
of operations for the three months ended March 31, 1999 are not comparable to
the three months ended March 31, 1998, the results 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. 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" included elsewhere in
this prospectus supplement and the consolidated financial statements and
related notes of CCIC included in CCIC's Annual Report on Form 10-K and
Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
Three Months
Years Ended December 31, Ended March 31,
------------------------------------ -----------------
1995 1996 1997 1998 1998 1999
------- ------- -------- -------- ------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues:
Site rental and
broadcast
transmission.......... $ 4,052 $ 5,615 $ 11,010 $ 75,028 $ 5,061 $ 45,326
Network services and
other................. 6 592 20,395 38,050 6,776 9,783
------- ------- -------- -------- ------- --------
Total net revenues... 4,058 6,207 31,405 113,078 11,837 55,109
------- ------- -------- -------- ------- --------
Costs of operations:
Site rental and
broadcast
transmission.......... 1,226 1,292 2,213 26,254 1,172 18,527
Network services and
other................. -- 8 13,137 21,564 4,421 6,982
------- ------- -------- -------- ------- --------
Total costs of
operations.......... 1,226 1,300 15,350 47,818 5,593 25,509
------- ------- -------- -------- ------- --------
General and
administrative......... 729 1,678 6,824 23,571 3,803 8,304
Corporate
development(a)......... 204 1,324 5,731 4,625 1,331 874
Restructuring charges... -- -- -- -- -- 1,814
Non-cash compensation
charges(b) ............ -- -- -- 12,758 -- 667
Depreciation and
amortization........... 836 1,242 6,952 37,239 3,604 19,656
------- ------- -------- -------- ------- --------
Operating income
(loss)................. 1,063 663 (3,452) (12,933) (2,494) (1,715)
Other income (expense):
Equity in earnings
(losses) of
unconsolidated
affiliate............. -- -- (1,138) 2,055 (99) --
Interest and other
income (expense)(c)... 53 193 1,951 4,220 706 340
Interest expense and
amortization of
deferred financing
costs................. (1,137) (1,803) (9,254) (29,089) (4,706) (11,286)
------- ------- -------- -------- ------- --------
Loss before income
taxes, minority
interests and
cumulative effect of
change in accounting
principle.............. (21) (947) (11,893) (35,747) (6,593) (12,661)
Provision for income
taxes.................. -- (10) (49) (374) (13) (127)
Minority interests...... -- -- -- (1,654) -- (685)
------- ------- -------- -------- ------- --------
Loss before cumulative
effect of change in
accounting principle... (21) (957) (11,942) (37,775) (6,606) (13,473)
Cumulative effect of
change in accounting
principle for costs of
start-up activities.... -- -- -- -- -- (2,414)
------- ------- -------- -------- ------- --------
Net loss................ (21) (957) (11,942) (37,775) (6,606) (15,887)
Dividends on preferred
stock.................. -- -- (2,199) (5,411) (2,055) (6,408)
------- ------- -------- -------- ------- --------
Net loss after deduction
of dividends on
preferred stock........ $ (21) $ (957) $(14,141) $(43,186) $(8,661) $(22,295)
======= ======= ======== ======== ======= ========
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
----------------------------------------- --------------------
1995 1996 1997 1998 1998 1999
-------- -------- --------- ---------- -------- ----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Per common share--basic
and diluted:
Loss before cumulative
effect of change in
accounting
principle............. $ (0.01) $ (0.27) $ (2.27) $ (1.02) $ (0.79) $ (0.21)
Cumulative effect of
change in accounting
principle............. -- -- -- -- -- (0.03)
-------- -------- --------- ---------- -------- ----------
Net loss............... $ (0.01) $ (0.27) $ (2.27) $ (1.02) $ (0.79) $ (0.24)
======== ======== ========= ========== ======== ==========
Common shares
outstanding--basic
and diluted (in
thousands)............ 3,316 3,503 6,238 42,518 10,954 94,732
======== ======== ========= ========== ======== ==========
Other Data:
Site data (at period
end)(d):
Towers owned........... 126 155 240 1,344 331 3,683
Towers managed......... 7 7 133 129 128 13
Rooftop sites managed
(revenue producing)... 41 52 80 135 71 146
-------- -------- --------- ---------- -------- ----------
Total sites owned and
managed............. 174 214 453 1,608 530 3,842
======== ======== ========= ========== ======== ==========
EBITDA(e):
Site rental............ $ 2,697 $ 3,555 $ 7,682 $ 44,661 $ 3,490 $ 24,658
Network services and
other................. (594) (326) 1,549 (2,972) (1,049) (3,362)
Corporate development
expenses(a)........... (204) (1,324) (5,731) (4,625) (1,331) (874)
-------- -------- --------- ---------- -------- ----------
Total EBITDA......... $ 1,899 $ 1,905 $ 3,500 $ 37,064 $ 1,110 $ 20,422
======== ======== ========= ========== ======== ==========
Capital expenditures.... $ 161 $ 890 $ 18,035 $ 138,759 $ 24,539 $ 76,363
Summary cash flow
information:
Net cash provided by
(used for) operating
activities............ 1,672 (530) (624) 44,976 (2,951) 20,487
Net cash used for
investing
activities............ (16,673) (13,916) (111,484) (149,248) (24,539) (281,208)
Net cash provided by
financing
activities............ 15,597 21,193 159,843 345,248 25,807 66,397
Ratio of earnings to
fixed charges(f)....... -- -- -- -- -- --
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 596 $ 7,343 $ 55,078 $ 296,450 $ 101,847
Property and equipment,
net.................... 16,003 26,753 81,968 592,594 1,233,204
Total assets............ 19,875 41,226 371,391 1,523,230 2,123,694
Total debt.............. 11,182 22,052 156,293 429,710 771,190
Redeemable preferred
stock(g)............... 5,175 15,550 160,749 201,063 207,471
Total stockholders'
equity (deficit)....... 619 (210) 41,792 737,562 966,756
</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.
(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, non-cash compensation changes and restructuring charges.
EBITDA is presented as additional information
S-9
<PAGE>
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. For the three months ended March 31, 1998 and 1999, earnings
were insufficient to cover fixed charges by $6.5 million and $12.7 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 and 1999 amounts represent
our exchangeable preferred stock.
S-10
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, as well as the
other information included in this prospectus supplement, when evaluating an
investment in our common stock.
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 5,500 towers to our operations
through our recent and proposed transactions has and will continue to increase
our current business considerably and adds 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 supplement, we
may lose funds that we have placed in escrow or incur liquidated damages and we
will not recognize some of the benefits that we describe in this prospectus
supplement.
If one or more of the proposed transactions we describe in this prospectus
supplement is not completed or is completed on significantly different terms
than those described in this prospectus supplement, 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
proposed 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
supplement. 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 agreement for the proposed BellSouth DCS
transaction, we placed $20.0 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 proposed BellSouth DCS transaction, or if we fail to comply with all
conditions, covenants and representations we are required to fulfill under our
agreement with BellSouth DCS. In addition, our initial BellSouth transaction is
closing in a series of closings. If we fail to close on all of the contracted
towers, BellSouth could terminate our agreement, rescind the prior closings and
retain a $50.0 million liquidated damages payment. The loss of the BellSouth
DCS escrow payment or the recission of the other BellSouth transaction, 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".
S-11
<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 March 31,
1999, assuming we had completed the recent and proposed offerings and the
recent and proposed transactions described in this prospectus supplement, each
as of March 31, 1999.
<TABLE>
<CAPTION>
Pro Forma
for Recent and
Proposed
Offerings and
Recent Transactions
-------------------
(Dollars in
thousands)
<S> <C>
Total indebtedness.................................... $1,428,396
Redeemable preferred stock............................ 207,471
Stockholders' equity.................................. 1,755,932
Debt and redeemable preferred stock to equity
ratio................................................ 0.93x
</TABLE>
In addition, assuming we had completed these transactions on January 1,
1998, our earnings for the twelve months ended December 31, 1998, and the three
months ended March 31, 1999, would have been insufficient to cover fixed
charges by $175.2 million and $ 49.0 million, respectively.
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, including interest and principal payments, under our debt
instruments.
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 and principal on its outstanding 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
S-12
<PAGE>
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 or distribute such a
dividend or funds, or that applicable state law and contractual restrictions,
including negative covenants contained in the debt instruments of such
subsidiaries, would permit such dividends, distributions or payments.
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. Our 9% senior notes
require annual cash interest payments of approximately $16.2 million and our 9
1/2% senior notes will require annual cash interest payments of approximately
$11.9 million. Prior to November 15, 2002, May 15, 2004 and August 1, 2004, the
interest expense on our 10 5/8% discount notes, our 10 3/8% discount notes and
our 11 1/4% discount notes, respectively, will be comprised solely of the
amortization of original issue discount. Thereafter, the 10 5/8% discount
notes, the 10 3/8% discount notes and the 11 1/4% discount notes will require
annual cash interest payments of approximately $26.7 million, $51.9 million and
$29.3 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.
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 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, in the prospectus supplement, "Description of Capital
Stock--Senior Exchangeable Preferred Stock".
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
S-13
<PAGE>
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. TdF retains
significant governance rights even if we acquire the remaining 20% interest of
our U.K. business held by TdF.
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, through its subsidiary, DFI, 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;
. 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 supplement. 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.
S-14
<PAGE>
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 additional 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 closings 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 exercised
these preemptive rights as a result of our acquisition of Millennium
Communications Limited in the United Kingdom on October 8, 1998, as a result of
our contribution of shares of our common stock to the Bell Atlantic joint
venture on March 31, 1999 and as a result of our equity offering in May 1999.
The further 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 supplement and the construction of
new towers that we have agreed to build, we expect to use the net proceeds of
our recent 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
S-15
<PAGE>
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 June 30, 1999, we had over 125 towers under construction. We
currently have plans to commence construction on approximately 600 to 700
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;
. 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
S-16
<PAGE>
reduced ability of these customers to finance expansion activities. Finally,
advances in technology, such as the development of new satellite and antenna
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.
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
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<PAGE>
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 recent and proposed transactions described in
this prospectus supplement, each as of January 1, 1999, the BBC would have
still accounted for approximately 29.7% of our revenues for the three-month
period ended March 31, 1999.
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.
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 or breach
contractual. 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.
S-18
<PAGE>
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 three-month period ended
March 31, 1999, but without giving effect to the recent and proposed
transactions we describe in this prospectus supplement, approximately 79.2% 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
future 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 of our executives 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.
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 exchange will be deemed, for purposes of
Section 382, to have been acquired by an existing separate public group treated
as a new 5% public group shareholder which had an increase in ownership. The
ownership increase by this 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.
S-19
<PAGE>
It is unclear whether the exchange 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 exchange 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.
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;
. 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 "Description of Capital Stock" in the
attached prospectus.
S-20
<PAGE>
This Prospectus Supplement 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
"Summary", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Industry Background" and "Business" and located
elsewhere in this prospectus supplement supplement 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.
S-21
<PAGE>
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.............................................. 21.50 16.38
Third Quarter (through July 26, 1999)....................... 25.50 19.31
</TABLE>
On July 28, 1999, the last reported sale price of the common stock as
reported by Nasdaq was $22.8125. As of July 26, 1999, there were approximately
318 holders of record of the common stock.
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".
S-22
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1999:
. our historical capitalization;
. our pro forma capitalization after giving effect to our recent and
proposed offerings; and
. our pro forma capitalization after giving effect to such offerings and
the recent transactions we describe in this prospectus supplement.
The information set forth below should be read in conjunction with "Unaudited
Pro Forma Condensed Consolidated Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus supplement, and the consolidated
financial statements and related notes included in CCIC's Annual Report on Form
10-K and Quarterly Report on Form 10-Q. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements" for detail regarding the pro forma
adjustments.
<TABLE>
<CAPTION>
March 31, 1999
--------------------------------------
Pro Forma
for Recent
Pro Forma and Proposed
for Recent Offerings and
and Proposed Recent
Actual Offerings Transactions
---------- ------------ -------------
(Dollars in thousands, except share
amounts)
<S> <C> <C> <C>
Cash and cash equivalents............... $ 101,847 $1,345,769 $ 741,152
========== ========== ==========
Notes payable and current maturities of
long-term debt......................... $ -- $ -- $ --
========== ========== ==========
Long-term debt (less current
maturities):
Senior Credit Facility(a).............. $ 40,000 $ 40,000 $ 40,000
Castle Transmission Credit
Facility(a)........................... 83,513 83,513 83,513
Joint Venture Credit Facility.......... 180,000 180,000 180,000
10 5/8% Senior Discount Notes due
2007.................................. 172,505 172,505 172,505
10 3/8% Senior Discount Notes due
2011.................................. -- 301,695 301,695
9% Senior Notes due 2011............... -- 180,000 180,000
9% Guaranteed Bonds due 2007........... 195,172 195,172 195,172
Term Loans due 2007.................... 100,000 -- --
Notes offered in the proposed debt
offering.............................. -- 275,511 275,511
---------- ---------- ----------
Total long-term debt.................. 771,190 1,428,396 1,428,396
---------- ---------- ----------
Minority interests...................... 53,098 53,098 53,098
Redeemable preferred stock:
Exchangeable Preferred Stock ($.01 par
value; 400,000 shares authorized;
206,375 shares issued)................ 207,471 207,471 207,471
Stockholders' equity:
Common stock ($.01 par value;
690,000,000 shares authorized):
Common stock (99,168,585 shares
issued, actual; 137,065,915 shares
issued, pro forma for offerings; and
146,149,942 shares issued, pro forma
for the offerings and the proposed
transactions)........................ 992 1,371 1,461
Class A common stock (11,340,000
shares issued)....................... 113 113 113
Additional paid-in capital............. 1,051,224 1,663,021 1,842,931
Cumulative foreign currency translation
adjustment............................ (3,053) (3,053) (3,053)
Accumulated deficit.................... (82,520) (85,520) (85,520)
---------- ---------- ----------
Total stockholders' equity............ 966,756 1,575,932 1,755,932
---------- ---------- ----------
Total capitalization................. $1,998,515 $3,264,897 $3,444,897
========== ========== ==========
</TABLE>
- --------
(a) As of June 1, 1999 Crown Communication had unused borrowing availability
under its senior credit facility of approximately $25.9 million, and Castle
Transmission had approximately (Pounds)9.2 million ($14.8 million) of
unused borrowing availability under its credit facility. See "Description
of Certain Indebtedness".
S-23
<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
periods 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 the exchangeable preferred stock in December 1998;
(5) the recent debt and equity offerings;
(6) the proposed debt offerings;
(7) the Bell Atlantic joint venture;
(8) the BellSouth transaction; and
(9) the 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 Statement of Operations for the three months ended March 31, 1999
gives effect to the (1) recent and proposed debt and equity offerings described
in clauses (5) and (6) above and (2) the recent transactions described in
clauses (7), (8) and (9) above as if they had occurred as of January 1, 1999.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to
the (1) recent and proposed debt and equity offerings described in clauses (5)
and (6) above and (2) the recent transactions described in clauses (8) and (9)
above as if they had occurred as of March 31, 1999. The pro forma adjustments
are described in the accompanying notes and are based upon available
information and certain assumptions that management believes are reasonable.
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 in CCIC's Annual Report on Form
10-K and Quarterly Report on Form 10-Q, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus supplement.
The roll-up, the Bell Atlantic joint venture and the 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 has 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.
S-24
<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) (82,468)(i) (121,246) -- (17,711)(n)
-------- ------- -------- -------- -------- --------- -------- -------
Income (loss)
before income
taxes and
minority
interests....... (35,747) 5,970 (9,829) (39,606) (82,468) (122,074) (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) (82,468) (125,296) (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) $(82,468) $(152,041) $(10,036) $(5,893)
======== ======= ======== ======== ======== ========= ======== =======
Loss per common
share--basic and
diluted ........ $ (1.02) $ (0.74) $ (1.20)
======== ======== =========
Common shares
outstanding--
basic and
diluted (in
thousands)...... 42,518 94,064 126,566
======== ======== =========
<CAPTION>
Pro Forma
for 1998
Transactions, Adjustments Adjustments
Offerings for for 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........... (138,957) -- -- -- (138,957)
------------- --------------- ----------- ------------- ------------
Income (loss)
before income
taxes and
minority
interests....... (142,158) (8,060) (11,836) 7,929 (154,125)
Provision for
income taxes.... (374) -- -- -- (374)
Minority
interests....... 1,307 -- -- -- 1,307
------------- --------------- ----------- ------------- ------------
Net income
(loss).......... (141,225) (8,060) (11,836) 7,929 (153,192)
Dividends on
preferred
stock........... (26,745) -- -- -- (26,745)
------------- --------------- ----------- ------------- ------------
Net income (loss)
after deduction
of dividends on
preferred
stock........... $(167,970) $(8,060) $(11,836) $ 7,929 $(179,937)
============= =============== =========== ============= ============
Loss per common
share--basic and
diluted ........ $ (1.14) $ (1.15)
============= ============
Common shares
outstanding--
basic and
diluted (in
thousands)...... 147,559 156,643
============= ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
S-25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1999
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma
Bell for Adjustments
Adjustments Pro Forma Atlantic Adjustments Offerings for
Historical for for Joint for Joint and Joint BellSouth Historical
CCIC(a) Offerings Offerings Venture(j) Venture Venture Transaction Powertel(s)
---------- ----------- --------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission...... $ 45,326 $ -- $ 45,326 $ 3,705 $ 8,092(k) $ 57,123 $ 8,460(p) $ 1,118
Network services
and other......... 9,783 -- 9,783 -- -- 9,783 -- --
-------- -------- -------- ------- ------- -------- ------- -------
Total net
revenues........ 55,109 -- 55,109 3,705 8,092 66,906 8,460 1,118
-------- -------- -------- ------- ------- -------- ------- -------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 18,527 -- 18,527 5,359 --(l) 23,886 2,850(l)(q) 1,641
Network services
and other....... 6,982 -- 6,982 -- -- 6,982 -- --
General and
administrative.... 8,304 -- 8,304 -- --(l) 8,304 --(l) --
Corporate
development....... 874 -- 874 -- -- 874 -- --
Restructuring
charges........... 1,814 -- 1,814 -- -- 1,814 -- --
Non-cash
compensation
charges........... 667 -- 667 -- -- 667 -- --
Depreciation and
amortization...... 19,656 -- 19,656 1,899 6,222(m) 27,777 7,625(r) 2,151
-------- -------- -------- ------- ------- -------- ------- -------
56,824 -- 56,824 7,258 6,222 70,304 10,475 3,792
-------- -------- -------- ------- ------- -------- ------- -------
Operating income
(loss)............. (1,715) -- (1,715) (3,553) 1,870 (3,398) (2,015) (2,674)
Other income
(expense):
Interest and
other income
(expense)......... 340 -- 340 -- -- 340 -- --
Interest expense
and amortization
of deferred
financing costs... (11,286) (22,545)(i) (33,831) -- (4,428)(n) (38,259) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Income (loss)
before income
taxes, minority
interests and
cumulative effect
of change in
accounting
principle.......... (12,661) (22,545) (35,206) (3,553) (2,558) (41,317) (2,015) (2,674)
Provision for
income taxes....... (127) -- (127) -- -- (127) -- --
Minority
interests.......... (685) -- (685) -- 1,224(o) 539 -- --
-------- -------- -------- ------- ------- -------- ------- -------
Income (loss)
before cumulative
effect of change in
accounting
principle.......... (13,473) (22,545) (36,018) (3,553) (1,334) (40,905) (2,015) (2,674)
Cumulative effect
of change in
accounting
principle for costs
of start-up
activities......... (2,414) -- (2,414) -- -- (2,414) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Net income (loss).. (15,887) (22,545) (38,432) (3,553) (1,334) (43,319) (2,015) (2,674)
Dividends on
preferred stock.... (6,408) -- (6,408) -- -- (6,408) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Net income (loss)
after deduction of
dividends on
preferred stock.... $(22,295) $(22,545) $(44,840) $(3,553) $(1,334) $(49,727) $(2,015) $(2,674)
======== ======== ======== ======= ======= ======== ======= =======
Per common share--
basic and diluted:
Loss before
cumulative effect
of change in
accounting
principle......... $ (0.21) $ (0.33) $ (0.32)
Cumulative effect
of change in
accounting
principle......... (0.03) (0.02) (0.02)
-------- -------- --------
Net loss.......... $ (0.24) $ (0.35) $ (0.34)
======== ======== ========
Common shares
outstanding--basic
and diluted (in
thousands)......... 94,732 127,234 148,227
======== ======== ========
<CAPTION>
Adjustments
for Pro Forma
Powertel for the
Acquisition Transactions
------------ ------------
<S> <C> <C>
Net revenues:
Site rental and
broadcast
transmission...... $3,510(t) $ 70,211
Network services
and other......... -- 9,783
------------ ------------
Total net
revenues........ 3,510 79,994
------------ ------------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... --(l) 28,377
Network services
and other....... -- 6,982
General and
administrative.... --(l) 8,304
Corporate
development....... -- 874
Restructuring
charges........... -- 1,814
Non-cash
compensation
charges........... -- 667
Depreciation and
amortization...... 1,244(u) 38,797
------------ ------------
1,244 85,815
------------ ------------
Operating income
(loss)............. 2,266 (5,821)
Other income
(expense):
Interest and
other income
(expense)......... -- 340
Interest expense
and amortization
of deferred
financing costs... -- (38,259)
------------ ------------
Income (loss)
before income
taxes, minority
interests and
cumulative effect
of change in
accounting
principle.......... 2,266 (43,740)
Provision for
income taxes....... -- (127)
Minority
interests.......... -- 539
------------ ------------
Income (loss)
before cumulative
effect of change in
accounting
principle.......... 2,266 (43,328)
Cumulative effect
of change in
accounting
principle for costs
of start-up
activities......... -- (2,414)
------------ ------------
Net income (loss).. 2,266 (45,742)
Dividends on
preferred stock.... -- (6,408)
------------ ------------
Net income (loss)
after deduction of
dividends on
preferred stock.... $2,266 $(52,150)
============ ============
Per common share--
basic and diluted:
Loss before
cumulative effect
of change in
accounting
principle......... $ (0.32)
Cumulative effect
of change in
accounting
principle......... (0.01)
------------
Net loss.......... $ (0.33)
============
Common shares
outstanding--basic
and diluted (in
thousands)......... 157,311
============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
S-26
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Statements 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 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
the exchangeable preferred stock.
(i) Reflects:
(1) increase in interest expense as a result of the issuance of the notes
in the recent debt offering of $48,313 for the year ended December 31,
1998 and $11,875 for the three months ended March 31, 1999;
(2) amortization of deferred financing costs related to the notes issued in
the recent debt offering of $1,329 for the year ended December 31, 1998
and $333 for the three months ended March 31, 1999;
(3) nonrecurring financing fees of $3,000 for both periods related to the
term loans incurred to fund the escrow payments in connection with the
BellSouth transaction and the Powertel acquisition;
(4) increase in interest expense as a result of the issuance of the notes
in the proposed debt offering of $29,284 for the year ended December
31, 1998 and $7,202 for the three months ended March 31, 1999; and
(5) amortization of deferred financing costs related to the notes in the
proposed debt offering of $542 for the year ended December 31, 1998 and
$135 for the three months ended March 31, 1999.
(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.
S-27
<PAGE>
(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 revenues to be received from BellSouth and
$7,200 in revenues to be received from other tenants for the year ended
December 31, 1998; and $6,660 in revenues to be received from BellSouth and
$1,800 in revenues to be received from other tenants for the three months
ended March 31, 1999.
(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
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.
S-28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Adjustments Adjustments
Adjustments Pro Forma for for Pro Forma
Historical for for BellSouth Historical Powertel for the
CCIC Offerings Offerings Transaction Powertel(h) Acquisition Transactions
---------- ----------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents.......... $ 101,847 $1,243,922(a) $1,345,769 $(380,000)(e) $ -- $(224,617)(i) $ 741,152
Receivables........... 37,146 -- 37,146 -- -- -- 37,146
Inventories........... 8,634 -- 8,634 -- -- -- 8,634
Prepaid expenses and
other current
assets............... 7,148 -- 7,148 -- 1,604 -- 8,752
---------- ---------- ---------- --------- -------- --------- ----------
Total current
assets.............. 154,775 1,243,922 1,398,697 (380,000) 1,604 (224,617) 795,684
Property and equipment,
net.................... 1,233,204 -- 1,233,204 610,000 (f) 116,722 156,380 (j) 2,116,306
Escrow deposits for
acquisitions........... 100,000 -- 100,000 (50,000)(e) -- (50,000)(i) --
Goodwill and other
intangible assets,
net.................... 617,769 -- 617,769 -- -- -- 617,769
Deferred financing costs
and other assets, net.. 17,946 22,460(b) 40,406 -- -- -- 40,406
---------- ---------- ---------- --------- -------- --------- ----------
$2,123,694 $1,266,382 $3,390,076 $ 180,000 $118,326 $(118,237) $3,570,165
========== ========== ========== ========= ======== ========= ==========
Liabilities and
Stockholders' Equity:
Current liabilities:
Accounts payable...... $ 27,383 $ -- $ 27,383 $ -- $ -- $ -- $ 27,383
Other current
liabilities.......... 50,912 -- 50,912 -- 89 -- 51,001
Long-term debt,
current maturities... -- -- -- -- -- -- --
---------- ---------- ---------- --------- -------- --------- ----------
Total current
liabilities......... 78,295 -- 78,295 -- 89 -- 78,384
Long-term debt, less
current maturities..... 771,190 657,206(c) 1,428,396 -- -- -- 1,428,396
Other liabilities....... 46,884 -- 46,884 -- -- -- 46,884
---------- ---------- ---------- --------- -------- --------- ----------
Total liabilities.... 896,369 657,206 1,553,575 -- 89 -- 1,553,664
---------- ---------- ---------- --------- -------- --------- ----------
Minority interests...... 53,098 -- 53,098 -- -- -- 53,098
Redeemable preferred
stock.................. 207,471 -- 207,471 -- -- -- 207,471
Stockholders' equity.... 966,756 609,176(d) 1,575,932 180,000 (g) 118,237 (118,237)(k) 1,755,932
---------- ---------- ---------- --------- -------- --------- ----------
$2,123,694 $1,266,382 $3,390,076 $ 180,000 $118,326 $(118,237) $3,570,165
========== ========== ========== ========= ======== ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
S-29
<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 recent offerings................................... $ 904,320
(2) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the recent offerings........................ (34,855)
(3) Decrease resulting from the payment of outstanding
borrowings and nonrecurring financing fees related to
the term loans used to finance the BellSouth and
Powertel escrow payments............................... (103,000)
(4) Increase resulting from sale of common stock to TdF
under its preemptive rights from the Bell Atlantic
joint venture and the equity offering.................. 208,456
(5) Increase resulting from the receipt of proceeds from
the proposed debt offering............................. 275,511
(6) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the proposed debt offering.................. (6,510)
-------------
Total adjustments to cash and cash equivalents......... $ 1,243,922
=============
(b) Reflects deferred financing costs resulting from the
payment of underwriting discounts and commissions and other
fees and expenses related to the recent and proposed debt
offerings.
(c) Reflects the following adjustments to long-term debt, less
current maturities:
(1) Increase resulting from the receipt of proceeds from
the recent debt offering............................... $ 481,695
(2) Decrease resulting from the repayment of outstanding
borrowings under the term loans used to finance the
BellSouth and Powertel escrow payments................. (100,000)
(3) Increase resulting from the receipt of proceeds from
the proposed debt offering............................. 275,511
-------------
Total adjustments to long-term debt, less current
maturities................................................. $ 657,206
=============
(d) Reflects the following adjustments to stockholders' equity:
(1) Increase resulting from the receipt of proceeds from
the recent equity offering............................. $ 422,625
(2) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the recent equity offering.................. (18,905)
(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)
(4) Increase resulting from sale of common stock to TdF
under its preemptive rights from the Bell Atlantic
joint venture and the equity offering.................. 208,456
-------------
Total adjustments to stockholders' equity.................. $ 609,176
=============
(e) Reflects the payment of the cash portion of the purchase price for the
BellSouth transaction.
(f) Reflects the basis of property and equipment recorded in connection with
the BellSouth transaction.
(g) Reflects the increase resulting from the issuance of common stock for a
portion of the purchase price for the BellSouth transaction.
(h) Reflects the historical amounts from the statement of net assets for the
tower operations acquired in the Powertel acquisition.
(i) Reflects the payment of the closing price for the Powertel acquisition.
(j) Reflects the increase in basis of property and equipment acquired in the
Powertel acquisition.
(k) Reflects the elimination of the historical basis of the net assets
acquired in the Powertel acquisition.
</TABLE>
S-30
<PAGE>
The following table summarizes the adjustments for the recent offerings,
with increases to liabilities and stockholders' equity balances shown as
negative amounts:
<TABLE>
<CAPTION>
Adjustment Reference
-------------------------------------------------
(a)(1), (a)(4), (a)(5), (a)(3),
(c)(1), (c)(3), (d)(1), (a)(2), (a)(6), (c)(2),
(d)(4) (b), (d)(2) (d)(3) Totals
----------------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Cash and cash
equivalents............ $1,388,287 $(41,365) $(103,000) $1,243,922
Deferred financing cost
and other assets, net.. -- 22,460 -- 22,460
Long-term debt, less
current maturities..... (757,206) -- 100,000 (657,206)
Stockholders' equity.... (631,081) 18,905 3,000 (609,176)
---------- -------- --------- ----------
$ -- $ -- $ -- $ --
========== ======== ========= ==========
</TABLE>
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
--------------------
(e),(f),(g)
--------------------
<S> <C>
Cash and cash equivalents............................... $(380,000)
Property and equipment, net............................. 610,000
Escrow deposits for acquisitions........................ (50,000)
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
--------------------
(i),(j),(k)
--------------------
<S> <C>
Cash and cash equivalents............................... $(224,617)
Property and equipment, net............................. 156,380
Escrow deposits for acquisitions........................ (50,000)
Stockholders' equity.................................... 118,237
---------
$ --
=========
</TABLE>
S-31
<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 summary historical consolidated
financial and other data for CCIC set forth below for the three months ended
March 31, 1998 and 1999, and as of March 31, 1999, have been derived from the
unaudited consolidated financial statements of CCIC, which include all
adjustments that CCIC considers necessary for a fair presentation of the
financial position and results of operations for those periods. Operating
results for the three months ended March 31, 1998 and 1999 are not necessarily
indicative of the results that may be expected for the entire year. The results
of operations for the three months ended March 31, 1999 are not comparable to
the three months ended March 31, 1998, the results 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. 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" included elsewhere in
this prospectus supplement and the consolidated financial statements and
related notes of CCIC included in CCIC's Annual Report on Form 10-K and
Quarterly Report on Form 10-Q.
<TABLE>
<CAPTION>
Three Months
Years Ended December 31, Ended March 31,
---------------------------------- -----------------
1995 1996 1997 1998 1998 1999
------ ------ -------- -------- ------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues:
Site rental and
broadcast
transmission.......... $4,052 $5,615 $ 11,010 $ 75,028 $ 5,061 $ 45,326
Network services and
other................. 6 592 20,395 38,050 6,776 9,783
------ ------ -------- -------- ------- --------
Total net revenues... 4,058 6,207 31,405 113,078 11,837 55,109
------ ------ -------- -------- ------- --------
Costs of operations:
Site rental and
broadcast
transmission.......... 1,226 1,292 2,213 26,254 1,172 18,527
Network services and
other................. -- 8 13,137 21,564 4,421 6,982
------ ------ -------- -------- ------- --------
Total costs of
operations.......... 1,226 1,300 15,350 47,818 5,593 25,509
------ ------ -------- -------- ------- --------
General and
administrative......... 729 1,678 6,824 23,571 3,803 8,304
Corporate
development(a)......... 204 1,324 5,731 4,625 1,331 874
Restructuring charges... -- -- -- -- -- 1,814
Non-cash compensation
charges(b)............. -- -- -- 12,758 -- 667
Depreciation and
amortization........... 836 1,242 6,952 37,239 3,604 19,656
------ ------ -------- -------- ------- --------
Operating income
(loss)................. 1,063 663 (3,452) (12,933) (2,494) (1,715)
Equity in earnings
(losses) of
unconsolidated
affiliate.............. -- -- (1,138) 2,055 (99) --
Interest and other
income (expense)(c).... 53 193 1,951 4,220 706 340
Interest expense and
amortization of
deferred financing
costs.................. (1,137) (1,803) (9,254) (29,089) (4,706) (11,286)
------ ------ -------- -------- ------- --------
Loss before income
taxes, minority
interests and
cumulative effect of
change in accounting
principle.............. (21) (947) (11,893) (35,747) (6,593) (12,661)
Provision for income
taxes.................. -- (10) (49) (374) (13) (127)
Minority interests...... -- -- -- (1,654) -- (685)
------ ------ -------- -------- ------- --------
Loss before cumulative
effect of change in
accounting principle... (21) (957) (11,942) (37,775) (6,606) (13,473)
Cumulative effect of
change in accounting
principle for costs of
start-up activities.... -- -- -- -- -- (2,414)
------ ------ -------- -------- ------- --------
Net loss................ (21) (957) (11,942) (37,775) (6,606) (15,887)
Dividends on preferred
stock.................. -- -- (2,199) (5,411) (2,055) (6,408)
------ ------ -------- -------- ------- --------
Net loss after deduction
of dividends on
preferred stock........ $ (21) $ (957) $(14,141) $(43,186) $(8,661) $(22,295)
====== ====== ======== ======== ======= ========
Per common share--basic
and diluted:
Loss before cumulative
effect of change in
accounting
principle............. $(0.01) $(0.27) $ (2.27) $ (1.02) $ (0.79) $ (0.21)
Cumulative effect of
change in accounting
principle............. -- -- -- -- -- (0.03)
------ ------ -------- -------- ------- --------
Net loss............... $(0.01) $(0.27) $ (2.27) $ (1.02) $ (0.79) $ (0.24)
====== ====== ======== ======== ======= ========
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
----------------------------------------- --------------------
1995 1996 1997 1998 1998 1999
-------- -------- --------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Common shares
outstanding--basic and
diluted (in
thousands)............. 3,316 3,503 6,238 42,518 10,954 94,732
======== ======== ========= ========== ======== ==========
Other Data:
Site data (at period
end)(d):
Towers owned............ 126 155 240 1,344 331 3,683
Towers managed.......... 7 7 133 129 128 13
Rooftop sites managed
(revenue producing).... 41 52 80 135 71 146
-------- -------- --------- ---------- -------- ----------
Total sites owned and
managed................ 174 214 453 1,608 530 3,842
======== ======== ========= ========== ======== ==========
EBITDA(e)............... $ 1,899 $ 1,905 $ 3,500 $ 37,064 $ 1,110 $ 20,422
Capital expenditures.... 161 890 18,035 138,759 24,539 76,363
Summary cash flow
information:
Net cash provided by
(used for) operating
activities............ 1,672 (530) (624) 44,976 (2,951) 20,487
Net cash used for
investing activities.. (16,673) (13,916) (111,484) (149,248) (24,539) (281,208)
Net cash provided by
financing activities.. 15,597 21,193 159,843 345,248 25,807 66,397
Ratio of earnings to
fixed charges(f)....... -- -- -- -- -- --
Balance Sheet Data (at
period end):
Cash and cash
equivalents............ $ 596 $ 7,343 $ 55,078 $ 296,450 $ 101,847
Property and equipment,
net.................... 16,003 26,753 81,968 592,594 1,233,204
Total assets............ 19,875 41,226 371,391 1,523,230 2,123,694
Total debt.............. 11,182 22,052 156,293 429,710 771,190
Redeemable preferred
stock(g)............... 5,175 15,550 160,749 201,063 207,471
Total stockholders'
equity (deficit)....... 619 (210) 41,792 737,562 966,756
</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 for our initial Castle Transmission investment.
(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, non-cash compensation charges and restructuring 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. For the three months ended March 31, 1998 and 1999, earnings
were insufficient to cover fixed charges by $6.5 million and $12.7 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
S-33
<PAGE>
connection with the completion of our initial public offering in August
1998. The 1998 and 1999 amounts represent our 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
-------- ------- ------------ -----------
(Dollars in
thousands, 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)
1999:
Net revenues...................... $ 55,109
Gross profit(1)................... 29,600
Loss before cumulative effect of
change in accounting principle... (13,473)
Cumulative effect of change in
accounting principle............. (2,414)
Net loss.......................... (15,887)
Per common share--basic and
diluted:
Loss before cumulative effect of
change in accounting principle.. (0.21)
Cumulative effect of change in
accounting principle............ (0.03)
Net loss......................... (0.24)
</TABLE>
- --------
(1) Represents net revenues less costs of operations.
S-34
<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 March 31, 1999
and its consolidated results of operations for the three-month periods ended
March 31, 1998 and 1999 and 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" and "Selected Financial and Other Data of
CCIC" included elsewhere in this prospectus supplement, and the consolidated
financial statements and related notes included in CCIC's Annual Report on Form
10-K and Quarterly Report on Form 10-Q. 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 three months ended
March 31, 1999 are not comparable to the three months ended March 31, 1998, the
results 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.
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<PAGE>
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;
. 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
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<PAGE>
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.
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;
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<PAGE>
.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 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
three months ended March 31, 1999 are not comparable to the three months ended
March 31, 1998, the results 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.
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<PAGE>
The following information is derived from CCIC's historical Consolidated
Statements of Operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Three Months
Year Ended Year Ended Year Ended Ended March 31, Ended March 31,
December 31, 1996 December 31, 1997 December 31, 1998 1998 1999
-------------------- ------------------ ------------------ ----------------- ------------------
Percent Percent Percent Percent Percent
of Net of Net of Net of Net of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues Amount Revenues
--------- --------- -------- -------- -------- -------- ------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission......... $ 5,615 90.5% $ 11,010 35.1% $ 75,028 66.4% $ 5,061 42.8% $ 45,326 82.2%
Network services and
other................ 592 9.5 20,395 64.9 38,050 33.6 6,776 57.2 9,783 17.8
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Total net
revenues......... 6,207 100.0 31,405 100.0 113,078 100.0 11,837 100.0 55,109 100.0
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission....... 1,292 23.0 2,213 20.1 26,254 35.0 1,172 23.2 18,527 40.9
Network services
and other.......... 8 1.4 13,137 64.4 21,564 56.7 4,421 65.2 6,982 71.4
--------- -------- -------- ------- --------
Total costs of
operations....... 1,300 21.0 15,350 48.9 47,818 42.3 5,593 47.3 25,509 46.3
General and
administrative....... 1,678 27.0 6,824 21.7 23,571 20.8 3,803 32.1 8,304 15.1
Corporate
development.......... 1,324 21.3 5,731 18.3 4,625 4.1 1,331 11.2 874 1.6
Restructuring
charges.............. -- -- -- -- -- -- -- -- 1,814 3.3
Non-cash
compensation
charges.............. -- -- -- -- 12,758 11.3 -- -- 667 1.2
Depreciation and
amortization......... 1,242 20.0 6,952 22.1 37,239 32.9 3,604 30.5 19,656 35.6
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Operating income
(loss)................ 663 10.7 (3,452) (11.0) (12,933) (11.4) (2,494) (21.1) (1,715) (3.1)
Other income
(expense):
Equity in earnings
(losses) of
unconsolidated
affiliate............ -- -- (1,138) (3.6) 2,055 1.8 (99) (0.8) -- --
Interest and other
income (expense)..... 193 3.1 1,951 6.2 4,220 3.7 706 6.0 340 0.6
Interest expense and
amortization of
deferred financing
costs................ (1,803) (29.0) (9,254) (29.5) (29,089) (25.7) (4,706) (39.8) (11,286) (20.5)
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Loss before income
taxes, minority
interests and
cumulative effect of
change in accounting
principle............. (947) (15.2) (11,893) (37.9) (35,747) (31.6) (6,593) (55.7) (12,661) (23.0)
Provision for income
taxes................. (10) (0.2) (49) (0.1) (374) (0.3) (13) (0.1) (127) (0.2)
Minority interests.... -- -- -- -- (1,654) (1.5) -- -- (685) (1.2)
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Loss before cumulative
effect of change in
accounting principle.. (957) (15.4) (11,942) (38.0) (37,775) (33.4) (6,606) (55.8) (13,473) (24.4)
Cumulative effect of
change in accounting
principle for costs of
start-up activities... -- -- -- -- -- -- -- -- (2,414) (4.4)
--------- ------- -------- ----- -------- ----- ------- ----- -------- -----
Net loss.............. $ (957) (15.4)% $(11,942) (38.0)% $(37,775) (33.4)% $(6,606) (55.8)% $(15,887) (28.8)%
========= ======= ======== ===== ======== ===== ======= ===== ======== =====
</TABLE>
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<PAGE>
Comparison of Three Months Ended March 31, 1999 and 1998
Consolidated revenues for the three months ended March 31, 1999 were $55.1
million, an increase of $43.3 million from the three months ended March 31,
1998. This increase was primarily attributable to:
(1) a $40.3 million, or 795.6%, increase in site rental and broadcast
transmission revenues, of which $39.0 million was attributable to
Castle Transmission and $1.3 million was attributable to the Crown
operations;
(2) a $0.8 million decrease in network services and other revenues from
the Crown operations; and
(3) $3.8 million in network services and other revenues from Castle
Transmission.
Costs of operations for the three months ended March 31, 1999 were $25.5
million, an increase of $19.9 million from the three months ended March 31,
1998. This increase was primarily attributable to:
(1) a $17.4 million increase in site rental and broadcast transmission
costs, of which $16.9 million was attributable to Castle Transmission
and $0.5 million was attributable to the Crown operations;
(2) a $1.4 million decrease in network services costs related to the Crown
operations; and
(3) $3.9 million in network services costs from Castle Transmission.
Costs of operations for site rental and broadcast transmission as a percentage
of site rental and broadcast transmission revenues increased to 40.9% for the
three months ended March 31, 1999 from 23.2% for the three months ended March
31, 1998 because of higher costs attributable to the Castle Transmission and
Crown operations. Costs of operations for network services and other as a
percentage of network services and other revenues increased to 71.4% for the
three months ended March 31, 1999 from 65.2% for the three months ended March
31, 1998, primarily due to lower margins from the Castle Transmission
operations. Margins from the Crown network services operations increased for
the three months ended March 31, 1999 as compared to the three months ended
March 31, 1998.
General and administrative expenses for the three months ended March 31,
1999 were $8.3 million, an increase of $4.5 million from the three months ended
March 31, 1998. This increase was primarily attributable to:
(1) a $1.9 million increase in expenses related to the Crown operations;
(2) a $0.9 million increase in expenses at our corporate office; and
(3) $1.7 million in expenses at Castle Transmission.
General and administrative expenses as a percentage of revenues decreased for
the three months ended March 31, 1999 to 15.1% from 32.1% for the three months
ended March 31, 1998 because of lower overhead costs as a percentage of
revenues for Castle Transmission, partially offset by increases in costs at
Crown and our corporate office.
Corporate development expenses for the three months ended March 31, 1999
were $0.9 million, compared to $1.3 million for the three months ended March
31, 1998. Corporate development expenses for the three months ended March 31,
1998 include discretionary bonuses related to our performance totaling
approximately $0.8 million for certain members of our management.
In connection with the formation of Crown Atlantic, we completed a
restructuring of our United States operations during the first quarter of 1999.
The objective of this restructuring was to transition from a centralized
organization to a regionally-based organization in the United States. For the
three
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<PAGE>
months ended March 31, 1999, we have recorded one-time charges of $1.8 million
related to severance payments for staff reductions, as well as costs related to
non-cancelable leases of excess office space.
For the three months ended March 31, 1999, we have recorded non-cash
compensation charges of $0.7 million related to the issuance of stock options
to certain employees and executives.
Depreciation and amortization for the three months ended March 31, 1999 was
$19.7 million, an increase of $16.1 million from the three months ended March
31, 1998. This increase was primarily attributable to:
(1) $15.1 million of depreciation and amortization related to the property
and equipment and goodwill from Castle Transmission and
(2) a $0.7 million increase in depreciation and amortization related to
the property and equipment, goodwill and other intangible assets
related to the Crown operations.
The equity in losses of unconsolidated affiliate represents our 34.3% share
of Castle Transmission's net earnings (losses) for the periods prior to August
1998 (at which time the share exchange with Castle Transmission's shareholders
was consummated). For the three months ended March 31, 1998, after making
appropriate adjustments to Castle Transmission's results of operations for such
period to conform to generally accepted accounting principles of the United
States, Castle Transmission had net revenues, operating income, interest
expense (including amortization of deferred financing costs) and net losses of
$34.2 million, $4.6 million, $5.2 million and $0.3 million, respectively.
Included in Castle Transmission's results of operations for such period are
non-cash compensation charges for approximately $2.9 million related to the
issuance of stock options to certain members of Castle Transmission's
management.
Interest and other income (expense) for the three months ended March 31,
1999 resulted primarily from:
(1) the investment of the net proceeds from our initial public offering of
common stock in August 1998;
(2) the investment of the excess proceeds from the sale of our 12 3/4%
senior exchangeable preferred stock in December 1998; and
(3) the investment of the excess proceeds from the sale of our 10 5/8%
discount notes in November 1997; largely offset by costs incurred in
connection with unsuccessful acquisition attempts.
Interest and other income (expense) for the three months ended March 31, 1998
resulted primarily from the investment of the excess proceeds from the sale of
the notes.
Interest expense and amortization of deferred financing costs for the three
months ended March 31, 1999 was $11.3 million, an increase of $6.6 million, or
139.8%, from the three months ended March 31, 1998. This increase was primarily
attributable to interest on Castle Transmission's indebtedness, amortization of
the original issue discount on the 10 5/8% discount notes and interest on the
term loans used to finance the BellSouth and Powertel escrow payments.
Minority interests represent the minority shareholder's 20% interest in
Castle Transmission's operations.
The cumulative effect of the change in accounting principle for costs of
start-up activities represents the charge recorded by us upon the adoption of
SOP 98-5 on January 1, 1999.
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<PAGE>
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;
(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.
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<PAGE>
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.
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.
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<PAGE>
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 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.;
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<PAGE>
(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.
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
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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.
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
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(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.
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
other.................... 5,912 58.6 6,075 44.2
----------- -------- ----------- --------
Total cost of
operations............. 67,251 55.0 60,032 47.1
General and administrative.. 7,196 5.9 8,626 6.8
Corporate development....... -- -- 2,303 1.8
Depreciation and
amortization............... 17,256 14.1 37,382 29.4
----------- -------- ----------- --------
Operating income.............. 30,509 25.0 18,946 14.9
Other income (expense):
Interest and other income... 79 0.1 746 0.6
Interest expense and
amortization of deferred
financing costs............ (1,434) (1.2) (24,201) (19.0)
Income (loss) before income
taxes........................ 29,154 23.9 (4,509) (3.5)
Provision for income taxes.. -- -- -- --
----------- -------- ----------- --------
Net income (loss)............. $ 29,154 23.9% $ (4,509) (3.5)%
=========== ======== =========== ========
</TABLE>
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
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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 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.
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<PAGE>
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.
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, and for the three
months ended March 31, 1999, our net cash provided by (used for) operating
activities was ($0.5 million), ($0.6 million), $45.0 million and $20.5 million,
respectively. For the years ended December 31, 1996, 1997 and 1998, and for the
three months ended March 31, 1999, our net cash provided by financing
activities was $21.2 million, $159.8 million, $345.2 million and $66.4 million,
respectively. Our primary financing-related activities in 1998 and 1999
included the following:
Recent Debt and Equity Offerings. On May 12, 1999, we completed public
offerings of debt and equity securities. We sold (1) 21,000,000 shares of
our common stock at a price of $17.50 per share and received proceeds of
$352.8 million (after underwriting discounts of $14.7 million), (2) $500.0
million aggregate principal amount at maturity of our 10 3/8% discount
notes for proceeds of $292.6 million (net of original issue discount of
$198.3 million and after underwriting discounts of $9.1 million), and (3)
$180.0 million aggregate principal amount of our 9% senior notes for
proceeds of $174.6 million (after underwriting discounts of $5.4 million).
We had granted the underwriters for the offerings an over-allotment option
to purchase an additional 3,150,000 shares of our common stock. On May 13,
1999, the underwriters exercised this over-allotment option in full. As a
result, we received additional proceeds of $52.9 million (after
underwriting discounts of $2.2 million). A portion of the proceeds from
these offerings was used to repay amounts drawn under the term loans in
connection with the BellSouth and Powertel transactions. The remaining
proceeds will be used to pay the remaining purchase price for the BellSouth
and Powertel transactions, to fund our initial interest payments on the 9%
senior notes and for general corporate purposes.
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.
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<PAGE>
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. Capital expenditures were
$76.4 million for the three months ended March 31, 1999, of which $0.4 million
were for CCIC, $17.2 million were for Crown Communication and $58.8 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 remaining cash
portion of the consideration being paid in connection with the recent and
proposed transactions discussed in this prospectus supplement.
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.
In connection with the BellSouth transaction, through July 1, 1999, we have
issued approximately 2.5 million shares of our common stock and paid BellSouth
$124.7 million in cash. We expect to (1) issue an additional 6.6 million shares
of our common stock and (2) use a portion of the net proceeds from our recent
offerings to finance the remaining $305.3 million cash purchase price for this
transaction.
In connection with the Powertel acquisition, we paid Powertel $261.5
million in cash on June 1, 1999. We expect to use a portion of the net proceeds
of our recent offerings to finance the remaining $13.5 million cash purchase
price for this transaction.
In connection with the proposed BellSouth DCS transaction, we will pay
BellSouth DCS $317.0 million in cash. We have deposited $20.0 million in an
escrow account to be applied to the purchase price at closing. We expect to use
a portion of the net proceeds from the proposed debt offering to finance this
transaction.
We expect that the completion of the recent and 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
remaining portion of the BellSouth transaction or the proposed BellSouth DCS
transaction. If we complete our proposed offering and subsequently fail to
complete the remaining portion of the BellSouth transaction or the proposed
BellSouth DCS transaction, 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 payment made in connection with
the proposed BellSouth DCS transaction that we may forfeit or any liquidated
damages paid in connection with the BellSouth transaction as a result of not
closing such transactions. See "Recent and Proposed Transactions".
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To fund the execution of our business strategy, including the proposed
transactions described in this prospectus supplement and the construction of
new towers that we have agreed to build, we expect to use the net proceeds of
our recent and proposed 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 March 31, 1999, assuming we had completed our recent and proposed
offerings, we would have had consolidated cash and cash equivalents of $1,345.8
million (including $5.2 million at CTSH and $46.0 million at the Bell Atlantic
joint venture), consolidated long-term debt of $1,428.4 million, consolidated
redeemable preferred stock of $207.5 million and consolidated stockholders'
equity of $1,575.9 million. As of March 31, 1999, assuming we had completed the
recent and proposed offerings and the recent transactions described in this
prospectus supplement, we would have had consolidated cash and cash equivalents
of $741.2 million (including $5.2 million at CTSH and $46.0 million at the Bell
Atlantic joint venture), consolidated long-term debt of $1,428.4 million,
consolidated redeemable preferred stock of $207.5 million and consolidated
stockholders' equity of $1,755.9 million.
As of June 1, 1999, Crown Communication and its subsidiaries had unused
borrowing availability under its senior credit facility of approximately $25.9
million, and CTSH had unused borrowing availability under its credit facility
of approximately (Pounds)9.2 million ($14.8 million). As of December 31, 1998,
Crown Communication and its subsidiaries and CTSH and its subsidiaries had
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. Our 9% senior notes,
and the senior notes offered in the proposed debt offering, will require annual
cash interest payments of approximately $16.2 million and $11.9 million,
respectively. Prior to November 15, 2002, May 15, 2004 and August 1, 2004, the
interest expense on our 10 5/8% discount notes, our 10 3/8% discount notes and
our 11 1/4% discount notes offered in the proposed debt offering, respectively,
will be comprised solely of the amortization of original issue discount.
Thereafter, the 10 5/8% discount notes, the 10 3/8% discount notes and the 11
1/4% discount notes offered in the proposed debt offering will require annual
cash interest payments of approximately $26.7 million, $51.9 million and $29.3
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
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senior credit facility, Castle Transmission's credit facility and the joint
venture'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, the 10 3/8% discount
notes and the 11 1/4% discount notes offered in the proposed 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 recent and proposed
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 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
requires 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 adopted the requirements of SOP 98-5 as of January 1,
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1999. The cumulative effect of the change in accounting principle for the
adoption of SOP 98-5 resulted in a charge to results of operations for $2.4
million in our financial statements for the three months ended March 31, 1999.
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, as amended, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. We will adopt the
requirements of SFAS 133 in our financial statements for the three months
ending March 31, 2001. 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.
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
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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 $7.2 million on the year 2000 project through March 31,
1999, 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 approximately $0.3 million for all remaining
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 user and would require substantial strengthening
to house new digital transmission equipment or
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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 another site and
consequently be forced to re-engineer its network. Moving a single antenna may
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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 ventures
with, experienced tower operators who have the proven capability to provide
comprehensive services to the wireless communications industry.
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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 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.
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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.
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
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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.
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.
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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 June 30, 1999, we
owned or managed 7,251 towers, including 5,402 towers in the United States and
Puerto Rico and 1,849 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
other wireless technologies.
Our two main businesses are leasing, or licensing, 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 supplement, 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.
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. Since completing the One2One transaction described in this prospectus
supplement, we now 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 and Powertel. In the United
Kingdom our major customers include the BBC, Cellnet, Dolphin, NTL, ONdigital,
One2One, Orange, Virgin Radio and Vodafone AirTouch.
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 600 to 700 towers at an estimated aggregate cost between $135.0 million
and
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$160.0 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
and also for the capacity on our One2One and other towers in the U.K. 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, BellSouth PCS 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.
. Partner with Wireless Carriers to Assume Ownership of their Existing
Towers. In addition to the joint venture with Bell Atlantic and with the
BellSouth and BellSouth DCS
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transactions, 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 20 regional offices in
connection with the recent and proposed transactions, including Boston,
Washington D.C., Philadelphia, Atlanta, Birmingham, Boca Raton,
Charlotte, Houston, Louisville, Phoenix, Albany and Puerto Rico. 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 June 30, 1999, assuming we had
completed the recent and proposed transactions, the geographic concentration of
our 7,251 owned and managed towers and 132 revenue producing rooftop sites:
U.S. Towers and Rooftop Sites
<TABLE>
<CAPTION>
% of % of
Crown Bell BellSouth U.S. CCIC
Communication Atlantic BellSouth Powertel DCS Total Total Total
------------- -------- --------- -------- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Towers:
North Carolina........ 28 144 20 -- 410 602 11.0% 8.2%
Georgia............... -- 22 341 140 29 532 9.7 7.2
Florida............... 3 -- 434 76 -- 513 9.3 7.0
Tennessee............. 23 1 202 111 110 447 8.1 6.1
South Carolina........ 12 151 10 18 222 413 7.5 5.6
Alabama............... -- 9 179 187 -- 375 6.8 5.1
Pennsylvania.......... 146 219 -- -- -- 365 6.6 5.0
Texas ................ 226 43 -- -- -- 269 4.9 3.7
Kentucky.............. 27 -- 191 18 -- 236 4.3 3.2
Louisiana............. 53 13 162 -- -- 228 4.1 3.1
Mississippi........... 21 8 125 60 -- 214 3.9 2.9
Indiana............... 8 -- 183 5 -- 196 3.6 2.7
Arizona............... 12 162 -- -- -- 174 3.2 2.4
New Jersey............ 1 150 -- -- -- 151 2.2 2.1
New York.............. 1 131 -- -- -- 132 2.4 1.8
Maryland.............. -- 115 -- -- -- 115 2.1 1.6
Massachusetts......... -- 80 -- -- -- 80 1.5 1.1
Virginia.............. 7 66 -- -- 2 75 1.4 1.0
New Mexico............ 34 37 -- -- -- 71 1.3 *
Ohio.................. 39 -- -- -- 39 * *
Connecticut........... -- 37 -- -- -- 37 * *
New Hampshire -- 26 -- -- -- 26 * *
Delaware.............. -- 25 -- -- -- 25 * *
West Virginia......... 6 15 -- -- -- 21 * *
Puerto Rico........... 20 -- -- -- -- 20 * *
Rhode Island.......... -- 14 -- -- -- 14 * *
All Others............ 22 2 3 5 -- 32 * *
--- ----- ----- --- --- ----- ----- ----
Rooftops(a)............. 95 -- -- -- -- 95
--- ----- ----- --- --- ----- ----- ----
Total................... 784 1,470 1,850 620 773 5,497 100.0% 74.8%
=== ===== ===== === === ===== ===== ====
</TABLE>
- --------
(a) 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.......................... 520 821 1,341 72.5% 18.2%
Wales............................ 135 48 183 9.9 2.5
Scotland......................... 156 27 183 9.9 2.5
Northern Ireland................. 91 -- 91 4.9 1.2
--- --- ----- ----- ----
Rooftops........................... 51 -- 51 2.8 *
--- --- ----- ----- ----
Total.............................. 953 896 1,849 100.0% 25.2%
=== === ===== ===== ====
</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,
Powertel, 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 June 30, 1999, without giving effect to the portion of the BellSouth
transaction that has not closed and the proposed BellSouth DCS transaction
described in this prospectus supplement, we owned or managed 3,052 towers and
95 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. As of June 30, 1999, we have acquired control of
273 of these towers, and we expect to close on the balance by December 31,
1999. 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.
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Through the Powertel acquisition, we acquired and now operate an additional
620 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 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 expect to acquire an
additional 31 towers from Powertel by December 31, 1999.
Upon consummation of the proposed BellSouth DCS transaction, we will
control and operate an additional 773 personal communications towers located in
North Carolina, South Carolina, east Tennessee and parts of Georgia. These
towers represent substantially all of the towers in BellSouth DCS's 1.9 GHz
wireless network. The towers are complementary to the towers we have acquired
or in the process of acquiring through the BellSouth transaction and the
Powertel acquisition. Substantially all of these towers are over 100 feet tall
and can accomodate 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 entered into similar agreements 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 and with Powertel to construct 31 additional towers. As
part of the proposed BellSouth DCS transaction we will enter into an agreement
to construct towers as well.
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
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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. The lease agreements
relating to network acquisitions generally have a base term of 10 years.
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 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.
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 Nextel. In connection with the agreement with Nextel, as of
June 30, 1999, we have the option to own and operate up to 96 additional
towers. Further, 117 towers included in the Bell Atlantic joint venture were
subject to a prior sublease agreement. Since we previously maintained 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.
We also have significant site rental opportunities in connection with the
recent and proposed transactions we describe in this prospectus supplement. In
connection with the joint venture, we entered into a global lease under which
Bell Atlantic leases 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 are paid a monthly site
maintenance fee from BellSouth for its use of space on the towers we control.
Further, in connection with the Powertel acquisition, we entered into an
agreement under which the sellers rent space on the towers we acquired from
them. In each of these transactions, we are permitted to lease additional space
on the towers to third parties. See "Recent and Proposed Transactions".
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.
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<PAGE>
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.
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
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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.
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.
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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, Powertel and BellSouth, and expect to enter into further
important contracts in connection with the BellSouth PCS transaction. 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.
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 three months
ended March 31, 1999, no customer in the United States accounted for more than
10.0% of our U.S. revenues, other than Nextel, which accounted for
approximately 14.4% 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
Services................ BellSouth, 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................... Vodafone 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
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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 sponsorship of a third generation wireless communication
showcase, 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.
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
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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 Corp., 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, JJS Leasing, Inc.,
Motorola, Signal One, Subcarrier Communications and Tower Resources Management.
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, Whalen & Company and Gearon & Company (a subsidiary of American
Tower Corp.). 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.
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 three months
ended March 31, 1999, approximately 55.5% of Castle Transmission's consolidated
revenues were derived from the provision of services to the BBC.
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At June 30, 1999, we owned, leased or licensed 1,773 transmission sites on
which we operated 1,798 towers, including the 102 towers we acquired from a
wireless carrier. In addition, as of June 30, 1999, we were constructing four
new towers on existing sites and had 201 site acquisition projects in process
for new tower sites. We have 51 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 June 30, 1999, 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 May 12, 1999, Castle Transmission completed the One2One transaction,
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 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 225 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 three months ended March 31, 1999, Castle Transmission
generated approximately 47.3% 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 six months ended March 31, 1999, the BBC analog
transmission contract generated revenues of approximately (Pounds)12.5 million
($20.2 million) for us.
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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 June 30,
1999, Castle Transmission had 3,673 transmitters, of which 2,393 were for
television broadcasting and 1,280 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 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)66.0 million ($106.5 million) of which we had
already invested by March 31, 1999. 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
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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 June 30,
1999, approximately 200 companies rented antenna space on approximately 1,426
of Castle Transmission's 1,849 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)668 ($1,078) of site rental revenue in March 1999.
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.
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 AirTouch. 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 June 30, 1999, there were approximately 620
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
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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 the
Netherlands, 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.
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 Air Touch.
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
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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. On July 16, 1999,
the BBC and Castle Transmission amended the transmission contract to allow
Castle Transmission to provide certain liaison services to BBC.
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.
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. On July 17, 1999, in return for the provision of liaison services by
Castle Transmission to the BBC described above, the BBC consented to the recent
amendment to the TdF agreements.
The BBC commitment agreement also required TdF's parent and us to enter
into a services agreement 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.
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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. The BBC has
committed to the full digital terrestrial television roll-out contemplated by
the contract providing for approximately (Pounds)10.5 million ($17.8 million)
of revenue per year during the 12 year period, with service credits repayable
for performance below agreed thresholds. There is a termination provision
during the three-month period following the fifth anniversary of 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.
On September 10, 1991, the BBC and NTL entered into the site sharing
agreement which set out the commercial site sharing terms under which the
parties were entitled to share each others sights for any television and radio
services.
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
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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 Air Touch
On April 16, 1998, under Vodafone AirTouch's master lease agreement with
us, Vodafone AirTouch agreed to locate antennas on 122 of our existing
communication sites in the United Kingdom. The first 77 sites had been
completed by the end of June 1999 and orders for an additional 80 sites had
been received. This included 20 sites at which a new tower had been constructed
to replace an existing structure of limited capacity. The remaining sites are
expected to be completed by end of July 2000 and will include the construction
of a further 48 replacement towers. After their upgrade, these sites will be
able to accommodate additional tenants.
Customers
For the three months ended March 31, 1999, the BBC accounted for
approximately 55.5% of Castle Transmission's consolidated revenues. This
percentage has decreased from 58.9% for the twelve months ended December 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 AirTouch) 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 AirTouch, Cellnet
Public Telecommunications............ British Telecom, Cable & Wireless
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
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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 ONdigitalCserving 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.
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
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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 June 30, 1999, we had
approximately 2,660 land leases in the United States. 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. As of June 30, 1999,
we had approximately 1,386 land leases in the U.K.
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 do not expect such settlement to
have a material adverse effect on our business.
Employees
At June 30, 1999, we employed 950 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.
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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 has and will
continue to 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 was
formed on March 31, 1999, and the Powertel acquisition and the One2One
transaction closed on June 1, 1999 and March 31, 1999, respectively. The
BellSouth transaction is scheduled to close in a series of closings over eight
months, the first, second and third of which took place on June 1, 1999, June
16, 1999 and July 1, 1999, respectively. The proposed BellSouth DCS transaction
is expected to close in a series of closings no later than December 31, 1999,
the first of which is anticipated to occur on July 31, 1999 for a majority of
the BellSouth DCS towers. There can be no assurance that the BellSouth and
proposed BellSouth DCS transactions will ultimately be fully completed on the
terms described in this prospectus supplement 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, we and CCA Investment Corp., our wholly owned indirect
subsidiary, formed a joint venture with Bell Atlantic Mobile and certain of its
affiliates 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 are
consolidating the joint venture's results of operations and financial condition
with our own.
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 1,322 towers (56 of which are under
construction) along with related assets and liabilities to the joint venture.
In addition, under an exclusive management agreement, we will be responsible
for managing, maintaining, marketing and leasing space on another 136 Bell
Atlantic towers along with related assets and liabilities. These additional
towers will continue to be owned by Bell Atlantic under the stipulation that
they will be transferred to the joint venture in the event that restrictions on
their transfer lapse or are waived. The formation agreement also gives CCA
Investment Corp. the authority to manage the day-to-day affairs of the joint
venture and select the managers of 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. Upon dissolution of the joint
venture, the shares contributed by CCA Investment Corp. to the joint venture
will be transferred to Bell Atlantic.
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. Under the build-
to-suit agreement, 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. In addition, the
joint venture has a right of first refusal on our next 300 build-to-suit
opportunities from customers that are not affiliated with Bell Atlantic within
regions where Bell Atlantic has contributed assets to the joint venture. As of
June 30, 1999, approximately 12 towers had been completed pursuant to the
build-to-suit agreement.
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Bell Atlantic and joint venture have also entered into a global lease,
under which Bell Atlantic has agreed to lease space on the 1,458 towers. The
average monthly rent paid by Bell Atlantic on each of the 1,458 towers is
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. The initial term
of the leases will be for 10 years.
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 approximately 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.
BellSouth Transaction
On June 1, 1999, we entered into an agreement with BellSouth Mobility Inc.,
BellSouth Telecommunications Inc. and certain of its affiliates. The 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 certain adjustments. We have also entered into a
registration rights agreement with BellSouth in which we granted to BellSouth
certain registration rights with regard to the common stock that we have and
will transfer to BellSouth through this transaction.
Under the sublease which we have entered into with BellSouth, we will
ultimately be responsible for managing, maintaining, marketing 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. BellSouth will pay us a management fee
of $1,200 per month per site for its services on existing and newly built
towers. Further, our rights to lease space on these towers are subject to
BellSouth rights to reserve certain space for its own activities. The term of
the sublease is 100 years.
We have also entered into a build-to-suit agreement with BellSouth under
which we will build up to 500 towers over five years for BellSouth. As we build
towers for BellSouth under the build-to-suit agreement, these towers will
become subject to the master sublease.
On June 1, 1999, we closed the first of a series of transactions that in
the end will consummate the BellSouth transaction. This first transaction
involved the transfer of 258 towers located in Kentucky and Indiana from
BellSouth to our newly formed subsidiary, Crown Castle South, Inc. In
connection with this first closing, a $50 million escrow deposit which we had
made at the time of the signing of the preliminary letter agreement was
returned to us. On June 16, 1999, we completed the transfer of an additional 15
towers in Kentucky and Indiana, and on July 1, 1999 we completed the transfer
of 15 more towers in Kentucky and Indiana.
Powertel Acquisition
On June 2, 1999, we, through our wholly owned indirect subsidiary, CCP,
acquired 620 towers from Powertel, Inc. and five of its subsidiaries for
approximately $262 million in cash under an asset purchase agreement, dated
March 15, 1999. In accordance with the terms of the asset purchase
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agreement, Powertel has agreed to lease space on the towers for ten years with
options to extend the lease for a monthly fee of $1,800 per tower. This per
tower amount is subject to increase on each fifth anniversary of the agreement
and as Powertel adds equipment to these towers.
In addition, we and CCP have entered into a letter agreement dated June 2,
1999 with Powertel to purchase 31 more towers which are existing Powertel sites
or are in the process of being constructed. Under the terms of the letter
agreement, the aggregate purchase price will be approximately $13 million in
cash. Upon the closing of this transaction, which is expected to occur on or
before December 2, 1999, space on these towers will be leased to Powertel on
the same terms as the towers that we have already acquired from Powertel. The
letter agreement also includes an exclusive built-to-suit arrangement through
December 31, 2000.
One2One Transaction
On March 31, 1999, we consummated a framework agreement with One2One, under
which Castle Transmission now manages, develops and, at its option, will
acquire up to 821 towers. Castle Transmission has three years from March 31,
1999 to exercise the option. 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. In addition, under the framework agreement, we
have the option to manage additional towers, and at our option acquire them, on
the same terms as the 821 towers. As of June 30, 1999, we had added 75 towers
under this option.
The 821 existing towers are managed by Castle Transmission under a
management contract with an initial term of 10 years from March 31, 1999, 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, 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 (Pounds)1.00 per site. 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. As consideration
for the framework agreement, One2One will receive varying rent-free periods of
site use depending on the type of tower site.
In connection with the framework agreement, Castle Transmission entered
into and closed 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.
Proposed BellSouth DCS Transaction
On July 1, 1999, we and CCS entered into a letter agreement with two of
BellSouth's affiliates. The letter agreement sets forth the terms of our
agreement under which the BellSouth affiliates will lease to us under a master
sublease agreement 773 towers for an aggregate consideration of approximately
$317 million in cash.
Under the sublease that we have agreed to enter into with the BellSouth
affiliates, we will be responsible for managing, maintaining, marketing and
leasing the available space on the BellSouth Affiliates towers located
throughout North Carolina, South Carolina, eastern Tennessee and Georgia, in
accordance with terms similar to those of the proposed BellSouth transaction.
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The letter agreement contemplates that we will also enter into an exclusive
build-to-suit agreement with the BellSouth affiliates under which we will
construct any and all new towers that the BellSouth affiliates will require
over the next three years. As we build these towers for the BellSouth
affiliates, these towers will become subject to the master sublease.
The proposed BellSouth DCS transaction is expected to close in a series of
closings, the last of which is anticipated to occur no later than December 31,
1999.
The consummation of the proposed BellSouth DCS transaction is subject to a
number of significant conditions, including approval by the both BellSouth
Corporation's Board of Directors and the Executive Committee of its affiliate,
BellSouth Carolinas DCS. In addition, we have deposited $20 million into an
escrow account which will be delivered to the BellSouth affiliates if we and
the BellSouth affiliates fail to execute an agreement to sublease or if the
agreement to sublease is executed, but the initial closing fails as a result of
our breach of the sublease or our failure to satisfy certain closing
conditions. Further, the proposed BellSouth DCS transaction is also subject to
a number of termination rights on the part of the BellSouth affiliates.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information, as of July 27, 1999,
for our directors or executive officers and other key personnel:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Ted B. Miller, Jr........... 48 Chief Executive Officer and Chairman of the
Board of Directors
David L. Ivy................ 52 President and Director
Charles C. Green, III....... 53 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................... 56 Chief Operating Officer and Director of CTSH
George E. Reese............. 48 Chief Financial Officer, Secretary and Director
of CTSH
Michel Azibert.............. 44 Director
Bruno Chetaille............. 45 Director
Robert A. Crown............. 44 Director
Carl Ferenbach.............. 57 Director
Randall A. Hack............. 52 Director
Edward C. Hutcheson Jr. .... 53 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 2002, 2000 and 2001, respectively. See
"Description of Capital Stock--Certificate of Incorporation and By-laws--
Classified Board of Directors and Related Provisions" in the attached
supplement. 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
and director of CCIC since 1995. Mr. Miller served as Vice Chairman of the
board of directors from August 1997 until May 1999 at which time he was elected
Chairman. 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
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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 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.
Edward C. Hutcheson, Jr. was a director of CCIC from 1995 until his
resignation in February 1999. He was reelected to the board on July 21, 1999.
Mr. Hutcheson served as our Chief Executive Officer from our inception to March
1997. Mr. Hutcheson co-founded CTC in 1994. He became Chief Operating Officer
of Pinnacle Global Group, Inc., the holding company of Harris Webb & Garrison
in July 1999. From 1997 to July 1999, Mr. Hutcheson served as a principal with
HWG Capital, an affiliate of the Houston investment banking firm of Harris Webb
& Garrison. During 1994, he was involved in private investment activities
leading to the creation of the predecessor to CCIC. From 1990 to 1993, he was
the President, Chief Operating Officer and a director of Baroid Corporation, a
company engaged in the petroleum services business. Mr. Hutcheson also serves
on the board of directors of Trico Marine Services and Titanium Metals
Corporation.
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
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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.
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. Upon consummation of this offering,
it is expected that Mr. Crown will resign from the board of CCIC and the board
of Crown Communication.
Carl Ferenbach served as Chairman of the board of directors of CCIC from
April 1997 until May 1999, and is currently the lead director. 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
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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.
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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SELLING STOCKHOLDERS
Some or all of the shares of our common stock, or cash in lieu of common
stock, may be delivered to the trust by the selling stockholders pursuant to
the prepaid forward contracts relating to the DECS securities. The following
table shows the selling stockholders' beneficial ownership of our common stock
as of the date of this prospectus supplement and the maximum number of shares
the selling stockholders may be required to deliver to the trust under the
applicable contracts. Robert A. Crown is the beneficial owner of the common
stock held by the selling stockholders and will retain beneficial ownership of
our common stock following the offering of the DECS securities unless, until
and to the extent, the selling stockholders elect or are required to deliver
shares of our common stock to the trust pursuant to the prepaid forward
contracts. All of the shares are issued and outstanding as of the date of this
prospectus supplement. Mr. Crown is currently a director of CCIC. For
additional information concerning his relationship to us, see the "Management"
section.
<TABLE>
<CAPTION>
Maximum Number of
Shares
Shares Beneficially Deliverable to Trust
Owned as of Pursuant to
Selling Stockholders July 28, 1999 Contract(1)
-------------------- ------------------- --------------------
<S> <C> <C>
RC Investors Corp.(2)................ 2,188,091 2,188,091
BC Investors Corp.(2)................ 1,873,091 1,873,091
Robert A. Crown Grantor Retained
Annuity Trust(2).................... 791,909 791,909
Barbara A. Crown Guarantor Retained
Annuity Trust(2).................... 791,909 791,909
</TABLE>
- --------
(1) Assumes over-allotment option described in the trust prospectus is
exercised in full. In the event the over-allotment option is not exercised,
the maximum aggregate number of shares deliverable to the trust would be
5,000,000.
(2) The principal business address for each of the selling stockholders is c/o
Crown Management Services, L.L.C., 6500 Crown Place, Presto, PA 15142.
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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 June 30, 1999, Crown Communication and its subsidiaries had
unused borrowing availability under the senior credit facility of $8.9 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,
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.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 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.
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Castle Transmission Credit Facility
Under the loan amendment agreement dated June 18, 1999, among Castle
Transmission, as borrower, CTSH and Millennium Communications, as guarantors,
Credit Suisse First Boston, as lead arranger and agent, and J.P. Morgan
Securities Ltd., as co-arranger, Castle Transmission's (Pounds)64.0 million
revolving loan facility was amended to a (Pounds)150.0 million revolving loan
facility. The facility comprises a seven year (Pounds)100.0 million revolving
loan facility which converts into a term loan facility on the third anniversary
of the amendment date and a seven year (Pounds)50.0 million revolving loan
facility.
The Castle Transmission credit facility provides for revolving credit loans
in an aggregate principal amount not to exceed (Pounds)150.0 million to finance
working capital, capital expenditures and other related costs in respect of
digital terrestrial television for working capital needs and for general
corporate purposes. As of June 30, 1999, Castle Transmission and its
subsidiaries had unused borrowing availability under the Castle Transmission
credit facility of approximately (Pounds)90.0 million ($45.3 million).
On the third anniversary of the amendment date, the amount drawn under the
(Pounds)100.0 million revolving loan facility is converted into a term loan
facility and is amortized in equal semi-annual installments on June 30 and
December 31 of each year with the final installment being on the seventh
anniversary of the amendment date. The (Pounds)50.0 million revolving loan
facility expires on the seventh anniversary of the amendment date. 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 or CTSH.
Castle Transmission's, Millennium'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 an applicable spread ranging
from 0.625% to 1.5%, which is determined based on a leverage ratio, plus cost
rates 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
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EBITDA, a minimum ratio of EBITDA to interest expense, and a minimum fixed
charges coverage ratio from June 30, 2002. 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.
The 10 5/8% Discount Notes
The 10 5/8% discount notes are our unsecured senior obligations, and 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,
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(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.
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. As of June 30, 1999, the joint venture had $6.2 million
unused borrowing availability under the joint venture credit facility. 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.
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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.
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 2.75% (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.
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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.
9% Cash-Pay Notes and 10 3/8% Discount Notes
Simultaneously with our May 17, 1999 equity offering, we issued a $180.0
million principal amount of 9% cash-pay notes and $500.0 principal amount at
maturity ($301.7 million gross proceeds) of 10 3/8% discount notes. In this
section the term "notes" refers to both the 9% cash-pay notes and the 10 3/8%
discount notes. The notes are our unsecured senior obligations, rank equally in
right of payment with all our existing and future senior indebtedness and are
senior to our future subordinated indebtedness. The notes rank equally in right
of payment with each other. The notes will mature on May 15, 2011.
The 9% cash-pay notes accrue interest at a rate of 9%, which is payable
semiannually.
The 10 3/8% discount notes accrete in value through May 15, 2004, to their
principal amount at maturity. After that date, cash interest will accrue on the
10d% discount notes at a rate of 10.375% per annum, which will be payable
semiannually commencing on November 15, 2004.
In the event we complete a public equity offering or certain strategic
equity investments prior to May 15, 2002, we will be able to use all or a
portion of the net proceeds from such offering or investment to redeem up to
35% of the original aggregate principal amount of the 9% cash-pay notes, so
long as at least 65% of the original aggregate principal amount of the 9% cash-
pay notes remains outstanding after each such redemption. The price for this
redemption would equal 109.000% of the principal amount of the 9% cash-pay
notes to be redeemed, plus accrued and unpaid interest, if any, to the
redemption date. Except as stated above, the 9% cash-pay notes will not be
redeemable prior to May 15, 2004. On or after that date, we will have the right
to redeem the 9% cash-pay notes, in whole or in part, at a premium which is at
a fixed percentage that declines to par on or after May 15, 2007, in each case
together with accrued and unpaid interest, if any, to the date of redemption.
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In the event we complete a public equity offering or certain strategic
equity investments prior to May 15, 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 10 3/8%
discount notes, so long as at least 65% of the original aggregate principal
amount at maturity of the 10 3/8% discount notes remains outstanding after
each such redemption. The price for this redemption would equal 110.375% of
the accreted value of the 10 3/8% discount notes to be redeemed. Except as
stated above, the 10 3/8% discount notes will not be redeemable prior to May
15, 2004. After that date, we will have the right to redeem the 10 3/8%
discount notes, in whole or in part, at a premium which is at a fixed
percentage that declines to par on or after May 15, 2007, 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 has 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 9% cash-pay notes repurchased,
plus accrued and unpaid interest on those 9% cash-pay notes, if any,
to the date of repurchase;
(2) 101% of the principal amount of any 10 3/8% discount notes repurchased
after May 15, 2004, plus accrued and unpaid interest on those 10 3/8%
discount notes, if any, to the date of repurchase; and
(3) 101% of the accreted value of any 10 3/8% discount notes repurchased
before May 15, 2004.
The indentures governing the notes 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.
9 1/2% Senior Notes and 11 1/4% Senior Discount Notes
On July 27, 1999 we priced the private placement of $125.0 million
principal amount of 9 1/2% senior notes and $260.0 principal amount at
maturity ($150.5 million gross proceeds) of 11 1/4% senior discount notes. In
this section the term "notes" refers to both the 9 1/2% cash-pay notes and the
11 1/4% discount notes. The notes are our unsecured senior obligations, rank
equally in right of payment with all our existing and future senior
indebtedness and are senior to our future subordinated indebtedness. The notes
rank equally in right of payment with each other. The notes will mature on
August 1, 2011. We are scheduled to close the private placement on August 3,
1999.
The 9 1/2% cash-pay notes accrue interest at a rate of 9 1/2%, which is
payable semiannually.
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The 11 1/4% discount notes accrete in value through August 1, 2004, to
their principal amount at maturity. After that date, cash interest will accrue
on the 11 1/4% discount notes at a rate of 11 1/4% per annum, which will be
payable semiannually commencing on February 1, 2005.
In the event we complete a public equity offering or certain strategic
equity investments on or prior to August 1, 2002, we will be able to use all or
a portion of the net proceeds from such offering or investment to redeem up to
35% of the original aggregate principal amount of the 9 1/2% cash-pay notes, so
long as at least 65% of the original aggregate principal amount of the 9 1/2%
cash-pay notes remains outstanding after each such redemption. The price for
this redemption would equal 109.50% of the principal amount of the 9 1/2% cash-
pay notes to be redeemed, plus accrued and unpaid interest, if any, to the
redemption date. Except as stated above, the 9 1/2% cash-pay notes will not be
redeemable prior to August 1, 2004. On or after that date, we will have the
right to redeem the 9 1/2% cash-pay notes, in whole or in part, at a premium
which is at a fixed percentage that declines to par on or after August 1, 2007,
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 August 1, 2002, we will be able to at our option
use all or portion of the net proceeds from such offering or investment to
redeem up to 35% of the original aggregate principal amount at maturity of the
11 1/4% discount notes, so long as at least 65% of the original aggregate
principal amount at maturity of the 11 1/4% discount notes remains outstanding
after each such redemption. The price for this redemption would equal 111.25%
of the accreted value of the 11 1/4% discount notes to be redeemed. Except as
stated above, the 11 1/4% discount notes will not be redeemable prior to August
1, 2004. After that date, we will have the right to redeem the 11 1/4% discount
notes, in whole or in part, at a premium which is at a fixed percentage that
declines to par on or after August 1, 2007, 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 has 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 9 1/2% cash-pay notes repurchased,
plus accrued and unpaid interest on those 9 1/2% cash-pay notes, if
any, to the date of repurchase;
(2) 101% of the principal amount of any 11 1/4% discount notes repurchased
after August 1, 2004, plus accrued and unpaid interest on those 11
1/4% discount notes, if any, to the date of repurchase; and
(3) 101% of the accreted value of any 11 1/4% discount notes repurchased
before August 1, 2004.
The indentures governing the notes 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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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
General
The following general discussion summarizes certain of the material U.S.
federal income and estate tax consequences of the ownership and disposition of
common stock applicable to a non-U.S. holder (as described below). This
discussion is based on provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), existing, temporary and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This discussion
does not address all aspects of U.S. federal income and estate taxation and
does not address any foreign, state or local tax consequences. Furthermore,
this 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.
For purposes of this discussion, the term U.S. holder means a holder 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 source 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. In the case of a partnership
that is a holder of Company common stock, any partner described in any of (1)
through (4) above is also a U.S. holder. A "non-U.S. holder" is a holder,
including any partner in a partnership that holds Company common stock, that is
not a U.S. holder.
Dividends
In general, the gross amount of dividends paid to a non-U.S. holder of
common stock that are not effectively connected with a U.S. trade or business
of the non-U.S. holder will be subject to U.S. federal withholding tax at a 30%
rate, or such lower rate as may be specified by an applicable tax treaty. To
receive a reduced treaty rate, the non-U.S. holder must furnish the Company or
its paying agent a duly completed Form 1001 or Form W-8BEN (or substitute form)
certifying to its qualification for such rate.
Dividends that are effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to a U.S. permanent establishment of the non-U.S. holder, are exempt from U.S.
federal withholding tax, provided that the non-U.S. holder furnishes the
Company or its paying agent a duly completed Form 4224 or Form W-8ECI (or
substitute form) certifying to such fact. Effectively connected dividends are
subject to U.S. federal income tax on a net income basis at the same graduated
rates applicable to U.S. persons. In the case of a non-U.S. holder that is a
corporation, effectively connected income may, in certain circumstances, be
subject to an additional "branch profits tax" at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
A non-U.S. holder of common stock that is eligible for a reduced rate of
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Internal
Revenue Service (the "IRS").
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Disposition of Common Stock
Generally, a non-U.S. holder will not be subject to U.S. federal income tax
on any gain recognized on 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, the gain is attributable to a U.S. permanent
establishment maintained by such 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 or more days 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) the Company is or has been a "U.S. real property holding
corporation" for U.S. federal income tax purposes at any time within
the shorter of the five-year period ending on the date of the
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 more than 5% of the outstanding common stock. The
Company believes that it 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 tax treaties, which may exempt
from U.S. taxation gains realized upon the disposition of common stock in
certain cases.
Federal Estate Tax
Common stock held by an individual non-U.S. holder at the time of death
will be included in such holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Under U.S. Treasury regulations, the Company must 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.
Backup withholding, which generally is a withholding tax imposed at a 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 U.S. withholding tax, whether at 30% or a reduced treaty rate,
or (2) dividends paid to non-U.S. holders at an address outside the United
States on or prior to December 31, 2000 unless the payor has actual knowledge
that the payee is a U.S. person.
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
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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.
Backup withholding is not an additional tax. 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 liability, provided the required
information or appropriate claim for refund is filed with the IRS.
Recently promulgated U.S. Treasury 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 recently
promulgated 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.
THE FOREGOING DISCUSSION IS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF THE
COMMON STOCK BY NON-U.S. HOLDERS. ACCORDINGLY, HOLDERS ARE URGED TO CONSULT
WITH THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK INCLUDING THE
APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING
JURISDICTION.
S-104
<PAGE>
PLAN OF DISTRIBUTION
Pursuant to prepaid forward contracts, the DECS Trust V has agreed, subject
to the terms and conditions set forth therein, to purchase from the selling
stockholders named herein a number of shares of CCIC common stock equal to the
total number of DECS to be purchased by the underwriters from the trust
pursuant to an underwriting agreement (including any DECS to be purchased by
the underwriters upon exercise of an over-allotment option plus the number of
DECS purchased by Salomon Smith Barney, who sponsored the formation of the
trust, in connection with the organization of the trust) among Salomon Smith
Barney Inc. and Goldman Sachs & Co., as representatives of the underwriters,
the trust, the selling stockholders and CCIC. Pursuant to the terms of the
prepaid forward contracts, each selling stockholder will deliver to the trust
at an exchange date a number of shares of CCIC common stock (or, at the option
of each seller, the cash equivalent) and/or such other consideration as
permitted or required by the terms of the prepaid forward contracts, that are
expected to have the same value as the shares of CCIC common stock delivered
pursuant to the DECS.
In connection with the DECS offering, the underwriters may over-allot, or
engage in syndicate covering transactions, stabilizing transactions and penalty
bids. Over-allotment involves syndicate sales of DECS or CCIC common stock in
excess of the number of DECS to be purchased by the underwriters in the
offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the DECS or the CCIC common stock in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing transactions consist of certain bids or purchases
of DECS or common stock made for the purpose of preventing or retarding a
decline in the market price of the DECS or common stock while the offering is
in progress. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when Salomon Smith Barney Inc. or Goldman,
Sachs & Co., in covering syndicate short positions or making stabilizing
purchases, repurchase DECS or common stock originally sold by the syndicate
member. These activities may cause the price of DECS or common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the Nasdaq
National Market or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.
In addition, in connection with the DECS offering, certain of the
underwriters (and selling group members) may engage in passive market making
transactions in the DECS or common stock on the Nasdaq National Market, prior
to the pricing and completion of the DECS offering. Passive market making
consists of displaying bids on the Nasdaq National Market no higher than the
bid prices of independent market makers and making purchases at prices no
higher than those independent bids and effected in response to order flow. Net
purchases by a passive market on each day are limited to a specified percentage
of the passive market maker's average daily trading volume in the common stock
during a specified period and must be discontinued when such limit is reached.
Passive market making may cause the price of the common stock to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. If passive market making is commenced, it may be discontinued at
any time.
The underwriters have performed certain investment banking and advisory
services for CCIC from time to time for which they have received customary fees
and expenses. The underwriters may, from time to time, engage in transactions
with and perform services for CCIC in the ordinary course of its business.
CCIC, its executive officers and the selling stockholders have agreed that,
for a period of 45 days from the date of this prospectus, they will not,
without the prior written consent of Salomon Smith Barney Inc., as
representative of the underwriters, offer, sell, contract to sell, or otherwise
dispose of, any shares of common stock of CCIC or any securities convertible
into, or exercisable or
S-105
<PAGE>
exchangeable for, common stock. Salomon Smith Barney Inc. in its sole
discretion may release any of the securities subject to these lock-up
agreements at any time without notice. However, this agreement will not
restrict the ability of CCIC and the selling stockholders to take any of the
actions listed above in connection with the offering by the trust of the DECS
or any delivery of shares of CCIC common stock pursuant to the terms of the
DECS.
CCIC and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities. Crown Castle has agreed to pay $750,000 on
behalf of the selling stockholders in respect of fees, expenses and other
compensation in connection with the DECS offering.
S-106
<PAGE>
CERTAIN CURRENCY TRANSLATIONS
CTSH publishes its consolidated financial statements in pounds sterling.
For the convenience of the reader, this prospectus supplement 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 March 31, 1999, of (Pounds)1.00 = $1.6120.
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 July 27, 1999, the noon buying rate was (Pounds)1.00 = $1.5895.
S-107
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
DATED JULY 29, 1999
PROSPECTUS
CROWN CASTLE INTERNATIONAL CORP.
From time to time, we may sell any of the following securities:
--DEBT SECURITIES
--PREFERRED STOCK
--COMMON STOCK
--WARRANTS
We will provide the specific terms of these securities in one or more
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest.
Our common stock is traded over-the-counter on The Nasdaq Stock Market's
National Market under the trading symbol "TWRS." The applicable prospectus
supplement will contain information, where applicable, as to any other listing
(if any) on The Nasdaq Stock Market's National Market or any securities
exchange of the securities covered by the prospectus supplement.
In addition, up to 15,000,000 shares of common stock being registered may be
offered by certain selling shareholders. For additional information on the
methods of sale, you should refer to the section entitled "Plan of
Distribution."
The securities may be sold directly by us or, in case of the common stock,
may be sold by selling shareholders, to investors, through agents designated
from time to time or to or through underwriters or dealers. See "Plan of
Distribution." If any underwriters are involved in the sale of any securities
in respect of which this prospectus is being delivered, the names of such
underwriters and any applicable commissions or discounts will be set forth in a
prospectus supplement. The net proceeds we expect to receive from such sale
also will be set forth in a prospectus supplement. We would not receive any of
the proceeds from the sale of common stock by selling shareholders.
This prospectus may not be used to offer or sell any securities unless
accompanied by a prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued under this
prospectus or determined if this prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THIS PROSPECTUS...................................................... 1
WHERE YOU CAN FIND MORE INFORMATION........................................ 1
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.......................... 1
FORWARD-LOOKING STATEMENTS................................................. 2
THE COMPANY................................................................ 3
RATIO OF EARNINGS TO FIXED CHARGES......................................... 4
USE OF PROCEEDS............................................................ 4
DESCRIPTION OF DEBT SECURITIES............................................. 5
DESCRIPTION OF CAPITAL STOCK............................................... 15
DESCRIPTION OF WARRANTS.................................................... 23
SELLING SHAREHOLDERS....................................................... 24
PLAN OF DISTRIBUTION....................................................... 24
VALIDITY OF SECURITIES..................................................... 25
EXPERTS.................................................................... 25
</TABLE>
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may,
over the next two years, sell any combination of the securities described in
this prospectus in one or more offerings up to a total dollar amount of
$650,000,000.
This prospectus provides you with a general description of the securities we
may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described
immediately below under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at the SEC's following public reference
facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-
2511
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further
information on the operations of the public reference facilities. Our SEC
filings are also available at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file with
them, which means:
--incorporated documents are considered part of this prospectus;
--we can disclose important information to you by referring you to those
documents; and
--information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934:
(1) Our Annual Report on Form 10-K for the year ended on December 31, 1998.
(2) Our Quarterly Report on Form 10-Q for the three months ended March 31,
1999.
(3) Our Current Report on Form 8-K dated March 8, 1999.
(4) Our Current Report on Form 8-K dated March 15, 1999.
(5) Our Current Report on Form 8-K dated March 31, 1999.
(6) Our Current Report on Form 8-K dated June 9, 1999.
(7) Our Current Report on Form 8-K dated July 12, 1999.
(8) The description of our common stock contained in the Registration
Statement on Form S-1, as amended (File No. 333-74553), filed on March
16, 1999.
<PAGE>
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of the initial filing of the registration
statement and prior to the time we sell all of the securities offered by this
prospectus:
--Reports filed under Section 13(a) and (c) of the Exchange Act;
--Definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent shareholders meeting;
and
--Any reports filed under Section 15(d) of the Exchange Act.
You can obtain any of the filings incorporated by reference in this document
through us, or from the SEC through the SEC's web site or at the addresses
listed above. Documents incorporated by reference are available from us without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You
can obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone from us at the following address:
Crown Castle International Corp.
510 Bering Drive
Suite 500
Houston, TX 77057
Attention: Kathy Broussard, Corporate Secretary
Telephone: (713) 570-3100
If you request any incorporated documents from us, we will mail them to you
by first class mail, or another equally prompt means, within one business day
after we receive your request.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in or incorporated by reference in this
prospectus discuss our plans and strategies for our business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act. The words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions are intended to identify
these forward-looking statements, but are not the exclusive means of
identifying them. These forward-looking statements reflect the current views of
our management; however, various risks, uncertainties and contingencies could
cause our actual results, performance or achievements to differ materially from
those expressed in, or implied by, these statements, including the following:
. the success or failure of our efforts to implement our business
strategy
. the other factors discussed below under the heading "Risk Factors"
and elsewhere in this prospectus
We assume no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. For a
discussion of important risks of an investment in our securities, including
factors that could cause actual results to differ materially from results
referred to in the forward-looking statements, see "Risk Factors." You should
carefully consider the information set forth under the caption "Risk Factors."
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in or incorporated by reference in this prospectus might not
occur.
2
<PAGE>
THE COMPANY
We are a leading owner and operator of towers and transmission networks for
wireless communications and broadcast companies. 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. 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.
Our principal executive offices are located at 510 Bering Drive, Suite 500,
Houston, Texas 77057, and our telephone number is (713) 570-3000.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges, the deficiency of our consolidated earnings to cover fixed charges,
our consolidated ratio of earnings to combined fixed charges and preferred
stock dividends and the deficiency of our consolidated earnings to cover
combined fixed charges and preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
Three
Months
Years Ended December 31, Ended
------------------------- March 31,
1995 1996 1997 1998 1999
---- ---- ------- ------- ---------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges........ -- -- -- -- --
Deficiency of Earnings to Cover Fixed
Charges.................................. $21 $947 $10,755 $37,802 $12,661
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.... -- -- -- -- --
Deficiency of Earnings to Cover Combined
Fixed Charges and Preferred Stock
Dividends................................ $21 $947 $12,954 $43,213 $19,069
</TABLE>
For purposes of computing the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends, earnings
represent income (loss) before income taxes, minority interests, 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.
USE OF PROCEEDS
We will use the net proceeds from our sale of the securities for our general
corporate purposes, which may include, repaying indebtedness, making additions
to our working capital, funding future acquisitions or for any other purpose we
describe in the applicable prospectus supplement.
We will not receive any of the proceeds from the sale of common stock that
may be sold by selling shareholders.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities sets forth
certain general terms and provisions of the debt securities to which any
prospectus supplement may relate. The particular terms of the debt securities
offered by any prospectus supplement and the extent, if any, to which such
general provisions may apply to the debt securities so offered will be
described in the prospectus supplement relating to such debt securities.
Accordingly, for a description of the terms of a particular issue of debt
securities, reference must be made to both the prospectus supplement relating
thereto and to the following description.
The debt securities will be our general obligations and may be subordinated
to "Senior Indebtedness" (as defined below) we have or may incur to the extent
set forth in the prospectus supplement relating to them. See "Description of
Debt Securities--Subordination" below. Debt securities will be issued under an
indenture between us and one or more commercial banks to be selected as
trustees (collectively, the "trustee"). A copy of the form of indenture has
been filed as an exhibit to the registration statement filed with the SEC. The
following discussion of certain provisions of the indenture is a summary only
and should not be considered a complete description of the terms and provisions
of the indenture. Accordingly, the following discussion is qualified in its
entirety by reference to the provisions of the indenture, including the
definition of certain terms used below.
General
The indenture does not limit the aggregate principal amount of debt
securities that can be issued under it. The debt securities may be issued in
one or more series as we may authorize from time to time. You should refer to
the applicable prospectus supplement for the following terms of the debt
securities of the series with respect to which that prospectus supplement is
being delivered:
(a) the title of the debt securities of the series;
(b) any limit on the aggregate principal amount of the debt securities
of the series that may be authenticated and delivered under the indenture;
(c) the date or dates on which the principal and premium with respect to
the debt securities of the series are payable;
(d) the rate or rates (which may be fixed or variable) at which the debt
securities of the series shall bear interest (if any) or the method of
determining such rate or rates, the date or dates from which such interest
shall accrue, the interest payment dates on which such interest shall be
payable or the method by which such dates will be determined, the record
dates for the determination of holders thereof to whom such interest is
payable (in the case of Registered Securities (as defined below)), and the
basis upon which interest will be calculated if other than that of a 360-
day year of twelve 30-day months;
(e) the place or places, if any, in addition to or instead of the
corporate trust office of the trustee (in the case of Registered
Securities) or the principal New York office of the trustee (in the case of
Bearer Securities), where the principal, premium, and interest with respect
to debt securities of the series shall be payable;
(f) the price or prices at which, the period or periods within which,
and the terms and conditions upon which debt securities of the series may
be redeemed, in whole or in part at our option or otherwise;
(g) whether debt securities of the series are to be issued as Registered
Securities or Bearer Securities (as defined below) or both and, if Bearer
Securities are to be issued, whether coupons will be attached to them,
whether Bearer Securities of the series may be exchanged for Registered
Securities of the series, and the circumstances under which and the places
at which any such exchanges, if permitted, may be made;
(h) if any debt securities of the series are to be issued as Bearer
Securities or as one or more Global Securities (as defined below)
representing individual Bearer Securities of the series, whether certain
5
<PAGE>
provisions for the payment of additional interest or tax redemptions shall
apply; whether interest with respect to any portion of a temporary Bearer
Security of the series payable with respect to any interest payment date
prior to the exchange of such temporary Bearer Security for definitive
Bearer Securities of the series shall be paid to any clearing organization
with respect to the portion of such temporary Bearer Security held for its
account and, in such event, the terms and conditions (including any
certification requirements) upon which any such interest payment received
by a clearing organization will be credited to the persons entitled to
interest payable on such interest payment date; and the terms upon which a
temporary Bearer Security may be exchanged for one or more definitive
Bearer Securities of the series;
(i) our obligation, if any, to redeem, purchase, or repay debt
securities of the series under any sinking fund or analogous provisions or
at the option of a holder of such debt securities and the price or prices
at which, the period or periods within which, and the terms and conditions
upon which debt securities of the series shall be redeemed, purchased, or
repaid, in whole or in part, under such obligations;
(j) the terms, if any, upon which the debt securities of the series may
be convertible into or exchanged for our or any other issuer's or obligor's
common stock, preferred stock, other debt securities or warrants for common
stock, preferred stock, indebtedness or other securities of any kind and
the terms and conditions upon which such conversion or exchange shall be
effected, including the initial conversion or exchange price or rate, the
conversion or exchange period and any other additional provisions;
(k) if other than denominations of $1,000 or any integral multiple
thereof, the denominations in which debt securities of the series shall be
issuable;
(l) if the amount of principal, premium or interest with respect to the
debt securities of the series may be determined with reference to an index
or pursuant to a formula, the manner in which such amounts will be
determined;
(m) if the principal amount payable at the stated maturity of debt
securities of the series will not be determinable as of any one or more
dates prior to such stated maturity, the amount that will be deemed to be
such principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding as
of any such date (or, in any such case, the manner in which such deemed
principal amount is to be determined), and if necessary, the manner of
determining the equivalent thereof in United States currency;
(n) any changes or additions to the provisions of the indenture dealing
with defeasance;
(o) if other than the principal amount thereof, the portion of the
principal amount of debt securities of the series that shall be payable
upon declaration of acceleration of the maturity thereof or provable in
bankruptcy;
(p) the terms, if any, of the transfer, mortgage, pledge or assignment
as security for the debt securities of the series of any properties,
assets, moneys, proceeds, securities or other collateral, including whether
certain provisions of the Trust Indenture Act of 1939, as amended, are
applicable and any corresponding changes to provisions of the Indenture as
then in effect;
(q) any addition to or change in the Events of Default (as defined
below) with respect to the debt securities of the series and any change in
the right of the trustee or the holders to declare the principal, premium
and interest with respect to such debt securities due and payable;
(r) if the debt securities of the series shall be issued in whole or in
part in the form of a global security, the terms and conditions, if any,
upon which such global security may be exchanged in whole or in part for
other individual debt securities in definitive registered form, the
depositary (as defined in the applicable prospectus supplement) for such
global security and the form of any legend or legends to be borne by any
such global Security in addition to or in lieu of the legend referred to in
the Indenture;
(s) any trustee, authenticating or paying agents, transfer agents or
registrars;
6
<PAGE>
(t) the applicability of, and any addition to or change in, the
covenants and definitions then set forth in the indenture or in the terms
then set forth in the indenture relating to permitted consolidations,
mergers, or sales of assets;
(u) the terms, if any, of any guarantee of the payment of principal,
premium, and interest with respect to debt securities of the series and any
corresponding changes to the provisions of the indenture as then in effect;
(v) the subordination, if any, of the debt securities of the series
pursuant to the indenture and any changes or additions to the provisions of
the Indenture relating to subordination;
(w) with regard to debt securities of the series that do not bear
interest, the dates for certain required reports to the trustee; and
(x) any other terms of the debt securities of the series (which terms
shall not be prohibited by the provisions of the Indenture).
The prospectus supplement will also describe any material United States
federal income tax consequences or other special considerations applicable to
the series of debt securities to which such prospectus supplement relates,
including those applicable to (a) Bearer Securities, (b) debt securities with
respect to which payments of principal, premium or interest are determined with
reference to an index or formula (including changes in prices of particular
securities, currencies or commodities), (c) debt securities with respect to
which principal, or interest is payable in a foreign or composite currency, (d)
debt securities that are issued at a discount below their stated principal
amount, bearing no interest or interest at a rate that at the time of issuance
is below market rates ("Original Issue Discount Debt Securities") and (e)
variable rate debt securities that are exchangeable for fixed rate debt
securities.
Unless otherwise provided in the applicable prospectus supplement,
Registered Securities may be transferred or exchanged at the office of the
trustee at which its corporate trust business is principally administered in
the United States or at the office of the trustee or the trustee's agent in the
Borough of Manhattan, the City and State of New York, at which its corporate
agency business is conducted, subject to the limitations provided in the
indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. Bearer Securities will be
transferable only by delivery. Provisions with respect to the exchange of
Bearer Securities will be described in the prospectus supplement relating to
such Bearer Securities.
All funds which we pay to a paying agent for the payment of principal,
premium or interest with respect to any debt securities that remain unclaimed
at the end of two years after such principal, premium or interest shall have
become due and payable will be repaid to us, and the holders of such debt
securities or any coupons appertaining thereto will thereafter look only to us
for payment thereof.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities. A global security is a debt security
that represents, and is denominated in an amount equal to the aggregate
principal amount of, all outstanding debt securities of a series, or any
portion thereof, in either case having the same terms, including the same
original issue date, date or dates on which principal and interest are due, and
interest rate or method of determining interest. A global security will be
deposited with, or on behalf of, a depositary, which will be identified in the
prospectus supplement relating to such debt securities. Global securities may
be issued in either registered or bearer form and in either temporary or
definitive form. Unless and until it is exchanged in whole or in part for the
individual debt securities represented thereby, a global security may not be
transferred except as a whole by the depositary to a nominee of the depositary,
by a nominee of the depositary to the depositary or another nominee of the
depositary, or by the depositary or any nominee of the depositary to a
successor depositary or any nominee of such successor.
7
<PAGE>
The specific terms of the depositary arrangement with respect to a series of
debt securities will be described in the prospectus supplement relating to such
debt securities. We anticipate that the following provisions will generally
apply to depositary arrangements.
Upon the issuance of a global security, the depositary for such global
security will credit, on its book entry registration and transfer system, the
respective principal amounts of the individual debt securities represented by
such global security to the accounts of persons that have accounts with the
depositary ("participants"). Such accounts shall be designated by the dealers
or underwriters with respect to such debt securities or, if such debt
securities are offered and sold directly by us or through one or more agents,
by us or such agents. Ownership of beneficial interests in a global security
will be limited to participants or persons that hold beneficial interests
through participants. Ownership of beneficial interests in such global security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the depositary (with respect to interests of
participants) or records maintained by participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limitations and laws may impair the ability to transfer
beneficial interests in a global security.
So long as the depositary for a global security, or its nominee, is the
registered owner or holder of such global security, such depositary or nominee,
as the case may be, will be considered the sole owner or holder of the
individual debt securities represented by such global security for all purposes
under the indenture. Except as provided below, owners of beneficial interests
in a global security will not be entitled to have any of the individual debt
securities represented by such global security registered in their names, will
not receive or be entitled to receive physical delivery of any of such debt
securities in definitive form, and will not be considered the owners or holders
thereof under the Indenture.
Subject to the restrictions applicable to Bearer Securities described in an
applicable prospectus supplement (see "Limitations on Issuance of Bearer
Securities" below), payments of principal, premium, and interest with respect
to individual debt securities represented by a global security will be made to
the depositary or its nominee, as the case may be, as the registered owner or
holder of such global security. Neither we, the trustee, any paying agent or
registrar for such debt securities or any agent of ours or the trustee's will
have any responsibility or liability for (a) any aspect of the records relating
to or payments made by the depositary, its nominee or any participants on
account of beneficial interests in the global security or for maintaining,
supervising or reviewing any records relating to such beneficial interests, (b)
the payment to the owners of beneficial interests in the global security of
amounts paid to the depositary or its nominee or (c) any other matter relating
to the actions and practices of the depositary, its nominee or its
participants. Neither we, the trustee, any paying agent or registrar for such
debt securities or any agent of ours or the trustee will be liable for any
delay by the depositary, its nominee or any of its participants in identifying
the owners of beneficial interests in the global security, and we and the
trustee may conclusively rely on, and will be protected in relying on,
instructions from the depositary or its nominee for all purposes.
We expect that the depositary for a series of debt securities or its
nominee, upon receipt of any payment of principal, premium or interest with
respect to a definitive global security representing any of such debt
securities, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such global security, as shown on the records of the depositary or
its nominee. We also expect that payments by participants to owners of
beneficial interests in such global security held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers and registered in
"street name." Such payments will be the responsibility of such participants.
Receipt by owners of beneficial interests in a temporary global security of
payments of principal, premium or interest with respect thereto will be subject
to the restrictions described in an applicable prospectus supplement (see
"Limitation on Issuance of Bearer Securities" below).
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If the depositary for a series of debt securities is at any time unwilling,
unable or ineligible to continue as depositary, we shall appoint a successor
depositary. If a successor depositary is not appointed by us within 90 days,
we will issue individual debt securities of such series in exchange for the
global security representing such series of debt securities. In addition, we
may at any time and in our sole discretion, subject to any limitations
described in the prospectus supplement relating to such debt securities,
determine to no longer have debt securities of a series represented by a
global security and, in such event, will issue individual debt securities of
such series in exchange for the global security representing such series of
debt securities. Furthermore, if we so specify with respect to the debt
securities of a series, an owner of a beneficial interest in a global security
representing debt securities of such series may, on terms acceptable to us,
the trustee, and the depositary for such global security, receive individual
debt securities of such series in exchange for such beneficial interests,
subject to any limitations described in the prospectus supplement relating to
such debt securities. In any such instance, an owner of a beneficial interest
in a global security will be entitled to physical delivery of individual debt
securities of the series represented by such global security equal in
principal amount to such beneficial interest and to have such debt securities
registered in its name (if the debt securities are issuable as Registered
Securities). Individual debt securities of such series so issued will be
issued (a) as Registered Securities in denominations, unless otherwise
specified by us, of $1,000 and integral multiples thereof if the debt
securities are issuable as Registered Securities, (b) as Bearer Securities in
the denomination or denominations specified by us if the debt securities are
issuable as Bearer Securities or (c) as either Registered Securities or Bearer
Securities as described above if the debt securities are issuable in either
form.
Limitations on Issuance of Bearer Securities
The debt securities of a series may be issued as Registered Securities
(which will be registered as to principal and interest in the register
maintained by the registrar for such debt securities) or Bearer Securities
(which will be transferable only by delivery). If such debt securities are
issuable as Bearer Securities, the applicable prospectus supplement will
describe certain special limitations and considerations that will apply to
such debt securities.
Certain Covenants
Merger, Consolidation or Sale of Assets
The indenture provides that we may not:
(1) consolidate or merge with or into (whether or not we are the
surviving corporation), or
(2) sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our properties or assets in one or more related
transactions, to another corporation, Person or entity, unless:
(a) either:
(A) we are the surviving corporation, or
(B) the entity or the Person (as defined) formed by or surviving
any such consolidation or merger (if other than us) 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 us) or the entity or Person to
which the sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all our obligations under the
debt securities and the indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the trustee;
(c) immediately after such transaction no Default (as defined)
exists; and
(d) except in the case of:
(A) a merger of us with or into our Wholly Owned Restricted
Subsidiary (as defined) and
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(B) a merger entered into solely for the purpose of
reincorporating us in another jurisdiction:
(x) in the case of a merger or consolidation in which we are
the surviving corporation, our Debt to Adjusted Consolidated
Cash Flow Ratio (as defined) 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 our most recently ended four full
fiscal quarter period for which internal financial statements
are available for income statement purposes, would have been
less than our 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
us), 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 our 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 us in the definition of Debt to Adjusted
Consolidated Cash Flow Ratio and the defined terms included in
the indenture.
Subordination
Debt securities of a series may be subordinated ("subordinated debt
securities") to Senior Indebtedness (as defined in the applicable prospectus
supplement) to the extent set forth in the prospectus supplement relating
thereto. We conduct substantially all our operations through subsidiaries, and
the holders of debt securities (whether or not subordinated debt securities)
will be structurally subordinated to the creditors of our subsidiaries.
Upon any payment or distribution of our assets to creditors or upon our
total or partial liquidation or dissolution or in a bankruptcy, receivership,
or similar proceeding relating to us or our property, holders of Senior
Indebtedness shall be entitled to receive payment in full in cash of the Senior
Indebtedness before holders of subordinated debt securities shall be entitled
to receive any payment of principal, premium, or interest with respect to the
subordinated debt securities, and until the Senior Indebtedness is paid in
full, any distribution to which holders of subordinated debt securities would
otherwise be entitled shall be made to the holders of Senior Indebtedness
(except that such holders may receive shares of stock and any debt securities
that are subordinated to Senior Indebtedness to at least the same extent as the
subordinated debt securities).
We may not make any payments of principal, premium, or interest with respect
to subordinated debt securities, make any deposit for the purpose of defeasance
of such subordinated debt securities, or repurchase, redeem, or otherwise
retire (except, in the case of subordinated debt securities that provide for a
mandatory sinking fund, by the delivery of subordinated debt securities by us
to the trustee in satisfaction of our sinking fund obligation) any subordinated
debt securities if (a) any principal, premium or interest with respect to
Senior Indebtedness is not paid in full in cash within any applicable grace
period (including at maturity) or (b) any other default on Senior Indebtedness
occurs and the maturity of such Senior Indebtedness is accelerated in
accordance with its terms, unless, in either case, the default has been cured
or waived and such acceleration has been rescinded, such Senior Indebtedness
has been paid in full in cash or we and the trustee receive written notice
approving such payment from the representatives of such Senior Indebtedness.
During the continuance of any default (other than a default described in clause
(a) or (b) above) with respect to any Designated Senior
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Indebtedness (as defined in the applicable prospectus supplement) pursuant to
which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, we may not pay the subordinated
debt securities for a period (the "payment blockage period") commencing on the
receipt by us and the trustee of written notice of such default from the
representative of any Designated Senior Indebtedness specifying an election to
effect a payment blockage period (a "blockage notice"). The payment blockage
period may be terminated before its expiration by written notice to the trustee
and us from the person who gave the blockage notice, by repayment in full in
cash of the Senior Indebtedness with respect to which the blockage notice was
given or because the default giving rise to the payment blockage period is no
longer continuing. Unless the holders of such Designated Senior Indebtedness
shall have accelerated the maturity thereof, we may resume payments on the
subordinated debt securities after the expiration of the payment blockage
period. Not more than one blockage notice may be given in any period of 360
consecutive days. In no event, however, may the total number of days during
which any payment blockage period or periods is in effect exceed 179 days in
the aggregate during any period of 360 consecutive days. After all Senior
Indebtedness is paid in full and until the subordinated debt securities are
paid in full, holders of the subordinated debt securities shall be subrogated
to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness.
By reason of such subordination, in the event of insolvency, creditors of
ours who are holders of Senior Indebtedness, as well as certain general
creditors of ours, may recover more, ratably, than the holders of the
subordinated debt securities.
Events of Default and Remedies
The following events are defined in the indenture as "Events of Default"
with respect to a series of debt securities:
(a) default for 30 days in the payment when due of interest on the debt
securities;
(b) default in payment when due of the principal of or premium, if any,
on the debt securities;
(c) our failure or failure by any of our Subsidiaries (as defined) to
comply with the provisions described under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" or our failure to
consummate a Change of Control Offer (as defined) or Asset Sale Offer (as
defined) in accordance with the provisions of the indenture;
(d) our failure or failure by any of our Subsidiaries for 30 days after
notice to comply with any other agreements in the indenture or the debt
securities;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness (as defined) for money borrowed by us or any of our
Significant Subsidiaries (as defined), or the payment of which is
guaranteed by us or any of our Significant Subsidiaries, whether such
Indebtedness or guarantee now exists, or is created after the date of the
indenture, which default:
(1) 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
(2) 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;
(f) failure by us or any of our 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
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(g) certain events of bankruptcy or insolvency described in the
indenture with respect to us or any of our Restricted Subsidiaries.
(h) any other Event of Default provided with respect to debt securities
of that series.
An Event of Default with respect to one series of debt securities is not
necessarily an Event of Default for another series.
A prospectus supplement may omit, modify or add to the foregoing Events of
Default.
If any Event of Default occurs and is continuing, the trustee under the
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 us, all outstanding debt securities will become due
and payable without further action or notice. Holders of the debt securities
may not enforce the indenture or the debt securities except as provided in the
indenture. Subject to certain limitations, Holders of a majority in principal
amount at maturity of the then outstanding debt securities may direct the
trustee under the indenture in its exercise of any trust or power.
The holders of a majority in aggregate principal amount at maturity of the
debt securities then outstanding by notice to the trustee under the indenture
may on behalf of the holders of all of such series of debt securities 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 debt securities.
The indenture provides 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 debt securities 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 debt security, 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 debt securities. In addition, we
are 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. We are 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 we
are taking or proposes to take in respect thereof.
Modification of the Indenture
We and the trustee may enter into supplemental indentures without the
consent of the holders of debt securities for one or more of the following
purposes:
(a) to evidence the succession of another person to us pursuant to the
provisions of the indenture relating to consolidations, mergers and sales
of assets and the assumption by such successor of our covenants, agreements
and obligations in the indenture and in the debt securities;
(b) to surrender any right or power conferred upon us by the indenture,
to add to our covenants such further covenants, restrictions, conditions or
provisions for the protection of the holders of all or any series of debt
securities as our board of directors shall consider to be for the
protection of the holders of such debt securities, and to make the
occurrence, or the occurrence and continuance, of a default in any of such
additional covenants, restrictions, conditions or provisions a default or
an Event of Default under the indenture (provided, however, that with
respect to any such additional covenant, restriction, condition or
provision, such supplemental indenture may provide for a period of grace
after default, which may be shorter or longer than that allowed in the case
of other defaults, may provide for an immediate enforcement upon such
default, may limit the remedies available to the trustee upon such default
or may limit the right of holders of a majority in aggregate principal
amount of any or all series of debt securities to waive such default);
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(c) to cure any ambiguity or correct or supplement any provision
contained in the indenture, in any supplemental indenture or in any debt
securities that may be defective or inconsistent with any other provision
contained therein, to convey, transfer, assign, mortgage or pledge any
property to or with the trustee, or to make such other provisions in regard
to matters or questions arising under the indenture as shall not adversely
affect the interests of any holders of debt securities of any series;
(d) to modify or amend the indenture in such a manner as to permit the
qualification of the indenture or any supplemental indenture under the
Trust Indenture Act as then in effect;
(e) to add to or change any of the provisions of the indenture to
provide that Bearer Securities may be registerable as to principal, to
change or eliminate any restrictions on the payment of principal or premium
with respect to Registered Securities or of principal, premium or interest
with respect to Bearer Securities, or to permit Registered Securities to be
exchanged for Bearer Securities, so as to not adversely affect the
interests of the holders of debt securities or any coupons of any series in
any material respect or permit or facilitate the issuance of debt
securities of any series in uncertificated form;
(f) to comply with the provisions of the indenture relating to
consolidations, mergers and sales of assets;
(g) in the case of subordinated debt securities, to make any change in
the provisions of the indenture relating to subordination that would limit
or terminate the benefits available to any holder of senior indebtedness
under such provisions (but only if each such holder of senior indebtedness
consents to such change);
(h) to add guarantees with respect to the debt securities or to secure
the debt securities;
(i) to make any change that does not adversely affect the rights of any
holder;
(j) to add to, change, or eliminate any of the provisions of the
indenture with respect to one or more series of debt securities, so long as
any such addition, change or elimination not otherwise permitted under the
indenture shall (1) neither apply to any debt security of any series
created prior to the execution of such supplemental indenture and entitled
to the benefit of such provision nor modify the rights of the holders of
any such debt security with respect to such provision or (2) become
effective only when there is no such debt security outstanding;
(k) to evidence and provide for the acceptance of appointment by a
successor or separate trustee with respect to the debt securities of one or
more series and to add to or change any of the provisions of the indenture
as shall be necessary to provide for or facilitate the administration of
the indenture by more than one trustee; and
(l) to establish the form or terms of debt securities and coupons of any
series, as described under "Description of Debt Securities--General" above.
With the consent of the holders of a majority in aggregate principal amount
of the outstanding debt securities of each series affected thereby, we and the
trustee may from time to time and at any time enter into a supplemental
indenture for the purpose of adding any provisions to, changing in any manner
or eliminating any of the provisions of the Indenture or of any supplemental
Indenture or modifying in any manner the rights of the holder of the debt
securities of such series; provided, however, that without the consent of the
holders of each debt security so affected, no such supplemental indenture shall
(a) reduce the percentage in principal amount of debt securities of any series
whose holders must consent to an amendment, (b) reduce the rate of or extend
the time for payment of interest on any debt security or coupon or reduce the
amount of any payment to be made with respect to any coupon, (c) reduce the
principal of or extend the stated maturity of any debt security, (d) reduce the
premium payable upon the redemption of any debt security or change the time at
which any debt security may or shall be redeemed, (e) make any debt security
payable in a currency other than that stated in the debt security, (f) in the
case of any subordinated debt security or coupons appertaining thereto, make
any change in the provisions of the indenture relating to subordination that
adversely affects the rights of
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any holder under such provisions, (g) release any security that may have been
granted with respect to the debt securities, (h) make any change in the
provisions of the indenture relating to waivers of defaults or amendments that
require unanimous consent, (i) change any obligation of ours provided for in
the indenture to pay additional interest with respect to Bearer Securities or
(j) limit our obligation to maintain a paying agency outside the United States
for payment on Bearer Securities or limit our obligation to redeem certain
Bearer Securities.
Satisfaction and Discharge of the Indenture; Defeasance
The indenture shall generally cease to be of any further effect with respect
to a series of debt securities if (a) we have delivered to the trustee for
cancellation all debt securities of such series (with certain limited
exceptions) or (b) all debt securities and coupons of such series not
theretofore delivered to the trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year, and we shall have deposited with
the trustee as trust funds the entire amount sufficient to pay at maturity or
upon redemption all such debt securities and coupons (and if, in either case,
we shall also pay or cause to be paid all other sums payable under the
indenture by us).
In addition, we shall have a "legal defeasance option" (pursuant to which we
may terminate, with respect to the debt securities of a particular series, all
of our obligations under such debt securities and the indenture with respect to
such debt securities) and a "covenant defeasance option" (pursuant to which we
may terminate, with respect to the debt securities of a particular series, our
obligations with respect to such debt securities under certain specified
covenants contained in the indenture). If we exercise our legal defeasance
option with respect to a series of debt securities, payment of such debt
securities may not be accelerated because of an Event of Default. If we
exercise our covenant defeasance option with respect to a series of debt
securities, payment of such debt securities may not be accelerated because of
an Event of Default related to the specified covenants.
The applicable prospectus supplement will describe the procedures we must
follow in order to exercise our defeasance options.
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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. As of July 20, 1999 there are 139,993,196 shares of common stock
outstanding, 11,340,000 shares of Class A common stock outstanding and 212,953
shares of 12 3/4% Senior Exchangeable Preferred Stock due 2010 outstanding.
Common Stock
Voting Rights
Each share of common stock is entitled to one vote. The common stock votes
together as a single class on all matters presented for a vote of the
stockholders, except as provided under the Delaware General Corporation Law.
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 corporate actions we may take.
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, 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 us.
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 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.
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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 divided into three
classes of directors, consisting of three, three and four directors. One class
of directors, initially consisting of three directors, was elected for a term
expiring at the annual meeting of shareholders to be held in 2000, another
class initially consisting of three directors was elected for a term expiring
at the annual meeting of stockholders to be held in 2000, and another class
initially consisting of four directors was 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 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
18
<PAGE>
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.
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.
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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
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.
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<PAGE>
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 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.
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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 directors 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 WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or common stock. Warrants may be issued independently or together with debt
securities, preferred stock or common stock offered by any prospectus
supplement and may be attached to or separate from any such offered securities.
Each series of warrants will be issued under a separate warrant agreement to be
entered into between us and a bank or trust company, as warrant agent. The
warrant agent will act solely as our agent in connection with the warrants and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of warrants. The following summary of certain
provisions of the warrants does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the warrant
agreement that will be filed with the SEC in connection with the offering of
such warrants.
Debt Warrants
The prospectus supplement relating to a particular issue of debt warrants
will describe the terms of such debt warrants, including the following: (a) the
title of such debt warrants; (b) the offering price for such debt warrants, if
any; (c) the aggregate number of such debt warrants; (d) the designation and
terms of the debt securities purchasable upon exercise of such debt warrants;
(e) if applicable, the designation and terms of the debt securities with which
such debt warrants are issued and the number of such debt warrants issued with
each such debt security; (f) if applicable, the date from and after which such
debt warrants and any debt securities issued therewith will be separately
transferable; (g) the principal amount of debt securities purchasable upon
exercise of a debt warrant and the price at which such principal amount of debt
securities may be purchased upon exercise (which price may be payable in cash,
securities, or other property); (h) the date on which the right to exercise
such debt warrants shall commence and the date on which such right shall
expire; (i) if applicable, the minimum or maximum amount of such debt warrants
that may be exercised at any one time; (j) whether the debt warrants
represented by the debt warrant certificates or debt securities that may be
issued upon exercise of the debt warrants will be issued in registered or
bearer form; (k) information with respect to book-entry procedures, if any; (1)
the currency or currency units in which the offering price, if any, and the
exercise price are payable; (m) if applicable, a discussion of material United
States federal income tax considerations; (n) the antidilution provisions of
such debt warrants, if any; (o) the redemption or call provisions, if any,
applicable to such debt warrants; and (p) any additional terms of such debt
warrants, including terms, procedures, and limitations relating to the exchange
and exercise of such debt warrants.
Stock Warrants
The prospectus supplement relating to any particular issue of preferred
stock warrants or common stock warrants will describe the terms of such
warrants, including the following: (a) the title of such warrants; (b) the
offering price for such warrants, if any; (c) the aggregate number of such
warrants; (d) the designation and terms of the common stock or preferred stock
purchasable upon exercise of such warrants; (e) if applicable, the designation
and terms of the offered securities with which such warrants are issued and the
number of such warrants issued with each such offered security; (f) if
applicable, the date from and after which such warrants and any offered
securities issued therewith will be separately transferable; (g) the number of
shares of common stock or preferred stock purchasable upon exercise of a
warrant and the price at which such shares may be purchased upon exercise; (h)
the date on which the right to exercise such warrants shall commence and the
date on which such right shall expire; (i) if applicable, the minimum or
maximum amount of such warrants that may be exercised at any one time; (j) the
currency or currency units in which the offering price, if any, and the
exercise price are payable, (k) if applicable, a discussion of material United
States federal income tax considerations; (l) the antidilution provisions of
such warrants, if any; (m) the redemption or call provisions, if any,
applicable to such warrants; and (n) any additional terms of such warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such warrants.
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SELLING SHAREHOLDERS
The selling shareholders may be our directors, executive officers, former
directors, employees or certain holders of our common stock. The prospectus
supplement for any offering of the common stock by selling shareholders will
include the following information:
--the names of the selling shareholders;
--the number of shares held by each of the selling shareholders;
--the percentage of the common stock held by each of the selling
shareholders; and
--the number of shares of the common stock offered by each of the
selling shareholders.
PLAN OF DISTRIBUTION
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each prospectus
supplement will describe the method of distribution of the securities offered
therein.
Our company and any selling shareholders may sell securities directly,
through agents designated from time to time, through underwriting syndicates
led by one or more managing underwriters or through one or more underwriters
acting alone. The selling shareholders may also distribute securities through
one or more special purpose trusts, which will enter into forward purchase
arrangements with selling shareholders and distribute their own securities.
Each prospectus supplement will describe the terms of the securities to which
such prospectus supplement relates, the names of the selling shareholders and
the number of shares of common stock to be sold by each, the name or names of
any underwriters or agents with whom we or the selling shareholders, or both,
have entered into arrangements with respect to the sale of such securities, the
public offering or purchase price of such securities and the net proceeds we or
the selling shareholders will receive from such sale. In addition, each
prospectus supplement will describe any underwriting discounts and other items
constituting underwriters' compensation, any discounts and commissions allowed
or paid to dealers, if any, any commissions allowed or paid to agents, and the
securities exchange or exchanges, if any, on which such securities will be
listed. Dealer trading may take place in certain of the securities, including
securities not listed on any securities exchange.
If so indicated in the applicable prospectus supplement, we or the selling
shareholders, or both, will authorize underwriters or agents to solicit offers
by certain institutions to purchase securities from us or the selling
shareholders, or both, pursuant to delayed delivery contracts providing for
payment and delivery at a future date. Institutions with which such contracts
may be made include, among others:
--commercial and savings banks;
--insurance companies;
--pension funds;
--investment companies;
--educational and charitable institutions.
In all cases, such institutions must be approved by us or the selling
shareholders, or both. Unless otherwise set forth in the applicable prospectus
supplement, the obligations of any purchaser under any such contract will not
be subject to any conditions except that (i) the purchase of the securities
will not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (ii) if the securities are
also being sold to underwriters acting as principals for their own account, the
underwriters will have purchased such
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securities not sold for delayed delivery. The underwriters and such other
persons will not have any responsibility in respect of the validity or
performance of such contracts.
Any selling shareholder, underwriter or agent participating in the
distribution of the securities may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the securities so offered and sold and any
discounts or commissions received by them, and any profit realized by them on
the same or resale of the securities may be deemed to be underwriting discounts
and commissions under the Securities Act.
Certain of any such underwriters and agents including their associates, may
be customers of, engage in transactions with and perform services for us and
our subsidiaries in the ordinary course of business. One or more of our
affiliates may from time to time act as an agent or underwriter in connection
with the sale of the securities to the extent permitted by applicable law. The
participation of any such affiliate in the offer and sale of the securities
will comply with Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. regarding the offer and sale of securities of an
affiliate.
Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the common
stock, which is listed on The Nasdaq Stock Market's National Market, and any
underwriters or dealers will not be obligated to make a market in securities.
We cannot predict the activity or liquidity of any trading in the securities.
We will not receive any proceeds from the sale of shares of common stock by
the selling shareholders. We will, however, bear certain expenses in connection
with the registration of the securities being offered under this prospectus by
the selling shareholders, including all costs incident to the offering and sale
of the securities to the public other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes.
VALIDITY OF SECURITIES
The validity of the securities offered hereby will be passed upon for us by
Cravath, Swaine & Moore, New York, New York and for the underwriters or agents,
if any, by Latham & Watkins, New York, New York.
EXPERTS
The consolidated financial statements 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, 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, the
financial statements of the Bell Atlantic Mobile Tower Operations at December
31, 1998 and for each of the two years in the period ended December 31, 1998
and the financial statements of the Powertel Tower Operations at December 31,
1998 and for the year ended December 31, 1998, have been incorporated by
reference in this prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, and upon the authority of said firm
as experts in accounting and auditing.
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5,000,000 Shares
Crown Castle International Corp.
Common Stock
[logo] crown castle
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PROSPECTUS
, 1999
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 279,608
Printing and engraving expenses............................... 150,000
Legal fees and expenses....................................... 250,000
Accounting fees and expenses.................................. 200,000
Miscellaneous................................................. 120,392
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Total....................................................... $1,000,000
==========
</TABLE>
Item 15. 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
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.
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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 16. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
*****2.1 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
******2.2 Letter of Agreement between Crown Castle International Corp. and
BellSouth Mobility Inc. dated March 5, 1999 (including the Form of
Sublease)
****2.3 Framework Agreement between One2One and Castle Transmission
International Ltd. dated March 5, 1999
********2.4 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.
********2.5 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
##2.6 Letter of Agreement among Crown Castle South, Inc., BellSouth
Personal Communications, Inc. and BellSouth Carolinas PCS, L.P.
dated July 1, 1999
****3.1 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 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
**4.2 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
**4.3 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")
***4.4 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
**4.5 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
**4.6 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
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------------------------------------------------
<C> <S>
**4.7 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
****4.8 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
***4.9 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
****4.10 Governance Agreement among Crown Castle International Corp., T l
Diffusion de France International S.A. and Digital Future
Investments B.V., dated as of August 21, 1998
****4.11 Shareholders Agreement among Crown Castle International Corp., T
1 Diffusion de France International S.A. and Castle Transmission
Services (Holdings) Limited dated August 1998
****4.12 Rights Agreement dated as of August 21, 1998, between Crown
Castle International Corp. and ChaseMellon Shareholder Services
L.L.C.
********4.13 Amendment No. 1 to Rights Agreement dated March 31, 1999, between
Crown Castle International Corp. and ChaseMellon Shareholder
Services L.L.C.
#4.14 Registration Rights Agreement dated June 1, 1999 between
BellSouth Mobility Inc. and Crown Castle International Corp.
4.15 Form of Indenture
*4.16 Form of Warrant Agreement
5.1 Opinion of Cravath, Swaine & Moore
+12.1 Statement regarding computation of ratio of earnings to fixed
charges
+23.1 Consent of KPMG LLP
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5.1)
+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
</TABLE>
- --------
+ Previously filed.
* To be filed supplementally.
** Incorporated by reference to the exhibits previously filed by the
Registrant in the Registration Statement on Form S-4 previously filed
by the Registrant (Registration No. 333-43873).
*** Incorporated by reference to the exhibits previously filed by the
Registrant in the Registration Statement on Form S-1 previously filed
by the Registrant (Registration No. 333-57283).
**** Incorporated by reference to the exhibits previously filed by the
Registrant 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.
II-4
<PAGE>
******* Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated March 31, 1999
# Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated June 9, 1999
## Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated July 12, 1999.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b)
under the Securities Act of 1933 if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purpose of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act (and, where
applicable, each filing of any employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference in the Registration Statement 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.
(5) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
II-5
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 (other than the
provisions relating to insurance), or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy 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 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on this 28th day of July, 1999.
CROWN CASTLE INTERNATIONAL CORP.,
by /s/ Charles C. Green
-----------------------------------
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 28th day of July, 1999.
Signature Title
Chairman of the Board and Chief Executive
* Officer (Principal Executive Officer)
- -----------------------------------
Ted B. Miller, Jr.
President and Director
*
- -----------------------------------
David L. Ivy
/s/ Charles C. Green, III Executive Vice President and Chief
- ----------------------------------- Financial Officer (Principal Financial
Charles C. Green, III Officer)
Senior Vice President, Chief Accounting
* Officer and Corporate Controller
- ----------------------------------- (Principal Accounting Officer)
Wesley D. Cunningham
Director
*
- -----------------------------------
Michel Azibert
Director
*
- -----------------------------------
Bruno Chetaille
Director
*
- -----------------------------------
Robert A. Crown
Director
*
- -----------------------------------
Carl Ferenbach
Director
*
- -----------------------------------
Randall A. Hack
- -----------------------------------
Director
Edward C. Hutcheson
Director
*
- -----------------------------------
Robert F. McKenzie
Director
*
- -----------------------------------
William A. Murphy
Director
*
- -----------------------------------
Jeffrey H. Schutz
/s/ Charles C. Green, III
- -----------------------------------
*Charles C. Green, III
Attorney-in-Fact
II-7
<PAGE>
Exhibits Index
The following exhibits are filed as a part of this Registration Statement.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
*****2.1 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
******2.2 Letter of Agreement between Crown Castle International Corp. and
BellSouth Mobility Inc. dated March 5, 1999 (including the Form of
Sublease)
****2.3 Framework Agreement between One2One and Castle Transmission
International Ltd. dated March 5, 1999
********2.4 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.
********2.5 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
##2.6 Letter of Agreement among Crown Castle South, Inc., BellSouth
Personal Communications, Inc. and BellSouth Carolinas PCS, L.P.
dated July 1, 1999
****3.1 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 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
**4.2 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
**4.3 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")
***4.4 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
**4.5 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
**4.6 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------------------------------------------------
<C> <S>
**4.7 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
****4.8 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
***4.9 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
****4.10 Governance Agreement among Crown Castle International Corp., T l
Diffusion de France International S.A. and Digital Future
Investments B.V., dated as of August 21, 1998
****4.11 Shareholders Agreement among Crown Castle International Corp., T
1 Diffusion de France International S.A. and Castle Transmission
Services (Holdings) Limited dated August 1998
****4.12 Rights Agreement dated as of August 21, 1998, between Crown
Castle International Corp. and ChaseMellon Shareholder Services
L.L.C.
********4.13 Amendment No. 1 to Rights Agreement dated March 31, 1999, between
Crown Castle International Corp. and ChaseMellon Shareholder
Services L.L.C.
#4.14 Registration Rights Agreement dated June 1, 1999 between
BellSouth Mobility Inc. and Crown Castle International Corp.
4.15 Form of Indenture
*4.16 Form of Warrant Agreement
5.1 Opinion of Cravath, Swaine & Moore
+12.1 Statement regarding computation of ratio of earnings to fixed
charges
+23.1 Consent of KPMG LLP
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5.1)
+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
</TABLE>
- --------
+ Previously filed.
* To be filed supplementally.
** Incorporated by reference to the exhibits previously filed by the
Registrant in the Registration Statement on Form S-4 previously filed
by the Registrant (Registration No. 333-43873).
*** Incorporated by reference to the exhibits previously filed by the
Registrant in the Registration Statement on Form S-1 previously filed
by the Registrant (Registration No. 333-57283).
**** Incorporated by reference to the exhibits previously filed by the
Registrant 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.
<PAGE>
******* Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated March 31, 1999
# Incorporated by reference to the exhibit previously filed by the
registrant on Form 8-K (Registration No. 0-24737) dated June 9, 1999
## Incorporated by reference to the exhibit previously filed by the
Registrant on Form 8-K (Registration No. 0-24737) dated July 12, 1999.
<PAGE>
Exhibit 1.1
Crown Castle International Corp.
Debt Securities, Preferred and Common Stock
Underwriting Agreement
----------------------
Ladies and Gentlemen:
Crown Castle International Corp., a Delaware corporation (the "Company")
and, if there are Selling Stockholders, the selling stockholders named in a
schedule to the Terms Agreement (as defined in Article 2 below) (the "Selling
Stockholders"), propose[s], subject to the terms and conditions stated herein,
to issue and sell to the Underwriters named in a schedule to the Terms Agreement
(the "Underwriters") from time to time certain of its debt securities, preferred
stock or common stock (the "Offered Securities"). The representatives of the
Underwriters, if any, specified in a Terms Agreement are hereinafter referred to
as the "Representatives"; provided, however, that if the Terms Agreement does
not specify any representative of the Underwriters, the term "Representatives",
as used in this Agreement, shall mean the Underwriters. If the Offered
Securities are Debt Securities: The Offered Securities will be issued under an
indenture, dated as of ____, ____ (the "Indenture"), between the Company and a
trustee as Trustee, in one or more series, which series may vary as to interest
rates, maturities, redemption provisions, selling prices and other terms. If
the Offered Securities are Preferred Stock: The Offered Securities may be issued
in one or more series, which series may vary as to dividend rates, redemption
provisions, selling prices and other terms. Particular series or offerings of
Offered Securities will be sold pursuant to a Terms Agreement, for resale in
accordance with terms of offering determined at the time of sale.
1. (a) The Company, as of the date of each Terms Agreement, represents
and warrants to, and agrees with, each Underwriter that:
(i) A registration statement on Form S-3 relating to the Offered
Securities has been filed with the Securities and Exchange Commission (the
"Commission") and has become effective; 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 Rule 462(b)
registration statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission. Such
registration statement, as amended at the time of any Terms Agreement, is
hereinafter referred to as the "Registration Statement", and the prospectus
included in such Registration Statement, as supplemented and as
contemplated by Section 2 to reflect the terms of the Offered Securities
(if they are debt securities or preferred stock) and the terms of the
offering of the Offered Securities, as first filed with the Commission
pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the
Securities Act of 1993 ("Act"), including all material incorporated by
reference therein, is hereinafter referred to as the "Prospectus".
<PAGE>
(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 expressly
for use therein [or by a Selling Stockholder].
(iii) The Registration Statement conforms and on the date of each Terms
Agreement will conform, 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 ("Rules and Regulations") 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 date as to the
Prospectus and any amendment or supplement thereto and as of the date of
each Terms Agreement, contain any 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 expressly for use therein [or by a
Selling Stockholder expressly for use in the preparation of the answers
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 Company 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 marketable 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;
2
<PAGE>
(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;
(vii) Each subsidiary of the Company is a corporation (or in the case of
Crown Atlantic Holding Company LLC, a limited liability company) duly
organized and validly existing and in good standing under the laws of the
its jurisdiction of organization with all requisite 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;
(viii) None of the subsidiaries of the Company (other than the
subsidiaries designated as "Significant Subsidiaries" under the Terms
Agreement) (collectively, the "Significant Subsidiaries")) is a
"significant subsidiary," as such term is defined in Rule 405 of the rules
and regulations under the Act;
(ix) 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;
(x) If the Offered Securities are Debt Securities: The Offered
Securities have been duly and validly authorized and, when issued and
delivered against payment therefor as provided pursuant to the Terms
Agreement, 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 Indenture
under which they are to be issued, which is substantially in the form filed
as an exhibit to the Registration Statement, the Indenture 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 relating to or
affecting creditor's rights and to general equity principles; and the
Offered Securities and the Indenture will conform to the description
thereof in the Registration Statement and the Prospectus;
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(xi) If the Offered Securities are Common Stock or are convertible into
Common Stock: The Offered Securities to be issued and sold by the Company
to the Underwriters pursuant to the Terms 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
nonassessable and will conform to the description of the Stock contained in
the Prospectus; and, except as described in the Prospectus, the
stockholders of the Company have no preemptive rights with respect to the
Offered Securities;
(xii) If the Offered Securities are Preferred Stock: The Offered
Securities have been duly authorized and, when the Offered Securities have
been delivered and paid for in accordance with the Terms Agreement on the
Closing Date, such Offered Securities will have been validly issued, fully
paid and nonassessable and will conform to the description thereof
contained in the Prospectus; and, except as described in the Prospectus,
the stockholders of the Company have no preemptive rights with respect to
the Offered Securities.
(xiii) If the Offered Securities are Convertible: When the Offered
Securities are delivered and paid for pursuant to the Terms Agreement at
the Time of Delivery, such Offered Securities will be convertible into
Common Stock of the Company in accordance with their terms (if the Offered
Securities are preferred stock) or the Indenture (if the Offered Securities
are debt securities); the shares of Common Stock initially issuable upon
conversion of such Offered Securities have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable; the
outstanding share of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and conform to the description
thereof contained in the Prospectus; and, except as described in the
Prospectus, the stockholders of the Company have no preemptive rights with
respect to the Common Stock.
(xiv) The execution, delivery and performance of [If the Offered
Securities are Debt Securities: the Indenture] [If the Offered Securities
are Preferred Stock: the certificate of designations] and the Terms
Agreement and the issuance and sale of the Offered Securities and
compliance by the Company with all of the provisions thereof 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 the Terms Agreement (including the provisions
of this Agreement), except (A) the registration under the Act of the
Offered Securities and (B) such consents, approvals, authorizations,
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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;
(xv) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by the Terms Agreement
(including the provisions of this Agreement) in connection with the
issuance and sale of the Offered Securities by the Company, except such as
have been obtained and made under the Act and, if the Offered Securities
are debt securities, the Trust Indenture Act and such as may be required
under state securities laws;
(xvi) 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;
(xvii) The statements set forth in the Prospectus under the caption
"Description of the [Capital Stock/Notes]", insofar as they purport to
constitute a summary of the terms of the Offered 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;
(xviii) 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;
(xix) The Company is not and, after giving effect to the offering and
sale of the Offered 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");
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(xx) 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;
(xxi) 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;
(xxii) If the Offered Securities are issued on or before January 1,
2000: The Company has reviewed its operations and that of its subsidiaries
and is in the process of reviewing 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. 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
in any material respect at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000;
(xxiii) 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 as described in the Terms Agreement) 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 the Prospectus in any securities being registered pursuant to
any other registration statement filed by the Company or any of its
subsidiaries under the Act;
(xxiv) This Agreement and the Terms Agreement have been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Underwriters, constitute the
valid and binding agreement of the Company, 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 or materiality, reasonableness, good faith and fair dealing,
regardless of whether in a proceeding in equity or at law);
(xxv) If the Offered Securities are Common Stock or are convertible
into Common Stock:; 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 Terms Agreement, 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 other employee
compensation plans or pursuant to outstanding options, rights or warrants;
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(xxvi) 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-3 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;
(xxvii) 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;
(xxviii) 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;
(xxix) 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 or the Prospectus (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;
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(xxx) 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;
(xxxi) 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;
(xxxii) 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;
(xxxiii) 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 of the Terms Agreement 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;
(xxxiv) Since the date as of which information is given in the
Prospectus through the date of the Terms Agreement, and except as may
otherwise be disclosed in the Registration Statement or the Prospectus,
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);
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(xxxv) 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;
(xxxvi) 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;
(xxxvii) 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
(xxxviii) 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) If there are Selling Stockholders: Each of the Selling Stockholders
represents and warrants to, and agrees with, each of the Underwriters and the
Company that:
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(i) Such Selling Stockholder has, and immediately prior to the First
Time of Delivery (as defined in Section 2 hereof) such Selling
Stockholder will have, good and valid title to the Offered Securities to
be sold by such Selling Stockholder under the Terms Agreement on such
date, free and clear of all liens, encumbrances, equities or claims; and
upon delivery of such Offered Securities and payment therefor pursuant
hereto, good and valid title to such Offered Securities, free and clear
of all liens, encumbrances, equities or claims, will pass to the several
Underwriters;
(ii) Such 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
Offered Securities to be sold by such Selling Stockholder under the Terms
Agreement;
(iii) Such 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 and of the Terms Agreement on behalf of such Selling Stockholder;
(iv) 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 indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument 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 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 Offered
Securities 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 Offered Securities 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;
(v) Such Selling Stockholder has no actual knowledge (as defined in
Section 6(f) hereof) of (i) any untrue statement or alleged untrue
statement of a material fact contained in 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 the
Prospectus,
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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 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 Offered Securities;
(vii) During the period beginning at the time of execution of the
Terms Agreement and ending the number of days after the Time of Delivery
specified under "Blackout" in the Terms Agreement, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder
and under the Terms Agreement, any securities of the Company that are
substantially similar to the Offered Securities, 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;
(viii) The Offered Securities to be sold by such Selling Stockholder
under the Terms Agreement which are represented by the certificates held
in custody for such Selling Stockholder are subject to the interest of
the Underwriters, the arrangements made by such Selling Stockholder for
such custody are to that extent irrevocable, and the obligations of such
Selling Stockholder hereunder and under the Terms Agreement shall not be
terminated by any act of such Selling Stockholder, by operation of law,
by the death or incapacity of any individual 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 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).
2. Purchase and Offering of Offered Securities.
The obligation of the Underwriters to purchase the Offered Securities
will be evidenced by an agreement or exchange of other written communications
("Terms Agreement") at the time the Company determines to sell the Offered
Securities. The Terms Agreement may also amend, modify or supplement this
Agreement as provided therein. The Terms Agreement will incorporate by
reference the provisions of this Agreement, except as otherwise provided
therein, and will specify the firm or firms which will be Underwriters, the
names of any Representatives, the principal amount or number of shares to be
purchased by each Underwriter, the purchase price to be paid by the Underwriters
and (if the Offered Securities are debt securities or preferred stock) the terms
of the Offered Securities not already specified (in the Indenture, in the case
of Offered Securities that are debt securities), including, but not limited to,
interest rate (if debt securities), dividend rate (if preferred
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stock), maturity (if debt securities), any redemption provisions and any sinking
fund requirements. The Terms Agreement will also specify the time and date of
delivery and payment (such time and date, or such other time not later than
seven full business days thereafter as the Underwriter first named in the Terms
Agreement (the "Lead Underwriter") and the Company agree as the time for payment
and delivery, being herein and in the Terms Agreement referred to as the "Time
of Delivery") the place of delivery and payment and any details of the terms of
offering that should be reflected in the prospectus supplement relating to the
offering of the Offered Securities. For purposes of Rule 15c6-1 under the
Securities Exchange Act of 1934, the Time of Delivery (if later than the
otherwise applicable settlement date) shall be the date for payment of funds and
delivery of securities for all the Offered Securities sold pursuant to the
offering. The obligations of the Underwriters to purchase the Offered Securities
will be several and not joint. It is understood that the Underwriters propose to
offer the Offered Securities for sale as set forth in the Prospectus.
If the Offered Securities are debt securities and the Terms Agreement
specifies "Book-Entry Only" settlement or otherwise states that the provisions
of this paragraph shall apply, the Company will deliver against payment of the
purchase price the Offered Securities in the form of one or more permanent
global securities in definitive form (the "Global Securities") deposited with
the Trustee as custodian for The Depository Trust Company ("DTC") and registered
in the name of Cede & Co., as nominee for DTC. Interests in any permanent global
securities will be held only in book-entry form through DTC, except in the
limited circumstances described in the Prospectus. Payment for the Offered
Securities shall be made by the Underwriters (if the Terms Agreement specifies
that the Offered Securities will not trade in DTC's Same Day Funds Settlement
System) by certified or official bank check or checks in New York Clearing House
(next day) funds or (if the Terms Agreement specifies that the Offered
Securities will trade in DTC's Same Day Funds Settlement System) in Federal
(same day) funds by official check or checks or wire transfer to an account in
New York previously designated to the Lead Underwriter by the Company at a bank
acceptable to the Lead Underwriter, in each case drawn to the order of the
Company at the place of payment specified in the Terms Agreement on the Closing
Date, against delivery to the Trustee as custodian for DTC of the Global
Securities representing all of the Offered Securities.
3. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by the Representatives
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 the Terms 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 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 the Representatives with copies
thereof; to advise the Representatives 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 Prospectus, of the suspension of the
qualification of the Offered 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 the Prospectus or for additional information;
and, in the event of the issuance
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of any stop order or of any order preventing or suspending the use of the
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 Offered 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 Offered 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 Noon, New York City time, on the New York Business Day next
succeeding the date of the Terms Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as the Representatives may reasonably request, and, if the delivery of the
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 Offered Securities 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 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 [For Debt Securities:
or the Trust Indenture Act, or] 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 the
Prospectus in connection with sales of any of the Offered 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 date of
the Terms Agreement, 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 at the time of the execution of the Terms
Agreement and ending the number of days after the Time of Delivery specified
under "Blackout" in the Terms Agreement, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder and under the Terms Agreement
any securities of the Company that are substantially similar to the Offered
Securities [For Common Stock] 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;
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(f) To cause each of the persons listed on a schedule to the Term Agreement,
to the extent such person is not a Selling Stockholder hereunder and under the
Term Agreement, to enter into a lock-up agreement with the Underwriters, in form
and substance satisfactory to the Underwriters, providing that, during the
period beginning at the time of execution of the Terms Agreement and ending the
number of days after the Time of Delivery specified under "Blackout" in the
Terms Agreement, such person will not offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder or under the Terms Agreement, any
securities of the Company that are substantially similar to the Offered
Securities, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, the Offered
Securities 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 the Term
Agreement), without the prior written consent of the Underwriters;
(g) 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 stockholders, 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 Offered Securities or any class
of securities of the Company is listed [For Debt Securities: and (B) the
documents specified in the Indenture as in effect at the Time of Delivery];
(h) To use the net proceeds received by it from the sale of the Offered
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(i) If Offered Securities are Common Stock: 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.
4. The Company covenants and agrees with the several Underwriters 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 Offered Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, the Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers; (ii) the cost
of printing or producing any Agreement among Underwriters, this Agreement, the
Terms Agreement the Blue Sky Memorandum, [If the Offered Securities are Debt
Securities: the Indenture,] closing documents (including any compilations
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Offered Securities; (iii) all expenses in connection with
the qualification of the Offered Securities for offering and sale under state
securities laws as provided in Section 3 hereof, including the fees and
disbursements of counsel for the Underwriters (not in excess, in the aggregate,
an amount specified in the Terms Agreement) in connection with such
qualification and in connection with the Blue Sky
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surveys [If the Offered Securities are Debt Securities: and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Offered Securities] [If the Offered Securities are Common Stock: (v) all fees
and expenses in connection with listing the Offered Securities on the NASDAQ];
(vi) 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 Offered
Securities; (vii) the cost of preparing certificates evidencing the Offered
Securities; (viii) the fees and expenses [If the Offered Securities are Debt
Securities: of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Offered Securities] [If the Offered Securities are Common Stock: any
transfer agent or registrar ; (ix) [If there are Selling Stockholders: all fees
and expenses of counsel to the Selling Stockholders, incurred in connection with
the public offering of the Offered Securities]; and (x) all other costs and
expenses incident to the performance of its obligations hereunder and under the
Terms Agreement which are not otherwise specifically provided for in this
Section. It is understood, however, except as provided in this Section, and
Sections 6 and 9 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 Offered Securities by them, and any advertising expenses connected with
any offers they may make.
5. Conditions of the Obligations of the Underwriters.
The respective obligations of the Underwriters hereunder and under the
Terms Agreement as to the Offered Securities to be delivered at each Time of
Delivery, shall be subject, in the sole discretion of the Representatives, to
the condition that all representations and warranties of the Company [and the
Selling Stockholders] herein are, at and as of the 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 and under the Terms
Agreement theretofore to be performed 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 5(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 as the case may be;
(b) Latham & Watkins, counsel for the Underwriters, shall have furnished to
the Representatives, such written opinion or opinions, dated the Time of
Delivery, with respect to the matters covered in paragraphs (i), (v), (vi),
(vii) and (ix) and the paragraph following clause (xiv) of subsection (c) below
as well as such other related matters as the Representatives, 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, as the case may be, their written opinion, dated the
Time of Delivery, in form and substance satisfactory to the Representatives, to
the effect that:
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(i) The Company and each of the Significant Subsidiaries 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. The Company and each of the Significant
Subsidiaries 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 Offered Shares being delivered at such Time of Delivery); and the
shares conform to the description of the Stock contained in the Prospectus;
(iii) If the Offered Securities are Common Stock: 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 Offered
Securities 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) If the Offered Securities are Debt Securities: The Indenture 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 the Indenture duly qualified under the
Trust Indenture Act;]
(vii) If the Offered Securities are Debt Securities: The Offered
Securities have been duly and validly authorized by the Company and when duly
executed by the Company in
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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 of the Terms
Agreement, 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
Offered Securities and the Indenture conforms to the descriptions thereof in the
Prospectus;
(viii) If the Offered Securities are Common Stock: The Offered Securities
have been duly and validly authorized and are fully paid and nonassessable, when
issued, delivered and sold will conform to the description thereof described in
the Prospectus;
(ix) 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;
(x) The statements contained (A) in the Prospectus under the captions
"Description of the [Notes/Capital Stock]", [If the Offered Securities are
Common 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;
(xi) The Terms Agreement has been duly and validly authorized, executed and
delivered by the Company.
(xii) This Agreement has been duly and validly authorized, executed
and delivered by the Company;
(xiii) None of the issuance, offer or sale of Offered Securities, the
execution, delivery or performance by the Company of this Agreement and the
Terms Agreement or compliance by the Company with the provisions hereof and of
the Terms Agreement (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 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
17
<PAGE>
Lien upon any property or assets of the Company and each Significant Subsidiary
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
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; and
(xiv) The Company is not and, upon sale of the Offered 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.
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 Time of Delivery,
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, as the case may be, his written opinion, dated such Time of
Delivery, in form and substance reasonably satisfactory to the Representatives,
to the effect that:
(i) Each of the Company, and it subsidiaries is (other than [list
non-corporate entities]) 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, and its subsidiaries 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
18
<PAGE>
qualification, except where the failure so to register or qualify or to
be in good standing would not have a Material Adverse Effect;
(ii) All of the issued shares of capital stock of the Company and each
Subsidiary of the Company (other than as set forth in the Terms
Agreement) 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 and the Prospectus (including the exhibits thereto);
(iii) 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 as set forth in the Terms Agreement), 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
Offered Securities or the consummation of the transactions contemplated
by this Agreement;
(iv) 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 as set forth in the
Terms Agreement) 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; and
(v) None of the issuance, offer or sale of Offered Securities, the
execution, delivery or performance by the Company of this Agreement or
the Terms Agreement or compliance by the Company with the provisions
hereof or of the Terms Agreement (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 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, ot its Significant Subsidiaries 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;
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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, as the case may be, their written opinion, dated such Time
of Delivery, in form and substance reasonably to the Representatives, 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 Prospectus;
(f) If there are Selling Shareholders: The counsel for each of the Selling
Stockholders, as indicated in a schedule to the Terms Agreement shall have
furnished to the Underwriter, its written opinion with respect to each of the
Selling Stockholders for whom they are acting as counsel, dated such Time of
Delivery, in form and substance satisfactory to the 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 Terms Agreement, the Power of Attorney and
the Custody Agreement; the execution, delivery and performance of this
Agreement, the Terms 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 Offered Securities 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 Offered Securities
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
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by such Selling Stockholder and the consummation by such Selling
Stockholder of the transactions contemplated hereby and thereby;
(ii) The Terms Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder;
(iii)This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder;
(iv) 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;
(v) Such Selling Stockholder has full right, power and authority to
sell, assign, transfer and deliver the Offered Securities to be sold by
such Selling Stockholder under the Terms Agreement; and
(vi) Upon physical delivery of the certificates representing the
Offered Securities 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 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
Underwriters and they are justified in relying upon such certificate.
(g) 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 the Terms Agreement and also at the Time of Delivery, KPMG Peat Marwick LLP
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;
(h) 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
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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 Offered Securities on the terms and in the manner contemplated
in the Prospectus;
(i) On or after the date of the Terms Agreement (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;
(j) On or after the date of the Terms Agreement 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 offered Securities on the terms and in the manner contemplated in the
Prospectus; or [If the Offered Securities are Debt Securities: (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;
(k) If the Offered Securities are Common Stock: At such Time of Delivery
Nasdaq National Markets shall have approved the Offered Securities to be sold by
the Company [and the Selling Stockholders] for inclusion, subject only to
official notice of issuance and evidence of satisfactory distribution;
(l) If the Offered Securities are Common Stock: The Company has obtained
and delivered to the Underwriters executed copies of an agreement from the
persons identified a schedule to the Terms Agreement to the effect set forth in
Subsection 3(e) hereof in form and substance satisfactory to the Underwriter;
(m) The Company shall have complied with the provisions of Section 3(c)
hereof with respect to the furnishing of Prospectuses on the New York Business
Day next succeeding the date of this Agreement;
(n) The Company [and the Selling Stockholders] shall have furnished or
caused to be furnished to the Representatives at the Time of Delivery
certificates of officers of the Company [and the Selling Stockholders,
respectively] satisfactory to the Representatives 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, (i) the performance by
the Company [and the Selling Stockholders] of
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all of [its/their] obligations hereunder and under the Terms Agreement to be
performed at or prior to such Time of Delivery, [If the Offered Securities are
Common Stock: (iii) in the case of the Company and the 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 the Prospectus, (iv) in the case of the Company and
the Selling Stockholders, absence of events since the Effective Date which
should be set forth in a supplement or amendment to the Registration Statement
and the Prospectus, and (v) such other matters as the Underwriter 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 (h) of this
Section and as to such other matters as the Representatives may reasonably
request;
(o) 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
(p) If there are Selling Stockholders: The Representatives shall have
received a copy of the executed Custody Agreement and Power of Attorney from
each Selling Stockholder.
6. Indemnifications
(a) The Company [and the Selling Stockholders, jointly and severally] will
indemnify and hold harmless each 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
Offered Securities), 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 [the Company or such Selling
Stockholder, as the case may be, contained herein; provided that the indemnity
by the Company and the 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 the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or (iii) the omission or
alleged omission to in the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein any material fact required to be stated therein or necessary to make the
statements therein not misleading, 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 [and the 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 the Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company by any Representatives by
or on behalf of any underwriter specifically for inclusion therein consented to
by it pursuant to Section 7 hereof; provided further that [neither] the Company
[nor any Selling Stockholder] shall be liable to any Underwriter under the
indemnity agreement in this paragraph 6(a)
23
<PAGE>
with respect to the Prospectus to the extent that any such loss, claim, damage
or liability of such Underwriters results from the fact that such Underwriter
sold Offered Securities to a person as to whom there was not sent or given, at
or prior to written confirmation of such sale, a copy of the Prospectus as then
amended or supplemented if the Company had previously furnished copies thereof
in the quantity requested and in a timely manner in accordance with Section 3(c)
hereof to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement or omission of a material fact
contained in the Registration Statement and corrected in the Prospectus as
amended or supplemented. If there are Selling Stockholders: Notwithstanding the
foregoing provisions, the indemnity and contribution obligations of the 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 Selling Stockholders and the
Underwriters shall thereafter be entitled to pursue any remaining unsatisfied
Claims by seeking recovery from the 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 6(a)
shall not exceed the net cash proceeds received by such Selling Stockholder from
its sale of Offered Securities 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 Offered Securities by such Selling Stockholder
thereunder, including without limitation claims under the Act; and (iii) the
Selling Stockholders shall be liable under this paragraph 6(a) solely with
respect to any untrue statement of material fact contained in the Registration
Statement or 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 the 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 6 shall constitute the sole and
exclusive remedy available to the Underwriters with respect to any claims
against the Selling Stockholders relating to the offering or sale of Offered
Securities by such Selling Stockholders under the Terms Agreement;
(b) 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 or the Prospectus 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 the Registration Statement or the Prospectus or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state in the Registration Statement or the Prospectus, or in
24
<PAGE>
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.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above 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 such subsection, notify the indemnifying party in
writing of the claim or the commencement thereof; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this section 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 such subsection. In case 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 such subsection 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 6, (ii) the Company and its Subsidiaries and (iii) the
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
25
<PAGE>
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 6.
(d) If the indemnification provided for in this Section 6 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 subsection (a) or
(b) above 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 the Terms
Agreement from the offering of the Offered Securities or (ii) if the allocation
provided by the clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of each party to the Terms 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
Underwriters, [and the Selling Stockholders] with respect to such offering shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Offered Securities purchased under this Agreement (before
deducting expenses) received by the Company, the [Selling Stockholders], and the
total underwriting discounts and commissions received by the Underwriters with
respect to the Offered Securities purchased under the Terms Agreement as set
forth in the table on the cover page of the Prospectus, bear to the sum of the
total proceeds from the sale of the Offered Securities (before deducting
expenses) in the offering. 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, [the Selling Stockholders] or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, [the Selling Stockholders], and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this subsection (e)
were determined by pro rata allocation or by any other method of allocation
which does not take into account of 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 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 shall be required to contribute any amount in
excess of the amount by which the total price at which the Offered Securities
underwritten by it and distributed to the public was offered to the public,
exceeds the amount of any damages which such Underwriter, as the case may be,
has otherwise been required paid or become liable to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. [If there
are Selling Stockholders: No Selling Stockholder will be required to contribute
any amount in excess of the proceeds received by such person in respect of all
Offered Securities offered and sold by it pursuant to the Prospectus and] no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be
26
<PAGE>
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.
(e) 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.
(f) The obligations of the Company under this Section 6 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 6 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 or the
Prospectus 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.
7. (a) If any Underwriter shall default in its obligation to purchase the
Offered Securities which it has agreed to purchase under the Terms Agreement, at
a Time of Delivery, the Representatives may in their discretion arrange for the
Representatives or another party or other parties to purchase such Offered
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 Offered Securities, 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 the Representatives to
purchase such Offered Securities on such terms. In the event that, within the
respective prescribed periods, the Representatives notify the Company [and the
Selling Stockholders] that they have so arranged for the purchase of such
Offered Securities, or the Company [and the Selling Stockholders] notifies the
Representatives that it has [they have] so arranged for the purchase of such
Offered 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 Offered
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Offered Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company [and the Selling Stockholders] as provided in
subsection (a) above, the aggregate number of such Offered Securities which
remains unpurchased does not exceed one-eleventh of the aggregate principal
number of all the Offered Securities 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 Offered Securities
which such Underwriter agreed to purchase under the Terms Agreement at such Time
of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata
27
<PAGE>
share (based on the number of Offered Securities which such Underwriter agreed
to purchase under the Terms Agreement) of the Offered 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
Offered Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company [and the Selling Stockholders] as provided in
subsection (a) above, the aggregate number of Offered Securities which remains
unpurchased exceeds one-eleventh of the aggregate principal amount of all the
Offered Securities, 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 Offered Securities of a defaulting Underwriter or
Underwriters, then this Agreement shall thereupon terminate, without liability
on the part of any non-defaulting 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 5 hereof and
the indemnity and contribution agreements in Section 6 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
8. 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 and the Terms 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 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 Offered
Securities.
9. If this Agreement shall be terminated pursuant to Section 7 hereof,
neither the Company [nor the Selling Stockholders] shall then be under any
liability to any Underwriter except as provided in Sections 5 and 6 hereof; but,
if for any other reason, the Offered Securities 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
Offered Securities to be sold by the Company and such Selling Shareholders under
the Terms Agreement)] 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 Offered Securities not so delivered, but the Company [and the
Selling Stockholders] shall then be under no further liability to any
Underwriter except as provided in and Sections 5 and 6 hereof.
10. In all dealings hereunder and under the Terms Agreement, 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 the Lead Underwriter on behalf of the Representatives.
All statements, requests, notices, and agreements hereunder and under the
Terms Agreement shall be in writing, and if to the Underwriters shall be
delivered or sent by mail, telex or facsimile transmission to the
Representatives at the address specified in the Terms Agreement; [if to any
Selling Stockholder shall be delivered or sent by mail, telex, facsimile
transmission to counsel for such Selling Stockholder at its address set forth in
a schedule to the Terms Agreement;] and if to the Company
28
<PAGE>
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 6(c) 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 the Representatives
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 [If there are
Selling Stockholders: 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 Attorneys-in-fact.]
11. This Agreement and the Terms 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 6 and 8 hereof, the
officers and directors of the Company and each person who controls the Company,
[any Selling Stockholder,] 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 Offered Securities from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.
12. Time shall be of the essence of this Agreement and the Terms
Agreement. As used herein, the term "business day" shall mean any day on which
the New York Stock Exchange, Inc. is open for trading.
13. This Agreement and the Terms 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.
14. This Agreement and the Terms 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.
Very truly yours,
Crown Castle International Corp.
By:
-----------------------------
Name:
Title:
29
<PAGE>
Exhibit 4.15
================================================================================
CROWN CASTLE INTERNATIONAL CORP.
ISSUER
$___________
--------------------
INDENTURE
Dated as of ______, ____
[United States Trust Company of New York]
Trustee
--------------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<S> <C>
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)................................................................ 2.06
(b)................................................................ 10.03
(c)................................................................ 10.03
313 (a)................................................................ 7.06
(b)(1)............................................................. N.A.
(b)(2)............................................................. 7.07
(c)................................................................ 7.06;10.02
(d)................................................................ 7.06
314 (a)................................................................ 4.03;10.02
(b)................................................................ N.A.
(c)(1)............................................................. 10.04
(c)(2)............................................................. 10.04
(c)(3)............................................................. N.A.
(d)................................................................ N.A.
(e)................................................................ 10.05
(f)................................................................ N.A.
315 (a)................................................................ 7.01
(b)................................................................ 7.05;10.02
(c)................................................................ 7.01
(d)................................................................ 7.01
(e)................................................................ 6.11
316 (a) (last sentence)................................................ 2.10
(a)(1)(A).......................................................... 6.05
(a)(1)(B).......................................................... 6.04
(a)(2)............................................................. N.A.
(b)................................................................ 6.07
(c)................................................................ 2.13
317 (a)(1)............................................................. 6.08
(a)(2)............................................................. 6.09
(b)................................................................ 2.05
318 (a)................................................................ 10.01
(b)................................................................ N.A.
(c)................................................................ 10.01
</TABLE>
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C>
Section 1.01. Definitions................................................................................1
Section 1.02. Other Definitions..........................................................................4
Section 1.03. Incorporation by Reference of Trust Indenture Act..........................................5
Section 1.04. Rules of Construction......................................................................5
ARTICLE 2. THE SECURITIES
Section 2.01. Issuable in Series.........................................................................5
Section 2.02. Establishment of Terms of Series of Securities.............................................6
Section 2.03. Execution and Authentication...............................................................7
Section 2.04. Registrar and Paying Agent.................................................................8
Section 2.05. Paying Agent to Hold Money in Trust........................................................9
Section 2.06. Securityholder Lists.......................................................................9
Section 2.07. Transfer and Exchange......................................................................9
Section 2.08. Mutilated, Destroyed, Lost and Stolen Securities..........................................10
Section 2.09. Outstanding Securities....................................................................10
Section 2.10. Treasury Securities.......................................................................11
Section 2.11. Temporary Securities......................................................................11
Section 2.12. Cancellation..............................................................................11
Section 2.13. Defaulted Interest........................................................................11
Section 2.14. Global Securities.........................................................................12
Section 2.15. CUSIP Numbers.............................................................................13
ARTICLE 3. REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee........................................................................13
Section 3.02. Selection of Securities to Be Redeemed....................................................13
Section 3.03. Notice of Redemption......................................................................14
Section 3.04. Effect of Notice of Redemption............................................................14
Section 3.05. Deposit of Redemption Price...............................................................15
Section 3.06. Securities Redeemed in Part...............................................................15
ARTICLE 4. COVENANTS
Section 4.01. Payment of Securities.....................................................................15
Section 4.02. Reports...................................................................................15
Section 4.03. Compliance Certificate....................................................................16
Section 4.04. Taxes.....................................................................................17
Section 4.05. Stay, Extension and Usury Laws............................................................17
Section 4.06. Corporate Existence.......................................................................17
ARTICLE 5. SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets...................................................17
Section 5.02. Successor Corporation Substituted.........................................................18
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default.........................................................................19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 6.02. Acceleration..............................................................................20
Section 6.03. Other Remedies............................................................................20
Section 6.04. Waiver of Past Defaults...................................................................20
Section 6.05. Control by Majority.......................................................................21
Section 6.06. Limitation on Suits.......................................................................21
Section 6.07. Rights of Holders of Securities to Receive Payment........................................21
Section 6.08. Collection Suit by Trustee................................................................22
Section 6.09. Trustee May File Proofs of Claim..........................................................22
Section 6.10. Priorities................................................................................22
Section 6.11. Undertaking for Costs.....................................................................23
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee.........................................................................23
Section 7.02. Rights of Trustee.........................................................................24
Section 7.03. Individual Rights of Trustee..............................................................24
Section 7.04. Trustee's Disclaimer......................................................................25
Section 7.05. Notice of Defaults........................................................................25
Section 7.06. Reports by Trustee to Holders of the Securities...........................................25
Section 7.07. Compensation and Indemnity................................................................25
Section 7.08. Replacement of Trustee....................................................................26
Section 7.09. Successor Trustee by Merger, etc..........................................................27
Section 7.10. Eligibility; Disqualification.............................................................27
Section 7.11. Preferential Collection of Claims Against Company.........................................27
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................................27
Section 8.02. Legal Defeasance and Discharge............................................................27
Section 8.03. Covenant Defeasance.......................................................................28
Section 8.04. Conditions to Legal or Covenant Defeasance................................................28
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions............................................................30
Section 8.06. Repayment to Company......................................................................30
Section 8.07. Reinstatement.............................................................................30
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Securities..................................................31
Section 9.02. With Consent of Holders of Securities.....................................................31
Section 9.03. Compliance with Trust Indenture Act.......................................................33
Section 9.04. Revocation and Effect of Consents.........................................................33
Section 9.05. Notation on or Exchange of Securities.....................................................33
Section 9.06. Trustee to Sign Amendments, etc...........................................................33
ARTICLE 10 MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.............................................................33
Section 10.02. Notices..................................................................................34
Section 10.03. Communication by Holders of Securities with Other Holders of Securities..................35
Section 10.04. Certificate and Opinion as to Conditions Precedent.......................................35
Section 10.05. Statements Required in Certificate or Opinion............................................35
</TABLE>
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<TABLE>
<S> <C>
Section 10.06. Rules by Trustee and Agents..............................................................35
Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders.................36
Section 10.08. Governing Law............................................................................36
Section 10.09. No Adverse Interpretation of Other Agreements............................................36
Section 10.10. Successors...............................................................................36
Section 10.11. Severability.............................................................................36
Section 10.12. Counterpart Originals....................................................................36
Section 10.13. Table of Contents, Headings, etc.........................................................36
</TABLE>
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INDENTURE dated as of ______, ____ 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 Securities issued
under this Indenture (the "Securities"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
Certain terms used herein and not defined herein shall have the meanings
assigned to them in a Board Resolution, an Officer's Certificate or a
supplemental Indenture. The following terms shall have the following meanings:
"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.
"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.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been adopted by the Board of
Directors or pursuant to authorization by the Board of Directors and to be in
full force and effect on the date of the certificate and delivered to the
Trustee.
"Business Day" means any day other than a Legal Holiday.
"Cedel" means Cedel Bank, S.A.
"Company" means Crown Castle International Corp., and any and all
successors thereto.
"Company Order" means a written order signed in the name of the Company by
two Officers, one of whom must be the Company's principal executive officer,
principal financial officer or principal accounting officer.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
<PAGE>
"Custodian" means the Trustee, as Custodian with respect to the Securities
in global form, or any successor entity thereto.
"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 Security" means a certificated Security registered in the name
of the Holder thereof and issued in accordance with Section 2.07 hereof,
substantially in the form of Exhibit A hereto except that such Security shall
not bear the Global Security Legend and shall not have the "Schedule of
Exchanges of Interests in the Global Security" attached thereto.
"Depositary" means, with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.04 hereof as
the Depositary with respect to the Securities, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Discount Security" means any Security that provides for an amount less
than the stated principal amount thereof to be due and payable upon declaration
of acceleration of the maturity thereof pursuant to Section 6.02.
"ECU" means the European Currency Unit as determined by the Commission of
the European Union.
"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.
"Foreign Currency" means any currency or currency unit issued by a
government other than the government of The United States of America.
"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 Security Legend" means the legend set forth in Section 2.14(3),
which is required to be placed on all Global Securities issued under this
Indenture.
"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. The term "Guarantor" shall
mean any Person Guaranteeing any obligation.
"Holder" means a Person in whose name a Security is registered.
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"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 Security through a Participant.
"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).
"Maturity," when used with respect to any Security or installment of
principal thereof, means the date on which the principal of such Security or
such installment of principal becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, notice of option to elect repayment or otherwise.
"Offering" means the offering of the Securities 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 10.04
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 10.04 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).
"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).
"Responsible Office" 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
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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.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning assigned to it in the preamble to this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Series" or "Series of Securities" means each series of debentures, notes
or other debt instruments of the Company created pursuant to Sections 2.01 and
2.02 hereof.
"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).
"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.
"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.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- ------------
<S> <C>
"Covenant Defeasance"............................................................. 8.03
"Event of Default"................................................................ 6.01
"Legal Defeasance"................................................................ 8.02
"Paying Agent".................................................................... 2.04
"Payment Default"................................................................. 6.01
"Registrar"....................................................................... 2.04
"Service Agent"................................................................... 2.04
</TABLE>
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<PAGE>
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 Securities;
"indenture security Holder" means a Holder of a Security;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Securities means the Company and any successor obligor
upon the Securities.
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.
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 SECURITIES
Section 2.01. Issuable in Series.
The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited. The Securities may be issued in
one or more Series. All Securities of a Series shall be identical except as may
be set forth in a Board Resolution, a supplemental indenture or an Officers'
Certificate detailing the adoption of the terms thereof pursuant to the
authority granted under a Board Resolution. In the case of Securities of a
Series to be issued from time to time, the Board Resolution, Officers'
Certificate or supplemental indenture may provide for the method by which
specified terms (such as interest rate, maturity date, record date or date from
which interest shall
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<PAGE>
accrue) are to be determined. Securities may differ between Series in respect of
any matters, provided that all Series of Securities shall be equally and ratably
entitled to the benefits of the Indenture.
Section 2.02. Establishment of Terms of Series of Securities.
At or prior to the issuance of any Securities within a Series, the
following shall be established (as to the Series generally, in the case of
Subsection 2.02(1) and either as to such Securities within the Series or as to
the Series generally in the case of Subsections 2.02(2) through 2.02(21)) by a
Board Resolution, a supplemental indenture or an Officers' Certificate pursuant
to authority granted under a Board Resolution:
(1) the title of the Series (which shall distinguish the Securities of that
particular Series from the Securities of any other Series);
(2) the price or prices (expressed as a percentage of the principal amount
thereof) at which the Securities of the Series will be issued;
(3) any limit upon the aggregate principal amount of the Securities of the
Series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
Series);
(4) the date or dates on which the principal of the Securities of the Series is
payable;
(5) the rate or rates (which may be fixed or variable) per annum or, if
applicable, the method used to determine such rate or rates (including, but
not limited to, any commodity, commodity index, stock exchange index or
financial index) at which the Securities of the Series shall bear interest,
if any, the date or dates from which such interest, if any, shall accrue,
the date or dates on which such interest, if any, shall commence and be
payable and any regular record date for the interest payable on any
interest payment date;
(6) the place or places where the principal of and interest, if any, on the
Securities of the Series shall be payable, or the method of such payment,
if by wire transfer, mail or other means;
(7) if applicable, the period or periods within which, the price or prices at
which and the terms and conditions upon which the Securities of the Series
may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase the Securities
of the Series pursuant to any sinking fund or analogous provisions or at
the option of a Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which Securities
of the Series shall be redeemed or purchased, in whole or in part, pursuant
to such obligation;
(9) the dates, if any, on which and the price or prices at which the Securities
of the Series will be repurchased by the Company at the option of the
Holders thereof and other detailed terms and provisions of such repurchase
obligations;
(10) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which the Securities of the Series shall be issuable;
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(11) the forms of the Securities of the Series in bearer or fully registered
form (and, if in fully registered form, whether the Securities will be
issuable as Global Securities);
(12) if other than the principal amount thereof, the portion of the principal
amount of the Securities of the Series that shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section
6.02;
(13) the currency of denomination of the Securities of the Series, which may be
Dollars or any Foreign Currency, including, but not limited to, the ECU,
and if such currency of denomination is a composite currency other than the
ECU, the agency or organization, if any, responsible for overseeing such
composite currency;
(14) the designation of the currency, currencies or currency units in which
payment of the principal of and interest, if any, on the Securities of the
Series will be made;
(15) if payments of principal of or interest, if any, on the Securities of the
Series are to be made in one or more currencies or currency units other
than that or those in which such Securities are denominated, the manner in
which the exchange rate with respect to such payments will be determined;
(16) the manner in which the amounts of payment of principal of or interest, if
any, on the Securities of the Series will be determined, if such amounts
may be determined by reference to an index based on a currency or
currencies or by reference to a commodity, commodity index, stock exchange
index or financial index;
(17) the provisions, if any, relating to any security provided for the
Securities of the Series;
(18) any addition to or change in the Events of Default which applies to any
Securities of the Series and any change in the right of the Trustee or the
requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 6.2;
(19) any addition to or change in the covenants set forth in Articles 4 or 5
which applies to Securities of the Series;
(20) any other terms of the Securities of the Series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.01, but which may modify or delete any provision of this
Indenture insofar as it applies to such Series); and
(21) any depositories, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to Securities of such
Series if other than those appointed herein.
All Securities of any one Series need not be issued at the same time and
may be issued from time to time, consistent with the terms of this Indenture, if
so provided by or pursuant to the Board Resolution, supplemental indenture or
Officers' Certificate referred to above, and the authorized principal amount of
any Series may not be increased to provide for issuances of additional
Securities of such Series, unless otherwise provided in such Board Resolution,
supplemental indenture or Officers' Certificate.
Section 2.03. Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature.
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If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual signature
of the Trustee or an authenticating agent. The signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
The Trustee shall at any time, and from time to time, authenticate
Securities for original issue in the principal amount provided in the Board
Resolution, supplemental indenture hereto or Officers' Certificate, upon receipt
by the Trustee of a Company Order. Such Company Order may authorize
authentication and delivery pursuant to oral or electronic instructions from the
Company or its duly authorized agent or agents, which oral instructions shall be
promptly confirmed in writing. Each Security shall be dated the date of its
authentication unless otherwise provided by a Board Resolution, a supplemental
indenture hereto or an Officers' Certificate.
The aggregate principal amount of Securities of any Series outstanding at
any time may not exceed any limit upon the maximum principal amount for such
Series set forth in the Board Resolution, supplemental indenture hereto or
Officers' Certificate delivered pursuant to Section 2.02, except as provided in
Section 2.08.
Prior to the issuance of Securities of any Series, the Trustee shall have
received and (subject to Section 7.02) shall be fully protected in relying on:
(a) the Board Resolution, supplemental indenture hereto or Officers' Certificate
establishing the form of the Securities of that Series or of Securities within
that Series and the terms of the Securities of that Series or of Securities
within that Series, (b) an Officers' Certificate complying with Section 10.04,
and (c) an Opinion of Counsel complying with Section 10.04.
The Trustee shall have the right to decline to authenticate and deliver any
Securities of such Series: (a) if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken; or (b) if the Trustee in
good faith by its board of directors or trustees, executive committee or a trust
committee of directors and/or vice-presidents shall determine that such action
would expose the Trustee to personal liability to Holders of any then
outstanding Series of Securities.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. An authenticating agent may authenticate Securities
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 the Company or
an Affiliate.
Section 2.04. Registrar and Paying Agent.
The Company shall maintain, with respect to each Series of Securities, at
the place or places specified with respect to such Series pursuant to Section
2.02, an office or agency where Securities of such Series may be presented or
surrendered for payment ("Paying Agent"), where Securities of such Series may be
surrendered for registration of transfer or exchange ("Registrar") and where
notices and demands to or upon the Company in respect of the Securities of such
Series and this Indenture may be served ("Service Agent"). The Registrar shall
keep a register with respect to each Series of Securities and to their transfer
and exchange. The Company will give prompt written notice to the Trustee of the
name and address, and any change in the name or address, of each Registrar,
Paying Agent or Service Agent. If at any time the Company shall fail to
maintain any such required Registrar, Paying Agent or Service Agent or shall
fail to furnish the Trustee with the name and address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and
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the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more co-registrars,
additional paying agents or additional service agents 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 obligations to
maintain a Registrar, Paying Agent and Service Agent in each place so specified
pursuant to Section 2.02 for Securities of any Series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the name or address of any such co-registrar,
additional paying agent or additional service agent. The term "Registrar"
includes any co-registrar; the term "Paying Agent" includes any additional
paying agent; and the term "Service Agent" includes any additional service
agent.
The Company hereby appoints the Trustee the initial Registrar, Paying Agent
and Service Agent for each Series unless another Registrar, Paying Agent or
Service Agent, as the case may be, is appointed prior to the time Securities of
that Series are first issued.
Section 2.05. 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
Securityholders of any Series of Securities, or the Trustee, all money held by
the Paying Agent for the payment of principal of or interest on the Series of
Securities, 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 Securityholders of any Series of Securities all
money held by it as Paying Agent.
Section 2.06. Securityholder 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
Securityholders of each Series of Securities 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 ten 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
Securityholders of each Series of Securities.
Section 2.07. Transfer and Exchange.
Where Securities of a Series are presented to the Registrar or a co-
registrar with a request to register a transfer or to exchange them for an equal
principal amount of Securities of the same Series, the Registrar shall register
the transfer or make the exchange if its requirements for such transactions are
met. To permit registrations of transfers and exchanges, the Trustee shall
authenticate Securities at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange (except as otherwise expressly
permitted herein), 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 tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.11, 3.06 or 9.05).
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Neither the Company nor the Registrar shall be required (a) to issue,
register the transfer of, or exchange Securities of any Series for the period
beginning at the opening of business fifteen days immediately preceding the
mailing of a notice of redemption of Securities of that Series selected for
redemption and ending at the close of business on the day of such mailing, or
(b) to register the transfer of or exchange Securities of any Series selected,
called or being called for redemption as a whole or the portion being redeemed
of any such Securities selected, called or being called for redemption in part.
Section 2.08. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same Series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and make available for delivery, in lieu of any such destroyed,
lost or stolen Security, a new Security of the same Series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any Series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that Series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 2.09. Outstanding Securities.
The Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest on a Global Security effected by
the Trustee in accordance with the provisions hereof and those described in this
Section as not outstanding.
If a Security is replaced pursuant to Section 2.08, it ceases to be
outstanding until the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds on the Maturity of Securities of a Series money sufficient
to pay such Securities payable on that date,
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then on and after that date such Securities of the Series cease to be
outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
In determining whether the Holders of the requisite principal amount of
outstanding Securities have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, the principal amount of a Discount Security
that shall be deemed to be outstanding for such purposes shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon a declaration of acceleration of the Maturity thereof
pursuant to Section 6.02.
Section 2.10. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities of a Series have concurred in any request, demand, authorization,
direction, notice, consent or waiver Securities of a Series owned by the Company
or an Affiliate shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
request, demand, authorization, direction, notice, consent or waiver only
Securities of a Series that the Trustee knows are so owned shall be so
disregarded.
Section 2.11. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities upon a Company Order.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee upon request shall authenticate definitive Securities of the same Series
and date of maturity in exchange for temporary Securities. Until so exchanged,
temporary securities shall have the same rights under this Indenture as the
definitive Securities.
Section 2.12. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for transfer,
exchange, payment, replacement or cancellation and shall destroy such canceled
Securities (subject to the record retention requirement of the Exchange Act) and
deliver a certificate of such destruction to the Company, unless the Company
otherwise directs. The Company may not issue new Securities to replace
Securities that it has paid or delivered to the Trustee for cancellation.
Section 2.13. Defaulted Interest.
If the Company defaults in a payment of interest on a Series of Securities,
it shall pay the defaulted interest, plus, to the extent permitted by law, any
interest payable on the defaulted interest, to the persons who are
Securityholders of the Series on a subsequent special record date. The Company
shall fix the record date and payment date. At least 30 days before the record
date, the Company shall mail to the Trustee and to each Securityholder of the
Series a notice that states the record date, the payment date and the amount of
interest to be paid. The Company may pay defaulted interest in any other lawful
manner.
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Section 2.14. Global Securities.
(1) Terms of Securities. A Board Resolution, a supplemental indenture hereto
-------------------
or an Officers' Certificate shall establish whether the Securities of a
Series shall be issued in whole or in part in the form of one or more
Global Securities and the Depository for such Global Security or
Securities.
(2) Transfer and Exchange. Notwithstanding any provisions to the contrary
---------------------
contained in Section 2.07 of the Indenture and in addition thereto, any
Global Security shall be exchangeable pursuant to Section 2.07 of the
Indenture for Securities registered in the names of Holders other than the
Depository for such Security or its nominee only if (i) such Depository
notifies the Company that it is unwilling or unable to continue as
Depository for such Global Security or if at any time such Depository
ceases to be a clearing agency registered under the Exchange Act, and, in
either case, the Company fails to appoint a successor Depository within 90
days of such event, (ii) the Company executes and delivers to the Trustee
an Officers' Certificate to the effect that such Global Security shall be
so exchangeable or (iii) an Event of Default with respect to the Securities
represented by such Global Security shall have happened and be continuing.
Any Global Security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for Securities registered in such names as the
Depository shall direct in writing in an aggregate principal amount equal
to the principal amount of the Global Security with like tenor and terms.
Except as provided in this Section 2.14(2) a Global Security may not be
transferred except as a whole by the Depository with respect to such Global
Security to a nominee of such Depository, by a nominee of such Depository to
such Depository or another nominee of such Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such a successor
Depository.
(3) Legend. Any Global Security issued hereunder shall bear a legend in
------
substantially the following form:
"THIS GLOBAL SECURITY IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL SECURITY
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.07 OF THE
INDENTURE, (III) THIS GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS GLOBAL
SECURITY MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF CROWN CASTLE INTERNATIONAL CORP."
(4) Acts of Holders. The Depository, as a Holder, may appoint agents and
---------------
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a
Holder is entitled to give or take under the Indenture.
(5) Payments. Notwithstanding the other provisions of this Indenture, unless
--------
otherwise specified as contemplated by Section 2.02, payment of the
principal of and interest, if any, on any Global Security shall be made to
the Holder thereof.
(6) Consents, Declaration and Directions. Except as provided in Section
------------------------------------
2.14(5), the Company, the Trustee and any Agent shall treat a person as the
Holder of such principal amount of
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outstanding Securities of such Series represented by a Global Security as
shall be specified in a written statement of the Depositary with respect to
such Global Security, for purposes of obtaining any consents, declarations,
waivers or directions required to be given by the Holders pursuant to this
Indenture.
Section 2.15. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
--------
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other elements of
identification printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
The Company may, with respect to any Series of Securities, reserve the
right to redeem and pay the Series of Securities or may covenant to redeem and
pay the Series of Securities or any part thereof prior to the Stated Maturity
thereof at such time and on such terms as provided for in such Securities. If a
Series of Securities is redeemable and the Company wants or is obligated to
redeem prior to the Stated Maturity thereof all or part of the Series of
Securities pursuant to the terms of such Securities, it shall notify the Trustee
of the redemption date and the principal amount of Series of Securities to be
redeemed. The Company shall give the notice at least 30 but no more that 60 days
before the redemption date (or such shorter notice as may be acceptable to the
Trustee).
Section 3.02. Selection of Securities to Be Redeemed.
Unless otherwise indicated for a particular Series by a Board Resolution, a
supplemental indenture or an Officer's Certificate, if less than all of the
Securities are to be redeemed or purchased in an offer to purchase at any time,
the Trustee shall select the Securities to be redeemed as follows:
(1) if the Securities are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed; or
(2) if the Securities 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 Securities 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 Securities called for redemption also apply to portions
of Securities 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 Securities to be redeemed at its registered address.
Notices of redemption may not be conditional.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
of that Security to be redeemed. A new Security in principal amount equal to
the unredeemed portion of the original Security presented for redemption will be
issued in the name of the Holder thereof upon cancellation of the original
Security. Securities
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called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue or accrete on Securities or
portions of them called for redemption.
Section 3.03. Notice of Redemption.
Unless otherwise indicated for a particular Series by a Board Resolution, a
supplemental indenture or an Officers' Certificate, 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
Securities are to be redeemed at its registered address.
The notice shall identify the Securities to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the portion of the principal
amount of such Security to be redeemed and that, after the redemption date
upon surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion shall be issued upon cancellation of
the original Security;
(4) the name and address of the Paying Agent;
(5) that Securities 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 Securities called for redemption ceases to accrue on and after
the redemption date;
(7) the paragraph of the Securities and/or provision of an indenture pursuant
to which the Securities 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 Securities.
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,
Securities 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 Securities to be redeemed on that date.
The Trustee or the Paying Agent shall promptly return to the
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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 Securities 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 Securities
or the portions of Securities called for redemption. If a Security 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 Security was registered at the close of business on such
record date. If any Security 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 Securities.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security 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 Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Securities.
The Company covenants and agrees for the benefit of the Holders of each
Series of Securities that it will duly and punctually pay the principal of and
interest, if any, on the Securities of that Series in accordance with the terms
of such Securities and this Indenture.
Section 4.02. Reports.
Unless otherwise indicated in a Board Resolution, an Officer's Certificate
or a supplemental indenture, whether or not required by the SEC, so long as any
Securities are outstanding, the Company shall furnish to the Holders of
Securities:
(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
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(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 4.03. 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, as modified or supplemented
by an Officer's Certificate, a Board Resolution or a supplemental
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, as modified or supplemented by an Officer's Certificate, a Board
Resolution or a supplemental indenture, and is not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture, as modified or supplemented by an Officer's Certificate, a
Board Resolution or a supplemental 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 Securities 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(1) 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 Securities 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 4.04. 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 Securities.
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Section 4.05. 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, as modified or supplemented by an Officer's
Certificate, a Board Resolution or a supplemental 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 4.06. 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 Securities.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
Unless otherwise indicated for a particular Series by a Board Resolution, a
supplemental indenture or an Officer's Certificate, 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 (as defined in the Board
Resolution, a supplemental indenture, or an Officer's Certificate for a
particular Series) of the Company
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under the Securities 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 (as defined in the Board Resolution, a
supplemental indenture, or an Officer's Certificate for a particular
Series) 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 (as defined in the Board Resolution, a supplemental indenture, or an
Officer's Certificate for a particular Series) 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.
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, as modified or supplemented by an
Officer's Certificate, a Board Resolution or a supplemental 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 Securities 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.
Unless otherwise indicated for a particular Series by a Board Resolution, a
supplemental indenture, or an Officer's Certificate, each of the following
constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest on the Securities;
(2) default in payment when due of the principal of or premium, if any, on the
Securities;
(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, as modified or supplemented by an
Officer's Certificate, a Board Resolution or a supplemental indenture;
(4) failure by the Company or any of its Subsidiaries for 30 days after notice
by the Trustee or the Holders of at least 25% in the aggregate principal
amount of the Securities then outstanding, voting as a single class, to
comply with any of its other agreements in the Indenture or the Securities;
(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
(as defined in the Board Resolution, a supplemental indenture, or an
Officer's Certificate for a particular Series) for money borrowed by the
Company or any of its Significant Subsidiaries (as defined in the Board
Resolution, a supplemental indenture, or an Officer's Certificate for a
particular Series) (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 this Indenture, 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 (as defined in an
Officer's Certificate, a Board Resolution, or a supplemental indenture) 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,
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(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 Securities
may declare all the Securities to be due and payable immediately. Upon any such
declaration, the principal of, and accrued and unpaid interest if any, on such
Securities 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 Securities shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate principal amount of
the then outstanding Securities 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 Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Security 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 Securities by notice to the Trustee may on behalf of the
Holders of all of the Securities 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
Securities (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Securities may rescind an acceleration and its consequences,
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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
Securities 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 Securities or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Security may pursue a remedy with respect to this Indenture
or the Securities only if:
(1) the Holder of a Security 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
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder of a Security or Holders of Securities 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 of
the then outstanding Securities do not give the Trustee a direction
inconsistent with the request.
A Holder of a Security may not use this Indenture to prejudice the rights
of another Holder of a Security or to obtain a preference or priority over
another Holder of a Security.
Section 6.07. Rights of Holders of Securities to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium, if any, and
interest on the Security, on or after the respective due dates expressed in the
Security (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 Securities
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 Securities allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Securities), 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 Securities
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 Securities for amounts due and unpaid on the
Securities for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable
on the Securities 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 Securities 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
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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 Security pursuant to Section 6.07 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Securities.
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, as modified or supplemented by an
Officer's Certificate, a Board Resolution or a supplemental 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.
(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.
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(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 Securities 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, as modified or supplemented by an
Officer's Certificate, a Board Resolution or a supplemental indenture, or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, as modified or supplemented by
an Officer's Certificate, a Board Resolution or a supplemental 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
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recital herein or any statement in the Securities or any other document in
connection with the sale of the Securities 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 Securities 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 Security, 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 Securities.
Section 7.06. Reports by Trustee to Holders of the Securities.
Within 60 days after each May 15, beginning with the May 15 for so long as
Securities remain outstanding, the Trustee shall mail to the Holders of the
Securities 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
Securities shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Securities are listed in accordance with TIA (S) 313(d).
The Company shall promptly notify the Trustee when the Securities 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.
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To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. 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 Securities 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 Securities 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
Securities 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
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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 Securities 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 Securities 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 Securities, 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 Securities 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:
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(1) the rights of Holders of outstanding Securities 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 Securities when such payments are due;
(2) the Company's obligations with respect to such Securities 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 an Officer's Certificate, a Board
Resolution or a supplemental indenture and clause (4) of Section 5.01 hereof
with respect to the outstanding Securities on and after the date the conditions
set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"),
and the Securities 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 Securities shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Securities, 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 Securities 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(6) 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 Securities:
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 Securities on the stated date for payment thereof or on
the applicable redemption date, as the case may be;
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(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 Securities 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 Securities 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.
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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
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities 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 Securities 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
Securities.
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 Security 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 Security 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
Securities 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 Security
following the reinstatement of its obligations,
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the Company shall be subrogated to the rights of the Holders of such Securities
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 Securities.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Securities without the consent of
any Holder of Securities:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Securities in addition to or in place of
certificated Securities;
(3) to provide for the assumption of the Company's obligations to the Holders
of the Securities 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 Securities or that does not adversely affect the legal
rights hereunder of any Holder of Securities;
(5) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA; or
(6) as provided in Section 2.02 hereof.
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 Securities.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture and the Securities with the consent of
the Holders of at least a majority in principal amount of the Securities then
outstanding, voting as a single class (including, without limitation, consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Securities), 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 Securities,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture or the Securities may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Securities, voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Securities). Section 2.09 hereof shall determine which Securities are
considered to be "outstanding" for purposes of this Section 9.02.
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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 Securities 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 Securities
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 Securities 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 Securities then outstanding,
voting as a single class, may waive compliance in a particular instance by the
Company with any provision of this Indenture or the Securities. However,
without the consent of each Holder affected, an amendment or waiver under this
Section 9.02 may not (with respect to any Securities held by a non-consenting
Holder):
(1) reduce the principal amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Security or
alter or waive any of the provisions with respect to the redemption of the
Securities;
(3) reduce the rate of or change the time for payment of interest, including
default interest, on any Security;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Securities (except a rescission of
acceleration of the Securities by the Holders of at least a majority in
aggregate principal amount of the then outstanding Securities and a waiver
of the payment default that resulted from such acceleration);
(5) make any Security payable in money other than that stated in the
Securities;
(6) make any change in the provisions of this Indenture relating to waivers of
past Defaults or the rights of Holders of Securities to receive payments of
principal of, or premium, if any, or interest on the Securities;
(7) waive a redemption payment with respect to any Security;
(8) except as provided under Article Eight hereof or in accordance with the
terms of any Security Guarantee, release any Guarantor from any of its
obligations under its Security Guarantee or make any change in a Security
Guarantee that would adversely affect the Holders of the Securities; or
32
<PAGE>
(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 Securities 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 Security is a continuing consent by the Holder of a Security
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder of a Security
or subsequent Holder of a Security may revoke the consent as to its Security 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 Securities.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company in
exchange for all Securities may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Securities that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Security 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 10.04 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
MISCELLANEOUS
Section 10.01. 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.
33
<PAGE>
Section 10.02. 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) 474-3700
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.
34
<PAGE>
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 10.03. Communication by Holders of Securities with Other Holders of
Securities.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 10.04. 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 10.05
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 10.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 10.05. 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 10.06. 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 the TIA.
35
<PAGE>
Section 10.07. 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 Securities, 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 Security waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Securities.
Section 10.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE SECURITIES 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 10.09. 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 10.10. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 10.11. Severability.
In case any provision in this Indenture or in the Securities 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 10.12. 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 10.13. 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]
36
<PAGE>
SIGNATURES
Dated as of
--------------
Crown Castle International Corp.
By:
------------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
[United States Trust Company of New York]
By:
--------------------------------------
Name:
Title:
Attest:
- ----------------------------
Authorized Signatory
Date:
37
<PAGE>
EXHIBIT 5.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
(212) 474-1926
July 28, 1999
Crown Castle International Corp.
--------------------------------
Registration Statement on Form S-3
----------------------------------
Dear Ladies and Gentlemen:
We have acted as special counsel for Crown Castle International Corp.,
a Delaware corporation (the "Company"), in connection with the filing by the
Company with the Securities and Exchange Commission (the "Commission") of a
Registration Statement on Form S-3 (the "Registration Statement") relating to
(i) debt securities of the Company, which may be senior (the "Senior
Securities") or subordinated (the "Subordinated Securities" and, collectively
with the Senior Securities, the "Debt Securities"); (ii) warrants to purchase
Debt Securities (the "Debt Warrants"); (iii) shares of preferred stock, $.01 par
value per share, of the Company (the "Preferred Stock"); (iv) warrants to
purchase shares of Preferred Stock (the "Preferred Stock Warrants"); (v) Common
Stock, $.01 par value per share, of the Company (the "Common Stock"); and (vi)
warrants to purchase shares of Common Stock (the "Common Stock Warrants"). The
Debt Warrants, Preferred Stock Warrants and the Common Stock Warrants are
referred to herein as the "Warrants", and the Debt Securities, Preferred Stock,
Common Stock and the Warrants are referred to herein collectively as the
"Offered Securities". The Offered Securities being registered under the
Registration Statement will be offered on a continued or delayed basis pursuant
<PAGE>
to the provisions of Rule 415 under the Securities Act of 1933, (the "Securities
Act").
Unless otherwise provided in any prospectus supplement forming a part
of the Registration Statement relating to a particular series of Debt
Securities, the Debt Securities will be issued under an Indenture in the form of
Exhibit 4.15 to the Registration Statement (the "Indenture") to be executed by
the Company and United States Trust Company of New York, as Trustee (the
"Trustee"). The Preferred Stock will be issued pursuant to a Certificate of
Designations (the "Certificate of Designations") relating to a particular series
of Preferred Stock. The Warrants will be issued under one or more warrant
agreements (each, a "Warrant Agreement"), each to be entered into between the
Company and one or more institutions as identified in the applicable Warrant
Agreement.
In connection with the foregoing, 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 without limitation the following: (a) the
Certificate of Incorporation, as amended of the Company; (b) the Amended and
Restated By-laws of the Company; (c) the form of Indenture attached as Exhibit
4.15; (d) the form of the Underwriting Agreement attached as Exhibit 1.1 to the
Registration Statement; and (e) the minutes of the Board of Directors of the
Company.
Based upon and subject to the foregoing and assuming that (i) the
Registration Statement and any amendments thereto (including post-effective
amendments) will have become effective and comply with all applicable laws; (ii)
the Registration Statement will be effective and will comply with all applicable
laws at the time the Offered Securities are offered or issued as contemplated by
the Registration Statement; (iii) a prospectus supplement will have been
prepared and filed with the Commission describing the Offered Securities offered
thereby and will comply with all applicable laws; (iv) all Offered Securities
will be issued and sold in compliance with applicable federal and state
securities laws and in the manner stated in the Registration Statement and the
appropriate prospectus supplement; (v) a definitive purchase, underwriting or
similar agreement and any other necessary agreement with respect to any Offered
Securities offered or issued will have been duly authorized and validly executed
and delivered by the Company and the other parties thereto; and (vi) any Offered
Securities issuable upon conversion, exchange or exercise of any Offered
Security being offered or issued will be duly authorized, created and, if
<PAGE>
3
appropriate, reserved for issuance upon such conversion, exchange or exercise,
we are of the opinion as follows:
(1) The Company is duly incorporated and is a validly existing
corporation under the laws of the State of Delaware.
(2) With respect to Debt Securities to be issued under the Indenture,
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 Debt Securities, the terms of the offering thereof and related
matters, and (F) such Debt Securities 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 Debt Securities 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).
(3) With respect to shares of Preferred Stock, when both (A) the
Board has taken all necessary corporate action to approve the issuance and
terms of the shares of Preferred Stock, the terms of the offering thereof
and related matters, including the adoption of a Certificate of Designation
relating to such Preferred Stock and the filing of the Certificate of
Designation with the Secretary of State of the State of Delaware, and (B)
certificates representing the shares of Preferred Stock have been duly
executed, countersigned, registered and delivered either (i) in
<PAGE>
4
accordance with the applicable definitive purchase, underwriting or similar
agreement approved by the Board upon payment of the consideration therefor
(not less than the par value of the Preferred Stock) provided for therein
or (ii) upon conversion or exercise of any other Offered Security, in
accordance with the terms of such Offered Security or the instrument
governing such Offered Security providing for such conversion or exercise
as approved by the Board, for the consideration approved by the Board (not
less than the par value of the Preferred Stock), then the shares of
Preferred Stock will be validly issued, fully paid and nonassessable.
(4) With respect to shares of Common Stock, when both (A) the Board
has taken all necessary corporate action to approve the issuance of and the
terms of the offering of the shares of Common Stock and related matters and
(B) certificates representing the shares of Common Stock have been duly
executed, countersigned, registered and delivered either (i) in accordance
with the applicable definitive purchase, underwriting or similar agreement
approved by the Board upon payment of the consideration therefor (not less
than the par value of the Common Stock) provided for therein or (ii) upon
conversion or exercise of any other Offered Security, in accordance with
the terms of such Offered Security or the instrument governing such Offered
Security providing for such conversion or exercise as approved by the
Board, for the consideration approved by the Board (not less than the par
value of the Common Stock), then the shares of Common Stock will be validly
issued, fully paid and nonassessable.
(5) With respect to the Warrants, when (A) the Board has taken all
necessary corporate action to approve the creation of and the issuance and
terms of the Warrants, the terms of the offering thereof and related
matters, (B) the Warrant Agreement or Agreements relating to the Warrants
have been duly authorized and validly executed and delivered by the Company
and the warrant agent appointed by the Company and (C) the Warrants or
certificates representing the Warrants have been duly executed,
countersigned, registered and delivered in accordance with the appropriate
Warrant Agreement or Agreements and the applicable definitive purchase,
underwriting or similar agreement approved by the Board upon payment of the
<PAGE>
consideration therefor provided for therein, the Warrants will be validly
issued.
We are aware that we are referred to under the heading "Validity of
Securities" in the prospectus forming a part of the Registration Statement, and
we hereby consent to such use of our name therein and to the use of this opinion
for filing with the Registration Statement as Exhibit 5.1 thereto. In giving
this consent, we do not hereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the Rules and
Regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Cravath, Swaine & Moore
Cravath, Swaine & Moore
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, Texas 77057
