<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998
REGISTRATION NO. 333-46001
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERICAN TOWER SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4899 65-0598206
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
116 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02116, (617) 375-7500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEVEN B. DODGE
AMERICAN TOWER SYSTEMS CORPORATION
116 HUNTINGTON AVENUE
BOSTON, MASSACHUSETTS 02116
(617) 375-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPY TO:
NORMAN A. BIKALES, ESQ. KEITH R. FULLENWEIDER, ESQ.
SULLIVAN & WORCESTER LLP BRUCE C. HERZOG, ESQ.
ONE POST OFFICE SQUARE VINSON & ELKINS L.L.P.
BOSTON, MASSACHUSETTS 02109 1001 FANNIN, SUITE 2300
(617) 338-2800 HOUSTON, TX 70002
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is a compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 464(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT WILL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
AMERICAN TOWER CORPORATION
3411 RICHMOND, SUITE 400
HOUSTON, TEXAS 77046-3401
February , 1998
Dear ATC Stockholder:
On behalf of the Board of Directors of American Tower Corporation ("ATC"), I
am pleased to inform you that ATC and American Tower Systems Corporation
("ATS") have entered into an Agreement and Plan of Merger dated as of December
12, 1997 (the "ATC Merger Agreement"). Pursuant to the ATC Merger Agreement,
ATC will be merged (the "ATC Merger") with and into ATS, with ATS as the
surviving company. In connection with the consummation of the ATC Merger, ATS'
name will be changed to "American Tower Corporation" and Randall Mays of Clear
Channel Communications, Inc. and I will be nominated to the ATS board of
directors. Upon consummation of the ATC Merger, each outstanding share of
ATC's Series A Redeemable Preferred Stock will be converted into the right to
receive $200 in cash and each outstanding share of common stock of ATC will be
converted into a number of shares of ATS' Class A Common Stock pursuant to a
fixed exchange ratio. The fixed exchange ratio provides that the ATC common
stockholders and ATC optionholders will receive, as a group, 35% of all of the
outstanding shares of common stock of ATS after taking into account the common
stock issued in connection with the ATC Merger to the ATC stockholders, the
conversion of all outstanding convertible preferred stock of ARS and the
exercise of all options of ATS outstanding as of the effective time of the ATC
Merger. We currently anticipate that an aggregate of approximately 31,100,000
shares of ATS Class A Common Stock will be issued to the ATC common
stockholders and ATC optionholders, as a group, with respect to their ATC
common stock holdings. Each common stockholder of ATC will be entitled to a
pro rata share of the aggregate number of shares issued by ATS upon
consummation of the ATC Merger. Such pro rata share shall be determined by
taking into account the number of shares of ATC common stock, and the number
of shares of ATC common stock issuable upon exercise of all ATC options,
outstanding immediately prior to the effective time of the ATC Merger.
The ATC Merger is subject to a number of conditions including the separation
of ATS, which is currently a majority-owned subsidiary of American Radio
Systems Corporation ("ARS"), from ARS (the "Tower Separation"), and the
approval of the ATS Class A Common Stock for listing on Nasdaq or a national
stock exchange. As more fully described in the Prospectus accompanying this
letter, ARS is party to an Amended and Restated Merger Agreement, dated
December 18, 1997 with CBS Corporation ("CBS") and a wholly-owned subsidiary
of CBS (as amended, the "Merger Agreement"), pursuant to which such subsidiary
will merge into ARS (the "CBS Merger") and sell its radio broadcasting
business to CBS. The Tower Separation will be effected pursuant to the
consummation of the CBS Merger or, in the event the CBS Merger has not been
consummated on or prior to May 31, 1998 (which date could be extended with the
consent of ATC, ATS and CBS), pursuant to the merger of a newly organized
wholly-owned subsidiary of ARS into ARS (the "Tower Merger"). The ATC Merger
is also subject to the expiration or early termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The consent of the holders of a majority of ATC's common stock is required
to approve and adopt the ATC Merger Agreement and the transactions
contemplated thereby. ATS has prepared the enclosed Prospectus which provides
important information about ATS and the ATC Merger. ATC has participated in
the preparation of the Prospectus to the extent of the information relating
specifically to ATC. I urge you to read the enclosed Prospectus carefully
before determining whether to give your consent to the ATC Merger Agreement
and the transactions contemplated thereby. ATC will notify you promptly in the
event ATC receives the consent of the holders of a majority of ATC's
outstanding shares of common stock.
After careful consideration, the ATC Board of Directors has unanimously
approved, and recommends that you CONSENT TO, the ATC Merger Agreement and the
transactions contemplated thereby. Accordingly, ATC hereby requests that you
sign, date and return the accompanying Written Consent of Stockholders to
American
<PAGE>
Tower Corporation at 3411 Richmond Avenue, Suite 400, Houston, Texas 77046-
3401, or by telecopy at (713) 629-1189.
On or about the time the ATC Merger is expected to be consummated, a letter
of transmittal and instructions for its use will be sent to all holders of ATC
common stock and Series A Redeemable Preferred Stock to enable you to
surrender your stock in exchange for cash (in the case of the Series A
Redeemable Preferred Stock) or ATS common stock, as described above.
Accordingly, you are requested not to surrender your certificates for exchange
until you receive a letter of transmittal and instructions on how to surrender
your shares in connection with the consummation of the ATC Merger.
It has been a pleasure to serve you as an officer and director and I look
forward to continuing to serve your best interests in American Tower Systems.
Sincerely,
Fred R. Lummis,
Chairman of the Board and
Chief Executive Officer
2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THE SECURITIES OF AMERICAN TOWER SYSTEMS +
+CORPORATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS DOES NOT +
+CONSTITUTE AN OFFER TO SELL NOR SHALL THERE BE ANY SALE OF THESE SECURITIES +
+IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL +
+PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY +
+STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY AND SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
PROSPECTUS
LOGO
AMERICAN TOWER SYSTEMS CORPORATION
This Prospectus is being furnished by American Tower Systems Corporation, a
Delaware corporation ("American Tower Systems" or "ATS"), in connection with
the merger (the "ATC Merger") of American Tower Corporation, a Delaware
corporation ("ATC"), with and into ATS, pursuant to which the ATC common
stockholders (including holders of options to purchase ATC common stock (the
"ATS Common Stock")) will in the aggregate receive approximately 31.1 million
shares of ATS Class A Common Stock which will represent 35% of the aggregate
number of shares of ATS Common Stock which would be outstanding on a pro forms
basis.
The ATC Merger has been unanimously approved by the Board of Directors of ATS
and by American Radio Systems Corporation, a Delaware corporation ("American
Radio" or "ARS"), as the then sole stockholder of ATS. The ATC Merger Agreement
has also been unanimously approved by the Board of Directors of ATC which
believes that the approval and adoption of the ATC Merger Agreement is
advisable and in the best interests of ATC and its stockholders and unanimously
recommends that the ATC stockholders CONSENT TO the approval and adoption of
the ATC Merger Agreement and the transactions contemplated thereby.
Consummation of the ATC Merger requires the approval of the holders of a
majority of the outstanding shares of ATC Common Stock and is subject, among
other things, to the expiration or earlier termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
to the creation of a public trading market for the ATS Class A Common Stock.
Subject to the satisfaction of such conditions, the ATC Merger is expected to
be consummated in the spring of 1998. See "The ATC Merger".
American Radio is party to a merger agreement with CBS Corporation ("CBS")
and a wholly-owned subsidiary of CBS (the "Merger Agreement"), pursuant to
which ARS which will become a subsidiary of CBS (the "Merger"). The Merger
Agreement has been approved by the Boards of Directors of American Radio and
CBS and by the holders of the required majority of ARS Common Stock. Approval
of the CBS stockholders is not required. See "Background of the Merger--General
Background." As a result of the Merger (or the Tower Merger described below),
American Radio will distribute all of the ATS Common Stock owned by it to the
ARS stockholders or optionholders. Following consummation of the Merger or the
Tower Merger, as the case may be, ATS will operate as an independent publicly
owned corporation. Application will be made to list the ATS Class A Common
Stock on the Nasdaq National Market. To date, there has been no trading market
for the ATS Class A Common Stock.
In the event the Merger is not consummated prior to June 1, 1998 (or such
later date as may be approved by ATS, ATC and CBS), ARS may elect to effect a
merger with a newly organized wholly-owned subsidiary of ARS (the "Tower
Merger") in order to satisfy the condition to consummation of the ATC Merger
with respect to the ATS Class A Common Stock being publicly traded.
ATC common stockholders will be asked to CONSENT TO the ATC Merger and to an
amendment of the ATS Securityholders Agreement providing for its termination
upon consummation of the ATC Merger, pursuant to the form of Written Consent of
Stockholders in Lieu of Meeting of ATC enclosed herewith.
IN REVIEWING THIS PROSPECTUS, STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE SECTION ENTITLED "RISK FACTORS" ON PAGE 18.
-----------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is February , 1998 and is being mailed
to ATC Common Stockholders on or about February , 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE ATC
MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES
OFFERED BY THIS PROSPECTUS, OR THE SOLICITATION OF A PROXY OR CONSENT, IN ANY
JURISDICTION OR FROM ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DELIVERY OF ATS
COMMON STOCK, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN OR IN THE AFFAIRS
OF AMERICAN RADIO OR AMERICAN TOWER SYSTEMS SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
American Tower Systems has filed with the Securities and Exchange Commission
(the "Commission" or the "SEC") a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the ATS Class A Common Stock to be offered
pursuant to the ATC Merger. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to American Tower
Systems and the securities offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document to which reference is made are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement can be inspected without charge and copied at the prescribed rates
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
American Tower Systems is not subject to Section 14 of the Securities
Exchange Act of 1934 (the "Exchange Act"). By no later than the consummation
of the ATC Merger, American Tower Systems intends to comply with the reporting
requirements of such section including furnishing its stockholders with annual
reports containing consolidated financial statements audited by an independent
public accounting firm and quarterly reports for the first three quarters of
each fiscal year containing interim consolidated financial information.
ATS' principal executive offices are located at 116 Huntington Avenue,
Boston, Massachusetts, 02116 and their telephone number is (617) 375-7500.
i
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus sets forth or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act.
Discussions containing such forward-looking statements may be found in the
material set forth or referred to under "Summary--American Tower Systems",
"Business of American Tower Systems", "Industry Overview" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
American Tower Systems", as well as within the Prospectus generally. In
addition, when used in this Prospectus, the words "believes," "anticipates,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to a number of risks and
uncertainties. ATS wishes to caution readers that certain important factors
may have affected and could in the future affect ATS' actual results and could
cause ATS' actual results to differ materially from those expressed in any
forward-looking statement made by or on behalf of ATS. These important factors
include, among others, the risk factors set forth herein under "Risk Factors--
Risk Factors Relating to American Tower Systems".
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Available Information.................................................. (i)
Forward-Looking Statements............................................. (ii)
Summary................................................................ 1
American Tower Systems............................................... 1
American Tower Corporation........................................... 7
American Radio....................................................... 7
The Merger and Tower Separation...................................... 8
The ATC Merger....................................................... 12
Risk Factors......................................................... 13
American Tower Systems Dividend Policy............................... 13
Comparative Per Share Market Price Information....................... 14
Comparative Per Share Data........................................... 14
Other Comparative Information........................................
American Tower Systems Selected Financial Data....................... 15
American Radio Selected Combined Financial Data...................... 18
Risk Factors........................................................... 21
Risk Factors Relating to the Merger and the Tower Merger............. 21
Risk Factors Relating to American Tower Systems...................... 22
Market Prices and Dividend Policy...................................... 27
American Tower Systems Capitalization.................................. 28
Unaudited Pro Forma Condensed Consolidated Financial Statements of
American Tower Systems................................................ 30
Management's Discussion and Analysis of Financial Condition and Results
of Operations of American Tower Systems............................... 40
Industry Overview...................................................... 47
Business of American Tower Systems..................................... 50
General.............................................................. 50
Growth Strategy...................................................... 51
Products and Services................................................ 52
Management Organization.............................................. 55
History of ATS....................................................... 55
Recent Transactions.................................................. 55
Sales and Marketing.................................................. 57
Regulatory Matters................................................... 57
Environmental Matters................................................ 58
Competition.......................................................... 58
Properties........................................................... 58
Legal Proceedings.................................................... 59
Employees............................................................ 59
Management of American Tower Systems................................... 60
Executive Officers and Directors..................................... 60
Executive Compensation............................................... 62
Director Compensation................................................ 63
Stock Option Information............................................. 63
Principal Stockholders of American Tower Systems....................... 66
The ATC Merger......................................................... 70
General.............................................................. 70
Background of the ATC Merger; ATC Reasons for Merger................. 70
Background of the ATC Merger; ATS Reasons for Merger................. 70
The ATC Merger Agreement............................................. 73
Certain Federal Income Tax Consequences of ATC Merger................ 73
Stockholder Approval and Solicitation of Written Consents............ 76
Exchange Procedures.................................................. 76
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Appraisal Rights of ATC Stockholders................................... 76
Background of the Merger................................................. 77
General Background..................................................... 77
Recommendation of the ARS Board; ARS' Reasons for the Merger........... 80
Opinion of Financial Advisor to American Radio......................... 82
The Merger and Tower Separation.......................................... 86
General................................................................ 86
Conversion of Securities............................................... 87
Certain Federal Income Tax Consequences of Merger and Tower Merger..... 88
Reasons for the Tower Separation....................................... 90
Tower Merger........................................................... 91
Certificate of Incorporation and Bylaws................................ 92
Directors and Officers................................................. 93
ARS-ATS Separation Agreement........................................... 93
Closing Date Adjustments............................................... 95
Lease Arrangements..................................................... 97
Representations and Warranties......................................... 97
Certain Other Covenants................................................ 98
Conditions to the Merger............................................... 105
Termination............................................................ 107
Amendment.............................................................. 108
Waiver................................................................. 108
Interest of Certain Persons in the Merger.............................. 108
Regulatory Matters..................................................... 109
Other Consents......................................................... 112
ATS Stock Purchase Agreement........................................... 112
Expenses............................................................... 116
Description of American Tower Systems Capital Stock...................... 118
General................................................................ 118
Preferred Stock........................................................ 118
Common Stock........................................................... 118
Dividend Restrictions.................................................. 119
Delaware Business Combination Provisions............................... 120
Listing of Class A Common Stock........................................ 120
Transfer Agent and Registrar........................................... 120
Comparison of Rights of Stockholders of ATS and ATC...................... 121
Terms of Common Stock.................................................. 121
Other Stockholder Rights............................................... 122
Existing ATC Securityholders Agreement................................. 124
Shares Eligible for Future Sale.......................................... 125
General................................................................ 125
Validity of the Shares................................................... 126
Experts.................................................................. 126
Definition Cross Reference Sheet......................................... 128
Index to Financial Statements............................................ F-1
</TABLE>
<TABLE>
<C> <S>
Appendix I: Description of American Radio
The Amended and Restated Agreement and Plan of Merger relating
Appendix II: to the Merger
First Amendment to Amended and Restated Agreement and Plan of
Appendix IIB: Merger
Appendix III: Opinion of Credit Suisse First Boston Corporation
Appendix IV: Section 262 of Delaware General Corporation Law
Appendix V: Description of American Tower Corporation
Appendix VI: Agreement and Plan of Merger relating to the ATC Merger
</TABLE>
iv
<PAGE>
SUMMARY
All information with respect to American Tower Systems Corporation, a
Delaware corporation ("American Tower Systems" or "ATS"), and American Radio
Systems Corporation, a Delaware corporation ("American Radio" or "ARS"), except
as otherwise noted below, gives effect to the consummation of all acquisitions,
dispositions and exchanges of communications sites and related businesses and
radio stations which have been consummated since January 1, 1997 or which are
subject to a binding agreement (the "Recent Transactions"). See "Business of
American Tower Systems--Recent Transactions". The Unaudited Pro Forma Condensed
Consolidated Financial Statements of ATS (and certain other pro forma financial
information) give effect only to the ATS Pro Forma Transactions, which do not
include all of the Recent Transactions but do include consummation of the ATS
Stock Purchase Agreement and the transfer of towers from ARS to ATS in
connection with the Tower Separation. See the "Unaudited Pro Forma Condensed
Consolidated Financial Statements of American Tower Systems".
The term "Tower Separation" as used in this Prospectus refers to the
separation of the communications site business into a separate publicly traded
corporation. The Tower Separation will consist of a sale of the radio
broadcasting business to CBS and the distribution of the ATS Common Stock to
the holders of ARS Common Stock. The Tower Separation will be effected pursuant
to the Merger or, under certain circumstances which management does not
anticipate occurring, the Tower Merger (which, if consummated, will occur prior
to the consummation of the Merger). Whether or not the Tower Merger is
consummated, the holders of ARS Common Stock will receive the identical
aggregate amount of cash and number of shares of American Tower Systems.
The following is a summary of certain information contained in this
Prospectus. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth in this
Prospectus.
AMERICAN TOWER SYSTEMS
General
American Tower Systems is a leading independent owner and operator of
wireless communications towers in the U.S. with over 1,580 towers in 39 states
and the District of Columbia, including approximately 510 towers managed for
third party owners (of which approximately 255 are rooftop towers). Of such
1,580 towers, approximately 810 are presently operated by ATS (approximately
425 of which are owned by it and the balance of which are managed for others),
and approximately 775 are presently operated by American Tower Corporation (of
which approximately 125 are managed for a third party; ATC is a party to
agreements or letters of intent to acquire approximately 125 currently
operating towers). In addition to such 1,580 towers, ATS and ATC have more than
90 and 50 towers, respectively, currently under construction. ATS rents tower
space and provides related services for a diverse range of wireless
communications industries including: personal communications services,
cellular, paging, specialized mobile radio, enhanced specialized mobile radio
and fixed microwave, as well as radio and television broadcasters. ATS has
significant networks of sites throughout the United States with its most
significant tower networks in California, Florida and Texas, and owns and
operates communications sites or is constructing networks of tower sites in
cities such as Albuquerque, Atlanta, Austin, Baltimore, Boston, Dallas,
Jacksonville, Kansas City, Los Angeles, Miami-Ft. Lauderdale, Nashville, New
York, Philadelphia, Sacramento, San Antonio, San Diego, San Francisco, Tucson,
Washington, D.C. and West Palm Beach. On a pro forma basis ATS' customers
(which aggregate more than 2,390) include many of the major companies in the
wireless communications industries, including: AT&T, Arch, Bell Atlantic
Mobile, BellSouth Mobility, GTE Mobilnet, Houston Cellular, Prime Co.,
Metrocall, Nextel, PageMart, PageNet, Pittencrief Communications, SBC
Communications, Southwestern Bell, SNET and Sprint, and in the radio and
television broadcasting industry, including: ABC, American Radio, CBS,
Chancellor Media, Clear Channel, CNN, Fox, Jacor and NBC. While
1
<PAGE>
none of ATS' customers accounted for as much as 10% of its pro forma revenues
for the nine months ended September 30, 1997, most of the named customers
accounted for more than 1% of such revenues and each is considered by ATS to be
an important customer.
ATS' primary business is the leasing of antennae sites on multi-tenant towers
and rooftops, primarily for its own towers and, to a lesser extent, for
unaffiliated communications site owners. In support of its rental business, ATS
also offers its customers network development services, including: site
acquisition, zoning, antennae installation, site construction and network
design. These services are offered on a time and materials or fixed fee basis
or incorporated into build to suit construction contracts. American Tower
Systems is also engaged in the video, voice and data transmission business,
which it currently conducts in the New York City to Washington, D.C. corridor
and in Texas. For the nine months ended September 30, 1997, giving effect to
the ATS Pro Forma Transactions, ATS had revenues and EBITDA of $66.0 million
and $30.4 million, respectively.
Recent Developments
On December 12, 1997, ATS entered into an Agreement and Plan of Merger (the
"ATC Merger Agreement") with American Tower Corporation, an unaffiliated
Delaware corporation ("ATC"), pursuant to which, following the Tower
Separation, ATC will merge with and into ATS, which will be the surviving
corporation (the "ATC Merger"). ATC is a leading independent owner and operator
of wireless communications towers with approximately 775 towers in 31 states.
Pursuant to the ATC Merger, ATS will issue an aggregate of approximately 31.1
million shares of ATS Class A Common Stock (including shares issuable upon
exercise of options). Such number of shares will represent 35% of the number of
shares of ATS Common Stock that would be outstanding, assuming consummation of
the Merger, the ATC Merger, the exercise of all options to acquire ARS Common
Stock, ATC common stock (the "ATC Common Stock") and ATS Common Stock proposed
to be outstanding immediately prior to the ATC Merger, and the conversion of
all shares of ARS Convertible Preferred Stock. Consummation of the ATC Merger
is conditioned on, among other things, the expiration or earlier termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and consummation of the Tower Separation and,
accordingly, is not expected to take place until the spring of 1998. On January
28, 1998, the Justice Department issued a formal request for additional
information. ATS and ATC are in the process of compiling the information
requested by the Justice Department and intend to meet with its representatives
to address any questions they may have regarding such information. Upon
consummation of the ATC Merger, ATS will be renamed American Tower Corporation.
A description of the business and management of ATC, as well as certain
financial information, is included in Appendix V to, and ATC's consolidated
financial statements are included in, this Prospectus. See "The ATC Merger".
On January 22, 1998, ATS consummated an agreement to acquire a company
engaged primarily in the site acquisition business for third parties that also
owns or has under construction 40 towers (the "Gearon Transaction"). The merger
price of approximately $80.0 million was paid by delivery of 5,333,333 shares
of ATS Class A Common Stock, and approximately $30.0 million in cash and
assumed liabilities. See "Business of American Tower Systems--Recent
Transactions".
On January 22, 1998, American Tower Systems consummated a stock purchase
agreement (the "ATS Stock Purchase Agreement"), dated as of January 8, 1998,
with Steven B. Dodge, Chairman of the Board, President and Chief Executive
Officer of ARS and ATS, and certain other officers and directors of ARS (or
their affiliates or family members or family trusts), pursuant to which those
persons purchased 8.0 million shares of ATS Common Stock at a purchase price of
$10.00 per share for an aggregate purchase price of $80.0 million, including
4.0 million shares by Mr. Dodge for $40.0 million. See "The Merger and Tower
Separation--ATS Stock Purchase Agreement".
2
<PAGE>
Industry Overview
Communications site owners and operators have benefited in recent years from
a substantial increase in demand for wireless communications services. The
Cellular Telecommunications Industry Association ("CTIA") estimates that the
number of subscribers to wireless telephone services was approximately five
million in 1990. According to The Strategis Group, a telecommunications
marketing research firm, the number of subscribers to cellular and personal
communication services ("PCS") is over 50 million today, and is projected to
increase to over 100 million by the year 2001. This demand has prompted the
issuance of new wireless network licenses and construction of new wireless
networks. ATS believes that the increase in demand for wireless communications
is attributable to a number of factors, including: the increasing mobility of
the U.S. population and the growing awareness of the benefits of mobile
communications, technological advances in communications equipment and
decreasing costs of wireless services, favorable changes in telecommunications
regulations, and business and consumer preferences for higher quality voice and
data transmission. Consequently, more towers will be required to accommodate
the anticipated increase in the demand for higher frequency technologies (such
as PCS and enhanced specialized mobile radio ("ESMR")) which have a reduced
cell range and thus require a more dense network, or "footprint", of towers.
The Personal Communications Industry Association ("PCIA") estimates that over
100,000 additional antennae sites will have to be built to accommodate the
needs of cellular and PCS over the next ten years.
ATS believes that, as the wireless industry has become more competitive, many
carriers are seeking to focus their capital and operational resources primarily
on activities that contribute directly to subscriber growth, such as the
marketing and distribution of products. Management believes that these
carriers, therefore, may seek to preserve capital and to speed access to their
markets through the outsourcing of infrastructure requirements such as
communications site ownership, construction, operation and maintenance. Also,
in order to accelerate network deployment or expansion and to generate
efficiencies, ATS has observed in the course of its operations that many
carriers are increasingly co-locating transmission infrastructure with that of
other network operators. The need for co-location has also been driven by
regulatory restrictions and the growing trend in local municipalities to slow
the proliferation of towers in their communities by requiring that towers
accommodate multiple tenants.
ATS believes that national and other large wireless service providers will
prefer to deal with a company that can meet the majority of such providers'
needs within a particular market or region, rather than, as had been the
historical model, working with a large number of individual tower owners,
construction companies and other service providers. There can be no assurance
that ATS will be able to secure a substantial portion of such potential
business. See "Risk Factors".
While the wireless communications industry is experiencing rapid growth, the
television broadcasting industry, pursuant to a mandated construction timetable
imposed on television broadcast licensees by the Federal Communications
Commission ("FCC"), is actively planning its strategy for the transition from
analog to digital technology. The FCC construction timetable, although subject
to potential revision by the FCC, currently requires a number of television
stations to commence digital service as soon as May 1, 1999, and some stations
have promised to begin such service even earlier. ATS believes that this
transition will require a substantial investment in enhanced broadcast
infrastructure, including the construction or reengineering of broadcast
towers. While ATS expects much of the associated capital requirements will be
borne by the broadcasters, management believes that a significant opportunity
exists to invest profitably in the creation of tower capacity designed to
accommodate digital antennas for television broadcasters. Management believes
that, as with the deployment of towers for the wireless carriers, speed to
market and limited capital resources will cause certain broadcasters to
outsource the construction or reengineering of their towers in order to
accommodate digital technology.
Management believes that, in addition to the favorable growth and outsourcing
trends in the wireless communications and broadcasting industries, the
communications site industry benefits from several favorable characteristics
including: a diversified customer base, a stable and growing revenue stream
based primarily on
3
<PAGE>
long-term leases from substantial companies, low tenant "churn" due to the
costs and disruption associated with reconfiguring a wireless network or
broadcasting location, local government initiatives to reduce the numbers of
towers thereby requiring carriers to co-locate towers, and the opportunity to
consolidate in what is currently a highly fragmented industry, thereby creating
the potential for enhanced levels of customer service and operating efficiency.
Growth Strategy
ATS' objective is to maintain and extend its position as a leading U.S.
provider of communications sites and network development services to the
wireless communications and broadcasting industries. ATS' growth strategy
includes:
Internal Growth through Selling, Service and Capacity
Utilization. Management believes that a substantial opportunity for
profitable growth exists by maximizing the utilization of existing towers
through targeted sales and marketing techniques. Management believes that
the key to the success of this strategy lies in its ability to develop and
consistently deliver a high level of customer service, and to be widely
recognized as a company that makes realistic commitments and then delivers
on them. Since speed to market and reliable network performance are
critical components to the success of wireless service providers, ATS'
ability to assist its customers in meeting these criteria will ultimately
define its marketing success and capacity utilization. ATS targets wireless
providers that are expanding or improving their existing network
infrastructure as well as those deploying new technologies. ATS focuses on
building or acquiring towers engineered to hold as many tenants as possible
and acquiring towers with underutilized capacity because the costs of
operating a site are largely fixed, and increasing tower utilization
results in significantly improved site operating margins. When a specific
tower reaches full antennae attachment capacity, ATS is often able to
construct an additional tower at the same location, thereby further
leveraging its investment in land, related equipment and certain operating
costs, such as taxes, utilities and telephone service.
Growth by Construction (Build to Suit). ATS believes that attractive
investment returns can be achieved by constructing new tower networks
("footprints") in and around markets in which it already has a presence,
along major highways, and in targeted new markets, particularly markets
that have not been significantly built out by carriers or other
communications site companies. By working with one or more "anchor" tenants
(in much the same manner as a shopping mall developer), ATS will seek to
develop an overall master plan for a particular market by locating new
sites in areas identified by its customers as optimal for their network
expansion requirements (build to suit). ATS generally secures commitments
for leasing prior to commencing construction, thereby minimizing, to some
extent, the risks associated with the investment. In certain cases, ATS may
identify and secure all zoning and other regulatory permits for a site in
anticipation of customer demand, with actual construction being delayed
until an anchor tenant is secured on reasonable terms. Strategic
acquisitions are also pursued as a means of filling out or, in certain
cases, initiating a tower network.
American Tower Systems currently has under construction or plans to
construct during 1998 (exclusive of those which ATC is constructing or
plans to construct) approximately 300 towers (most of which are on a build
to suit basis) at an estimated aggregate cost of approximately $60.0
million. In addition, ATS is actively competing for the opportunity to
construct more than 200 towers in 1998 for an estimated cost of
approximately $42.0 million, although there can be no assurance as to how
many, if any, of such towers ATS will be engaged to construct. ATC has
under construction or plans to construct during 1998 approximately 125
towers at an estimated aggregate cost of approximately $28.0 million.
Because of the relatively attractive initial returns which can be
achieved from new tower construction, and because ATS can design and build
towers to specifications that assure ample future capacity and minimize the
need for future capital expenditures, management intends to place a strong
emphasis on new tower development for the foreseeable future. Management
also intends to pursue new tower construction
4
<PAGE>
to service the demand for digital television and for tower space for radio
antennae displaced by digital television requirements. Over time,
management believes that more than half of its towers will result from new
construction, with the substantial majority of these designed to serve the
wireless communications industry.
ATS believes that the ability to obtain, and commit to, large new
construction (build to suit) projects will require significant financial
resources. Based on its previous capital market transactions, management
believes that it has a good reputation in the financial community,
including among banks, investment banking firms, institutional investors
and public investors, and that such reputation will help it attract capital
on the favorable terms necessary to finance its growth, although there can
be no assurance that funds will be available to ATS on such terms. Further,
management believes that its cost of capital, relative to the cost of
capital of its competitors, will be an important factor in implementing
this aspect of its growth strategy.
Growth by Acquisition. ATS intends to continue to target strategic
acquisitions in markets or regions where it already owns towers as well as
new markets, including possibly non-U.S. markets. ATS has achieved a
leading industry position primarily through acquisitions. ATS will attempt
to increase revenues and operating margins at acquired communications sites
through expanded sales and marketing efforts, improved customer service,
the elimination of redundant overhead and, in certain instances, increasing
tower capacity. Acquisitions are evaluated using numerous criteria,
including potential demand, tower location, tower height, existing capacity
utilization, local competition, and local government restrictions on new
tower development. ATS also intends to pursue, on a selective basis, the
acquisition of site acquisition companies and providers of video, voice and
data transmission services. ATS may also pursue acquisitions related to the
communications site industry, including companies engaged in the tower
fabrication business.
While to date the majority of ATS' growth has resulted from acquisition
activities, once the remaining Recent Transactions are consummated,
management expects to shift ATS' emphasis more toward build to suit and new
tower construction, where it believes investment returns are more
attractive. It will, however, continue to evaluate numerous acquisition
prospects, and expects to consummate selected acquisitions when the
economics or fit are sufficiently attractive.
Growth through the Negotiation of Lease Escalators. The value of a tower
and its growth prospects are affected by the terms of the leases associated
with it. Most leases have escalator provisions (annual automatic increases
based on specified estimated cost measures or on increases in the consumer
price index) that permit ATS to keep pace with inflation. While these
provisions are not by themselves intended to be a primary source of growth,
they provide a stable and predictable growth component which is then
enhanced by increased tower utilization.
History of ATS
In early 1995, Steven B. Dodge, Chairman of the Board, President and Chief
Executive Officer of American Radio, and other members of American Radio's
management, recognized the opportunity in the communications site industry
through ARS' ownership and operation of broadcast towers. ATS was formed in
July 1995 to capitalize on this opportunity. During 1996, ATS' acquisition
program was modest, entailing the acquisition of companies owning an aggregate
of ten communications sites and managing approximately 250 sites for others,
for an aggregate purchase price of approximately $21.0 million. During that
year, however, ATS entered into several more significant acquisition agreements
that were consummated in 1997.
Since January 1, 1997, ATS has acquired more than 525 communications sites
(including the consummation of acquisition agreements entered into in 1996),
for an aggregate purchase price of approximately $290.0 million. All of such
transactions, as well as the ATC Merger, are included in the Recent
Transactions. As explained elsewhere herein, consummation of the ATC Merger
will result in the acquisition of more than 775 towers by ATS. In addition to
its acquisition program, ATS (including for this purpose companies it acquired
in 1997) will have constructed approximately 120 towers in 1997 at an aggregate
cost of approximately $25.7 million, and has
5
<PAGE>
plans to construct approximately 300 towers in 1998 (exclusive of ATC's
construction plans and exclusive of a bid to construct approximately 200 towers
at a cost of approximately $42.0 million) at a total estimated cost of
approximately $60.0 million. ATS intends to pursue, on a selective basis, the
acquisition of other communications sites and related businesses, although it
is not party to any definitive binding agreements with respect to any material
transactions, except as described in this Prospectus. Although such acquisition
or construction activity will not, except under circumstances in which
consummation of the Merger could be delayed materially (i.e., by more than 15
business days), require the consent of CBS under the Merger Agreement, such
activity may require certain regulatory approvals.
Management
The senior management of American Tower Systems consists of the following
senior executive officers (all of whom, with the exception of Messrs.
Eisenstein and Gearon, will continue to hold positions with American Radio
until the consummation of the Merger): Steven B. Dodge, Chairman of the Board
of Directors, President and Chief Executive Officer; Alan L. Box, Chief
Operating Officer and a director; Joseph L. Winn, Treasurer, Chief Financial
Officer and a director; James S. Eisenstein, Executive Vice President-Corporate
Development; and J. Michael Gearon, Jr., the former principal stockholder and
chief executive officer of Gearon & Co., Inc., Executive Vice President of ATS,
the chief executive officer of ATS' site acquisition business, and a director.
ATS is managed through a central headquarters in Boston, but relies on regional
offices for marketing, operations and site management.
ATS is a holding company whose principal asset is all of the issued and
outstanding capital stock of American Tower Systems (Delaware), Inc. ("ATSI"
or, collectively with ATSLP, the "Tower Operating Subsidiary"). ATSI, which
directly or through two limited liability company subsidiaries had previously
owned all of the assets and conducted all of the business of ATS and its
consolidated subsidiaries, transferred all of its assets and business to
American Tower Systems, L.P., a Delaware limited partnership ("ATSLP"),
immediately prior to the consummation of the Gearon Transaction pursuant to
which Gearon was merged into ATSI. References to ATS include ATS and its
consolidated subsidiaries, unless the context otherwise requires.
6
<PAGE>
AMERICAN TOWER CORPORATION
ATC is a leading independent owner and operator of wireless communications
towers with more than 775 towers in 31 states, including approximately 125
towers managed for a third party owner. ATC has agreed to acquire an additional
125 towers pursuant to letters of intent which are expected to be consummated,
subject to negotiation and execution of definitive agreements and satisfaction
of closing conditions, including, in certain cases, expiration or earlier
termination of the HSR Act waiting period, in the first half of 1998. During
1997, ATC acquired or agreed to acquire 192 towers and constructed or had, at
year end, under construction an aggregate of 64 towers; ATC plans to construct
approximately 125 towers in 1998. ATC rents tower space and provides related
services to wireless communications service providers, as well as operators of
private networks and government agencies, for a diverse range of applications
including paging, cellular, PCS, fixed microwave, SMR and ESMR. ATC owns and
operates towers in 45 of the largest 100 metropolitan statistical areas in the
United States and has clusters of towers in cities such as Albuquerque,
Atlanta, Baltimore, Dallas, Houston, Jacksonville, Kansas City, Nashville, San
Antonio and San Diego. ATC's customers (which aggregate more than 865) include
Bell South Mobility, CSX Transportation, Inc. ("CSX Transportation"), GTE
Mobilnet, Houston Cellular Telephone Company ("Houston Cellular"), Nextel,
PageMart, PageNet, Pittencrief Communications, SBC Communications, Shell
Offshore, and various federal and local government agencies. While none of
ATC's customers accounted for as much as 10% of its pro forma revenues for the
nine months ended September 30, 1997, most of the named customers accounted for
more than 1% of such revenues and each is considered by ATC to be an important
customer.
ATC was organized in October 1994 by an investor group led by Summit Capital
Inc. ("Summit Capital") of Houston and Chase Capital to acquire Bowen-Smith
Corp. ("Bowen-Smith"). Bowen-Smith had been in the tower rental business since
1966, initially serving the communications tower requirements of two-way radio
and microwave transmission users. At the time of the acquisition (the "Bowen-
Smith Acquisition"), Bowen-Smith owned 184 towers on 175 sites located
primarily in Texas, Louisiana and Oklahoma. Within the first year after the
Bowen- Smith Acquisition, ATC acquired or constructed more than 75
communications towers. In December 1995, ATC acquired 103 towers from CSX
Realty Development Corporation ("CSX"), and in October 1996, ATC acquired 154
towers from Prime Communication Sites Holding, L.L.C. ("Prime").
AMERICAN RADIO
American Radio is a national radio broadcasting company committed to
developing and operating groups of complementary radio stations in major and
growing advertising markets. American Radio is among the five largest radio
groups in the nation, owning and/or programming pursuant to local marketing
agreements ("LMAs") approximately 90 radio stations in 19 markets across the
United States. Consistent with its strategy of operating in the top 60 markets
(as ranked by revenues), American Radio owns or programs pursuant to LMAs
stations in the following markets: Boston, Seattle, St. Louis, Baltimore,
Cincinnati, Portland, Pittsburgh, Sacramento, Charlotte, Kansas City, Hartford,
Austin, Buffalo, Las Vegas, San Jose, West Palm Beach, Rochester, Fresno and
San Bernardino/Riverside. ARS station groups ranked first or second among
station operators in radio advertising revenues in 18 of its 19 markets, based
on the 1997 edition of Duncan's Radio Market Guide (the "Duncan Guide").*
- --------
* The Duncan Guide is published by a company partially owned by James H.
Duncan, Jr., a director of American Radio.
7
<PAGE>
THE MERGER AND TOWER SEPARATION
Tower Separation............ The Board of Directors of ARS (the "ARS Board")
has determined that it was in the best interests
of the holders of ARS Common Stock to dispose of
American Radio's radio broadcasting business and
to separate its communications site business
through the distribution of ATS Common Stock to
the holders of ARS Common Stock. Pursuant to that
decision, it has unanimously approved the Merger
(and, should the Merger not be consummated prior
to May 31, 1998, the Tower Merger) as the means
of effecting those goals. Pursuant to the Tower
Separation, regardless of how effected, holders
of ARS Common Stock will receive approximately
38.8% of the ATS Common Stock, assuming
consummation of the Merger, the ATC Merger, the
exercise of all options to acquire ARS Common
Stock, ATC Common Stock and ATS Common Stock
proposed to be outstanding, and the conversion of
all shares of ARS Convertible Preferred Stock.
See "The Merger and Tower Separation".
The Merger..................
On September 19, 1997, American Radio, CBS and R
Acquisition Corp., a Delaware corporation ("CBS
Sub"), entered into an Agreement and Plan of
Merger (the "Original Merger Agreement"),
pursuant to which CBS Sub will be merged with and
into American Radio and American Radio will
become a subsidiary of CBS. On December 18, 1997,
ARS, CBS and CBS Sub entered into an Amended and
Restated Agreement and Plan of Merger. Pursuant
to the Merger, each holder of ARS Common Stock,
at the effective time (the "Effective Time") of
the Merger, will receive for each share of ARS
Common Stock held by such holder, if the Tower
Merger has not then been consummated, $44.00 in
cash and one share of ATS Common Stock of the
same class as the ARS Common Stock to be
surrendered. On December 19, 1997, ARS, CBS and
CBS Sub executed an amendment to the Merger
Agreement reflecting ATS common stockholder
approval and adoption of the Merger Agreement and
approval of the Merger.
The Tower Merger............ In order to facilitate the ATC Merger, ARS has
entered into a merger agreement (the "Tower
Merger Agreement") with a newly organized wholly-
owned subsidiary of ARS which provides for the
Tower Merger, pursuant to which such subsidiary
would be merged with and into ARS. The Tower
Merger will occur only if the Merger has not been
consummated on or prior to May 31, 1998 (or such
later date as may be agreed to by ATC, ARS and
CBS) and then only if the ARS Board has
determined that, in light of all of the facts and
circumstances then existing, such merger is in
the best interests of the ARS common
stockholders. Pursuant to the Tower Merger,
holders of ARS Common Stock would receive the
shares of ATS Common Stock they would have
received had the Merger been consummated, in
exchange for a portion of their ARS Common Stock.
In such event, the amount of cash to be received
per share of ARS Common Stock pursuant to the
Merger would be increased in
8
<PAGE>
proportion to the reduction in the number of
shares of ARS Common Stock outstanding following
the Tower Merger so that each holder of ARS
Common Stock will receive the same aggregate
amount of cash consideration such holder would
have received had the Tower Merger not occurred
(assuming such holder did not dispose of any
shares of ARS Common Stock between the effective
time of the Tower Merger and the Effective Time).
See "The Merger and Tower Separation--Tower
Merger".
Stockholder Approval........ The Merger and the Tower Merger have been
approved by the holders of a majority of the
voting power of ARS Common Stock. Accordingly,
stockholder proxies are not required and are not
being sought from ARS common stockholders. CBS
stockholder approval is not required in
connection with the Merger.
Estimated Merger Effective
Date....................... Subject to the satisfaction or waiver of the
conditions to closing, consummation of the Merger
is expected to occur in the spring of 1998. See
"--Regulatory Matters" below.
Reasons for the Tower
Separation................. The ARS Board has unanimously approved the Merger
Agreement and concluded that its terms are fair
to and in the best interests of the holders of
ARS Common Stock. The ARS Board determined that,
in light of the growing consolidation of the
larger radio broadcasting companies that had
taken place and was being discussed, it was in
the best interests of the common stockholders of
ARS to seek a merger partner for ARS' radio
broadcasting business before such a possibility
became impossible or was seriously impaired. For
a description of the negotiations leading up to
the execution of the Merger Agreement and related
matters and the reasons for the Merger, see
"Background of the Merger".
The ARS Board has also unanimously approved the
distribution of the ATS Common Stock to the
holders of ARS Common Stock as part of the Tower
Separation, and concluded that its terms are fair
to and in the best interests of such holders. The
ARS Board determined that such distribution will
enable holders of ARS Common Stock to realize a
greater value, in the long run, than if the
communications site business had been offered for
sale as part of the sale of the radio
broadcasting business or separately at this time.
Opinion of ARS Financial
Advisor.................... American Radio retained Credit Suisse First
Boston Corporation ("Credit Suisse First Boston")
as its financial advisor in connection with the
Merger. Credit Suisse First Boston has delivered
its written opinion to the ARS Board stating
that, as of September 19, 1997, the date of such
opinion, the $44.00 per share in cash to be
received by the holders of ARS Common Stock for,
in effect, their interest in ARS' radio
broadcasting business was fair to such holders
from a financial point of view. The Credit Suisse
First Boston opinion was based on the procedures
and subject to the assumptions described therein.
See "Background of the Merger--Opinion of
Financial Advisor to American Radio". Since the
ARS Board had determined not to sell the
communications site business but to distribute it
to
9
<PAGE>
the holders of ARS Common Stock, the opinion of
Credit Suisse First Boston was limited to the
fairness, from a financial point of view, as of
its date, of the $44.00 per share of ARS Common
Stock to be received by such holders in the
Merger. Stockholders should recognize that the
opinion of Credit Suisse First Boston addressed
only the issue of the fairness of the cash
consideration to be received for the radio
broadcasting business of ARS and did not address
the issue of the fairness of the distribution of
ATS Common Stock as part of the Tower Separation.
The Board of Directors did not seek the opinion
of Credit Suisse First Boston (or any other firm)
as to the fairness of the distribution of ATS
Common Stock as part of the Tower Separation
(whether pursuant to the Merger or the Tower
Merger) because such distribution will be made on
a pro rata basis to ARS common stockholders and
will preserve the relative voting rights of the
ARS common stockholders at the time of the Tower
Separation. In addition, because the
modifications to the Original Merger Agreement
did not affect the amount of cash consideration
to be received by the holders of ARS Common
Stock, no updating of that opinion was considered
necessary by the ARS Board.
Termination of the Merger
Agreement.................. The Merger Agreement may be terminated by
American Radio or CBS under various
circumstances, including the failure to
consummate the Merger on or before December 31,
1998.
Regulatory Matters.......... The receipt of certain federal governmental and
regulatory approvals is required in order to
consummate the Merger, including approvals from
the FCC of the transfer of control to CBS of the
subsidiaries holding ARS' FCC licenses and the
expiration or earlier termination of the waiting
period under the HSR Act. Each of American Radio
and CBS has agreed in the Merger Agreement to use
its best efforts to obtain such regulatory
approvals.
Certain Federal Income Tax
Consequences............... The Tower Separation will result in taxable gain
to American Radio (most of which is required to
be borne by ATS pursuant to the provisions of the
ARS-ATS Separation Agreement to be executed by
ARS and ATS to implement certain provisions of
the Merger Agreement). In the event the Merger
(but not the Tower Merger) is consummated, a
holder of ARS Common Stock holding his or her
shares as a capital asset will recognize gain or
loss equal to the difference between the tax
basis in the ARS Common Stock surrendered
pursuant to the Merger and the sum of (i) the
aggregate cash received and (ii) the fair market
value of the shares of ATS Common Stock received
pursuant to the Merger. In the event both the
Tower Merger and the Merger are consummated,
comparable tax consequences will ensue for such
holders of ARS Common Stock. However, in the
event the Tower Merger were consummated and the
Merger were not, the redemption of shares of ARS
Common Stock pursuant to the Tower Merger would
not meet the applicable requirements of the
Internal Revenue Code of 1986, as amended (the
10
<PAGE>
"Code") for such redemption to qualify for sale
or exchange treatment, and the fair market value
of the shares of ATS Common Stock received
pursuant to the Tower Merger would be taxable as
a dividend. See "The Merger and Tower
Separation--Certain Federal Income Tax
Consequences of Merger and Tower Merger."
Classes of ATS Common
Stock...................... As is the case with the ARS Common Stock, the
Class A Common Stock of ATS (the "ATS Class A
Common Stock") is entitled to one (1) vote per
share, the Class B Common Stock of ATS (the "ATS
Class B Common Stock") is entitled to ten (10)
votes per share, and the Class C Common Stock of
ATS (the "ATS Class C Common Stock") is
nonvoting, except as otherwise provided by
applicable law. The holders of each class of ATS
Common Stock are entitled to identical rights
with respect to cash dividends and upon
liquidation and dissolution of ATS. Except as
otherwise provided by applicable law and except
for the rights of the holders of the ATS Class A
Common Stock to elect two "independent"
directors, the holders of ATS Class A Common
Stock and ATS Class B Common Stock vote together
on all matters requiring the vote of the ATS
common stockholders.
Trading Market.............. ATS intends to seek a Nasdaq National Market
("Nasdaq") listing for the ATS Class A Common
Stock. While ATS believes it currently meets the
financial listing criteria for such listing, no
application for such listing has been filed, and
there can be no assurance that such listing will
be obtained.
Principal ATS
Stockholders............... Assuming consummation of the Merger and the ATC
Merger, and the conversion of all shares of ARS
Convertible Preferred Stock, Steven B. Dodge,
Chairman of the Board of the Directors of ATS
(the "ATS Board") and the ARS Board, President
and Chief Executive Officer of ATS and ARS, and
Thomas H. Stoner, Chairman of the Executive
Committee of the ATS and ARS Boards, together
with their affiliates, owned "beneficially", on
February 1, 1998, approximately 51.4%
(approximately 63.0% prior to the consummation of
the ATC Merger) of the combined votes of the ATS
voting stock. See "Principal Stockholders of
American Tower Systems".
Relationship with ARS after
the Tower Separation....... As a result of the Tower Separation, American
Tower Systems will cease to be a subsidiary of,
or otherwise be affiliated with, American Radio
and will thereafter operate as an independent
publicly held company. However, ARS and ATS have
entered or will enter into certain agreements
providing for, among other things, (i) the
orderly separation of ARS and ATS and the
completion of the Tower Separation, (ii) the
lease of space on certain towers owned or leased
by ATS to ARS, (iii) the allocation of certain
tax and other liabilities between ARS and ATS,
and (iv) certain indemnification obligations of
ATS to ARS. See "The Merger and Tower
Separation--ARS-ATS Separation Agreement".
11
<PAGE>
Market Prices............... On August 19, 1997, the day prior to the
announcement by ARS that management was exploring
ways to maximize stockholder value, the last
reported sale price per share of the ARS Class A
Common Stock on the New York Stock Exchange (the
"NYSE") was $39.125. On September 18, 1997, the
day prior to the announcement by American Radio
of the signing of the Original Merger Agreement
with CBS, the last reported sale price per share
of ARS Class A Common Stock on the NYSE was $51
7/8. On February 12, 1998, the last reported sale
price per share of the ARS Class A Common Stock
on the NYSE was $58 7/8.
THE ATC MERGER
The ATC Merger.............. On December 12, 1997, ATC and ATS entered into
the ATC Merger Agreement, pursuant to which ATC
will be merged with and into ATS. Pursuant to the
ATC Merger, each holder of ATC Common Stock, at
the effective time of the ATC Merger, will
receive its pro rata share (assuming the exercise
of all options to acquire ATC Common Stock) of
35% of the number of shares of ATS Common Stock
that would be outstanding, assuming consummation
of the Merger, the ATC Merger, the exercise of
all options to acquire ARS Common Stock, ATC
Common Stock and ATS Common Stock proposed to be
outstanding immediately prior to the ATC Merger,
and the conversion of all shares of ARS
Convertible Preferred Stock.
Stockholder Approval........ The ATC Merger has been approved by the ATS Board
and the Board of Directors of ATC (the "ATC
Board") and by American Radio as the holder of a
majority of the voting power of ATS Common Stock.
The ATC Merger requires the approval of the
holders of a majority of the outstanding shares
of ATC Common Stock. The ATC Board has determined
that the ATC Merger is advisable and in the best
interest of the holders of ATC Common Stock and
has recommended that the holders of ATC Common
Stock vote in favor of the ATC Merger Agreement.
ATC intends to obtain stockholder approval of the
ATC Merger by the written consent of stockholders
in lieu of obtaining such approval at a special
meeting of stockholders. Accordingly, ATC is not
asking for a proxy and ATC stockholders are
requested not to send a proxy. See "Comparison of
Rights of Stockholders of ATS and ATC--Other
Stockholder Rights--Special Meetings of
Stockholders; Action by Written Consent".
Appraisal Rights............ Holders of ATC Stock are entitled to appraisal
rights as dissenting stockholders to the ATC
Merger. See "The ATC Merger--Appraisal Rights of
ATC Stockholders".
Estimated Merger Effective
Date....................... Subject to the satisfaction or waiver of the
conditions to closing, consummation of the ATC
Merger is expected to occur in the spring of
1998. See "Regulatory Matters" below.
12
<PAGE>
Termination of the Merger
Agreement.................. The ATC Merger Agreement may be terminated by ATS
and ATC under various circumstances, including
the failure to consummate the ATC Merger on or
before May 31, 1998.
Regulatory Matters.......... The receipt of certain federal governmental and
regulatory approvals is required in order to
consummate the ATC Merger, including the
expiration or earlier termination of the waiting
period under the HSR Act. See "The ATC Merger--
Background of the ATC Merger" for information
with respect to the receipt of a Second Request
from the Justice Department.
Certain Federal Income Tax
Consequences............... No gain or loss will be recognized for federal
income tax purposes by ATS or ATC as a
consequence of the ATC Merger. Except to the
extent of cash received in lieu of fractional
shares, no gain or loss will be recognized by a
U.S. holder of ATC Common Stock who receives ATS
Common Stock pursuant to the ATC Merger. Except
to the extent of the tax basis allocable to cash
received in lieu of fractional shares, the tax
basis of the ATS Common Stock received by a U.S.
holder of ATC Common Stock will be the same as
the aggregate tax basis of the ATC Common Stock
surrendered therefor. The holding period of the
ATS Common Stock received will include the
holding period of the ATC Common Stock
surrendered therefor. See "The ATC Merger--
Certain Federal Income Tax Consequences of ATC
Merger".
Principal ATC
Stockholders............... As of February 1, 1998, directors and executive
officers of ATC and their respective affiliates
may be deemed to be the beneficial owners of
114,132 shares of the outstanding ATC Common
Stock, which constitutes approximately 76.3% of
the total votes entitled to be cast by the
holders of ATC Common Stock. See "Principal
Stockholders of American Tower Corporation" in
Appendix V.
RISK FACTORS
Holders of ATC Common Stock should carefully consider the information set
forth or referred to under the heading "Risk Factors", in addition to the other
information contained in this Prospectus.
AMERICAN TOWER SYSTEMS DIVIDEND POLICY
American Tower Systems currently does not intend to pay cash dividends on ATS
Common Stock for the foreseeable future and any such payments would be limited
by the restrictions set forth in the Tower Loan Agreement. See "Description of
American Tower Systems Capital Stock--Dividend Restrictions" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
American Tower Systems--Liquidity and Capital Resources".
13
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
On December 12, 1997, ATS and ATC publicly announced the execution of a
definitive merger agreement with respect to the ATC Merger. No established
public trading exists for the ATS Class A Common Stock or the ATC Common Stock,
and, accordingly, no such price information is available with respect thereto.
COMPARATIVE PER SHARE DATA
The following table sets forth as of the date and for the periods indicated
per share data of ATS and ATC, pro forma per share data from continuing
operations of ATS and ATC (giving effect to the ATS Pro Forma Transactions
which includes the ATC Merger in the case of ATS), and pro forma equivalent per
share amounts giving effect to the ATS Pro Forma Transactions which includes
the ATC Merger. The pro forma equivalent information of ATC represents ATS' pro
forma per share information multiplied by 199.2628, the approximate exchange
ratio called for in the ATC Merger Agreement. Neither ATS nor ATC has ever paid
cash dividends on its common stock. The data set forth below should be read in
conjunction with the audited and unaudited consolidated financial statements of
ATS and ATC, including the notes thereto, which are included in this
Prospectus. The data should also be read in conjunction with the unaudited pro
forma condensed financial statements of ATS, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------- -------------------
ATS ATC ATS ATC
-------- --------- -------------------
<S> <C> <C> <C> <C>
Historical:
Income (loss) per share from
continuing operations............. $ (0.01) $ 4.61 $ (0.02) $ 8.55
Book value per share............... $ 0.82 $ 153.96 $ 1.39 $ 242.30
Pro Forma:
Loss per share..................... $ (0.34) $ -- $ (0.19) $ --
Book value per share............... -- $ -- $ 7.68 $ --
Pro Forma Equivalent:
Loss per share..................... -- $(68.59) -- $ (37.69)
Book value per share............... -- -- -- $1,531.10
</TABLE>
OTHER COMPARATIVE INFORMATION
Holders of Common Stock. As of February 1, 1998, there were 18 holders of
record of ATS Class A Common Stock and 35 holders of record of the ATC Common
Stock. Such record ownership of ATS Class A Common Stock does not include the
ownership which will result from the Tower Separation.
Dividends. Neither ATS nor ATC has paid dividends on its common stock and
each currently does not intend to pay cash dividends on its common stock for
the foreseeable future and any such payments would be limited by the
restrictions set forth in the applicable loan agreements of ATS and ATC. See
"Description of American Tower Systems Capital Stock--Dividend Restrictions"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations of American Tower System--Liquidity and Capital Resources".
14
<PAGE>
AMERICAN TOWER SYSTEMS SELECTED FINANCIAL DATA
The following Selected Financial Data of American Tower Systems has been
derived from the consolidated financial statements of American Tower Systems
included elsewhere in this Prospectus. The data as of and for the nine months
ended September 30, 1996 is unaudited, but in the opinion of management
contains all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of such information. The American Tower
Systems Selected Financial Data should be read in conjunction with American
Tower Systems' audited and unaudited financial statements and the notes thereto
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations of American Tower Systems". The pro forma financial data
with respect to the year ended December 31, 1996 and the nine months ended
September 30, 1997 included below reflects certain adjustments, as explained
elsewhere in this Prospectus, and therefore any comparison of such pro forma
financial data with the American Tower Systems Selected Financial Data
appearing below for periods prior to 1996 is inappropriate. Such pro forma
financial data for the year ended December 31, 1996 and the nine months ended
September 30, 1997 gives effect to the ATS Pro Forma Transactions and the
Merger, including the Tower Separation, as described in the Notes to Unaudited
Pro Forma Condensed Consolidated Statements of Operations of American Tower
Systems. The ATS Pro Forma Transactions do not include all Recent Transactions
relating to American Tower Systems or pending construction. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
American Tower Systems".
The historical financial data presented below reflects periods during which
American Tower Systems did not operate as an independent company. Therefore,
such data may not reflect the results of operations or the financial condition
which would have resulted if ATS had operated as a separate, independent
company during such periods, and is not necessarily indicative of ATS' future
results of operations or financial condition.
15
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION(1)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30,
------------------- --------------------------
HISTORICAL
JULY 17, 1995 THROUGH PRO --------------- PRO FORMA
DECEMBER 31, 1995 HISTORICAL FORMA(2) 1996 1997 1997(3)
--------------------- ---------- -------- ------ ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net revenues............ $ 163 $2,897 $ 65,873 $1,858 $ 7,902 $ 65,981
Operating expenses:
Operating expenses..... 60 1,362 37,633 1,066 3,588 33,186
Depreciation and
amortization.......... 57 990 49,906 614 2,706 38,873
Corporate general and
administrative........ 230 830 2,830 506 919 2,419
----- ------ -------- ------ ------- --------
Total operating
expenses............ 347 3,182 90,369 2,186 7,213 74,478
----- ------ -------- ------ ------- --------
Operating income
(loss)................. (184) (285) (24,496) (328) 689 (8,497)
Interest expense, net... -- 36 (11,726) 18 (1,221) (9,453)
Other income (expense).. -- -- 36 -- (3) (3)
Minority interest in net
earnings of
subsidiaries(4)........ -- (185) (185) (75) (221) (221)
----- ------ -------- ------ ------- --------
Income (loss) before
income taxes........... (184) (434) (36,371) (385) (756) (18,174)
Provision (benefit) for
income taxes........... (74) 46 (9,119) 69 (49) (3,198)
----- ------ -------- ------ ------- --------
Net income (loss)
applicable to common
stockholders........... $(110) $ (480) $(27,252) $ (454) $ (707) $(14,976)
===== ====== ======== ====== ======= ========
Pro forma net income
(loss) per common
share(5)............... $ (.01) $ (0.34) $ (.02) $ (0.19)
====== ======== ======= ========
Pro forma shares
outstanding............ 36,042 79,175 36,042 79,175
====== ======== ======= ========
OTHER OPERATING DATA:
Tower Cash Flow(6)...... $ 103 $1,535 $ 28,240 $ 792 $ 4,314 $ 32,795
EBITDA(6)............... (127) 705 25,410 286 3,395 30,376
EBITDA margin(6)........ (77.9)% 24.3% 38.6% 15.4% 43.0% 46.0%
After-tax cash flow(6).. (53) 510 22,654 160 1,999 23,897
Cash provided by (used
for) operating
activities............. (51) 2,229 -- 980 3,118 --
Cash used for investing
activities............. -- -- -- -- (74,318) --
Cash provided by
financing activities... 63 132 -- 582 71,121 --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
HISTORICAL PRO FORMA(3)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 2,295 $ 2,759
Working capital deficiency, excluding current portion
of long-term debt.................................... (580) (3,546)
Property and equipment, net........................... 43,941 228,023
Total assets.......................................... 111,340 823,621
Long-term debt, including current portion............. 54,203 173,020
Total stockholders' equity............................ 50,105 608,368
</TABLE>
- --------
(1) ATSI was organized on July 17, 1995 and American Radio contributed all of
the issued and outstanding capital stock of ATSI to ATS on September 24,
1996. Year-to-year comparisons are significantly affected by the timing of
acquisitions of communications sites and related businesses and
construction of towers, both of which have been numerous during the period.
See "Business of American Tower Systems--Recent Transactions" and the
consolidated financial statements of American Tower Systems elsewhere in
this Prospectus for a description of the acquisitions made and construction
activity in 1995, 1996 and the first nine months of 1997.
(2) The unaudited pro forma Statement of Operations Data and Other Operating
Data for the year ended December 31, 1996 gives effect to the ATS Pro Forma
Transactions and the Merger, including the Tower Separation, as if each of
the foregoing had occurred on January 1, 1996. The term "ATS Pro Forma
Transactions" includes the Meridian Transaction, the Diablo Transaction,
the MicroNet Transaction, the Tucson Transaction, the Gearon Transaction,
the ATC Merger, consummation of transactions contemplated by the ATS Stock
Purchase Agreement and the transfer of towers from ARS to ATS and does not
include all of the Recent Transactions relating to American Tower Systems
or pending construction. See "Business of American Tower Systems--Recent
Transactions" and "Unaudited Pro Forma Condensed Consolidated Financial
Statements of American Tower Systems".
16
<PAGE>
(3) The unaudited pro forma Statement of Operations Data and Other Operating
Data for the nine months ended September 30, 1997 gives effect to the ATS
Pro Forma Transactions and the Merger, including the Tower Separation, as
if each of the foregoing had occurred on January 1, 1997. The unaudited pro
forma Balance Sheet Data as of September 30, 1997 gives effect to the ATS
Pro Forma Transactions not consummated as of September 30, 1997 and the
Merger, including the Tower Separation, as if each of the foregoing had
occurred on September 30, 1997. See "Business of American Tower Systems--
Recent Transactions" and "Unaudited Pro Forma Condensed Consolidated
Financial Statements of American Tower Systems".
(4) Represents the elimination of the 49.9% member's earnings of ATS Needham,
LLC, in which Tower Operating Subsidiary holds a 50.1% interest and the
elimination of the 30% member's loss of Communications Systems Development
LLC, in which Tower Operating Subsidiary holds a 70% interest.
(5) Pro forma net income (loss) per share has been computed using (a) in the
case of historical information, the number of shares expected to be
outstanding following the Tower Separation and (b) in the case of pro forma
information, the number of shares expected to be outstanding following the
Tower Separation and the transactions discussed in Note 2 to the "American
Tower Systems Selected Financial Data" and the Notes to Unaudited Pro Forma
Condensed Consolidated Statement of Operations.
(6) "Tower Cash Flow" means operating income (loss) before depreciation and
amortization and corporate general and administrative expenses. "EBITDA"
means operating income (loss) before depreciation and amortization. "After-
tax cash flow" means income (loss) before extraordinary items, plus
depreciation and amortization. Tower Cash Flow, EBITDA and after-tax cash
flow should not be considered in isolation from, or as a substitute for,
operating income, net income or cash flow and other consolidated income or
cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of ATS' profitability or liquidity.
Although these measures of performance are not calculated in accordance
with generally accepted accounting principles, many of them are widely used
in the communications site industry as a measure of a company's operating
performance because they assist in comparing company performance on a
consistent basis without regard to depreciation and amortization, which can
vary significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Tower Cash Flow also excludes the effect of corporate general and
administrative expenses, which generally do not relate directly to
communications site performance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of American Tower
Systems--General" and "--Liquidity and Capital Resources".
17
<PAGE>
AMERICAN RADIO SELECTED COMBINED FINANCIAL DATA
The following Selected Combined Financial Data of American Radio has been
derived from the consolidated financial statements of American Radio and the
Selected Financial Data of the four predecessor entities of American Radio (the
"ARS Predecessor Entities"), which are contained in the American Radio Annual
Report on Form 10-K for the year ended December 31, 1996 (the "ARS 10-K") and
the American Radio Quarterly Report on Form 10-Q for the nine months ended
September 30, 1997 (the "ARS September 199710-Q"). The data as of and for the
nine months ended September 30, 1996 and 1997 is unaudited, but in the opinion
of management contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of such information. The American
Radio Selected Combined Financial Data should be read in conjunction with
American Radio's audited and unaudited financial statements and the notes
thereto and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the ARS 10-K and the ARS September 1997
10-Q. The following financial data presents the combined operating results of
the ARS Predecessor Entities for periods prior to the date of the formation of
American Radio (November 1, 1993) for 1992 and the ten months ended October 31,
1993 as if such entities had combined effective January 1, 1992 or, if later,
the date of commencement of operations of certain ARS Predecessor Entities. The
data for the two months ended December 31, 1993 and the years ended December
31, 1994, 1995 and 1996 is based on the historical audited American Radio
consolidated financial statements. The pro forma financial data with respect to
the year ended December 31, 1996 and the nine months ended September 30, 1997
included below reflects certain adjustments, as explained elsewhere in this
Prospectus, and therefore any comparison of such pro forma financial data with
the American Radio Selected Combined Financial Data appearing below for periods
prior to 1996 is inappropriate. Such pro forma financial data for the year
ended December 31, 1996 and the nine months ended September 30, 1997 gives
effect to the ARS Pro Forma Transactions, the ATS Pro Forma Transactions and to
the Merger, including the Tower Separation, as described in the Notes to
Unaudited Pro Forma Condensed Consolidated Statement of Operations of American
Radio. The ARS Pro Forma Transactions do not include all of the Recent
Transactions but do include the sale pursuant to the ATS Stock Purchase
Agreement of ATS Common Stock to Steven B. Dodge, Chairman of the Board,
President and Chief Executive Officer of ARS and ATS and certain other officers
and directors of ARS and ATS (or their affiliates, family members or family
trusts) and the transfer of towers from ARS to ATS in connection with the Tower
Separation. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the ARS 10-K and the ARS September 1997 10-Q and
the financial statements of EZ in the EZ Annual Report on Form 10-K for the
year ended December 31, 1996 (the "EZ 10-K").
18
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION(1)
<TABLE>
<CAPTION>
COMBINED ARS
COMBINED ARS PREDECESSOR
PREDECESSOR ENTITIES AND
ENTITIES(2) ARS ARS(2) YEAR ENDED DECEMBER 31,
------------------------ ------------ ------------ ------------------------------------
TEN TWO COMBINED
MONTHS MONTHS YEAR
YEAR ENDED ENDED ENDED ENDED HISTORICAL PRO
DECEMBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, -------------------------- FORMA
1992 1993 1993 1993 1994 1995 1996 1996(3)
------------ ----------- ------------ ------------ ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Net revenues.... $46,306 $45,010 $8,943 $53,953 $68,034 $97,772 $178,019 $315,905
Station
operating
expenses....... 36,698 37,058 6,493 43,551 50,129 66,448 120,004 209,498
Net local
marketing
agreement
expenses(5).... -- -- -- -- -- 600 8,128 8,128
Depreciation and
amortization... 4,465 5,900 1,415 7,315 9,920 12,364 17,810 59,275
Merger
expenses....... -- -- -- -- -- -- -- --
Corporate
general and
administrative
expenses....... 3,657 2,897 944 3,841 2,229 3,908 5,046 5,216
------- ------- ------ ------- ------- ------- -------- --------
Operating income
(loss)......... 1,486 (845) 91 (754) 5,756 14,452 27,031 33,788
Interest
expense--net... (4,370) (5,517) (801) (6,318) (7,051) (10,062) (16,762) (54,534)
Gains (losses)
on sale of
assets, net.... (964) 3,133 -- 3,133 2,345 11,544 (308) (159)
Other non-
operating
income
(expense),
net............ (3) 42 -- 42 (568) -- -- --
------- ------- ------ ------- ------- ------- -------- --------
Income (loss)
before income
taxes and other
items.......... (3,851) (3,187) (710) (3,897) 482 15,934 9,961 (20,905)
Provision
(benefit) for
income
taxes(6)....... 382 1,690 (263) 1,427 556 6,829 4,826 (10,711)
------- ------- ------ ------- ------- ------- -------- --------
Income (loss)
before
extraordinary
item........... $(4,233) $(4,877) $ (447) $(5,324) (74) 9,105 5,135 (10,194)
======= ======= ====== =======
Extraordinary
loss........... (1,159) (817) -- --
------- ------- -------- --------
Net income
(loss)......... (1,233) 8,288 5,135 (10,194)
Preferred Stock
and Series C
Common Stock
dividends...... (1,887) (815) (4,973) (27,723)
------- ------- -------- --------
Net income
(loss)
applicable to
common
stockholders... $(3,120) $ 7,473 $ 162 $(37,917)
======= ======= ======== ========
Net income
(loss) before
extraordinary
item per common
share.......... $ (0.21) $ 0.65 $ 0.01 $ (1.36)
======= ======= ======== ========
Weighted average
common shares
outstanding.... 9,338 12,646 20,510 27,893
======= ======= ======== ========
OTHER OPERATING
DATA:
Broadcast cash
flow(7)........ $ 9,608 $ 7,952 $2,450 $10,402 $17,905 $31,324 $ 58,015 $106,407
EBITDA(7)....... 5,951 5,055 1,506 6,561 15,676 27,416 52,969 101,191
After-tax cash
flow(7)........ -- -- -- -- 7,959 20,654 17,972 21,358
Cash (used for)
provided by
operating
activities..... 2,312 (531) (404) (935) 2,166 9,724 15,659 --
Cash (used for)
investing
activities..... (1,632) (6,573) (197) (6,770) (92,909) (81,183) (421,885) --
Cash provided by
financing
activities..... 22 6,197 1,977 8,174 89,519 72,180 412,784 --
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
HISTORICAL PRO
----------------------- FORMA
1996 1997 1997(4)
----------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Net revenues.... $ 113,582 $ 260,512 $ 274,826
Station
operating
expenses....... 78,171 172,018 184,284
Net local
marketing
agreement
expenses(5).... 4,878 1,914 1,914
Depreciation and
amortization... 10,966 42,974 48,829
Merger
expenses....... -- 300 300
Corporate
general and
administrative
expenses....... 3,615 6,601 6,182
----------- ----------- -----------
Operating income
(loss)......... 15,952 36,705 33,317
Interest
expense--net... (10,474) (38,562) (54,729)
Gains (losses)
on sale of
assets, net.... 172 455 679
Other non-
operating
income
(expense),
net............ -- -- --
----------- ----------- -----------
Income (loss)
before income
taxes and other
items.......... 5,650 (1,402) (20,733)
Provision
(benefit) for
income
taxes(6)....... 2,961 (774) (10,800)
----------- ----------- -----------
Income (loss)
before
extraordinary
item........... 2,689 (628) (9,933)
Extraordinary
loss........... -- (1,639) --
----------- ----------- -----------
Net income
(loss)......... 2,689 (2,267) (9,933)
Preferred Stock
and Series C
Common Stock
dividends...... (2,567) (22,770) (24,666)
----------- ----------- -----------
Net income
(loss)
applicable to
common
stockholders... $ 122 $ (25,037) (34,599)
=========== =========== ===========
Net income
(loss) before
extraordinary
item per common
share.......... $ 0.01 $ (0.88) $ (1.17)
=========== =========== ===========
Weighted average
common shares
outstanding.... 20,031 26,549 29,454
=========== =========== ===========
OTHER OPERATING
DATA:
Broadcast cash
flow(7)........ $ 35,411 $ 88,494 $ 90,542
EBITDA(7)....... 31,796 81,593 84,060
After-tax cash
flow(7)........ 11,088 19,576 14,230
Cash (used for)
provided by
operating
activities..... 18,477 29,594 --
Cash (used for)
investing
activities..... (382,739) (529,246) --
Cash provided by
financing
activities..... 374,926 503,027 --
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
HISTORICAL PRO FORMA(4)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 13,822 $ 11,527
Restricted cash....................................... 34,441 34,441
Working capital, excluding current portion of long-
term debt............................................ 59,879 60,459
Intangible assets--net................................ 1,592,772 1,532,953
Total assets.......................................... 1,962,925 1,847,419
Long-term debt, including current portion............. 809,015 873,412
Cumulative exchangeable preferred stock............... 215,550 215,550
Total stockholders' equity............................ 674,937 502,066
</TABLE>
- --------
(1) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations, which have been numerous
during the periods shown. See "Unaudited Pro Forma Condensed Consolidated
Financial Statements of American Radio" in Appendix I and the consolidated
financial statements of American Radio in the ARS 10-K and the ARS
September 1997 10-Q for a description of the acquisitions and dispositions
made in 1995, 1996 and the first nine months of 1997.
(2) The information for the Combined ARS Predecessor Entities includes the
results of operations of the following entities for the following periods:
two entities--the year ended December 31, 1992 and ten months ended October
31, 1993; one entity--the fiscal year ended August 31, 1992 (included in
calendar year 1992) and the sum of (a) eight-twelfths of the fiscal year
ended August 31, 1993 and (b) the historical results for the two months
ended October 31, 1993 (included in the ten months ended October 31, 1993);
and the fourth entity--the one-month period ended December 31, 1992 (in
calendar year 1992) and the ten months ended October 31, 1993 (in that
period). In addition, the 1993 financial information combines the ARS
Predecessor Entities for the ten months ended October 31, 1993 and
historical American Radio financial statements for the two month period
ended December 31, 1993.
(3) The unaudited pro forma Statement of Operations Data and Other Operating
Data for the year ended December 31, 1996 give effect to (i) the ARS Pro
Forma Transactions, (ii) the ATS Pro Forma Transactions, (iii) the offering
and exchange of the 11 3/8% Cumulative Exchangeable Preferred Stock (the
"ARS Cumulative Preferred Stock") and the use of the proceeds thereof, and
(iv) the Tower Separation, as if each of the foregoing had occurred on
January 1, 1996. The term "ARS Pro Forma Transactions" means the EZ Merger,
the BayCom Transaction, the Hartford Transaction, the HBC Merger (excluding
the Omaha stations which have been sold) and the Baltimore Transaction and
does not include all of the Recent Transactions. See "Business of American
Tower Systems--Recent Transactions" and "Unaudited Pro Forma Condensed
Consolidated Financial Statements of American Radio" in Appendix I.
(4) The unaudited pro forma Statement of Operations Data and Other Operating
Data for the nine months ended September 30, 1997 gives effect to (i) the
EZ Merger, (ii) the Baltimore Transaction, (iii) the ATS Pro Forma
Transactions, (iv) the offering and exchange of the ARS Cumulative
Preferred Stock and the use of the proceeds thereof, and (v) the Tower
Separation, as if each of the foregoing had occurred on January 1, 1997.
The unaudited pro forma Balance Sheet Data as of September 30, 1997 gives
effect to (i) the ATS Pro Forma Transactions and (ii) the Tower Separation,
as if each of the foregoing had occurred on September 30, 1997. See
"Business of American Tower Systems--Recent Transactions" and "Unaudited
Pro Forma Condensed Consolidated Financial Statements of American Radio" in
Appendix I.
(5) In connection with a number of Recent Transactions, ARS entered into local
marketing agreements ("LMAs"). Net LMA expense represents the excess of
monthly payments payable by ARS to the station owners over LMA revenue
received by ARS. Net LMA expense is, in effect, a reimbursement to the
station owners of their depreciation and amortization and interest expense
and, upon acquisition of the stations by ARS, will be replaced by such
expenses.
(6) The ARS Predecessor Entities' provision (benefit) for income taxes for the
periods prior to 1994 represents the historical provision (benefit) for one
of such entities. One of the other predecessors was a partnership and one
was an S corporation and, accordingly, taxable income or loss flowed
through to the partners and stockholder, respectively, of those entities.
The fourth predecessor had net operating loss carryforwards available to
reduce future taxable income. As the realization of the benefit of those
losses was not assured, no income tax benefit was recorded. Based on these
circumstances, a combined tax provision for periods prior to 1994 has not
been presented.
(7) "Broadcast cash flow" means operating income (loss) before net LMA
expenses, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income (loss) before LMA
expenses and depreciation and amortization. LMA expenses are, as explained
in note (5), fees paid by American Radio which permit American Radio to
program stations prior to their acquisition. "After-tax cash flow" means
income (loss) before extraordinary items, plus depreciation and
amortization, less stock dividends. Broadcast cash flow, EBITDA and after-
tax cash flow should not be considered in isolation from, or as a
substitute for, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of American
Radio's profitability or liquidity. Although these measures of performance
are not calculated in accordance with generally accepted accounting
principles, they are widely used in the broadcasting industry as a measure
of a radio company's operating performance because they assist in comparing
radio station performance on a consistent basis across radio companies
without regard to depreciation and amortization, which can vary
significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Broadcast cash flow also excludes the effect of corporate general
and administrative expenses, which generally do not relate directly to
station performance.
20
<PAGE>
RISK FACTORS
The following risk factors should be considered by the holders of ATC Common
Stock in evaluating and determining whether to consent to the ATC Merger and,
in the case of holders of ATC Stock, whether to exercise their appraisal
rights. These factors should be considered in conjunction with the other
information included and incorporated by reference in this Prospectus.
RISK FACTORS RELATING TO THE MERGER AND THE TOWER MERGER
MERGER AGREEMENT--CERTAIN CONTINGENT LIABILITIES
The Merger Agreement provides that ATS will be responsible for the tax
consequences of the Tower Separation to the extent that the aggregate amount
of taxes required to be paid by CBS or any of its affiliates (including
without limitation ARS after the Merger) exceeds $20.0 million. The amount of
that tax liability is dependent on the "fair market value" of the ATS Class A
Common Stock at the time of the Tower Separation. Such "fair market value" is
likely to be based on the initial trading levels of such stock for some
reasonable period after the Tower Separation. American Tower Systems estimates
that, assuming such fair market value is $10.00 per share (the price at which
ATS Common Stock was issued pursuant to the consummation of the transactions
contemplated by the ATS Stock Purchase Agreement), the federal tax liability
of American Radio for which ATS will be responsible will be approximately
$66.6 million (after giving effect to the $20.0 million of taxes to be borne
by ARS pursuant to the provisions of the Merger Agreement), and that for each
$1.00 by which such fair market value exceeds or is less than $10.00 per
share, the federal tax liability would increase or decrease by approximately
$14.8 million. In addition, state taxes could be payable by ARS in connection
with the Tower Separation for which ATS would also be responsible. See "The
Merger and Tower Separation--ARS-ATS Separation Agreement--Sharing of Tax and
Other Consequences".
The Merger Agreement also provides for closing date balance sheet
adjustments based upon the working capital and specified debt levels
(including the liquidation preference of the ARS Cumulative Preferred Stock)
of ARS at the Effective Time which may result in payments to be made by either
ARS or ATS to the other party following the Closing Date. ATS will benefit
from or bear the cost of such adjustments. Since the amounts of working
capital and debt are dependent upon future operations and events, including
without limitation cash flow from operations, capital expenditures, and
expenses of the Merger and the Tower Separation, neither ARS nor ATS is able
to state with any degree of certainty what payments, if any, will be owed
following the Closing Date by either ARS or ATS to the other party. However,
as indicated in the pro forma financial information with respect to ATS
included elsewhere in this Prospectus, and based on the assumptions stated
therein, ARS has estimated that the payment, if any, required to be paid or to
be received by ATS will not be material as a result of those provisions. See
"The Merger and Tower Separation--Closing Date Adjustments".
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the present holders of ARS Common Stock will
no longer have the opportunity to share in ARS' radio business' future
earnings and growth. Instead each such holder will have the right to receive
cash consideration and shares of ATS Common Stock pursuant to the Tower
Separation of the same class as the class of ARS Common Stock to be
surrendered.
FEDERAL INCOME TAX CONSEQUENCES OF TOWER MERGER
In the event the Tower Merger were consummated and the Merger were not, the
redemption of shares of ARS Common Stock pursuant to the Tower Merger would
not meet the applicable requirements of the Code for such redemption to
qualify for sale or exchange treatment, and the fair market value of the
shares of ATS Common Stock received pursuant to the Tower Merger would be
taxable as a dividend. Because of these adverse federal income tax
consequences, the ARS Board has not made a final determination of whether to
proceed with the Tower Merger. It intends to evaluate all of the facts and
circumstances existing at the time of any such proposed consummation to
determine whether the Tower Merger is in the best interests of the ARS common
21
<PAGE>
stockholders, notwithstanding such possible adverse consequences. See "The
Merger and Tower Separation--Certain Federal Income Tax Consequences of Merger
and Tower Merger".
ABSENCE OF OPINION ON TOWER SEPARATION
Stockholders should recognize that the opinion of Credit Suisse First Boston
as to the fairness of the Merger addressed only the issue of the fairness of
the cash consideration to be received by ARS common stockholders for the radio
broadcasting business of ARS and did not address the issue of the fairness of
the distribution of ATS Common Stock as part of the Tower Separation. The ARS
Board did not seek the opinion of Credit Suisse First Boston (or any other
firm) as to the fairness of the distribution of ATS Common Stock as part of
the Tower Separation (whether pursuant to the Merger or the Tower Merger)
because such distribution will be made to ARS common stockholders on a pro
rata basis and will preserve the relative voting rights of the ARS common
stockholders existing at the time.
INTERESTS OF CERTAIN ARS PERSONS IN THE MERGER
In reviewing the recommendation of the ARS Board with respect to the Merger,
ARS common stockholders should be aware that certain members of American Radio
management and the ARS Board may have interests in the Merger and the Tower
Separation that may present them with actual or potential conflicts of
interest. See "The Merger and Tower Separation--Interest of Certain Persons in
the Merger".
POTENTIAL LOSS OF KEY PERSONNEL
The pendency of the Merger may increase the risk that certain key employees,
including the co-chief operating officers, station general managers, sales
managers and program directors, as well as on-air announcers who are well
recognized and established in the markets in which ARS conducts business,
could decide to seek employment elsewhere.
RISK FACTORS RELATING TO THE ATC MERGER
INTERESTS OF CETAIN ATC PERSONS IN THE MERGER
In reviewing the recommendation of the ATC Board with respect to the ATC
Merger, ATC common stockholders should be aware that certain members of ATC
management and the ATC Board may have interests in the ATC Merger that may
present them with actual or potential conflicts of interest. Chase Manhattan
Capital Corporation, which is an affiliate of Chase Equity Associates, a
stockholder of ARS, and of Mr. Chavkin, a director of ARS, owned approximately
18.1% of the ATC Common Stock as of January 27, 1998 and has a representative
on the ATC Board of Directors. Mr. Chavkin is also a director of ATS and ARS,
and owns "beneficially" (principally as a consequence of his being a general
partner of the general partner of CEA), 1,323,429 shares of ARS Class C Common
Stock (which represents approximately 4.48% of the ARS Common Stock
outstanding) and 2,000,000 shares of ATS Class A Common Stock. See "Principal
Stockholders of American Tower Systems" below. Summit Capital is entitled upon
closing of the ATC Merger to receive from ATC a $2.25 million broker's fee.
Fred Lummis, President and Chief Executive Officer of ATC, is an affiliate of
Summit Capital. The ATC Merger is conditioned upon Mr. Lummis and Randall R.
Mays, a director of ATC and the Chief Financial Officer and Executive Vice
President of Clear Channel, being elected as directors of ATS. See "The ATC
Merger--Background of the ATC Merger" below and "Principal Stockholders of
American Tower Corporation" in Appendix V to this Prospectus.
LIMITATION OF ATS LIABILITY FOR ATC MERGER TERMINATION
The ATC Merger Agreement provides for a termination fee to ATC of $15.0
million (together with reimbursement of reasonable out-of-pocket expenses up
to an aggregate of $1.0 million) in the event such agreement is terminated
because of the failure of either the Merger or the Tower Merger to occur or
the failure of American Radio to obtain the approval, if required, of the
holder of ARS Common Stock. Such termination fee and reimbursement would be
the sole and exclusive recourse of ATC in the event of any such termination.
See "The ATC Merger".
22
<PAGE>
RISK FACTORS RELATING TO AMERICAN TOWER SYSTEMS
DEPENDENCE ON DEMAND FOR WIRELESS COMMUNICATIONS AND IMPLEMENTATION OF DIGITAL
TELEVISION
The demand for rental space on ATS' towers is dependent on a number of
factors beyond ATS' control, including demand for wireless services by
consumers, the financial condition and access to capital of wireless
providers, the strategy of wireless providers with respect to owning or
leasing their own communications sites, government licensing of broadcast
rights, changes in FCC regulations and general economic conditions. A slowdown
in the growth of wireless communications in the United States would depress
network expansion activities and reduce the demand for ATS' antennae sites. In
addition, a downturn in a particular wireless segment, or of the number of
carriers, nationally or locally, in a particular segment, as a result of
technological or other competition or other factors beyond the control of ATS
could adversely affect the demand for its antennae sites. Finally, advances in
technology could reduce the need for tower-based transmission and reception.
The occurrence of any of these factors could have a material adverse effect on
ATS' financial condition and results of operations. See "Industry Overview".
The demand for rental space on ATS' towers is also dependent on the demand
for tower sites by television and radio broadcasters. Many of the same factors
described above with respect to wireless providers are also applicable to
television and radio broadcasters. Additionally, certain technological
advances, including the development and implementation of satellite-delivered
radio, may reduce the need for tower-based broadcast transmission. ATS could
also be affected adversely should the development of digital television
("DTV") be delayed or impaired, particularly should the intensity of demand
for DTV service decrease because of the speed with which the industry
implements the changes or because of regulatory requirements.
ACQUISITION STRATEGY
American Tower Systems has pursued on an aggressive basis, and intends to
continue to pursue on a selective basis, the acquisition of other companies in
the communications site industry. Inherent in such a strategy are certain
risks, such as increasing leverage and debt service requirements, combining
disparate company cultures and facilities, and operating towers in many
geographically diverse markets. Certain of these risks may be increased to the
extent that ATS' acquisitions (including the ATC Merger) are larger and/or
involve communications sites in diverse geographic areas. Accordingly, there
can be no assurance that one or more of ATS' past or future acquisitions may
not have an adverse effect on its business.
ATS competes with certain wireless service providers, site developers and
other independent tower owners and operators, as well as financial
institutions, for acquisitions of towers and potential sites and expects such
competition to increase. Certain of those competitors have greater financial
and other resources than ATS. The success of ATS' growth strategy continues to
be dependent, although to a lesser extent than in the past, on its ability to
identify and complete acquisitions of communications site companies. Increased
competition may result in fewer acquisition opportunities as well as higher
acquisition prices. No assurance can be given that ATS will be able to
identify, finance and complete future acquisitions on acceptable terms. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements of American
Tower Systems" and "Business of American Tower Systems--Recent Transactions".
CONSTRUCTION OF NEW TOWERS
American Tower Systems currently has under construction, or plans to
construct during 1998 (exclusive of those which ATC is constructing or plans
to construct), an aggregate of approximately 300 towers (most of which are on
a build to suit basis) at an estimated aggregate cost of approximately $60.0
million. In addition, ATS is actively competing for the opportunity to
construct more than 200 towers in 1998 for an estimated cost of approximately
$42.0 million, although there can be no assurance as to how many, if any, of
such towers ATS will be engaged to construct. ATC has under construction or
plans to construct during 1998 an aggregate of approximately 125 towers at an
estimated aggregate cost of approximately $28.0 million. The success of ATS'
growth strategy is highly dependent on its ability to complete new tower
construction. Such construction can be prevented, delayed and/or made more
costly by factors beyond the control of ATS, including zoning
23
<PAGE>
and local permitting requirements, FCC and Federal Aviation Administration
("FAA") regulations, environmental group opposition, availability of erection
equipment and skilled construction personnel, and adverse weather conditions.
In addition, as the pace of tower construction has increased in recent years,
manpower and equipment needed to erect towers have been in increasing demand.
Such factors could increase costs associated with new tower construction and
could have a material adverse effect on ATS' financial condition or result of
operations. In light of the anticipated increase in construction activity,
both for ATS and the communications site industry generally, these factors
may, in the future, be significantly exacerbated. The construction of towers
for the broadcasting industry could be particularly affected by a potential
shortage of construction capability should a large number of towers be
required to be built in a relatively short period of time to accommodate the
initiation of digital television service. See "Business of American Tower
Systems--Regulatory Matters".
ATS competes for new tower construction site opportunities with wireless
service providers, site developers and other independent tower operating
companies. ATS believes that competition for tower construction sites will
increase and that additional competitors will enter the tower market, certain
of which may have greater financial resources than ATS.
Build to suit activities (such as the 200-tower project described above)
involve certain additional risks. While they do involve at least one "anchor"
tenant, there can be no assurance that a sufficient number of additional
tenants will be secured for all or most of the towers to be constructed
pursuant to such projects (particularly the larger ones such as the 200-tower
project), to ensure that such projects will be profitable. Moreover, ATS may
find that one of the reasons wireless carriers are willing to permit ATS to
build towers for them is that certain or many of such towers may be on sites
that are either expensive or difficult to build on or that they are such that
they are unlikely to attract a sufficient number of other tenants.
SUBSTANTIAL CAPITAL REQUIREMENTS AND LEVERAGE
ATS' acquisition and construction activities will create substantial ongoing
capital requirements. During 1997, ATS made capital investments aggregating
approximately $178.0 million in communications site acquisitions and
approximately $25.7 million in new tower construction, including site
upgrades. ATS has financed its capital expenditures through a combination of
bank borrowings, equity investments by American Radio, and cash flow from
operations. As of September 30, 1997, on a pro forma basis, assuming
consummation of the ATS Pro Forma Transactions and all other Recent
Transactions relating to ATS, the Tower Separation and the transactions
contemplated by the ATS Stock Purchase Agreement, ATS would have had aggregate
indebtedness of approximately $323.0 million. Based on the foregoing
assumptions and the estimated current pro forma cash flow, ATS would be able
to borrow an additional $61.5 million under the Tower Loan Agreement; the
total capacity under the Tower Loan Agreement is $400.0 million. ATS expects
that it will continue to be required to borrow funds to finance construction
and, to a lesser extent, acquisitions and to operate with substantial
leverage. If ATS' revenues and cash flow do not meet current expectations, or
if its borrowing base is reduced as a result of operating performance,
American Tower Systems may have limited ability to access necessary capital.
If such cash flow is not sufficient to meet its debt service requirements, ATS
could be required to sell equity or debt securities, refinance its obligations
or dispose of certain of its operating assets in order to make scheduled
payments. There can be no assurance that ATS would be able to effect any such
transactions on favorable terms.
Each Tower Operating Subsidiary is a party to a loan agreement (the "Tower
Loan Agreement") providing for maximum borrowing, subject to compliance with
certain financial ratios, of $400.0 million. The Tower Loan Agreement includes
certain financial and operational covenants and other restrictions with which
each Tower Operating Subsidiary must comply, including, among others,
limitations on additional indebtedness, capital expenditures, investments in
Unrestricted Subsidiaries (as defined therein) and cash distributions, as well
as restrictions on the use of borrowings and requirements to maintain certain
financial ratios. The obligations of each Tower Operating Subsidiary under the
Tower Loan Agreement are collateralized by a pledge of the stock and
partnership interests of each Tower Operating Subsidiary and a first priority
security interest in substantially all of each Tower Operating Subsidiary's
assets.
24
<PAGE>
Assuming consummation of all of the Recent Transactions and the Merger,
management believes that, in light of current construction plans and potential
acquisitions, ATS will require additional financing during 1998. Any such
financing could take the form of an increase in the maximum borrowing levels
under the Tower Loan Agreement, the issuance, publicly or privately, of debt
securities (which could have the effect of increasing its consolidated
leverage ratios) or equity securities (which, in the case of ATS Common Stock
or securities convertible into or exercisable for ATS Common Stock, would have
a dilutive effect on the proportionate ownership of ATS by its then existing
common stockholders). There can be no assurance that any such debt or equity
financing would be available on favorable terms.
CONTROL BY THE PRINCIPAL STOCKHOLDERS; RESTRICTIONS ON CHANGE OF CONTROL
Assuming consummation of the Merger and the ATC Merger, and the conversion
of all shares of ARS Convertible Preferred Stock, Messrs. Dodge and Stoner,
together with their affiliates (the "ATS Principal Stockholders"), owned
"beneficially", on February 1, 1998, approximately 51.4% (approximately 63.0%
prior to consummation of the ATC Merger) of the combined voting power of the
ATS voting stock. See "Principal Stockholders of American Tower Systems".
Accordingly, the ATS Principal Stockholders may, in effect, be able to control
the vote on all matters submitted to a vote of the holders of the ATS Common
Stock, except with respect to (i) the election of two independent directors,
(ii) those matters which the Restated Certificate of Incorporation of ATS (the
"ATS Restated Certificate") or applicable law requires a 66 2/3% vote, and
(iii) those matters requiring a class vote by law. Control by the ATS
Principal Stockholders may have the effect of discouraging certain types of
transactions involving an actual or potential change of control of ATS. See
"Description of American Tower Systems Capital Stock--Common Stock".
The Tower Loan Agreement provides that an "Event of Default" will occur upon
certain changes in the ownership interests and executive positions in American
Tower Systems of Mr. Dodge. In addition, the Communications Act of 1934, as
amended (the "Communications Act"), and the rules of the FCC require the prior
consent of the FCC for any change in control of ATS. In addition to the stock
ownership by the ATS Principal Stockholders and the FCC restrictions, certain
provisions of the Delaware law may have the effect of discouraging a third
party from making an acquisition proposal for ATS and may thereby inhibit a
change of control. See "Description of American Tower Systems Capital Stock--
Delaware Business Combination Provisions".
DEPENDENCE ON KEY PERSONNEL
The implementation of ATS' growth strategy is dependent, to a significant
degree, on the efforts of ATS' Chief Executive Officer and certain other
executive officers. ATS has not entered into employment agreements with any of
its executive officers, other than with J. Michael Gearon, Jr., the former
principal stockholder and chief executive officer of Gearon & Co., Inc. which
was merged into ATSI pursuant to the Gearon Transaction in January 1998. Many
of the executive and other officers have been granted options to purchase
shares of ATS Common Stock that are subject to vesting provisions generally
over a five-year period. However, there can be no assurance that American
Tower Systems will be able to retain such officers, the loss of whom could
have a material adverse effect upon ATS, or that ATS will be able to prevent
them from competing in the event of their departure. ATS does not maintain key
man life insurance of any significance on the lives of any of such officers.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the costs of investigation, removal or remediation of
soil and groundwater contaminated by certain hazardous substances or wastes.
Certain of such laws impose cleanup responsibility and liability without
regard to whether the owner or operator of the real estate or operations
thereon knew of or was responsible for the contamination, and whether or not
operations at the property have been discontinued or title to the property has
been transferred. The owner or operator of contaminated real estate also may
be subject to common law claims by third parties based on damages and costs
25
<PAGE>
resulting from off-site migration of the contamination. In connection with its
former and current ownership or operation of its properties, ATS may be
potentially liable for environmental costs such as those discussed above. See
"Business of American Tower Systems--Environmental Matters".
LACK OF DIVIDENDS; RESTRICTIONS ON PAYMENTS OF DIVIDENDS AND REPURCHASE OF
COMMON STOCK
American Tower Systems intends to retain all available earnings, if any,
generated by its operations for the development and growth of its business and
does not anticipate paying any dividends on the ATS Common Stock in the
foreseeable future. In addition, each Tower Operating Subsidiary is and will
be restricted under the Tower Loan Agreement from paying dividends on its
stock (distributions to its partners, in the case of ATSLP) and from
repurchasing, redeeming or otherwise acquiring any shares of ATS Common Stock.
Since ATS has no significant assets other than its ownership of the Tower
Operating Subsidiary, its ability to pay dividends to its stockholders in the
foreseeable future is restricted.
NO PRIOR MARKET FOR ATS COMMON STOCK
Prior to the Tower Separation, there will be no public market for the ATS
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained in the future. ATS intends to seek listing on Nasdaq
for the ATS Class A Common Stock. While ATS believes it currently meets the
financial listing criteria for such listing, no application has been filed and
such listing will be subject to the discretion of the applicable authorities.
Accordingly, there can be no assurance that any such listing will be obtained.
There also can be no assurance as to the price at which the ATS Class A Common
Stock will trade or as to the liquidity or volatility of any such trading
market. Market prices might also be affected by shares available for future
sale held by certain stockholders who hold freely saleable shares. See "Shares
Eligible for Future Sale".
26
<PAGE>
MARKET PRICES AND DIVIDEND POLICY
Shares of ARS Class A Common Stock were quoted on Nasdaq under the symbol
"AMRD" from the consummation of the ARS Class A Common Stock initial public
offering in June 1995 through February 4, 1997. On February 5, 1997, shares of
ARS Class A Common Stock began trading on the NYSE under the symbol "AFM". The
following table sets forth, for the calendar quarters indicated, the high and
low closing sales prices per share of Class A Common Stock on Nasdaq and the
NYSE for the applicable periods, as reported in published financial sources in
the case of Nasdaq, and thereafter as reported on the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
-------- ---------
<S> <C> <C>
1995:
Second Quarter (commencing June 9, 1995).................. $26 $18 1/4
Third Quarter............................................. 29 3/4 23
Fourth Quarter............................................ 28 1/2 19 1/2
1996:
First Quarter............................................. $34 1/2 $25
Second Quarter............................................ 43 1/2 30 1/4
Third Quarter............................................. 43 33
Fourth Quarter............................................ 37 3/4 23 7/8
1997:
First Quarter............................................. $36 1/2 $27
Second Quarter............................................ 39 7/8 25 1/4
Third Quarter............................................. 51 7/8 38 5/16
Fourth Quarter............................................ 53 5/16 47 11/16
1998:
First Quarter (through February 12, 1998)................. $60 5/8 $52 11/16
</TABLE>
On August 19, 1997, the day prior to the announcement by American Radio that
management was exploring ways to maximize stockholder value, the last reported
sale price per share of the ARS Class A Common Stock on the NYSE was $39.125.
On September 18, 1997, the day prior to the announcement by American Radio of
the signing of the Original Merger Agreement with CBS, the last reported sale
price per share of the ARS Class A Common Stock on the NYSE was $51 7/8. On
February 6, 1998, the last reported sale price per share of the ARS Class A
Common Stock on the NYSE was $60 per share. As of January 30, 1998, there were
339 holders of record of the ARS Class A Common Stock.
No established public trading market currently exists for either the ATS
Class A Common Stock or the ATC Common Stock.
ATS has not paid a dividend on any class of its capital stock and
anticipates that it will retain future earnings, if any, to fund the
development and growth of its business and does not anticipate paying cash
dividends on shares of ATS Common Stock in the foreseeable future. In
addition, each Tower Operating Subsidiary is and will be restricted under the
Tower Loan Agreement from paying dividends on the stock (distributions to its
partners, in the case of ATSLP) and repurchasing, redeeming or otherwise
acquiring any shares of ATS Common Stock. Since ATS has no significant assets
other than its ownership of each Tower Operating Subsidiary, its ability to
pay dividends to its stockholders in the foreseeable future is restricted. See
"Description of American Tower Systems Capital Stock--Dividend Restrictions"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations of American Tower Systems--Liquidity and Capital Resources".
27
<PAGE>
AMERICAN TOWER SYSTEMS CAPITALIZATION
Prior to the consummation of the Merger (or the Tower Merger), American
Tower Systems will have been operated as part of American Radio. The following
table sets forth the capitalization of American Tower Systems as of September
30, 1997, and as adjusted to give effect to (a) the ATS Pro Forma Transactions
and (b) the Merger and the related transactions (including the Tower
Separation), and events described in the notes hereto as if all of the
foregoing had been consummated on September 30, 1997. See Notes to the
Unaudited Pro Forma Condensed Consolidated Balance Sheet of American Tower
Systems included in this Prospectus, and "The Merger and Tower Separation--ATS
Stock Purchase Agreement".
Management believes that the assumptions used provide a reasonable basis on
which to present such capitalization. The capitalization table below should be
read in conjunction with the historical financial statements of ATS included
elsewhere in this Prospectus, "Management's Discussion and Analysis of
Financial Condition and Results of Operations of American Tower Systems" and
"Unaudited Pro Forma Condensed Consolidated Financial Statements of American
Tower Systems". The capitalization table below is provided for informational
purposes only and (i) should not be construed to be indicative of ATS'
capitalization or financial condition had the transactions and events referred
to above been consummated on the date assumed, (ii) may not reflect the
capitalization or financial condition which would have resulted had ATS been
operated as a separate, independent company during such period, and (iii) is
not necessarily indicative of ATS' future capitalization or financial
condition.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................. $ 2,295 $ 2,759
======== ========
Long term debt, including current portion(1)(2)
Borrowings under the Tower Loan Agreement............... $ 52,500 $171,317
Other long-term debt.................................... 1,703 1,703
-------- --------
Total long-term debt................................ 54,203 173,020
-------- --------
Stockholders' equity(1)(3)
Preferred Stock......................................... -- --
Common Stock(4):
Common Stock........................................... -- --
Class A Common Stock................................... -- 660
Class B Common Stock................................... -- 91
Class C Common Stock................................... -- 33
Additional paid-in capital................................ 51,403 608,882
Accumulated deficit....................................... (1,298) (1,298)
-------- --------
Total stockholders' equity.............................. 50,105 608,368
-------- --------
Total capitalization.................................... $104,308 $781,388
======== ========
</TABLE>
- --------
(1) For additional information, see "Unaudited Pro Forma Condensed
Consolidated Financial Statements of American Tower Systems" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations of American Tower Systems--Liquidity and Capital Resources".
(2) See Notes to Consolidated Financial Statements of American Tower Systems
for additional information regarding the components and terms of ATS'
long-term debt. Approximately $150.0 million of additional long-term debt
borrowings are expected to be required (on a net basis) to finance the
Recent Transactions not included in the ATS Pro Forma Transactions.
(3) Consists, on a pro forma basis, of (a) Preferred Stock, par value $.01 per
share, authorized, 20,000,000 shares, none issued or outstanding; (b) ATS
Class A Common Stock, par value $.01 per share, authorized 200,000,000
shares; shares issued and outstanding: 3,000 (historical) and 66,021,279
(pro forma); (c) ATS
28
<PAGE>
Class B Common Stock, par value $.01 per share, 50,000,000 authorized
shares; shares issued and outstanding: none (historical) and 9,054,454 (pro
forma); and (d) ATS Class C Common Stock, par value $.01 per share,
10,000,000 authorized shares; shares issued and outstanding: none
(historical) and 3,295,518 (pro forma).
(4) The number of outstanding shares does not include, except as otherwise
indicated: (a) shares of ATS Class A Common Stock issuable upon conversion
of ATS Class B Common Stock or ATS Class C Common Stock, or (b) shares
issuable upon exercise of options currently outstanding to purchase an
aggregate of 3,895,300 shares of ATS Common Stock, (of which 2,695,300 are
purchasable at $10.00 per share and 1,200,000 are purchaseable at $13.00
per share), all of which become exercisable, on a cumulative basis, at the
rate of 20% per year, commencing one year from the date of original grant,
or (c) shares of ATS Common Stock issuable upon the exchange of options to
purchase an aggregate of (i) 682,000 shares of Common Stock of ATSI, at
prices ranging from $5.00 to $8.00, which will be exchanged for options to
purchase 938,713 shares of ATS Common Stock, at prices ranging from $3.61
to $5.77, or (ii) 803,916 shares of ARS Common Stock, at prices ranging
from $6.375 to $28.25, which assumes that all options of employees of ATS
will be exchanged (based on assumed relative values of the ARS Common
Stock and ATS Common Stock of $54.00 per share and $10.00 per share,
respectively) for options to purchase 4,341,146 shares of ATS Common
Stock, at prices ranging from $1.18 to $5.23, or (iii) 6,500 shares of ATC
Common Stock, at prices ranging from $100.00 to $475.00, which will be
exchanged for options to purchase 1,295,208 shares of ATS Common Stock, at
prices ranging from $0.50 to $2.38. The number of outstanding shares does,
however, include the 8,000,000 shares issued in connection with the ATS
Stock Purchase Agreement. See the Notes to Consolidated Financial
Statements of American Tower Systems, "Business of American Tower
Systems--Recent Transactions", "The ATC Merger" and "The Merger and Tower
Separation--Certain Other Covenants--ARS Options" and "--ATS Stock
Purchase Agreement".
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF AMERICAN TOWER SYSTEMS
The following unaudited pro forma condensed consolidated financial
statements of American Tower Systems consist of an unaudited pro forma
condensed consolidated balance sheet as of September 30, 1997 and unaudited
pro forma condensed consolidated statements of operations for the year ended
December 31, 1996 and for the nine months ended September 30, 1997, adjusted
for the ATS Pro Forma Transactions and the Merger, as if such transactions had
been consummated on January 1, 1996. With respect to acquisitions, the pro
forma statements give effect only to the ATS Pro Forma Transactions based on
their significance in relation to all of ATS' acquisitions. The unaudited pro
forma condensed consolidated balance sheet and the unaudited pro forma
condensed consolidated statements of operations should be read in conjunction
with American Tower Systems' consolidated financial statements and notes
thereto, as well as the financial statements and notes thereto of certain
businesses that have been or may be acquired, which are included elsewhere in
this Prospectus. The unaudited pro forma condensed consolidated balance sheet
and the unaudited pro forma condensed consolidated statements of operations
are not necessarily indicative of the financial condition or the results of
operations that would have been reported had such events actually occurred on
the date specified, nor are they indicative of ATS' future results of
operations or of the financial condition or the results of operations which
would have resulted had ATS been operated as a separate, independent company
during such periods, and are not necessarily indicative of ATS' future
financial conditions or results of operations.
In reviewing the unaudited pro forma condensed consolidated financial
statements set forth below, in addition to the assumptions and other matters
noted in the above paragraph and in the notes to the unaudited pro forma
condensed consolidated financial statements, it should be noted that estimated
incremental costs that will be incurred because ATS is an independent company
have been reflected in the pro forma adjustments. However, there can be no
assurance that actual incremental costs for such independent operation will
not exceed such estimated amounts.
30
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 2,295 $ 464 $ 2,759
Accounts receivable, net.................. 1,560 976 2,536
Other current assets...................... 710 965 1,675
Notes receivable.......................... 260 260
Property and equipment, net............... 43,941 184,082 228,023
Intangible assets, net.................... 59,819 527,794 587,613
Investment in affiliate................... 322 322
Deposits and other assets................. 2,433 (2,000) 433
-------- -------- --------
Total................................... $111,340 $712,281 $823,621
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities, excluding current
portion of long-term debt................ $ 5,145 $ 5,371 $ 10,516
Deferred income taxes..................... 1,084 29,657 30,741
Other long-term liabilities............... 29 173 202
Long-term debt, including current por-
tion..................................... 54,203 118,817 173,020
Minority interest......................... 774 774
Stockholders' equity...................... 50,105 558,263 608,368
-------- -------- --------
Total................................... $111,340 $712,281 $823,621
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet of
American Tower Systems.
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet as of September
30, 1997 gives effect to the Diablo Transaction, the MicroNet Transaction, the
Tucson Transaction, the Gearon Transaction and the ATC Merger (collectively,
with the Meridian Transaction, the transfer of towers from ARS to ATS, and the
consummation of the transactions contemplated by the ATS Stock Purchase
Agreement, the "ATS Pro Forma Transactions") and the Merger, including the
Tower Separation, as if each of the foregoing had occurred on September 30,
1997. See "Business of American Tower Systems--Recent Transactions" for a
description of each of the transactions included in the ATS Pro Forma
Transactions.
(a) The following table sets forth the pro forma balance sheet adjustments
for the ATS Pro Forma Transactions as of September 30, 1997. (In thousands).
<TABLE>
<CAPTION>
TRANSFER TOWER ATS STOCK
DIABLO MICRONET TUCSON GEARON ATC OF SEPARATION PURCHASE
TRANSACTION TRANSACTION TRANSACTION TRANSACTION MERGER TOWERS TAX AGREEMENT TOTAL
----------- ----------- ----------- ----------- -------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........... $ 464 $ 464
Accounts receivable,
net................... 976 976
Other current assets... 965 965
Property and equipment,
net................... $18,215 $40,000 $ 4,700 $ 5,000 112,000 $4,167 184,082
Intangible assets,
net................... 26,785 30,250 7,300 75,000 388,459 527,794
Deposits and other
assets................ (2,000) (2,000)
------- ------- ------- ------- -------- ------ -------- -------- --------
Total................. $43,000 $70,250 $12,000 $80,000 $502,864 $4,167 $ -- $ -- $712,281
======= ======= ======= ======= ======== ====== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities,
excluding current
portion of long-term
debt.................. $ 5,371 $ 5,371
Deferred income taxes.. 116,257 $(86,600) 29,657
Other long-term
liabilities........... 173 173
Long-term debt,
including current
portion............... $ 2,500 $29,750 $26,400 72,967 66,600 $(79,400) 118,817
Stockholders' equity... 40,500 40,500 $12,000 53,600 308,096 $4,167 20,000 79,400 558,263
------- ------- ------- ------- -------- ------ -------- -------- --------
Total................. $43,000 $70,250 $12,000 $80,000 $502,864 $4,167 $ -- $ -- $712,281
======= ======= ======= ======= ======== ====== ======== ======== ========
</TABLE>
The Diablo Transaction, MicroNet Transaction, Tucson Transaction, Gearon
Transaction and the ATC Merger will be accounted for under the purchase method
of accounting.
32
<PAGE>
The following table describes the financing of the transactions described
above.
<TABLE>
<CAPTION>
BORROWINGS BY
AND
PURCHASE BORROWINGS BY CONTRIBUTIONS COMMON STOCK
PRICE ATS FROM ARS ISSUED BY ATS
-------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Diablo Transaction........... $ 45,000 $ 2,500 $40,500
MicroNet Transaction......... 70,250 29,750 40,500
Tucson Transaction........... 12,000 12,000
Gearon Transaction........... 80,000 26,400 5,600 $ 48,000
ATC Merger................... 500,459 72,967 308,096
</TABLE>
In addition, in connection with the ATC Merger, a deferred tax liability of
$116.3 million will be established for the differences in bases for book and
tax purposes resulting from the transaction. The working capital deficiency of
ATC at September 30, 1997 ($3.1 million) has also been recorded as a pro forma
adjustment.
The Transfer of Towers from ARS to ATS will be recorded at the historical
depreciated net book value of such towers on the books of ARS on the date of
transfer.
As a result of the Tower Separation, ATS will be required to bear an
estimated $66.6 million of income tax liabilities (net of $20.0 million to be
borne by ARS pursuant to the provisions of the Merger Agreement.) In addition,
the tax bases of ATS' assets will be increased as a result of the separation;
a deferred tax asset of $86.6 million has been recorded for such increase. The
estimated tax liability of $66.6 million is based on an assumed fair market
value of the ATS Common Stock of $10.00 per share, which is the price at which
shares were issued pursuant to the consummation of the transactions
contemplated by the ATS Stock Purchase Agreement. Such estimated tax liability
would increase or decrease by approximately $14.8 million for each $1.00 per
share increase or decrease in the fair market value of the ATS Common Stock.
The issuance of ATS Common Stock pursuant to the ATS Stock Purchase
Agreement for an aggregate of $80.0 million, $79.4 million net of expenses (of
which approximately $49.4 million was paid in the form of secured notes due
upon consummation of the Merger and the balance in cash).
ATS expects to issue a total of 43,132,691 shares of Common Stock to effect
all of the transactions described above. The following shares will be issued
pursuant to the Gearon Transaction (5,333,333), the ATC Merger (29,799,358),
and the ATS Stock Purchase Agreement (8,000,000).
No adjustment has been included in the pro forma information with respect to
certain adjustment provisions in the Merger Agreement related to the Working
Capital and Debt Amount (each as defined in the Merger Agreement) of ARS at
the time of consummation of the Merger because ARS currently estimates that
the payment, if any, which would be required to be paid or to be received by
ATS would not be material.
The ATS Pro Forma Transactions referred to above do not constitute all of
the Recent Transactions. Since January 1, 1997, ATS has consummated more than
15 acquisitions (four of which are included in the ATS Pro Forma Transactions
listed above and a fifth, the Meridian Transaction, was consummated in July
1997) involving more than 525 sites, including sites on which towers are to be
constructed (of which approximately 340 are represented by the ATS Pro Forma
Transactions referred to above and the Meridian Transaction), in a variety of
regions for an aggregate purchase price of approximately $290.0 million (of
which approximately $240.8 million was represented by the ATS Pro Forma
Transactions referred to above and the Meridian Transaction). ATS is a party
to two pending transactions, one of which (the ATC Merger) is included in the
ATS Pro Forma Transactions and one of which (the acquisition of the assets
relating to a teleport serving the Washington, D.C. area for approximately
$30.5 million) is not. See "Business of American Tower Systems--Recent
Transactions".
33
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Net revenues.............................. $2,897 $ 62,976 $ 65,873
Operating expenses........................ 1,362 36,271 37,633
Depreciation and amortization............. 990 48,916 49,906
Corporate general and administrative ex-
penses................................... 830 2,000 2,830
------ -------- --------
Operating loss............................ (285) (24,211) (24,496)
Other (income) expense:
Interest expense, net................... 11,726 11,726
Other (income) expense.................. (36) (36)
Minority interest in net earnings of
subsidiary............................. 185 185
------ -------- --------
Total other (income) expense.......... 149 11,726 11,875
------ -------- --------
Loss before income taxes.................. (434) (35,937) (36,371)
Provision (benefit) for income taxes...... 46 (9,165)(b) (9,119)
------ -------- --------
Net loss.................................. $ (480) $(26,772) $(27,252)
====== ======== ========
Net loss per common share................. $(0.01) $ (0.34)
====== ========
Pro forma common shares outstanding(c).... 36,042 43,133 79,175
====== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
of American Tower Systems.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1996 gives effect to the ATS Pro Forma
Transactions and the Merger as if each of the foregoing had occurred on
January 1, 1996.
(a) To record the results of operations for the ATS Pro Forma Transactions.
The results of operations have been adjusted to: (i) reverse historical
interest expense of $4.2 million; (ii) record interest expense of $11.7
million for the year ended December 31, 1996, as a result of approximately
$128.4 million of additional net debt to be incurred in connection with the
ATS Pro Forma Transactions and payment of the estimated tax liability
attributable to the Tower Separation of approximately $66.6 million (net of
the $20.0 million to be borne by ARS pursuant to the provisions of the Merger
Agreement), after giving effect to (x) capital contributions by ARS of $146.1
million, representing the difference between the aggregate amount invested by
ARS in ATS at January 1, 1996 of $3.9 million and the maximum amount ($150.0
million) permitted by the Merger Agreement, and (y) the proceeds from the
issuance of ATS Common Stock pursuant to the ATS Stock Purchase Agreement for
an aggregate purchase price of $80.0 million, $79.4 million net of expenses
(of which approximately $49.4 million was paid in the form of secured notes
which are due upon consummation of the Merger and the balance in cash); and
(iii) the historical depreciated book value of $4.2 million for an aggregate
of 16 towers transferred or to be transferred by American Radio to ATS
representing an additional ARS equity investment in ATS. Each 1/4% change in
the interest rate applicable to the change in floating rate debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.3 million. The estimated tax liability shown in clause (i)
preceding is based on an assumed fair market value of the ATS Common Stock of
$10.00 per share, which is the price at which shares were issued pursuant to
the consummation of the transactions contemplated by the ATS Stock Purchase
Agreement. Such estimated tax liability would increase or decrease by
approximately $14.8 million for each $1.00 per share increase or decrease in
the fair market value of the ATS Common Stock. No adjustment has been included
in the pro forma information with respect to certain adjustment provisions in
the Merger Agreement relating to the Working Capital and Debt Amount (each as
defined in the Merger Agreement) of ARS at the time of the consummation of the
Merger, because ARS estimates that the payment, if any, required by such
provisions to be paid or to be received by ATS will not be material. For
information with respect to such adjustments, see "The Merger and Tower
Separation--Closing Date Adjustments".
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $7.7 million for the year ended
December 31, 1996 and record depreciation and amortization expense of $48.7
million for the year ended December 31, 1996 based on estimated allocations of
purchase prices. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of fifteen years. Costs
of acquired intangible assets for the transactions are amortized over 15
years. The preliminary estimates of the fair value of property, plant and
equipment and intangible assets may change upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by ATS. Because ATS maintains a separate corporate
headquarters which provides services substantially similar to those
represented by these costs, they are not expected to recur following
acquisition. After giving effect to an estimated $2.0 million of incremental
costs, ATS believes that it has existing management capacity sufficient to
provide such services without incurring additional incremental costs.
35
<PAGE>
(a) continued
The following table sets forth the historical results of operations for the
ATS Pro Forma Transactions for the year ended December 31, 1996. (In
thousands).
<TABLE>
<CAPTION>
MERIDIAN DIABLO MICRONET TUCSON GEARON ATC TRANSFER PRO FORMA
TRANSACTION TRANSACTION TRANSACTION TRANSACTION TRANSACTION MERGER OF TOWERS ADJUSTMENTS TOTAL
----------- ----------- ----------- ----------- ----------- ------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues....... $4,498 $7,422 $15,058 $1,438 $21,484 $12,366 $ 710 $ 62,976
Operating
expenses.......... 3,218 5,922 9,867 371 13,302 2,849 742 36,271
Depreciation and
amortization...... 416 417 3,936 164 103 2,709 215 $ 40,956 48,916
Corporate general
and
administrative.... 776 2,049 (825) 2,000
------ ------ ------- ------ ------- ------- ----- -------- --------
Operating income
(loss)............ 864 307 1,255 903 8,079 4,759 (247) (40,131) (24,211)
Other (income)
expense...........
Interest expense,
net............. 70 81 213 3,808 8,536 12,708
Other expense
(income)........ 294 (43) (19) (95) 150 (287)
------ ------ ------- ------ ------- ------- ----- -------- --------
Income (loss) from
operations before
income taxes...... $ 794 $ (68) $ 1,298 $ 709 $ 8,174 $ 801 $(247) $(48,380) $(36,919)
====== ====== ======= ====== ======= ======= ===== ======== ========
</TABLE>
(b) To record the tax effect of the pro forma adjustments and impact on ATS'
estimated effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
(c) Consists of shares expected to be issued pursuant to the Tower
Separation (36,042,476, assuming the exercise of all ARS Options prior to the
Merger), the Gearon Transaction (5,333,333), the ATC Merger (29,799,358), and
the ATS Stock Purchase Agreement (8,000,000).
36
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS (a) PRO FORMA
---------- --------------- ---------
<S> <C> <C> <C>
Net revenues.............................. $ 7,902 $ 58,079 $ 65,981
Operating expenses........................ 3,588 29,598 33,186
Depreciation and amortization............. 2,706 36,167 38,873
Corporate general and administrative ex-
penses................................... 919 1,500 2,419
------- -------- --------
Operating income (loss)................... 689 (9,186) (8,497)
Other (income) expense:
Interest expense, net................... 1,221 8,232 9,453
Other income (expense).................. 3 3
Minority interest in net earnings of
subsidiary............................. 221 221
------- -------- --------
Total other (income) expense.......... 1,445 8,232 9,677
------- -------- --------
Income (loss) before income taxes......... (756) (17,418) (18,174)
Provision (benefit) for income taxes...... (49) (3,149)(b) (3,198)
------- -------- --------
Net income (loss)......................... $ (707) $(14,269) $(14,976)
======= ======== ========
Net loss per common share................. $ (0.02) $ (0.19)
======= ========
Pro forma common shares outstanding(c).... 36,042 43,133 79,175
======= ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
of American Tower Systems.
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the nine months ended September 30, 1997 gives effect to the ATS Pro Forma
Transactions and the Merger as if each of the foregoing had occurred on
January 1, 1997.
(a) To record the results of operations for the ATS Pro Forma Transactions.
The results of operations have been adjusted to: (i) reverse historical
interest expense of $4.2 million; (ii) record interest expense of $8.2 million
for the nine months ended September 30, 1997, as a result of approximately
$118.8 million of additional net debt to be incurred in connection with the
ATS Pro Forma Transactions and payment of the estimated tax liability
attributable to the Tower Separation of approximately $66.6 million (net of
the $20.0 million to be borne by ARS pursuant to the provisions of the Merger
Agreement), after giving effect to (x) capital contributions by ARS of $98.6
million, representing the difference between the aggregate amount invested by
ARS in ATS at September 30, 1997 of $51.4 million and the maximum amount
($150.0 million) permitted by the Merger Agreement, and (y) the proceeds from
the issuance of ATS Common Stock pursuant to the ATS Stock Purchase Agreement
for an aggregate purchase price of $80.0 million, $79.4 million net of
expenses (of which approximately $49.4 million was paid in the form of secured
notes which are due upon consummation of the Merger and the balance in cash);
and (iii) the historical depreciated book value of $4.2 million for an
aggregate of 16 towers transferred or to be transferred by American Radio to
ATS representing an additional ARS equity investment in ATS. Each 1/4% change
in the interest rate applicable to the change in floating rate debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.2 million. The estimated tax liability shown in clause (i)
preceding is based on an assumed fair market value of the ATS Common Stock or
$10.00 per share, which was the price at which shares were issued pursuant to
the consummation of the transactions contemplated by the ATS Stock Purchase
Agreement. Such estimated tax liability would increase or decrease by
approximately $14.8 million for each $1.00 per share increase or decrease in
the fair market value of the ATS Common Stock. No adjustment has been included
in the pro forma information to certain adjustment provisions in the Merger
Agreement relating to the Working Capital and Debt Amount (each as defined in
the Merger Agreement) of ARS at the time of the consummation of the Merger,
because ARS estimates that the payment, if any, required to be paid or to be
received by ATS will not be material. For information with respect to such
adjustments, see "The Merger and Tower Separation--Closing Date Adjustments".
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $6.8 million for the nine months
ended September 30, 1997 and record depreciation and amortization expense of
$36.0 million for the nine months ended September 30, 1997 based on estimated
allocations of purchase prices. Depreciation expense for property, plant and
equipment acquired has been determined based on an average life of fifteen
years. Costs of acquired intangible assets for the transaction are amortized
over 15 years. The preliminary estimates of the fair value of property, plant
and equipment and intangible assets may change upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by ATS. Because ATS maintains a separate corporate
headquarters which provides services substantially similar to those
represented by these costs, they are not expected to recur following
acquisition. After giving effect to an estimated $1.5 million of incremental
costs, ATS believes that it has existing management capacity sufficient to
provide such services without incurring additional incremental costs.
38
<PAGE>
(a) continued
The following table sets forth the historical results of operations for the
ATS Pro Forma Transactions for the periods in which they were not owned by
American Radio for the nine months ended September 30, 1997. (In thousands).
<TABLE>
<CAPTION>
MERIDIAN DIABLO MICRONET TUCSON GEARON ATC TRANSFER OF PRO FORMA
TRANSACTION TRANSACTION TRANSACTION TRANSACTION TRANSACTION MERGER TOWERS ADJUSTMENTS TOTAL
----------- ----------- ----------- ----------- ----------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues..... $2,385 $6,930 $13,477 $1,201 $19,062 $14,491 $ 533 $ 58,079
Operating
expenses........ 1,730 3,309 7,900 255 12,922 2,924 558 29,598
Depreciation and
amortization.... 211 393 2,638 123 111 3,369 162 $ 29,160 36,167
Corporate general
and
administrative.. 1,802 88 2,347 (2,737) 1,500
------ ------ ------- ------ ------- ------- ----- -------- --------
Operating income
(loss).......... 444 1,426 2,939 735 6,029 5,851 (187) (26,423) (9,186)
Interest expense,
net............. 80 110 150 3,900 4,782 9,022
Other expense
(income)........ (30) (7) (65) 213 (111)
------ ------ ------- ------ ------- ------- ----- -------- --------
Income (loss)
from operations
before income
taxes........... $ 364 $1,316 $ 2,969 $ 592 $ 6,094 $ 1,738 $(187) $(31,094) $(18,208)
====== ====== ======= ====== ======= ======= ===== ======== ========
</TABLE>
(b) To record the tax effect of the pro forma adjustments and impact on ATS'
estimated effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
(c) Consists of shares issued or expected to be issued pursuant to the Tower
Separation (36,042,476, assuming the exercise of all ARS Options prior to the
Merger), the Gearon Transaction (5,333,333), the ATC Merger (29,799,358) and
the ATS Stock Purchase Agreement (8,000,000).
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AMERICAN TOWER SYSTEMS
GENERAL
This discussion contains "forward-looking statements" including statements
concerning projections, plans, objectives, future events or performance and
underlying assumptions and other statements which are other than statements of
historical fact. ATS wishes to caution readers that certain important factors
may have affected and could in the future affect ATS' actual results and could
cause ATS' actual results for subsequent periods to differ materially from
those expressed in any forward-looking statement made by or on behalf of ATS.
These important factors include among others, the risk factors set forth
herein under "Risk Factors--Risk Factors Relating to American Tower Systems".
The discussion should be read in conjunction with the American Tower Systems
Consolidated Financial Statements and the notes thereto contained elsewhere in
this Prospectus. As ATS was a wholly-owned subsidiary of American Radio during
the periods presented, the consolidated financial statements may not reflect
the results of operations or financial position of ATS had it been an
independent, public company during the periods. Because of ATS' relatively
brief operating history and the large number of recent acquisitions, the
following discussion, while presented to satisfy certain SEC disclosure
requirements, will not necessarily reveal any significant developing or
continuing trends. See "Business of American Tower Systems--Growth Strategy".
ATS was formed in July 1995 to capitalize on the opportunity in the
communications site industry. ATS is a leading independent owner and operator
of wireless communications towers in the United States. On a pro forma basis,
ATS currently owns and operates in excess of 1,580 towers in 39 states and the
District of Columbia, including approximately 510 towers managed for third
party owners (of which approximately 255 are rooftop towers). ATS' rapid
growth has come from numerous strategic acquisitions during 1996 and 1997.
During 1996, ATS acquired approximately ten communications sites and site
management businesses involving approximately 250 sites for an aggregate
purchase price of approximately $21.0 million. Through September 1997, its
acquisition activity accelerated and ATS acquired approximately 360 sites (and
related site management businesses) for an aggregate purchase price of
approximately $62.8 million.
RESULTS OF OPERATIONS
Management expects that acquisitions consummated to date and the major
acquisition now pending (the ATC Merger) will have a material impact on future
revenues, expenses and income from continuing operations. As indicated in the
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1996 and the nine months ended September 30, 1997,
there is a dramatic difference between the historical results and the pro
forma results for each of the foregoing items. The notes to the Unaudited Pro
Forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997 indicate the
effect of certain of the acquisitions, both consummated and pending, and their
impact on revenues, expenses and income from continuing operations. In that
connection, the increase in operating expenses and, to a greater extent,
depreciation and amortization, each as a percentage of net revenues in the pro
forma information compared to the historical information, should be noted. The
effects shown do include all of the ATS Pro Forma Transactions which, as
explained elsewhere herein, do not constitute all of the Recent Transactions.
See "Business of American Tower Systems--Recent Transactions". Since January
1, 1997, ATS has consummated more than 15 acquisitions involving more than 525
communications sites (of which approximately 340 sites are represented by the
ATS Pro Forma Transactions that have been consummated and approximately 60 are
sites on which towers are to be built), in a variety of regions for an
aggregate purchase price of approximately $290.0 million (of which
approximately $240.8 million is represented by ATS Pro Forma Transactions
which have been consummated). In addition, the ATC Merger (which is included
in the ATS Pro Forma Transactions) will represent the acquisition of not less
than an additional 775 communications sites for approximately 35% of the pro
forma ATS Common Stock. Accordingly, the impact of the Recent Transactions
which are not included in the pro forma financial information on revenues,
expenses and income from continuing operations, when compared to those that
are so included, is not likely to prove material. Finally, the impact of
40
<PAGE>
the construction program of ATS is not reflected to any significant extent in
the pro forma information because most of that activity is of more recent
origin and is expected to accelerate in 1998. Management believes that such
activity will have a material effect on future operations, which effect, in
the initial years, will probably be negative until such time, if ever, as the
newly constructed towers approach full or close to full utilization.
Management believes that ARS common stockholders should be aware of the
dramatic changes in the nature and scope of ATS' business in reviewing the
ensuing discussion of comparative historical results.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (DOLLARS IN THOUSANDS)
As of September 30, 1997, ATS owned and/or operated approximately 370
wireless communications sites principally in the Northeast and Mid-Atlantic
regions, Florida and California. As of September 30, 1996, ATS owned and/or
operated approximately 250 wireless communications sites, principally in the
Northeast and Mid-Atlantic regions and Florida. See the Notes to the
Consolidated Financial Statements of American Tower Systems for a description
of the acquisitions consummated in 1997 and 1996. These transactions have
significantly affected operations for the nine months ended September 30, 1997
as compared to the nine months ended September 30, 1996.
Net revenues were $7,902 for the nine months ended September 30, 1997
compared to $1,858 for the same nine months in 1996, an increase of $6,044 or
325.3%. This increase was attributable to the impact of communications sites
and related business acquisitions that occurred in the first nine months of
1997.
Tower lease revenues were $4,803 or 60.8% of net revenues for the nine
months ended September 30, 1997 compared to $1,057 or 56.9% of net revenues
for the same nine months in 1996; an increase of $3,746. This increase was
attributable to revenue growth from the communications site acquisitions that
occurred in the first nine months of 1997.
Sublease revenues were $702 or 8.9% of net revenues for the nine months
ended September 30, 1997 compared to $296 or 15.9% of net revenues for the
same period in 1996; an increase of $406. This increase was due to the impact
of revenue growth from the communications site acquisitions that occurred in
the first nine months of 1997.
Management fee revenues were $621 or 7.9% of net revenues for the nine
months ended September 30, 1997 compared to $362 or 19.5% of net revenues for
the same nine months in 1996; an increase of $259. The increase is due to the
increased number of site management agreements ATS assumed in connection with
the communications site acquisitions that occurred in the first nine months of
1997.
Consulting revenues from site acquisition services were $1,436 or 18.2% of
net revenues for the nine months ended September 30, 1997. The revenues are
attributable to the acquisition of a company in May of 1997, which performs
site acquisition professional services to customers in the wireless
communications industry.
Operating expenses excluding depreciation and amortization and corporate
general and administrative expenses were $3,588 for the nine months ended
September 30, 1997 compared to $1,066 for the same period in 1996, an increase
of $2,522. This increase was due to the impact of increased costs associated
with ATS' acquisitions.
Depreciation and amortization was $2,706 and $614 for the nine months ended
September 30, 1997 and 1996, respectively, an increase of $2,092. This
increase was primarily attributable to the increase in depreciable and
amortizable assets resulting from the 1996 and 1997 acquisitions, and to a
lesser extent, completed construction projects.
Corporate general and administrative expenses increased to $919 for the nine
months ended September 30, 1997 from $506 for the nine months ended September
30, 1996, an increase of $413 or 81.6%. This increase was primarily
attributable to the higher personnel costs associated with supporting ATS'
greater number of tower properties and growth strategy.
41
<PAGE>
Interest income was $97 for the nine months ended September 30, 1997
compared to $18 for the nine months ended September 30, 1996, an increase of
$79. The increase is attributable to higher investable cash balances and
interest income earned on a note receivable in 1997 as compared to 1996.
Interest expense net of amounts capitalized was $1,318 for the nine months
ended September 30, 1997 compared to $0 for the 1996 period, an increase of
$1,318. The increase is related to higher borrowing levels under the Tower
Loan Agreement in 1997 as compared to 1996. Such borrowings were used to fund
the 1997 acquisitions.
Minority interest in net earnings of subsidiary was $221 for the nine months
ended September 30, 1997 compared to $75 for the 1996 period, an increase of
$146. This represents the elimination of the minority shareholder's earnings
of consolidated subsidiaries. The increase is related to increased overall
earnings of ATS Needham, LLC, in which ATS holds a 50.1% interest.
The income tax benefit for the nine months ended September 30, 1997 was $49
as compared to an income tax provision of $69 for nine months ended September
30, 1996. The effective tax rate for the nine months ended September 30, 1997
was approximately 6% compared to 18% in 1996. The effective rate in 1997 and
1996 is due to the effect of permanent differences, principally amortization
of non-deductible goodwill, on certain stock acquisitions.
The net loss was $707 for the nine months ended September 30, 1997 compared
to $454 for the nine months ended September 30, 1996, as a result of the
factors discussed above.
Tower Cash Flow for the nine months ended September 30, 1997 was $4,314 as
compared to $792 for the nine months ended September 30, 1996, as a result of
the factors discussed above.
EBITDA for the nine months ended September 30, 1997 was $3,395 as compared
to $286 for the nine months ended September 30, 1996, as a result of the
factors discussed above.
YEAR ENDED DECEMBER 31, 1996 AND PERIOD ENDED DECEMBER 31, 1995 (DOLLARS IN
THOUSANDS)
As of December 31, 1996, ATS owned and/or operated approximately 260
wireless communications sites principally in the Northeast and Mid-Atlantic
regions and Florida. As of December 31, 1995, ATS owned and/or operated one
wireless communications site in Florida. See the Notes to the ATS consolidated
financial statements for a description of the acquisitions consummated in
1996. These transactions have significantly affected operations for the year
ended December 31, 1996 as compared to the period from July 17, 1995 (date of
incorporation) to December 31, 1995.
Net revenues were $2,897 for the year ended December 31, 1996 compared to
$163 for period ended December 31, 1995, an increase of $2,734. This increase
was primarily attributable to the impact of the tower site acquisitions that
occurred in 1996.
Tower lease revenues were $1,804 or 62.3% of net revenues for the year ended
December 31, 1996 compared to $163 or 100% of net revenues for the period
ended December 31, 1995; an increase of $1,641. This increase was attributable
to revenue growth from the communications site acquisitions that occurred
during 1996.
Sublease revenues were $468 for the year ended December 31, 1996 compared to
$0 for the period ended December 31, 1995. This increase was attributable to
revenue growth from the communications site acquisitions that occurred during
1996.
Management fee revenues were $467 for the year ended December 31, 1996
compared to $0 for the period ended December 31, 1995. This increase was
attributable to revenue growth from the communications site acquisitions that
occurred during 1996.
42
<PAGE>
Operating expenses excluding depreciation and amortization and corporate
general and administrative expenses were $1,362 for the year ended December
31, 1996 compared to $60 for the 1995 period, an increase of $1,302. This
increase was due to the impact of increased costs associated with ATS'
acquisitions and revenue growth.
Depreciation and amortization was $990 for the year ended December 31, 1996
and $57 for the 1995 period, an increase of $933. This increase was primarily
attributable to the increase in depreciable and amortizable assets resulting
from the 1996 acquisitions.
Corporate general and administrative expenses were $830 for the year ended
December 31, 1996 and $230 for the 1995 period, an increase of $600. This
increase was primarily attributable to the higher personnel costs associated
with supporting ATS' greater number of tower properties.
Interest income was $36 for the year ended December 31, 1996 and $0 for the
1995 period. The increase is attributable to higher investable cash balances
in 1996 as compared to 1995.
Minority interest in net earnings of subsidiary was $185 for the year ended
December 31, 1996. This represents the elimination of the minority
shareholder's earnings of consolidated subsidiaries. ATS purchased its 50.1%
interest in ATS Needham, LLC, in July 1996.
The income tax provision for the year ended December 31, 1996 was $46 as
compared to a benefit for income taxes of $74 for the 1995 period. The
effective tax rate for the year ended December 31, 1996 was approximately 11%
compared to 40% in 1995. The effective rate in 1996 is due to the effect of
permanent differences, principally amortization of non-deductible goodwill on
certain stock acquisitions. The effective tax rate in 1995 was consistent with
the statutory rate.
The net loss was $480 for the year ended December 31, 1996 compared to $110
for the 1995 period, as a result of the factors discussed above.
Tower Cash Flow was $1,535 for the year ended December 31, 1996 as compared
to $103 for the year ended December 31, 1995, as a result of the factors
discussed above.
EBIDTA was $705 for the year ended December 31, 1996 as compared to a
negative $127 for the year ended December 31, 1995, as a result of the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
ATS' liquidity needs arise from its acquisition-related activities, debt
service, working capital, and capital expenditures. Historically, ATS has met
its operational liquidity needs with internally generated funds and has
financed the acquisition of tower related properties, including related
working capital needs, with a combination of contributions from American Radio
and bank borrowings. For the nine months ended September 30, 1997, cash flow
from operating activities was $3.1 million, as compared to $1.0 million for
the nine months ended September 30, 1996. The change is primarily attributable
to working capital investments related to communications site acquisitions and
growth.
Cash flows used for investing activities were $74.3 million for the nine
months ended September 30, 1997. ARS funded substantially all of the ATS
investing activities during 1996.
Cash provided by financing activities was $71.1 million for the nine months
ended September 30, 1997 as compared to $.6 million for the nine months ended
September 30, 1996. The increase in 1997 is due to the impact of borrowings
under the Tower Loan Agreement, offset somewhat by contributions from American
Radio.
Pending Sale of American Radio Operations and Tower Separation: In September
1997, ARS entered into a merger agreement with CBS, pursuant to which a
subsidiary of CBS will merge with and into ARS, each holder
43
<PAGE>
of ARS Common Stock at the Effective Time of the Merger will receive $44.00
per share in cash and, assuming the Tower Merger has not been consummated, a
share of the same class of ATS Common Stock as the share of ARS Common Stock
surrendered, and ARS will become a subsidiary of CBS. As a result of the Tower
Separation, ATS will cease to be a subsidiary of, or otherwise be affiliated
with, ARS and will thereafter operate as an independent publicly held company.
ARS and ATS will enter into certain agreements pursuant to the Merger
Agreement providing for, among other things, the orderly separation of ARS and
ATS, certain closing date adjustments based on ARS' debt levels and working
capital (current assets less defined liabilities), the transfer of lease
obligations to ATS of leased space on certain towers owned or leased by ARS to
ATS, and the allocation of certain tax liabilities between ARS and ATS and
certain indemnification obligations of ATS to ARS. The Tower Separation will
result in a taxable gain to ARS, of which $20.0 million will be borne by ARS,
and the remaining obligation (currently estimated at approximately $66.6
million, based on an assumed value of ATS Common Stock of $10.00 per share)
will be required to be borne by ATS pursuant to the Merger Agreement. The
liability is expected to be paid with borrowings under the Tower Loan
Agreement. For each $1.00 by which such fair market value exceeds or is less
than $10.00 per share, the federal tax liablility would increase or decrease
by approximately $14.8 million. In addition, state taxes could be payable by
ARS in connection with the Tower Separation for which ATS would also be
responsible. See "The Merger and Tower Separation--ARS-ATS Separation
Agreement--Sharing of Tax Consequences".
Prior to the Tower Separation, ARS intends to increase its overall
investment in ATS from $51.4 million at September 30, 1997 to $150.0 million
and to contribute tower properties with a net book value of approximately $4.2
million to ATS; 14 of the 16 towers to be so contributed were transferred in
January 1998. In January 1998, ATS issued 8,000,000 shares of ATS Common Stock
at a purchase price of $10.00 per share, for an aggregate purchase price of
$80.0 million, of which an aggregate of 4,487,500 shares of ATS Class B Common
Stock and 450,000 shares of ATS Class A Common Stock were issued in exchange
for an aggregate of $49.375 million of notes secured by ARS Common Stock
having a market value of not less than 175% of the principal amount and
accrued and unpaid interest on such notes. These transactions will increase
ATS' ability to fund acquisitions and meet its liquidity and capital resource
needs.
Credit Agreements: As of September 30, 1997, ATS had approximately $54.2
million of total long-term debt (including the current portion thereof)
outstanding. This included approximately $52.5 million of borrowings
outstanding under ATS' then credit facility and approximately $1.7 million
outstanding under other obligations. As of such date, assuming consummation of
all of the Recent Transactions relating to ATS, the ATS Stock Purchase
Agreement and the Tower Separation, the aggregate principal amount outstanding
under the Tower Loan Agreement would have been approximately $321.3 million.
In October 1997, ATS entered into the Tower Loan Agreement, which replaced the
previously existing credit facility. All amounts outstanding under the
previous facility ($55.0 million) were repaid with proceeds from the Tower
Loan Agreement. The Tower Loan Agreement provides ATS with a $250.0 million
loan commitment based on ATS maintaining certain operational ratios and an
additional $150.0 million loan at the discretion of ATS, which is available
through June 2005. Following the closing of the Tower Loan Agreement and
repayment of amounts outstanding under the previous agreement, ATS incurred an
extraordinary loss in the fourth quarter of 1997 of approximately $1.2 million
which will be recorded net of the applicable income tax benefit, representing
the write-off of deferred financing fees associated with the previous
facility. The terms of the Tower Loan Agreement are discussed in the Notes to
the Consolidated ATS Financial Statements. In January 1998, the Tower Loan
Agreement was amended to reflect the transfer of substantially all of the
assets and business of ATSI (immediately prior to consummation of the Gearon
Transaction) to ATSLP, as a consequence of which ATSI and ATSLP are co-
borrowers and jointly and severally liable under the Tower Loan Agreement and
various subsidiaries of ATS and ATSI have guaranteed all of the obligations of
ATSI and ATSLP under the Tower Loan Agreement. As of the date of this
Prospectus, approximately $132.5 million of borrowings were outstanding under
the Tower Loan Agreement.
In order to finance acquisitions of tower related properties and for general
corporate purposes, ATS has borrowed and expects to continue to borrow under
the Tower Loan Agreement. A substantial portion of ATS'
44
<PAGE>
cash flow from operations is required for debt service. Accordingly, ATS'
leverage could make it vulnerable to a downturn in the operating performance
of its tower properties or in economic conditions.
ATS believes that its cash flows from operations will be sufficient to meet
its debt service requirements for interest and scheduled payments of principal
under the Tower Loan Agreement. If such cash flow is not sufficient to meet
such debt service requirements, ATS may be required to sell equity securities,
refinance its obligations or dispose of one or more of its properties in order
to make such scheduled payments. There can be no assurance that ATS would be
able to effect any of such transactions on favorable terms.
ATS historically has had sufficient cash from its operations to meet its
working capital needs, apart from needs generated by acquisitions and
construction, and believes that it has sufficient financial resources
available to it, including borrowings under the Tower Loan Agreement, to
finance operations for the foreseeable future.
ATS has entered into several merger and acquisition agreements (see the
Notes to the ATS Consolidated Financial Statements). The consummation of
certain of the transactions contemplated by these agreements is subject to,
among other things, the expiration or earlier termination of the HSR Act
waiting period. Unless otherwise noted, ATS intends to effect all of the
Recent Transactions as soon as the necessary approvals are obtained and any
conditions to closing are satisfied. ATS intends to finance the acquisitions
with contributions from American Radio, available cash, borrowings under the
Tower Loan Agreement, and, in certain cases, issuance of equity securities.
ATS made approximately $7.8 million in capital expenditures in the nine
months ended September 30, 1997, principally related to tower construction.
ATS expects capital expenditures in 1998 to be approximately $60.0 million
(exclusive of ATC which plans to construct approximately 125 towers at a cost
of approximately $28.0 million) and of up to $42.0 million to construct
approximately 200 towers as to which ATS has submitted a bid), consisting
principally of tower site construction and ongoing technical improvements. To
the extent that funds generated from operations, or available cash, are
insufficient to finance non-recurring capital expenditures, ATS would seek to
borrow the necessary funds under the Tower Loan Agreement. The availability of
funds under the Tower Loan Agreement is dependent upon ATS being able to meet
certain leverage ratios. Assuming consummation of all of the Recent
Transactions and the Merger, management believes that, in light of current
construction plans and potential acquisitions, ATS will require additional
financing during 1998. Any such financing could take the form of an increase
in the maximum borrowing levels under the Tower Loan Agreement, the issue,
publicly or privately, of debt securities (which could have the effect of
increasing its consolidated leverage ratios) or equity securities (which, in
the case of ATS Common Stock or securities convertible into or exercisable for
ATS Common Stock, would have a dilutive effect on the proportionate ownership
of ATS by its then existing common stockholders). There can be no assurance
that any such financing would be available on favorable terms.
Management expects that the consummated acquisitions, the consummation of
the ATC Merger and current and future construction activities will have a
material impact on liquidity. As indicated in the Unaudited Pro Forma
Condensed Consolidated Balance Sheet for the nine months ended September 30,
1997, and the foregoing discussion there is a substantial difference in the
historical liquidity and pro forma liquidity of ATS. Management believes that
the acquisition activities once integrated will have a favorable impact on
liquidity and will offset the initial effects of the funding requirements.
Management also believes that the construction activities may initially have
an adverse effect on the future liquidity of ATS as newly constructed towers
will initially decrease the overall liquidity of ATS, although as such sites
become more fully operational and achieve higher utilization, they should
generate cash flow and, in the longer term, increase liquidity. Management
intends to plan its construction activities in a manner designed to ensure
that no violations occur in the Tower Loan Agreement. However, in order to
facilitate such construction activity and to avoid any such violation ATS will
require, as noted above, additional financing during 1998. Any such financing
could take the form of an increase in the maximum borrowing levels under the
Tower Loan Agreement, the issue, publicly or privately, of debt securities
(which could have the effect of increasing its consolidated leverage ratios)
or equity securities (which, in the
45
<PAGE>
case of ATS Common Stock or securities convertible into or exercisable for ATS
Common Stock, would have a dilutive effect on the proportionate ownership of
ATS by its then existing common stockholders). There can be no assurance that
any such financing would be available on favorable terms.
See the Notes to the ATS Consolidated Financial Statements with respect to
acquisition and related construction commitments.
YEAR 2000
ATS is aware of the issues associated with the Year 2000 as it relates to
information systems. The Year 2000 is not expected to have a material impact
on ATS' current information systems because its current software is either
already Year 2000 compliant or required changes are not expected to be
material. Based on the nature of ATS' business, ATS anticipates it is not
likely to experience material business interruption due to the impact of Year
2000 compliance on its customers and vendors. As a result, ATS does not
anticipate that incremental expenditures to address Year 2000 compliance will
be material to ATS' liquidity, financial position or results of operations
over the next few years.
INFLATION
The impact of inflation on ATS' operations has not been significant to date.
However, there can be no assurance that a high rate of inflation in the future
will not have material adverse effect on ATS' operating results.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards (FAS) No. 128, "Earnings Per
Share" ("FAS 128"), which ATS will adopt in the fourth quarter of 1997.
In June 1997, the FASB released FAS No. 130 "Reporting Comprehensive Income"
("FAS 130"), and FAS No. 131 "Disclosures about Segments of and Enterprise and
Related Information" ("FAS 131"). These pronouncements will be effective in
1998. FAS 130 establishes standards for reporting comprehensive income items
and will require ATS to provide a separate statement of comprehensive income;
reported financial statement amounts will not be affected by this adoption.
FAS 131 established standards for reporting information about the operating
segments in its annual report and interim reports and will require ATS to
adopt this standard in the first quarter of 1998.
46
<PAGE>
INDUSTRY OVERVIEW
Communications site owners and operators have benefited in recent years from
a substantial increase in demand for wireless communications services. The
CTIA estimates that the number of subscribers to wireless telephone services
was approximately five million in 1990. According to The Strategis Group, a
telecommunications marketing research firm, the number of subscribers to
cellular and PCS is over 50 million today, and is projected to increase to
over 100 million by the year 2001. This demand has prompted the issuance of
new wireless network licenses and construction of new wireless networks. ATS
believes that the increase in demand for wireless communications is
attributable to a number of factors, including: the increasing mobility of the
U.S. population and the growing awareness of the benefits of mobile
communications, technological advances in communications equipment, decreasing
costs of wireless services, favorable changes in telecommunications
regulations, and business and consumer preferences for higher quality voice
and data transmission. Consequently, more towers will be required to
accommodate the anticipated increase in the demand for higher frequency
technologies (such as PCS and ESMR) which have a reduced cell range and thus
require a more dense network, or "footprint", of towers. PCIA estimates that
over 100,000 additional antennae sites will have to be built to accomodate the
needs of cellular and PCS over the next ten years.
ATS believes that, as the wireless industry has become more competitive,
many carriers are seeking to focus their capital and operation resources
primarily on activities that contribute directly to subscriber growth, such as
the marketing and distribution of products. Management believes that these
carriers, therefore, may seek to preserve capital and speed access to their
markets through the outsourcing of infrastructure requirements such as
communications site ownership, construction, operation and maintenance. Also,
in order to accelerate network deployment or expansion and to generate
efficiencies, carriers are increasingly co-locating transmission
infrastructure with that of other network operators. The need for co-location
has also been driven by regulatory restrictions and the growing trend in local
municipalities to slow the proliferation of towers in their communities by
requiring that towers accommodate multiple tenants.
While the wireless communications industry is experiencing rapid growth, the
television broadcasting industry, with strong encouragement from both Congress
and the FCC, is actively planning its strategy for the transition from analog
to digital technology. ATS believes that this transition will require a
substantial investment in enhanced broadcast infrastructure, including the
construction or reengineering of broadcast towers. While ATS expects much of
the associated capital requirements will be borne by the broadcasters,
management believes that a significant opportunity exists to invest profitably
in the creation of tower capacity designed to accommodate digital antennas for
television broadcasters. Management believes that, as with the deployment of
towers for the wireless carriers, speed to market and limited capital
resources will cause certain broadcasters to outsource the construction or
reengineering of their towers in order to accommodate digital technology.
The attractiveness of a communications site is dependent on its location and
the loaded capacity at certain wind speeds of its towers, which determine its
desirability to wireless carriers and the number of antennae that its towers
can support. Virtually all forms of wireless communications depend upon
placing transmitting and receiving antennae at some level of altitude, the
height depending on whether the site is elevated above sea level or not and
what is in the surrounding area. A transmitter's height on a tower and such
tower's location determine the line-of-sight of such transmitter with the
horizon and, consequently, the distance a signal can be transmitted. Some
users, such as paging companies and specialized mobile radio ("SMR") providers
in rural areas, need higher elevations for broader coverage. Other businesses
such as ESMR, PCS and cellular companies in metropolitan areas usually do not
need to place their equipment at the highest tower point to maximize
transmission distance and quality.
A tower can be either self-supported or supported by guy wires. There are
two types of self-supported towers: the lattice and the monopole. A lattice
model is usually tapered from the bottom up and can have three or four legs. A
monopole is a tubular structure that is typically used as a single purpose
tower or in places where there are space constraints or a need to address
aesthetic concerns. Self-supported towers typically range in height from 50-
200 feet for monopoles and up to 1,000 feet for lattices, while guyed towers
can reach 2,000 feet or
47
<PAGE>
more. A typical communications site consists of a compound enclosing the tower
or towers and an equipment shelter (which houses a variety of transmitting,
receiving and switching equipment).
Rooftop or other building top sites are more common in urban downtown areas
where tall buildings are generally available and multiple communications sites
are required due to high traffic density. One advantage of a rooftop site is
that zoning regulations typically permit installation of antennae. In cases of
such population density, neither height nor extended radius of coverage are as
important. Moreover, the installation of a tower structure in urban areas will
often prove to be impossible due to zoning restrictions, land cost and land
availability.
The cost of construction of a tower varies both by site location (which will
determine, among other things, the required height of the tower) and type of
tower. Non-broadcast towers (whether on a rooftop or the ground) generally
cost between approximately $150,000 and $200,000, while broadcasting towers
(which generally are built to bear a greater load) generally cost between
approximately $300,000 and $1.0 million if on an elevated location and between
approximately $1.0 million and $3.5 million if on flat terrain. While the
number of tenants which a tower can accommodate will vary depending on the
nature of the services provided by such tenants, well-constructed non-
broadcast towers generally are capable of housing between five and ten tenants
using an aggregate of between 25 and 50 antennae and broadcasting towers
generally are capable of housing between ten and forty tenants using an
aggregate of between 50 and 100 antennae. Annual rental payments vary
considerably depending upon (i) the type of service being provided; (ii) the
size of the line and the number and weight of the antennae on the tower; (iii)
the existing capacity of the tower; (iv) the location on the tower; and (v)
the competitive environment.
Lease terms vary depending upon the industry user, with television and radio
broadcasters tending to prefer longer term leases (15 to 20 years) than
wireless communications service providers (five to ten years). In either case,
most of such leases contain provisions for multiple renewals at the option of
the tenant. Governmental agencies, because of budgetary restrictions,
generally have one year leases, but tend to renew automatically. Leases tend
to be renewed because of the complications associated with moving antennae. In
the case of a television or radio broadcaster, such a move might necessitate
FCC approval and could entail major dislocations and the uncertainty
associated with building antennae in new coverage areas. In the case of
cellular, PCS and other wireless users, moving one antenna might necessitate
moving several others because of the interlocking grid-like nature of such
systems. In addition, the increasing difficulty of obtaining local zoning
approvals, the environmental activism of community groups, and the
restrictions imposed upon owners and operators by the FAA and upon tenants by
the FCC, tend to reduce significantly the number of alternatives available to
a tower user. Leases generally provide for annual automatic price increases
(escalator provisions) based on specified estimated cost measures or on
increases in the consumer price index. Owners and operators generally also
receive fees for installing customers' equipment and antennae on the
communications site.
Wireless communications towers are owned by a wide range of companies,
including wireless communications providers, regional Bell operating
companies, long distance companies, television and radio broadcasting
companies, independent tower operators, utilities and railroads. Despite the
increasing demand for communications sites, the industry remains highly
fragmented, with few independent operators owning a large number of towers.
ATS estimates that no one independent tower owner and operator (one which owns
and operates communications sites principally for other entities) owns more
than 2% of the towers in the United States. The pace of consolidation has
begun to accelerate, however, as the larger independent operators continue to
acquire small local or regional operators and purchase communications sites
and related assets from wireless communications carriers. Management believes
that a major factor contributing to such consolidation is the emergence of
many major companies seeking to provide increasingly sophisticated wireless
services on a national basis. This, in turn, creates a need for substantial
companies capable of developing and constructing networks of communications
sites and maintaining and servicing the sophisticated support facilities
associated with ongoing operations. ATS believes that the national and other
large wireless service providers will prefer to deal with a company that can
meet the majority of such providers' needs within a particular market or
region, rather than, as has been the historical model, a large number of
individual tower owners, construction companies
48
<PAGE>
and other service providers. There can, of course, be no assurance that ATS
will be able to secure a substantial portion of such potential business. See
"Risk Factors--Factors Relating to American Tower Systems".
ATS believes that there is another significant trend influencing the
wireless service providers that is likely to continue to have important
implications for independent tower operators. In the increasingly competitive
environment, ATS believes that many carriers are seeking to dedicate their
capital and operations primarily to those activities, such as marketing and
distribution of products, that directly contribute to subscriber growth.
Management believes these carriers, therefore, may seek to preserve capital
and to speed access to their markets through the outsourcing of infrastructure
network requirements such as communications site ownership, construction,
operation and maintenance. Previously, carriers typically sourced many of such
services in-house while local non-integrated service contractors focused on
specific segments such as radio frequency engineering, site acquisition and
tower construction. To meet those needs, independent operators have expanded
into a number of associated network and communications site services,
including the selection and acquisition of communications sites (including the
resolution of zoning and permitting issues), the design of wireless and
broadcast sites and networks, and the construction or supervision of
construction of towers.
Unlike the fragmented nature of the communications site business, customers
in all segments of the wireless communications industry and the broadcast
industry tend to be large, financially responsible national companies. As a
consequence of the foregoing factors, as well as the lack of seasonality of
the industry, the communications site industry is characterized by a
predictable and recurring stream of income.
49
<PAGE>
BUSINESS OF AMERICAN TOWER SYSTEMS
GENERAL
American Tower Systems is a leading independent owner and operator of
wireless communications towers in the U.S. with over 1,580 towers in 39 states
and the District of Columbia, including approximately 510 towers managed for
third party owners (of which approximately 255 are rooftop towers). Of such
1,580 towers, approximately 810 are presently operated by ATS (approximately
750 of which are owned by it and the balance of which are managed for others),
and approximately 775 are presently operated by ATC (of which approximately
125 are managed for a third party; ATC is a party to agreements or letters of
intent to acquire approximately 125 currently operating towers). In addition
to such 1,580 towers, ATS and ATC have more than 90 and 50 towers,
respectively, currently under construction. ATS rents tower space and provides
related services to a diverse range of wireless communications service
industries, including PCS, cellular, paging, SMR, ESMR and fixed microwave, as
well as radio and television broadcasters. ATS has significant tower networks
throughout the United States with its most significant networks in California,
Florida and Texas, and owns and operates communications sites or is
constructing networks of tower sites in cities such as Albuquerque, Atlanta,
Austin, Baltimore, Boston, Dallas, Jacksonville, Kansas City, Los Angeles,
Miami-Ft. Lauderdale, Nashville, New York, Philadelphia, Sacramento, San
Antonio, San Diego, San Francisco, Tucson, Washington, D.C. and West Palm
Beach.
ATS' primary business is the leasing of antennae sites on multi-tenant
towers and rooftops, primarily for its own towers and, to a lesser extent, for
unaffiliated communications site owners. In support of its rental business,
ATS also offers its customers network development services, including: site
acquisition, zoning, antennae installation, site construction and network
design. These services are offered on a time and materials or fixed fee basis
or incorporated into build to suit construction contracts. American Tower
Systems is also engaged in the video, voice and data transmission business,
which it currently conducts in the New York City to Washington, D.C. corridor
and in Texas. For the nine months ended September 30, 1997, giving effect to
the ATS Pro Forma Transactions, ATS had revenues and EBITDA of $66.0 million
and $30.4 million, respectively.
On a pro forma basis, ATS' customers (which aggregate more than 2,390)
include many of the major companies in the wireless communications industry,
including: (i) cellular and PCS, including AT&T Corp. ("AT&T"), Bell Atlantic
NYNEX Mobile ("Bell Atlantic Mobile"), BellSouth Mobility, Inc. ("BellSouth
Mobility"), GTE Mobilnet of South Texas ("GTE Mobilnet"), Houston Cellular,
Prime Co. ("Prime"), SBC Communications, Inc. ("SBC Communications"), Southern
New England Telephone ("SNET"), Southwestern Bell Mobile Systems (operating as
Cellular One) ("Southwestern Bell") and Sprint Corp. ("Sprint"); (ii) paging,
including Arch Communications Group Inc. ("Arch"), Metrocall, Inc.
("Metrocall"), PageMart Inc. ("PageMart"), PageNet, Inc. ("PageNet") and
Pittencrief Communications, Inc. ("Pittencrief Communications"); (iii) ESMR,
including Nextel Communications, Inc. ("Nextel"); and (iv) the television and
radio broadcasting industries including American Broadcasting Company ("ABC"),
American Radio, CBS, Chancellor Media Corporation ("Chancellor Media"), Clear
Channel Communications, Inc. ("Clear Channel"), Cable News Network ("CNN"),
The Fox Network ("Fox"), Jacor Communications, Inc. ("Jacor") and the National
Broadcasting Company ("NBC"). ATS' site acquisition activities, which affords
the opportunity to provide additional services such as the construction and
leasing of communications sites, are provided to Bell Atlantic Mobile, SNET
and Southwestern Bell, and ATS has constructed or is constructing towers on a
build to suit basis for companies such as Nextel, Omnipoint and Southwestern
Bell. The principal users of ATS' video, voice and data transmission services
are television broadcasters and other video suppliers such as CBS, CNN, Fox
and Home Box Office ("HBO"). While none of ATS' customers accounted for as
much as 10% of its pro forma revenues for the nine months ended September 30,
1997, most of the named customers accounted for more than 1% of such revenues
and each is considered by ATS to be an important customer.
Giving effect to all ATS Pro Forma Transactions, management estimates that
its site leasing activities, which it believes to generate the highest profit
margin of its businesses, account for approximately 49% of such revenues, site
acquisition activities (including construction for others) account for 31%,
and the video, voice and
50
<PAGE>
data transmission business accounts for 20%. However, in light of management's
intention to focus on construction (build to suit) activities, which will
increase the number of sites available for leasing, it believes that antennae
site leasing is likely to grow at a more rapid rate than other aspects of ATS'
business.
ATS derives its revenue from various industry segments. The percentage of
ATS' revenues derived from the various industry segments is approximately as
follows: PCS--15%; paging--24%; cellular--12%; ESMR/SMR--12%; radio and
television broadcasting--9%; microwave--3%; private industrial users--3%; and
governmental and others--2%. The remaining approximately 20% of ATS' revenues
are derived from its video, voice and data transmission customers which are
primarily the major television networks, CNN and HBO. Management believes that
the foregoing percentages are not necessarily indicative of future
contributions likely to be made by the various aspects of its business or of
the several different types of wireless providers, particularly in light of
the anticipated growth of PCS and cellular compared to other wireless
providers and management's intended focus on build to suit and other tower
construction activities.
GROWTH STRATEGY
ATS' objective is to maintain and extend its position as a leading U.S.
provider of communications sites and network development services to the
wireless communications and broadcasting industries. ATS' growth strategy
includes:
Internal Growth through Selling, Service and Capacity
Utilization. Management believes that a substantial opportunity for
profitable growth exists by maximizing the utilization of existing towers
through targeted sales and marketing techniques. Management believes that
the key to the success of this strategy lies in its ability to develop and
consistently deliver a high level of customer service, and to be widely
recognized as a company that makes realistic commitments and then delivers
on them. Since speed to market and reliable network performance are
critical components to the success of wireless service providers, ATS'
ability to assist its customers in meeting these criteria will ultimately
define its marketing success and capacity utilization. ATS targets wireless
providers that are expanding or improving their existing network
infrastructure as well as those deploying new technologies. ATS focuses on
building or acquiring towers engineered to hold as many tenants as possible
and acquiring towers with underutilized capacity because the costs of
operating a site are largely fixed, and increasing tower utilization
results in significantly improved site operating margins. When a specific
tower reaches full antennae attachment capacity, ATS is often able to
construct an additional tower at the same location, thereby further
leveraging its investment in land, related equipment and certain operating
costs, such as taxes, utilities and telephone service.
Growth by Construction (Build to Suit). ATS believes that attractive
investment returns can be achieved by constructing new tower networks
("footprints") in and around markets in which it already has a presence,
along major highways, and in targeted new markets, particularly markets
that have not been significantly built out by carriers or other
communications site companies. By working with one or more "anchor" tenants
(in much the same manner as a shopping mall developer), ATS will seek to
develop an overall master plan for a particular market by locating new
sites in areas identified by its customers as optimal for their network
expansion requirements (build to suit). ATS generally secures commitments
for leasing prior to commencing construction, thereby minimizing, to some
extent, the risks associated with the investment. See "Risk Factors--Risk
Factors Relating to American Tower Systems--Construction of New Towers". In
certain cases, ATS may identify and secure all zoning and other regulatory
permits for a site in anticipation of customer demand, with actual
construction being delayed until an anchor tenant is secured on reasonable
terms. Strategic acquisitions will also be pursued as a means of filling
out or, in certain cases, initiating, a tower network.
American Tower Systems currently has under construction or plans to
construct during 1998 (exclusive of those which ATC is constructing or
plans to construct) approximately 300 towers (most of which are on a build
to suit basis) at an estimated aggregate cost of approximately $60.0
million. In addition, ATS is actively competing for the opportunity to
construct more than 200 towers in 1998 for an estimated cost of
51
<PAGE>
approximately $42.0 million, although there can be no assurance as to how
many, if any, of such towers ATS will be engaged to construct. ATC has
under construction or plans to construct during 1998 approximately 125
towers at an estimated aggregate cost of approximately $28.0 million.
Because of the relatively attractive initial returns which can be
achieved from new tower construction, and because ATS can design and build
towers to specifications that assure ample future capacity and minimize the
need for future capital expenditures, management intends to place a strong
emphasis on new tower development for the foreseeable future. Management
also intends to pursue new tower construction to service the demand for
digital television and for tower space for radio antennae displaced by
digital television requirements. Over time, management believes that more
than half of its towers will result from new construction, with the
substantial majority of these designed to serve the wireless communications
industry.
ATS believes that the ability to obtain, and commit to, large new
construction (build to suit) projects will require significant financial
resources. Management believes its reputation in the financial community,
including among banks, investment banking firms, institutional investors
and public investors, will attract such capital, on the favorable terms
necessary to finance its growth, although there can be no assurance that
funds will be available to ATS on such terms. Further, management believes
that its cost of capital, relative to the cost of capital of its
competitors, will be an important factor in implementing this aspect of its
growth strategy.
Growth by Acquisition. ATS intends to continue to target strategic
acquisitions in markets or regions where it already owns towers as well as
new markets, including possibly non-U.S. markets. ATS has achieved a
leading industry position primarily through acquisitions. ATS will attempt
to increase revenues and operating margins at acquired communications sites
through expanded sales and marketing efforts, improved customer service,
the elimination of redundant overhead and, in certain instances, increasing
tower capacity. Acquisitions are evaluated using numerous criteria,
including potential demand, tower location, tower height, existing capacity
utilization, local competition, and local government restrictions on new
tower development. ATS also intends to pursue, on a selective basis, the
acquisition of site acquisition companies and providers of video, voice and
data transmission services. ATS may also pursue acquisitions related to the
communications site industry, including companies engaged in the tower
fabrication business.
While to date the majority of ATS' growth has resulted from acquisition
activities, once the Recent Transactions are consummated management expects
to shift ATS' emphasis more towards build to suit and new tower
construction, where it believes investment returns are more attractive. It
will, however, continue to evaluate numerous acquisition prospects, and
expects to consummate selected acquisitions when the economics or fit are
sufficiently attractive.
Growth through the Negotiation of Lease Escalators. The value of a tower
and its growth prospects are affected by the terms of the leases associated
with it. Most leases have escalator provisions (annual automatic increases
based on specified estimated cost measures or on increases in the consumer
price index) that permit ATS to keep pace with inflation. While these
provisions are not by themselves intended to be a primary source of growth,
they provide a stable and predictable growth component which is then
enhanced by increased tower utilization.
PRODUCTS AND SERVICES
Leasing of Antennae Sites. ATS' primary business is the leasing of antennae
sites on multi-tenant towers to companies in all segments of the wireless
communications and broadcasting industries. ATS' communications site business
(including that of ATC) consists of more than 1,580 towers in 39 states and in
the District of Columbia, including approximately 510 towers managed for third
party owners (of which approximately 255 are rooftop towers). Of such 1,580
towers, approximately 810 are presently operated by ATS (approximately 425 of
which are owned by it and the balance of which are managed for others), and
approximately 775 are presently operated by American Tower Corporation (of
which approximately 125 are managed for a third party; ATC is a party to
agreements or letters of intent to acquire approximately 125 currently
operating towers). In addition to such 1,580 towers, ATS and ATC have more
than 90 and 50 towers, respectively, currently under construction.
52
<PAGE>
ATS rents tower space and provides related services for a diverse range of
wireless communications industries, including: PCS, cellular, paging, SMR,
ESMR, paging, fixed microwave, as well as radio and television broadcasters.
ATS has significant networks of sites throughout the United States with its
most significant clusters in California, Florida and Texas, and owns and
operates communications sites or is constructing networks of tower sites in
cities such as Albuquerque, Atlanta, Austin, Baltimore, Boston, Dallas,
Jacksonville, Kansas City, Los Angeles, Miami-Ft. Lauderdale, Nashville, New
York, Philadelphia, Sacramento, San Antonio, San Diego, San Francisco, Tucson,
Washington, D.C. and West Palm Beach.
ATS' leases, like most of those in the industry, generally vary depending
upon the industry user, with television and radio broadcasters preferring long
term leases (generally from 15 to 20 years), and wireless communications
providers favoring somewhat shorter lease terms (generally from five to ten
years), with multiple renewals at the option of the tenant. Leases contain
escalator provisions based on the consumer price index or a predetermined
minimum increase, and tend to be renewed due to the costs and disruption
associated with reconfiguring a network or broadcast location. The number of
antennae which ATS' towers can accommodate varies depending on the type of
tower (broadcast or non-broadcast) and nature of the services provided by such
antennae, although broadcasting towers generally are capable of holding more
and larger antennae and serving more tenants than non-broadcasting towers.
Annual rental payments vary considerably depending upon (i) the type of
service being provided; (ii) the size of the line and the number and weight of
the antennae on the tower; (iii) the existing capacity of the tower; (iv) the
location on the tower; and (v) the competitive environment. Management
believes that it is not possible to state with any degree of precision the
vacancy or unused capacity of a "typical" tower, group of related towers or
all of its towers for a variety of reasons, including, among others, the
variations that occur depending on the types of antennae placed on the tower,
the types of service being provided by the tower users, the type and location
of the tower or towers, the ability to build other towers so as to configure a
"footprint" of related towers, whether any of the users have imposed
restrictions on competitive users, and whether there are any environmental,
zoning or other restrictions on the number or type of users.
Build to Suit Business. Historically, cellular and other wireless service
providers have constructed a majority of towers for their own use, while
usually outsourcing certain services such as site acquisition and construction
management. More recently, however, service providers have expressed a growing
interest in having independent companies own the towers on which they will
secure space under long-term leases. Management believes this trend is the
result of a need among such providers to preserve capital and to speed access
to their markets, as they seek to focus their capital and operational
resources primarily on activities that contribute to subscriber growth, such
as marketing and distribution of products. ATS has positioned itself as an
attractive choice for this build to suit opportunity. It has done so by
acquiring and developing reputable site acquisition companies with established
client relationships in both site acquisition and construction management, and
by securing the financial resources necessary to participate in the build to
suit arena on a substantial scale. Management believes companies that are able
to demonstrate the ability to successfully locate, acquire, permit, finance
and construct towers in a timely manner will be used by a significant number
of wireless service providers on an expanded basis. ATS is currently engaged
in build to suit efforts for a range of clients including Nextel, Omnipoint,
Prime and Southwestern Bell.
In most cases, well engineered and well located towers built to serve the
specifications of an initial anchor tenant in the wireless communications
sector will attract three or more additional wireless tenants over time,
thereby increasing revenue and enhancing margins. ATS has had only limited
experience, to date, with build to suit projects and those that it has
completed and are operational have been on a much smaller scale than those on
which it is now bidding or considering bidding. Management believes that ATS'
favorable results (occupancy and financial) achieved on completed projects is
not representative of the results likely to be achieved from the larger
projects ATS is currently contemplating and, therefore, has not included
information herein with respect to the typical vacancy rates or financial
results that can be expected to be generated by such build to suit projects.
Although build to suit projects involve at least one "anchor" tenant, there
can be no assurance that a sufficient number of additional tenants will be
secured for all or most of the towers to be constructed pursuant to
53
<PAGE>
such projects (particularly the larger ones such as the 600-tower project on
which ATS is bidding as described elsewhere in this Prospectus), to ensure
that such projects will be profitable. Moreover, ATS may find that one of the
reasons that carriers are willing to permit ATS to build towers for them is
that certain or many of such towers may be on sites that are either expensive
or difficult to build on or that they are such that they are unlikely to
attract a sufficient number of other tenants.
Site Acquisition Business. The site selection and acquisition process begins
with the network design. Highway corridors, population centers and
topographical features are identified within the carrier's existing or
proposed network, and drive tests are performed to monitor all PCS, cellular
and ESMR frequencies to locate the systems then operating in that geographic
area and identify where any holes in coverage may be. Based on this data, the
carrier and ATS develop a "search ring", generally of one-mile radius, within
which the site acquisition department identifies land available either for
purchase or lease. ATS personnel select the most suitable sites, based on
demographics, traffic patterns and signal characteristics. The site is then
submitted to the local zoning/planning board for approval. If the site is
approved, in certain instances ATS will supervise construction of the towers
and other improvements on the various communications sites. ATS' site
acquisition services are provided on a fixed fee or time and materials basis.
Existing users of ATS' site acquisition business, include Bell Atlantic
Mobile, SNET and Southwestern Bell. While ATS will continue to provide site
acquisition services to those customers desiring them, it also intends to
actively market its construction and leasing services as an extension of these
services.
Communications Site Management Business. ATS is a leading manager of
communications sites, principally rooftop sites but also including ground
towers, for other owners. A principal aspect of this business is the
development of new sources of revenue for building owners by effectively
managing all aspects of rooftop telecommunications, including two-way radio
systems, microwave, fiber optics, wireless cable, paging and rooftop
infrastructure construction services. ATS currently manages more than 380
sites in 35 states, exclusive of the approximately 125 sites managed by ATC
for a third party. Management contracts are generally for a period of five
years and contain automatic five-year renewal periods unless terminated by
either party on notice prior to such renewal term or upon an uncured default.
Pursuant to these contracts, ATS is responsible for marketing antennae sites
on the tower, reviewing existing and negotiating future license agreements
with tenant users, managing and enforcing those agreements, supervising
installation of equipment by tenants to ensure, among other things, non-
interference with other users, supervising repairs and maintenance to the
towers, as well as site billing, collections and contract administration. In
addition, ATS handles all calls as well as questions regarding the site so
that the building management team or owner is relieved of this responsibility.
For such services, ATS is entitled to a percentage of lease payments, which is
higher for new tenants than for existing tenants. Upon any termination of a
contract, unless because of its default, ATS is entitled to its percentage
with respect to then existing tenants so long as they remain tenants.
Voice, Video and Data Transmission Business. ATS' voice, video and data
transmission business is operated in the New York City to Washington, D.C.
corridor and in Texas. ATS owns a teleport outside of New York City and has an
agreement to acquire a teleport outside of Washington, D.C., and distributes
video, voice and data over the New York to Washington D.C. corridor through a
fiber and microwave network, including 13 towers. The New York teleport system
is located on a 70-acre owned site which is zoned for 29 microwave dishes of
which 22 are existing, thereby providing significant expansion capacity. The
Washington teleport system is located in Northern Virginia, inside of the
Washington Beltway, on ten acres and houses 40 antennae with the capacity for
an additional ten antennae. The network includes both fiber and microwave
channels, is used by all of the major television broadcast networks, and
accesses all domestic and major international satellites in the operating
region. The system is able to distribute voice, video and data through
satellite or terrestrial distribution. The Texas systems consists of a
teleport outside of Dallas that enables it to distribute video, voice and data
from Dallas to Corpus Christi through a fiber and microwave network including
35 towers. This system includes 15 microwave dishes and covers the most
populated area of Texas, servicing Austin, Corpus Christi, Dallas, Houston and
San Antonio. The system connects to all major sports and convention venues,
video companies and broadcast networks in those cities. The principal users of
ATS' video, voice and data transmission services are television broadcasters
and other video suppliers such as CBS, CNN, Fox and HBO.
54
<PAGE>
MANAGEMENT ORGANIZATION
ATS is organized on a regional basis. Management believes that its regional
operations centers should be capable of responding effectively to the
opportunities and customer needs of its defined geographic area and that these
operations centers should have skilled engineers, construction management and
marketing personnel. Management also believes that over time enhanced customer
service and greater operating efficiencies can be achieved by centralizing
certain operating functions, including accounting and lease administration.
Such centralization, when achieved, will enable key information about each
site, tower lease and customer to become part of a centralized database, with
communications links to regional operating centers.
In conjunction with its acquisition of various companies, management
believes it has obtained the services of key personnel with skills in areas
such as engineering, site acquisition, construction management, tower
operations, marketing, lease administration, and finance. However, as ATS
seeks to expand its size and improve on the quality and consistency of service
delivery, it believes it will need to supplement its current workforce in
certain critical areas and intensify its dedication to customer service.
Accordingly, management is actively recruiting key personnel to complete the
staffing of its regional operations centers and to strengthen and deepen its
corporate group. ATS focuses its efforts on recruiting people from the
industry sectors it serves and in some instances recruiting skilled engineers,
marketing and other personnel from outside the communications site, wireless
communications and broadcasting industries.
HISTORY OF ATS
In early 1995, Steven B. Dodge, Chairman of the Board, President and Chief
Executive Officer of American Radio, and other members of American Radio's
management, recognized the opportunity in the communications site industry
through ARS' ownership and operation of broadcast towers. ATS was formed in
July 1995 to capitalize on this opportunity. During 1996, ATS' acquisition
program was modest, entailing the acquisition of companies owning an aggregate
of ten communications sites and managing approximately 250 sites for others,
for an aggregate purchase price of approximately $21.0 million. During that
year, however, ATS entered into several more significant acquisition
agreements that were consummated in 1997.
RECENT TRANSACTIONS
The following transactions constitute the Recent Transactions (of which only
the Meridian Transaction, the Diablo Transaction, the MicroNet Transaction,
the Tucson Transaction, the Gearon Transaction and the ATC Merger are,
together with the Tower Separation and the ATS Stock Purchase Agreement,
included in the ATS Pro Forma Transactions).
Consummated Acquisitions. Since January 1, 1997, ATS has consummated more
than 15 acquisitions (including those agreed to in 1996) involving more than
525 sites (including sites on which towers are to be constructed), in a
variety of regions for an aggregate purchase price of approximately $290.0
million, certain of which are described below.
In May 1997, ATS consummated, among others, three acquisitions as follows:
. the purchase for approximately $13.0 million of two related companies
engaged in the site acquisition business for unaffiliated third parties
in various locations in the United States;
. the purchase for approximately $5.4 million of 21 tower sites, and a
tower site management business, in Georgia, North Carolina and South
Carolina. The acquisition agreement also provided for additional
payments if the seller is able to arrange for the purchase or management
of tower sites presently owned by an unaffiliated public utility in
South Carolina, which payments are estimated to aggregate up to
approximately $1.2 million; management believes that it is unlikely that
any such arrangement will be entered into; and
. the purchase of a 70% interest in a business that will initially own and
operate communications towers that are to be constructed on 58 sites in
northern California; the remaining 30% of the joint venture is
55
<PAGE>
owned by an unaffiliated party. ATS paid the other party approximately
$0.8 million in cash for its 70% interest and is obligated to provide
equity financing for the construction of those towers (estimated at
approximately $5.0 million) as well as any others that the joint venture
may construct.
In July 1997, ATS consummated four unrelated acquisitions, including the
purchase for approximately $33.5 million for 56 sites and a tower site
management business in southern California (the "Meridian Transaction").
In October 1997, ATS consummated two unrelated acquisitions as follows:
. the purchase for approximately $45.0 million of 110 sites and a site
management business primarily in northern California (the "Diablo
Transaction"); and
. the purchase for approximately $70.25 million of 128 owned or leased
tower sites, principally in the Mid-Atlantic region, with the remainder
in California and Texas. The acquisition also provided ATS with its
video, voice and data transmission business (the "MicroNet
Transaction").
In January 1998, ATS consummated the acquisition of OPM-USA-INC. ("OPM"), a
company which owned approximately 90 towers at the time of acquisition (the
"OPM Transaction"). In addition, OPM is in the process of developing an
additional approximately 160 towers that are expected to be constructed during
the next 12 to 18 months. The purchase price, which is variable and based on
the number of towers completed and the forward cash flow of the completed OPM
towers, could aggregate up to $105.0 million, of which approximately $21.3
million was paid at the closing. ATS has also agreed to provide the financing
to OPM to enable it to construct the 160 towers in an aggregate amount not to
exceed $37.0 million (less advances as of consummation aggregating
approximately $5.7 million).
In January 1998, ATS consummated the Gearon Transaction pursuant to which
ATSI merged with a company engaged primarily in the site acquisition business
for unaffiliated third parties that also owned or had under construction 40
tower sites. The merger price of approximately $80.0 million was paid by
delivery of 5,333,333 shares of ATS Class A Common Stock, the payment of
approximately $30.0 million in cash and assumed liabilities.
In January 1998, as part of the Tower Separation, ARS transferred to ATS 14
of the 16 communications sites currently used by American Radio and various
third parties and ARS and ATS entered into leases or subleases of space on the
towers transferred. The remaining two communications sites will be transferred
and leases entered into following acquisition by ARS of the sites from third
parties. See "The Merger and Tower Separation--Lease Arrangements".
In January 1998, ATS consummated the purchase of a communications site with
six towers in Tucson, Arizona (the "Tucson Transaction") for approximately
$12.0 million.
In February 1998, ATS acquired 11 communications tower sites in northern
California for approximately $11.8 million.
Pending Acquisitions. In January 1998, ATS entered into an agreement to
purchase the assets relating to a teleport serving the Washington, D.C. area
for a purchase price of approximately $30.5 million. The facility is located
in northern Virginia, inside of the Washington Beltway, on ten acres.
Consummation of the transaction, which is subject to certain conditions,
including receipt of FCC approvals and the expiration or earlier termination
of the HSR Act waiting period, is expected to occur in the first half of 1998.
ATC Merger. On December 12, 1997, ATS entered into the ATC Merger Agreement
pursuant to which ATC will merge with and into ATS which will be the surviving
corporation. Pursuant to the ATC Merger, ATS will issue an aggregate of
approximately 31.1 million shares of ATS Class A Common Stock (including
shares issuable upon exercise of options to acquire ATC Common Stock which, to
the extent they are outstanding as of the effectiveness of the ATC Merger,
will become options to acquire ATS Class A Common Stock). The
56
<PAGE>
31.1 million shares of ATS Class A Common Stock will represent 35% of the
aggregate number of shares of ATS Common Stock which would be outstanding on a
pro forma basis, assuming consummation of the ATC Merger, the Merger, the
exercise of all ATS and ATC stock options currently proposed to be outstanding
immediately prior to the ATC Merger, and the conversion of all ARS Convertible
Preferred Stock. See "The ATC Merger".
Other Transactions. ATS is negotiating and intends to pursue the acquisition
of other communications sites and management and related businesses on a
selective basis, although there are no definitive binding agreements with
respect to any material transaction except as referred to above, and,
accordingly, such transactions are not included in Recent Transactions.
Neither the Recent Transactions nor any such acquisitions (unless they could
delay consummation of the Merger for a period of more than 15 business days)
will require the consent of CBS under the provisions of the Merger Agreement,
although certain regulatory approvals may be required.
ATS Stock Purchase Agreement. In January 1998, American Tower Systems
consummated the transactions contemplated by the ATS Stock Purchase Agreement,
dated as of January 8, 1998, with Steven B. Dodge, Chairman of the Board and
Chief Executive Officer of ARS and ATS, and certain other officers and
directors of ARS (or their affiliates, members of their families or family
trusts), pursuant to which those persons purchased 8.0 million shares of ATS
Common Stock at a purchase price of $10.00 per share for an aggregate purchase
price of $80.0 million, including 4.0 million shares by Mr. Dodge for $40.0
million. See "The Merger and Tower Separation--ATS Stock Purchase Agreement".
SALES AND MARKETING
American Tower Systems' sales and marketing personnel target wireless
carriers expanding their network capabilities as well as carriers entering new
markets. ATS attempts to minimize hurdles to purchasing decisions by offering
master license agreements which correspond to the internal requirements of
wireless operators. ATS also offers standardized system pricing in areas in
which it operates tower networks which enable potential customers to obtain
pricing information for an entire service area rather than on a tower-by-tower
basis. ATS believes customer satisfaction is the key to successful marketing
and that referrals from its current customers are a primary source of new
customers.
REGULATORY MATTERS
Federal Regulations. Both the FCC and the FAA regulate towers used for
wireless communications transmitters and receivers and radio and television
transmitters. Such regulations control the siting, lighting, marking and
maintenance of towers and may, depending on the characteristics of the tower,
require registration of tower facilities. Wireless communications devices
operating on towers are separately regulated and independently licensed by the
FCC based upon the regulation of the particular frequency used. In addition,
the FCC also separately licenses and regulates television and radio broadcast
stations operating on towers. Most proposals to construct new antenna
structures or to modify existing antenna structures are reviewed by both the
FCC and the FAA to ensure that a structure will not present a hazard to
aircraft. Tower owners also may bear the responsibility for notifying the FAA
of any tower lighting failures. ATS generally indemnifies its customers
against any failure to comply with applicable standards. Failure to comply
with applicable requirements may lead to civil penalties.
The introduction and development of digital television also may affect ATS
and some of its largest customers. In addition, the structural and power
requirements for DTV transmission facilities may necessitate the relocation of
many currently co-located FM antennae. The construction and reconstruction of
this substantial number of antenna structures presents a potentially
significant state and local regulatory obstacle to the communications site
industry. As a result, the FCC has solicited comments on whether, and in what
circumstances, the FCC should preempt state and local zoning and land use laws
and ordinances regulating the placement and construction of communications
sites. There can be no assurance as to whether or when any such federal
preemptive regulations may be promulgated or, if adopted, what form they might
take, whether they
57
<PAGE>
would be more or less restrictive than existing state regulation, or whether
the constitutionality of such regulation, if challenged, would be upheld.
Local Regulations. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but typically require tower owners
to obtain approval from local officials or community standards organizations
prior to tower construction. Local regulations can delay or prevent new tower
construction or site upgrade projects, thereby limiting ATS' ability to
respond to customer demand. In addition, such regulations increase costs
associated with new tower construction. There can be no assurance that
existing regulatory policies will not adversely affect the timing or cost of
new tower construction or that additional regulations will not be adopted
which increase such delays or result in additional costs to ATS. Such factors
could have a material adverse effect on ATS' financial condition or results of
operations.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real estate or a lessee conducting operations thereon
may become liable for the costs of investigation, removal or remediation of
soil and groundwater contaminated by certain hazardous substances or wastes.
Certain of such laws impose cleanup responsibility and liability without
regard to whether the owner or operator of the real estate or operations
thereon knew of or was responsible for the contamination, and whether or not
operations at the property have been discontinued or title to the property has
been transferred. The owner or operator of contaminated real estate also may
be subject to common law claims by third parties based on damages and costs
resulting from off-site migration of the contamination. In connection with its
former and current ownership or operation of its properties, ATS may be
potentially liable for environmental costs such as those discussed above.
ATS believes it is in compliance in all material respects with all
applicable material environmental laws. ATS has not received any written
notice from any governmental authority or third party asserting, and is not
otherwise aware of, any material environmental non-compliance, liability or
claim relating to hazardous substances or wastes or material environmental
laws. However, no assurance can be given (i) that there are no undetected
environmental conditions for which ATS might be liable in the future or (ii)
that future regulatory action, as well as compliance with future environmental
laws, will not require ATS to incur costs that could have a material adverse
effect on ATS' financial condition and results of operations.
COMPETITION
ATS' competes for antennae site customers with wireless carriers that own
and operate their own tower networks and lease tower space to other carriers,
site development companies that acquire space on existing towers for wireless
providers and manage new tower construction, other national independent tower
companies and traditional local independent tower operators. Wireless service
providers that own and operate their own tower networks generally are
substantially larger and have greater financial resources than ATS. ATS
believes that tower location and capacity, price, quality of service and
density within a geographic market historically have been and will continue to
be the most significant competitive factors affecting owners, operators and
managers of communications sites.
ATS competes for acquisition and new tower construction site opportunities
with wireless service providers, site developers and other independent tower
operating companies, as well as financial institutions. ATS believes that
competition for acquisitions and tower construction sites will increase and
that additional competitors will enter the tower market, certain of which may
have greater financial resources than ATS.
PROPERTIES
ATS' interests in its communications sites are comprised of a variety of fee
interests, leasehold interests created by long-term lease agreements, private
easements, and easements, licenses or rights-of-way granted by government
entities. In rural areas, a communications site typically consists of a three
to five acre tract which
58
<PAGE>
supports towers, equipment shelters and guy wires to stabilize the structure.
Less than 2,500 square feet are required for a self-supporting tower structure
of the kind typically used in metropolitan areas. Land leases generally have
twenty (20) to twenty-five (25) year terms, with three five-year renewals, or
are for five-year terms with automatic renewals unless ATS otherwise
specifies. Some land leases provide "trade-out" arrangements whereby ATS
allows the landlord to use tower space in lieu of paying all or part of the
land rent. As of September 30, 1997, giving effect as of such date to the
Recent Transactions, ATS had more than 1,000 land leases. Pursuant to the
Tower Loan Agreement, the senior lenders have liens on substantially all of
the fee interests, leasehold interests and other assets of the Tower Operating
Subsidiary which owns, directly or, in certain cases, through subsidiaries all
of the assets of the consolidated group.
LEGAL PROCEEDINGS
ATS is occasionally involved in legal proceedings that arise in the ordinary
course of business. 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 ATS' financial condition or results of operations.
EMPLOYEES
As of January 1, 1998, ATS employed approximately 140 full time individuals
and considers its employee relations to be satisfactory. Such number does not
include employees of companies included in Recent Transactions which had not
then been consummated (such as ATC, Gearon and OPM) or members of the
corporate administrative staff of ARS that may be employed by ATS upon
consummation of the Merger. ATS estimates that on a pro forma basis, giving
effect to consummation of all of the Recent Transactions and the Tower
Separation, it will have approximately 450 full time employees.
59
<PAGE>
MANAGEMENT OF AMERICAN TOWER SYSTEMS
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of American Tower Systems:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ------------------------------------------------------------
<S> <C> <C>
Steven B. Dodge(1)...... 52 Chairman of the Board, President and Chief Executive Officer
Alan L. Box............. 46 Chief Operating Officer and Director
Arnold L.
Chavkin(1)(2)(3)....... 46 Director
James S. Eisenstein..... 39 Executive Vice President--Corporate Development
J. Michael Gearon, Jr... 32 Executive Vice President and Director
*Fred R. Lummis......... 44 Director
*Randall Mays........... 32 Director
Thomas H.
Stoner(1)(2)(3)........ 63 Director
Joseph L. Winn.......... 46 Treasurer, Chief Financial Officer and Director
</TABLE>
- --------
* Director nominee, conditioned on the ATC Merger being consummated.
(1) Member of the Executive Committee; Mr. Stoner is the Chairman of the
Executive Committee.
(2) Member of the Audit Committee; Mr. Chavkin is the Chairman of the Audit
Committee.
(3) Member of the Compensation Committee; Mr. Stoner is the Chairman of the
Compensation Committee.
As of the consummation of the Merger (or the earlier consummation of the
Tower Merger), the ATS Board will be expanded to include two "independent"
directors. Although management has had discussions with certain persons
concerning their willingness to serve as "independent" directors, no decisions
or commitments have been made with respect to filling those positions. The two
"independent" directors will be elected annually, commencing in the year
following consummation of the Merger (or the earlier consummation of the Tower
Merger), by the holders of ATS Class A Common Stock, voting as a separate
class. All directors hold office until the annual meeting of the stockholders
of ATS next following their election or until their successors are elected and
qualified. Each executive officer is appointed annually and serves at the
discretion of the ATS Board.
As a condition to the consummation of the ATC Merger, two nominees of ATC,
Fred R. Lummis, Chairman of the Board, President and Chief Executive Officer
of ATC, and Randall Mays, the Chief Financial Officer and Executive Vice
President of Clear Channel, one of the principal stockholders of ATC, will be
elected as directors of ATS, and Mr. Winn will resign as a director of ATS.
Steven B. Dodge is the Chairman, President and Chief Executive Officer of
American Tower Systems. Mr. Dodge is also the Chairman of the Board, President
and Chief Executive Officer of ARS, a position he has occupied since its
founding on November 1, 1993. ARS completed its initial public offering in
June 1995 at $16.50 per share of ARS Class A Common Stock. Mr. Dodge was the
founder in 1988 of Atlantic Radio, L.P. ("Atlantic") which was one of the
predecessor entities of American Radio. Prior to forming Atlantic, Mr. Dodge
served as Chairman and Chief Executive Officer of American Cablesystems
Corporation ("American Cablesystems"), a cable television company he founded
in 1978 and operated as a privately-held company until 1986 when it completed
a public offering in which its stock was priced at $14.50 per share. American
Cablesystems was merged into Continental Cablevision, Inc. in 1988 in a
transaction valued at more than $750 million, or $46.50 per share. Mr. Dodge
also serves as a director of American Media, Inc., the National Association of
Broadcasters (the "NAB").
Alan L. Box is the Chief Operating Officer and a director of American Tower
Systems. Mr. Box also has been Executive Vice President of ARS since April,
1997. Prior to that date, Mr. Box was employed by EZ Communications, Inc.
("EZ"), starting in 1974 as the General Manager of EZ's Washington, D.C. area
radio station. He became Executive Vice President and General Manager and a
director of EZ in 1979, President of
60
<PAGE>
EZ in 1985 and Chief Executive Officer of EZ in 1995. He serves as a director
of the George Mason Bankshares, Inc. and the George Mason Bank.
Mr. Chavkin is the Chairman of the Audit Committee of the Board of American
Tower Systems. Mr. Chavkin has been the Chairman of the Audit Committee of the
Board of American Radio since its founding. Mr. Chavkin is a general partner
of Chase Capital Partners ("CCP"), previously known as Chemical Venture
Partners ("CVP"), which is a general partner of Chase Equity Associates
("CEA"), one of American Radio's shareholders, and previously a principal
shareholder of Multi Market Communications, Inc. ("Multi-Market"), one of the
predecessors of American Radio. Mr. Chavkin has been a General Partner of CCP
and CVP since January 1992 and has served as the President of Chemical
Investments, Inc. since March 1991. Mr. Chavkin is also a director of R&B
Falcon Drilling Company, Bell Sports Corporation, and Wireless One, Inc. Prior
to joining Chemical Investments, Inc., Mr. Chavkin was a specialist in
investment and merchant banking at Chemical Bank for six years. For the
information with respect to the interests of an affiliate of Mr. Chavkin, CCP
and CEA in ATC, see "The ATC Merger" above and "Principal Stockholders of
American Tower Corporation" in Appendix V.
James S. Eisenstein is the Executive Vice President--Corporate Development
of American Tower Systems. Mr. Eisenstein has overall responsibility for
seeking out acquisition and development opportunities for ATS. Mr. Eisenstein
helped form ATS in the summer of 1995. He was previously Chief Operating
Officer for Amaturo Group Ltd., a broadcast company operating eleven radio
stations and four broadcasting towers from 1990 to 1995, several of which were
purchased by American Radio. Mr. Eisenstein was also General Corporate Counsel
of Home Shopping Network from 1988 to 1990, an Associate with Skadden, Arps,
Slate, Meagher and Flom from 1985 to 1988 and an Associate with Vinson &
Elkins LLP from 1983 to 1985. He has extensive experience in structuring
acquisitions and the operation and management of broadcasting and tower
businesses.
Mr. Gearon was the principal stockholder and Chief Executive Officer of
Gearon & Co., Inc., a position he held since September 1991. As a condition to
consummation of the Gearon Transaction, Mr. Gearon was elected an Executive
Vice President and a director of ATS and the Chief Executive Officer of the
site acquisition business of ATS. See "Business of American Tower Systems--
Recent Transactions".
Fred R. Lummis has served as Chairman, Chief Executive Officer and President
of ATC since its organization in October 1994. Mr. Lummis has been the
President of Summit Capital, a private investment firm, since 1990. Mr. Lummis
served as Senior Vice President of Duncan, Cook & Co., a private investment
firm, from 1986 to 1990 and as Vice President of Texas Commerce Bank Inc. from
1978 to 1986. Mr. Lummis currently serves on the board of several private
companies and is a trustee of the Baylor College of Medicine.
Randall Mays has served as Chief Financial Officer and Executive Vice
President of Clear Channel since February 1997, prior to which he had served
as a Vice President and Treasurer since joining Clear Channel in 1993. Prior
to joining Clear Channel, he was an associate at Goldman Sachs & Co.
Mr. Stoner is the Chairman of the Executive Committee and the Compensation
Committee of the Board of American Tower Systems. Mr. Stoner has been the
Chairman of the Executive Committee and the Compensation Committee of the
Board of American Radio since its founding. Mr. Stoner founded Stoner
Broadcasting Systems, Inc. ("Stoner") in 1965. Stoner, which was one of the
predecessors of American Radio, operated radio stations for over 25 years in
large, medium and small markets. Mr. Stoner is a director of Gaylord Container
Corporation and a trustee of Chesapeake Bay Foundation.
Joseph L. Winn is the Chief Financial Officer, Treasurer and a director of
American Tower Systems. Mr. Winn is also Treasurer, Chief Financial Officer
and has been a director of ARS since its founding. In addition to serving as
Chief Financial Officer of American, Mr. Winn was Co-Chief Operating Officer
responsible for Boston operations until May 1994. Mr. Winn served as Chief
Financial Officer and a director of the general partner of Atlantic after its
organization. He also served as Executive Vice President of the general
partner of Atlantic from its organization until June 1992, and as its
President from June 1992 until the organization of ARS.
61
<PAGE>
Prior to joining Atlantic, Mr. Winn served as Senior Vice President and
Corporate Controller of American Cablesystems after joining that company in
1983.
EXECUTIVE COMPENSATION
All of the executive officers of American Tower Systems are employees of and
have been paid by ARS (or, in the case of Mr. Box, by EZ prior to the EZ
Merger and in the case of Mr. Gearon, by Gearon prior to consummation of the
Gearon Transaction) since the organization of ATS in 1995. During that period
the highest paid executive officers, other than Mr. Dodge, who are employees
of ATS, were Messrs. Box, Winn and Eisenstein. The compensation of each of
those individuals (other than Mr. Eisenstein) was principally for acting as an
executive officer of American Radio (or, in the case of Mr. Box, EZ prior to
the EZ Merger) and, accordingly, information provided with respect to their
executive compensation represents compensation paid by ARS (with the exception
of Mr. Eisenstein).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ------------------------------
NAME AND OTHER ANNUAL SHARES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(3) BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- --------- ------ ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Dodge(1)(2).... 1995 $252,625 -- -- -- --
Chairman of the Board, 1996 $297,250 50,000 -- 40,000 4,910(4)
President and Chief 1997 $502,338 -- -- 100,000 1,716(4)
Executive Officer
Joseph L. Winn(1)(2)..... 1995 $227,859 -- -- 65,000 --
Treasurer and Chief 1996 $257,250 42,500 -- 20,000 11,456(5)
Financial Officer 1997 $352,329 40,000 -- 35,000 12,876(5)
Alan L. Box(1)(2)........ 1997 $264,400(6) -- -- 100,000 1,216(7)
Chief Operating Officer
James S. Eisenstein(2)... 1995 $ 62,109 -- -- 40,000(8) 5,260(9)
Executive Vice Presi-
dent-- 1996 $167,250 19,000 -- 200,000(10) 8,669(9)
Corporate Development 1997 $212,367 -- -- 20,000(10) 12,656(9)
</TABLE>
- --------
(1) Represents both annual and long-term compensation paid by ARS.
(2) The Compensation Committee of ATS has approved annual base salaries for
1998 for Mr. Dodge, and each of such four executive officers, at the
following rates: Mr. Dodge: $250,000; Mr. Box: $225,000; Mr. Eisenstein
$200,000; Mr. Gearon: $200,000; and Mr. Winn: $225,000. Such salaries
will commence (in the case of all such officers other than Mr. Gearon)
with the Tower Separation, prior to which such individuals will have been
paid by ARS at their present compensation rates.
(3) Includes American Radio's matching 401(k) plan contributions.
(4) Includes group term life insurance and parking expenses paid by ARS.
(5) Includes group term life insurance, automobile lease and parking expenses
paid by ARS.
(6) Includes $87,500 paid by ATS commencing October 1, 1997.
(7) Includes group term life insurance paid by ARS.
(8) Represents options to purchase shares of ARS Class A Common Stock granted
pursuant to the ARS stock option plan.
(9) Includes group term life insurance and automobile expenses paid by ATS.
(10) Represents options to purchase shares of common stock of ATSI granted
pursuant to the ATSI Plan.
62
<PAGE>
DIRECTOR COMPENSATION
As of the consummation of the Merger, the ATS Board will be expanded to
include two independent directors. Such independent directors will be granted
options to purchase 25,000 shares of common stock, which will be exercisable
in 20% cumulative annual increments commencing one year from the date of grant
and will expire at the end of ten years. The outside directors will also
receive fees of $3,000 for each Board of Directors meeting attended and $1,000
for each committee meeting attended held apart from a board meeting and will
be reimbursed for expenses.
STOCK OPTION INFORMATION
Effective November 5, 1997, ATS instituted the 1997 Stock Option Plan (the
"Plan"), which is administered by the Compensation Committee of the ATS Board.
The Plan was designed to encourage directors, consultants and key employees of
American Tower Systems and its subsidiaries to continue their association with
ATS by providing opportunities for such persons to participate in the
ownership of American Tower Systems and in its future growth through the
granting of stock options, which may be options designed to qualify as
incentive stock options ("ISOs") within the meaning of Section 422 of the
Code, or options not intended to qualify for any special tax treatment under
the Code ("NQOs"). The Plan provides that ATS may not grant options to
purchase more than 5,000,000 shares per year per participant.
The duration of the ISOs and NQOs granted under the Plan may be specified by
the Compensation Committee pursuant to each respective option agreement, but
in no event can any such option be exercisable after the expiration of ten
(10) years after the date of grant. In the case of any employee who owns (or
is considered under Section 424(d) of the Code as owning) stock possessing
more than ten percent of the total combined voting power of all classes of
stock of ATS, no ISO shall be exercisable after the expiration of five (5)
years from the date such option is granted. The option pool under the Plan
consists of an aggregate of 10,000,000 shares of ATS Common Stock, which may
consist of shares of ATS Class A Common Stock, shares of ATS Class B Common
Stock or some combination thereof. It is a condition to consummation of the
ATC Merger that all future grants of options under the Plan must be to
purchase shares of ATS Class A Common Stock.
In July 1996, ATSI adopted its 1996 Stock Option Plan (the "ATSI Plan") and,
pursuant thereto, options were granted to various officers of ATSI (the "ATSI
Options"). In connection with the Merger, those options to purchase the common
stock of ATSI will be converted into options to acquire shares of ATS Class A
Common Stock (the "ATS Options"). In addition, each option to purchase shares
of ARS Common Stock (the "ARS Options") may be exchanged for ATS Options. Both
the ATSI Options and the ARS Options may be exchanged in a manner that will
preserve the spread in such ARS Options between the option exercise price and
the fair market value of ARS Common Stock and the ratio of the spread to the
exercise price prior to such conversion and, to the extent applicable,
otherwise in conformity with the rules under Section 424(a) of the Code and
the regulations promulgated thereunder. See "The Merger and Tower Separation--
Certain Other Covenants--ARS Options".
63
<PAGE>
During the year ended December 31, 1997 the only options granted pursuant to
the ATSI Plan to the individuals referred to in "--Executive Compensation"
above were to Mr. Eisenstein.
OPTION GRANTS IN FISCAL YEAR 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES OF APPRECIATION
UNDERLYING EXERCISE FOR OPTION TERMS(b)
OPTIONS PRICE EXPIRATION --------------------
NAME GRANTED(a) PER SHARE DATE 5% 10%
---- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
James S. Eisenstein..................... 27,732 $5.41 1/2/07 $94,353 $ 239,109
</TABLE>
- --------
(a) Assuming the exchange of ATSI Options to purchase 20,000 shares at $7.50
per share for ATS Options.
(b) The potential realizable value at assumed annual rates of stock price
appreciation for the option term of 5% and 10% would be $94,353 and
$239,109, respectively. A 5% and 10% per year appreciation in stock price
from $5.41 per share yields appreciation of $3.40 per share and $8.62 per
share, respectively. The actual value, if any, Mr. Eisenstein may realize
will depend on the excess of the stock price over the exercise price on
the date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the amounts reflected in this
table.
The only unexercised options granted pursuant to the ATSI Plan to the
individuals referred to in the "--Executive Compensation" above were to Mr.
Eisenstein.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
NAME OPTIONS AT DECEMBER 31, 1997 OPTIONS AT DECEMBER 31, 1997(b)
---- ---------------------------- ---------------------------------
EXERCISABLE(a) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
James S. Eisenstein..... 116,472 188,576 $734,278 $1,165,061
</TABLE>
- --------
(a) In 1996 Mr. Eisenstein was granted options pursuant to the ATSI Plan for
an aggregate of 200,000 shares at $5.00 per share. Such options became
exercisable to the extent of 80,000 shares on July 1, 1997 and become
exercisable in 20% cumulative annual increments commencing on July 1,
1998, and expire September 9, 2006. Assuming the exchange of ATSI Options
for ATS Options, Mr. Eisenstein will have options to purchase 277,316
shares of ATS Class A Common Stock at $3.61 per share, of which 110,926
shares will be exercisable. An additional ten-year option to purchase
20,000 shares of common stock of ATSI at $7.50 per share was granted to
Mr. Eisenstein on January 2, 1997. Assuming the exchange of ATSI Options
for ATS Options, this option will convert into options to purchase 27,732
of shares of ATS Class A Common Stock at $5.41 per share, of which 5,546
shares will be exercisable.
(b) The value of unexercised in-the-money options of Mr. Eisenstein at
December 31, 1997, based on an assumed price of $10.00 per share was
approximately $1,899,339.
In January 1998, the ATS Compensation Committee granted options to purchase
shares of ATS Common Stock to the executive officers of ATS in the amounts
shown (which will be increased by subsequent grants, contingent upon
consummation of the ATC Merger, as shown in parenthesis). All existing options
have an exercise price of $10.00, the price at which shares of ATS Common
Stock were sold pursuant to the ATS Stock Purchase Agreement, are to purchase
ATS Class A Common Stock (ATS Class B Common Stock in the case of Mr. Dodge's
option to purchase 1,700,000 shares) and become exercisable in 20% cumulative
annual increments commencing one year from the grant dates): Mr. Dodge--
1,700,000 shares (an additional 1,300,000 shares); Mr. Box--120,000 shares (an
additional 80,000 shares); Mr. Eisenstein--28,000 shares (an additional 22,000
shares); and Mr. Winn--275,000 shares (an additional 210,000 shares). Pursuant
to options granted as a condition to consummation of the Gearon Transaction,
Mr. Gearon received an option to purchase 234,451 shares of ATS Class A Common
Stock at $13.00 per share, which also becomes exercisable in 20% cumulative
annual increments.
64
<PAGE>
The information set forth above does not include ARS Options held by Messrs.
Dodge, Box, Eisenstein and Winn which, as explained elsewhere in this
Prospectus, may be converted into options to purchase ATS Common Stock at the
election of the optionee. Such individuals have indicated that they intend to
elect to convert their ARS Options as follows: Mr. Dodge--290,000 shares; Mr.
Box--options to purchase 100,000 shares; Mr. Eisenstein--options to purchase
40,000 shares; and Mr. Winn--options to purchase 285,000 shares; however, such
indications are not binding on such individuals and they will not be required
to make a definitive election until shortly before the consummation of the
Tower Separation. See "The Merger and Tower Separation--Certain Other
Covenants--ARS Options" and "Principal Stockholders of American Tower
Systems".
65
<PAGE>
PRINCIPAL STOCKHOLDERS OF AMERICAN TOWER SYSTEMS
The following information sets forth certain information known to ATS as of
February 1, 1998, with respect to the shares of ATS Common Stock that will be
beneficially owned after the Tower Separation, based on the ARS Common Stock
(and, in certain cases, ATS Common Stock) beneficially owned as of such date
by (i) each person known by American Radio to own more than 5% of the
outstanding ARS Common Stock, (ii) each director of American Tower Systems,
(iii) each executive officer of American Tower Systems, and (iv) all directors
and executive officers of American Tower Systems as a group. The table also
sets forth information of a comparable nature giving effect, in addition to
the foregoing, to the consummation of the ATC Merger. The number of shares
beneficially owned by each director or executive officer is determined
according to the rules of the Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual or entity has sole or shared voting power or investment power and
also any shares which the individual or entity has the right to acquire within
sixty days of February 1, 1998 through the exercise of an option, conversion
feature or similar right. Except as noted below, each holder has sole voting
and investment power with respect to all shares of ATS Common Stock listed as
owned by such person or entity. For information with respect to ownership of
ARS Common Stock, see "Principal Stockholders of American Radio" in Appendix
I.
<TABLE>
<CAPTION>
SHARES OF ATS COMMON STOCK BENEFICIALLY OWNED(1) AFTER ATC MERGER
-------------------------------------------------- -------------------------
PERCENT PERCENT PERCENT OF PERCENT OF PERCENT OF
OF OF COMMON TOTAL VOTING PERCENT OF TOTAL VOTING
NUMBER CLASS A CLASS B STOCK POWER COMMON STOCK POWER
---------- ------- ------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Steven B. Dodge(2)...... 6,842,346 * 69.35 13.90 50.60 8.66 41.36
Thomas H. Stoner(3)..... 1,628,817 * 17.32 3.35 12.41 2.08 10.05
Alan L. Box(4).......... 848,428 2.34 -- 1.75 * 1.08 *
James S. Eisenstein(5).. 227,872 * * * * * *
J. Michael Gearon,
Jr.(6)................. 4,711,113 13.01 -- 9.70 3.72 6.01 3.01
Joseph L. Winn(7)....... 987,448 * 9.76 1.99 7.17 1.25 5.88
Arnold L. Chavkin
(CEA)(2)............... 3,327,829 * -- 6.85 * 12.83 4.32
All executive officers
and directors as a
group
(7 persons)(9)......... 18,573,854 16.26 86.96 36.84 69.11 45.16 67.35
DIRECTOR NOMINEES
Fred R. Lummis(10)...... -- -- -- -- -- + +
Randall Mays (Clear
Channel)(11)........... -- -- -- -- -- + +
FIVE PERCENT STOCKHOLD-
ERS
Baron Capital Group,
Inc.(12)............... 5,620,000 15.15 -- 11.58 4.44 7.17 3.59
Wellington Management
Company LLP(13)........ 1,929,676 5.33 -- 3.97 1.52 2.46 1.23
Massachusetts Financial
Services Company(14)... 3,157,679 8.72 -- 6.50 2.50 4.03 2.02
Lehman Brothers Holding
Inc.(15)............... 2,050,000 5.66 -- 4.22 1.62 2.62 1.31
Arthur C. Kellar(16).... 2,473,257 6.83 -- 5.09 1.95 3.16 1.58
Charlton H.
Buckley(17)............ 2,116,957 5.84 -- 4.36 1.67 2.70 1.35
</TABLE>
- --------
* Less than 1%.
+ For information regarding the pro forma beneficial ownership of Messrs.
Lummis and Mays, see Notes 10 and 11.
(1) The number of shares of ATS Common Stock that each person or entity will
beneficially own immediately after the Tower Separation has been
calculated assuming that all of the ARS Options held by the directors and
executive officers of ATS (other than ARS Options to purchase an
aggregate of 84,010 shares of ARS Common Stock held by Mr. Box) will have
been exchanged for ATS Options, and that none of the other employees of
ATS entitled to exchange ARS Options for ATS Options exercise such
privilege. For purposes of determining such exchanges, which will be made
with respect to an aggregate of 803,916 shares of ARS Common Stock, the
relative values of ARS Common Stock and ATS Common Stock have been
assumed to be $54.00 and $10.00, respectively. See "Management of
American Tower Systems--Stock Option Information" and "The Merger and
Tower Separation--Certain Other Covenants--ARS Options". To the extent
ARS Options are not exercised or exchanged or have not expired prior to
the
66
<PAGE>
Effective Time, the holders thereof will receive, in the Merger, a number
of shares of ATS Common Stock equal to the number of shares of ARS Common
Stock covered by such options.
(2) Mr. Dodge is Chairman of the Board, President and Chief Executive Officer
of American Tower Systems. His address is 116 Huntington Avenue, Boston,
Massachusetts 02116. Includes 75,950 shares of ATS Class A Common Stock
owned by Mr. Dodge. Does not include an aggregate of 885,600 shares of
ATS Class B Common Stock purchasable under ATS Options to be received in
exchange for ARS Options; includes an aggregate of 680,400 shares of ATS
Class B Common Stock as to which such options will be exercisable.
Includes an aggregate of 25,050 shares of ATS Class A Common Stock and
20,832 shares of ATS Class B Common Stock owned by three trusts for the
benefit of Mr. Dodge's children and 3,000 shares of ATS Class A Common
Stock owned by Mr. Dodge's wife. Mr. Dodge disclaims beneficial ownership
in all shares owned by such trusts and his wife. Does not include an
aggregate of 1,566,000 shares of ATS Class B Common Stock purchasable
under options granted on January 8, 1998 to Mr. Dodge under the Plan and
170 shares of ATS Class A Common Stock held by Thomas S. Dodge, an adult
child of Mr. Dodge, with respect to which Mr. Dodge disclaims beneficial
ownership.
(3) Mr. Stoner is Chairman of the Executive Committee of the ATS Board. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Does not
include 21,600 shares of ATS Class A Common Stock purchasable under an
ATS Option to be received in exchange for an ARS Option; includes 5,400
shares of ATS Class A Common Stock as to which such option will be
exercisable. Includes 1,094,158 shares of ATS Class B Common Stock owned
by Mr. Stoner, 46,311 shares of ATS Class B Common Stock owned by his
wife and an aggregate of 424,448 shares of ATS Class B Common Stock and
58,500 shares of ATS Class A Common Stock owned by trusts of which he
and/or certain other persons are trustees. Mr. Stoner disclaims
beneficial ownership of 242,128 shares of ATS Class B Common Stock and
58,500 shares of ATS Class A Common Stock owned by such trusts. Does not
include 61,454 shares of ATS Class B Common Stock and 100,675 shares of
ATS Class A Common Stock owned by Mr. Stoner's adult children.
(4) Mr. Box is a director and Chief Operating Officer of American Tower
Systems. His address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 846,358 shares of ATS Class A Common Stock owned by Mr.
Box and 2,070 shares of ATS Class A Common Stock owned by two trusts for
the benefit of Mr. Box's children. Does not include an aggregate of
540,000 shares of ATS Class A Common Stock purchasable under ATS Options
to be received in exchange for ARS Options. Does not include an aggregate
of 120,000 shares of ATS Class A Common Stock purchasable under options
granted on January 8, 1998 to Mr. Box under the Plan.
(5) Mr. Eisenstein is Executive Vice President-Corporate Development of
American Tower Systems. His address is 116 Huntington Avenue, Boston,
Massachusetts 02116. Includes 25,000 shares of ATS Class A Common Stock
owned by Mr. Eisenstein. Does not include an aggregate of 129,600 shares
of ATS Class B Common Stock purchasable under ATS Options to be received
in exchange for ARS Options; includes an aggregate of 86,400 shares of
ATS Class B Common Stock as to which such options will be exercisable.
Does not include an aggregate of 188,576 shares of ATS Class A Common
Stock purchasable under options originally granted by Tower Operating
Subsidiary which will become options to purchase ATS Class A Common Stock
pursuant to the transactions contemplated by the Merger; includes an
aggregate of 116,472 shares of ATS Class A Common Stock as to which such
options will be exercisable. Does not include an aggregate of 28,000
shares of ATS Class A Common Stock purchasable under options granted on
January 8, 1998 to Mr. Eisenstein under the Plan.
(6) Mr. Gearon is an Executive Vice President and director of American Tower
Systems. His address is 116 Huntington Avenue, Boston, Massachusetts
02116. Includes 4,240,002 shares of ATS Class A Common Stock owned by
Mr. Gearon and 471,111 shares of ATS Class A Common Stock held by a trust
for the benefit of Mr. Gearon's son of which J. Michael Gearon, Sr. is
the trustee. Mr. Gearon disclaims beneficial ownership in all shares
owned by such trust. Does not include an aggregate of 234,451 shares of
ATS Class A Common Stock purchasable under options granted on January 22,
1998 to Mr. Gearon under the Plan.
(7) Mr. Winn is a director, Treasurer and Chief Financial Officer of American
Tower Systems. Pursuant to the ATC Merger Agreement, Mr. Winn has agreed
to resign as a director upon the election of the ATC director nominees.
His address is 116 Huntington Avenue, Boston, Massachusetts 02116.
Includes 2,000 shares of
67
<PAGE>
ATS Class A Common Stock and 7,948 shares of ATS Class B Common Stock
owned individually by Mr. Winn and 100 shares of ATS Class A Common Stock
held for the benefit of his children. Does not include an aggregate of
499,738 shares of ATS Class B Common Stock and 34,862 shares of ATS Class
A Common Stock purchasable under ATS Options to be received in exchange
for ARS Options; includes an aggregate of 968,684 shares of ATS Class B
Common Stock and 8,716 shares of ATS Class A Common Stock as to which such
options will be exercisable. Does not include an aggregate of 275,000
shares of ATS Class A Common Stock purchasable under options granted on
January 8, 1998 to Mr. Winn under the Plan.
(8) Mr. Chavkin is a director of American Tower Systems. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Mr. Chavkin, as a general
partner of CCP, which is the general partner of CEA may be deemed to own
beneficially shares held by CEA and Chase Manhattan Capital Corporation
("Chase Capital"), an affiliate of Mr. Chavkin. Giving effect to the
Tower Separation, CEA would own 26,911 shares of ATS Class A Common Stock
and 3,295,518 shares of ATS Class C Common Stock. Giving effect to the
ATC Merger, Chase Capital would own 5,379,100 shares of ATS Class A
Common Stock and Archery Partners, an affiliate of Chase Capital, would
own 1,345,024 shares of ATS Class A Common Stock. Mr. Chavkin disclaims
such beneficial ownership of such shares. The address of CCP and CEA is
380 Madison Avenue, 12th Floor, New York, New York 10017. Does not
include 21,600 shares of ATS Class A Common Stock purchasable under an
ATS Option to be received in exchange for an ARS Option; includes 5,400
shares of ATS Class A Common Stock as to which such option will be
exercisable. For information with respect to the ownership of shares of
ATC Common Stock by Chase Capital and Archery Partners, see "Principal
Stockholders of American Tower Corporation" in Appendix V.
(9) Includes all shares stated to be owned in the preceding notes and, in the
case of the post-ATC Merger information, that set forth in notes (10) and
(11) following.
(10) Mr. Lummis is the Chairman, Chief Executive Officer and President of ATC.
His address is 3411 Richmond Avenue, Suite 400, Houston, Texas, 77046.
Mr. Lummis beneficially owns 7,155 shares of ATC Common Stock. Giving
effect to the ATC Merger, Mr. Lummis would own 1,874,066 shares of ATS
Class A Common Stock representing 2.81%, 2.37% and 1.19% of the pro forma
ATS Class A Common Stock, ATS Common Stock and Voting Power,
respectively. Includes 14,944 shares of ATS Class A Common Stock that
will be owned by Mr. Lummis, an aggregate of 265,020 shares of ATS Class
A Common Stock owned by trusts of which he is trustee, 996,314 shares of
ATS Class A Common Stock owned by Summit, an affiliate of Mr. Lummis by
reason of Mr. Lummis' 50% ownership of the common stock of Summit, and
597,788 shares of ATS Class A Common Stock purchasable under an option
originally granted by ATC which will become an option to purchase ATS
Class A Common Stock pursuant to the ATC Merger. For information with
respect to his ownership of shares of ATC Common Stock, see "Principal
Stockholders of American Tower Corporation" in Appendix V.
(11) Mr. Mays is Chief Financial Officer and an Executive Vice President of
Clear Channel. His address is P.O. Box 659512, San Antonio, TX 78265-
9512. Clear Channel owns 46,814 shares of ATC Common Stock. Giving effect
to the ATC Merger, Clear Channel would own 9,328,288 shares of ATS Class
A Common Stock representing 14.13%, 11.91% and 5.97% of the pro forma ATS
Class A Common Stock, ATS Common Stock and Voting Power, respectively.
Mr. Mays disclaims beneficial ownership of Clear Channel's ownership of
ATC and ATS. See "Principal Stockholders of American Tower Corporation"
in Appendix V.
(12) The address of Baron Capital Group, Inc. ("Baron") is 767 Fifth Avenue,
New York, New York 10153. On a pro forma basis, based on Baron's
Amendment No. 2 to Schedule 13D dated February 2, 1998, Mr. Baron, the
president of Baron, will have sole voting power over 180,000 shares of
ATS Class A Common Stock, shared voting power over 1,896,600 shares of
ATS Class A Common Stock, sole dispositive power over 180,000 shares of
ATS Class A Common Stock and shared dispositive power over 1,896,600
shares of ATS Class A Common Stock. Mr. Baron disclaims beneficial
ownership of 5,620,000 shares of ATS Class A Common Stock.
(13) The address of Wellington Management Company LLP ("Wellington") is 75
State Street, Boston, Massachusetts 02109. On a pro forma basis, based on
its Schedule 13G (Amendment No. 2) dated August 8, 1997, Wellington will
have shared voting power over 985,313 shares of ATS Class A Common Stock
and shared dispositive power over 1,929,676 shares of ATS Class A Common
Stock.
68
<PAGE>
(14) The address of Massachusetts Financial Services Company ("MFS") is 500
Boylston Street, Boston, Massachusetts 02116-3741. On a pro forma basis,
based on its Schedule 13G (Amendment No. 2) dated February 12, 1998, MFS
will have sole voting power over 3,132,749 shares of ATS Class A Common
Stock and sole dispositive power over 3,157,679 shares of ATS Class A
Common Stock.
(15) The address of Lehman Brothers Holding Inc. ("Lehman") is 3 World
Financial Center, 24th Floor, New York, New York 10285. On a pro forma
basis, based on its Schedule 13D dated January 23, 1998, Lehman will have
shared voting power over 2,050,000 shares of ATS Class A Common Stock and
shared dispositive power over 2,050,000 shares of ATS Class A Common
Stock.
(16) Mr. Kellar is a director of American Radio. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116.
(17) Mr. Buckley is a director of American Radio. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Does not include 6,053
shares of ATS Class A Common Stock which are held by an adult child of
Mr. Buckley with respect to which Mr. Buckley disclaims beneficial
ownership.
On February 9, 1998, FMR Corp. ("FMR") filed Amendment No. 2 to its Schedule
13G. Giving effect to the Tower Separation, FMR will have sole voting power
over 206,790 shares of ATS Class A Common Stock and sole dispositive power
over 1,716,690 shares of ATS Class A Common Stock representing 4.74%, 3.54%
and 1.36% of the ATS Class A Common Stock, ATS Common Stock and Voting Power,
respectively. Giving effect to the ATC Merger, FMR will own 2.19% and 1.10% of
the ATS Common Stock and Voting Power, respectively.
69
<PAGE>
THE ATC MERGER
On December 12, 1997, ATS entered into the ATC Merger Agreement pursuant to
which ATC will merge with and into ATS which will be the surviving
corporation. Pursuant to the ATC Merger, ATS will issue an aggregate of
approximately 31.1 million shares of ATS Class A Common Stock (including
shares issuable upon exercise of options to acquire ATC Common Stock which, to
the extent they are outstanding as of the effectiveness of the ATC Merger,
will become options to acquire ATS Class A Common Stock) and the ATC preferred
stock (the "ATC Preferred Stock") will be converted into the right to receive
cash in the amount of $200.00 per share (the "Preferred Stock Consideration").
The 31.1 million shares of ATS Class A Common Stock will represent 35% of the
aggregate number of shares of ATS Common Stock which would be outstanding on a
pro forma basis, assuming consummation of the ATC Merger, the Merger, the
exercise of all ATS and ATC stock options currently proposed to be outstanding
immediately prior to the ATC Merger, and the conversion of all ARS Convertible
Preferred Stock.
BACKGROUND OF THE ATC MERGER
The ATS Board and the ATC Board each believe that the ATC Merger Agreement
and the transactions contemplated thereby (including the respective
proportions of the combined company to be owned by the ATS common stockholders
and the ATC common stockholders) are fair to, and in the best interests of,
its respective stockholders. ARS, as the then sole ATS stockholder, has
approved the ATC Merger Agreement and the transactions contemplated thereby.
Approval of the holders of a majority of the ATC Common Stock will be required
to approve and adopt the ATC Merger Agreement and approve the ATC Merger.
ATC Reasons for Merger
The ATC Board believes that the terms of the ATC Merger are fair to and in
the best interest of ATC and its stockholders. In approving the ATC Merger
Agreement and the transactions contemplated thereby, and in recommending that
the ATC stockholders approve the same, the ATC Board consulted with ATC's
management, as well as its financial advisors and considered a number of
factors including, but not limited to: (i) the potential for increasing and
accelerating ATC's long-term objective of establishing a national tower
network; (ii) the structure of the transaction in terms of the ATC Merger
Agreement, including the consideration to be received by ATC's stockholders,
which were the result of arm's length negotiations between ATS and ATC; (iii)
the fact that the ATC Merger would enhance the liquidity of the investment of
the holders of ATC common stock by converting their common stock into a
publicly traded security; (iv) consolidation benefits that would be available
to the combined entity after the ATC Merger; and (v) the expectation that the
ATC Merger will afford ATC stockholders the opportunity to receive ATS Class A
Common Stock in a transaction that is non-taxable for U.S. federal income tax
purposes.
Increased Scope of the Surviving Corporation. The ATC Board considered the
increased size and scope of ATS, as the surviving corporation, as a
significant advantage of the ATC Merger. In the view of the ATC Board, the
combined companies will be able to accelerate ATC's long-term objective of
establishing a national tower network. The ATC Board believed that such a
national network will be a key ingredient in competition for national accounts
in the communications site industry. In addition to immediately increasing
geographic scope by combining two systems with different regional strengths,
the ATC Merger would, in the judgement of the ATC Board, create a financially
stronger company which will be well-positioned to compete for acquisitions in
the future.
Consideration to be Received by ATC Common Stockholders. The ATC Board
considered the percentage of ATS to be received by the holders of ATC Common
Stock in light of the relative historical and projected financial performance
of ATC and ATS. The ATC Board evaluated certain financial projections for ATC
and ATS for the 1998 calendar year and the quarterly periods therein. These
projections were prepared using comparable assumptions regarding the growth
rate of new wireless systems, the construction of new towers, the acquisition
of existing towers from independent owners and the expenses related to
managing these operations. Depending on the period measured, the comparison of
projected results for ATC and ATS when combined with the 35% interest in the
combined companies to be received by holders of ATC Common Stock resulted in a
valuation of ATC at 14 to 15 times ATC's projected 1998 EBITDA.
70
<PAGE>
Liquidity. The ATC Board considered favorably the fact that the ATC Merger
would result in the holders of ATC Common Stock receiving shares in a publicly
traded company with what it believed would be an ATS active trading market.
Consolidation Benefits. The ATC Board viewed favorably the benefit to ATS of
combining certain of the companies' administrative functions including finance
and accounting, insurance and information technology. The ATC Board also
considered the fact that the combined company would have certain cost
advantages because of its scope, including in terms of sales and marketing and
tower fabrication and construction. The ATC Board viewed these consolidation
issues as part of its analysis of the relative strengths of the new company to
ATC as a stand alone company and did not attempt to quantify the impact of
such savings. In this regard, the ATC Board considered the fact that the ATC
common stockholders were to receive 35% of the stock in the combined entity
and thus stood to share in the benefits of such savings with the current
direct and indirect holders of ARS Common Stock.
Other Terms of the Merger Agreement. The ATC Board also considered the other
terms of the ATC Merger Agreement, including the requirement that ATS pay ATC
a $15.0 million termination fee under certain circumstances, the requirements
that the companies receive legal opinions regarding the tax free nature of the
transaction, the limitations on transfers of stock in ATS by certain
affiliates of ATS, the registration rights granted to holders of ATC Common
Stock and the other customary terms and conditions thereof.
In determining that the ATC Merger was fair to and in the best interest of
ATC's stockholders, the ATC Board considered the factors above as a whole and
did not assign specific or relative weights to such factors. The ATC Board
believes that the ATC Merger is an opportunity for ATC's stockholders to
participate in a combined enterprise that has significantly greater business
and financial resources than ATC would have absent the ATC Merger.
The ATC Board has not sought a fairness opinion from an independent
financial advisor in connection with its consideration of the ATC Merger. The
ATC Board felt that such a fairness opinion was unnecessary because of the
extensive experience of ATC's management and board of directors in private
equity investing and investment banking (including the valuation of companies
like ATC), management's experience in valuing and acquiring communications
tower businesses, and the similarity between the businesses of ATC and ATS
which lend themselves to financial comparability. One member of the ATC Board
is affiliated with Chase Capital, which has an affiliate which is a
significant stockholder in ARS and ATS and has a representative on the ARS
Board and the ATS Board. This director did not participate in the negotiation
of the ATC Merger Agreement or its terms, See "Principal Stockholders of
American Tower Corporation" in Appendix V, "Principal Stockholders of American
Radio" in Appendix I and "Principal Stockholders of American Tower Systems".
ATS Reasons for Merger
The ATS Board, in reaching its conclusions, considered the factors discussed
below. In view of the wide variety of factors considered in connection with
the evaluation of the ATC Merger, the ATS Board did not find it practicable,
nor did it attempt, to quantify or otherwise to assign relative weights to the
specific factors it considered in reaching its determinations.
Amount and Form of ATC Merger Consideration. The ATS Board viewed favorably
the exchange ratio (the "ATC Merger Consideration") and the proportions of the
combined company to be owned by the ATS stockholders and the ATC stockholders.
Such determination was based on all of the factors discussed herein. The ATS
Board also viewed as favorable the fact that the ATC Merger would result in a
decrease in the combined company's leverage ratios, thereby enabling ATS to
continue the construction activities of both companies which were viewed as
essential to the long term growth of ATS.
Other Terms of the ATC Merger Agreement. The ATS Board considered the legal
and other financial terms of the ATC Merger Agreement. The ATS Board gave
consideration to, in addition to the amount and form of
71
<PAGE>
consideration offered to the ATC stockholders, the provisions of the ATC
Merger Agreement that would permit ATS to terminate the agreement, if the
Merger had not occurred and the ATS Board determined that consummation of the
Tower Separation was not in the best interests of the ATS common stockholders,
upon the payment of $15.0 million (together with reimbursement of reasonable
out-of-pocket fees and expenses up to $1.0 million). Finally, the ATS Board
considered the absence of any term or condition in the ATC Merger Agreement
that was unduly onerous or could materially impede or impair the consummation
of the ATC Merger.
Industry Changes and Consolidation. The ATS Board was aware of the changes
that are taking place and will take place in the wireless communications and
broadcasting industries, as well as the consolidation that had been taking
place in the communications site industry. Particularly as a result of the
outsourcing by many wireless carriers and the growth in build to suit
projects, the ATS Board viewed as favorable the increased size and capacity
that the combination with ATC would achieve, and believed that such fact would
enhance its ability to compete effectively in the build to suit market and, of
equal importance, to be able to provide enhanced levels of service to the much
larger carriers, wireless and broadcasting, that dominate the communications
industry.
ATS' and ATC's Business, Conditions and Prospects. In evaluating the terms
of the ATC Merger, the ATS Board reviewed, among other things, information
with respect to the financial condition, results of operations and businesses
of ATS and ATC, on both an historical and prospective basis, and current
industry, economic and market conditions. In evaluating ATS' and ATC's
prospects and the terms of the ATC Merger, the ATS Board considered, among
other things, the strengths and weaknesses of the two companies. Included in
that consideration were the financial, accounting and computer systems and
programs that ATC had available to it, the depth and quality of its employees,
the location and clustering of its communications sites, and the identity of
its stockholders. In this connection, management had prepared and presented to
the ATS Board various financial projections with respect to ATS and had
received comparable projections from ATC. Among the specific financial
information considered were the following: (a) debt levels of the two
companies anticipated to exist at the time of the merger and at December 31,
1998; (b) financial projections of the two companies with respect to operating
cash flow for 1998 and fourth quarter of 1998; (c) revenue per tower
information with respect to ATC; (d) a summary of ATC's acquisitions,
including prices paid (and the then current multiples of annualized revenues)
as compared to current annualized revenues and the multiple thereof
represented by the purchase price; and (e) a summary of construction
opportunities for ATC (potential and expected) and the likely customer or
customers. One of the more significant factors in determining the relative
value of the two companies was the fact that ATC was engaged exclusively in
the ownership and operation of communications sites, an activity that was
considered to command a higher multiple of operating cash flow than certain
aspects of ATS' business (the site acquisition business and the voice, video
and data transmission business).
Depending on the period measured, the multiple applied, and whether such
multiple was, in the case of ATS, applied to its overall business or whether
different multiples were used for the different aspects of ATS' business, the
information considered by the ATS Board indicated a range of comparative
values for the two companies. For example, based on applying the same
multiples (ranging from 12 times to 15 times) to all aspects of ATS' business,
the percentage allocable to ATC ranged from 36.4% to 31.7% annualizing
estimated 1997 fourth quarter EBITDA, 31.2% to 28.0% using estimated 1998
EBITDA, and 31.8% to 29.7% annualizing estimated 1998 fourth quarter EBITDA.
However, using blended multiples (17.2 times for tower rental business, 8.0
times for site acquisition business, and 6.0 for audio, video and data
transmission business, which resulted in a "blended" rate for ATS of 14.0
times EBITDA), the percentage allocable to ATC was 42.5% (based on annualized
1997 fourth quarter EBITDA), 37.2% (based on estimated 1998 EBITDA), and 36.9%
(based on annualized estimated 1998 fourth quarter EBITDA). When an 18.7
(rather than 17.2) multiple (resulting in a "blended" rate for ATS of 15.0
times EBITDA) was applied to tower rental business, ATC's percentage
allocations were 41.4%, 36.4% and 36.4%, respectively.
Other Acquisition Information. The ATS Board also considered the historical
prices that had been paid by it for other communications sites companies,
although this was a factor of less importance given the fact that none of the
prior acquisitions were of companies of a comparable size or state of
development as ATC.
72
<PAGE>
ATS management did not believe that the obtaining of a fairness opinion from
an independent investment banking firm in connection with the ATC Merger was
necessary. ATS management believed that it could evaluate and make a
recommendation to the ATS Board with respect to the fairness of the ATC
Merger, without the need of any such opinion. Among the factors leading to
that conclusion were management's prior experience in acquiring other
companies in the communications site industry, the extensive experience that
management had over twenty years in buying and selling businesses in the cable
and radio broadcasting industries, and the absence of any conflict of interest
on the part of any member of management (and the fact that the one member of
the ATS Board who had a conflict of interest abstained from participating in
any of the negotiations of the terms and conditions of the ATC Merger).
ATC required, as conditions of consummation of the ATC Merger, that (i) the
ATS Class A Common Stock be publicly traded and (ii) the ATC Merger occur on
or prior to May 31, 1998. While management believes that the merger with CBS
(which will result in such a public trading market) will be consummated prior
to that time, since clearance of the Merger by the Justice Department under
the HSR Act and FCC approval of the transfer of ARS' FCC licenses to CBS are
not within the control of either ARS or CBS, ATC was not willing to enter into
the ATC Merger Agreement unless an alternative means of creating such a public
trading market was included. Accordingly, provisions were added to the ATC
Merger Agreement and the Merger Agreement to provide for such separation
through the Tower Merger, which could be effected on June 1, 1998, if the
Merger has not been consummated on or prior to May 31, 1998. See "The Merger
and Tower Separation--Tower Merger". Management believes that the merger with
CBS will be consummated by such time and therefore intends to consummate the
Tower Merger only if required to timely consummate the ATC Merger. However, in
light of the adverse federal income tax consequences to the ARS common
stockholders should the Tower Merger occur and the merger with CBS not occur,
the ARS Board intends to evaluate all of the facts and circumstances existing
at the time of any proposed consummation of the Tower Merger to determine
whether it is in the best interests of the ARS common stockholders,
notwithstanding such adverse tax consequences. In that connection, the ARS
Board will also consider the provision of the ATC Merger Agreement which
provides for a termination fee to ATC of $15.0 million (together with
reimbursement of reasonable out-of-pocket expenses up to an aggregate of $1.0
million) in the event that such agreement is terminated because of the failure
of either the Merger or the Tower Merger to occur on or prior to May 31, 1998.
Such termination fee would be the sole and exclusive recourse of ATC in the
event of any such termination. See "The Merger and Tower Separation--Certain
Federal Income Tax Consequences of ATC Merger".
Consummation of the ATC Merger is also conditioned on, among other things,
the expiration or earlier termination of the HSR Act waiting period. On
January 28, 1998, the Justice Department issued a Second Request with respect
to the ATC Merger. ATS and ATC are in the process of compiling the information
requested by the Justice Department and intend to meet with its
representatives to address any questions they may have regarding such
information. (For information on the effects of a Second Request, see "The
Merger and Tower Separation--Regulatory Matters--Antitrust".)
In light of the fact that ARS management would prefer not to consummate the
Tower Merger (which would occur prior to the consummation of the Merger with
the consequence of two publicly traded companies), the ATC Merger is not
expected to be consummated prior to the spring of 1998, which is the
anticipated timing for consummation of the Merger.
It is a condition of ATC's obligation to consummate the ATC Merger that
Messrs. Dodge and Stoner shall have entered into a voting agreement with ATC
and certain of the ATC common stockholders, pursuant to which Messrs. Dodge
and Stoner will have agreed to vote in favor of the election of each of
Messrs. Lummis and Mays (or any other nominee of Mr. Lummis and Clear Channel
reasonably acceptable to the ATS Board) so long as Messrs. Lummis and Clear
Channel (or their respective affiliates), as the case may be, hold at least
50% of the shares of ATS Class A Common Stock to be received by him or it, as
the case may be, in the ATC Merger.
Chase Capital, which is an affiliate of Chase Equity Associates, a
stockholder of ARS, and of Mr. Chavkin, a director of ARS, owned approximately
18.1% of the ATC common stock as of February 1, 1998 and has a
73
<PAGE>
representative on the ATC Board of Directors. See "Principal Stockholders of
American Tower Systems" below and "Principal Stockholders of American Tower
Corporation" in Appendix V to this Prospectus. Summit Capital is entitled upon
closing of the ATC Merger to receive from ATC a $2.25 million financial
advisory fee. Fred Lummis, President and Chief Executive Officer of ATC, is an
affiliate of Summit Capital.
The ATC Merger Agreement
The provisions of the ATC Merger Agreement are comparable to those customary
in similar transactions, including without limitation (a) detailed,
substantially identical representations and warranties of ATS and ATC; (b)
covenants as to the interim conduct of the business of ATS and ATC (including
the necessity of approval of the other party for acquisitions or construction
commitments not therein disclosed and over certain specified amounts); (c)
agreements of ATS to (i) indemnify the officers and directors of ATC and to
maintain officer and director insurance for their benefit, (ii) maintain
employment benefits for a period of one year for officers and employees of
ATC, both on terms and conditions comparable to those which CBS has agreed to
in the Merger Agreement, and (iii) continue the employment of ATC employees at
existing salary levels for a period of one year; (d) closing conditions,
(including (i) the delivery of customary closing opinions, (ii) the receipt of
opinions of counsel as to the federal income tax consequences of the ATC
Merger to the parties and, in the case of ATC, its stockholders, (iii) the
election of Messrs. Lummis and Mays as directors of ATS; and (iv) the
amendment of the ATS Restated Certificate to (A) prohibit future issuances of
ATS Class B Common Stock (except upon exercise of then outstanding options and
pursuant to stock dividends or stock splits), (B) limit transfers of the ATS
Class B Common Stock, (C) limit Steven B. Dodge's voting power to 49.99%,
(less the voting power represented by the shares of Class B Common Stock
acquired by the Stoner purchasers pursuant to the ATS Private Placement and
still owned by them), (D) provide for automatic conversion of the ATS Class B
Common Stock to ATS Class A Common Stock should Mr. Dodge's aggregate voting
power fall below either (i) 50% of his initial aggregate voting power
(immediately after consummation of the ATC Merger) or (ii) 20% of the
aggregate voting power of all shares of ATS Common Stock at the time
outstanding, and (E) require consent of the holders of a majority of ATS Class
A Common Stock for amendments adversely affecting the ATS Class A Common
Stock; (e) the nonsolicitation of employees in the event of termination of the
ATC Merger Agreement; (f) a termination fee of $15.0 million (together with
reimbursement of reasonable out-of-pocket fees and expenses up to $1.0
million) payable to (i) ATS in the event that the ATC stockholders do not
approve the ATC Merger Agreement, and (ii) ATC in the event that (A) neither
the Merger nor the Tower Merger has occurred on or prior to May 31, 1998, or
(B) if required, approval of the ATC Merger by the ARS common stockholders has
not been obtained; and (g) the nonsurvival of the representations and
warranties of both parties. The ATC Merger Agreement provides, among other
conditions of consummation, that there shall not have been any event which
shall have had a Material Adverse Effect (as defined in the ATC Merger
Agreement) on ATS or ATC.
The ATC Merger will be accounted for as a "purchase," as such term is used
under generally accepted accounting principles. Accordingly, from and after
the ATC Merger Effective Date, ATC's consolidated results of operations will
be included in ATS' consolidated results of operations. For purposes of
preparing consolidated financial statements, ATS will establish a new
accounting basis for ATC's assets and liabilities based upon the fair market
values thereof and ATS' purchase price, including the fees and other costs
associated with the ATC Merger. Accordingly, the purchase accounting
adjustments made in connection with the development of the pro forma condensed
financial information appearing elsewhere in this Prospectus are preliminary
and have been made solely for purposes of developing such pro forma
consolidated financial information to comply with disclosure requirements of
the Commission. Although the final allocation will differ, the pro forma
consolidated financial information reflects management's best estimate based
upon currently available information. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements of American Tower Systems".
A copy of the ATC Merger Agreement is attached herewith as Appendix VI.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF ATC MERGER
The following discussion summarizes certain federal income tax consequences
of the ATC Merger, including certain consequences to holders of ATC Common
Stock and ATC Preferred Stock who are citizens or
74
<PAGE>
residents of the United States and who hold their shares as capital assets. It
does not discuss all aspects of federal income taxation that may be relevant
to a particular holder of ATC Common Stock or ATC Preferred Stock in light of
the holder's personal circumstances or special federal income tax treatment
(such as foreign persons, insurance companies, regulated investment companies,
dealers in securities, certain retirement plans, financial institutions, tax
exempt organizations, persons subject to the alternative minimum tax, persons
that have a functional currency other than the U.S. dollar, persons who have
received ATC Common Stock or ATC Preferred Stock in connection with the
performance of services or upon exercise of options received in connection
with the performance of services, or persons who hold ATC Common Stock or ATC
Preferred Stock as part of a straddle, hedging transaction or conversion
transaction). In addition, this summary does not address any aspects of state,
local, foreign or other tax laws that may be relevant to holders of ATC Common
Stock or ATC Preferred Stock.
It is the policy of the Internal Revenue Service (the "IRS") not to rule
directly on the tax status of transactions such as the ATC Merger, and no such
ruling will be sought. The obligations of ATS and ATC to effect the ATC Merger
are each conditioned upon receipt by each from its counsel of an opinion dated
as of the effective time of the ATC Merger, in form and substance reasonably
satisfactory to it, regarding certain federal income tax consequences of the
ATC Merger. Such opinions are required to be collectively substantially to the
effect that for federal income tax purposes the ATC Merger constitutes a
reorganization within the meaning of section 368 of the Code, that no gain or
loss will be recognized by ATS or ATC as a result of the ATC Merger and that
no gain or loss will be recognized by United States holders of ATC Common
Stock as a result of the ATC Merger, except that gain or loss will be
recognized in respect of cash received in lieu of a fractional share of ATS
Common Stock. In rendering their opinions, counsel will rely upon, and assume
the factual accuracy of, representations of ATS, ATC, and certain holders of
ATC Common Stock, including a representation that there is no plan or intent
on the part of the holders of ATC Common Stock receiving ATS Common Stock to
engage in a sale or other disposition of such stock that would result in the
reduction of the ownership of shares of ATS Common Stock received by the
holders of ATC Common Stock in the ATC Merger to a number of shares having a
value as of the Effective Time less than 50% of the aggregate fair market
value of all the outstanding shares of ATC Common Stock and ATC Preferred
Stock at such time. Such opinions are not binding on the IRS and would not, in
any event, prevent the IRS from challenging the tax-free nature of the ATC
Merger under the Code.
The following discussion is a general summary of the material United States
federal income tax consequences of the ATC Merger and assumes that the ATC
Merger will qualify as a tax-free reorganization within the meaning of section
368 of the Code. Sullivan & Worcester, tax counsel to ATS, has rendered its
opinion (a copy of which has been filed as an exhibit to the Registration
Statement) that the discussion contained in this section describes the
material federal income tax consequences of the ATC Merger. The discussion is
based upon the Code, regulations proposed or promulgated thereunder, judicial
precedent relating thereto, and current rulings and administrative practice of
the IRS, in each case as in effect as of the date hereof, all of which are
subject to change at any time, possibly with retroactive effect.
Tax Consequences to ATS and ATC. No gain or loss will be recognized for
federal income tax purposes by ATS or ATC as a consequence of the ATC Merger.
Tax Consequences to Holders of ATC Common Stock. Except to the extent of
cash received in lieu of fractional shares (discussed below), no gain or loss
will be recognized by a holder of ATC Common Stock who receives ATS Common
Stock pursuant to the ATC Merger. Except to the extent of tax basis allocable
to cash received in lieu of fractional shares (discussed below), the tax basis
of the ATS Common Stock received by a holder of ATC Common Stock will be the
same as the aggregate tax basis of the ATC Common Stock surrendered therefor.
The holding period of the ATS Common Stock received will include the holding
period of the ATC Common Stock surrendered therefor.
Cash received by a holder of ATC Common Stock in lieu of a fractional share
interest in ATS Common Stock will be treated as received in exchange for such
fractional share interest, and gain or loss will be recognized for federal
income tax purposes, measured by the difference between the amount of cash
received
75
<PAGE>
and the portion of the basis of the ATC Common Stock allocable to such
fractional share interest (measured as though such fractional share interest
were actually issued and allocated tax basis pursuant to the above
allocation). Such gain or loss would be capital gain or loss, and will be
long-term if such share of ATC Common Stock had been held for more than one
year at the effective time of the ATC Merger. Amounts treated as long-term
capital gain are subject to taxation of varying rates, depending among other
things on the holding period of the property disposed of and the tax status of
the holder.
Notwithstanding the above, because ATC is a "United States real property
holding corporation" as defined in section 897 of the Code, certain U.S. flow-
through entities such as partnerships, trusts, and estates may have a tax
withholding liability under Section 1445 of the Code in respect of the gain
realized on their ATC Common Stock in the ATC Merger that is allocable to such
flow-through entity's foreign partners or beneficiaries.
Tax Consequences to Holders of ATC Preferred Stock. The treatment accorded
to the exchange of ATC Preferred Stock for cash pursuant to the ATC Merger can
only be determined on the basis of the particular facts of each holder of ATC
Preferred Stock. In general, a holder of ATC Preferred Stock will recognize
gain (but not loss) measured by the difference between the amount of cash
received by the holder for its ATC Preferred Stock pursuant to the ATC Merger
and such holder's adjusted tax basis in the ATC Preferred Stock surrendered.
Such recognized gain will be capital gain if the exchange is "not essentially
equivalent to a dividend" with respect to the holder under section 302(b)(1)
of the Code, and will be taxed as a dividend distribution otherwise to the
extent of such holder's share of ATC's earnings and profits for federal income
tax purposes. In determining whether or not the exchange is "not essentially
equivalent to a dividend" each holder's ownership of ATS Common Stock
following the ATC Merger, as well as any options to acquire any ATS Common
Stock, must be taken into account. A holder of ATS Preferred Stock must also
take into account for these purposes ATS Common Stock that is considered to be
owned by such holder by reason of the constructive ownership rules set forth
in section 318 of the Code.
If a holder of ATC Preferred Stock owns (actually or constructively) only an
insubstantial percentage of the outstanding ATS Common Stock following the ATC
Merger, it is probable that the exchange of the ATC Preferred Stock for cash
pursuant to the ATC Merger will be considered "not essentially equivalent to a
dividend," and hence that the recognized gain from such disposition will
constitute capital gain. Such capital gain will constitute long-term capital
gain if the holder's holding period in the ATC Preferred Stock surrendered
exceeds one year. Amounts treated as long-term capital gain are subject to
taxation at varying rates, depending among other things on the holding period
of the property disposed of and the tax status of the holder.
Backup and FIRPTA Withholding. Under the Code, a holder of ATC Common Stock
or ATC Preferred Stock may be subject, under certain circumstances, to back-up
withholding at a 31% rate with respect to the amount of cash received pursuant
to the ATC Merger unless such holder provides to the exchange agent proof of
an applicable exemption or a correct taxpayer identification number, and
otherwise complies with applicable requirements of the back-up withholding
rules to be described in more detail in the exchange transmittal documents. In
addition, because ATC is a "United States real property holding corporation"
as defined in section 897 of the Code, the total consideration otherwise
issuable to a holder of ATC Common Stock or ATC Preferred Stock pursuant to
the ATC Merger will be subject to withholding of 10% of such total amount,
unless prior to the effective time of the ATC Merger and pursuant to
instructions to be mailed to holders of ATC Common Stock and ATC Preferred
Stock prior to such effective time, such holder certifies to ATS under
penalties of perjury that the holder is a citizen or resident of the United
States, a domestic corporation, a domestic partnership, or other United States
person as defined in Code section 7701(a)(30), and provides such other
customary information as may be required in connection with such
certification. Amounts withheld under the foregoing withholding rules are not
an additional tax and may be refunded or credited against the holder's federal
income tax liability, provided that the required information is furnished to
the IRS.
HOLDERS OF ATC COMMON STOCK OR ATC PREFERRED STOCK SHOULD CONSULT THEIR TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE ATC MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND
FOREIGN INCOME AND OTHER TAX LAWS.
76
<PAGE>
THE FOREGOING SECTION IS A SUMMARY DESCRIPTION OF MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE ATC MERGER AND RELATED TRANSACTIONS, WITHOUT
CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY HOLDER OF ATC
COMMON STOCK. IN ADDITION, IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX
ASPECTS OF THE ATC MERGER AND RELATED TRANSACTIONS. THE DISCUSSION IS BASED ON
CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY
REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS.
ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT
THE CONTINUING VALIDITY OF THE DISCUSSION.
STOCKHOLDER APPROVAL AND THE SOLICITATION OF WRITTEN CONSENTS OF STOCKHOLDERS
The ATC Merger has been approved by the ATS Board and the ATC Board and by
American Radio as the then holder of all of the outstanding voting stock of
ATS Common Stock. The ATC Merger requires the approval of the holders of a
majority of the outstanding shares of ATC Common Stock. The management of ATC
intends to obtain such approval through the solicitation of written consents
of stockholders of ATC Common Stock in lieu of obtaining such approval at a
special meeting of such stockholders. The costs of such solicitation shall be
borne by ATC. As soon as reasonably practicable after the date of this
Prospectus, ATC intends to mail consent solicitation material to all holders
of ATC Common Stock then outstanding. Each holder will be asked to consent to
the approval and adoption of the ATC Merger Agreement. For consents to be
effective under Section 228 of the DGCL, it is required that ATC receive,
within sixty (60) days of its receipt of the earliest dated consent from a
record holder of ATC Common Stock, consents from holders of record of ATC
Common Stock representing not less than a majority of the shares of ATC Common
Stock then outstanding. ATC will notify all holders of ATC Common Stock
promptly in the event ATC receives the consent of the holders of a majority of
ATC's outstanding shares of common stock. In the event ATC receives less than
unanimous written consent, it will notify the holders of ATC Common Stock who
do not consent to the ATC Merger. See "Principal Stockholders of American
Tower Corporation" in Appendix V.
The consent also covers approval of the holders of the ATC Common Stock to
the amendment of the ATC Securityholders Agreement to provide for its
termination upon consummation of the ATC Merger. For consent to be effective
under Section 228 of the DGCL, it is required that ATC receive, within sixty
(60) days of its receipt of the earliest dated consent from a record holder of
ATC Common Stock, consents from holders of record of ATC Common Stock
representing not less than two-thirds of the shares of ATC Common Stock then
outstanding. ATC will notify all holders of ATC Common Stock promptly in the
event ATC receives the consent of the holders of a majority of ATC's
outstanding shares of common stock. In the event ATC receives less than
unanimous written consent, it will notify the holders of ATC Common Stock who
do not consent to such amendment.
EXCHANGE PROCEDURES
As soon as reasonably practicable after the effective time of the ATC Merger
(the "ATC Merger Effective Time"), an Exchange Agent (the "Exchange Agent"),
selected by ATS and not reasonably disapproved of by ATC, will mail to each
holder of record of a certificate or certificates of ATC which immediately
prior to the ATC Merger Effective Time evidenced outstanding shares of ATC
Common Stock or ATC Preferred Stock (the "Certificates") (i) a letter of
transmittal and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the ATC Merger Consideration, or in the case of
the ATC Preferred Stock, the Preferred Stock Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with the letter of transmittal, duly executed, and such other
documents as ATS or the Exchange Agent may reasonably request, the holder of
such Certificate will be entitled to receive promptly in exchange therefor (i)
the certificates vvrepresenting that number of shares of ATS Class A Common
Stock (together with any cash in lieu of fractional shares) that such holder
has the right to receive (in each case less the amount of any required
withholding taxes, if any), or (ii) in the case of holders of ATC Preferred
Stock, the Preferred Stock Consideration that such holder has the right to
receive pursuant to the ATC Merger Agreement, and the Certificate so
surrendered shall forthwith be canceled. Until surrendered, each Certificate
will, at any time after the ATC Merger Effective Time, represent
77
<PAGE>
only the right to receive the ATC Merger Consideration or the Preferred Stock
Consideration with respect to the shares of ATC Common Stock or ATC Preferred
Stock formerly represented thereby.
HOLDERS OF ATC COMMON STOCK SHOULD SEND CERTIFICATES TO THE EXCHANGE AGENT
ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS ACCOMPANYING,
THE LETTER OF TRANSMITTAL.
No fractional shares of ATS Class A Common Stock will be issued upon the
surrender for exchange of Certificates. In lieu of any such fractional shares,
the holders thereof will be entitled to receive from the Exchange Agent a cash
payment equal to such fraction multiplied by the closing price per share of
ATS Class A Common Stock on Nasdaq, or, if not then traded on Nasdaq, on the
principal stock exchange on which the ATS Class A Common Stock is admitted to
trading, as reported by the The Wall Street Journal, for the first trading day
immediately following the ATC Merger Effective Date.
No dividends or other distributions declared after the ATC Merger Effective
Time on ATS Common Stock will be paid with respect to any shares of ATS Common
Stock represented by a Certificate until such Certificate is surrendered for
exchange in accordance with the procedures described above.
APPRAISAL RIGHTS OF ATC STOCKHOLDERS
Certain holders of ATC Common Stock and ATC Preferred Stock (collectively,
the "ATC Stock") immediately prior to the ATC Merger Effective Time have the
right to dissent from the ATC Merger and demand and perfect appraisal rights
in accordance with the conditions established by Section 262 of the DGCL
("Section 262"). The ATC stockholders who execute the Consent of Stockholders
in Lieu of Meeting of ATC, pursuant to which the ATC Merger Agreement is to be
approved and adopted, will by such execution, waive their appraisal rights
with respect to their shares of ATC Stock.
SECTION 262 IS REPRINTED IN ITS ENTIRETY AS APPENDIX IV TO THIS PROSPECTUS.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO
APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX IV.
THIS DISCUSSION SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO
EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO
SO, AS FAILURE TO COMPLY WITH THE PROCEDURES SET FORTH HEREIN OR THEREIN WILL
RESULT IN THE LOSS OF APPRAISAL RIGHTS. A PERSON HAVING A BENEFICIAL INTEREST
IN SHARES OF ATC STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A
BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE
STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL
RIGHTS.
A holder of record of shares of ATC Stock who makes the demand described
below with respect to such shares, who continuously is the record holder of
such shares through the ATC Merger Effective Time, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of
the ATC Merger Agreement nor consents thereto in writing may be entitled to an
appraisal by the Delaware Court of Chancery (the "Delaware Court") of the fair
value of his or her shares of stock. All references in this summary of
appraisal rights to a "stockholder" is to the record holder of shares of ATC
Stock.
Under Section 262, where a merger has been approved by written consent
pursuant to the provisions of Section 228 of the DGCL, as in the case of
adoption of the ATC Merger by the ATC common stockholders, each constituent
corporation must notify each of the holders of its stock for which appraisal
rights are available, either before the ATC Merger Effective Time or within
ten days thereafter, that such appraisal rights are available and include in
each such notice a copy of Section 262. This Prospectus shall constitute such
notice to the record holders of ATC Stock.
Holders of ATC Stock immediately prior to the ATC Merger Effective Time who
desire to exercise their appraisal rights must not vote in favor of the ATC
Merger Agreement or the ATC Merger and must deliver a separate written demand
for appraisal to ATS within twenty (20) days after the date notice is first
mailed to stockholders of ATC to the effect that the ATC Merger has been
approved by the ATC Stockholders. A demand
78
<PAGE>
for appraisal must be executed by or on behalf of the stockholder of record
fully and correctly, as his, hers or its name appears on his, hers or its
stock certificates and must state that such person intends to demand appraisal
of his, hers or its shares of ATC Stock issued and outstanding immediately
prior to the ATC Merger Effective Time. A person having beneficial interests
in shares of ATC Stock that are held of record in the name of another person,
such as a broker, fiduciary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a timely
manner to perfect whatever appraisal rights are available. If the shares of
ATC Stock are owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or custodian) or
other nominee, such demand must be executed by or for the record owner. If the
shares of ATC Stock are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or for all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
shares of ATC Stock as a nominee for others, may exercise appraisal rights
with respect to the shares held for all or less than all beneficial owners of
shares as to which such person is the record owner. In such case, the written
demand must set forth the number of shares covered by such demand. Where the
number of shares is not expressly stated, the demand will be presumed to cover
all shares of ATC Stock outstanding in the name of such record owner. Former
stockholders who held their shares of ATC Stock in brokerage accounts or other
nominee forms and who wish to exercise appraisal rights are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights, if available, should
mail or deliver his or her written demand to: American Tower Corporation, 3411
Richmond, Suite 400, Houston, Texas 77046-3401, Attention: Secretary.
The written demand for appraisal should specify the stockholder's name and
mailing address, the number of shares of ATC Stock owned, and that the
stockholder is thereby demanding appraisal of his or her shares. Within ten
(10) days after the ATC Merger Effective Time, the Surviving Corporation must
provide notice of the ATC Merger Effective Time to all stockholders who have
complied with Section 262.
Within one hundred and twenty (120) days after the ATC Merger Effective
Time, but not thereafter, either the Surviving Corporation or any former
holders of ATC Stock who has complied with the required conditions of Section
262 may file a petition in the Delaware Court, with a copy served on the
Surviving Corporation in the case of a petition filed by a stockholder,
demanding a determination of the fair value of the shares of all dissenting
stockholders. The Surviving Corporation is under no obligation to and has no
present intention to file such a petition. Accordingly, ATC stockholders
immediately prior to the ATC Merger Effective Time who desire to have their
shares appraised should initiate any petitions necessary for the perfection of
their appraisal rights within the time periods and in the manner prescribed in
Section 262. Within one hundred and twenty (120) days after the ATC Merger
Effective Time, any former ATC stockholder who has theretofore complied with
the applicable provisions of Section 262 will be entitled, upon written
request, to receive from the Surviving Corporation a statement setting forth
the aggregate number of shares of ATC Stock not voting in favor of the ATC
Merger Agreement and with respect to which demands for appraisal were received
by ATS and the number of holders of such shares. Such statement must be mailed
within 10 days after the written request therefor has been received by the
Surviving Corporation or within ten days after the expiration of the period
for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed and assuming appraisal rights
are available by a former ATC stockholder and a copy thereof is served on the
surviving corporation, the Surviving Corporation will then be obligated within
20 days to file with the Delaware Register of Chancery a duly verified list
containing the names and addresses of all former stockholders who have
demanded appraisals of their shares and with whom agreements as to the value
of their shares have not been reached. After such notice to such former
stockholders as required by the Delaware Court prepared to conduct a hearing
on such is empowered to conduct a hearing on such petition. At the hearing on
such petition, the Delaware Court will determine which stockholders, if any,
are
79
<PAGE>
entitled to appraisal rights. The Delaware Court may require the stockholders
who have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register of
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Delaware Court
may dismiss the proceedings as to such stockholder. Where proceedings are not
dismissed, the Delaware Court will appraise the shares of ATC Stock owned by
such stockholders, determining the fair value of such shares exclusive of any
element of value arising from the accomplishment or expectation of the ATC
Merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. Former holders of ATC Stock
considering seeking appraisal should be aware that the fair value of their
shares of ATC Stock as determined by Section 262 could be more than, the same
as or less than the consideration they would receive pursuant to the ATC
Merger if they did not seek appraisal of their shares of ATC Stock and that
the investment banking opinions as to the fairness from a financial point of
view are no necessarily opinions as to the fair value under Section 262. In
determining fair value, the Delaware Court is to take into account all
relevent factors. In Weinberger v. UOP Inc., the Delaware Supreme Court
discussed the factors that could be considered in determining fair value in an
appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value
of a company." The Delaware Supreme Court stated that in making this
determination of fair value to court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other
facts ascertainable as of the date of the Merger that throw light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the Merger and not
the product of speculation, may be considered." Section 262, however, provides
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the Merger." In addition, Delaware courts
have decided that the statutory appraisal remedy, depending on factual
circumstances, may or may not be a dissenter's exclusive remedy.
The Delaware Court will also determine the amount of interest, if any, to be
paid upon the amounts to be received by persons whose shares of ATC Stock have
been appraised. The cost of the appraisal proceeding may be determined by the
Delaware Court and taxed against the parties as the Delaware Court deems
equitable in the circumstances. Upon application of a dissenting stockholder
of ATC, the Delaware Court may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares of stock entitled to appraisal.
Any holder of shares of ATC Stock who has duly demanded appraisal in
compliance with Section 262 will not, after the ATC Merger Effective Time, be
entitled to vote for any purpose any shares subject to such demand or to
receive payment of dividends or other distributions on such shares, except for
dividends or distributions payable to stockholders of record at a date prior
to the ATC Merger Effective Time.
If no petition for appraisal is filed with the Delaware Court within one
hundred and twenty (120) days after the ATC Merger Effective Time,
stockholders' rights to appraisal shall cease. Any stockholder may withdraw
such stockholder's demand for appraisal by delivering to the Surviving
Corporation a written withdrawal of his or her demand for appraisal and
acceptance of the ATC Merger, except that (i) any such attempt to withdraw
more than 60 days after the ATC Merger Effective Time will require written
approval of the Surviving Corporation and (ii) no appraisal proceeding in the
Delaware Court will be dismissed as to any stockholder without the approval of
the Delaware Court, which may be conditioned upon such terms as the Delaware
Court deems just. If any former stockholder who demands appraisal of his,
hers, or its shares of ATC Stock under Section 262 fails to perfect, or
effectively withdraw or losses his, hers or its right to appraisal as provided
by the DGCL, the shares of ATC Stock of such stockholders will be converted
into the right to receive the consideration of the ATC Merger (without
interest).
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING APPRAISAL
RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A FORMER
STOCKHOLDER OF ATC STOCK WILL BE ENTITLED TO RECEIVE THE ATC MERGER
CONSIDERATION FOR EACH SHARE OF ATC STOCK ISSUED AND OUTSTANDING IMMEDIATELY
PRIOR TO THE ATC MERGER EFFECTIVE TIME OWNED BY HIM, HER OR IT).
80
<PAGE>
BACKGROUND OF THE MERGER
GENERAL BACKGROUND
The radio broadcasting industry has undergone significant changes in the
last several years in anticipation and, after February 1996, as a consequence
of a new regulatory structure. The passage of the Telecommunications Act of
1996 (the "Telecommunications Act") fundamentally altered the landscape in the
radio broadcasting industry by dramatically expanding the number of radio
stations that could be owned in a local market and eliminating all FCC
restrictions on the number of stations that could be owned nationwide by a
single entity. In anticipation of those changes, ARS began to pursue, and
after such legislation was enacted pursued even more aggressively, the
acquisition of additional radio stations in new and existing markets, in order
to achieve, among other things, increased size and greater geographic
diversification. ARS intended to increase its presence in these markets
through further acquisitions, as well as to expand into new markets. ARS
concentrated these efforts in markets ranked in the top 60 (with an emphasis
on markets ranked 10 through 50) in terms of radio advertising revenues where
management had believed it could have ultimately achieved a substantial market
position. When evaluating acquisition opportunities in new markets, ARS
assessed the potential to achieve a strong position in audience share and to
generate significant cash flow growth through owning multiple stations and
through improved programming, marketing, sales and operating efficiencies.
Commencing in the spring of 1997, ARS perceived a change in the nature of
the consolidation taking place in the radio broadcasting industry with a shift
from local or regional acquisitions to mergers between more substantial
companies beginning to accelerate. As a consequence, ARS began to consider and
evaluate possible strategic alternatives for ARS, including potential major
transactions with third parties. In August 1997, American Radio announced that
it was exploring ways to maximize stockholder value in the immediate future.
On behalf of ARS, Credit Suisse First Boston contacted thirteen potential
merger or acquisition candidates, eleven of whom were engaged in the radio
broadcasting industry and two of which were leveraged buyout firms or
financial companies. Of these thirteen, eleven signed confidentiality
agreements and received an informational memorandum prepared by ARS. The
informational memorandum contained detailed historical and projected financial
information with respect to ARS' radio broadcasting business distribution of
revenues by stations and markets, station rating information, "value" of
"underdeveloped" stations, and historical and projected financial information
with respect to the communications site business. Management consulted with
Credit Suisse First Boston as to the companies to whom the informational
memorandum should be sent, recognizing that such companies would need to have
the financial resources to be able to consummate a transaction with ARS. The
prospective bidders were advised to submit their best and final bid to ARS no
later than September 19, 1997.
During the course of the due diligence which was conducted by the
prospective bidders, ARS made clear to them that their bids were to relate
solely to ARS' radio broadcasting business and not to the communications site
business. The ARS Board had concluded that the separation of the
communications site business through the distribution of ATS Common Stock to
the ARS common stockholders would enable such stockholders to realize a
greater value, in the long run, than if the communications site business had
been offered for sale as part of the radio broadcasting business. The ARS
Board based such belief on two principal groups of factors: (i) factors
affecting the communications site industry, including that the communications
site business was a new one as far as the market place was concerned, that
there were no publicly traded communications site companies, and that the
amount of information publicly available about such industry was limited,
together with the ARS Board's knowledge with respect to the prices at which
companies in the industry were being bought and sold; and (ii) factors
affecting ATS, including that ATS was in the very early stages of development,
that ATS was engaged in a major acquisition program only a portion of which
had been completed, that ATS had not had the opportunity to consolidate its
acquisitions and to begin to reap the benefits of such acquisition program,
and that ATS' construction activities had been relatively minimal (compared to
its projected program) and therefore the benefits of such program were in the
future. See also the discussion below under "The Merger and Tower Separation--
Reasons for the Tower Separation".
81
<PAGE>
The principal alternatives to a cash sale of the radio broadcasting business
to another radio broadcasting company considered by the ARS Board were (i) an
acquisition by ARS of another radio broadcasting company, including one which
might be larger than ARS, in which management of ARS would be the continuing
management, (ii) a merger of ARS with another radio broadcasting company in
which stock or other securities of the other company would be the principal
consideration and in which management of the other company would be the
continuing management, and (iii) a management cash buyout, financed by a
leverage buyout firm or other financial institutions. All of the alternatives
were ultimately rejected, some (the management leveraged buyout) earlier than
others for the reasons explained in more detail below and which can be
summarized as follows: (a) the ARS Board did not believe ARS had the capacity,
either financially or, equally importantly from management's perspective,
operationally to continue to operate effectively and grow a company which was
engaged, to such a significant extent, in both the radio broadcasting business
and the communications site business, and (b) the ARS Board's evaluation of
the current and long term values of potential stock merger candidates. The
leveraged buyout route was rejected by management because the potential
bidder, which was not itself a radio company and therefore not a direct
competitor of ARS, indicated that it might be prepared to make an all cash
offer for the entire company that would exceed the CBS offer. However, since
such bidder indicated that its offer would be contingent on key ARS management
personnel continuing in their current positions, management concluded that
such contingency was completely antithetical to what the ARS Board was trying
to accomplish, the separation of the two businesses and the freeing up of
management to capitalize on the potential of the communications site business.
On September 12, 1997, one of the prospective bidders, CBS, indicated that
it was not willing to participate in a bidding process and that, if it had not
negotiated and executed a definitive merger agreement prior to the time when
bids were due, it would not submit a bid. No bids had been received by ARS at
the time, although that fact was not revealed to CBS. ARS indicated that it
was willing to enter into negotiations with CBS, but that it would not stop
the bidding process unless and until a satisfactory merger agreement was
executed by ARS and CBS. ARS' willingness to enter into negotiations with CBS
was based on a number of factors: (i) its belief that CBS was the most likely
(and probably the only) all cash purchaser; (ii) ARS' indication to CBS that
it would not (and it did not) terminate the bidding process until after an
agreement had been reached with CBS; and (iii) its belief (based on its
knowledge of what the management of CBS with whom it was negotiating had done
in other similar situations) that CBS was serious in its intention not to
participate in the bidding process and its belief that it was essential that
CBS not be eliminated as a potential purchaser. On September 15, 1997, CBS
advised ARS that it was willing to pay $2.5 billion for ARS' radio
broadcasting business, which amount included the assumption of all ARS
indebtedness as well as the liquidation preference of the ARS Preferred Stock.
Such amount resulted in a per share price for the ARS Common Stock of
approximately $41.30. ARS indicated that such offer was inadequate and further
negotiations ensued. An agreement in principle on a $2.6 billion overall or
$44.00 per share price was reached on September 16, 1997. However, while an
agreement in principle with respect to price had been reached, a number of
material financial and legal issues remained to be resolved, CBS had not
conducted its due diligence investigation and a definitive merger agreement
remained to be negotiated. Thereafter, CBS conducted its due diligence and
representatives of ARS and CBS negotiated the terms and conditions of the
definitive merger agreement. Such negotiations were completed on September 19,
1997.
An informational meeting of the ARS Board took place by telephone conference
on September 17, 1997, at which all of the directors other than Messrs. Kellar
and Primis were present. Also in attendance were representatives of Credit
Suisse First Boston, Sullivan & Worcester LLP, counsel for ARS ("Sullivan &
Worcester") and Sullivan & Cromwell, counsel for Credit Suisse First Boston.
Credit Suisse First Boston presented certain informational material and
analyses (described in detail below under "--Opinion of Financial Advisor to
American Radio"), including an overview of the transaction, the background to
the offer, a list of the persons who had been furnished information concerning
ARS and invited to participate in the bidding process, and the financial terms
of the CBS offer. Also included in the material presented by Credit Suisse
First Boston was its evaluation of the likely form (all or predominantly
stock) of potential bids to be received by those companies that had indicated
they were likely to submit a bid and the likely range of those bids, to the
extent known by it. Among the matters reviewed by the directors were the
market performance of the ARS Common
82
<PAGE>
Stock and trading statistics, and various valuation analyses. The nature of
the CBS bid was discussed, including the risks associated with accepting or
not accepting it before determining the results of the bidding process.
Mr. Dodge then explained in detail the reasons why he was recommending the
sale of the radio broadcasting business at this time and why he favored the
CBS proposal. Among Mr. Dodge's concerns were the high multiples at which
radio companies were trading and his opinion that there were substantial risks
that those multiples may not be sustained. In that regard, Mr. Dodge
considered the factors that might cause such multiples to decline
substantially, including the failure of a leading radio broadcaster to achieve
expected results, an economic or stock market decline, and regulatory and
technological factors. He also advised the directors that he was concerned, in
light of the known discussions that were currently taking place among the
larger companies in the industry, that, in the not too distant future, if ARS
did not act promptly, the number of prospective bidders would be considerably
smaller than at present (and that the antitrust and FCC regulatory problems
most of such bidders would face in merging with ARS would have been
exacerbated) and that perhaps none of them would be able to offer an all or
predominantly cash transaction. Mr. Dodge also believed that once a "deal" had
been reached with CBS, it would be consummated based on CBS' record of
successfully closing large mergers and acquisitions. He then outlined the
history of his negotiations with Mr. Mel Karmazin, who negotiated the
transaction on behalf of CBS and who is the Chairman and Chief Executive
Officer of the CBS Stations Group. With the assistance of Credit Suisse First
Boston, Mr. Dodge advised the ARS Board, based upon discussions between Mr.
Dodge and one of the potential bidders and between representatives of Credit
Suisse First Boston and certain of the other potential bidders, on the
prospects of other bids, who might be making them what form the consideration
might take, and, if known, the amount of such bids, based on the respective
current market prices per share of the potential bidders' common stock. In
that connection, Mr. Dodge and representatives of Credit Suisse First Boston
reported to the ARS Board that based on preliminary indications from potential
bidders to date that it appeared likely that a maximum of three bids (other
than the CBS offer) would be received, that all of those bids would likely be
from other radio broadcasting companies, and that in two, or possibly three
cases, the consideration to be offered would consist predominately of common
stock (with a possibility of convertible or nonconvertible preferred stock as
a portion or all of such consideration in certain cases). The ARS Board then
reviewed the possible value of each of the bids, which in a majority of the
cases was approximately the same as that of CBS (valuing where relevant such
bids on the current trading levels per share of the bidders' common stock).
The ARS Board then proceeded to consider at length the merits of the CBS offer
and the potential other bids. Among the factors considered was the likelihood
and timing of consummation of the CBS transaction compared to those of the
other potential bidders. Mr. Dodge expressed the view that he believed a
merger with CBS involved far fewer regulatory problems which could be resolved
far quicker than those with two of the other potential bidders and that while
the regulatory fit with the third bidder was somewhat more favorable than with
CBS, he did not believe the difference was material or should be considered as
an important factor. An extended discussion ensued on the comparative "value"
of the CBS cash offer and those likely to be received from the other potential
bidders. The ARS Board, with the assistance of Mr. Dodge, considered the
management and reputation of the other bidders, the nature of their respective
businesses, including in one case businesses other than the radio broadcasting
business, and each potential bidder's ability to digest and operate a
potentially much larger radio broadcasting business. After such discussion,
the ARS Board tentatively concluded that it appeared to be in the best
interests of the ARS common stockholders to pursue the CBS all cash offer,
given the regulatory considerations, the form and "value" of the consideration
likely to be offered by other bidders and the market risks inherent therein.
A meeting of the ARS Board took place by telephone conference on September
18, 1997, at which all of the directors other than Mr. Peebler (who had
indicated his approval of the proposed CBS transaction at the prior day's
meeting) were present. Also in attendance were representatives of Credit
Suisse First Boston, Sullivan & Worcester and Sullivan & Cromwell. The ARS
Board reviewed the substance of the prior days' discussion and materials and
then considered the basic terms of the proposed merger agreement, including
both the financial and legal terms and conditions. Mr. Dodge also presented
more current information concerning the prospects of bids from other parties
under consideration, including the fact that the one potential bid that he had
been aware
83
<PAGE>
of that was higher than the CBS offer was being substantially reduced. He also
indicated that no bids had, in fact, been received. The directors were also
advised in general terms of the proposed distribution to the ARS stockholders
of the stock of ATS, although it was noted that many of the details of that
transaction needed to be resolved and that a definitive proposal regarding the
separation of ATS would be presented to the directors at a future meeting.
Thereafter, the ARS Board unanimously approved the Merger with CBS pursuant to
the Original Merger Agreement which had been presented to it.
On September 19, 1997, American Radio, CBS and CBS Sub executed and
delivered the Original Merger Agreement. CBS requested that certain
stockholders (who were, in most instances members of the ARS Board: Messrs.
Box (and his wife), Buckley, Dodge, Kellar and Stoner (and certain members of
his family or trusts for their benefit), and a partner of ARS' legal counsel,
Sullivan & Worcester) execute and deliver consents, in accordance with the
Delaware General Corporation Law (the "DGCL") and the proxy rules under the
Exchange Act, approving and adopting the Original Merger Agreement and
approving the Merger. As a result of such requests, holders of shares of ARS
Common Stock representing a majority of the voting power of the shares of the
ARS Common Stock entitled to vote with respect to the Original Merger
Agreement executed and delivered such consents on September 19, 1997, thereby
approving and adopting the Original Merger Agreement and approving the Merger.
CBS advised ARS that its Board of Directors had approved the Original Merger
Agreement on September 18, 1997. On September 18, 1997, ARS and Credit Suisse
First Boston advised the other potential bidders of the agreement with CBS. No
other bids had been or were thereafter received.
During the period from September to early December 1997, management
considered various means of effecting the Tower Separation in order to
increase the likelihood that the distribution of ATS Common Stock to the
holders of ARS Common Stock would be treated as capital gains for federal
income tax purposes. On December 10, 1997, the ARS Board approved the form of
an Amended and Restated Agreement and Plan of Merger (referenced elsewhere
herein as the "Merger Agreement") to provide for such means of effectuating
the Tower Separation. On December 18, 1997, ARS, CBS and CBS Sub executed and
delivered the Merger Agreement, a copy of which is included as Appendix II. As
a result of the request of one of the ARS common stockholders, who was aware
of the tax benefit to holders of ARS Common Stock of the new provision in the
Merger Agreement, holders of ARS Common Stock representing a majority of the
voting power of the shares of the ARS Common Stock entitled to vote with
respect to such matters executed and delivered on December 19, 1997 written
consents approving and adopting the Merger Agreement and the Tower Merger
Agreement and approving the Merger and the Tower Merger, each on the
respective terms set forth therein and in accordance with the DGCL.
On December 19, 1997, ARS, CBS and CBS Sub executed an amendment to the
Merger Agreement reflecting ATS common stockholder approval and adoption of
the Merger Agreement and approval of the Merger, changing all references to
the term "Proxy Statement" to "Information Statement" and to the term "Tower
Proxy Statement" to "Tower Information Statement", deleting the requirement
that a meeting of ARS common stockholders be held to approve and adopt the
Merger Agreement and the Tower Merger Agreement and approve the transactions
contemplated by each of them, and acknowledging that the Merger Agreement
amended and restated the Original Merger Agreement. The amendment also
contained a representation and warranty of ARS to the effect that the
stockholder consents constituted the Required Vote. A copy of such amendment
is included as Appendix IIB to this Prospectus.
RECOMMENDATION OF THE ARS BOARD; ARS' REASONS FOR THE MERGER
The ARS Board believes that the Merger Agreement and the transactions
contemplated thereby are fair to, and in the best interests of, its common
stockholders. Accordingly, the ARS Board unanimously recommended that the ARS
common stockholders vote for the approval of the Merger Agreement and the
transactions contemplated thereby. The ARS Board, in reaching its conclusions,
considered the factors discussed below. In view of the wide variety of factors
considered in connection with the evaluation of the Merger, the ARS Board did
not find it practicable, nor did it attempt, to quantify or otherwise to
assign relative weights to the specific factors it considered in reaching its
determinations.
84
<PAGE>
Amount and Form of Merger Consideration. The ARS Board viewed favorably the
price of $44.00 per share to be received by the holders of ARS Common Stock
for their interest in the ARS radio broadcasting business. The ARS Board
concluded that this price represented, in light of estimated value of ATS, a
significant premium to the trading prices of ARS Class A Common Stock during
the period prior to the announcement that ARS was exploring ways to maximize
stockholder values. Also viewed as extremely favorable to the ARS common
stockholders was the fact that CBS had offered an all cash transaction. The
ARS Board was aware of the other potential bidders as a result of the due
diligence process and concluded, after advice from Credit Suisse First Boston,
that none of such potential bidders would be financially able to offer an all
or principally cash transaction. Consideration was given to the mix of cash,
if any, and securities and the nature of the securities likely to be offered
by other bidders and how the intrinsic value of such securities compared to
the ARS Common Stock.
Other Terms of the Merger Agreement. The ARS Board considered the legal and
other financial terms of the Merger Agreement. The ARS Board gave
consideration to, in addition to the amount and form of consideration offered
to the ARS common stockholders (i.e., $44.00 cash) for their interest in the
ARS radio broadcasting business, the provisions of the Merger Agreement that
(i) the closing date adjustment provisions (which would not affect the $44.00
per share price but which would benefit or burden ATS); and (ii) permit the
Tower Separation to be implemented on terms favorable to the holders of ARS
Common Stock. Finally, the ARS Board considered the absence of any term or
condition in the Merger Agreement that was unduly onerous or could materially
impede or impair the consummation of the Merger.
Trading History of ARS Common Stock and Other Market Information. The ARS
Board also considered historical market prices and trading volume of the ARS
Class A Common Stock and historical and projected earnings, the premium CBS'
offer represented over the historical trading prices of the ARS Class A Common
Stock during the period prior to the announcement that ARS was exploring ways
to maximize stockholder values, the market prices and financial data relating
to companies engaged in similar businesses to ARS, and prices and premiums
paid in recent acquisitions of similar companies.
Market Consolidation. In light of changes effected by the Telecommunications
Act, ARS and other radio broadcasting companies have aggressively pursued the
acquisition of additional radio stations. More recently, such acquisitions
have taken the form of consolidation among larger companies and the ARS Board
was aware that a number of possible further consolidations were being
discussed. Management had advised the ARS Board that, in light of that
phenomenon, ARS could not continue to rely solely on pursuing the acquisition
of isolated stations or groups of stations, but would have to enter into a
major transaction if it was to remain competitive. The ARS Board was concerned
that were ARS to do nothing in the way of a merger with another large company,
it might be left, in a relatively short period, with no potential or possibly
only one merger candidate. Accordingly, it had retained Credit Suisse First
Boston to seek possible merger candidates.
ARS' Business, Conditions and Prospects. In evaluating the terms of the
Merger, the ARS Board reviewed, among other things, information with respect
to the financial condition, results of operations and businesses of ARS, on
both a historical and prospective basis, and current industry, economic and
market conditions. In evaluating ARS' prospects and the terms of the Merger,
the ARS Board considered, among other things, the strengths of ARS' radio
broadcasting business, including the markets in which it operates, its
management team, and the state of the development of its stations. The ARS
Board also considered the current industry-specific challenges facing the
business including, among other things, increased review by the Antitrust
Division of acquisitions in local markets, increased capital requirements, and
competition from larger and rapidly growing competitors established pursuant
to the changes effected by the Telecommunications Act.
Opinion of Credit Suisse First Boston. The ARS Board considered as favorable
to its determination the oral opinion delivered by Credit Suisse First Boston
on September 17 and 18, 1997, subsequently confirmed in a written opinion to
the ARS Board, dated September 19, 1997, that, as of such date, the $44.00 per
share to be received by the holders of ARS Common Stock in the Merger for, in
effect, their interest in the ARS radio broadcasting business was fair to such
stockholders from a financial point of view. The ARS Board also
85
<PAGE>
considered the presentation made to it by Credit Suisse First Boston. See "--
Opinion of Financial Advisor to American Radio". Although the Merger Agreement
executed on December 18, 1997 changed the means by which the Tower Separation
would be effected, it did not affect the amount of the aggregate cash
consideration (which had been set forth in the Original Merger Agreement, as
executed on September 19, 1997) to be received by holders of ARS Common Stock
for their interest in ARS' radio broadcasting business. In connection with the
adoption of the Merger Agreement, the ARS Board did not seek an updated
fairness opinion from its financial advisor. The Credit Suisse First Boston
Opinion obtained in connection with the Original Merger Agreement addressed
the fairness of the consideration to be received for American's radio business
and concluded that the $44.00 per share was fair from a financial point of
view to the American common stockholders. See "--Opinion of Financial Advisor
to American Radio" and Appendix III. The ARS Board determined that, with
respect to the Merger Consideration, the Merger Agreement changed only the
form of the Tower Separation and did not change the net economics of the
Merger Consideration. Accordingly, it concluded that it would not be necessary
to incur the expense of engaging Credit Suisse First Boston to re-issue its
opinion in connection with such modifications to the Merger Agreement.
OPINION OF FINANCIAL ADVISOR TO AMERICAN RADIO
Credit Suisse First Boston was engaged by ARS to act as a financial advisor,
including rendering a fairness opinion letter to the ARS Board in connection
with the cash consideration in payment for ARS' radio broadcasting business to
be received by the holders of ARS Common Stock in connection with the Merger
(but not the distribution of ATS Common Stock as part of the Tower
Separation). At the September 18, 1997 meeting of the ARS Board, Credit Suisse
First Boston delivered its oral opinion to the ARS Board, subsequently
confirmed in a written opinion (the "Credit Suisse First Boston Opinion") to
the ARS Board on September 19, 1997 that, as of such date, the $44.00 per
share of ARS Common Stock to be received by the ARS stockholders in the Merger
for, in effect, their interest in the ARS radio broadcasting business was fair
to such holders from a financial point of view.
The full text of the Credit Suisse First Boston Opinion, which sets forth
the procedures followed, assumptions made, matters considered and limitations
on the review undertaken, is attached hereto as Appendix III, is incorporated
herein by reference and is included with the consent of Credit Suisse First
Boston. ARS common stockholders are urged to, and should, read the Credit
Suisse First Boston Opinion carefully and in its entirety. The Credit Suisse
First Boston Opinion is directed to the ARS Board and relates only to the
fairness of the Cash Consideration (in payment for ARS' radio broadcasting
business) from a financial point of view. It does not address the distribution
of ATS Common Stock as part of the Tower Separation or any other aspect of the
Merger nor does it constitute a recommendation to any ARS stockholder with
respect to the Merger. The summary of the Credit Suisse First Boston Opinion
set forth below is qualified in its entirety by reference to the full text of
such opinion.
In arriving at its opinion, Credit Suisse First Boston: (i) reviewed certain
publicly available business and financial information relating to ARS, as well
as the Merger Agreement; (ii) reviewed certain other information, including
financial forecasts and pro forma financial information provided to it by ARS
concerning ARS, after giving effect to a distribution by ARS of all of the
capital stock of ATS or the net proceeds from the sale thereof to the ARS
stockholders; (iii) discussed the business and prospects of ARS with
management of ARS; (iv) considered certain financial and stock market data of
ARS; (v) compared such data with similar data for other publicly held
companies in similar businesses; (vi) considered the financial terms of
certain other business combinations and other transactions which have recently
been effected; and (vii) considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria as
Credit Suisse First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information provided
to or otherwise received by Credit Suisse First Boston and relied on its being
complete and accurate in all material respects. With respect to the financial
forecasts, Credit Suisse First Boston assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of ARS' management as to the future financial performance of ARS. In
addition, Credit Suisse First Boston was not requested to make, and did not
make, an independent evaluation or appraisal of the
86
<PAGE>
assets or liabilities (contingent or otherwise) of ARS nor was Credit Suisse
First Boston furnished with any such evaluations or appraisal. The Credit
Suisse First Boston Opinion was necessarily based upon financial, economic,
market and other conditions as they existed and could be evaluated on the date
of its opinion. In connection with its engagement, Credit Suisse First Boston
approached third parties to solicit indications of interest in a possible
acquisition of ARS and held preliminary discussions with certain of such
parties which discussions, at ARS' request, were not completed, prior to the
date on which its opinion was rendered. Although Credit Suisse First Boston
evaluated the Merger Consideration from a financial point of view, Credit
Suisse First Boston was not requested to, and did not, recommend the specific
consideration payable in the Merger. Interested stockholders are encouraged to
review the Credit Suisse First Boston Opinion in its entirety.
In preparing its opinion to the ARS Board, Credit Suisse First Boston
performed a variety of financial and comparative analyses, including those
described below. The summary of Credit Suisse First Boston's analyses set
forth below does not purport to be a complete description of the analyses
underlying the Credit Suisse First Boston Opinion. The preparation of a
fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. In arriving at its opinion, Credit Suisse First Boston made
qualitative judgments as to the significance and relevance of each analysis
and factor considered by it. Accordingly, Credit Suisse First Boston believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such
analyses and its opinion. In its analyses, Credit Suisse First Boston made
numerous assumptions with respect to ARS, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of ARS. No company, transaction or business used
in such analyses as a comparison is identical to ARS or the Merger, nor is an
evaluation of the results of such analyses entirely mathematical; rather, such
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities may actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Credit Suisse
First Boston's opinion and financial analyses were only one of many factors
considered by the ARS Board in its evaluation of the Merger and should not be
viewed as determinative of the views of the ARS Board or management with
respect to the Cash Consideration in payment for the interest in ARS' radio
broadcasting business or the Merger.
The summary set forth below does not purport to be a complete description of
the Credit Suisse First Boston Opinion or Credit Suisse First Boston's
analysis related thereto. As used in the following discussion, ARS and
American Radio refer only to American Radio's broadcasting assets and
operations.
Premium to Unaffected Market Price. Credit Suisse First Boston analyzed the
premium to market value of the $44.00 per share price to be received by
holders of ARS Common Stock. Assigning a valuation of ATS of $9.00 (per share
of ARS Common Stock), Credit Suisse First Boston computed the premiums to be
paid over the ARS Class A Common Stock as follows: 35.5% over the $39.125
closing price on August 19, 1997 (the last unaffected trading price) and 6.3%
over the $49.875 closing price on September 15, 1997. The price was also
determined to provide a 221.2% premium over the June 9, 1995 initial public
offering price of ARS of $16.50 and a 17.9% premium over the "unaffected" all-
time high stock price of $44.938 (July 17, 1997).
Discounted Cash Flow Analysis. Credit Suisse First Boston performed a
discounted cash flow analysis of the projected cash flow of ARS for the period
1997 through 2006 based in part upon certain operating and financial
assumptions, forecasts and other information provided by the management of
ARS. Using the financial information set forth by management, Credit Suisse
First Boston calculated the estimated free cash flow based on forecast net
revenues, cash flow margins and cash expenditures. Credit Suisse First Boston
analyzed the
87
<PAGE>
financial information provided by management and discounted the stream of free
cash flows provided in such forecast back to September 30, 1997 using discount
rates ranging from 10.5% to 11.5%. To estimate the residual value of ARS at
the end of the forecast, Credit Suisse First Boston applied a range of
terminal multiples of 9.5x to 11.0x to the forecasted fiscal 2007 broadcast
cash flow ("BCF") and discounted such value estimates back to September 30,
1997 using discount rates ranging from 10.5% and 11.5%. The range of discount
rates was selected based on a variety of factors including analysis of the
estimated cost of capital and capital structures for companies operating in
businesses similar to that in which ARS operates, and the range of terminal
year multiples was selected based on the trading multiples for such companies.
Credit Suisse First Boston performed this analysis on three different cases.
The first case was based upon management projections. Under this scenario,
revenues grow at approximately 14.25% in 1997, and 1998 and revenue growth
declines to 6.0% (industry average) by 2005. BCF grows at approximately 22% in
1998 and BCF growth declines to 9% by 2005. In the "Upside" case, revenue
growth declines from 14.25% in 1998 to 7% by 2005 and BCF growth declines from
22% in 1998 to 10% by 2004. In the "Downside" case, revenue growth declines
from 8% in 1998 to 6% in 1999 and BCF growth remains constant at 10%. Credit
Suisse First Boston then summed the present values of the free cash flows and
the present values of the residual value to derive a reference range of values
for ARS of approximately $2.5 billion to $2.8 billion in the "Management"
case, $2.6 billion to $2.875 billion in the Upside case and $2.05 billion to
$2.25 billion in the "Downside" case. This reference range of values was then
adjusted for non-operating assets and liabilities including (i) total debt and
other liabilities of $1,045,622,289 (assuming conversion of the 7% Convertible
Exchangeable Preferred Stock, par value $.01 per share, of ARS (the "ARS
Convertible Preferred Stock") and pro forma for $62.5 million of debt to be
spun off with ATS); and (ii) cash and cash equivalents of $53,557,000
(including $39,088,000 of option proceeds) (collectively the "Corporate
Adjustments") and then divided by 36,697,241 fully diluted shares of ARS
Common Stock (including 2,674,078 shares issuable upon exercise of options and
3,897,059 shares issuable upon conversion of the ARS Convertible Preferred
Stock) outstanding to yield a valuation reference range for ARS of $41.09 to
$49.27 per share in the Management case, $43.82 to $51.31 in the Upside case
and $28.83 to $34.28 in the Downside case.
Comparable Company Analysis. Credit Suisse First Boston reviewed and
compared certain actual and forecasted financial, operating and stock market
information of ARS with selected publicly traded radio broadcasting companies
considered by Credit Suisse First Boston to be reasonably comparable to ARS.
These companies included Chancellor Media (pro forma for the merger of
Chancellor Broadcasting Company and Evergreen Media Corporation), Clear
Channel, Saga Communications, Jacor, Emmis Broadcasting, Cox Radio and Heftel
Broadcasting Corporation (the "Comparable Companies"). Credit Suisse First
Boston calculated a range of market multiples for the Comparable Companies by
dividing the market capitalization (total common shares outstanding plus "in
the money" exercisable options times the closing market price per share on
September 15, 1997 plus latest reported total debt, capitalized leases,
preferred stock and minority interest, minus cash and cash equivalents and
option proceeds of each of the Comparable Companies), by such company's sales,
BCF and operating cash flow ("OFC") for fiscal 1997 and 1998 on the basis of
estimates of selected investment banking firms. This analysis indicated that
the average fiscal 1997 multiples of sales, BCF and OCF for the Comparable
Companies were 5.9x, 15.2x and 16.6x, respectively and that the average fiscal
1998 multiples of sales, BCF and OCF for the Comparable Companies were 5.1x,
12.4x and 13.5x, respectively. Prior to the announcement that American Radio
had retained Credit Suisse First Boston, ARS traded in a range between 12.0x-
13.0x forward year broadcasting cash flow, which is in-line, or slightly
better than most of the Comparable Companies.
Comparable Acquisition Analysis. Credit Suisse First Boston analyzed the
purchase prices and multiples paid or proposed to be paid in selected merger
or acquisition transactions using publicly available information in the radio
broadcasting industry which occurred over the last two years including:
Capstar Broadcasting/SFX, Clear Channel/Paxson, Evergreen & Chancellor/Viacom,
Evergreen/Chancellor, SFX/Secret, Jacor/Regent, Chancellor/Colfax, American
Radio/EZ, Heftel & Clear Channel/Tichenor, CBS/Infinity, Clear Channel/Heftel,
Cox/New City, Chancellor/OmniAmerica, Clear Channel/Equity Radio Partners,
SFX/Multi-Market, ARS/Henry, Infinity/Granum, Jacor/Citicasters, SFX/Prism,
Jacor/Noble, SFX/Liberty, Infinity/Alliance, Chancellor/ Shamrock,
Evergreen/Pyramid and Capstar's acquisitions of Commodore Media, Osborn,
Benchmark, Community Pacific, Madison, Knight Quality and Patterson (the
"Comparable Transactions"). Credit Suisse First
88
<PAGE>
Boston selected these acquisitions based on the comparability of businesses
conducted by the acquired company to that of ARS. Credit Suisse First Boston
calculated the adjusted purchase price (purchase price plus total assumed debt
less assumed cash) as a multiple of BCF for each acquired company.
Credit Suisse First Boston determined that the relevant ranges of multiples
derived from the Comparable Transactions as they applied to ARS were 16.0x to
19.0x 1997 estimated BCF and 13.5x to 16.0x 1998 estimated BCF. Credit Suisse
First Boston then calculated imputed valuation ranges of ARS by applying
projected results for fiscal 1997 and 1998 to the multiples derived from its
analysis of the Comparable Transactions. Using such information, Credit Suisse
First Boston derived a reference range of values for ARS of $2.25 billion to
$2.65 billion. This reference range of values was then adjusted for the
Corporate Adjustments and then divided by 36,550,182 fully diluted shares of
ARS Common Stock outstanding to yield a valuation reference range for ARS of
$34.28 to $45.18 per share.
Credit Suisse First Boston also valued ARS based upon acquisition multiples
appropriate for cash flowing stations, separating out non-cash flowing or
under-performing stations and accounting for such stations on a "stick value"
basis. Credit Suisse First Boston determined that the relevant ranges of
multiples for cash flowing stations, derived from the Comparable Transactions,
were 14.5x to 17.0x 1997 estimated BCF and 12.5x to 15.0x 1998 estimated BCF.
Using such information, Credit Suisse First Boston derived a reference range
of values for ARS of $2.3 billion to $2.675 billion, or $35.64 to $45.86 per
share.
The ARS Board retained Credit Suisse First Boston based upon its experience
and expertise. Credit Suisse First Boston is an internationally recognized
investment banking and advisory firm. Credit Suisse First Boston, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporate and other purposes. Credit Suisse First Boston is a full-service
securities firm engaged in securities trading and brokerage activities, as
well as providing investment banking financing and financial advisory
services. In the ordinary course of its trading and brokerage activities,
Credit Suisse First Boston or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions, for its own
account or the accounts of customers, in securities or senior loans of ARS or
CBS. In the past, Credit Suisse First Boston and its affiliates have provided
financial services to ARS and have received customary fees for rendering these
services.
Pursuant to a letter agreement dated as of August 20, 1997, ARS has agreed
to pay Credit Suisse First Boston a fee of $7.0 million in consideration for
its services. In addition to the foregoing compensation, ARS has agreed to
reimburse Credit Suisse First Boston for its expenses, including reasonable
fees and expenses of its counsel, and to indemnify Credit Suisse First Boston
for liabilities and expenses arising out of its engagement and the
transactions in connection therewith, including liabilities under federal
securities laws.
89
<PAGE>
THE MERGER AND TOWER SEPARATION
The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Appendix II to this Prospectus and
is incorporated by reference herein. This summary is qualified in its entirety
by reference to the full and complete text of the Merger Agreement.
Capitalized terms used in this Section describing the provisions of the Merger
Agreement which are not otherwise defined in this Prospectus shall have the
meaning ascribed thereto in the Merger Agreement.
GENERAL
Subject to the terms and conditions of the Merger Agreement, the closing of
the transactions contemplated thereby (the "Closing") will take place on the
date (the "Closing Date") that is the second business day after the date on
which all of the conditions set forth in the Merger Agreement, other than
those which require the delivery of opinions or documents on the Closing Date,
is fulfilled or waived, unless another date is agreed to by CBS and ARS. The
Merger will become effective at the Effective Time, which will be the time at
which a Certificate of Merger is filed with the Secretary of State of the
State of Delaware, or such later time as is specified in such Certificate of
Merger. At such time, CBS Sub will be merged with and into ARS, with ARS
continuing as the surviving corporation and a subsidiary of CBS. As a result
of the Merger, American Tower Systems will become an independent, publicly
owned corporation.
Upon consummation of the Merger, assuming the Tower Merger has not occurred,
each holder of record of shares of ARS Common Stock at the Effective Time will
receive for each share so held: (i) $44.00 per share in cash; and (ii) one
share of ATS Common Stock, with such holders receiving the same class of ATS
Common Stock as they owned of ARS Common Stock. Upon consummation of the Tower
Merger, holders of ARS Common Stock will receive the same number and class of
shares of ATS Common Stock as they would have received had the Merger been
consummated at such time, in exchange for a portion of their ARS Common Stock.
In such event, the amount of cash to be received per share of ARS Common Stock
pursuant to the Merger will be increased in proportion to the reduction in the
number of shares of ARS Common Stock outstanding following the Tower Merger so
that each ARS common stockholder will receive the same aggregate amount of
cash consideration pursuant to the Merger he or she would have received had
the Tower Merger not occurred. The following table indicates how the foregoing
provisions (which are those described below under "--Conversion of
Securities") would operate to increase proportionately the amount of cash
consideration to be received in the Merger if the Tower Merger (and related
redemption of a portion of ARS Common Stock outstanding at the Tower Merger
Effective Time) is effected prior the Merger. Numbers in the table have been
rounded for ease of presentation.
<TABLE>
<CAPTION>
ASSUMED CLOSING SALE
PRICE OF ARS CLASS A
COMMON STOCK ON NYSE ASSUMED VALUE OF PERCENT OF SHARES OF ARS ADJUSTED CASH CONSIDERATION
AT TOWER MERGER ATS COMMON STOCK AT COMMON STOCK REDEEMED IN IN MERGER
EFFECTIVE TIME TOWER MERGER EFFECTIVE TIME TOWER MERGER (IN LIEU OF $44.00 PER SHARE)
- -------------------- --------------------------- ------------------------ -----------------------------
<S> <C> <C> <C>
$53.00 $ 9.00 17% $53.00
$54.00 $10.00 18.5% $53.99
$55.00 $11.00 20% $55.00
$56.00 $12.00 21.4% $55.98
$57.00 $13.00 22.8% $56.99
</TABLE>
For example, if the closing sale price per share of the ARS Class A Common
Stock was $54.00 at the Tower Merger Effective Time, then a holder of 1,000
shares of ARS Class A Common Stock would then have the right to exchange such
shares at the Tower Merger Effective Time for 815 shares of ARS Class A Common
Stock and 1,000 shares of ATS Class A Common Stock. If the Merger is
subsequently consummated, such holder would at the Effective Time have the
right to receive $53.99 per share for his or her 815 shares of ARS Class A
Common Stock (assuming such holder did not dispose of such shares in the
interim). In summary, as a result of the Tower Merger followed by the Merger,
such holder would have the right to receive 1,000 shares of ATS Class A Common
Stock and $44,000 in cash consideration ($53.99 multiplied by 815 shares). If
the Tower Merger had
90
<PAGE>
not occurred prior to the Merger, then such holder at the Effective Time would
receive 1,000 shares of ATS Class A Common Stock and $44,000 in cash ($44 per
share multiplied by 1,000 shares). In the event the Tower Merger were
consummated but the Merger were not, ARS common stockholders would continue to
own their interests in American Radio and such interests, while represented by
a reduced number of shares, would represent the same proportionate interests
as existing immediately prior to the Tower Merger.
CONVERSION OF SECURITIES
Conversion of ARS Common Stock. Upon consummation of the Merger, each share
of ARS Common Stock issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares) will be converted into the right to
receive the following:
(a) in the event the Tower Merger has not occurred, (i) $44.00 in cash
and (ii) one share of ATS Common Stock of the same class as the shares of
ARS Common Stock surrendered (the "Tower Stock Consideration"); or
(b) in the event the Tower Merger has occurred, (i) an amount in cash
determined by dividing $44.00 by the American Conversion Factor.
The term (i) "Cash Consideration" means (x) if the Tower Merger has not
occurred, $44.00, and (y) if the Tower Merger has occurred, the amount of cash
determined pursuant to the provisions of paragraph (b) preceding, and (ii)
"American Conversion Fraction" means a fraction (x) the numerator of which is
the difference between (A) the denominator and (B) the value (determined as
set forth in the Merger Agreement) of one share of ATS Class A Common Stock
immediately prior to the Tower Merger Effective Time, and (y) the denominator
of which is the value (determined as set forth in the Merger Agreement) of one
share of American Class A Common immediately prior to the Tower Merger
Effective Time. The Merger Agreement provides that for purposes of determining
the value of the American Class A Common and the ATS Class A Common Stock
immediately prior to the Tower Merger Effective Time the following principles
shall apply:
(x) each share of American Class A Common shall be valued at an amount
equal to the average closing sales price of the American Class A Common on
the NYSE, as reported by the Wall Street Journal, for the ten (10)
consecutive trading days immediately preceding the second trading date
prior to the Tower Merger Effective Time; and
(y) each share of ATS Class A Common Stock shall be valued at the amount
determined in good faith by the ARS Board to be its fair market value
immediately prior to the Tower Merger Effective Time.
The term "Merger Consideration" means the Cash Consideration and, if the Tower
Merger Effective Time shall not have occurred, the Tower Stock Consideration.
Conversion of ARS Options. Upon consummation of the Merger, each ARS Option
outstanding immediately prior to the Effective Time will be canceled and the
holders thereof will be entitled to receive (i) one share of ATS Class A
Common Stock and (ii) the difference between $44.00 and the exercise price per
share of the ARS Option so canceled, multiplied, in both cases, by the number
of shares subject to such ARS Option. See "--Certain Other Covenants--ARS
Options" for information concerning exchange of ARS Options held by ARS
employees who will become ATS employees for options to acquire ATS Common
Stock.
ARS Preferred Stock. Upon consummation of the Merger, each share of
Preferred Stock, par value $.01 per share (the "ARS Preferred Stock"), issued
and outstanding immediately prior to the Effective Time will remain issued and
outstanding and will not be changed in any respect by the Merger, except that,
in accordance with its terms, the ARS Convertible Preferred Stock will become
convertible into cash and ATS Class A Common Stock.
91
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF MERGER AND TOWER MERGER
The IRS has not ruled directly on the tax status of the Merger or the Tower
Merger, and no such ruling will be sought. Set forth below is a description of
certain material federal income tax consequences of the Merger and the Tower
Merger which would be applicable to holders of ARS Common Stock. Sullivan &
Worcester, tax counsel to ARS, has rendered its opinion (a copy of which has
been filed as an exhibit to the Registration Statement) that the discussion
contained in this section describes the material federal income tax
consequences of the Merger and Tower Merger. There can be, however, no
assurance that the IRS would agree with the conclusions discussed or refrain
from challenging some or all of the described consequences. Except as
otherwise expressly indicated, the following only describes certain tax
consequences to United States persons (e.g., citizens or residents of the
United States and domestic corporations) who hold shares of ARS Common Stock
as capital assets. It does not discuss the tax consequences that might be
relevant to holders of such stock who may be subject to special rules under
the federal income tax law, such as life insurance companies, regulated
investment companies, tax-exempt organizations, financial institutions,
dealers in securities or foreign currency, persons that have a functional
currency other than the U.S. dollar, persons who acquired ARS Common Stock or
options to acquire such stock in connection with their employment, persons
subject to alternative minimum tax or persons who hold ARS Common Stock as
part of a straddle, hedging transaction or conversion transaction.
Tax Consequences to ARS and ATS. American Radio will recognize gain, but not
loss, in an amount equal to the difference between the fair market value of
the shares of ATS Common Stock distributed in the Merger (or, if applicable,
the fair market value of the shares of ATS Common Stock distributed in the
Tower Merger) and American Radio's basis in such shares. Pursuant to the
Merger Agreement, ATS is obligated to indemnify and hold American Radio
harmless, on an after-tax basis, from any tax liability imposed upon it in
connection with the distribution of ATS Common Stock in the Merger (and, if
applicable, the Tower Merger), or in connection with certain associated
intercompany sales and transfers of property and assets between and among ATS
and other affiliates of American Radio, in excess of $20.0 million. See "--
ARS-ATS Separation Agreement" below.
Tax Consequences to Holders of ARS Common Stock in the Merger. The surrender
of ARS Common Stock for cash and ATS Common Stock in the Merger will be
treated as a sale of such stock. Each holder of ARS Common Stock will
recognize capital gain or loss equal to the difference between (i) the amount
of cash received and the fair market value of ATS Common Stock received, and
(ii) the adjusted tax basis of the shares of ARS Common Stock surrendered. Any
such capital gain or loss will be long-term capital gain or loss if, as of the
effective date of the Merger, the holding period for such shares is more than
one year. Amounts treated as long-term capital gain are subject to taxation at
varying rates, depending among other things on the holding period of the
property disposed of and the tax status of the holder. The holder's basis in
any ATS Common Stock received will equal its fair market value on the date of
the Merger, and the holder's holding period therein will commence on the
following day.
It is possible that circumstances may delay consummation of the Merger
beyond May 31, 1998 and that ATC would be unwilling to extend the termination
date (May 31, 1998) set forth in the ATC Merger Agreement. Under such
circumstances, management may determine to effect the Tower Merger. See "The
ATC Merger--Background of the ATC Merger". The discussion in the following
section below will only be applicable should management determine to pursue
the Tower Merger.
Tax Consequences to Holders of ARS Common Stock of the Tower Merger. The
surrender in the Tower Merger of a number of shares of ARS Common Stock in
exchange for a number of shares of ATS Common Stock (plus cash in lieu of
fractional shares) will be treated as a redemption of such ARS Common Stock
for an amount of consideration equal to the fair market value of any ATS
Common Stock received plus any cash received. Such redemption will be treated
as a sale or exchange of the surrendered ARS Common Stock in which gain or
loss is recognized equal to the difference between the fair market value of
any ATS Common Stock received plus any cash received and the holder's adjusted
tax basis in the ARS Common Stock surrendered (with
92
<PAGE>
such gain or loss constituting long-term capital gain or loss if the holding
period for the surrendered ARS Common Stock exceeded one year), provided the
redemption (i) results in a "complete termination" of the holder's stock
interest in ARS under section 302(b)(3) of the Code, (ii) is "substantially
disproportionate" with respect to the holder under section 302(b)(2) of the
Code, or (iii) is "not essentially equivalent to a dividend" with respect to
the holder under section 302(b)(1) of the Code. A distribution to a holder is
"not essentially equivalent to a dividend" if it results in a "meaningful
reduction" in the holder's stock interest in ARS, but there cannot always be
certainty as to when such a "meaningful reduction" has occurred because the
applicable test is not based on numerical criteria. Satisfaction of the
"complete termination" and "substantially disproportionate" exceptions is
dependent upon compliance with the more objective tests set forth in sections
302(b)(3) and 302(b)(2) of the Code, respectively.
In determining whether any of the tests under sections 302(b)(1)-(3) of the
Code have been met, the holder must take into account not only stock he
actually owns, but also stock he constructively owns within the meaning of
section 318 of the Code, and in addition, a redemption that is part of a firm
and fixed integrated plan is to be tested under Code sections 302(b)(1)-(3) by
taking into account all changes in proportionate stock ownership in ARS that
occur as a result of such overall plan. Accordingly, assuming that the Merger
is consummated, a holder of ARS Common Stock surrendering shares of ARS Common
Stock in the Tower Merger should be treated as subsequently disposing of the
balance of his shares of ARS Common Stock in the Merger (or selling or
exchanging such shares in a sooner disposition) as part of a firm and fixed
integrated plan for a "complete termination" of his interest in ARS or,
alternatively, a "substantially disproportionate" reduction or "meaningful
reduction" thereof. However, whether such a firm and fixed integrated plan
exists is in part a question of fact, and accordingly counsel is unable to
conclude with certainty that such a plan would be considered to exist if the
Merger is ultimately consummated. If the Merger is ultimately not consummated,
the Tower Merger would constitute a pro rata redemption of ARS Common Stock
that, absent a holder's firm and fixed integrated plan to otherwise sell or
exchange a sufficient amount of his remaining ARS Common Stock, would
generally not affect a holder's proportionate ownership of ARS, and
accordingly would not qualify for sale or exchange treatment under any of the
tests under sections 302(b)(1)-(3) of the Code. Because of the absence of any
definitive judicial precedent or regulatory provision, it is not at all clear
that a holder's sale of remaining ARS Common Stock into the market, if the
Merger is ultimately not consummated, would meet the standard of a firm and
fixed integrated plan.
If the redemption is not treated as a sale or exchange to the holder of ARS
Common Stock under the tests of sections 302(b)(1)-(3) of the Code, the
redemption will be treated as a distribution in the amount of the fair market
value of any ATS Common Stock received plus any cash received, which
distribution will be taxable as ordinary dividend income to the extent of the
holder's share of ARS' current or accumulated earnings and profits for federal
income tax purposes. The holder's adjusted tax basis in the redeemed ARS
Common Stock will be transferred to the holder's remaining stock holdings in
ARS, and if the holder has no actual stock interest in ARS remaining (having
only a constructive stock interest), the holder may lose such basis entirely.
To the extent that the foregoing amount of the distribution exceeds the
holder's share of ARS' current or accumulated earnings and profits, such
distribution will be treated first as a return of capital that will be applied
against and reduce the adjusted tax basis of the holder's remaining ARS Common
Stock. Any remaining amount of the distribution after such basis has been
reduced to zero will be taxed as capital gain and will be long-term capital
gain if the holding period for the applicable ARS Common Stock exceeds one
year. For purposes of determining ARS' current or accumulated earnings and
profits for federal income tax purposes, the distribution of shares of ATS
Common Stock in the Tower Merger is deemed to be a taxable sale by ARS of the
shares of ATS Common Stock so distributed and will, therefore, increase such
current earnings and profits to the extent that the value of the ATS Common
Stock exceeds ARS' adjusted tax basis therein at the time of distribution. In
addition, prior transactions that had the effect of causing ATS to cease to be
a member of ARS' consolidated group (i.e., consummation of the Gearon
Transaction and the transactions contemplated by the ATS Stock Purchase
Agreement), also had the effect of triggering any previously deferred
intercompany gains arising from transactions between ATS (or one of its
subsidiaries) and certain members of the ARS consolidated group (including ATS
and its subsidiaries). Such gains will increase ARS' current earnings and
profits for federal income tax purposes. See "Unaudited Pro
93
<PAGE>
Forma Condensed Consolidated Financial Statements of American Tower Systems"
for ARS' estimate of the tax payable by ATS as a result of gain likely to
result as a consequence of such transactions.
Whether or not the tests of sections 302(b)(1)-(3) of the Code are satisfied
in respect of ARS Common Stock surrendered in the Tower Merger, the holder's
basis in any ATS Common Stock received will equal its fair market value on the
date of the Tower Merger, and the holder's holding period therein will
commence on the following day.
Amounts treated as long-term capital gain are subject to taxation at varying
rates, depending among other things on the holding period of the property
disposed of and the tax status of the holder.
Backup Withholding. Under the federal income tax backup withholding rules,
unless an exemption applies, the Exchange Agent will be required to withhold,
and will withhold, 31% of certain payments to which a holder of ARS Common
Stock or other payee is entitled pursuant to the Merger (or the Tower Merger)
and related transactions, unless the holder or other payee provides a tax
identification number (social security number in the case of any individual,
or employer identification number in the case of other ARS stockholders) and
certifies under penalties of perjury that such number is correct. Each holder
of ARS Common Stock, and, if applicable, each other payee, should complete and
sign the substitute Form W-9 which will be included as part of the letter of
transmittal to be returned to the Exchange Agent in order to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Exchange Agent. Certain holders (including, among others, corporations) are
not subject to these backup withholding requirements. Any amounts withheld
will be allowed as a credit against the holder's federal income tax liability
for such year.
HOLDERS OF ARS COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER AND TOWER MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
THE FOREGOING SECTION IS A SUMMARY DESCRIPTION OF MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER, THE TOWER MERGER AND RELATED TRANSACTIONS,
WITHOUT CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY HOLDER
OF ARS COMMON STOCK. IN ADDITION, IT DOES NOT ADDRESS THE STATE, LOCAL OR
FOREIGN TAX ASPECTS OF THE MERGER, THE TOWER MERGER AND RELATED TRANSACTIONS.
THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING
AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE
RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION.
REASONS FOR THE TOWER SEPARATION
The Tower Separation has been designed to separate American Radio's
interests in the communications site business from its interests in the radio
broadcasting business. Management had concluded that the continued combination
of the radio broadcasting business and the communications site business was
not, in the long run, in the best interests of the ARS common stockholders.
Among the factors leading to such conclusion was that such businesses are in
management's judgment fundamentally different and require different management
skills. Management's experience in talking to investors and industry analysts
confirmed its judgment that the market place had difficulty in evaluating the
ARS Common Stock given the disparity in the development stages and potential
of ARS' two businesses. Management believes and the ARS Board has concluded
that the separation of ARS' communications site business through the
distribution of ATS Common Stock to the holders of shares of ARS Common Stock
will enable such stockholders to realize a greater value, in the long run,
than if such business had been offered for sale at this time, whether as part
of the radio broadcasting business or separately. Such belief was
94
<PAGE>
based on two groups of factors: (i) factors affecting the industry, including
that the communications site business was a new one as far as the market place
was concerned, that there were no publicly traded communications site
companies, and that the amount of information publicly available about such
industry was limited, together with the ARS Board's knowledge as to the prices
at which companies in the industry were being bought and sold; and (ii)
factors affecting ATS, including that ATS was in the very early stages of
development, that ATS was engaged in a major acquisition program only a
portion of which had been completed, that ATS had not had the opportunity to
consolidate its acquisitions and to begin to reap the benefits of such
acquisition program, and that ATS' construction activities had been relatively
minimal (compared to its projected program) and therefore the benefits of such
program were in the future.
The communications site business has grown substantially in recent years
and, as a result, the joint valuation and operation of these businesses has,
in management's opinion, become less desirable. ARS' management believed that,
because of the relative size of ATS' business compared to ARS' business on a
consolidated basis, the value of ATS had been largely overlooked by the
investment community. The separation of the communications site business from
its radio broadcasting business will, the ARS Board believes, enable the
market to focus on the individual strengths of ATS and more accurately
evaluate ATS' performance compared to other companies in that business. By
allowing the market to establish a separate valuation for ATS, the Tower
Separation should, in management's opinion, result in an increase in the long-
term value of the ARS current investment in ATS. The Tower Separation will
also give the ARS common stockholders and other potential investors the
opportunity to continue to retain an interest in the communications site
business. As a separate, publicly traded company, ATS will also have increased
flexibility to raise capital and effect acquisitions by issuing its own
securities.
Finally, the separation of the communications site business from the radio
broadcasting business will permit management of ATS to focus on the
development and expansion of its business in a manner best suited to that
business and its market, without concern for the objectives of, or competitive
effect of such expansion on, ARS' radio broadcasting business. Management will
be able to concentrate its efforts on responding to the operational
characteristics and competitive dynamics of the communications site business,
an industry which is undergoing dramatic change and expansion. ATS' management
will be able to tailor its business strategies and capital investments to the
specific requirements of that industry. Further, as an independent, publicly
traded company, ATS will be able to design more effective incentive
compensation programs for its management and employees by linking their
compensation to the performance of ATS' business, as reflected in the stock
market's evaluation of the ATS Common Stock, thereby enhancing ATS' ability to
attract, motivate and retain high quality employees.
TOWER MERGER
If the Merger has not been consummated on or prior to May 31, 1998 (as such
date may be extended by American Radio with the written consent of CBS, such
consent not to be unreasonably withheld, delayed or conditioned), on June 1,
1998 (or the date following the date, if any, to which the May 31, 1998 has
been so extended), pursuant to the Merger Agreement and the Tower Merger
Agreement, the ARS Board shall, in its sole discretion, elect to consummate or
irrevocably abandon the Tower Merger. If consummated, the Tower Merger will
involve the merger of ATS Merger Corporation, a Delaware corporation and a
wholly-owned subsidiary ARS ("ATS Mergercorp"), with and into ARS which will
be the surviving corporation. Pursuant to the Tower Merger Agreement, a copy
of which is included as Exhibit D as part of Appendix II, each share of ARS
Common Stock issued and outstanding immediately prior to the Tower Merger (the
"Tower Merger Effective Time") will be converted into the right to receive:
(a) one share of ATS Common Stock, with (i) each share of American Class
A Common being converted into the right to receive one share of ATS Class A
Common Stock, (ii) each share of American Class B Common being converted
into the right to receive one share of ATS Class B Common Stock, and (iii)
each share of American Class C Common being converted into the right to
receive one share of ATS Class C Common Stock (collectively, the "Tower
Merger Tower Consideration"); and
95
<PAGE>
(b) a fraction (the "American Conversion Fraction") of a share of ARS
Common Stock of the same class as the class of ARS Common Stock being
converted, (i) the numerator of which is the difference between (A) the
denominator and (B) the value (as described above) of one share of ATS
Class A Common Stock immediately prior to the Tower Merger Effective Time,
and (ii) the denominator of which is the value (as described above) of one
share of American Class A Common immediately prior to the Tower Merger
Effective Time (collectively with the Tower Merger Tower Consideration, the
"Tower Merger Consideration").
No certificates in respect of fractional shares of ARS Common Stock shall be
issued in the Tower Merger, fractional shares otherwise so issuable shall be
satisfied in cash as provided in the Tower Merger Agreement, and the
certificates that immediately prior to the Tower Merger Effective Time
represent outstanding shares of ARS Common Stock shall be deemed, without any
action of the holders thereof, to represent (i) the number of shares of ARS
Common Stock the holder thereof has the right to receive pursuant to paragraph
(b) above, together with cash in lieu of fractional shares as provided in the
Tower Merger Agreement and (ii) the Tower Merger Tower Consideration.
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Certificate of Incorporation of ARS, as in effect immediately prior to
the Effective Time, will be amended as of the Effective Time as read in its
entirety as set forth in Exhibit A to the Merger Agreement and, as so amended,
such Certificate of Incorporation, together with the certificates of
designation for the ARS Cumulative Preferred Stock and the ARS Convertible
Preferred Stock, will be the Certificate of Incorporation of the surviving
corporation in the Merger until thereafter changed or amended as provided
therein or by applicable law. Such amendment will not be deemed to affect in
any manner the Certificate of Designation of (i) the ARS Cumulative Preferred
Stock or (ii) the ARS Convertible Preferred Stock. The by-laws of ARS in
effect at the Effective Time will be the by-laws of the surviving corporation
in the Merger until amended in accordance with Applicable law and the organic
documents of ARS.
The ATS Restated Certificate and the ATS by-laws are identical in all
material respects to those of ARS except as follows:
(i) the authorized number of shares of preferred stock and common stock
are greater in the case of ATS and there will be no preferred stock of ATS
outstanding upon consummation of the Tower Separation (unless authorized
and issued subsequent to the date hereof by the ATS Board);
(ii) dividends and other distributions of securities of Persons other
than ATS (including its subsidiaries) can be made in the form of different
classes of securities of such Persons in a manner designed to preserve the
voting rights of the ATS common stockholders; such distributions are
permitted by the ARS Restated Certificate of Incorporation only in the
context of a merger or consolidation;
(iii) the ATS Class C Common Stock can be converted into ATS Class A
Common Stock with the consent of the ATS Board; no such provision is
contained in the ARS Restated Certificate of Incorporation;
(iv) the definition of "Transferred" in the ATS Restated Certificate of
Incorporation has been clarified to provide that such term does not include
the granting of a proxy or the entering into of a voting agreement, whether
revocable or irrevocable, and whether generally or with respect to a
specific issue or issues; such had been the intent of the provisions of the
ARS Restated Certificate of Incorporation; and
(v) the provisions of the ATS Restated Certificate of Incorporation with
respect to class voting by the ATS common stockholders has been clarified
to provide that there is no such class vote, notwithstanding the provisions
of Delaware law, with respect to increases or decreases in the authorized
number of shares of any class; such had been the intent of the provisions
of the ARS Restated Certificate of Incorporation.
In addition, in order to satisfy a condition to the consummation of the ATC
Merger, if it is consummated, the ATS Restated Certificate will be amended to
(a) prohibit future issuances of ATS Class B Common Stock (except upon
exercise of then outstanding options and pursuant to stock dividends or stock
splits), (b) limit transfers of
96
<PAGE>
ATS Class B Common Stock to a more narrow group than is provided in the ARS
Restated Certificate of Incorporation, (c) limit Mr. Dodge's voting power to
49.99% (less the voting power represented by the shares of Class B Common
Stock acquired by the Stoner purchasers pursuant to the ATS Stock Purchase
Agreement and still owned by them), (d) provide for automatic conversion of
the ATS Class B Common Stock to ATS Class A Common Stock should Mr. Dodge's
aggregate voting power fall below either (i) 50% of his initial aggregate
voting power (immediately after consummation of the ATC Merger) or (ii) 20% of
the aggregate voting power of all shares of ATS Common Stock at the time
outstanding, and (e) require consent of the holders of a majority of ATS Class
A Common Stock for amendments adversely affecting the ATS Class A Common
Stock.
DIRECTORS AND OFFICERS
From and after the Effective Time, until successors are duly elected or
appointed and qualified, or upon their earlier resignation or removal, in
accordance with applicable law and the organic documents of CBS Sub and ARS,
as applicable, (a) the directors of CBS Sub at the Effective Time will be the
directors of the surviving corporation, and (b) the officers of ARS at the
Effective Time will be the officers of the surviving corporation, except that
as explained elsewhere herein, Messrs. Dodge, Box, Winn and certain other ARS
officers who will become ATS officers will resign from their positions with
ARS.
ARS-ATS SEPARATION AGREEMENT
The Merger Agreement requires that American Radio and American Tower Systems
enter into an agreement (the "ARS-ATS Separation Agreement") to provide for
(i) the sharing of various liabilities and obligations, including without
limitation those relating to the taxes payable by American Radio as a
consequence of the Tower Separation, (ii) certain adjustments based on
American Radio's working capital and indebtedness as of the Effective Time of
the Merger, and (iii) the leasing of space to American Radio on certain of
American Tower Systems' towers. The following is a brief summary of the
material provisions of the Merger Agreement, a copy of which is attached as
Appendix II to this Prospectus and is incorporated by reference herein, which
are to be contained in the ARS-ATS Separation Agreement. This summary is
qualified in its entirety by reference to the full and complete text of the
Merger Agreement. Capitalized terms used in this Section describing the
provisions of the Merger Agreement which are not otherwise defined in this
Prospectus shall have the meaning prescribed therefor in the Merger Agreement.
Sharing of Tax and Other Consequences. With respect to the terms and
conditions of the Tower Separation, including the sharing of the tax
consequences thereof, the ARS-ATS Separation Agreement provides as follows:
(a) American Tower Systems is obligated to indemnify American Radio and
its Subsidiaries (other than the Tower Subsidiaries, collectively the "ATS
Group") harmless from and against any liabilities (other than income tax
liabilities) to which American Radio or any of its Subsidiaries (other than
the ATS Group) may be or become subject that relate to or arise from the
assets, business, operations, debts or liabilities of the ATS Group,
including without limitation (i) the assets to be transferred to American
Tower Systems except certain leases listed in the Merger Agreement, (ii)
liabilities (A) in connection with the distribution of the Tower Stock
Consideration as part of the Tower Merger or the Merger, (B) relating to or
arising from any agreement, arrangement or understanding (other than the
Tower Documentation) entered into by American Radio, ATS or any member of
the American Tower Group (x) for the benefit of any member of the American
Tower Group, (y) in contemplation of the Tower Separation, or (z) with
respect to the sale, assignment, transfer or other disposition of shares of
ATS Common Stock, (C) relating to or arising from any untrue statement or
alleged untrue statements of a material fact contained in this Prospectus,
the Information Statement/Prospectus used in connection with the Merger,
any proxy statement used in connection with any ARS stockholder meeting
with respect to approval of the Tower Merger, the Registration Statement or
in any document filed or required to be filed in connection with the
Merger, or in any document filed or required to be filed by American or any
member of the American Tower Group in connection with the preceding clause
(B) or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except with respect to information provided by or relating
97
<PAGE>
solely to American Radio (excluding ATS Mergercorp and the American Tower
Group) which is contained in or expressly consistent with the Filed
American SEC Documents or the American Form 10-Q for the nine months ended
September 30, 1997 filed by American Radio with the Commission under the
Exchange Act, or (D) in connection with any action or omission of any Tower
Employee for the benefit of, including without limitation in furtherance of
the business of, any member of the American Tower Group or in connection
with or incident to such employee's duties and responsibilities as a Tower
Employee, (iii) any economic impact related to or arising from the failure
to obtain any government authorizations, private authorizations or other
third party consents, or to make any governmental filings, necessary to
consummate the Tower Separation, as the case may be, and (iv) the rental
and related expenses for the relevant portion of the leased premises
located at 116 Huntington Avenue, Boston Massachusetts in the event of the
failure to obtain the landlord's consent to the assignment of the
obligations relating to, or sublease of, such relevant portion of such
premises.
(b) American Radio is obligated to indemnify the ATS Group harmless from
and against any liabilities (other than income tax liabilities) to which
the ATS Group may be or become subject that relate to or arise from the
assets, business, operations, debts or liabilities of American Radio or its
Subsidiaries (other than the ATS Group) whether arising prior to,
concurrent with or after the Merger.
(c) The allocation of Tax liabilities and deconsolidation of American
Radio and the ATS Group is to be made in accordance with the principles set
forth in the ARS-ATS Separation Agreement, including without limitation
that ATS is obligated to indemnify (and make whole on an after-tax basis)
American for all Taxes imposed by any Taxing Authority on any member of the
American Tax Group or on CBS as a result of or in connection with sale or
transfer of assets to the American Tower Group pursuant to Section 6.17(f)
of the Merger Agreement (or between members of the American Tax Group prior
to the final transfer to a member of the American Tower Group or between
members of the American Tower Group), the Merger, the Tower Merger, the
Tower Separation, any other disposition of stock of ATS contemplated or
permitted by the Merger Agreement, or the merger of ATS with any other
Person as the case may be, including without limitation any Taxes on any
gain to any member of the American Tax Group arising under Section 311 of
the Code, any Taxes on any deferred gain to any member of the American Tax
Group triggered as a result of or upon any such event, any gain
attributable to any excess loss account triggered upon any such event, any
Taxes arising as a result of the election or other transactions
contemplated by clause 6.17(c)(xii) of the Merger Agreement, income or gain
arising as a result of transactions described in Section 3.4(c) or the
second sentence of Section 6.8(a) of the Merger Agreement, and gain on the
conversion of ARS Convertible Preferred Stock into ATS Common Stock, and
any transfer Taxes arising from any such event, all to the extent that the
additional liability for such Taxes payable by the American Tax Group as a
consequence of such events (on a "but for" basis) exceeds $20,000,000.
(d) The ARS-ATS Separation Agreement provides that a member of the ATS
Group shall assume to the extent permitted by the landlord, the obligations
under the lease of 116 Huntington Avenue, Boston, Massachusetts, with
respect to the relevant portion of such leased premises.
(e) American Radio is obligated to transfer, or cause its Subsidiaries to
transfer, to ATS the communications towers agreed upon by CBS and American
Radio prior to the execution of the Merger Agreement (the "Transferred
Towers"), and ATS is obligated to assume all of American Radio's and such
Subsidiaries' obligations with respect to the Transferred Towers to the
extent set forth in the ATS-ARS Separation Agreement.
(f) On the earlier to occur of the Merger or the Tower Merger, certain
employees of American Radio (the "ATS Employees") are to be offered full-
time employment by ATS or one of its Subsidiaries. If the Tower Merger
shall be consummated, during the period between the Tower Merger Effective
Time and the Effective Time, the Tower Employees who accept American
Tower's offer of full-time employment shall be employed by American Tower
and American Tower hereby covenants and agrees that such Tower Employees
shall be made available to provide American Radio with such management
services as shall enable American Radio to fulfill its obligations under
Section 6.10(i) of the Merger Agreement (i.e., conduct its business in the
ordinary and usual course of business and consistent with past practice).
In rendering
98
<PAGE>
such management services, the Tower Employees shall act as consultants who
are independent contractors to American Radio. For a period of eighteen
(18) months following the consummation of the Tower Separation, members of
the ATS Group shall not actively solicit or seek to hire any employees of
American Radio or its Subsidiaries not engaged in the business of the ATS
Group as of the date of the Merger Agreement, other than the ATS Employees,
it being understood and agreed that such agreement shall not be deemed to
prevent members of the ATS Group from placing general advertisements in
publications or on the Internet or soliciting any such employee who (i)
initiates employment discussions with a member of the ATS Group or (ii) is
not employed by American Radio or CBS or any of their respective
Subsidiaries on the date such a member first solicits such employee.
For a complete description of the material terms and conditions of the ARS-
ATS Separation Agreement relating to the sharing of tax and other liabilities,
see Section 6.17 of the Merger Agreement attached hereto as Appendix II.
The foregoing is a description of the rights and obligations of ARS and ATS
in the event the Merger is consummated. Although the ARS-ATS Separation
Agreement will be effective and operational upon consummation of the Tower
Merger, in the event the Merger were not subsequently consummated, the ARS
Board has reserved the right to alter the terms of that agreement to provide
for a sharing of the rights and obligations in a manner that may be more or
less favorable to ATS. Because the ARS Board believes that the Merger will be
consummated, it has not made any determination of what the rights and
obligations of ARS and ATS should be in the event it were not.
CLOSING DATE ADJUSTMENTS
The Merger Agreement also contains provisions (that are to be included in
the ARS-ATS Separation Agreement) relating to adjustments of the amount
required to be paid by CBS in the Merger, based on American Radio's working
capital and indebtedness as of the Closing Date. Any such adjustments are
required to be paid by or to ATS; they will not, in any event, affect the
Merger Consideration payable to the holders of ARS Common Stock. With respect
to such adjustments, the Merger Agreement provides, among other things, for an
adjustment as follows:
(a) Subject to paragraph (c) below, if Closing Working Capital is less
than (i) $60,000,000 in the event the Closing Date is on or prior to March
31, 1998 or (ii) $70,000,000 in the event the Closing Date is after March
31, 1998 (the "WC Amount"), then ATS shall, and if Closing Working Capital
is greater than the WC Amount, CBS shall, owe the other the amount of such
difference. The term "Working Capital" shall mean Current Assets minus
Liabilities. The terms "Current Assets" and "Liabilities" shall mean the
current assets and liabilities of the Post-Closing American Group
calculated in accordance with GAAP, except that (i) outstanding principal
amount of indebtedness and liquidation preference of preferred stock will
be excluded, (ii) cash will be excluded, (iii) accruals for taxes will be
included except that (A) tax liabilities which ATS is obligated to
indemnify American Radio and its Subsidiaries (other than the American
Tower Group) pursuant to the provisions of the Tower Documentation, and
deferred income Tax assets and liabilities that exist or arise from
differences in basis for Tax and financial reporting purposes attributable
to acquisitions, exchanges and dispositions or attributable to depreciation
and amortization shall not be taken into account, (B) Tax benefits arising
from the exercise or cancellation of options between the date of the
Original Merger Agreement and the Effective Time shall not be taken into
account, and (C) accruals for taxes relating to acquisitions, exchanges or
dispositions will be determined in accordance with ARS' past accounting
practices, (iv) Current Assets will be increased by amount equal to the sum
of (x) the amount derived by multiplying the Cash Consideration by the
number of shares of ARS Common Stock held in its treasury as of the
Effective Date and (y) the aggregate amount of the spread of $44.00 over
the exercise price of each ARS Option outstanding on the date of the
Original Merger Agreement terminated or canceled prior to the Effective
Time or for which the holder has elected to receive an option to acquire
ATS Common Stock
99
<PAGE>
in lieu thereof, less the tax benefit that would have been received with
respect to the exercise of such options, (v) Current Assets will be (A)
increased (if the number of shares of ARS Common Stock issuable upon
conversion of the American Convertible Preferred Stock is fewer than
3,750,000 (or if the Tower Merger Effective Time shall have occurred,
3,750,000 multiplied by the American Conversion Fraction)) by an amount
equal to the amount derived by multiplying the Cash Consideration by the
excess of (I) 3,750,000 (or if the Tower Merger Effective Time shall have
occurred, 3,750,000 multiplied by the American Conversion Fraction)) less
(II) the number of shares of ARS Common Stock issuable upon conversion of
the American Convertible Preferred Stock or (B) decreased (if the number of
shares of ARS Common Stock issuable upon conversion of the American
Convertible Preferred Stock is greater than 3,750,000 (or if the Tower
Merger Effective Time shall have occurred, 3,750,000 multiplied by the
American Conversion Fraction)) by an amount equal to the amount derived by
multiplying the Cash Consideration by the excess of (I) the number of
shares of ARS Common Stock issuable upon conversion of the American
Convertible Preferred Stock less (II) 3,750,000 (or if the Tower Merger
Effective Time shall have occurred, 3,750,000 multiplied by the American
Conversion Fraction)) (vi) liabilities from the radio broadcasting rights
contracts for St. Louis Rams games will be limited to $3,300,000, and (vii)
amounts owed by American Tower to American pursuant to Section 9.3(c) shall
be excluded from Current Assets and liabilities with respect to such
amounts shall be excluded from Liabilities.
(b) Subject to paragraph (c) below, if Closing Net Debt is greater than
the Debt Amount minus $50,419,000, minus cash received by the Post-Closing
American Group in respect of options exercised between the date of the
Original Merger Agreement and the Effective Time (the "CD Amount"), ATS
shall, and if Closing Net Debt is less than the CD Amount, CBS shall, owe
the other the amount of such difference. "Debt Amount" shall mean
$1,066,721,000, subject to adjustment for the failure to consummate any of
the Recent Transactions relating to American Radio and for the consummation
of any other acquisitions or dispositions. The term "Net Debt" shall mean
outstanding principal amount of indebtedness (including, without
duplication, guarantees of indebtedness) plus outstanding liquidation
preference of all preferred stock (other than the American Convertible
Preferred Stock) minus cash.
(c) The amounts owed pursuant to the provisions of paragraphs (a) and (b)
above shall be aggregated or netted, as appropriate (the resulting amount,
the "Adjustment Amount"). In the event that the Adjustment Amount minus
$10,000,000 is greater than $0 (the "Final Adjustment Amount"), the party
that owes the Final Adjustment Amount will make payment by wire transfer of
immediately available funds of the Final Adjustment Amount together with
interest thereon at a rate of interest equal to the lesser of (i) 10% per
annum and (ii) if ATS is being charged a rate of interest by a financial
institution, such rate, but in no event lower than the prime rate as
reported in the Wall Street Journal on the date of the Closing Statement
becomes final and binding on the parties, calculated on the basis of the
actual number of days elapsed divided by 365, from the date of the
Effective Time to the date of actual payment.
(d) The scope of the disputes to be resolved by the Accounting Firm is
limited to whether the Closing Statement was prepared in compliance with
the requirements set forth above and the allocation of the costs of dispute
resolution, and the Accounting Firm is not to make any other determination.
(e) During the period of time from and after the delivery of the Closing
Statements to ATS through the date the Closing Statement becomes final and
binding on CBS, ARS and the Tower Entity, CBS will cause the Post-Closing
American Group to afford the Tower Entity and any accountants, counsel or
financial advisors retained by the Tower Entity in connection with the
adjustments described above reasonable access (with the right to make
copies) during normal business hours to the books and records of the Post-
Closing American Group to the extent relevant to the adjustments.
(f) Any adjustment pursuant to Section 6.18 of the Merger Agreement shall
be taken into account in the calculation of Tax liability pursuant to
Section 6.17(c) of the Merger Agreement, and any increase or decrease in
the amount of Taxes that are reimbursable or indemnifiable by the ATS Group
as a result of any such adjustment shall be treated as an adjustment to
Taxes for purposes of Section 6.17(c) of the Merger Agreement.
See Section 6.18 of the Merger Agreement for a complete description of the
Closing Date adjustments.
100
<PAGE>
LEASE ARRANGEMENTS
In connection with the Tower Separation, CBS and ARS will agree on the
definitive documentation ("Tower Leases") to be executed by ARS and ATS with
respect to certain broadcasting towers ("Towers"). The markets in which such
Towers are located and the annual "market price" for each antenna are set
forth in Exhibit B to the Merger Agreement. Subject to certain exceptions, 14
of such Towers were owned or leased by ARS and in January 1998 became the
property of ATS; the balance will be transferred by ARS to ATS prior to the
Tower Separtion. Each of the Tower Leases contains or will contain standard
and customary terms and conditions and CBS and ARS specifically agree to the
inclusion of the following in each of the Tower Leases: (a) except for certain
exceptions, each Tower Lease will be for a term of twenty (20) years with four
(4) renewal periods of five (5) years each; each such renewal to be upon the
same terms and conditions as the original Tower Lease; (b) Prior to the
Effective Time, ARS will use its best efforts to extend the term of each lease
("Land Leases") to a minimum duration of twenty (20) years, inclusive of
renewal periods, if any, and provide CBS with respect to the Towers subject to
the extended Land Leases, tower leases with the equivalent benefits set forth
in clauses (c), (d) and (e) and for a minimum duration of twenty (20) years
("Extended Tower Leases"). With respect to any such Land Lease that is not so
extended (except with respect to the Land Lease for KBAY (FM) (formerly KUFX
(FM)), Gilroy, California which present term of approximately eighteen (18)
remaining years shall be deemed to satisfy the foregoing requirement of a
minimum duration of twenty (20) years), ARS, ATS and CBS will negotiate in
good faith to agree upon definitive documentation to provide CBS with respect
to the Towers subject to such Land Leases, tower leases with the benefits
equivalent of such Extended Tower Leases or mutually agreed to alternative
arrangements providing equivalent value to CBS; (c) each Tower Lease will
provide that no payments will be payable by CBS for a period of three (3)
years from the Effective Time; for the next three (3) years the payments will
be as follows: one-third ( 1/3) of the market price as set forth in Exhibit B
to the Merger Agreement corresponding to each FM antenna (or AM/FM antenna)
for year four (4); two-thirds ( 2/3) for year five (5) and full market price
for year six (6); thereafter, for the balance of the term and any renewals
thereof, the payments will be the market price, together with an annual
increase every year, beginning for year seven (7), of the lesser of five
percent (5%) or the Consumer Price Index for all Urban Consumers over the
previous year's payments (except with respect to (KBAY (FM) (formerly KUFX
(FM)), Gilroy, California and WNFT (AM), Boston, Massachusetts which such
payments will begin at the Effective Time, with respect to CBS, and will begin
on January 1, 1998 as between ARS and ATS). Notwithstanding the foregoing, CBS
acknowledges that Tower Lease payments at the full "market price" indicated on
Exhibit B to the Merger Agreement by ARS to ATS may commence upon such leases
becoming the property of ATS and will continue until the Effective Time; (d)
all expenses for taxes, insurance, maintenance and utilities in respect of
each Tower shall be paid by ATS; and (e) ATS will assume the obligation and
responsibility for complying with all applicable law with respect to the
Towers.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary representations and
warranties relating to, among other things: (a) each of CBS' and ARS'
organization and similar corporate matters; (b) ARS' capital structure; (c)
the authorization, execution, delivery, performance and enforceability of the
Merger Agreement with respect to CBS and ARS; (d) the financial statements and
certain other documents filed by ARS with the Commission and the accuracy of
the information contained therein; (e) the absence of undisclosed material
litigation relating to ARS; (f) the absence of material adverse changes with
respect to the business of ARS; (g) certain tax and employee benefit matters
with respect to ARS; (h) the holding of FCC licenses and other governmental
and private authorizations by CBS and ARS; (i) certain environmental and tax
matters with respect to ARS; (j) the conduct by ARS of its business in the
ordinary and usual course; (k) the absence of litigation or similar
proceedings of CBS and ARS; and (l) that CBS will have sufficient funds to
consummate the Merger. The Merger Agreement provides that the representations
and warranties of the parties do not survive consummation of the Merger.
101
<PAGE>
CERTAIN OTHER COVENANTS
The Merger Agreement contains certain customary covenants and agreements,
including, without limitation, the following:
Certain Efforts; FCC and Antitrust Requirements. Pursuant to the Merger
Agreement, each of ARS and CBS have agreed to use best efforts (x) to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under Applicable Law to consummate the Merger
and the Tower Separation, and (y) to refrain from taking, or cause to be
taken, any action and to refrain from doing or causing to be done, anything
which could impede or impair the consummation of the Merger or the Tower
Separation, including, in all cases, without limitation, using its best
efforts (i) to prepare and file with the applicable Authorities as promptly as
practicable after the execution of the Merger Agreement all requisite
applications and amendments thereto, together with related information, data
and exhibits, necessary to request issuance of orders approving the Merger by
all such applicable Authorities, each of which is required to be obtained or
become final in order to satisfy the condition applicable to it set forth in
the Merger Agreement, (ii) to obtain all necessary or appropriate waivers,
consents and approvals, (iii) to effect all necessary registrations, filings
and submissions, (iv) to defend any suit, action or proceeding, whether
judicial or administrative, challenging the Merger or any of the transactions
contemplated by the Merger Agreement, including seeking to lift any injunction
or other legal bar to the Merger (and, in such case, to proceed with the
Merger as expeditiously as possible), and (v) to obtain the satisfaction of
the conditions specified in the Merger Agreement, including without limitation
the securing of all authorizations, consents, waivers, modifications, orders
and approvals set forth in the Merger Agreement relating to the FCC and the
HSR Act.
ARS and CBS agree to use their best efforts to take such steps as may be
necessary (i) diligently to prosecute the Applications and to prepare and file
any further Applications or amendments as may be necessary to obtain the
consent to the transfer of control to CBS of the licensees that will hold the
FCC licenses for the ARS Brokered Stations that are expected to be acquired by
ARS and (ii) to obtain the FCC Consents, including action by CBS, at its sole
cost and expense (except as provided elsewhere in the Merger Agreement), to
satisfy or cause to be removed all Divestiture Conditions, if any. The failure
by ARS or CBS to use its best efforts to timely file or diligently prosecute
its portion of any Application or, in the case of CBS, the failure to use its
best efforts to make any Required Divestiture or otherwise satisfy or cause to
be removed all Divestiture Conditions on or before the Termination Date, shall
be a material breach by ARS or CBS, as the case may be, of the Merger
Agreement. ARS agrees that any delay in prosecuting the Applications or
obtaining the FCC Consents resulting from CBS' good faith negotiations,
subject to Applicable Law, with the FCC, Antitrust Division or FTC with
respect to the imposition of a Divestiture Condition shall not constitute a
failure by CBS to use its best efforts diligently to prosecute the
Applications or obtain the FCC Consents and so long as such negotiations do
not interfere with satisfaction of all conditions to Closing prior to the
Termination Date. If reconsideration or judicial review is sought with respect
to any FCC Consent, ARS and CBS shall (promptly and with all due efforts)
oppose such efforts to obtain reconsideration or judicial review.
Each of ARS and CBS has agreed to file all applications required under the
HSR Act on a timely basis and to (i) use its best efforts to comply as
expeditiously as possible with all lawful requests of the FTC or the Antitrust
Division for additional information and documents and (ii) not extend any
waiting period under the HSR Act or enter into any agreement with the FTC or
the Antitrust Division not to consummate the transactions contemplated by the
Merger Agreement, except with the prior written consent of the other;
provided, however, that nothing shall limit the ability of CBS to extend the
20-day waiting period under the HSR Act following substantial compliance with
any request for additional information that may be forthcoming, if such
extension is reasonably necessary to allow the continuation of good faith
negotiations intended to remove any objection to the transaction that the FTC
or Antitrust Division may have asserted, and if such extension will expire not
less than 30 days prior to the Termination Date.
Anything in the Merger Agreement, including without limitation Section
6.2(b), to the contrary notwithstanding, CBS is obligated to obtain the FCC
Consents and clearances under the HSR Act and the grant
102
<PAGE>
of any waivers in connection therewith prior to the Termination Date unless
the failure to obtain such FCC Consents, clearances and waivers is primarily
the result of one or more Uncontrollable Events. For purposes of the Merger
Agreement, the term "Uncontrollable Events" shall mean (i) acts or omissions
on the part of ARS or any of its Subsidiaries in conducting its respective
operations other than those relating to the number of ARS FCC Licenses or
amount of revenues in a particular market, (ii) an unremedied or unwaived
material breach by ARS of its obligations under the Merger Agreement, or (iii)
any change in or enactment of Applicable Law by Congress and signed by the
President and which (A) has the effect of decreasing the number of radio
licenses which a Person may own nationally or locally or (B) materially and
adversely relates to the concentration of radio licenses which a Person may
own in a market, and as a result of the change or enactment referred to in
either clause (A) or (B) above, CBS' performance of its obligations under the
Merger Agreement would have a Material Adverse Effect on CBS' radio and
television broadcasting business. CBS is obligated to file with the FCC,
within sufficient time to permit timely grant of the Applications,
applications for consent to assign or transfer, pursuant to trust arrangements
satisfying the FCC's local multiple ownership rules and policies, such radio
broadcast stations as CBS may designate, so that the radio broadcast stations
of CBS and ARS not designated for such trust arrangements may be held by the
Surviving Corporation (i.e., ARS) in compliance with the FCC's local multiple
ownership rules and policies. CBS is obligated, to the extent necessary to
obtain grant of the trust applications, thereafter promptly to file or cause
to be filed any further applications (including applications to assign radio
broadcast stations to third party purchasers for value) that may be required
by the FCC. Notwithstanding the two preceding sentences, with regard to
stations located in the San Jose market, the obligations of CBS to submit
trust or sale applications shall be excused for such stations to the extent
and for the duration of the period that CBS is unable to identify the stations
to be placed in trust or sold because of the failure of ARS to notify CBS of
the resolution of the Antitrust Division impediment impacting the ARS
transactions pending in the San Jose market.
If CBS or any of its Affiliates receives an administrative or other order or
notification relating to any violation or claimed violation of the rules and
regulations of the FCC, or of any other Authority (including without
limitation seeking or relating to a Divestiture Condition), that could affect
CBS' ability to consummate the transactions contemplated hereby, or if CBS or
any of its Affiliates should become aware of any fact relating to the
qualifications of CBS or any of its Affiliates that reasonably could be
expected to cause the FCC to withhold its consent to the assignment of the ARS
FCC Licenses, CBS is required to promptly notify ARS thereof and use its best
efforts, and take such steps as are necessary, in order to satisfy or remove
the Divestiture Condition to enable the Closing to occur prior to the
Termination Date. CBS has covenanted and agreed to keep ARS fully informed as
to all matters concerning all Required Divestitures and promptly to notify ARS
in writing of any and all significant developments relating thereto and ARS
has agreed to do likewise with CBS.
CBS has acknowledged and agreed that certain of the ARS Stations and ARS
Brokered Stations may file or have pending applications for renewal of their
licenses during the time that an application for the FCC Consents is pending
before the FCC. To the extent any such application for renewal may be filed or
remain pending, CBS has agreed to amend the transferee's portion of any
application for the FCC Consents and, as may be required, to amend any license
renewal applications for all of the ARS Stations or ARS Brokered Stations, to
confirm CBS' intention to consummate the Merger Agreement during the pendency
of such license renewal application, and to agree to assume the consequences
associated with succeeding to the place of ARS in such license renewal
applications. The making of this statement shall not be deemed to limit or
waive any other rights that CBS may otherwise have under the Merger Agreement.
CBS and ARS will cooperate with one another in the preparation, execution
and filing of all Tax Returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Merger that are required or permitted to be filed on or
before the Closing Date.
Subject to Applicable Laws relating to the exchange of information, ARS and
CBS have the right to review in advance, and to the extent practicable each
will consult the other with respect to, all the information relating
103
<PAGE>
to ARS or CBS, as the case may be, and any of their respective Subsidiaries,
that appear in any filing made with, or written materials submitted to, any
Authority and/or other Person in connection with the Merger and the other
transactions contemplated by the Merger Agreement. In exercising the foregoing
right, each of ARS and CBS shall act reasonably and as promptly as
practicable.
Conduct of Business. ARS has agreed that, during the period from September
19, 1997, until the Closing Date or earlier termination of the Merger
Agreement, except as contemplated by the Merger Agreement, unless CBS shall
otherwise consent in writing, ARS will and will cause its Subsidiaries, to:
(i) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(ii) not (A) amend or propose to amend their respective Organic
Documents, (B) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in
substitution for shares of its capital stock, or (C) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for (x) the payment of dividends or the making of
distributions by a direct or indirect wholly owned Subsidiary of ARS and
(y) the payment of dividends on shares of the ARS Preferred Stock in
accordance with their terms;
(iii) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of ARS Stock, Convertible Securities or
Option Securities, except that ARS may issue shares of ARS Common Stock
upon conversion of Convertible Securities and exercise of Option Securities
outstanding on the date of the Original Merger Agreement and in accordance
with their then existing terms, including any adjustment to the conversion
price of Convertible Securities as a result of the Tower Separation;
(iv) not (A) incur or become contingently liable with respect to any
indebtedness other than (x) short-term borrowings not to exceed $25 million
in the aggregate outstanding at any one time, (y) borrowings to finance
pending acquisitions of certain radio stations and, pursuant to agreements
in effect on the date of the Original Merger Agreement and (z) borrowings
not to exceed $120 million to finance or acquire any shares of its capital
stock, Convertible Securities or Option Securities, except pursuant to the
conversion or exercise thereof, as the case may be, or except to the extent
pursuant to the conversion or exercise thereof, as the case may be, or
except to the extent required by the then existing terms thereof, (C) sell,
lease, license, pledge, dispose of or encumber any properties or assets or
sell any businesses other than pursuant to agreements in effect on the date
of the Original Merger Agreement or Liens arising in accordance with the
provisions of indebtedness in effect on such date and in accordance with
their then existing terms, or (D) make any loans, advances or capital
contributions to, or investments in, any other Person, other than to any
direct or indirect wholly owned Subsidiary of ARS (other than the Tower
Subsidiaries) and, except as provided in clause (z) above, or to officers
and employees of ARS or any of its Subsidiaries for travel, business or
relocation expenses in the ordinary course of business;
(v) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by the Merger Agreement;
(vi) confer on a regular and frequent basis with one or more
representatives of CBS to report material operational matters and the
general status of ongoing operations;
(vii) not adopt, enter into, amend or terminate any employment,
severance, special pay arrangement with respect to termination of
employment or other similar arrangements or agreements with any directors,
officers or key employees;
(viii) maintain with financially responsible insurance companies
insurance on their respective tangible assets and their respective
businesses in such amounts and against such risks and losses as are
consistent with past practice;
104
<PAGE>
(ix) not make any Tax election that could reasonably be likely to have a
Material Adverse Effect on ARS or settle or compromise any material income
Tax liability;
(x) except in the ordinary course of business or except as would not
reasonably be likely to have a Material Adverse Effect on ARS, not modify,
amend or terminate any Material Agreement to which ARS or any Subsidiary is
a party or waive, release or assign any material rights or claims
thereunder;
(xi) not make any material change to its accounting methods, principles
or practices, except as may be required by GAAP;
(xii) not acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any Person or other business organization or
division thereof or (y) any assets that, individually or in the aggregate,
are material to ARS and its Subsidiaries taken as a whole, in each case,
other than pursuant to agreements in effect on the date the Original Merger
Agreement was signed (CBS has agreed not to unreasonably withhold, delay or
condition a consent to any matters described in this paragraph);
(xiii) subject to certain exceptions, (a) not grant to any executive
officer or other key employee of ARS or any of its Subsidiaries any
increase in compensation, except for normal increases in the ordinary
course of business consistent with past practice or as required under
Benefit Arrangements in effect as of June 30, 1997, (b) not grant to any
such executive officer any increase in severance or termination pay, except
as was required under any Benefit Arrangements in effect as of June 30,
1997, or (c) not adopt or amend any Plan or Benefit Arrangement (including
change any actuarial or other assumption used to calculate funding
obligations with respect to any Plan, or change the manner in which
contributions to any Plan are made or the basis on which such contributions
are determined) and (d) except in the ordinary course, not enter into,
amend in any material respect or terminate any Governmental Authorization
(except as would not be reasonably likely to have a Material Adverse Effect
on ARS), material Private Authorization or Contract; and
(xiv) not authorize or enter into any agreement that would violate any of
the foregoing.
Anything in this subsection to the contrary notwithstanding, the provisions
of this subsection, other than clause (ii), will not apply to ATS or any of
its Subsidiaries.
CBS has agreed that, during the period from September 19, 1997, until the
Closing Date or earlier termination of the Merger Agreement, except as
otherwise contemplated by the Merger Agreement or as has been publicly
disclosed prior to the date of the Merger Agreement, unless ARS shall
otherwise agree in writing, with respect to CBS's media business, CBS will and
will cause its Subsidiaries, to:
(i) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice, which includes the
acquisition of other radio broadcasting stations;
(ii) not amend or propose to amend its Organic Documents in any manner
materially adverse to holders of the ARS Preferred Stock;
(iii) use all best efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with
them and not engage in any action, directly or indirectly, with the intent
to adversely affect the transactions contemplated by the Merger Agreement;
and
(iv) not authorize or enter into any agreement that would violate any of
the foregoing.
Notwithstanding the foregoing covenants, the Merger Agreement provides that
nothing contained therein shall give to (a) ARS, directly or indirectly,
rights to control or direct CBS' operations prior to the Effective Time, or
(b) CBS, directly or indirectly, rights to control or direct ARS' operations
prior to the Effective Time. The Merger Agreement further provides that prior
to the Effective Time, consistent with the terms and conditions of the Merger
Agreement, (a) CBS shall exercise, complete control and supervision of its
operations, and (b) ARS shall exercise complete control and supervision of its
operations.
105
<PAGE>
Meetings of Stockholders. ARS has received the written consent of the
holders of shares of ARS Common Stock representing a majority of the votes
entitled to be cast with respect to the approval and adoption of the Original
Merger Agreement, the Merger Agreement and the Tower Merger Agreement and the
approval of the transactions contemplated thereby. Accordingly, no special
meeting of the ARS common stockholders is required in connection with either
the Merger or the Tower Merger. Nevertheless, if for any reason such consent
is not effective with respect to either the Merger or the Tower Merger, ARS
has agreed to call and hold a special meeting of the ARS common stockholders.
Approval of the CBS stockholders of the Merger Agreement and the transactions
contemplated thereby is not required under Applicable Law. CBS, as the sole
stockholder of CBS Sub, has approved and adopted the Merger Agreement and
approved the transactions contemplated thereby.
Indemnification. Directors', Officers' and Employees' Indemnification and
Insurance. The Organic Documents of the Surviving Corporation will contain
provisions no less favorable with respect to indemnification than are set
forth in the Organic Documents of ARS, as in effect on the date of the
Original Merger Agreement, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years from the Effective Time in
any manner that would affect adversely the rights thereunder of individuals
who at any time prior to the Effective Time were directors, officers or
employees of ARS or any of its Subsidiaries, unless such modification is
required by Applicable Law.
From and after the Effective Time, CBS will indemnify, defend and hold
harmless the present and former officers, directors and employees of ARS or
any of its Subsidiaries (collectively, the "Indemnified Parties") against all
losses, expenses, claims, damages, liabilities or amounts that are paid in
settlement of, or otherwise in connection with any claim, action, suit,
proceeding or investigation (as used in this paragraph, a "claim"), based in
whole or in part on the fact that the Indemnified Party (or the Person
controlled by the Indemnified Party) is or was a director, officer or employee
of ARS or any of its Subsidiaries and arising out of actions or omissions
occurring at or prior to the Effective Time whether asserted or claimed prior
to, at or after the Effective Time, in each case to the fullest extent
permitted under the DCL (and will pay any expenses, as incurred, in advance of
the final disposition of any such action or proceeding to each Indemnified
Party to the fullest extent permitted under the DCL). Without limiting the
foregoing, in the event any such claim is brought against any of the
Indemnified Parties, (i) such Indemnified Parties may retain counsel
(including local counsel) satisfactory to them and which will be reasonably
satisfactory to CBS and they will pay all reasonable fees and expenses of such
counsel for such Indemnified Parties; and CBS will use its best efforts to
assist in the defense of any such claim; provided, however, that CBS will not
be liable for any settlement effected without its written consent, which
consent will not be unreasonably withheld, delayed or conditioned.
Notwithstanding the foregoing, nothing contained in this paragraph shall be
deemed to grant any right to any Indemnified Party which is not permitted to
be granted to an officer, director or employee of CBS under the DCL, assuming
for such purposes that CBS's Organic Documents provided for the maximum
indemnification permitted by the DCL.
CBS will cause to be maintained for a period of not less than six (6) years
from the Effective Time ARS' current directors' and officers' insurance and
indemnification policy to the extent that is provides coverage for events
occurring prior to the Effective Time ("D&O Insurance") for all Persons who
are directors and officers of ARS on the date of the Merger Agreement, so long
as the annual premium therefor would not be in excess of 200% of the last
annual premium therefor paid prior to the date of the Original Merger
Agreement (the "Maximum Premium"); provided, however, that if the annual
premiums of such insurance coverage exceed such amount, CBS will only be
obligated to obtain the greatest coverage available under such policy for a
cost not exceeding such amount, provided further, however, that CBS may, in
lieu of maintaining such existing D&O Insurance as provided above, cause
coverage to be provided under any policy maintained for the benefit of CBS or
any of its Subsidiaries, so long as the terms thereof are no less advantageous
to the intended beneficiaries thereof than the existing D&O Insurance. If the
existing D&O Insurance expires, is terminated or canceled during such six-year
period, CBS will use its best efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous to the covered Persons than the existing D&O
Insurance. ARS represented to CBS that the Maximum Premium is not greater than
$500,000.
106
<PAGE>
In the event CBS or CBS Sub or any or their respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provisions will be made so that the
successors and assigns of CBS or CBS Sub, as the case may be, will assume the
obligations set forth in this subsection.
The foregoing provisions are intended to be for the benefit of, and will be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and will be binding on CBS, CBS Sub and their respective
successors and assigns.
Employee Benefits. CBS is obligated to maintain, for a period of one (1)
year following the Effective Time, employee benefits plans and programs (other
than equity incentive arrangements) for ARS officers and employees which are
no less favorable in the aggregate than those generally available pursuant to
existing employee benefit plans and programs, except that CBS has the right to
determine the types and levels of specific benefits to be so provided.
Solicitation of Employees. CBS has agreed, in the event the Merger Agreement
is terminated, that for a period of eighteen (18) months following such
termination, it will not solicit or actively seek to hire any key employees
(including without limitation any station manager, sales manager, program
manager or any individual senior to any of such individuals) who during such
period is employed by ARS or any of its Subsidiaries, whether or not such
individual would commit breach of such individual's employment agreement or
contract in leaving such employment; provided, however, that the foregoing
shall not prevent the solicitation of any such key employee who (i) initiates
employment discussions with CBS, (ii) in not employed by ARS or any of its
Subsidiaries on the date CBS first solicits such employee, or (iii) is
solicited through general advertisement or on-going and ordinary course hiring
practices at CBS' broadcasting stations that do not have access to any of the
evaluation material furnished by ARS to CBS in connection with its offer to
merge with ARS.
American Radio Name. All right, title and interest to the name "American
Radio" and all related goodwill trademarks, service marks, logos and the like
are to be transferred, without expense, from ARS to ATS immediately prior to
the Closing and, thereafter, CBS will cause all of its Subsidiaries to cease
using such name as soon as practicable and, in any event, within six (6)
months.
ARS Options. All ARS Options outstanding immediately prior to the Effective
Time, except as provided otherwise in Section 6.8 of the Merger Agreement,
will be canceled by ARS and will be converted into the right to receive, for
each share of ARS Common Stock subject to such option: the Merger
Consideration, or, if the Tower Merger Effective Time shall have occurred, the
cash that the Optionholder would have received pursuant to the Merger and
shares of ATS Common Stock that the Optionholder would have received pursuant
to the Tower Merger, in each case with respect to each share of ARS Common
Stock subject to an unexpired ARS Option of the Optionholder had such ARS
Option been exercised immediately prior to the Tower Merger Effective Time, in
all cases reduced by an amount of cash (and, to the extent necessary, Tower
Common Stock) equal to the exercise price per share of ARS Common Stock
subject to such ARS Option. Except as provided in the preceding sentence, no
other consideration will be paid by ARS to an option holder in respect of his
or her canceled ARS Options. If the Merger is not consummated, the
cancellation of the ARS Options shall be rescinded and the holders shall
continue to hold such ARS Options upon their original terms and conditions. At
the election of any option holder who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1), Section
6.8(b) of the Merger Agreement will be inoperative with respect to such ARS
Options as he or she may specify to the extent that the acceleration, vesting
cancellation and cash-out of ARS Options at the Effective Time as provided in
the Merger Agreement would constitute an "excess parachute payment" (as such
term is defined in Section 280G(b)(1) of the Code). Any option holder who
makes such election shall forfeit the ARS Options which are subject to such
election and shall receive no consideration therefor.
ATS Employees (which includes, among others, Messrs. Box, Dodge, Eisenstein
and Winn) who hold ARS Options to purchase an aggregate of 710,000 shares of
ARS Common Stock (including Mr. Box: 100,000 shares;
107
<PAGE>
Mr. Dodge: 290,000 shares; Mr. Eisenstein: 40,000 shares; and Mr. Winn:
280,000 shares) will be given the opportunity to convert their ARS Options
into ATS Options, such conversion to be effectuated at the time of the Tower
Separation in a manner that will preserve the spread in such ARS Options
between the option exercise price and the fair market value of ARS Common
Stock and the ratio of the spread to the exercise price prior to such
conversion and, to the extent applicable, otherwise in conformity with the
rules under Section 424(a) of the Code and the regulations promulgated
thereunder. Messrs. Box, Dodge, Eisenstein and Winn have advised ARS of the
extent to which they intend to exercise their respective rights to exchange
ARS Options for ATS Options; based on such advice (which they have the right
to change at any time prior to the effectiveness of the Tower Separation, such
individuals will hold ATS Options as follows (assuming a $54.00 and $10.00 per
share value for the ARS Common Stock and ATS Common Stock, respectively): Mr.
Box: 540,000 shares of ATS Class A Common Stock at 5.05 per share; Mr. Dodge:
an aggregate of 1,566,000 shares of ATS Class B Common Stock at prices ranging
between $1.83 and $5.23 per share; Mr. Eisenstein: 216,000 shares of ATS Class
B Common Stock at $4.40 per share; and Mr. Winn: 1,468,422 shares of ATS Class
B Common Stock and an aggregate of 43,578 shares of ATS Class A Common Stock
at prices ranging between $1.18 and $5.23 per share.
ARS will use its best efforts (including best efforts to obtain any consents
of employees or directors of ARS or any of its subsidiaries (each, an
"Optionholder"), if required) to cause the cancelation of all of the ARS
Options immediately prior to the Effective Time.
Notwithstanding the foregoing paragraphs, in the event that any amount
payable under the foregoing provisions to Optionholders in respect of his ARS
Options would fail to be deductible by ARS (or any successor thereto) solely
by reason of (S)162(m) of the Code (after taking into account all amounts paid
or reasonably expected to be payable to the Optionholder in the same taxable
year in which the payments under this subsection are made to the Optionholder
and which are not otherwise exempt from Code (S)162(m) in determining whether
any amount payable to the Optionholder will fail to be deductible thereunder),
then, with respect to such portion of the Optionholder's ARS Options the
cancellation and cash-out of which would be nondeductible under said (S)162(m)
(the "(S)162(m) Options"), such (S)162(m) Options will be canceled in
accordance with the foregoing provisions, but the payments of the excess of
the aggregate Merger Consideration over the aggregate exercise price of each
Optionholder's (S)162(m) Options that the Optionholder would have received in
connection with the Tower Separation and other cash consideration contemplated
in respect of the Optionholder's (S)162(m) Options will be made to the
Optionholder on the 110th day following the Effective Time. ARS will use its
best efforts to obtain the written consent of each Optionholder affected by
this provision.
All amounts payable to an Optionholder pursuant to the foregoing provisions
will be reduced by any applicable withholding taxes.
Notwithstanding anything to the contrary in the Merger Agreement, ARS will
have the right in its sole and absolute discretion, to accelerate, on such
terms and conditions as it shall determine, in whole or in part, the vesting
of any or all of the ARS Options outstanding on the date hereof so that such
ARS Options are exercisable in full prior to the Effective Date.
To the extent that Tower Employees elect to convert their ARS Options into
options to acquire ATS Common Stock, ARS is obligated to contribute (without
the payment of any amount or the issuance of any securities by ATS) to the
capital of ATS at the earlier to occur of the Tower Merger Effective Time and
the Effective Time a number of shares of ATS Common Stock equal to the excess,
if any, of (i) the number of shares of ATS Common Stock owned by ARS
immediately prior to the Tower Merger Effective Time or the Effective Time, as
the case may be, over (ii) the number of shares of ATS Common Stock required
to be delivered (x) to the holders of shares of ARS Common Stock, (y) to
holders of ARS Options pursuant to the provisions of Section 6.8(a) of the
Merger Agreement, and (z) upon conversion of the ARS Convertible Preferred
Stock.
Information Statement/Registration Statements. ARS is obligated to, and to
cause ATS to, prepare and file with the Commission an information statement
and a registration statement on Form S-4 complying with the applicable rules
and regulations of the Commission and the DGCL, to correct promptly any false
or misleading
108
<PAGE>
information therein, and take all steps necessary to file with and have
cleared by the Commission any amendment or supplement thereto so as to correct
it and cause the same to be disseminated to the ARS common stockholders to the
extent required by Applicable Law. Such registration statement is required to
cover the registration under the Securities Act of the shares of Tower Common
Stock to be delivered as the Tower Stock Consideration or Tower Merger
Consideration to the holders of shares of ARS Common Stock and to holders of
ARS Options at the Effective Time or the Tower Merger Effective Time, as the
case may be.
ATS is also required to file with, and cause to be declared effective by,
the Commission prior to the Effective Time, (i) a registration statement on
Form S-8 to register under the Securities Act the shares of Tower Common Stock
subject to all ARS Options which have been converted into ATS Options, and
(ii) a registration statement to permit the delivery of shares of Tower Common
Stock by ARS upon conversion of the ARS Convertible Preferred Stock following
the Effective Time and to maintain, on customary terms, the effectiveness of
such registration statement under the Securities Act until such time as ATS
shall deliver to ARS an opinion of legal counsel reasonably satisfactory to
ARS and CBS that such registration statement is no longer required to permit
such delivery in accordance with the Securities Act.
Affiliate Agreements. ARS is obligated to use its best efforts to cause each
principal executive officer, each director and each other person who is an
"affiliate" of ARS for purposes of Rule 145 under the Securities Act at the
time each of the Merger Agreement and the Tower Merger Agreement was approved
by written consents of the ARS common stockholders to deliver to ATS, on or
prior to the earlier of Effective Time and the Tower Merger Effective Time, a
written agreement, reasonably satisfactory in form, scope and substance to ARS
and CBS, to the effect that such person will not offer to sell, assign,
transfer or otherwise dispose of any shares of ATS Common Stock issued in the
Merger or the Tower Merger, as the case may be, except, in each case, pursuant
to an effective registration statement or in compliance with Rule 145, or in a
transaction which, in the opinion of legal counsel reasonably satisfactory to
ARS and CBS, is exempt from the registration requirements of the Securities
Act.
Certain Other Covenants. Both CBS and ARS have also agreed, among other
things: (a) to consult with each other prior to issuing any press release or
public statement; and (b) that CBS and its representatives be granted access
to the management, accounts, books, records, contracts, and other materials,
as well as to the directors, officers, employees and independent accountants,
of ARS. ARS has agreed, to the extent permitted by its debt instruments and by
the ARS Cumulative Preferred Stock, to pay dividends on the ARS Cumulative
Preferred Stock in the form of cash.
No Material Delay. ARS has agreed that it will not, and will not permit any
of its Subsidiaries to, take any action or enter into any agreement, plan or
arrangement to take any action that could reasonably be expected to materially
delay the date of the Effective Time (it being provided that any delay in
excess of fifteen (15) business days which would arise as a result of any such
action shall be deemed "material" for purposes of such provision).
CONDITIONS TO THE MERGER
Joint Conditions. The obligations of ARS, CBS and CBS Sub to consummate the
Merger are subject to the satisfaction of the following conditions, any or all
of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) The Required Vote shall have been obtained;
(b) The FCC shall have issued the FCC Order approving the applications
for transfer of control of ARS' FCC Licenses in connection with the
transactions contemplated herein, and the FCC Order shall have been
obtained without the imposition of conditions that would have a Material
Adverse Effect on CBS' television and radio broadcasting business; provided
that without triggering CBS' right to approve such conditions or
restrictions, the FCC Order (i) may condition consummation of the Merger on
CBS complying with the numerical limits on local multiple radio ownership
imposed by 47 C.F.R. (S)73.3555(a) by affording
109
<PAGE>
CBS a period of at least six (6) months following the Effective Time within
which to comply with such rule through the use of divestiture trusts on
terms and conditions required by the FCC, provided further, however, that
to the extent that the FCC authority for such divestiture trusts provides
for a period of less than six (6) months, (A) ARS has the right to postpone
the Effective Time (and, to the extent necessary, the Termination Date), so
that CBS is afforded the six (6) month divestiture period, whether before
or after the Effective Time and (B) if ARS exercises such right, CBS' right
to approve such condition will not be triggered, and (ii) may grant CBS
temporary, rather than permanent, waivers of the One-to-a-Market Rule, so
long as such temporary waivers shall remain in effect until at least six
(6) months following the effective date of FCC action concluding the
ongoing rulemaking proceeding with respect to such Rule, all as set forth
in Section 7.1(b) of the Merger Agreement and described under "--Regulatory
Matters" below;
(c) No Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) that remains in effect and restraints, enjoins or otherwise
prohibits consummation of the Merger; and
(d) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
CBS Conditions. The obligations of CBS and CBS Sub to consummate the Merger
are also subject to the satisfaction of the following additional conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by Applicable Law:
(a) ARS shall have furnished CBS with an opinion, dated the Closing Date,
of Dow, Lohnes & Albertson, PLLC, FCC counsel for ARS, substantially in the
form attached to the Merger Agreement as Exhibit C;
(b) (i) The representations and warranties of ARS contained in the Merger
Agreement (other than those relating to capital stock, voting requirements
and capitalization of ATS and certain related matters) shall be true and
correct as of the date of the Original Merger Agreement and as of the
Closing Date as though made on and as of such date except (x) to the extent
such representations and warranties speak as of an earlier date (in which
case such representations and warranties shall be true and correct as of
such earlier date) and (y) to the extent that the failure of such
representations and warranties to be true and correct, individually or in
the aggregate, would not have a Material Adverse Effect on ARS; provided,
however, that for the purposes of this clause (y), representations and
warranties that are qualified as to materiality (including by reference to
"Material Adverse Effect") shall not be deemed to be so qualified, and (ii)
the representations and warranties relating to capital stock, voting
requirements and capitalization of ATS and certain related matters shall be
true and correct in all material respects as of the date of the Original
Merger Agreement and as of the Closing Date;
(c) ARS shall have performed in all material respects all obligations to
be performed by it under the Merger Agreement at or prior to the Closing
Date; and
(d) Between the date of the Original Merger Agreement and the Closing
Date, except as contemplated by the Merger Agreement, including without
limitation the Tower Separation, and except as set forth in Section 4.3 of
the American Disclosure Schedule, there shall not have occurred and be
continuing any Material Adverse Change in ARS.
ARS Conditions. The obligations of ARS to consummate the Merger are also
subject to the satisfaction of the following additional conditions, any or all
of which may be waived, in whole or in part, to the extent permitted by
Applicable Law:
(a) The representations and warranties of CBS contained in the Merger
Agreement shall be true and correct as of the date of the Original Merger
Agreement and as of the Closing Date as though made on and as of such date
except (i) to the extent such representations and warranties speak as of an
earlier date (in which case such representations and warranties shall be
true and correct as of such earlier date) and (ii) to the extent that the
failure of such representations and warranties to be true and correct,
individually or in the aggregate, would not have a Material Adverse Effect
on CBS; provided, however, that for the purposes
110
<PAGE>
of this clause (ii), representations and warranties that are qualified as
to materiality (including by reference to "Material Adverse Effect") shall
not be deemed to be so qualified; and
(b) CBS shall have performed in all material respects all obligations to
be performed by it under the Merger Agreement at or prior to the Closing
Date.
TERMINATION
Termination Events. The Merger Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the stockholders of
ARS:
(a) by mutual consent of CBS, CBS Sub and ARS;
(b) by either ARS or CBS if any Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Law that shall
have become final and nonappealable and that restraints, enjoins or
otherwise prohibits consummation of the Merger, unless the party seeking
such restraint, injunction or prohibition or any Affiliate thereof was the
terminating party;
(c) by either ARS or CBS if the Merger shall not have been consummated by
the Termination Date for any reason; provided, however, that the right to
terminate the Merger Agreement under this provisions shall not be available
to any party whose action or failure to act (or the action of failure to
act of any Affiliate) has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of the Merger Agreement;
(d) by either ARS or CBS of the Required Vote shall not have been
obtained;
(e) by ARS in the event (i) ARS is not in material breach of the Merger
Agreement and none of its representations or warranties shall have been or
become and continue to be untrue in any manner that would cause the
condition in Section 7.2(b) (i.e., paragraph (b) under "--Conditions to the
Merger--CBS Conditions" above) not to be satisfied, and (ii) CBS is in
material breach of the Merger Agreement or any of its representations or
warranties shall have been or become and continue to be untrue in any
manner that would cause the condition in Section 7.3(a) (i.e., paragraph
(c) under "--Conditions to the Merger--ARS Conditions" above) not to be
satisfied, and such a breach or untruth exists and is not capable of being
cured by and will prevent or delay consummation of the Merger by or beyond
the Termination Date; or
(f) by CBS in the event (i) CBS is not in material breach of the Merger
Agreement and none of its representations or warranties shall have been or
become and continue to be untrue in any manner that would cause the
condition in Section 7.3(a) (i.e., paragraph (c) under "--Conditions to the
Merger--ARS Conditions" above) not to be satisfied, and (ii) ARS is in
material breach of the Merger Agreement or any of its representations or
warranties shall have become and continue to be untrue in any manner that
would cause the condition in Section 7.2(b) (i.e., paragraph (b) under "--
Conditions to the Merger--CBS Conditions" above) not to be satisfied, and
such a breach or untruth exists and is not capable of being cured by and
will prevent or delay consummation of the Merger by or beyond the
Termination Date.
"Termination Date" means December 31, 1998 or such other date may from time to
time be extended pursuant to the provisions of Section 7.1(b) (i.e., paragraph
(b) under "--Conditions to the Merger--Joint Conditions" above) or by mutual
agreement of the parties. The right of ARS or CBS to terminate the Merger
Agreement as described above shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of either party,
any Person controlling any such party or any of their respective
Representatives, whether prior to or after the execution of the Merger
Agreement.
Effect of Termination. Except as specifically provided in the Merger
Agreement, in the event of the termination of the Merger Agreement as
described above, or in the event the Merger shall not have become effective
prior to the end of business on the day prior to the Termination Date, the
Merger Agreement shall forthwith become void, there shall be no liability on
the part of either party, or any of their respective stockholders, officers or
directors, to the other; provided, however, that such termination shall not
relieve either party from liability for any misrepresentation or breach of any
of its warranties, covenants or agreements set
111
<PAGE>
forth in the Merger Agreement. The Merger Agreement provides that in the event
the Merger Agreement is terminated by any party pursuant to the provisions of
paragraph (d) under "--Termination Events" above, then ARS shall pay to CBS a
fee equal to $35.0 million, together with the reasonable and reasonably
documented out-of-pocket fees and expenses incurred or paid by or behalf of
CBS in connection with the Merger or the consummation of the transactions
contemplated by the Merger Agreement, including all fees and expenses of its
counsel, commercial banks, investment banking firms, accountants, experts and
consultants in an aggregate amount not to exceed $5.0 million.
AMENDMENT
The Merger Agreement may be amended from time to time by the parties at any
time prior to the Closing Date but only by an instrument in writing signed by
the parties and, after receipt of the Required Vote, subject, in the case of
ARS, to Applicable Law.
WAIVER
At any time prior to the Closing Date, except to the extent not permitted by
Applicable Law, CBS or ARS may, either generally or in a particular instance
and either retroactively or prospectively, extend the time for the performance
of any of the obligations or other acts of the other, subject, however, to the
above under "--Termination--Termination Events", waive any inaccuracies in the
representations and warranties of the other contained within the Merger
Agreement or in any document delivered pursuant to the Merger Agreement, and
waive compliance by the other with any of the agreements, covenants,
conditions or other provision contained within the Merger Agreement. Any such
extension or waiver will be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
INTEREST OF CERTAIN PERSONS IN THE MERGER
In reviewing the recommendation of the ARS Board with respect to the Merger,
ARS stockholders should be aware that certain members of ARS' management and
the ARS Board have certain interests in the Merger that may present them with
actual or potential conflicts of interest.
ARS Stock Options. The directors and officers who are or will become ATS
Employees, including without limitation Messrs. Box, Dodge, Eisenstein and
Winn, will be entitled to convert their ARS Options into options to purchase
ATS Common Stock, as described under "--Certain Other Covenants--ARS Options"
above. See "Principal Stockholders of American Tower Systems" for information
with respect to ARS Options held by the directors and executive officers of
ARS who will become directors and executive officers of ATS.
Indemnification. The directors and officers of ARS will be indemnified by
CBS and CBS is obligated, subject to certain conditions, to provide insurance
for such directors and officers as described under "--Certain Other
Covenants--Indemnification" above.
Benefit Arrangements. The officers of ARS who will remain with it (which
does not include Messrs. Dodge, Box and Winn) will receive the benefit of the
arrangements described under "--Certain Other Covenants--Employee Benefits".
In addition, ARS' three Chief Co-Operating Officers (Messrs. Bouloukos, Gehron
and Pearlman) may be granted severance arrangements, for which no definite
agreements have been reached.
ATS Stock Purchase Agreement. Certain officers and directors (or their
affiliates, family members or trusts for the benefit of family members) of ARS
entered into the ATS Stock Purchase Agreement pursuant to which they purchased
shares of ATS Common Stock at $10.00 per share, which had been determined by
the Special Committee of the ARS Board to be "fair" from a financial point of
view to ARS common stockholders. See "--ATS Stock Purchase Agreement" below.
112
<PAGE>
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals is required in order to consummate the Merger, including the
approval of the FCC, and the expiration or termination of the waiting period
under the HSR Act. ARS and CBS have agreed in the Merger Agreement to use best
efforts to obtain such approvals or waivers, but there can be no assurance as
to when or if such approvals or waivers will be obtained.
FCC Approvals. On October 24, 1997, ARS and CBS filed an application (the
"Transfer Application") with the FCC requesting the FCC's consent to transfer
control of the subsidiaries of ARS holding the FCC licenses for each of the
ARS broadcast Stations, from the holders of ARS Common Stock to CBS. As a
result of the transfer and giving effect to the Recent Transactions, the
Transfer Application demonstrates that CBS and its subsidiaries would have
attributable interests that would (a) exceed the numerical limits on local
multiple radio station ownership (the "Multiple Ownership Limit") in the
Boston, Baltimore and San Francisco/San Jose markets, and (b) violate the
limits on common ownership of television and radio stations serving the same
market (the "One-to-a-Market Rule") in Boston, Baltimore, Pittsburgh and San
Francisco/San Jose. CBS has requested temporary waivers of any obligation to
divest itself of stations as follows: (a) with respect to the Multiple
Ownership Limit, CBS has indicated that it would divest the necessary number
of stations in the appropriate markets prior to the consummation of the Merger
Agreement, or, if divestiture could not be completed in a timely manner, it
would place certain stations in insulated trusts to comply with the Multiple
Ownership Limit; and (b) with respect to the One-to-a-Market Rule, CBS has
requested that the FCC issue temporary waivers of such Rule to permit CBS to
retain all of its radio and television stations which would otherwise be in
violation of such Rule until at least six (6) months following the effective
date of final FCC action concluding the ongoing rulemaking proceeding in MM
Docket Nos. 91-221, 87-8 (FCC 94-322) or a successor rulemaking proceeding
pending at the time of the grant of the FCC Order, that considers the One-to-
a-Market Rule.
The Merger Agreement provides, among other things, that, as a condition of
the obligation of the parties to consummate the Merger, the FCC shall have
issued the FCC Order approving the applications for transfer of control of the
ARS FCC Licenses, and that the FCC Order shall have been obtained without the
imposition of conditions that would have a Material Adverse Effect on CBS'
television and radio broadcasting business. However, without triggering CBS'
right to approve such conditions or restrictions, the FCC Order (i) may
condition consummation of the Merger on CBS complying with the Multiple
Ownership Limitation by affording CBS a period of at least six (6) months
following the Effective Time within which to comply with such rule through the
use of divestiture trusts on terms and conditions required by the FCC,
provided that to the extent that the FCC authority for such divestiture trusts
provides for a period of less than six (6) months, (x) ARS has the right to
postpone the Effective Time (and, to the extent necessary, the Termination
Date), so that CBS is afforded the six (6) month divestiture period, whether
before or after the Effective Time and (y) if ARS exercises such right, CBS'
right to approve such condition shall not be triggered, and (ii) may grant CBS
temporary, rather than permanent, waivers of the One-to-a-Market Rule, so long
as such temporary waivers shall remain in effect until at least six (6) months
following the effective date of FCC action concluding the ongoing rulemaking
proceeding in MM Docket Nos. 91-221, 87-8 (FCC 94-322), or a successor
rulemaking proceeding pending at the time of the grant of the FCC Order, that
considers the One-to-a-Market Rule. "FCC Order" is defined in the Merger
Agreement to mean an action by the FCC approving the transfer of the ARS FCC
Licenses with respect to which, except as may be waived in writing by CBS in
its sole discretion, (i) no timely request for stay, petition for
reconsideration or appeal or sua sponte action of the FCC with comparable
effect is pending, or (ii) if any of the foregoing is pending, in the judgment
of CBS it lacks any substantial merit or is contrary to established FCC
precedent, or (iii) if it were to be so granted, it would not have a Material
Adverse Effect on CBS' televisions and radio broadcasting business and as to
which the thirty (30) day time period specified in 47 U.S.C. (S)405(a) for
initiating a petition for reconsideration of the grant of the FCC Order has
expired.
CBS is obligated under the terms of the Merger Agreement to obtain the
required FCC Consents except as described above under "--Certain Other
Covenants--Certain Efforts; FCC and Antitrust Requirements" above.
113
<PAGE>
On August 13, 1997, a petition to deny alleging multiple ownership
violations, assertion of excessive control by American Radio, and lack of
candor with respect to radio stations in the West Palm Beach market was filed
against American Radio's FCC application to acquire WTPX(FM), Jupiter,
Florida, submitted in FCC File No. BALH-970703GM (the "WTPX(FM) Application").
On September 16, 1997, American Radio and the current FCC licensee of WTPX(FM)
jointly requested the dismissal of the WTPX(FM) Application. The FCC granted
the request without prejudice to whatever further actions, if any, the
Commission may deem appropriate with respect to the matters raised in the
petition, and dismissed the petition as moot. American Radio is reviewing the
alleged course of conduct to ensure compliance with the Communications Act and
FCC rules. In December 1997, an objection was lodged at the FCC against the
license renewal application of WAAF(FM), Worcester, Massachusetts, claiming
that the station aired allegedly indecent programming. American Radio is
investigating the allegations.
On November 3, 1997, the FCC issued a public notice accepting the Transfer
Application for filing. Pursuant to the Communications Act and the FCC's
rules, interested third parties had until December 3, 1997 to file petitions
to deny the Transfer Application, and thereafter may file informal objections
until the Transfer Application is granted. On October 27, 1997, a letter was
filed alleging improprieties in CBS' employment practices at WLIF(FM) in
Baltimore, Maryland and objecting to the grant of the application for FCC
consent to the transfer of control of the subsidiaries holding ARS' FCC
licenses. CBS opposed the letter on November 10, 1997, and the opposing party
thereafter filed an undated reply. By letter dated January 22, 1998, the FCC's
staff dismissed this letter on procedural grounds, and the allegations set
forth therein were otherwise denied. On December 3, 1997, an objection was
filed against the merger application alleging that KMJ(AM), Fresno, California
had broadcast advertisements that were false and deceptive and defamed a local
business. A similar objection to the KMJ(AM) renewal application was filed
November 3, 1997, by the same parties. On December 18, 1997, ARS filed a
consolidated opposition to both pleadings, and, on January 7, 1998, the
petitioners filed a consolidated reply to both pleadings. A letter opposing
the Merger was filed with the FCC, on behalf of a former ATS employee, but the
FCC has notified the complainant that, in light of procedural deficiencies,
the letter will not be considered in connection with the FCC's review of the
merger application. In addition, a former American Radio consulting engineer
wrote to the FCC complaining about a debt he claims is owed to him by American
Radio stations in Fresno. The FCC has sent a letter to the engineer stating
that his claim is a private dispute that is not relevant to the Merger.
On December 24, 1997, applications were filed with the FCC seeking authority
to place certain stations in insulated trusts so as to permit CBS to achieve
compliance with the Multiple Ownership Limit at the time of consummation of
the Merger Agreement (the "Trust Applications"). The Trust Applications were
amended at the request of the FCC's staff on January 28, 1998.
In evaluating any opposition to the Transfer Application or the Trust
Applications, the FCC will determine on the basis of the petitions or informal
responses, objections that may be filed by ARS and/or CBS, and such other
facts as it may officially notice, whether there are substantial and material
issues of fact that will require an evidentiary hearing to resolve. In the
absence of issues requiring an evidentiary hearing, and upon a finding that a
grant of the Transfer Application (and the associated waivers noted above) and
the Trust Applications would serve the public interest, convenience and
necessity, the FCC, or the FCC's staff acting by delegated authority, will
grant the Transfer Application and the Trust Applications. In the unlikely
event that there are any issues of fact which cannot be resolved without an
evidentiary hearing, the FCC must designate the Transfer Application or the
Trust Applications for such a hearing, and the consummation of the Merger
could be jeopardized due to the length of time ordinarily required to complete
such proceedings.
Within thirty (30) days following FCC public notice of a grant of the
Transfer Application or the Trust Applications, parties in interest may file a
petition for reconsideration requesting that the FCC (or the FCC's staff in
the case of a staff grant, which, nonetheless, is unlikely in the case of a
transfer of control or assignment involving an unusual waiver request),
reconsider its action. Alternatively, in the case of a staff grant, parties in
interest may within the same thirty-day period file an "Application for
Review" requesting that the FCC review and set aside the staff grant. In the
event of a staff grant, a party in interest could take both actions, by first
filing
114
<PAGE>
a petition for reconsideration with the staff and later, within thirty (30)
days following public notice of denial of that petition, filing an Application
for Review. In the case of a staff grant, the FCC may also review the staff
action on its own motion within forty (40) days following public notice of the
staff's action. The FCC may review any of its own actions on its own motion
within thirty (30) days following public notice of the action.
Within thirty (30) days of public notice of an action by the FCC (i)
granting the Transfer Application or the Trust Applications, (ii) denying a
petition for reconsideration of such a grant or (iii) denying an Application
for Review of a staff grant, parties in interest may appeal the FCC's action
to the U.S. Court of Appeals for the District of Columbia Circuit.
In the event that the Transfer Application or the Trust Applications should
be denied or the requested waivers in the Transfer Application not granted by
the FCC or its staff, ARS and CBS would have the same rights to seek
reconsideration or file an appeal as set forth above with respect to adverse
parties.
If the FCC does not, on its own motion, or upon a request by an interested
party for reconsideration or review, review a staff grant or its own action
within the time periods set forth above, an action by the FCC or its staff
granting the Transfer Application and the Trust Applications would become
final. The Merger Agreement provides that the parties are not obligated to
consummate the Merger upon the issuance of an FCC grant of the Transfer
Application, until such grant has become final.
When the FCC considers a proposed transfer of control of an FCC licensee
that holds multiple FCC licenses, some of which licenses are subject to
pending renewal applications, the FCC's recently adopted policy provides that
so long as there are no unresolved issues pertaining to the qualifications of
the transferor or the transferee and so long as the transferee is willing to
substitute itself as the renewal applicant, the FCC will grant a transfer
application for a licensee holding applications for one or several of the
licensee's stations. This new policy should permit the parties to consummate
the Merger (assuming satisfaction or waiver of all other conditions and the
FCC's grant of the Transfer Application) during those periods when renewal
applications are pending for one or more of ARS' stations. CBS has
acknowledged and agreed that certain of the ARS Stations and ARS Brokered
Stations may file or have pending applications for renewal of license during
the time that an application for the FCC Consents is pending before the FCC.
To the extent any such application for renewal may be filed or remain pending,
CBS has agreed to amend the transferee's portion of any application for the
FCC Consents and, as may be required, to amend any license renewal
applications for the ARS Stations or ARS Brokered Stations, to confirm CBS'
intention to consummate the Merger Agreement during the pendency of such
license renewal application, and to agree to assume the consequences
associated with succeeding to the place of ARS in such license renewal
applications. The making of this statement shall not be deemed to limit or
waive any other rights that CBS may otherwise have under the Merger Agreement.
Antitrust. Under the HSR Act and the rules promulgated thereunder, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") and the FTC and specified waiting period requirements
have been satisfied. ARS and CBS intend to file in due course with the
Antitrust Division and the FTC a Notification and Report Form with respect to
the Merger.
The Antitrust Division and the FTC determine between themselves which agency
is to review a proposed transaction. The Antitrust Division or the FTC, as the
case may be, may then issue a formal request for additional information (the
"Second Request"). Under the HSR Act, if a Second Request is issued, the
waiting period then would be extended and would expire at 11:59 p.m., on the
twentieth calendar day after the date of substantial compliance by both
parties with such Second Request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with
the consent of the parties. In practice, complying with a request for
additional information or material can take a significant amount of time. In
addition, if the Antitrust Division or the FTC raises substantive issues in
connection with a proposed transaction, the parties frequently engage in
115
<PAGE>
negotiations with the relevant governmental agency concerning possible means
of addressing those issues and may agree to delay consummation of the
transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. In light of the
continuing consolidation occurring in the radio broadcasting industry, the
Antitrust Division and the FTC may be expected to give increased attention to
the Merger. Moreover, divestures required to comply with the Multiple
Ownership Limit may not necessarily be sufficient to meet the requirements of
the Antitrust Division and the FTC. At any time before or after the
consummation of the Merger, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the Merger or seeking the
divesture of substantial assets of ARS or CBS.
In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of certain assets of ARS or
CBS. No state authorities have indicated that they will undertake an
investigation of the Merger. Private parties may also seek to take legal
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if such a challenge is made, what the result of such challenge may be.
OTHER CONSENTS
Consummation of the Merger will require the consent of the lenders under the
ARS Credit Agreement. ARS believes that such consent will be obtained. The
consent of the holders of ARS' other debt is not required for consummation of
the Merger. ARS does not anticipate any problem in obtaining the necessary
consents. Holders of the requisite majority of the ARS Cumulative Preferred
Stock have consented to the Tower Separation, whether pursuant to the Merger
or the Tower Merger, on terms satisfactory to CBS. Consummation of the Tower
Merger will also require the consent of the banks under ARS' Credit
Agreements. CBS has no obligation to assist ARS in obtaining such consent and
there can be no assurance that such consent will be obtained.
ATS STOCK PURCHASE AGREEMENT
ATS recently consummated the transactions contemplated by the ATS Stock
Purchase Agreement, dated as of January 8, 1998, with certain officers and
directors of ARS (or their affiliates or members of their family or family
trusts), pursuant to which those persons purchased shares of ATS Common Stock
at $10.00 per share, as follows: Mr. Dodge: 4,000,000 (Class B); Mr. Box:
450,000 (Class A); Mr. Buckley: 300,000 (Class A); each of Messrs. Eisenstein
and Steven J. Moskowitz: 25,000 (Class A); Mr. Kellar: 400,000 (Class A); Mr.
Stoner, his wife and certain family trusts: 649,950 (Class B); other Stoner
family and trust purchasers: 150,050 (Class A); and Chase Equity Associates:
2,000,000 (Class C). Messrs. Buckley and Kellar are directors of ARS, and Mr.
Chavkin, a director of ARS and ATS, is an affiliate of Chase Equity
Associates. See "Principal Stockholders of American Radio" in Appendix I. Mr.
Moskowitz is a newly recruited Vice President of ATS, responsible for the
Northeast Region.
Payment of the purchase price was in the form of cash in the case of Chase
Equity Associates, all members of Mr. Stoner's family and the family trusts
(but not Mr. Stoner and his wife) and Messrs. Buckley, Eisenstein, Kellar and
Moskowitz, and, in the case of Messrs. Dodge, Box and Stoner (and his wife) in
the form of a note due on the earlier of the consummation of the Merger or, in
the event the Merger Agreement is terminated, December 31, 2000. The notes
bear interest at the six-month London Interbank Rate, from time to time, plus
1.5% per annum, and are secured by shares of ARS Common Stock having a fair
market value of not less than 175% of the principal amount of and accrued and
unpaid interest on the note. The notes are prepayable at any time at the
option of the obligor and will be due and payable, at the option of American
Tower Systems, in the event of certain defaults as described therein.
The ARS Board appointed a special committee (the "Special Committee")
consisting of Messrs. Duncan, Peebler and Primis, with Mr. Peebler acting as
chairman, to determine the fairness to ARS from a financial point
116
<PAGE>
of view of the terms and conditions of the ATS Stock Purchase Agreement. None
of the members of the Special Committee was a party to the ATS Stock Purchase
Agreement. No limitations were imposed on the activities of the Special
Committee by the ARS Board. The Special Committee retained Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to act as its exclusive
financial advisor in connection with the transactions contemplated by the ATS
Stock Purchase Agreement. No limitations were placed on the activities of
Merrill Lynch. Merrill Lynch delivered its written opinion, dated January 8,
1998, to the Special Committee that, as of such date and based upon and
subject to the matters set forth therein, the purchase price of $10.00 per
share to be received by ATS pursuant to the ATS Stock Purchase Agreement was
fair from a financial point of view to ARS. Based upon such opinion, and its
own evaluation of the terms and conditions of the ATS Stock Purchase
Agreement, the Special Committee approved the ATS Stock Purchase as fair to
and in the best interests of ARS.
Pursuant to an Engagement Letter, dated November 20, 1997, ARS has agreed to
pay Merrill Lynch a fee of $500,000 in consideration for its services. ARS has
also agreed to reimburse Merrill Lynch for its expenses, including reasonable
fees and expenses of its counsel, and to indemnify Merrill Lynch for
liabilities and expenses arising out of its engagement and the transactions in
connection therewith, including liabilities under the federal securities laws.
ATS has agreed to pay to ARS immediately following the Effective Time all such
fees and expenses which ARS has incurred to Merrill Lynch.
EXPENSES
Each of the parties will pay its own fees and expenses, except that the
Merger Agreement provides that (a) ATS is obligated to indemnify and hold
harmless ARS with respect to certain liabilities, and (b) the Merger Agreement
provides for an adjustment (the cost or benefit of which is borne or inures to
the benefit of ATS) based on the working capital and aggregate debt of ARS at
the Closing Date. See "The Merger and Tower Separation--ARS-ATS Separation
Agreement". The Merger Agreement also provides that in the event the Merger
Agreement is terminated by any party pursuant to the provisions of paragraph
(d) under "--Termination--Termination Events" above, then ARS shall pay to CBS
a fee equal to $35.0 million, together with the reasonable and reasonably
documented out-of-pocket fees and expenses incurred or paid by or on behalf of
CBS in connection with the Merger or the consummation of the transactions
contemplated by the Merger Agreement, including all fees and expenses of its
counsel, commercial banks, investment banking firms, accountants, experts and
consultants in an aggregate amount not to exceed $5.0 million. Estimated fees
and expenses of ARS in connection with the Merger and related transactions
(including the Tower Separation and assuming the consummation thereof) are as
follows (in millions):
<TABLE>
<S> <C>
Financial advisory fees and expenses............................... $ 7.5
Consent solicitation fees and expenses ............................ 2.3
Legal and accounting fees and expenses............................. 2.3
Printing and mailing to stockholders............................... 0.4
SEC fees........................................................... 0.4
Bonus and severance arrangements payable to officers and
employees......................................................... 1.1
Miscellaneous...................................................... 0.3
-----
Total Fees and Expenses.......................................... $14.3
=====
</TABLE>
Promptly following the Effective Time, ATS is obligated to pay to ARS in
immediately available funds (and make ARS whole on an after-tax basis under
the principles set forth in Section 6.17(c)(iv) of the Merger Agreement) an
amount equal to the aggregate costs and expenses incurred by ARS in connection
with any agreement, arrangement or understanding (other than the Tower
Documentation) entered into by ARS, ATS Mergercorp or any member of the
American Tower Group following the date of the Original Merger Agreement (x)
for the benefit of any member of the American Tower Group, (y) in
contemplation of the Tower Separation or (z) in connection with the sale,
assignment, transfer or other disposition of shares of ATS Common Stock,
including without limitation such costs and expenses incurred by ARS to
Merrill Lynch and any such costs and expenses incurred by ARS to Credit Suisse
First Boston in excess of those set forth in the engagement letter between ARS
and Credit Suisse First Boston provided by ARS to CBS.
117
<PAGE>
DESCRIPTION OF AMERICAN TOWER SYSTEMS CAPITAL STOCK
GENERAL
The authorized capital stock of American Tower Systems consists of
20,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock") 200,000,000 shares of ATS Class A Common Stock, $.01 par value per
share, 50,000,000 shares of ATS Class B Common Stock, $.01 par value per
share, and 10,000,000 shares of ATS Class C Common Stock, $.01 par value per
share. The outstanding shares of ATS Common Stock (there being no Preferred
Stock outstanding) as of February 1, 1998 were as follows: ATS Class A Common
Stock--36,351,265; ATS Class B Common Stock--9,320,576; and ATS Class C Common
Stock--3,295,518. The Restated Certificate of Incorporation of ATS is
identical to the Restated Certificate of Incorporation of ARS. Accordingly,
the rights of the holders of ATS Common Stock are identical to the respective
rights of the holders of the ARS Common Stock.
PREFERRED STOCK
The 20,000,000 authorized and unissued shares of Preferred Stock may be
issued with such designations, preferences, limitations and relative rights as
the ATS Board may authorize, including, but not limited to: (i) the
distinctive designation of each series and the number of shares that will
constitute such series; (ii) the voting rights, if any, of shares of such
series; (iii) the dividend rate on the shares of such series, any restriction,
limitation or condition upon the payment of such dividends, whether dividends
shall be cumulative, and the dates on which dividends are payable; (iv) the
prices at which, and the terms and conditions on which, the shares of such
series may be redeemed, if such shares are redeemable; (v) the purchase or
sinking fund provisions, if any, for the purchase or redemption of shares of
such series; (vi) any preferential amount payable upon shares of such series
in the event of the liquidation, dissolution or winding-up of ATS or the Tower
Separation of its assets; and (vii) the price or rates of conversion at which,
and the terms and conditions on which the shares of such series may be
converted into other securities, if such shares are convertible. Although ATS
has no present intention to issue shares of Preferred Stock, the issuance of
Preferred Stock, or the issuance of rights to purchase such shares, could
discourage an unsolicited acquisition proposal.
COMMON STOCK
Dividends. Holders of record of shares of ATS Common Stock on the record
date fixed by the ATS Board are entitled to receive such dividends as may be
declared by the ATS Board out of funds legally available for such purpose. No
dividends may be declared or paid in cash or property on any share of any
class of ATS Common Stock, however, unless simultaneously the same dividend is
declared or paid on each share of the other classes of ATS Common Stock,
except that in the event of any such dividend in which shares of stock of any
company (including American Tower Systems or any of its Subsidiaries) are
distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the different classes of ATS Common Stock. In
the case of any dividend payable in shares of ATS Common Stock, holders of
each class of ATS Common Stock are entitled to receive the same percentage
dividend (payable in shares of that class) as the holders of each other class.
Voting Rights. Except as otherwise required by law and in the election of
directors, holders of shares of ATS Class A Common Stock and ATS Class B
Common Stock have the exclusive voting rights and will vote as a single class
on all matters submitted to a vote of the stockholders, with each share of ATS
Class A Common Stock entitled to one vote and each share of ATS Class B Common
Stock entitled to ten votes. The holders of the ATS Class A Common Stock,
voting as a separate class, have the right to elect two independent directors.
The ATS Class C Common Stock is nonvoting except as otherwise required by the
DGCL.
Under Delaware law, the affirmative vote of the holders of a majority of the
outstanding shares of any class of common stock is required to approve, among
other things, a change in the designations, preferences and limitations of the
shares of such class of common stock. Under the ATS Restated Certificate, the
affirmative vote of the holders of not less than 66 2/3% of the ATS Class A
Common Stock and ATS Class B Common Stock,
118
<PAGE>
voting as a single class, is required in order to amend most of the provisions
of the ATS Restated Certificate, including those relating to the provisions of
the various classes of ATS Common Stock, indemnification of directors,
exoneration of directors for certain acts, and such super-majority provision.
Conversion Provisions. Shares of ATS Class B Common Stock and, except as
hereinafter noted, ATS Class C Common Stock are convertible, at any time at
the option of the holder, on a share for share basis into shares of ATS Class
A Common Stock. The present owner of ATS Class C Common Stock can convert such
stock only in the event of a Conversion Event (as defined in the ATS Restated
Certificate) or with the consent of the ATS Board. Shares of ATS Class B
Common Stock automatically convert into shares of ATS Class A Common Stock
upon any sale, transfer, assignment or other disposition other than to
Permitted Transferees (as defined in the ATS Restated Certificate) which term
presently includes certain family members, trusts and other family entities
and charitable organizations and upon pledges but not to the pledgee upon
foreclosure.
It is a condition of consummation of the ATC Merger Agreement that the ATS
Restated Certificate be amended to (i) limit the aggregate voting power of
Steven B. Dodge (and his Controlled Entities as to be defined therein) to
49.99% of the aggregate voting power of all shares of capital stock entitled
to vote generally from the election of directors (less the voting power
represented by the shares of ATS Class B Common Stock acquired by the Stoner
purchasers pursuant to the ATS Stock Purchase Agreement and owned by them at
such time), (ii) prohibit future issuances of ATS Class B Common Stock (except
upon exercise of then outstanding options and pursuant to stock dividends or
stock splits), (iii) limit transfers of ATS Class B Common Stock to a more
narrow group than is provided in the ATS Restated Certificate, (iv) provide
for automatic conversion of the ATS Class B Common Stock to ATS Class A Common
Stock at such time as the aggregate voting power of Mr. Dodge (and his
Controlled Entities) falls below either (x) 50% of their initial aggregate
voting power (immediately after consummation of the ATC Merger) or (y) 20% of
the aggregate voting power of all shares of ATS Common Stock at the time
outstanding, and (v) require consent of the holders of a majority of ATS Class
A Common Stock for amendments adversely affecting the ATS Class A Common
Stock.
Liquidation Rights. Upon liquidation, dissolution or winding-up of ATS, the
holders of each class of ATS Common Stock are entitled to share ratably (based
on the number of shares held) in all assets available for distribution after
payment in full of creditors and payment in full to any holders of the
Preferred Stock then outstanding of any amount required to be paid under the
terms of the Preferred Stock.
Other Provisions. The holders of ATS Common Stock are not entitled to
preemptive or subscription rights. The shares of ATS Common Stock presently
outstanding are validly issued, fully paid and nonassessable. In any merger,
consolidation or business combination, the consideration to be received per
share by holders of each class of ATS Common Stock must be identical to that
received by holders of the other class of ATS Common Stock, except that in any
such transaction in which shares of ATS Common Stock (or any other company)
are distributed, such shares may differ as to voting rights to the extent that
voting rights now differ among the different classes of ATS Common Stock. No
class of ATS Common Stock may be subdivided, consolidated, reclassified or
otherwise changed unless, concurrently, the other classes of ATS Common Stock
are subdivided, consolidated, reclassified or otherwise changed in the same
proportion and in the same manner.
DIVIDEND RESTRICTIONS
ATSI is prohibited under the terms of the Tower Loan Agreement from paying
cash dividends on its capital stock (including Preferred Stock) except that,
beginning on April 15, 2000, Tower Operating Subsidiary may pay cash dividends
if (a) no Default exists or would be created thereby under the Tower Loan
Agreement, and (b) (ii) the ratio of Total Debt to Annualized Operating Cash
Flow is less than 4.0 after giving effect to certain payments required under
the Tower Loan Agreement out of the proceeds of any equity offering, and (c)
then only to the extent that Restricted Payments do not exceed (i)(x) 50% of
Excess Cash Flow for the preceding calendar year minus (y) any portion thereof
used to invested in Unrestricted Subsidiaries, or (ii) (x) 50% of the net
proceeds of any equity offering minus (y) any portion thereof used to invested
in Unrestricted Subsidiaries (as each such term is defined in the Tower Loan
Agreement). Comparable restrictions are imposed on the ability
119
<PAGE>
of ATSLP to make distributions to its partners. Since American Tower Systems
has no other assets other than its ownership of all of the capital stock of
the Tower Operating Subsidiary, its ability to pay dividends to its
stockholders in the foreseeable future is restricted.
DELAWARE BUSINESS COMBINATION PROVISIONS
Under the DGCL, certain "business combinations" (including the issuance of
equity securities) between a Delaware corporation and any person who owns,
directly or indirectly, 15% or more of the voting power of the corporation's
shares of capital stock (an "Interested Stockholder") must be approved by the
holders of at least 66 2/3% of the voting stock not owned by the Interested
Stockholder if it occurs within three years of the date such person became an
Interested Stockholder unless prior to such date the ATS Board approved either
the business combination or the transaction which resulted in the stockholder
becoming an Interested Stockholder. The Tower Separation and the ATS Stock
Purchase Agreement were approved by the ATS Board.
LISTING OF CLASS A COMMON STOCK
There has been no trading market for the ATS Class A Common Stock, and there
can be no assurances as to the establishment or continuity of any such market.
However, it is expected that a "when-issued" trading market may develop on or
about the consummation of the Merger. ATS intends to seek a Nasdaq listing for
the ATS Class A Common Stock. While ATS believes it currently meets the
financial listing criteria for Nasdaq listing, no application has been filed,
any such listing is subject to the distribution of the relevant exchange and
there can be no assurance that a Nasdaq or other listing will be obtained. If
a listing is not obtained, the ATS stock would trade in the over-the-counter
market which is generally less liquid.
Prices at which the ATS Class A Common Stock may trade after the Merger
cannot be predicted. Prices at which trading in shares of ATS Class A Common
Stock occurs may fluctuate significantly. See "Risk Factors--Risk Factors
Relating to American Tower Systems--No Prior Market for ATS Common Stock". The
prices at which the ATS Class A Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others,
quarter to quarter variations in the actual or anticipated financial results
of ATS or other companies in the communications site industry or the markets
served by ATS. These and other factors may adversely affect the market price
of the ATS Class A Common Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the ATS Common Stock is Harris Trust
and Savings Bank, 311 West Monroe Street, Chicago, Illinois 60606 (telephone
number (312) 461-4600).
120
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF ATS AND ATC
Upon consummation of the ATC Merger, the ATC common stockholders will become
common stockholders of ATS. Set forth below is a comparison of the terms of
the ATS Class A Common Stock and the terms of the ATC Common Stock, as well as
a summary of other material differences between the rights of holders of ATS
Class A Common Stock and the rights of holders of ATC Common Stock. This
summary does not purport to be complete and is qualified in its entirety by
reference to the ATS Restated Certificate, ATS' Bylaws (the "ATS Bylaws"), the
ATC Certificate of Incorporation, as amended (the "ATC Certificate"), the ATC
Bylaws (the "ATC Bylaws") and the more detailed description of the ATS Common
Stock contained herein. The description gives effect to the amendment of the
terms of the ATS Common Stock required as a condition to the consummation of
the ATC Merger. See "Business of American Tower Systems--Recent Transactions--
ATC Merger" and "Description of American Tower Systems Capital Stock--Common
Stock".
TERMS OF COMMON STOCK
<TABLE>
<CAPTION>
ATS COMMON STOCK ATC COMMON STOCK
------------------------------------ ------------------------------------
<S> <C> <C>
BUSINESS: All businesses of ATS. All business of ATC.
LISTING: Application will be made to Nasdaq. Not publicly traded.
DIVIDENDS: ATS currently does not pay dividends ATC currently does not pay dividends
on the ATS Common Stock. Dividends on the ATC Common Stock. Dividends
on the ATS Common Stock may be paid on the ATC Common Stock may be paid
in the discretion of the ATS Board in the discretion of the ATC Board
based primarily upon the financial based primarily upon the financial
condition, results of operations and condition, results of operations and
business requirements of ATS. business requirements of ATC.
Dividends, if any, are payable out Dividends, if any, are payable out
of the funds of ATS legally of the funds of ATC legally
available for the payment of available for the payment of
dividends, subject to restrictions dividends, subject to restrictions
contained in the Tower Loan contained in its bank credit
Agreement. agreement.
VOTING RIGHTS: Except as otherwise required by the Except as otherwise required by the
DGCL, holders of the ATS Class A DGCL, and the rights of holders of
Common Stock and ATS Class B Common the Series A Redeemable Preferred
Stock vote together as a single Stock, $.01 par value (the "ATC
class. The ATS Class A Common Stock Preferred Stock"), holders of the
has one vote per share and the ATS ATC Common Stock have the sole
Class B Common Stock has ten votes voting rights. ATC has a class of
per share. The ATS Class C Common nonvoting common stock authorized,
Stock does not have any voting none of which is issued.
rights except as otherwise required
by the DGCL. The holders of ATS
Class A Common Stock have the right
to elect two independent directors.
PREEMPTIVE RIGHTS: The holders of ATS Common Stock do The holders of ATC Common Stock do
not have any preemptive rights. not have any preemptive rights.
CONVERSION: Shares of ATS Class B Common Stock None
will automatically convert into
shares of ATS Class A Common Stock
upon any transfer of such shares of
ATS Class B Common Stock, unless the
transferee is a Permitted Transferee
(an entity controlled by such
transferor a family member (so long
as voting control is retained by the
transferor) or is a holder of ATS
Class B Common Stock.
</TABLE>
121
<PAGE>
<TABLE>
<CAPTION>
ATS COMMON STOCK ATC COMMON STOCK
------------------------------------ ------------------------------------
<S> <C> <C>
A holder of shares of ATS Class B
Common Stock or of ATS Class C
Common Stock (subject to certain
restrictions in the case of the
present Class C holder) may at any
time, at such holder's election,
convert such shares into shares of
ATS Class A Common Stock.
All of the Class B Common Stock will
automatically convert into ATS Class
A Common Stock should Mr. Dodge's
aggregate voting power fall below
either (i) 50% of his initial
aggregate voting power (immediately
after consummation of the ATC
Merger) or (ii) 20% of the aggregate
voting power of all shares of ATS
Common Stock at the time
outstanding.
LIQUIDATION: In the event of a liquidation of In the event of a liquidation of
ATS, holders of ATS Common Stock ATC, holders of ATC Common Stock
will be entitled to receive the net will be entitled to receive the net
assets of ATS, if any, remaining for assets of ATC, if any, remaining for
distribution to holders of ATS distribution to holders of ATC
Common Stock. Common Stock.
</TABLE>
OTHER STOCKHOLDER RIGHTS
Amendments to the Certificate of Incorporation
Under the ATS Restated Certificate, amendments to the ATS Restated
Certificate must be adopted by the holders of a majority of the voting power
of the ATS Voting Stock, except that amendments to the provisions relating to
(i) the number, rights and powers of any class of stock; (ii) the composition
and powers of the ATS Board; (iii) release of directors' liability; (iv)
indemnification of directors as a result of a breach of fiduciary duties,
officers, employees and agents; (v) amendments to the ATS Bylaws; and (vi)
amendments to foregoing provisions, require adoption by the holders of 66 2/3%
of the total number of the voting power of the outstanding shares of ATS
Voting Stock.
Under the ATC Certificate, amendments to the ATC Articles must be adopted by
a majority of the votes cast on such amendment by the holders of ATC Common
Stock entitled to vote on such amendment at a meeting at which a quorum of
such votes exists, except that without the affirmative vote or written consent
of the holders of more than 50% of the outstanding shares of ATC Series A
Preferred Stock, no amendment shall be effective to: (i) amend or repeal any
provision of, or add any provision to, the ATC Certificate or ATC Bylaws if
such action would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the ATC Series A
Preferred Stock, or increase or decrease the authorized number of shares of
the ATC Series A Preferred Stock; (ii) authorize or issue shares of any class
of stock, or any class of bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of any other class or series of stock of ATC, having any preference or
priority as to assets superior to or on a parity with the ATC Series A
Preferred Stock; or (iii) reclassify any Junior Stock (as defined in the ATC
Certificate) into shares having any preference or priority as to assets
superior to or on a parity with any preference or priority of the ATC Series A
Preferred Stock. The ATC Series A Preferred Stock will be redeemed as part of
the consummation of the ATC Merger.
122
<PAGE>
Amendments to Bylaws
The ATS Restated Certificate and the ATS Bylaws provide that bylaws may be
adopted, amended, altered, changed or repealed by either the affirmative vote
of the holders of 66 2/3% of the outstanding shares of ATS Voting Stock or by
the affirmative vote of a majority of the entire ATS Board.
The ATC Bylaws may be amended or repealed by the affirmative vote of a
majority of the members of the ATC Board present at any meeting at which a
quorum is present or by the ATC stockholders, except as described above under
"--Amendments to the Certificate of Incorporation".
Directors
Under the ATS Bylaws, the number of directors is determined by the ATS Board
from time to time, but can not be less than three. The ATS Bylaws do not
provide for a classified board. The ATS Restated Certificate provides that the
holders of the ATS Class A Common Stock shall be entitled to vote as a class
to elect two directors, all other directors are elected by the holders of the
ATS Class A Common Stock and the ATS Class B Common Stock, voting together as
a single class, with each share of ATS Class A Common Stock entitled to one
vote and each share of the ATS Class B Common Stock entitled to ten votes. See
"The ATC Merger" for information with respect to voting agreement to be
executed by Messrs. Dodge and Stoner relating to the election of two nominees
of certain ATC common stockholders.
Under the ATC Bylaws, the number of directors is determined by the ATC Board
of Directors from time to time, but can not be less than three. The ATC
Securityholders Agreement provides that the Board should consist of not more
than nine members. The ATC Bylaws do not provide for a classified board. The
holders of ATC Common Stock are entitled to elect all of the members of the
ATC Board of directors, subject to the rights of the holders of the ATC
Preferred Stock outstanding from time to time and provision of the ATC
Securityholders Agreement. See "Business of American Tower Systems--Recent
Transactions--ATC Merger" for information with respect to voting agreement to
be executed by Messrs. Dodge and Stoner relating to the election of two
nominees of certain ATC common stockholders.
Removal of Directors
Under the ATS Restated Certificate and Bylaws, (a) directors elected by the
ATS common stockholders may be removed, with or without cause, by vote of the
holders of a majority of the ATS Voting Stock; and (b) any directors elected
by the holders of ATS Class A Common Stock may be removed, with or without
cause, by a vote of the holders of the ATS Class A Common Stock holding not
less than a majority of the issued and outstanding shares of ATS Class A
Common Stock. Under the ATC Certificate, subject to restrictions in the ATC
Securityholders Agreement, directors may be removed, with or without cause, by
a vote of the holders of ATC Common Stock holding not less than a majority of
the issued and outstanding shares of ATC Common Stock.
Newly Created Directorships and Vacancies
Under the ATS Restated Certificate and the ATS Bylaws, vacancies in the ATS
Board and newly created directorships may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. If there are no directors in office, the DGCL provides that any
officer or stockholder may call a special meeting of stockholders in
accordance with the ATS Restated Certificate and ATS Bylaws, at which meeting
such vacancies shall be filled.
Under the ATC Certificate and the ATC Bylaws, except as provided in ATC's
existing security holders agreement vacancies in the ATC Board of Directors
and newly created directorships may be filled by a majority of the directors
then in office, even if less than a quorum, or by the sole remaining director.
If there are no
123
<PAGE>
directors in office, any officer or stockholder may call a special meeting of
stockholders in accordance with the ATC Certificate and ATC Bylaws, at which
meeting such vacancies shall be filled.
Special Meetings of Stockholders; Action by Written Consent
Under the ATS Bylaws, special meetings of the stockholders may be called for
any purpose or purposes by the Chairman of the ATS Board or, if there be none,
the President, or by the ATS Board, and shall be called by the President or
Secretary of ATS at the request in writing of the stockholders holding of
record a majority in interest of the voting power of the shares of stock of
ATS issued and outstanding and entitled to vote. Under the DGCL, any action
required or permitted by law or the ATS Restated Certificate to be taken at
any meeting of stockholders may be taken without a meeting, without prior
notice, and without a vote, if a written consent, setting forth the action so
taken, is signed by the number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present or present by proxy and voted.
Under the ATC Bylaws, special meetings of stockholders may be called for any
purpose or purposes any time by the Chairman of the Board, the President or a
majority of the ATC Board. Under the DGCL, any action required or permitted by
law or the ATC Certificate to be taken at any meeting of stockholders may be
taken without a meeting, without prior notice, and without a vote, if a
written consent, setting forth the action so taken, is signed by the number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present or present by proxy and
voted.
Stockholder Proposals and Nominations
The ATS Bylaws do not contain specific requirements which must be met in
order for a stockholder to present a proposal for action at an annual meeting
of stockholders or to nominate an individual for election to the ATS Board.
The ATC Bylaws do not contain specific requirements which must be met in
order for a stockholder to present a proposal for action at an annual meeting
of stockholders or to nominate an individual for election to the ATC Board of
Directors.
Business Combinations Following a Change in Control
Each of ATS and ATC is a Delaware corporation and is subject to Section 203
of the DGCL, which governs business combinations with interested stockholders.
See "Description of American Tower Systems Capital Stock--Delaware Business
Combination Provisions".
EXISTING ATC SECURITYHOLDERS AGREEMENT
ATC and its securityholders are parties to a Securityholders Agreement dated
October 12, 1995, as amended (the "ATC Securityholders Agreement") that
provides for, among other things:
(i) a Board of Directors consisting of not more than nine individuals,
including nominees of certain of ATC's stockholders or representatives of
ATC's stockholders, which nominees may be removed, and the vacancy created
by any such removal filled, by those entitled to make such nomination;
(ii) rights of first refusal triggered upon the proposed sale of any ATC
common stock, preferred stock or certain warrants to any third party, or
upon death, divorce or bankruptcy;
(iii) piggy-back registration rights;
(iv) co-sale provisions including (a) the rights of ATC securityholders
to participate in or "tag along" in certain stock sales, and (b) the
obligations of ATC securityholders to participate in or be "dragged along"
in certain sales of ATC's capital stock;
(v) the right of Clear Channel, ATC's largest stockholder, to subscribe
for additional shares of ATC Common Stock to prevent its aggregate
percentage interest from falling below 25%;
124
<PAGE>
(vi) standstill provisions that require the consent of the ATC Board or a
supermajority of securityholders before any securityholder or its
affiliates could acquire more than 33% of the fully-diluted capital stock
of ATC;
(vii) provisions restricting certain securityholders form pursuing
business opportunities until ATC elects not to pursue such opportunities;
(viii) a 180-day lock-up period following an initial public offering;
(ix) rights of securityholders to participate in certain issuances of ATC
Common Stock; and
(x) provisions requiring ATC to provide periodic financial statements.
The ATC Securityholders Agreement will be terminated upon consummation of
the ATC Merger.
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon completion of the ATS Pro Forma Transactions and the Merger, there will
be an aggregate of approximately 80.0 million shares of ATS Common Stock
outstanding. All of such shares, other than an aggregate of 5,333,333 shares
issued in connection with the Gearon Transaction, will be freely transferable
without restriction or future registration under the Securities Act, unless
held by an "affiliate" (as that term is defined under the Securities Act) of
ATS. Persons who may be deemed to be affiliates of ATS after the Merger
generally include individuals or entities that directly, or indirectly through
one or more intermediaries, control, are controlled by, or are under common
control with, ATS. Person who are affiliates of ATS will be permitted to sell
their ATS Common Stock received pursuant to the Merger only pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act, such as the exemption
afforded by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of
ATS Common Stock for at least one year is entitled to sell, within any three-
month period, a number of such shares which does not exceed the greater of 1%
of the then outstanding shares of ATS Class A Common Stock (approximately
362,000 shares immediately after the Merger and prior to the consummation of
the ATC Merger, approximately 660,000 shares thereafter) or the average weekly
public trading volume of the ATS Class A Common Stock during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about ATS. Any person (or persons whose shares are aggregated) who
has not been an affiliate of ATS at any time during the past three months
preceding a sale and who has owned shares of ATS Common Stock for at least two
years is entitled to sell such shares under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information or notice
requirements of Rule 144. In February 1997, the Commission solicited comments
regarding certain proposed amendments to Rule 144, including reducing the
aforementioned one year and two year holding periods.
Options to purchase an aggregate of approximately 12.6 million shares of ATS
Common Stock will be outstanding immediately following the consummation of the
ATS Pro Forma Transactions and the Merger. Shares of ATS Common Stock issued
upon exercise of such options will be registered on Form S-8 under the
Securities Act and will, therefore, be freely transferable under the
securities laws. American Tower Systems has entered into agreements to
register shares of ATS Common Stock under the Securities Act issued pursuant
to the ATS Stock Purchase Agreement, the ATC Merger and the Gearon Transaction
and shares held by certain affiliates of ATS.
American Tower Systems cannot make any predictions as to the effect, if any,
sales of shares of ATS Common Stock, or the availability of shares for future
sale, will have on the market price of the ATS Class A Common Stock prevailing
from time to time.
125
<PAGE>
VALIDITY OF THE SHARES
The validity of the ATS Common Stock to be issued in the Merger will be
passed upon by Sullivan & Worcester LLP, Boston, Massachusetts. Norman A.
Bikales, a member of the firm of Sullivan & Worcester LLP, is the owner of
9,000 shares of ARS Class A Common Stock and 41,490 shares of ARS Class B
Common Stock and has an option to purchase 20,000 shares of ATS Class A Common
Stock at $10.00 per share. Mr. Bikales and/or associates of that firm serve as
secretary or assistant secretaries of American Radio and certain of its
subsidiaries.
EXPERTS
The following financial statements incorporated by reference or included
herein in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated by
reference or included herein, and have been so incorporated or included herein
in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing:
(1) The consolidated financial statements of American Radio Systems
Corporation as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 and the related financial
statement schedule (incorporated by reference from American Radio Systems
Corporation's Annual Report on Form 10-K for the year ended December 31,
1996);
(2) The consolidated financial statements of American Tower Systems
Corporation as of December 31, 1996 and September 30, 1997, for the nine
months ended September 30, 1997, for the year ended December 31, 1996 and
for the period July 17, 1995 (Incorporation) to December 31, 1995;
(3) The consolidated financial statements of EZ Communications, Inc. as
of December 31, 1996 and for the year then ended and the related financial
statement schedule (incorporated by reference from EZ Communication's
Annual Report on Form 10-K for the year ended December 31, 1996);
(4) The combined financial statements of Meridian Communications as of
December 31, 1995 and 1996 and for each of the two years then ended;
(5) The financial statements of Diablo Communications, Inc. as of
December 31, 1995 and 1996 and for each of the two years then ended; and
(6) The financial statements of Gearon & Co., Inc as of December 31, 1996
and September 30, 1997 and for the year ended December 31, 1996 and the
nine months ended September 30, 1997.
The combined financial statements of CBC of Baltimore, Inc. (d/b/a WOCT-FM)
and WWMX-FM, Inc. (wholly-owned subsidiaries of Capitol Broadcasting Company,
Inc.) as of December 31, 1995 and 1996 and for the years then ended,
incorporated in this Prospectus by reference to American Radio's Current
Report on Form 8-K/A (Amendment No. 1) dated April 17, 1997, have been so
incorporated in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements and schedule of EZ Communications,
Inc. as of and for the two years in the period ended December 31, 1995 have
been audited by Ernst & Young LLP, independent auditors, as stated in their
report incorporated by reference in this Prospectus and have been so included
in reliance upon the report of such firm as experts in accounting and
auditing.
The combined financial statements of net assets of MicroNet, Inc. and
Affiliates to be sold to ATS as of December 31, 1996 and for the year then
ended have been audited by Pressman Ciocca Smith LLP, independent certified
public accountants, as stated in their report appearing in this Prospectus and
have been so included in reliance upon the report of such firm as experts in
accounting and auditing.
The financial statements of Diablo Communications of Southern California,
Inc. for the year ended December 31, 1996 have been audited by Rooney, Ida,
Nolt & Ahern, independent auditors, as stated in their report appearing in
this Prospectus and have been so included in reliance upon the report of such
firm as experts.
126
<PAGE>
The financial statements of Tucson Communications Company at December 31,
1996 and for the year then ended have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
in this Registration Statement and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of American Tower Corporation and
subsidiaries as of December 31, 1996 and 1995, and for each of the years in
the two year period ended December 31, 1996, the period from October 15, 1994
to December 31, 1994 (Successor) and the period from January 1, 1994 to
October 14, 1994 (Predecessor), have been included herein and in this
Prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants appearing elsewhere herein, and upon the
authority of such firm as experts in accounting and auditing.
127
<PAGE>
DEFINITION CROSS REFERENCE SHEET
Set forth below is a list of certain defined terms used in this Prospectus
and the page on which such terms are defined. Terms designated with I, II,
III, IV, and VI are found on the pages indicated in Appendix I, Appendix II,
Appendix III Appendix IV, Appendix V and Appendix VI respectively.
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
ABC....................................................................... 50
Acquiror.................................................................. III-1
Adjustment Amount......................................................... 100
After-tax cash flow....................................................... 17
American Cablesystems..................................................... 60
American Conversion Fraction.............................................. 91
American Radio............................................................ Cover
American Tower Systems.................................................... Cover
Antitrust Division........................................................ 115
APB....................................................................... F-83
Arch...................................................................... 50
ARS....................................................................... Cover
ARS-ATS Separation Agreement.............................................. 97
ARS Board................................................................. 8
ARS Common Stock.......................................................... Cover
ARS Convertible Preferred Stock........................................... 88
ARS Cumulative Preferred Stock............................................ 20
ARS Options............................................................... 63
ARS Predecessor Entities.................................................. 18
ARS Preferred Stock....................................................... 91
ARS Pro Forma Transactions................................................ 20
ARS September 1997 10-Q................................................... 18
ARS 10-K.................................................................. 18
AT&T...................................................................... 50
ATC....................................................................... Cover
ATC Board................................................................. 12
ATC Bylaws................................................................ 121
ATC Certificate........................................................... 121
ATC Common Stock.......................................................... 2
ATC Credit Facility....................................................... V-8
ATC Merger................................................................ Cover
ATC Merger Agreement...................................................... 2
ATC Merger Consideration.................................................. 71
ATC Merger Effective Time................................................. 77
ATC Preferred Stock....................................................... 70
ATC Securityholders Agreement............................................. 123
ATC Stock................................................................. 78
Atlantic.................................................................. 60
ATS....................................................................... Cover
ATS Board................................................................. 11
ATS Bylaws................................................................ 121
ATS Class A Common Stock.................................................. 11
ATS Class B Common Stock.................................................. 11
ATS Class C Common Stock.................................................. 11
ATS Common Stock.......................................................... Cover
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
ATS Employees............................................................. 98
ATS Group................................................................. 97
ATS Mergercorp............................................................ 95
ATS Options............................................................... 63
ATS Principal Stockholders................................................ 25
ATS Pro Forma Transactions................................................ 16
ATS Restated Certificate.................................................. 25
ATS Stock Purchase Agreement.............................................. 2
ATSI...................................................................... 6
ATSI Options.............................................................. 63
ATSI Plan................................................................. 63
ATSLP..................................................................... 6
Baltimore Transaction..................................................... I-7
Baron..................................................................... 68
BayCom Transaction........................................................ I-7
BCF....................................................................... 88
Bell Atlantic Mobile...................................................... 50
Bell South Mobility....................................................... 50
Bowen-Smith............................................................... 7
Bowen-Smith Acquisition................................................... 7
Broadcast cash flow....................................................... 20
Business Combination Statute.............................................. V-12
Cash Consideration........................................................ 91
CBS....................................................................... Cover
CBS Sub................................................................... 8
CCP....................................................................... 61
CD Amount................................................................. 100
CEA....................................................................... 61
Certificates.............................................................. 77
Chancellor Media.......................................................... 50
Chase Capital............................................................. 68
Clear Channel............................................................. 50
Closing................................................................... 90
Closing Date.............................................................. 90
CNN....................................................................... 50
Code...................................................................... 10
Commission................................................................ i
Communications Act........................................................ 25
Company's Parent.......................................................... F-25
Comparable Companies...................................................... 88
Comparable Transactions................................................... 88
Corporate Adjustments..................................................... 88
Credit Suisse First Boston................................................ 9
Credit Suisse First Boston Opinion........................................ 86
CSFB...................................................................... III-1
CSX....................................................................... 7
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
CSX Transportation........................................................ 7
CTIA...................................................................... 3
Current Assets............................................................ 99
CVP....................................................................... 61
Debt Amount............................................................... 100
Delaware Court............................................................ 78
DGCL...................................................................... 84
Diablo Transaction........................................................ 56
Distribution.............................................................. III-1
DTV....................................................................... 23
Duncan Guide.............................................................. 7
D & O Insurance........................................................... 106
EBITDA.................................................................... 17;20
Effective Time............................................................ 8
ESMR...................................................................... 3
Exchange Act.............................................................. i
Exchange Agent............................................................ 77
Extended Tower Leases..................................................... 101
EZ........................................................................ 60
EZ 10-K................................................................... 18
FAA....................................................................... 24
FASB...................................................................... 46
FAS 121................................................................... F-65
FAS 128................................................................... 46
FAS 130................................................................... 46
FAS 131................................................................... 46
FCC....................................................................... 3
FCC Order................................................................. 113
Final Adjustment Amount................................................... 100
FMR....................................................................... 69
Fox....................................................................... 50
FTC....................................................................... 115
Gearon Transaction........................................................ 2
GTE Mobilnet.............................................................. 50
Hartford Transaction...................................................... I-7
HBC....................................................................... I-7
HBC Merger................................................................ I-7
HBO....................................................................... 50
Houston Cellular.......................................................... 7
HSR Act................................................................... 2
Incorporation............................................................. F-3
Indemnified Parties....................................................... 106
Interested Stockholder.................................................... 120
IRS....................................................................... 75
ISOs...................................................................... 63
Jacor..................................................................... 50
Land Leases............................................................... 101
LCI....................................................................... F-25
Lehman.................................................................... 69
Liabilities............................................................... 99
LMAs...................................................................... 7
Loan Agreement............................................................ F-12
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Maximum Premium........................................................... 106
MCN....................................................................... F-55
Merger.................................................................... Cover
Merger Agreement.......................................................... Cover
Merger Consideration...................................................... 91
Meridian Transaction...................................................... 56
Merrill Lynch............................................................. 117
Metrocall................................................................. 50
MFS....................................................................... 69
MicroNet Transaction...................................................... 56
MRS....................................................................... F-55
MSSC...................................................................... F-55
Multi-Market.............................................................. 61
Multiple Ownership Limit.................................................. 113
NAB....................................................................... 60
NBC....................................................................... 50
Nasdaq.................................................................... 11
Net Assets................................................................ F-25
Net Debt.................................................................. 100
Nextel.................................................................... 50
NOLs...................................................................... F-88
NQOs...................................................................... 63
NYSE...................................................................... 12
OFC....................................................................... 88
One-to-a-Market Rule...................................................... 113
Original Merger Agreement................................................. 8
OPM....................................................................... 56
OPM Transaction........................................................... 56
Optionholder.............................................................. 108
PageMart.................................................................. 50
PageNet................................................................... 50
Parent.................................................................... F-8
Partnership............................................................... F-60
PCIA...................................................................... 3
PCS....................................................................... 3
Pittencrief Communications................................................ 50
Plan...................................................................... 63
Preferred Stock........................................................... 118
Preferred Stock Consideratoin............................................. 70
Prime..................................................................... 7
Recent Transactions....................................................... 1
Registration Statement.................................................... i
SBC Communications........................................................ 50
Second Request............................................................ 114
Section 262............................................................... 78
Securities Act............................................................ i
SEC....................................................................... i
Series A Preferred Stock.................................................. F-89
SMR....................................................................... 47
SNET...................................................................... 50
Southwestern Bell......................................................... 50
Special Committee......................................................... 116
Sprint.................................................................... 50
</TABLE>
129
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Stoner.................................................................... 61
Sub....................................................................... III-1
Suburban.................................................................. F-25
Sullivan & Worcester...................................................... 82
Summit Capital............................................................ 7
TCI....................................................................... F-30
Telecommunications Act.................................................... 81
Termination Date.......................................................... 111
Tower Cash Flow........................................................... 17
Tower Leases.............................................................. 101
Tower Loan Agreement...................................................... 24
Towers.................................................................... 101
Tower Merger.............................................................. Cover
Tower Merger Agreement.................................................... 8
Tower Merger Consideration................................................ 96
Tower Merger Effective Time............................................... 95
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
------------ ----
<S> <C>
Tower Merger Tower Consideration........................................... 95
Tower Operating Subsidiary................................................. 6
Tower Separation........................................................... 1
Tower Stock Consideration.................................................. 91
Transfer Application....................................................... 113
Transferred Towers......................................................... 98
Trust Applications......................................................... 114
Tucson Transaction......................................................... 56
Uncontrollable Events...................................................... 103
VEBA....................................................................... F-30
WC Amount.................................................................. 99
Wellington................................................................. 68
Working Capital............................................................ 99
WTPX(FM) Application....................................................... 114
(S)162(m) Options.......................................................... 108
</TABLE>
130
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
Independent Auditors' Report............................................. F-3
Consolidated Balance Sheets as of December 31, 1996 and September 30,
1997.................................................................... F-4
Consolidated Statements of Operations for the period from July 17, 1995
("Incorporation") to December 31, 1995, the year ended December 31, 1996
and the nine months ended September 30, 1997 and 1996 (unaudited)....... F-5
Consolidated Statements of Stockholder's Equity for the period from July
17, 1995 ("Incorporation") to December 31, 1995, the year ended December
31, 1996 and the nine months ended September 30, 1997................... F-6
Consolidated Statements of Cash Flows for the period from July 17, 1995
("Incorporation") to December 31, 1995, the year ended December 31, 1996
and nine months ended September 30, 1997 and 1996 (unaudited)........... F-7
Notes to Consolidated Financial Statements............................... F-8
MICRONET, INC. AND AFFILIATES
Report of Independent Certified Public Accountants....................... F-22
Combined Statements of Net Assets To Be Sold as of December 31, 1996 and
September 30, 1997 (unaudited).......................................... F-23
Combined Statements of Income Derived From Net Assets To Be Sold for the
year ended December 31, 1996 and nine months ended September 30, 1996
and 1997 (unaudited).................................................... F-24
Combined Statements of Cash Flows Derived from Net Assets To Be Sold for
the year ended December 31, 1996 and nine months ended September 30,
1996 and 1997 (unaudited)............................................... F-25
Notes to Combined Financial Statements................................... F-26
DIABLO COMMUNICATIONS, INC.
Independent Auditors' Report............................................. F-32
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................. F-33
Statements of Income for the years ended December 31, 1995 and 1996 and
nine months ended September 30, 1996 and 1997 (unaudited)............... F-34
Statements of Stockholders' Equity for the years ended December 31, 1995
and 1996 and nine months ended September 30, 1996 and 1997 and 1996
(unaudited)............................................................. F-35
Statements of Cash Flows for years ended December 31, 1995 and 1996 and
nine months ended September 30, 1996 and 1997 (unaudited)............... F-36
Notes to Financial Statements............................................ F-37
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
Independent Auditors' Report............................................. F-41
Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................. F-42
Statements of Operations for the period from September 1, 1995
(inception) to December 31, 1995, year ended December 31, 1996, and nine
months ended September 30, 1996 and 1997 (unaudited).................... F-43
Statements of Stockholders' Equity for the period from September 1, 1995
(inception) to December 31, 1995, year ended December 31, 1996 and nine
months ended September 30, 1997 (unaudited)............................. F-44
Statements of Cash Flows for the period from September 1, 1995
(inception) to December 31, 1995, year ended December 31, 1996 and nine
months ended September 30, 1996 and 1997 (unaudited).................... F-45
Notes to Financial Statements............................................ F-46
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MERIDIAN COMMUNICATIONS
Independent Auditors' Report............................................ F-51
Combined Balance Sheets as of December 31, 1995 and 1996 and June 30,
1997 (unaudited)........................................................ F-52
Combined Statements of Operations for the years ended December 31, 1995
and 1996 and six months ended June 30, 1996 and 1997 (unaudited)........ F-53
Combined Statements of Stockholder's Equity for the years ended December
31, 1995 and 1996 and six months ended June 30, 1997 (unaudited)........ F-54
Combined Statements of Cash Flows for years ended December 31, 1995 and
1996 and six months ended June 30, 1996 and 1997 (unaudited)............ F-55
Notes to Combined Financial Statements.................................. F-56
TUCSON COMMUNICATIONS COMPANY
Report of Independent Auditors.......................................... F-61
Balance Sheets as of December 31, 1996 and September 30, 1997 (unau-
dited).................................................................. F-62
Statements of Income for the year ended December 31, 1996 and September
30, 1997 and 1996 (unaudited)........................................... F-63
Statements of Partners' Deficit for the year ended December 31, 1996 and
September 30, 1997 and 1996 (unaudited)................................. F-64
Statements of Cash Flows for the year ended December 31, 1996 and Sep-
tember 30, 1997 and 1996 (unaudited).................................... F-65
Notes to Financial Statements........................................... F-66
GEARON & CO., INC.
Independent Auditors' Report............................................ F-69
Balance Sheets as of December 31, 1996 and September 30, 1997........... F-70
Statements of Income for the year ended December 31, 1996 and the nine
months ended September 30, 1997 and 1996 (unaudited).................... F-71
Statements of Stockholder's Equity for the year ended December 31, 1996
and the nine months ended September 30, 1997............................ F-72
Statements of Cash Flows for the year ended December 31, 1996 and the
nine months ended September 30, 1997 and 1996 (unaudited)............... F-73
Notes to Financial Statements........................................... F-74
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
Independent Auditors' Report............................................ F-78
Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-79
Consolidated Statements of Operations--Predecessor for the period from
January 1, 1994 to October 14, 1994 and--Successor for the period from
October 15, 1994 to December 31, 1994 and the years ended December 31,
1995 and 1996........................................................... F-80
Consolidated Statements of Stockholders' Equity (Deficit)--Predecessor
for the period from January 1, 1994 to October 14, 1994 and--Successor
for the period from October 15, 1994 to December 31, 1994 and the years
ended December 31, 1995 and 1996........................................ F-81
Consolidated Statements of Cash Flows--Predecessor for the period from
January 1, 1994 to October 14, 1994 and--Successor for the period from
October 15, 1994 to December 31, 1994 and the years ended December 31,
1995 and 1996........................................................... F-82
Notes to Consolidated Financial Statements.............................. F-83
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors ofAmerican Tower Systems Corporation:
We have audited the accompanying consolidated balance sheets of American
Tower Systems Corporation and subsidiaries (the "Company"), a wholly owned
subsidiary of American Radio Systems Corporation, as of September 30, 1997 and
December 31, 1996 and the related consolidated statements of operations,
stockholder's equity and cash flows for the nine months ended September 30,
1997, the year ended December 31, 1996 and the period from July 17, 1995
("Incorporation") to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the companies as
of September 30, 1997 and December 31, 1996, and the results of their
operations and their cash flows for the nine months ended September 30, 1997,
the year ended December 31, 1996 and the period from Incorporation to December
31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
November 7, 1997
F-3
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 2,294,934 $ 2,373,360
Accounts receivable, net of allowance for doubtful
accounts of $80,000 in 1997 and $47,000 in 1996
................................................. 1,560,144 236,990
Prepaid and other current assets.................. 269,402 79,657
Deferred income taxes............................. 440,522
------------ -----------
Total current assets............................ 4,565,002 2,690,007
PROPERTY AND EQUIPMENT, net......................... 43,941,330 19,709,523
UNALLOCATED PURCHASE PRICE, net..................... 52,438,342 12,954,959
OTHER INTANGIBLE ASSETS, net........................ 7,379,837 1,336,361
INVESTMENT IN AFFILIATE............................. 322,243 325,000
NOTE RECEIVABLE..................................... 259,542
DEPOSITS AND OTHER LONG-TERM ASSETS................. 2,433,382 101,803
------------ -----------
TOTAL............................................... $111,339,678 $37,117,653
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................. $ 108,457 $ 117,362
Accounts payable.................................. 1,617,891 1,058,822
Accrued expenses.................................. 2,022,596 715,322
Accrued interest.................................. 452,825
Unearned income................................... 1,051,262 252,789
------------ -----------
Total current liabilities....................... 5,253,031 2,144,295
------------ -----------
LONG-TERM DEBT...................................... 54,094,507 4,417,896
DEFERRED INCOME TAXES............................... 1,084,052 279,218
OTHER LONG-TERM LIABILITIES......................... 28,500 18,950
------------ -----------
Total long-term liabilities..................... 55,207,059 4,716,064
------------ -----------
MINORITY INTEREST IN SUBSIDIARIES................... 774,317 528,928
------------ -----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares autho-
rized, issued and outstanding in 1997 and 1996.. 30 30
Additional paid-in capital........................ 51,403,212 30,318,420
Accumulated deficit............................... (1,297,971) (590,084)
------------ -----------
Total stockholder's equity...................... 50,105,271 29,728,366
------------ -----------
TOTAL............................................... $111,339,678 $37,117,653
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED), YEAR ENDED DECEMBER
31, 1996 AND PERIOD FROM JULY 17, 1995 (INCORPORATION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ ---------------------
1997 1996 1996 1995
----------- ----------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Tower revenues (includes
revenue from related parties
of $255,000 and $70,000 in
1997 and 1996).............. $ 4,802,508 $1,056,862 $1,803,854 $ 162,933
Sublease revenues............ 702,194 295,582 468,356
Management fees.............. 621,004 361,669 466,851
Consulting revenues.......... 1,436,083
Other........................ 340,042 143,555 157,817 186
----------- ---------- ---------- ---------
Total operating revenues... 7,901,831 1,857,668 2,896,878 163,119
----------- ---------- ---------- ---------
OPERATING EXPENSES:
Operating expenses excluding
depreciation and
amortization and corporate
general and administrative
expenses ................... 3,588,340 1,066,402 1,362,284 59,417
Depreciation and amortiza-
tion........................ 2,706,119 613,293 989,936 57,428
Corporate general and admin-
istrative expense........... 919,010 505,711 830,248 230,109
----------- ---------- ---------- ---------
Total operating expenses... 7,213,469 2,185,406 3,182,468 346,954
----------- ---------- ---------- ---------
INCOME (LOSS) FROM OPERATIONS.. 688,362 (327,738) (285,590) (183,835)
OTHER INCOME (EXPENSE):
Interest income.............. 96,991 18,508 36,204
Interest expense............. (1,318,334)
Gain (loss) on sale of as-
sets, net................... (2,757)
Minority interest in net
earnings of subsidiary...... (221,188) (75,812) (184,897)
----------- ---------- ---------- ---------
TOTAL OTHER EXPENSE............ (1,445,288) (57,304) (148,693)
----------- ---------- ---------- ---------
LOSS BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES.............. (756,926) (385,042) (434,283) (183,835)
BENEFIT (PROVISION) FOR INCOME
TAXES......................... 49,039 (69,308) (45,390) 73,424
----------- ---------- ---------- ---------
NET LOSS....................... $ (707,887) $ (454,350) $ (479,673) $(110,411)
=========== ========== ========== =========
PRO FORMA LOSS PER SHARE....... $ (0.02) $ (0.01)
=========== ==========
PRO FORMA OUTSTANDING SHARES... 36,042,046 36,042,046
=========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997, YEAR ENDED DECEMBER 31, 1996 AND PERIOD
FROM JULY 17, 1995 (INCORPORATION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL
OUTSTANDING PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock
to parent.............. 10
Contributions from par-
ent:
Cash................... $ 242,215 $ 242,215
Non-cash............... 3,816,445 3,816,445
Cash transfers to par-
ent.................... (179,426) (179,426)
Net loss................ $ (110,411) (110,411)
----- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 10 3,879,234 (110,411) 3,768,823
Issuance of common stock
to parent.............. 2,990 $30 (30)
Contributions from par-
ent:
Cash................... 2,548,557 2,548,557
Non-cash............... 29,856,885 29,856,885
Transfers to parent:
Cash................... (4,866,226) (4,866,226)
Non-cash............... (1,100,000) (1,100,000)
Net loss................ (479,673) (479,673)
----- --- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1996................... 3,000 30 30,318,420 (590,084) 29,728,366
Cash contributions from
parent................. 25,959,792 25,959,792
Transfers to parent:
Cash................... (4,150,000) (4,150,000)
Non-cash............... (725,000) (725,000)
Net loss................ (707,887) (707,887)
----- --- ----------- ----------- -----------
BALANCE, SEPTEMBER 30,
1997................... 3,000 $30 $51,403,212 $(1,297,971) $50,105,271
===== === =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED),
YEAR ENDED DECEMBER 31, 1996 AND PERIOD FROM JULY 17, 1995
(INCORPORATION) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, PERIOD ENDED DECEMBER 31,
------------------------ ---------------------------
1997 1996 1996 1995
----------- ----------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss................ $ (707,887) $ (454,350) $ (479,673) $ (110,411)
Adjustments to reconcile
net loss to cash
provided by (used in)
operating activities:
Depreciation and
amortization.......... 2,706,119 613,293 989,936 57,428
Minority interest in
net earnings of
subsidiary............ 221,188 75,812 184,897
Amortization of
deferred financing
costs................. 120,187
Deferred income taxes.. 364,312 223,325 108,715
Changes in assets and
liabilities, net of
acquisitions:
Accounts receivable.. (1,345,336) (99,156) (199,823) (37,167)
Prepaid and other
current assets...... (47,084) (94,647) (226,814) (54,499)
Accounts payable and
accrued expenses.... 1,817,334 715,659 1,833,073 93,860
Other long-term
liabilities......... (10,450) 18,950
----------- ----------- ------------- -----------
Cash provided by (used
in) operating
activities.............. 3,118,383 979,936 2,229,261 (50,789)
----------- ----------- ------------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments for purchase
of property and
equipment and
intangible assets..... (8,925,939)
Payments for tower
related acquisitions.. (62,803,880)
Advances of notes
receivable............ (259,542)
Deposits and other
long-term assets...... (2,328,822)
-----------
Cash used for investing
activities............ (74,318,183)
-----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under credit
facility.............. 50,000,000 2,500,000
Borrowings under other
notes payable......... 11,550 231,115
Repayments of other
notes payable......... (332,294) (4,119) (106,697)
Contributions from
parent................ 25,959,792 1,911,418 2,548,557 242,215
Cash transfers to
parent................ (4,150,000) (1,232,127) (4,866,226) (179,426)
Distributions to
minority interest..... (314,370) (104,790) (174,650)
Additions to deferred
financing costs....... (41,754)
----------- ----------- ------------- -----------
Cash provided by
financing activities.... 71,121,374 581,932 132,099 62,789
----------- ----------- ------------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............. (78,426) 1,561,868 2,361,360 12,000
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............... 2,373,360 12,000 12,000
----------- ----------- ------------- -----------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD.................. $ 2,294,934 $ 1,573,868 $ 2,373,360 $ 12,000
=========== =========== ============= ===========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Corporate Structure--American Tower Systems Corporation and
subsidiaries (formerly American Tower Systems Holding Corporation)
(collectively, ATS or the Company) is a wholly-owned subsidiary of American
Radio Systems Corporation (ARS or the Parent). American Tower Systems
(Delaware), Inc. (ATSI) is a wholly-owned subsidiary of the Company which
holds substantially all the operating assets and liabilities of the business.
ATSI was incorporated on July 17, 1995 (Incorporation) for the purpose of
acquiring, developing, marketing, managing and operating wireless
communications tower sites throughout the United States, for use by
communications related businesses, such as paging companies, cellular
telephone providers, fixed microwave transmission companies, specialized
mobile radio companies, and television and radio broadcasters. As of September
30, 1997, the Company owned and/or operated approximately 370 wireless
communication sites, principally in the Northeast and Mid-Atlantic regions,
Florida and California.
In September 1997, ARS entered into a merger agreement (the Merger
Agreement) with a subsidiary of CBS Corporation (formerly Westinghouse
Electric Corporation) (CBS), pursuant to which a subsidiary of CBS will merge
with and into ARS, each holder of ARS common stock at the effective time of
the merger will receive $44.00 per share in cash, and ARS will become a
subsidiary of CBS (the Merger). As part to the Merger, ARS will distribute all
of its outstanding shares of ATS common stock owned by ARS to the holders of
record of ARS common stock at or about the time of the Merger (the Tower
Separation). As a result of the Tower Separation, ATS will cease to be a
subsidiary of, or otherwise be affiliated with ARS, and will thereafter
operate as an independent publicly held company. ARS and ATS will enter into
certain agreements pursuant to the Merger Agreement providing for, among other
things, the orderly separation of ARS and ATS, the transfer of lease
obligations to ATS of leased space on certain towers owned or leased by ARS to
ATS, and the allocation of certain tax liabilities between ARS and ATS. The
Tower Separation will result in a taxable gain to ARS, of which approximately
$20.0 million will be borne by ARS and the remaining obligation (currently
estimated at approximately $66.6 million) will be required to be paid by ATS
pursuant to provisions of the Merger Agreement. The estimated tax liability
shown in the preceding sentence is based on an assumed fair market value of
the ATS Common Stock of $10.00 per share, which is the price at which shares
were issued pursuant to the consummation of the transactions contemplated by
the ATS Stock Purchase Agreement. This liability is expected to be paid with
borrowings under ATS' loan agreement. (See Note 12).
To facilitate the Tower Separation, the Company's common stock will be
divided into three classes, A, B, and C, consistent with the capital structure
of ARS. Each holder of ARS stock will receive a share of ATS stock with the
same designation and rights and privileges as the related ARS share. (See Note
12).
Prior to the Tower Separation, ARS intends to increase its overall
investment in ATS to approximately $150.0 million, contribute tower properties
with a net book value of approximately $4.2 million and ATS intends to sell
shares of common stock for an aggregate purchase price of approximately $80.0
million to certain of the stockholders of ARS, of which approximately $50.0
million will be issued in exchange for promissory notes, secured by ARS Common
Stock. In addition, following the Merger, ATS will assume ARS' lease
obligation with respect to ARS' corporate headquarters in Boston,
Massachusetts and certain senior executives of ARS will become employees of
ATS. Future lease payments required under the lease agreement assumed
aggregate approximately $1.6 million through July 2006. (See Note 12).
The Merger has been approved by the stockholders of ARS who hold sufficient
voting power to approve such action. Consummation of the Merger is subject to,
among other things, the expiration or earlier termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (HSR Act)
F-8
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
and the approval by the Federal Communications Commission (FCC) of the
transfer of control of ARS' FCC licenses with respect to its radio stations to
CBS. Subject to the satisfaction of such conditions, the Merger is expected to
be consummated in the spring of 1998.
Principles of Consolidation and Basis of Presentation--The accompanying
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Investments in affiliates, where ATS owns more than 20 percent of
the voting power of the affiliate but not in excess of 50 percent, are
accounted for using the equity method. Separate financial information
regarding equity method investees is not significant. The Company also
consolidates its 50.1% interest and its 70.0% interest in two other tower
communications limited liability companies, with the other members'
investments reflected as minority interest in subsidiaries in the accompanying
financial statements.
Through September 30, 1997, ATS effectively operated as a stand-alone
entity, with its own corporate staff and headquarters, and received minimal
assistance from personnel of the Parent. Accordingly, the accompanying
consolidated financial statements do not include any cost allocations from the
Parent. However, the consolidated financial statements may not reflect the
results of operations or financial position of ATS had it been an independent
public company during the periods presented.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates, and
such differences could be material to the financial statements.
Revenue Recognition--Tower and sublease revenues are recognized when earned.
Escalation clauses and other incentives present in lease agreements are
recognized on a straight-line basis over the term of the leases. Management
fee revenues are recognized when earned. Consulting revenues are recognized as
such services are provided. Amounts billed or received prior to services being
performed are deferred until such time as the revenue is earned.
Corporate General and Administrative Expense--Corporate general and
administrative expense consists of corporate overhead costs not specifically
allocable to any of the Company's individual business properties.
Concentration of Credit Risk--The Company extends credit to customers on an
unsecured basis in the normal course of business. The Company has policies
governing the extension of credit and collection of amounts due from
customers.
Derivative Financial Instruments--The Company uses derivative financial
instruments as a means of managing interest-rate risk associated with current
debt or anticipated debt transactions that have a high probability of being
executed. The Company's interest rate protection agreements generally consist
of interest rate swap agreements and interest rate cap agreements. These
instruments are matched with either fixed or variable rate debt and payments
thereon, are recorded on a settlement basis as an adjustment to interest
expense. Premiums paid to purchase interest rate cap agreements are amortized
as an adjustment of interest expense over the life of the contract. Derivative
financial instruments are not held for trading purposes. (See Note 4).
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposits and short-term investments with remaining maturities when
purchased of three months or less.
Property and Equipment and Intangible Assets--Property and equipment are
recorded at cost, or at estimated fair value in the case of acquired
properties. Cost includes expenditures for communications sites and related
assets and the net amount of interest cost associated with significant capital
additions. Approximately
F-9
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
$258,000 and $120,000 of interest was capitalized for the nine months ended
September 30, 1997 and the year ended December 31, 1996, respectively.
Depreciation is provided using the straight-line method over estimated useful
lives ranging from three to fifteen years.
The excess of purchase price over the estimated fair value of net assets
acquired has been preliminarily recorded as unallocated purchase price and is
being amortized over an estimated aggregate useful life of fifteen years using
the straight-line method. Accumulated amortization aggregated approximately
$2,025,000 at September 30, 1997 and $356,000 at December 31, 1996. The
consolidated financial statements reflect the preliminary allocation of
certain purchase prices as the appraisals for some acquisitions have not yet
been finalized. The Company is currently conducting studies to determine the
purchase price allocations and expects that upon final allocation the average
estimated useful life will approximate fifteen years. The final allocation of
purchase price is not expected to have a material effect on the Company's
results of operations, liquidity or financial position. Other intangible
assets consist principally of a noncompetition agreement, deferred financing
costs and deferred acquisition costs and are being amortized over their
estimated useful lives, generally five years. (See Note 3).
Note Receivable--In connection with an acquisition described in Note 11, the
Company agreed to advance the sellers an amount not to exceed $1,400,000 of
which an aggregate of approximately $260,000 was advanced. The advance bore
interest at 8.5%, was unsecured, and was due in full at the earlier of the
consummation of the acquisition or June 30, 2000. The note was repaid upon
consummation of the acquisition in October 1997.
Income Taxes--Deferred taxes are provided to reflect temporary differences
in basis between book and tax assets and liabilities, and net operating loss
carryforwards. Deferred tax assets and liabilities are measured using
currently enacted tax rates. ATS files as part of a consolidated filing group
with ARS; there are no significant differences between the tax provision or
benefit recorded and the amounts measured on a separate return basis. (See
Note 7).
Pro forma Loss Per Share--The pro forma loss per share for the nine months
ended September 30, 1997 and the year ended December 31, 1996 has been
computed using the number of ATS shares expected to be distributed to ARS
shareholders as part of the Tower Separation. (See Note 12).
Impairment of Long-Lived Assets--Recoverability of long-lived assets is
determined by periodically comparing the forecasted undiscounted net cash
flows of the operations to which the assets relate to the carrying amount,
including associated intangible assets of such operations. Through September
30, 1997, no impairments requiring adjustment have occurred.
Stock-Based Compensation--Compensation related to equity grants or awards to
employees is measured using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25. (See Note 8).
Fair Value of Financial Instruments--The Company believes that the carrying
value of all financial instruments, excluding the interest rate protection
agreements, is a reasonable estimate of fair value as of September 30, 1997
and December 31, 1996. The fair value of the interest rate protection
agreements are obtained from independent market quotes. These values represent
the amount the Company would receive or pay to terminate the agreements taking
into consideration current market interest rates. The Company would expect to
pay approximately $15,000 to settle these agreements at September 30, 1997.
(See Note 4).
Retirement Plan--Employees of the Company are eligible for participation in
a 401(k) plan sponsored by ARS, subject to certain minimum age and length-of-
employment requirements. Administrative expenses of the Plan are borne by ARS
and are not significant to ATS. Under the plan, the Company matches 30% of the
participants' contributions up to 5% of compensation. The Company contributed
approximately $10,800 and $6,000 for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively. The
F-10
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
Company's contributions for the nine months ended September 30, 1996 and for
the period from Incorporation to December 31, 1995 were not material.
Unaudited Interim Financial Information--In the opinion of management, the
financial statements and related footnote disclosures for the unaudited 1996
period presented include all adjustments necessary for a fair presentation in
accordance with generally accepted accounting principles, consisting solely of
normal recurring accruals and adjustments. The results of operations and cash
flows for the nine months ended September 30, 1997 and 1996 are not
necessarily indicative of results that would be expected for a full year.
Recent Accounting Pronouncements--In February 1997, the Financial Accounting
Standards Board (FASB) released Statement of Financial Accounting Standards
(FAS) No. 128, "Earnings Per Share" which ATS will adopt in the fourth quarter
of 1997.
In June 1997, the FASB released FAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information" (FAS 131). This pronouncement will be
effective in 1998. FAS 131 established standards for reporting information
about the operating segments in its annual report and interim reports. ATS
will adopt this statement in the first quarter of 1998.
Reclassifications--Certain reclassifications have been made to the 1995 and
1996 financial statements to conform with the 1997 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Land and improvements........................... $ 6,054,675 $ 4,081,011
Towers and buildings............................ 32,717,305 11,473,259
Technical equipment............................. 81,378 53,124
Transmitter equipment........................... 151,954 13,550
Office equipment, furniture, fixtures and other
equipment...................................... 811,438 317,025
Construction in progress-tower properties....... 5,636,007 4,276,410
----------- -----------
Total....................................... 45,452,757 20,214,379
Less accumulated depreciation and amortization.. (1,511,427) (504,856)
----------- -----------
Property and equipment, net..................... $43,941,330 $19,709,523
=========== ===========
</TABLE>
3. OTHER INTANGIBLE ASSETS
Other intangible assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Non-compete agreement............................. $5,530,000
Deferred financing costs.......................... 1,297,227 $1,255,474
Deferred acquisition costs........................ 917,208 93,965
---------- ----------
Total.......................................... 7,744,435 1,349,439
Less accumulated amortization..................... (364,598) (13,078)
---------- ----------
Other intangible assets, net...................... $7,379,837 $1,336,361
========== ==========
</TABLE>
F-11
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
4. FINANCING ARRANGEMENTS
Outstanding amounts under the Company's long-term financing arrangements
consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Loan Agreement.................................... $52,500,000 $2,500,000
Note payable--other............................... 1,490,207 1,557,701
Other obligations................................. 212,757 477,557
----------- ----------
Total............................................. 54,202,964 4,535,258
Less current portion.............................. (108,457) (117,362)
----------- ----------
Long-term debt.................................... $54,094,507 $4,417,896
=========== ==========
</TABLE>
Loan Agreements--In October 1997, ATSI entered into a new loan agreement
with a syndicate of banks (the Loan Agreement), which replaced the previously
existing credit agreement. All amounts outstanding under the previous
agreement were repaid with proceeds from the Loan Agreement; the following
discussion, with the exception of the information regarding interest rates and
availability under the agreements, is based on the terms and conditions of the
Loan Agreement. Collectively, the previous loan agreement and the 1997 loan
agreement are referred to as the Loan Agreements.
The Loan Agreement provides ATSI with a $250.0 million loan commitment based
on ATSI maintaining certain operational ratios, and an additional $150.0
million loan at the discretion of ATSI. The Loan Agreement may be borrowed,
repaid and reborrowed without reducing the availability until June 2005 except
as specified in the Loan agreement; thereafter, availability decreases in an
amount equal to 50% of excess cash flow, as defined in the Loan Agreement, for
the fiscal year immediately preceding the calculation date. In addition, the
Loan Agreement requires commitment reductions in the event of sale of ATSI's
common stock or debt instruments, and/or permitted asset sales, as defined in
the Loan Agreement.
Outstanding amounts under the Loan Agreements bear interest at either LIBOR
(5.72% as of September 30, 1997 and 5.78% as of December 31, 1996) plus 1.0%
to 2.25% or Base Rate, as defined in the Loan Agreements, plus 0.00% to 1.00%.
The spread over LIBOR and the Base Rate varies from time to time, depending
upon the Company's financial leverage. Under certain circumstances, the
Company may request that rates be fixed or capped. For the nine months ended
September 30, 1997 and year ended December 31, 1996 the weighted average
interest rate of the Loan Agreements was 7.23% and 8.75%, respectively.
There was $37.5 million, and $67.5 million available under the Loan
Agreements at September 30, 1997 and December 31, 1996, respectively. ATSI
pays quarterly commitment fees ranging from .375% to .50%, based on ATSI's
financial leverage and the aggregate unused portion of the aggregated
commitment. Commitment fees paid related to the Loan Agreements aggregated
approximately $196,000, and $24,000 for the nine months ended September 30,
1997 and year ended December 31, 1996, respectively.
The Loan Agreement contains certain financial and operational covenants and
other restrictions with which ATSI must comply, whether or not any borrowings
are outstanding, including among others, maintenance of certain financial
ratios, limitations on acquisitions, additional indebtedness and capital
expenditures, as well as restrictions on cash distributions unless certain
financial tests are met, and the use of borrowings. The obligations of ATSI
under the Loan Agreement are collateralized by a first priority security
interest in substantially all of the assets of ATSI. ATS has pledged all of
its stock to the banks as security for ATSI's obligations under the Loan
Agreement. The Loan Agreement is expected to be amended to provide for the
Tower Separation.
F-12
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
Following the closing of the Loan Agreement in October 1997, ATSI incurred
an extraordinary loss of approximately $1,156,000 (approximately $694,000 net
of the applicable income tax benefit) representing the write-off of deferred
financing fees associated with the previous agreement.
Derivative Positions--Under the terms of the Loan Agreement, ATSI is
required, under certain conditions, to enter into interest rate protection
agreements. There were no such agreements outstanding at December 31, 1996. As
of September 30, 1997, ATSI maintained a swap agreement, expiring in January
2001, under which the interest rate is fixed with respect to $7.3 million of
notional principal amount at approximately 6.4%. ATSI also maintained a cap
agreement, expiring in July 2000, under which the interest rate is fixed with
respect to $21.6 million of notional principal amount at approximately 9.5%.
ATSI's exposure under these agreements is limited to the impact of variable
interest rate fluctuations and the periodic settlement of amounts due under
these agreements if the other parties fail to perform.
Note Payable--Other--A limited liability company, which is under majority
control of the Company, has a note secured by the minority shareholder's
interest in the limited liability company. Interest rates under this note are
determined, at the option of the corporation, at either the Floating Rate (as
defined in the note agreement), the Federal Home Loan Bank of Boston rate plus
2.35% or the Treasury Fixed Rate plus 3%. As of September 30, 1997 and
December 31, 1996, the effective interest rate on borrowings under this note
was 8.02%. The note is payable in equal monthly principal payments with
interest through 2008.
Other Obligations--In connection with various acquisitions, the Company has
assumed certain long-term obligations of the acquired entities. These
obligations bear interest at rates ranging from 9% to 10% and are payable in
various monthly installments through 2007. Substantially all of these
obligations were repaid during 1997, with the remaining unpaid obligation
bearing interest at 9% and payable in monthly installments through 2007.
Future principal payments required under the Company's financing
arrangements at September 30, 1997 are approximately:
<TABLE>
<S> <C>
Period Ending:
Three months ending December 31, 1997........................... $ 26,000
Year ending December 31, 1998................................... 110,000
Year ending December 31, 1999................................... 119,000
Year ending December 31, 2000................................... 128,000
Year ending December 31, 2001................................... 137,000
Year ending December 31, 2002................................... 148,000
Thereafter...................................................... 53,535,000
-----------
Total......................................................... $54,203,000
===========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Lease Obligations--The Company leases space for its existing offices in
Florida and Virginia and space on various communications towers and land under
operating leases that expire over various terms. The Company also subleases
space on communications towers under substantially the same terms and
conditions, including cancellation rights, as those found in its own lease
contracts. Most leases allow cancellation at will or under certain technical
circumstances. Many of the leases also contain renewal options with specified
increases in lease payments upon exercise of the renewal option.
F-13
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
Future minimum rental payments under noncancelable leases in effect at
September 30, 1997 are approximately as follows:
<TABLE>
<S> <C>
Period Ending:
Three months ending December 31, 1997........................... $ 398,000
Year ending December 31, 1998................................... 1,557,000
Year ending December 31, 1999................................... 1,450,000
Year ending December 31, 2000................................... 1,248,000
Year ending December 31, 2001................................... 908,000
Year ending December 31, 2002................................... 603,000
Thereafter...................................................... 5,595,000
-----------
Total......................................................... $11,759,000
===========
</TABLE>
Aggregate rent expense under operating leases for the nine months ended
September 30, 1997 and 1996, and the years ended December 31, 1996 and 1995
approximated $945,000, $78,000, $420,000, and $5,000, respectively.
Customer Leases--As described in Note 1, the Company leases space on its
various tower properties (both owned and managed) to customers. Leases are
typically for set periods of time, although some leases are cancellable at the
customers' option and others are automatically renewed and have no fixed term.
Long-term leases typically contain provisions for renewals and specified rent
increases over the lease term.
Future minimum rental receipts expected to be received from customers under
noncancelable lease agreements in effect at September 30, 1997 are
approximately as follows:
<TABLE>
<S> <C>
Period Ending:
Three months ending December 31, 1997........................... $ 3,277,000
Year ending December 31, 1998................................... 8,257,000
Year ending December 31, 1999................................... 7,288,000
Year ending December 31, 2000................................... 6,515,000
Year ending December 31, 2001................................... 5,492,000
Year ending December 31, 2002................................... 3,399,000
Thereafter...................................................... 11,157,000
-----------
Total......................................................... $45,385,000
===========
</TABLE>
See Notes 9, 11 and 12 for information with respect to acquisition and
related commitments.
Litigation--ATS periodically becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of management, there are
no matters currently pending which would, in the event of adverse outcome,
have a material impact on the Company's consolidated financial position, the
results of operations or liquidity.
6. RELATED PARTY TRANSACTIONS
The Company received revenues of approximately $255,000 and $70,000 from ARS
for tower rentals at Company-owned sites for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively.
ARS has contributed all of the Company's capitalization and had funded,
through December 1996, substantially all of the acquisitions described in Note
9.
F-14
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
During January 1996, ARS contributed a tract of undeveloped land of
approximately two acres to the Company. The transfer was recorded at ARS' book
value of approximately $425,000.
In March 1996, ARS contributed approximately 200 acres of undeveloped land
to the Company. The transfer was recorded at ARS' book value of approximately
$2.3 million.
In November 1996, the Company transferred a tract of land to ARS. The
transfer was recorded at ATS' book value of approximately $1.1 million.
In December 1996, ARS contributed a tower site and related assets in
Peabody, Massachusetts to the Company at ARS' book value, which aggregated
approximately $1.1 million.
In December 1996, ARS contributed a tower site and related assets located in
Philadelphia, Pennsylvania, to the Company. These assets were contributed at
their initial estimated fair value of approximately $1.5 million, based on a
preliminary appraisal. In June 1997, the fair value of the tower site and
related assets was determined to be approximately $775,000 based on a final
independent appraisal. The net book value and contributions from parent
balance was adjusted by approximately $725,000 to reflect the change in
estimate. This change in estimate did not have a material effect on the
consolidated financial position or the results of operations of ATS.
7. INCOME TAXES
Effective October 15, 1996, the Company entered into a tax sharing agreement
with ARS. In accordance with this agreement, the Company's share of the
consolidated federal income tax benefit (liability) is calculated as a portion
of ARS' consolidated income tax benefit (liability). Any income tax benefit
(provision) attributable to the Company is payable to (due from) ARS. The
Company's reported provision or benefit is not significantly different from
what would have been recorded on a separate return basis.
The income tax benefit (provision) was comprised of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, PERIOD ENDED DECEMBER 31,
-------------------- -------------------------
1997 1996 1996 1995
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Current:
Federal................ $ 319,922 $ 130,914 $ 53,907 $ 62,503
State.................. 93,429 23,103 9,418 10,921
Deferred:
Federal................ (310,196) (182,738) (92,547)
State.................. (54,116) (40,587) (16,168)
--------- --------- ------------- ------------
Income tax benefit (pro-
vision)................. $ 49,039 $ (69,308) $ (45,390) $ 73,424
========= ========= ============= ============
</TABLE>
A reconciliation between the U.S. statutory rate and the effective rate was
as follows for the periods presented:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED PERIOD ENDED
SEPTEMBER 30, DECEMBER 31,
---------------- ----------------
1997 1996 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Statutory tax rate................... (34)% (34)% (34)% (34)%
State taxes, net of federal benefit.. (6) (6) (6) (6)
Nondeductible intangible amortiza-
tion................................ 34 58 57
Other................................ 1
------ ------ ------ ------
Effective tax rate................... (6)% 18 % 18 % (40)%
====== ====== ====== ======
</TABLE>
F-15
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
Significant components of the Company's deferred tax assets and liabilities
were composed of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets:
Allowances for financial reporting purposes
which are currently nondeductible............. $ 440,522
Net operating loss carryforwards............... $ 2,071
Valuation allowances........................... (2,071)
Liabilities:
Property and equipment and intangible assets... (939,661) (168,125)
Partnership investments........................ (77,648)
Long-term rental agreements.................... (144,391) (33,445)
--------- ---------
Net deferred tax liabilities.................... $(643,530) $(279,218)
========= =========
</TABLE>
8. STOCKHOLDER'S EQUITY
Stock Option Plan--ATSI has a stock option plan which provides for the
granting of options to employees to acquire up to 1,000,000 shares of the
common stock of ATSI. These options are expected to be converted into options
to acquire stock of ATS, as part of the Tower Separation. Exercise prices in
the case of incentive stock options are not less than the fair value of the
underlying common stock on the date of grant. Exercise prices in the case of
non-qualified stock options are set at the discretion of the Board of
Directors. Options vest ratably over various periods, generally five years,
commencing one year from the date of grant. There have been no option grants
at exercise prices different from fair value.
The following table summarizes the option activity for the periods
presented:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE NUMBER AVERAGE
PRICE CURRENTLY REMAINING
OPTIONS PER SHARE EXERCISABLE LIFE (YEARS)
------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Granted during 1996 and
outstanding at December 31,
1996....................... 550,000 $5.00 160,000 8.91
Granted..................... 167,000 $7.50-$8.00 9.47
Cancelled................... (40,000) $5.00
------- ----------- ------- ----
Outstanding as of September
30, 1997................... 677,000 160,000 9.09
======= ======= ====
</TABLE>
As described in Note 1, the intrinsic value method is used to determine
compensation associated with stock option grants. No compensation cost has
been recognized to date for grants under the Plan. Had compensation cost for
the Company's stock option plan been determined based on the fair value of the
grant date for awards in 1996 and 1997 consistent with the provisions of SFAS
123, the Company's net loss would have been approximately $882,000 for the
nine months ended September 30, 1997 and approximately $568,000 for the year
ended December 31, 1996.
The "fair value" of each option grant is estimated on the date of grant
using the minimum value method based on the following key assumptions: risk-
free interest rate of 6.53% and expected lives of 5 years. In accordance with
the provisions of SFAS 123, since the Company's stock is not publicly traded,
expected volatility in stock price has been omitted in determining the fair
value for options granted.
F-16
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
In November 1997, ATS instituted the 1997 Stock Option Plan which provides
for the granting of options to employees to acquire up to 10,000,000 shares of
ATS Class A and Class B Common Stock. The Plan is expected to be amended in
connection with the ATC Merger, described in Note 12, to limit future grants
to Class A Common Stock.
9. ACQUISITIONS
1997 Acquisitions--
In September 1997, the Company acquired nine tower sites in Massachusetts
and Rhode Island for approximately $7.2 million and land in Oklahoma for
approximately $0.6 million.
In August 1997, the Company acquired six tower sites in Connecticut and
Rhode Island for approximately $1.5 million.
In July 1997, the Company, in individual transactions, acquired the
following:
(i) the assets of three affiliated entities which owned and operated
approximately fifty towers and a tower site management business in
southern California for an aggregate purchase price of
approximately $33.5 million;
(ii) the assets of one tower site in Washington, D.C. for
approximately $0.9 million;
(iii) the assets of six tower sites in Pennsylvania for approximately
$0.3 million and
(iv) the rights to build five tower sites in Maryland for
approximately $0.5 million.
In May 1997, the Company acquired 21 tower sites and a tower site management
business in Georgia, North Carolina and South Carolina for approximately $5.4
million. The agreement also provides for additional payments by the Company if
the seller is able to arrange for the purchase or management of tower sites
presently owned by an unaffiliated public utility in South Carolina, which
payments could aggregate up to approximately $1.2 million.
In May 1997, the Company acquired the assets of two affiliated companies
engaged in the site acquisition business in various locations in the United
States for approximately $13.0 million.
In May 1997, the Company and an unaffiliated party formed a limited
liability company to own and operate communication towers which will be
constructed on over 50 tower sites in northern California. The Company
advanced approximately $0.8 million to this entity and currently owns a 70%
interest in the entity, with the remaining 30% owned by an unaffiliated party.
The Company is obligated to provide additional financing for the construction
of these and any additional towers it may approve; the obligation for such 50
tower sites is estimated to be approximately $5.3 million. The accounts of the
limited liability company are included in the consolidated financial
statements with the other party's investment reflected as minority interest in
subsidiary.
In May 1997, the Company acquired three tower sites in Massachusetts for
approximately $0.26 million.
1996 Acquisitions--
In February 1996, the Company acquired Skyline Communications and Skyline
Antenna Management in exchange for an aggregate of 26,989 shares of ARS Class
A common stock, having a fair value of approximately $774,000, $2.2 million in
cash, and the assumption of approximately $300,000 of long-term debt which was
paid at closing. Skyline Communications owned eight towers, six of which are
in West Virginia and the remaining two in northern Virginia. Skyline Antenna
Management managed more than 200 antenna sites, primarily in the northeast
region of the United States.
F-17
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
In April 1996, the Company acquired BDS Communications, Inc. and BRIDAN
Communications Corporation for 257,495 shares of ARS Class A common stock
having a fair value of approximately $7.4 million and $1.9 million in cash of
which approximately $1.5 million was paid at closing. BDS Communications owned
three towers in Pennsylvania and BRIDAN Communications managed or had sublease
agreements on approximately forty tower sites located throughout the mid-
Atlantic region.
In July 1996, the Company entered into a limited liability corporation
agreement with an unaffiliated party relating to the ownership and operation
of a tower site in Needham, Massachusetts, whereby the Company acquired a
50.1% interest in the corporation for approximately $3.8 million in cash. The
accounts of the limited liability corporation are included in the consolidated
financial statements with the other party's investment reflected as minority
interest in subsidiary.
In October 1996, the Company acquired the assets of tower sites in Hampton,
Virginia and North Stonington, Connecticut for approximately $1.4 million and
$1.0 million in cash, respectively.
Substantially all of the 1996 acquisitions were consummated by ARS and the
net assets were subsequently contributed to the Company. The following
schedule summarizes the above-described 1996 acquisitions:
<TABLE>
<CAPTION>
BDS/
SKYLINE BRIDAN NEEDHAM HAMPTON STONINGTON TOTAL
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash paid by Parent..... $2,453,761 $1,906,629 $3,843,559 $1,368,791 $1,008,712 $10,581,452
Stock issued by Parent.. 773,505 7,379,807 8,153,312
Liabilities assumed..... 519,637 100,000 1,600,000 2,219,637
---------- ---------- ---------- ---------- ---------- -----------
Purchase price of net
assets acquired........ $3,746,903 $9,386,436 $5,443,559 $1,368,791 $1,008,712 $20,954,401
========== ========== ========== ========== ========== ===========
</TABLE>
The acquisitions consummated during 1996 and 1997 have been accounted for by
the purchase method of accounting. The purchase price has been allocated to
the assets acquired, principally intangible and tangible assets, and the
liabilities assumed based on their estimated fair values at the date of
acquisition. The excess of purchase price over the estimated fair value of the
net assets acquired has been recorded as unallocated purchase price. The
financial statements reflect the preliminary allocation of certain purchase
prices as the appraisals of the assets acquired have not been finalized. The
Company does not expect any changes in depreciation and amortization as a
result of such appraisals to be material to the statement of operations.
Unaudited Pro Forma Operating Results--The operating results of these
acquisitions have been included in the Company's consolidated results of
operations from the date of acquisition. The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
had occurred as of January 1, 1996 after giving effect to certain adjustments,
including depreciation and amortization of assets and interest expense on debt
incurred to fund the acquisitions. These unaudited pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made as of January 1, 1996
or results which may occur in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
------------------------ DECEMBER 31,
1997 1996 1996
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues......................... $12,877,000 $ 9,875,000 $13,530,000
Loss from operations................. (983,000) (2,827,000) (3,744,000)
Net loss............................. (4,077,000) (6,743,000) (9,266,000)
</TABLE>
F-18
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
10. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and noncash investing and financing
activities are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
----------------------- DECEMBER 31,
1997 1996 1996
---------- ----------- ------------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the period for
interest (including amounts
capitalized).......................... $1,002,387 $ 51,267 $ 90,539
Cash paid during the period for income
taxes................................. 67,616
Noncash investing and financing activi-
ties:
Property and equipment transferred from
(to) Parent........................... (725,000) 6,524,518 11,103,352
Land transferred to Parent............. (1,100,000)
Deferred financing costs paid by Par-
ent................................... 1,255,474
Investment in affiliate paid by Par-
ent................................... 325,000
Details of acquisitions financed by Par-
ent:
Purchase price of net assets acquired.. 18,576,298 20,954,401
Liabilities assumed.................... (2,219,637) (2,219,637)
Stock issued by Parent................. (8,153,312) (8,153,312)
----------- -----------
Cash paid by Parent.................... 8,203,949 10,581,452
Less: cash acquired.................... (1,600,000) (1,600,000)
----------- -----------
Net cash paid by Parent for acquisi-
tions................................. $ 6,603,949 $ 8,981,452
=========== ===========
</TABLE>
11. SUBSEQUENT EVENTS
Pending Transactions:
In October 1997, the Company entered into an agreement to acquire the
outstanding stock of a company operating in Florida (OPM-USA-INC. or OPM) for
a maximum purchase price of approximately $105.0 million. By December 31, 1997
such company is expected to own approximately ninety towers. The final
purchase price is contingent upon the actual number of towers that have been
built, and sites permitted and the actual cashflows generated from those
towers. The Company has also agreed to provide financing to the seller on
identified sites which are in various stages of receiving site permits to
enable the seller to construct additional towers; the aggregate amount of such
financing cannot exceed $37.0 million. (See Note 12).
In October 1997, the Company entered into an agreement to acquire a
communications site with six towers in Tucson, Arizona for approximately $12.0
million. (See Note 12).
Consummation of these transactions is conditioned on various matters,
including, in the case of the OPM transaction, the expiration or earlier
termination of the HSR Act waiting period. Subject to the satisfaction of such
conditions, the acquisitions are expected to be consummated in the first
quarter of 1998.
The Company is also pursuing the acquisitions of tower properties and tower
businesses in new and existing locations, although there are no definitive
purchase agreements with respect thereto. (See Note 12).
Consummated Transactions:
In October 1997, the Company acquired two affiliated entities operating
approximately 110 tower sites and a tower site management business located
principally in northern California for approximately $45.0 million. In
F-19
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
connection therewith, the Company had also agreed to loan up to $0.65 million
to the sellers on an unsecured basis, of which approximately $0.26 million had
been advanced through September 30, 1997 and was re-paid at closing.
In October 1997, the Company acquired tower sites and certain video, voice
and data transport operations for approximately $70.25 million. The acquired
business owned or leased approximately 128 tower sites, principally in the
Mid-Atlantic region, with the remainder in California and Texas.
12. EVENTS SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT (UNAUDITED)
Authorized Shares:
In November 1997, the Company restated its certificate of incorporation to
increase the aggregate number of shares of all classes of stock which it is
authorized to issue to 280,000,000 shares as follows: 20,000,000 shares of
preferred stock $.01 par value per share, 260,000,000 shares of common stock
$.01 par value per share, of which 200,000,000 is Class A, 50,000,000 is Class
B and 10,000,000 is Class C.
Consummated Transactions:
In November 1997, the Company entered into an agreement to acquire all of
the outstanding stock of a company based in Atlanta, Georgia for an aggregate
purchase price of approximately $80.0 million consisting of approximately
$32.0 million in cash and assumed liabilities and the issuance of
approximately 5.3 million shares of ATS Class A common stock. The company
acquired is engaged in site acquisition, development, construction and
facility management of wireless network communication facilities on behalf of
its customers and owns or has under construction approximately 40 tower sites.
Consummation of the transaction occurred in January 1998. Following
consummation, the Company granted options to acquire up to 1,200,000 shares of
Class A Common Stock at an exercise price of $13 to employees of the acquired
company.
In December 1997, the Company entered into a merger agreement with American
Tower Corporation (ATC) pursuant to which ATC will merge with and into ATS
which will be the surviving corporation. Pursuant to the merger, ATS expects
to issue an aggregate of approximately 31.1 million shares of ATS class A
common stock (including shares issuable upon exercise of options to acquire
ATC common stock which will become options to acquire ATS class A common
stock). ATC is engaged in the business of acquiring, developing, and leasing
wireless communications sites to companies using or providing cellular
telephone, paging, microwave and specialized mobile radio services. ATC
currently owns and operates approximately 775 communications towers located in
31 states primarily in the Western, Eastern and Southern United States.
Consummation of the transaction is subject to, among other things, the
expiration or earlier termination of the HSR Act waiting period, and is
expected to occur in the spring of 1998.
In January 1998, ATS consummated the acquisition of OPM, a company which
owned approximately 90 towers at the time of acquisition. In addition, OPM is
in the process of developing an additional approximately 160 towers that are
expected to be constructed during the next 12 to 18 months. The purchase
price, which is variable and based on the number of towers completed and the
forward cash flow of the completed OPM towers, could aggregate up to $105.0
million, of which approximately $21.3 million was paid at the closing. ATS has
also agreed to provide the financing to OPM to enable it to construct the 160
towers in an aggregate amount not to exceed $37.0 million (less advances as of
consummation aggregating approximately $5.7 million).
In January 1998, ATS consummated the purchase of a communications site with
six towers in Tucson, Arizona for approximately $12.0 million.
F-20
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
In January 1998, ARS transferred to ATS 14 of the 16 communications sites
currently used by ARS and various third parties, and ARS and ATS entered into
leases or subleases of space on the towers transferred. The remaining two
communications sites will be transferred and leases entered into following
acquisition by ARS of the sites from third parties.
In February 1998, ATS acquired 11 communications tower sites in northern
California for approximately $11.8 million.
Pending Transactions:
In January 1998, ATS entered into an agreement to purchase the assets
relating to a teleport serving the Washington, D.C. area for a purchase price
of approximately $30.5 million. The facility is located in northern Virginia,
inside of the Washington Beltway, on ten acres. Consummation of the
transaction, which is subject to certain conditions, including receipt of FCC
approvals and the expiration or earlier termination of the HSR Act waiting
period, is expected to occur in the first half of 1998.
ATS Stock Purchase Agreement:
On January 22, 1998, ATS consummated a stock purchase agreement (the ATS
Stock Purchase Agreement), dated as of January 8, 1998, with Steven B. Dodge,
Chairman of the Board, President and Chief Executive Officer of ARS and ATS,
and certain other officers and directors of ARS (or their affiliates or family
members or family trusts), pursuant to which those persons purchased 8.0
million shares of ATS Common Stock at a purchase price of $10.00 per share for
an aggregate purchase price of $80.0 million, including 4.0 million shares by
Mr. Dodge for $40.0 million. Payment of the purchase price was in the form of
cash aggregating approximately $30.6 million and in the form of notes
aggregating approximately $49.4 million due on the earlier of the consummation
of the Merger or, in the event the Merger Agreement is terminated, December
31, 2000. The notes bear interest at the six-month London Interbank Rate, from
time to time, plus 1.5% per annum, and are secured by shares of ARS Common
Stock having a fair market value of not less than 175% of the principal amount
of and accrued and unpaid interest on the note. The notes are prepayable at
any time at the option of the obligor and will be due and payable, at the
option of the Company, in the event of certain defaults as described herein.
Tower Separation:
Based on the $10.00 per share price paid pursuant to the ATS Stock Purchase
Agreement, the Tower Separation will result in a taxable gain to ARS, of which
approximately $20.0 million will be borne by ARS and the remaining obligation
(currently estimated at approximately $66.6 million) will be required to be
paid by ATS pursuant to provisions of the Merger Agreement. This liability is
expected to be paid with borrowings under ATS' loan agreement. The estimated
tax liability shown in the preceding sentence is based on an assumed fair
market value of the ATS Common Stock of $10.00 per share, which is the price
at which shares were issued pursuant to the consummation of the transactions
contemplated by the ATS Stock Purchase Agreement. Such estimated tax liability
would increase or decrease by approximately $14.8 million for each $1.00 per
share increase or decrease in the fair market value of the ATS Common Stock.
The Merger Agreement also provides for closing date balance sheet
adjustments based upon the working capital and specified debt levels
(including the liquidation preference of the ARS Cumulative Preferred Stock)
of ARS at the effective time of the Merger which may result in payments to be
made by either ARS or ATS to the other party following the closing date of the
Merger. ATS will benefit from or bear the cost of such adjustments. Since the
amounts of working capital and debt are dependent upon future operations and
events, including without limitation cash flow from operations, capital
expenditures, and expenses of the Merger and the Tower Separation, neither ARS
nor ATS is able to state with any degree of certainty what payments, if any,
will be owed following the closing date by either ARS or ATS to the other
party. However, based on certain assumptions, ARS has estimated that the
payment, if any, required to be paid or to be received by ATS will not be
material as a result of those provisions.
F-21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
MicroNet, Inc. and Affiliates and
American Tower Systems, Inc.
We have audited the accompanying combined statement of net assets of
MicroNet, Inc. and affiliates to be sold to American Tower Systems, Inc. (the
"Company") as of December 31, 1996, and the related combined statements of
income and cash flows derived from those assets for the year ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the net assets of MicroNet, Inc. and affiliates to be sold
to American Tower Systems, Inc. as of December 31, 1996, and the results of
operations related to those assets, and cash flows generated from those assets
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared from the
separate records maintained by the Company and may not be indicative of the
conditions that would have existed or the results of operations had the net
assets to be sold been operated as an unaffiliated company. Certain expenses
represent allocations made by the Company's Parent, and, as discussed in Note
A, no provision for income taxes has been made in the combined statement of
income derived from the net assets to be sold.
Pressman Ciocca Smith LLP
/S/ PRESSMAN CIOCCA SMITH LLP
Hatboro, Pennsylvania
November 3, 1997
F-22
<PAGE>
MICRONET, INC. AND AFFILIATES
COMBINED STATEMENTS OF NET ASSETS TO BE SOLD
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
1996 30, 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Prepaid expenses.................................. $ 301,942 $ 218,927
------------ ------------
Total Current Assets............................ 301,942 218,927
Property and Equipment.............................. 39,564,758 40,541,672
Less accumulated depreciation..................... (22,486,975) (24,537,837)
------------ ------------
17,077,783 16,003,835
Goodwill, net of amortization....................... 4,120,276 3,734,000
Intangible Assets, net of amortization.............. 902,227 717,272
Other Assets........................................ 183,087 167,341
------------ ------------
$ 22,585,315 $ 20,841,375
============ ============
LIABILITIES AND NET ASSETS TO BE SOLD
Current Liabilities
Customer service prepayments...................... $ 459,638 $ 447,910
------------ ------------
Total Current Liabilities....................... 459,638 447,910
Commitments and Contingencies
Net Assets To Be Sold............................... 22,125,677 20,393,465
------------ ------------
$ 22,585,315 $ 20,841,375
============ ============
</TABLE>
See accompanying notes.
F-23
<PAGE>
MICRONET, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME DERIVED FROM NET ASSETS TO BE SOLD
YEAR ENDED DECEMBER 31, 1996, AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER ------------------------
31, 1996 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net Revenues........................... $15,058,305 $10,367,871 $13,476,827
Operating Expenses
Service.............................. 5,955,270 4,366,311 4,802,939
Selling and marketing................ 488,857 316,721 262,962
General and administrative........... 3,422,581 2,665,724 2,833,965
Depreciation......................... 3,199,495 2,086,786 2,066,405
Amortization......................... 736,025 546,593 571,231
----------- ----------- -----------
13,802,228 9,982,135 10,537,502
----------- ----------- -----------
Operating Income....................... 1,256,077 385,736 2,939,325
Other Income--Net...................... 42,904 24,395 30,013
----------- ----------- -----------
Net Income Derived from Net Assets To
Be Sold............................... 1,298,981 410,131 2,969,338
Net Assets To Be Sold, Beginning of
Period................................ 22,563,349 22,563,349 22,125,677
Distributions To Parent................ (1,736,653) (348,471) (4,701,550)
----------- ----------- -----------
Net Assets To Be Sold, End of Period... $22,125,677 $22,625,009 $20,393,465
=========== =========== ===========
</TABLE>
See accompanying notes.
F-24
<PAGE>
MICRONET, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS DERIVED FROM NET ASSETS TO BE SOLD
YEAR ENDED DECEMBER 31, 1996, AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER ------------------------
31, 1996 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income derived from net assets to be
sold.................................. $ 1,298,981 $ 410,131 $ 2,969,338
Adjustments to reconcile income derived
from net assets to be sold to cash
provided by operating activities:
Depreciation and amortization........ 3,935,520 2,633,379 2,637,636
Loss (gain) on disposal of property
and equipment....................... (400) 643 12,063
Write off assets to net realizable
value............................... 65,313 -- --
Change in assets and liabilities:
Prepaid expenses................... (49,781) (1,104) 83,015
Other assets....................... 15,396 26,661 15,746
Customer service prepayments....... 149,642 123,594 (11,728)
----------- ----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES.. 5,414,671 3,193,304 5,706,070
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment..... (3,678,418) (2,844,833) (1,004,520)
Proceeds from sale of property......... 400 -- --
----------- ----------- -----------
CASH USED FOR INVESTING ACTIVITIES..... (3,678,018) (2,844,833) (1,004,520)
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS
BEFORE ADJUSTMENT..................... 1,736,653 348,471 4,701,550
ADJUSTMENT FOR NET ASSETS NOT SOLD..... (1,736,653) (348,471) (4,701,550)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes.
F-25
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
(INFORMATION AS OF SEPTEMBER 30, 1997, AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997, IS UNAUDITED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of MicroNet, Inc. and
affiliates (the "Company") is presented to assist in understanding its
combined financial statements. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the combined financial statements.
Basis of Presentation and Combination
The accompanying combined statements of net assets to be sold to American
Tower Systems, Inc. ("ATS") are intended to present the assets and liabilities
of the Company expected to be transferred to ATS (the "Net Assets") pursuant
to an asset purchase agreement between ATS and Suburban Cable TV Co. Inc.
("Suburban") and the income and cash flows derived from such assets and
liabilities. MicroNet is a wholly owned subsidiary of Suburban (the "Company's
Parent"), which is a wholly owned subsidiary of Lenfest Communications, Inc.
("LCI"). As of July 8, 1997, the Company agreed to sell substantially all of
the operating assets of its communication towers, satellite transmission and
microwave video and data signal transmission businesses to ATS for
approximately $70.25 million. The accompanying combined statements include 128
operating tower sites of the Company, including 28 tower sites operated by
Suburban and other cable TV operating subsidiaries of LCI. The transaction
closed as of October 31, 1997.
The combined financial statements include the accounts of MicroNet, Inc. and
those of all wholly owned subsidiaries, excluding the assets, liabilities and
results of operations of assets not sold to ATS. The combined financial
statements also include the assets, liabilities and results of operations of
the 28 tower sites included in the sale that are operated by Suburban and
other cable TV operating subsidiaries of LCI.
Business Activity and Concentrations of Credit Risk
The Company provides satellite and microwave transmission of video, voice
and data communications and tower site rental throughout the United States.
The Company grants credit to broadcast and cable networks and cellular and
paging companies throughout the nation. Consequently, the Company's ability to
collect the amounts due from customers is affected by economic fluctuations in
these industries.
Unaudited Interim Financial Information
The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited; however, in the
opinion of the management of the Company, all adjustments (consisting solely
of normal recurring adjustments) necessary for a fair presentation of the
combined financial statements on the same basis as the audited combined
financial statements for these interim periods have been made. The results for
the interim periods ended September 30, 1996 and 1997, are not necessarily
indicative of the results to be obtained for a full fiscal year.
Use of Estimates
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and
F-26
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results may differ from those estimates, and such differences could be
material to the combined financial statements.
Property and Equipment
Property and equipment are stated at cost. For acquired communication
networks and facilities, the purchase price has been allocated to net assets
on the basis of appraisal reports issued by an independent appraiser.
Depreciation is provided using the accelerated and straight-line methods of
depreciation for financial reporting purposes at rates based on estimated
useful lives ranging from 3 to 33 years.
Expenditures for renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
Capitalization of Costs
All costs properly attributable to capital items, including that portion of
employees' compensation allocable to installation, engineering, design,
construction and various other capital projects are capitalized.
Goodwill and Intangible Assets
Goodwill and intangible assets acquired in connection with the purchases of
communications networks and facilities have been valued at acquisition cost on
the basis of the allocation of the purchase price on a fair market value basis
to net assets as determined by an independent appraiser. Additions to these
assets are stated at cost. Intangible assets consist of FCC licenses,
organization costs and covenants not to compete. The intangible assets are
being amortized on the straight-line method over their legal or estimated
useful lives to a maximum of forty (40) years. Goodwill represents the cost of
an acquired partnership interest in excess of amounts allocated to specific
assets based on their fair market values. Goodwill is amortized on the
straight-line method over ten years. In accordance with Statement of Financial
Accounting Standards No. 121"Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", the Company assesses on
an on-going basis the recoverability of intangible assets based on estimates
of future undiscounted cash flows for the applicable business acquired
compared to net book value. If the future undiscounted cash flow estimate is
less than net book value, net book value is then reduced to the undiscounted
cash flow estimate. The Company also evaluates the amortization periods of
intangible assets to determine whether events or circumstances warrant revised
estimates of useful lives. As of September 30, 1997, management believes that
no revisions to the remaining useful lives or writedowns of deferred charges
are required.
Revenue Recognition
The Company bills certain customers in advance; however, revenue is
recognized as services are provided. Credit risk is managed by discontinuing
services to customers who are delinquent.
Income Taxes
The Company, as a participating subsidiary, joins in the filing of a
consolidated Federal tax return with LCI. Current and deferred Federal income
taxes are allocated among LCI and its consolidated subsidiaries based upon the
respective net income (loss) and timing differences of each company. The
Company files separate state tax returns. No provision for income taxes has
been made in the combined financial statements. Deferred tax assets and
liabilities are excluded from net assets to be sold.
F-27
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
Fair Value of Financial Instruments
The Company believes that the carrying value of all financial instruments is
a reasonable estimate of fair value at December 31, 1996 and September 30,
1997.
NOTE B--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
ATS did not assume any debt of the Company. There is no interest expense
paid reflected in the accompanying financial statements. The Company did not
make any income tax payments to LCI.
In 1996, the Company wrote down $65,313 of property and equipment to net
realizable value. (See Note C).
NOTE C--PROPERTY AND EQUIPMENT
The schedule of property and equipment at December 31, 1996 and September
30, 1997, is as follows:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 31, SEPTEMBER USEFUL LIVES
1996 30, 1997 IN YEARS
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Land................................... $ 3,027,303 $ 3,027,303
Building and improvements.............. 1,799,553 1,812,512 15-33
Computer equipment..................... 291,002 299,976 5
Furniture, fixtures and office
equipment............................. 616,678 619,028 7
Tower, head-end equipment and microwave
equipment............................. 32,289,707 33,239,792 7-15
Land improvements...................... 188,195 205,537 7-15
Leasehold improvements................. 278,430 278,430 5-15
Radio equipment........................ 9,360 9,360 5-7
Test equipment......................... 584,458 588,305 7
Vehicles............................... 480,072 461,429 3-5
------------ ------------
$ 39,564,758 $ 40,541,672
============ ============
</TABLE>
During 1996, the Company recognized an impairment loss in connection with a
failed project to rebuild a tower. The township denied the Company's request
to tear-down and rebuild a larger tower on an existing tower site. Legal and
engineering costs associated with the project in the amount of $65,313,
previously capitalized, were written off. This impairment loss is included in
general and administrative expenses in the 1996 combined statement of income.
NOTE D--GOODWILL
The excess of the purchase price paid over the acquired net assets has been
allocated to goodwill. Accumulated amortization at December 31, 1996 and
September 30, 1997, was $1,030,069 and $1,416,345, respectively.
F-28
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE E--INTANGIBLE ASSETS
A schedule of intangible assets and accumulated amortization at December 31,
1996 and September 30, 1997, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------
ACCUMULATED
DESCRIPTION AMOUNT AMORTIZATION NET
----------- ----------- ------------ ---------
<S> <C> <C> <C>
FCC licenses............................ $ 326,163 $ 49,238 $ 276,925
Organization costs and covenants not to
compete................................ 1,928,336 1,303,034 625,302
----------- ----------- ---------
$ 2,254,499 $ 1,352,272 $ 902,227
=========== =========== =========
<CAPTION>
SEPTEMBER 30, 1997 (UNAUDITED)
----------------------------------
ACCUMULATED
DESCRIPTION AMOUNT AMORTIZATION NET
----------- ----------- ------------ ---------
<S> <C> <C> <C>
FCC licenses............................ $ 326,163 $ 55,626 $ 270,537
Organization costs and covenants not to
compete................................ 1,941,800 1,495,065 446,735
----------- ----------- ---------
$ 2,267,963 $ 1,550,691 $ 717,272
=========== =========== =========
</TABLE>
NOTE F--LEASES
The Company leases office space from an individual who is a shareholder,
chairman of the board and chief executive officer of LCI. The lease began on
May 24, 1990, and is classified as an operating lease. The initial lease term
assumed by ATS expires October 31, 1998.
Future minimum lease payments under all non-cancelable operating leases with
initial terms of one year or more consisted of the following at December 31,
1996:
<TABLE>
<CAPTION>
RELATED
YEAR ENDING DECEMBER 31, PARTY OTHER
------------------------ --------- -----------
<S> <C> <C>
1997............................................. $ 81,874 $ 901,084
1998............................................. 68,228 814,674
1999............................................. -- 674,389
2000............................................. -- 356,820
2001............................................. -- 296,001
Thereafter........................................ -- 870,036
--------- -----------
Total minimum lease payments....................... $ 150,102 $ 3,913,004
========= ===========
</TABLE>
Rental expense for all operating leases, principally head-end land and
building facilities, amounted to $1,149,855 for the year ended December 31,
1996 and $833,215 and $868,154 for the nine months ended September 30, 1996
and 1997, respectively. In addition, the Company made total payments to the
related party for office space of $81,874 for the year ended December 31,
1996, and $61,405 in each of the nine month periods ended September 30, 1996
and 1997.
In addition to fixed rentals, certain leases require payment of maintenance
and real estate taxes and contain escalation provisions based on future
adjustments in price indices. It is expected that, in the normal course of
business, expiring leases will be renewed or replaced by leases on other
properties; thus, it is anticipated that future minimum operating lease
commitments will not be less than the amount shown for 1996.
F-29
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE G--LESSOR OPERATING LEASES
The Company is the lessor of tower and head-end equipment and microwave
equipment under operating leases expiring in various years through 2005. Rental
income from operating leases amounted to $5,909,260 for the year ended December
31, 1996, and $4,074,175 and $6,725,321 for the nine months ended September 30,
1996 and 1997, respectively.
Following is a summary of property held for lease at December 31, 1996 and
September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Tower, head-end equipment and microwave
equipment................................. $ 32,289,707 $ 33,239,792
Less accumulated depreciation.............. (20,271,612) (22,329,026)
------------ ------------
$ 12,018,095 $ 10,910,766
============ ============
</TABLE>
Minimum future rentals to be received on non-cancelable leases consisted of
the following as of December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997....................................................... $ 5,915,803
1998....................................................... 4,733,229
1999....................................................... 3,636,045
2000....................................................... 3,032,860
2001....................................................... 1,768,802
Thereafter.................................................. 550,001
------------
$ 19,636,740
============
</TABLE>
NOTE H--OTHER INCOME (EXPENSE)
The schedules of other income (expense) for the year ended December 31, 1996,
and nine months ended September 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, -------------------
1996 1996 1997
------------ -------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Interest income.......................... $ 42,504 $ 25,038 $ 42,076
Gain (loss) on disposal of property and
equipment............................... 400 (643) (12,063)
-------- -------- ---------
$ 42,904 $ 24,395 $ 30,013
======== ======== =========
</TABLE>
F-30
<PAGE>
MICRONET, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE I--EMPLOYEE HEALTH BENEFIT PLAN
As a subsidiary of LCI, the Company participates in the Lenfest Group
Employee Health Plan (a trust) in order to provide health insurance for its
employees. This trust is organized under Internal Revenue Code Section
501(c)(9)--Voluntary Employee Beneficiary Association (VEBA). Benefits are
prefunded by contributions from the Company and all other participating LCI
subsidiaries. Insurance expense is recognized as incurred. The Company does
not provide postretirement benefits to its employees. Therefore, Statement of
Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, does not have an impact on the
Company's financial statements.
NOTE J--401(K) PLAN
LCI provides a 401(k) retirement plan to the employees of its subsidiaries.
The Company, as an indirect wholly owned subsidiary, is entitled to
participate. The Company matches the entire amount contributed by an eligible
employee up to 5% of their salary, subject to regulatory limitations. For the
year ended December 31, 1996, the Company matched $112,033 of contributions.
For the nine months ended September 30, 1996 and 1997, the Company matched
$79,735 and $86,144, respectively.
NOTE K--RELATED PARTY TRANSACTIONS
The Company does business and generates revenue with subsidiaries of Tele-
Communications, Inc. (TCI) (a stockholder of LCI, through an indirect, wholly
owned subsidiary). The amount of revenues generated was $1,225,000 for the
year ended December 31, 1996, and $863,000 and $1,330,000 for the nine months
ended September 30, 1996 and 1997, respectively. An additional $69,000 and
$74,000 received from TCI was included in customer service prepayments as of
December 31, 1996 and September 30, 1997, respectively.
All services provided to related parties were at standard billing rates.
Certain management services are provided to the Company by Suburban. Such
services include legal, tax, treasury, risk management, benefits
administration and other support services. Included in selling, general and
administrative expenses for the year ended December 31, 1996, and the nine
months ended September 30, 1996 and 1997 were allocated expenses of $108,000,
$81,000 and $81,000, respectively, related to these services. Allocated
expenses are based on Suburban's estimate of expenses related to the services
provided to the Company in relation to those provided to other affiliates of
Suburban. Management believes that these allocations were made on a reasonable
basis. However, the allocations are not necessarily indicative of the level of
expenses that might have been incurred had the Company contracted directly
with third parties. Management has not made a study or any attempt to obtain
quotes from third parties to determine what the cost of obtaining such
services from third parties would have been. The fees and expenses charged by
Suburban are subject to change.
The Company entered into a lease agreement with a principal stockholder of
LCI (See Note F).
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Diablo
Communications, Inc. (A California
S Corporation):
We have audited the accompanying balance sheets of Diablo Communications,
Inc. (the "Company"), as of December 31, 1995 and 1996, and the related
statements of income, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1996, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
San Francisco, California
November 4, 1997
F-32
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................. $ 515,896 $ 708,434 $ 554,201
Accounts receivable:
Trade, net of allowance for doubt-
ful accounts of $10,000 at each
date.............................. 292,971 334,926 398,844
Affiliates......................... 440,532 560,813 1,231,952
Prepaid and other current assets..... 242,436 160,678 199,702
----------- ----------- ----------
Total current assets............. 1,491,835 1,764,851 2,384,699
PROPERTY AND EQUIPMENT, net............ 1,720,423 2,952,926 2,992,593
INVESTMENT IN AFFILIATE................ 4,158 10,053 7,757
DEPOSITS AND OTHER ASSETS.............. 224,338 182,984 293,617
----------- ----------- ----------
TOTAL.................................. $ 3,440,754 $ 4,910,814 $5,678,666
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................... $ 191,258 $ 246,579 $ 188,624
Accrued expenses..................... 164,211 232,691 178,000
Deferred revenue..................... 340,556 364,865 250,056
Current portion of long-term debt.... 303,045 420,875 505,129
----------- ----------- ----------
Total current liabilities........ 999,070 1,265,010 1,121,809
----------- ----------- ----------
LONG-TERM DEBT......................... 925,002 1,786,410 1,732,390
----------- ----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Common stock, no par value,
10,000,000 shares authorized,
202,000 shares issued and outstand-
ing................................. 3,465,242 3,465,242 3,465,242
Accumulated deficit.................. (1,948,560) (1,605,848) (640,775)
----------- ----------- ----------
Total stockholders' equity....... 1,516,682 1,859,394 2,824,467
----------- ----------- ----------
TOTAL.................................. $ 3,440,754 $ 4,910,814 $5,678,666
=========== =========== ==========
</TABLE>
See notes to financial statements.
F-33
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ----------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Tower revenues............ $5,925,022 $6,337,292 $4,778,569 $5,878,022
Sublease revenues--related
party.................... 414,000 365,500 253,500 337,940
Management fees--related
party.................... 96,968 97,513 70,531 80,621
Insurance proceeds........ -- 213,000 -- --
---------- ---------- ---------- ----------
Total revenues.......... 6,435,990 7,013,305 5,102,600 6,296,583
---------- ---------- ---------- ----------
OPERATING EXPENSES:
General and administra-
tive..................... 1,229,313 1,414,136 1,036,774 968,071
Depreciation and amortiza-
tion..................... 283,023 416,883 359,184 359,856
Rent expense.............. 1,875,527 2,039,302 1,512,615 1,829,720
Technical................. 1,422,267 1,618,722 1,144,103 1,244,912
Sales and promotional..... 433,443 530,447 393,685 430,846
---------- ---------- ---------- ----------
Total operating ex-
penses................. 5,243,573 6,019,490 4,446,361 4,833,405
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS...... 1,192,417 993,815 656,239 1,463,178
OTHER INCOME (EXPENSE),
NET........................ (120,388) (144,257) (90,335) 133,704
---------- ---------- ---------- ----------
NET INCOME.................. $1,072,029 $ 849,558 $ 565,904 $1,596,882
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-34
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------------
OUTSTANDING ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994.... 202,000 $3,465,242 $(1,689,475) $ 1,775,767
Cash and noncash
distributions to
stockholders............... (1,331,114) (1,331,114)
Net income.................. 1,072,029 1,072,029
------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1995.... 202,000 3,465,242 (1,948,560) 1,516,682
Cash distributions to stock-
holders.................... (506,846) (506,846)
Net income.................. 849,558 849,558
------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1996.... 202,000 3,465,242 (1,605,848) 1,859,394
Cash distributions to stock-
holders (unaudited)........ (631,809) (631,809)
Net income (unaudited)...... -- -- 1,596,882 1,596,882
------- ---------- ----------- -----------
BALANCE, SEPTEMBER 30, 1997
(unaudited).................. 202,000 $3,465,242 $ (640,775) $ 2,824,467
======= ========== =========== ===========
</TABLE>
See notes to financial statements.
F-35
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------- ----------------------
1995 1996 1996 1997
---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net income............. $1,072,029 $ 849,558 $ 565,904 $1,596,882
Adjustments to recon-
cile net income to net
cash provided by oper-
ating activities:
Depreciation and amor-
tization............. 283,023 416,883 359,184 359,856
Changes in assets and
liabilities:
Accounts receivable--
trade............... (163,273) (30,000) (213,355) (63,918)
Accounts receivable--
Affiliates.......... (244,175) (132,236) (74,543) (671,139)
Prepaid and other
current assets...... (178,370) 81,758 (16,395) (39,024)
Deposits and other
assets.............. (37,181) 22,778 65,703 (108,337)
Accounts payable and
accrued expenses.... 115,175 123,801 (265,136) (112,646)
Deferred revenue..... 67,287 24,309 69,329 (114,809)
---------- ----------- ---------- ----------
Net cash provided by
operating activi-
ties............... 914,515 1,356,851 490,691 846,865
---------- ----------- ---------- ----------
CASH FLOW FROM INVESTING
ACTIVITIES--Purchases
of property and
equipment.............. (948,781) (1,636,705) (1,219,152) (399,523)
---------- ----------- ---------- ----------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Long-term borrowings.. 500,000 1,250,000 1,250,000 217,075
Repayments of long-
term debt............ (50,469) (270,762) (192,775) (186,841)
Cash distributions to
stockholders......... (880,193) (506,846) (362,171) (631,809)
---------- ----------- ---------- ----------
Net cash provided by
(used in) financing
activities......... (430,662) 472,392 695,054 (601,575)
---------- ----------- ---------- ----------
NET INCREASE (DECREASE)
IN CASH................ (464,928) 192,538 (33,407) (154,233)
CASH, BEGINNING OF PERI-
OD..................... 980,824 515,896 515,896 708,434
---------- ----------- ---------- ----------
CASH, END OF PERIOD..... $ 515,896 $ 708,434 $ 482,489 $ 554,201
========== =========== ========== ==========
SUPPLEMENTAL INFORMA-
TION:
Cash paid for inter-
est.................. $ 92,384 $ 140,970 $ 91,988 $ 90,335
Noncash distribution
to stockholders...... 450,921 -- -- --
</TABLE>
See notes to financial statements.
F-36
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Corporate Structure--Diablo Communications, Inc. (the
"Company") is engaged in acquiring, developing and operating communications
towers, for use by radio operators as well as other communication related
businesses. As of December 31, 1996, the Company owned and/or operated 81
towers and rooftops throughout Northern California.
Sale of the Company--On October 9, 1997, substantially all of the Company's
assets were sold to American Tower Systems, Inc. ("ATS"). ATS also assumed the
Company's operating lease agreements and certain of the Company's liabilities
on that date. The sale price was approximately $40,000,000. Subsequent to the
sale, the Company changed its name and will pursue other business
opportunities as Tyris Corporation.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from these estimates.
Unaudited Interim Information--The financial information with respect to the
nine-month periods ended September 30, 1996 and 1997 is unaudited. In the
opinion of management, such information contains all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of such periods. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
Impairment of Long-Lived Assets--In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of ("FAS 121"). FAS 121 addresses the accounting for the
impairment of long-lived assets, certain intangibles and goodwill when events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The Company adopted this statement during 1996 and the
impact on the Company's results of operations, liquidity or financial position
was not material.
Property and Equipment--Property and equipment are recorded at cost.
Depreciation is provided using the double-declining method over estimated
useful lives ranging from 3 to 15 years.
Investment in Affiliate--The Company owns a 25% interest in New Loma
Communications, Inc. which is accounted for using the equity method of
accounting.
Revenue Recognition--Tower and sublease revenues are recognized when earned
over the lease terms. Management fee revenues are recognized when earned over
the terms of the management contracts. Deferred revenue represents advance
payments by customers where related revenue is recognized when services are
provided.
S Corporation Election--The accompanying financial statements do not include
any provision for federal or state income taxes since the Company is treated
as a partnership under Subchapter S of the Internal Revenue Code and under
similar state income tax provisions. Accordingly, income or loss is allocated
to the shareholders and included in their tax returns.
Retirement Plan--Employees of the Company are eligible for participation in
a 401-K plan managed by the Company, subject to certain minimum age and
length-of-employment requirements. Under the plan, the Company does not match
the participants' contributions.
F-37
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements................ $ 674,574 $1,017,949 $1,135,034
Towers............................... 533,175 1,342,178 1,543,206
Technical equipment.................. 387,451 508,212 510,097
Office equipment, furniture, fixtures
and other equipment................. 378,290 478,285 506,172
Construction in progress............. 209,592 473,163 631,241
---------- ---------- ----------
Total.............................. 2,183,082 3,819,787 4,325,750
Less accumulated depreciation and am-
ortization.......................... (462,659) (866,861) (1,333,157)
---------- ---------- ----------
Property and equipment, net.......... $1,720,423 $2,952,926 $2,992,593
========== ========== ==========
</TABLE>
Technical and office equipment include assets under capital leases of
$285,749, $285,749 and $288,698 at September 30, 1997, December 31, 1996 and
1995, respectively with related accumulated depreciation of $223,980, $199,588
and $167,065, respectively.
3. LONG-TERM DEBT
Outstanding amounts under the Company's financing arrangements consisted of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Advances on bank term loan ap-
proved up to $1,500,000, varying
interest rates at 9.44% to
9.85%............................ $1,250,000 $1,250,000
Notes payable to banks at interest
rates of prime plus 1.5%......... $ 858,333 658,333 525,000
Other notes payable to banks...... 212,107 202,302 419,377
Capital lease obligations......... 157,607 96,650 43,142
---------- ---------- ----------
Total........................... 1,228,047 2,207,285 2,237,519
Less scheduled current maturi-
ties............................. (303,045) (420,875) (505,129)
---------- ---------- ----------
Long-term debt.................... $ 925,002 $1,786,410 $1,732,390
========== ========== ==========
</TABLE>
In October 1997, the Company's long-term debt was either assumed by ATS or
repaid by the Company with proceeds from the sale of assets to ATS (see Note
1--"Sale of the Company").
F-38
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
4. COMMITMENTS AND CONTINGENCIES
The Company leases various technical and office equipment under capital
leases and certain office space and other real property under noncancelable
operating leases. Future minimum lease payments under these operating and
capital leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
Year ending December 31:
1997................................................ $ 662,260 $ 73,529
1998................................................ 613,607 31,161
1999................................................ 608,642
2000................................................ 567,817
2001................................................ 510,557
Thereafter.......................................... 2,808,872
---------- --------
Total............................................. $5,771,755 104,690
==========
Less interest portion................................... (8,040)
--------
Present value of minimum lease payments................. $ 96,650
========
</TABLE>
5. RELATED PARTY TRANSACTIONS
New Loma Communications, Inc., is a corporation in which the Company owns
25% of the outstanding capital stock.
Drake Industrial Park, Inc. and Diablo Communications of Southern
California, Inc. are corporations under common ownership as that of the
Company.
During the nine months ended September 30, 1996 and 1997 and the years ended
December 31, 1995 and 1996, the Company received income from New Loma
Communications, Inc., as follows:
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1995 1996 1996 1997
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sublease revenues........................ $414,000 $365,500 $253,500 $337,940
Management services...................... 96,968 97,513 70,531 80,621
-------- -------- -------- --------
Total.................................. $510,968 $463,013 $324,031 $418,561
======== ======== ======== ========
</TABLE>
The Company had the following accounts receivable from affiliates:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Diablo Communications of Southern Califor-
nia, Inc................................. $391,872 $517,400 $1,214,622
New Loma Communications................... 48,660 27,859 176
Drake Industrial Park, Inc................ 15,554 17,154
-------- -------- ----------
Total................................... $440,532 $560,813 $1,231,952
======== ======== ==========
</TABLE>
F-39
<PAGE>
DIABLO COMMUNICATIONS, INC.
(A CALIFORNIA S CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
6. SPIN-OFF OF SOUTHERN CALIFORNIA OPERATION--NONCASH DISTRIBUTION TO
STOCKHOLDERS
In order to establish a separate company under which to conduct Southern
California business, on September 1, 1995, all of the Company's Southern
California communication site leases, customer contracts, affiliated
receivables, communication site equipment, vehicles, vehicle obligations,
office lease and contracts, and office equipment were distributed to the
Company's stockholders at net book value according to their pro rata
ownership. The net book value of such distribution was $450,921.
The Company's 1995 statement of income includes a net loss from the Southern
California operations of $318,291 for the eight months ended August 31, 1995.
7. MT. DIABLO COMMUNICATION SITE DAMAGE
On December 12, 1995, a severe wind destroyed the tower at the Company's Mt.
Diablo communication facility. The Company received insurance proceeds
totalling approximately $434,000 in 1996. Of these proceeds, $126,000 was
capitalized in property and equipment, $213,000 was recorded as revenue and
$95,000 was recorded as a reduction of operating expenses.
8. FUTURE LEASE INCOME
The Company has long-term, non-cancelable agreements under operating leases
for license fee income. Future minimum annual lease income at December 31,
1996 is as follows:
<TABLE>
<S> <C>
Year ending December 31:
1997..................................................... $ 3,263,693
1998..................................................... 2,786,793
1999..................................................... 1,935,638
2000..................................................... 1,493,622
2001..................................................... 964,394
Thereafter............................................... 593,206
-----------
Total.................................................. $11,037,346
===========
</TABLE>
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Diablo Communications of Southern California, Inc.
We have audited the balance sheets of Diablo Communications of Southern
California, Inc. (a California S Corporation) (the "Company") as of December
31, 1995 and December 31, 1996 and the related statements of operations,
stockholders' equity and cash flows for the period from September 1, 1995
(inception) to December 31, 1995 and for the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit of the financial statements
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of Diablo Communications of
Southern California, Inc. as of December 31, 1995 and December 31, 1996, and
the results of its operations and its cash flows for the period from September
1, 1995 (inception) to December 31, 1995 and the year ended December 31, 1996
in conformity with generally accepted accounting principles.
As emphasized in Note 9 to the financial statements, during October 1997,
the Company sold substantially all of its assets to an outside party.
Rooney, Ida, Nolt & Ahern
/s/ ROONEY, IDA, NOLT & AHERN Certified Public Accountants
Oakland, California
February 7, 1997
October 9, 1997 as to note 9
to the financial statements
F-41
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
--------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................... $ 204,781 $ 61,043 $ 15,094
Accounts receivable, trade......... 7,591 27,245 12,914
Prepaid expenses................... 1,272 2,462 24,990
--------- ----------- -----------
Total current assets............. 213,644 90,750 52,998
--------- ----------- -----------
PROPERTY AND EQUIPMENT--net.......... 441,105 1,013,434 1,667,418
--------- ----------- -----------
OTHER ASSETS:
Prepaid expenses--net.............. 2,348 7,970 6,468
Deposits........................... 6,976 10,776 11,146
--------- ----------- -----------
Total other assets............... 9,324 18,746 17,614
--------- ----------- -----------
TOTAL................................ $ 664,073 $ 1,122,930 $ 1,738,030
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Notes and contracts payable........ $ 283,544 $ 310,522 $ 382,494
Accounts payable................... 148,438 447,232 1,242,179
Customer fees advanced............. 1,707 12,839 17,426
Accrued liabilities................ 5,419 16,023 11,634
--------- ----------- -----------
Total current liabilities........ 439,108 786,616 1,653,733
--------- ----------- -----------
LONG-TERM DEBT....................... 21,139 930,617 1,065,417
--------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, no par value,
10,000,000 shares authorized,
1,000,000 issued and outstanding.. 450,921 450,921 450,921
Accumulated deficit................ (247,095) (1,045,224) (1,432,041)
--------- ----------- -----------
Total stockholders' equity
(deficiency).................... 203,826 (594,303) (981,120)
--------- ----------- -----------
TOTAL................................ $ 664,073 $ 1,122,930 $ 1,738,030
========= =========== ===========
</TABLE>
See notes to financial statements.
F-42
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SEPTEMBER 1, NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------------
1995 1996 1996 1997
-------------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES............... $ 45,445 $ 408,555 $ 251,733 $ 660,195
OPERATING EXPENSES:
Operating expenses,
excluding depreciation
and amortization and
corporate general and
administrative
expenses................ 49,488 319,011 196,377 402,945
Depreciation and
amortization............ 8,459 29,405 22,123 32,886
Corporate general and
administrative.......... 226,528 776,063 604,853 500,014
--------- ---------- --------- ---------
Total operating
expenses.............. 284,475 1,124,479 823,353 935,845
--------- ---------- --------- ---------
OPERATING LOSS............. (239,030) (715,924) (571,620) (275,650)
--------- ---------- --------- ---------
OTHER INCOME (EXPENSES):
Interest expense......... (8,656) (85,911) (54,096) (113,643)
Interest income.......... 1,391 4,506 3,461 3,276
--------- ---------- --------- ---------
Total other income
(expenses)............ (7,265) (81,405) (50,635) (110,367)
--------- ---------- --------- ---------
LOSS FROM OPERATIONS BEFORE
INCOME TAXES.............. (246,295) (797,329) (622,255) (386,017)
INCOME TAX PROVISION....... 800 800 800 800
--------- ---------- --------- ---------
NET LOSS................... $(247,095) $ (798,129) $(623,055) $(386,817)
========= ========== ========= =========
</TABLE>
See notes to financial statements.
F-43
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK DEFICIT TOTAL
------------ ----------- ---------
<S> <C> <C> <C>
BALANCES, SEPTEMBER 1, 1995 (inception)... $450,921 $ -0- $ 450,921
Net loss................................ (247,095) (247,095)
-------- ----------- ---------
BALANCES, DECEMBER 31, 1995............... 450,921 (247,095) 203,826
Net loss................................ (798,129) (798,129)
-------- ----------- ---------
BALANCES, DECEMBER 31, 1996............... 450,921 (1,045,224) (594,303)
Net loss (unaudited).................... (386,817) (386,817)
-------- ----------- ---------
BALANCES, SEPTEMBER 30, 1997.............. $450,921 $(1,432,041) $(981,120)
======== =========== =========
</TABLE>
See notes to financial statements.
F-44
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 1 NINE MONTHS ENDED
(INCEPTION) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------------
1995 1996 1996 1997
-------------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss.................. $(247,095) $ (798,129) $(623,055) $(386,817)
--------- ---------- --------- ---------
Adjustments to reconcile
net loss to cash used by
operating activities:
Depreciation and
amortization............ 8,459 29,405 21,517 32,886
Changes in assets and
liabilities:
Accounts receivable.... (7,591) (19,654) (23,386) 14,331
Prepaid expenses....... (1,151) (1,190) (4,129) (22,528)
Deposits............... (4,096) (3,800) (3,800) (370)
Accounts payable and
accrued expenses...... 153,857 309,398 119,535 790,558
Customer fees
advanced.............. 1,707 11,132 (1,707) 4,587
--------- ---------- --------- ---------
Total adjustments........ 151,185 325,291 108,030 819,464
--------- ---------- --------- ---------
Cash provided (used) by
operating activities...... (95,910) (472,838) (515,025) 432,647
--------- ---------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Collection on note
receivable.............. 81,310
Purchase of property and
equipment............... (50,449) (599,856) (371,191) (685,368)
Organization costs....... (2,516)
Loan fees................ (7,500) (7,500)
--------- ---------- --------- ---------
Cash provided (used) by
investing activities...... 28,345 (607,356) (378,691) (685,368)
--------- ---------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from debt....... 275,000 1,000,000 750,000 248,751
Repayment of debt........ (2,654) (63,544) (47,523) (41,979)
--------- ---------- --------- ---------
Cash provided by financing
activities................ 272,346 936,456 702,477 206,772
--------- ---------- --------- ---------
INCREASE (DECREASE) IN
CASH...................... 204,781 (143,738) (191,239) (45,949)
CASH, BEGINNING OF PERIOD.. -0- 204,781 204,781 61,043
--------- ---------- --------- ---------
CASH, END OF PERIOD........ $ 204,781 $ 61,043 $ 13,542 $ 15,094
========= ========== ========= =========
</TABLE>
See notes to financial statements.
F-45
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of business:
The Company develops and operates telecommunications sites in Southern
California. The Company has a broad customer base which includes specialized
mobile radio companies, paging companies, cellular telephone providers,
broadcasters, emergency services, various private and governmental two-way
radio users, and other entities with wireless communications needs.
Revenues are generated primarily from individual license agreements which
entitle a customer to use an antenna system or antenna tower space, and to use
on-site space in a climate controlled building for their transmitters,
receivers, and related equipment.
For most of its sites, the Company holds a long-term lease interest. As a
recognized full service site manager, the Company also manages sites for
outside site owners.
Allowances for doubtful accounts:
The Company uses the allowance method for accounting for bad debts. An
allowance for bad debts has not been provided currently since the Company's
bad debt experience indicates that the amount would not be material.
Leases:
Leases meeting certain criteria are treated as capital leases requiring
related assets and lease obligations to be recorded at their present value in
the financial statements. Other leases, not qualifying under these criteria,
are treated as operating leases for which rentals are charged to expense.
S Corporation election:
The Company has elected, by unanimous consent of its stockholders, to have
its income taxed directly to the stockholders. Accordingly, provision for
income taxes, except for an $800 minimum state franchise taxes, has not been
made. Deferred income taxes have not been recorded because such amounts are
immaterial.
Property and equipment:
Property and equipment are recorded at cost and depreciation is computed
using a combination of straight-line and accelerated methods of accounting
over useful lives of 5 to 15 years.
Organization costs and loan fees:
Organization costs and loan fees are amortized using the straight-line
method of accounting over 5 years.
Unaudited interim financial information:
In the opinion of management, the financial statements for the unaudited
periods presented include all adjustments necessary for a fair presentation in
accordance with generally accepted accounting principles, consisting solely of
normal recurring accruals and adjustments. The results of operations and cash
flows for the nine months ended September 30, 1996 and September 30, 1997 are
not necessarily indicative of results which would be expected for a full year.
F-46
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of disclosures. Accordingly,
actual results could differ from those estimates.
Concentration of Credit Risk:
The Company extends credit to customers on an unsecured basis in the normal
course of business. No individual customer is significant to the Company's
customer base. The Company has policies governing the extension of credit and
collection of amounts due from customers.
Recognition of Revenues:
Tower and sublease revenues are recognized when earned over the lease terms.
Management fee revenues are recognized when earned over the terms of the
management contracts.
Corporate general and administrative expenses:
Corporate general and administrative expenses consists of corporate overhead
costs not specifically allocable to any of the Company's direct operating
profit centers.
Impairment of long-lived assets:
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of ", the company assesses on an on-going basis the
recoverability of intangible assets based on estimates of future undiscounted
cash flows for the applicable business acquired compared to net book value. If
the future undiscounted cash flow estimate is less than net book value, net
book value is then reduced to the undiscounted cash flow estimate. The Company
also evaluates the amortization periods of intangible assets to determine
whether events or circumstances warrant revised estimates of useful lives. As
of September 30, 1997, management believes that no revisions to the remaining
useful lives or writedowns of deferred charges are required.
Fair value of financial instruments:
The Company believes that the carrying value of all financial instruments is
a reasonable estimate of fair value as of December 31, 1996 and September 30,
1997.
Retirement plan:
Employees of the Company, through its affiliate Diablo Communications, Inc.,
are eligible for participation in a 401(k) plan, subject to certain minimum
age and length-of-employment requirements. The plan does not provide for any
Company contributions.
Supplemental cash flow information:
For financial statement purposes of the statements of cash flows, the
Company issued capital stock in exchange for $450,921 in net assets, primarily
property and equipment on September 1, 1995.
Cash payments for interest approximated $8,656, $71,256, $50,653 and
$116,663 for period September 1, 1995 to December 31, 1995, for the year ended
December 31, 1996 and the nine months ended September 30, 1996 and 1997,
respectively.
F-47
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash payments for income taxes was $800 for the period September 1, 1995 to
December 31, 1995, for the year ended December 31, 1996 and the nine months
ended September 30, 1996 and 1997, respectively.
NOTE 2. COMPANY ORGANIZATION:
In order to establish a separate company under which to conduct business in
Southern California, on September 1, 1995, Diablo Communications, Inc.
distributed all of its Southern California communication site leases, customer
contracts, affiliated receivables, communication site equipment, vehicles,
vehicle obligations, office lease and contracts, and office equipment to its
stockholders according to their pro rata ownership. The stockholders then
contributed these assets in exchange for 1,000,000 shares of capital stock.
The net value of this contribution was $450,921.
NOTE 3. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1996 1997
-------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land improvements.......................... $ 8,276 $ 48,770 $ 48,770
Towers and wiring.......................... 6,261 31,815 205,269
Equipment.................................. 19,190 26,477 26,477
Office furniture and equipment............. 27,729 27,729 27,729
Computers and software..................... 23,718 24,746 24,746
Vehicles................................... 27,546 27,546 27,546
Construction in progress................... 355,276 880,769 1,392,684
-------- ---------- ----------
Total.................................... 467,996 1,067,852 1,753,221
-------- ---------- ----------
Less accumulated depreciation............ 26,891 54,418 85,803
-------- ---------- ----------
Property and equipment, net.............. $441,105 $1,013,434 $1,667,418
======== ========== ==========
</TABLE>
NOTE 4. RELATED PARTY TRANSACTIONS:
Richard D. Spight and the Mary C. Spight Family Trust are the majority
stockholders of Diablo Communications of Southern California, Inc. and Diablo
Communications, Inc.
At the end of each period, the Company owed the following amounts to Diablo
Communications, Inc:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable at 8.68%....................... $275,000 $220,000 $ 183,333
Accounts payable............................ 116,872 297,400 1,214,622
</TABLE>
After the sale of the Company's assets on October 9, 1997, these related
note and accounts payable were paid in full.
Interest expense on this related party note payable was $4,776, $22,424,
$17,335 and $13,290 for the period September 30, 1995 (inception) to December
31, 1995, year ended December 31, 1996 and for the nine month periods ended
September 30, 1996 and September 30, 1997, respectively.
F-48
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. NOTES PAYABLE:
The Company has taken advances against a bank term loan approved for
$1,500,000. The Company pays interest only on the advances at rates ranging
from 9.44% to 9.85%. The line of credit requires that certain financial
covenants be maintained. The note is secured by a blanket lien on all of the
Company's assets.
During March 1997, the Company entered into an unsecured credit agreement
with American Tower Systems, Inc., that provides the Company with a $650,000
unsecured loan commitment of which $248,751 was outstanding at September 30,
1997. The Company pays interest only on the advances at prime, currently 8.5%.
The note matures at the earlier of consummation of the sale or June 30, 2000.
The Company repaid all advances on both of these notes after the sale of
substantially all its assets.
NOTE 6. LONG-TERM DEBT:
Maturities of long-term debt for the years subsequent to December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997.......................................................... $ 87,689
1998.......................................................... 204,759
1999.......................................................... 205,199
2000.......................................................... 201,841
2001.......................................................... 200,000
Thereafter..................................................... 116,666
----------
Totals........................................................ $1,016,154
==========
</TABLE>
NOTE 7. COMMITMENTS:
Capital leases:
The future minimum lease payments under capital leases for communications
equipment and certain office equipment in effect at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997............................................................ $ 3,422
1998............................................................ 2,282
-------
Total........................................................... 5,704
Less interest portion........................................... 719
-------
Present value of minimum lease payments......................... 4,985
Less current installments....................................... 2,833
-------
Long-term obligations under capital leases...................... $ 2,152
=======
Cost of equipment under capital leases.......................... $12,946
Less accumulated depreciation to December 31, 1996.............. 7,625
-------
Net............................................................. $ 5,321
=======
Current depreciation expense.................................... $ 2,129
=======
</TABLE>
F-49
<PAGE>
DIABLO COMMUNICATIONS OF SOUTHERN CALIFORNIA, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Operating leases:
At December 31, 1996, the Company was liable for various leases of office
space and other real and personal property which require future minimum annual
rental payments as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997............................... $231,937
1998............................... 211,661
1999............................... 216,298
2000............................... 193,998
2001............................... 62,950
Thereafter.......................... -0-
--------
Total.............................. $916,844
========
</TABLE>
In addition, the Company is liable for various real property leases based on
percentages of gross income ranging from 25% to 70%.
Rental expenses for these operating leases were $35,611, $271,419, $173,407
and $344,987, for the period September 1, 1995 (inception) to December 31,
1995, the year ended December 31, 1996 and for the nine month periods ended
September 30, 1996 and September 30, 1997, respectively.
NOTE 8. FUTURE LEASE INCOME:
At December 31, 1996, the Company has long-term, non-cancelable agreements
under operating-type leases for license fee income. Future minimum annual
lease income is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997............................. $ 659,445
1998............................. 585,155
1999............................. 434,161
2000............................. 287,430
2001............................. 193,657
Thereafter........................ -0-
----------
Total............................ $2,159,848
==========
</TABLE>
NOTE 9. SUBSEQUENT EVENT:
On October 9, 1997 the Company, along with Diablo Communications, Inc., a
related company, sold substantially all of its assets to American Tower
Systems, Inc. (ATS) for a combined purchase price of approximately $46.5
million. DCSC's allocable share of the purchase price is approximately $5.4
million. Some of DCSC's liabilities were included in the transaction.
F-50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors, Stockholders and Partners of
Meridian Communications
Calabasas, California:
We have audited the accompanying combined balance sheets of Meridian
Communications (the "Company") as of December 31, 1995 and 1996, and the
related combined statements of income, partners' capital and stockholders'
equity, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Long Beach, California
October 31, 1997
F-51
<PAGE>
MERIDIAN COMMUNICATIONS
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................. $ 30,897 $ 63,665 $ 21,168
Accounts receivable:
Trade, net of allowance for doubtful ac-
counts of $1,244 and $10,118 in 1995 and
1996, respectively, and $17,720 (unau-
dited) at June 30, 1997................... 60,961 80,190 103,709
Other accounts receivable (Note 8)......... 19,461 25,889 2,260,295
Prepaid expenses and other current assets.. 79,044 77,108 122,366
---------- ---------- ----------
Total current assets..................... 190,363 246,852 2,507,538
PROPERTY AND EQUIPMENT, Net (Note 2)......... 2,523,929 2,917,751 3,147,692
INTANGIBLES, Net............................. 22,000 141,948 112,292
OTHER ASSETS................................. 1,859 2,259 6,299
---------- ---------- ----------
TOTAL........................................ $2,738,151 $3,308,810 $5,773,821
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL AND
STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Current maturities of long-term loans pay-
able to shareholder and partner (Note 7).. $ 119,121 $ 234,607 $ 477,388
Accounts payable and accrued expenses...... 175,627 182,441 286,803
Security and other deposits................ 128,208 231,154 131,611
---------- ---------- ----------
Total current liabilities................ 422,956 648,202 895,802
---------- ---------- ----------
LONG-TERM LOANS PAYABLE TO SHAREHOLDER AND
PARTNER (Note 7)............................ 553,533 1,012,681 918,808
DEFERRED REVENUE............................. 214,918 279,641 186,413
COMMITMENTS AND CONTINGENCIES (Note 3)
PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY:
Common stock; $1.00 par value; 75,000
shares authorized; 4,000 shares issued and
outstanding............................... 4,000 4,000 4,000
Additional paid-in capital................. 16,632 16,632 16,632
Partners' capital.......................... 631,690 507,245 2,734,202
Retained earnings.......................... 894,422 840,409 1,017,964
---------- ---------- ----------
Total partners' capital and stockholders'
equity.................................. 1,546,744 1,368,286 3,772,798
---------- ---------- ----------
TOTAL........................................ $2,738,151 $3,308,810 $5,773,821
========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
F-52
<PAGE>
MERIDIAN COMMUNICATIONS
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------- --------------------------
1995 1996 1996 1997
---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Site use................. $3,918,420 $4,165,919 $ 2,103,614 $ 2,278,612
Site management.......... 72,337 125,348 51,355 52,178
Repeater service......... 140,945 206,556 67,319 54,087
---------- ---------- ------------ ------------
Total revenues......... 4,131,702 4,497,823 2,222,288 2,384,877
EXPENSES:
Operating expenses,
excluding depreciation
and amortization........ 3,034,285 3,217,369 1,543,333 1,730,211
Depreciation and
amortization............ 303,197 416,369 202,154 210,983
---------- ---------- ------------ ------------
OPERATING INCOME........... 794,220 864,085 476,801 443,683
OTHER INCOME (EXPENSE):
Interest and other income
(expense)............... 5,155 3,581 23,311 (17,741)
Interest expense to
shareholder and
partner (Note 6)........ (36,111) (73,126) (36,712) (61,968)
Gain on sale of business
(Note 8)................ 3,080,563
---------- ---------- ------------ ------------
Total other income (ex-
pense)................ (30,956) (69,545) (13,401) 3,000,854
---------- ---------- ------------ ------------
INCOME BEFORE INCOME TAX-
ES........................ 763,264 794,540 463,400 3,444,537
INCOME TAXES............... 800 800 3,145 2,526
---------- ---------- ------------ ------------
NET INCOME................. $ 762,464 $ 793,740 $ 460,255 $ 3,442,011
========== ========== ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-53
<PAGE>
MERIDAN COMMUNICATIONS
COMBINED STATEMENTS OF PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN PARTNERS' RETAINED
STOCK CAPITAL CAPITAL EARNINGS TOTAL
------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994................... $4,000 $16,632 $ 630,902 $ 987,093 $ 1,638,627
Net income (loss)....... 855,135 (92,671) 762,464
Cash distributions...... (854,347) (854,347)
------ ------- ----------- ---------- -----------
BALANCE, DECEMBER 31,
1995................... 4,000 16,632 631,690 894,422 1,546,744
Net income (loss)....... 847,753 (54,013) 793,740
Cash distributions...... (972,198) (972,198)
------ ------- ----------- ---------- -----------
BALANCE, DECEMBER 31,
1996................... 4,000 16,632 507,245 840,409 1,368,286
Net income (Unaudited).. 3,264,456 177,555 3,442,011
Cash distributions (Un-
audited)............... (1,037,499) (1,037,499)
------ ------- ----------- ---------- -----------
BALANCE, JUNE 30, 1997
(Unaudited)............ $4,000 $16,632 $ 2,734,202 $1,017,964 $ 3,772,798
====== ======= =========== ========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-54
<PAGE>
MERIDIAN COMMUNICATIONS
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------- ----------------------
1995 1996 1996 1997
---------- ---------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING AC-
TIVITIES:
Net income.................... $ 762,464 $ 793,740 $ 460,255 $ 3,442,011
Adjustments to reconcile net
income to net cash
provided by operating activi-
ties:
Depreciation and amortiza-
tion......................... 303,197 416,369 202,154 210,983
Provision for doubtful ac-
counts....................... (907) 8,874 1,955 7,748
Loss (gain) on disposal of
property and equipment....... 7,315 8,954 (2,922,335)
Changes in operating assets
and liabilities:
Accounts receivable--trade... 45,358 (28,108) (5,500) (31,266)
Accounts receivable--other... 10,136 (6,428) 11,962 15,594
Prepaid expenses and other
current assets.............. (23,359) 1,936 (76,357) (45,258)
Other assets................. (59) (400) (4,200) (4,040)
Accounts payable and accrued
expenses.................... 47,801 (23,185) 255,826 153,552
Security and other depos-
its......................... 9,679 2,946 (400) 457
Deferred revenue............. 28,628 64,723 5,500 (93,228)
---------- ---------- --------- -----------
Net cash provided by operat-
ing activities............. 1,182,938 1,237,782 860,149 734,218
---------- ---------- --------- -----------
CASH FLOWS FROM INVESTING AC-
TIVITIES:
Purchase of property and
equipment.................... (716,932) (857,562) (312,264) (508,699)
Proceeds from sale of property
and equipment................ 42,609 29,175 750,575
Purchase of intangibles....... (122,500)
Receipt of deposits for re-
peater services.............. 130,000
Application of deposits for
repeater services............ (130,000)
---------- ---------- --------- -----------
Net cash provided by (used
in) investing activities... (716,932) (807,453) (283,089) 111,876
---------- ---------- --------- -----------
CASH FLOWS FROM FINANCING AC-
TIVITIES:
Borrowings from shareholder
and partner.................. 400,000 655,000 100,000 219,000
Repayments on loans from
shareholder and partner...... (37,346) (80,366) (26,432) (70,092)
Cash distributions............ (854,347) (972,195) (486,101) (1,037,499)
---------- ---------- --------- -----------
Net cash provided by (used
in) financing activities... (491,693) (397,561) (412,533) (888,591)
---------- ---------- --------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.............. (25,687) 32,768 164,527 (42,497)
CASH AND CASH EQUIVALENTS, BE-
GINNING OF PERIOD............. 56,584 30,897 30,897 63,665
---------- ---------- --------- -----------
CASH AND CASH EQUIVALENTS, END
OF PERIOD..................... $ 30,897 $ 63,665 $ 195,424 $ 21,168
========== ========== ========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during the period
for:
Interest...................... $ 36,111 $ 72,673 $ 13,087 $ 33,168
Income taxes.................. $ 0 $ 900 $ 900 $ 800
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
-- During December 1996, the Company acquired equipment by incurring accrued
expenses in the amount of $19,191.
-- During February 1997, the Company received a non-trade account receivable
in the amount of $2,250,000 from the sale of a repeater system.
See accompanying notes to combined financial statements.
F-55
<PAGE>
MERIDIAN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND
1997
(INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--The combined financial statements include the accounts of Meridian
Sales and Services Company ("MSSC"), a California S corporation, Meridian
Communications North ("MCN"), a general partnership, and Meridian Radio Sites
("MRS"), a general partnership (referred to collectively as Meridian
Communications or the "Company") which share common ownership and management.
All significant intercompany balances and transactions have been eliminated in
combination.
Meridian Communications develops and manages telecommunication antenna site
facilities and repeater (mobile relay) equipment throughout Southern
California.
Cash and Cash Equivalents--Cash and cash equivalents include cash in the
bank as well as short-term investments with an original maturity of three
months or less.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost less
accumulated depreciation. Major renewals or betterments are capitalized and
depreciated over their estimated useful lives. Repairs and maintenance are
charged to expense in the period incurred.
Depreciation for financial statements purposes is computed using the
straight-line method over the estimated useful lives of the assets. Buildings
and leasehold improvements are depreciated over a period of 20 years, antenna
site equipment over a period of 7 years, and office furniture, equipment, and
automobiles over a period of 5 years.
Intangibles--Intangible assets are primarily comprised of the rights to a
site lease acquired in 1996 and, to a lesser extent, an FCC license. The FCC
license was sold in February 1997 with the sale of the assets used in
connection with the repeater business for $3,000,000 (see Note 8). The site
lease rights are amortized on a straightline basis over the remainder of the
lease term of 8 years.
F-56
<PAGE>
MERIDIAN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
Long-Lived Assets--The Company records impairment losses on long-lived
assets when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Concentration of Credit Risk--The Company performs ongoing credit evaluation
of its customers' financial condition and generally requires a one-month
security deposit from its customers. As of December 31, 1996, the Company had
no significant concentrations of credit risk.
Revenue Recognition and Deferred Revenue--Revenue is recorded when services
are provided, according to rates set forth in customer contracts. Deferred
revenue is recorded when services are paid in advance of performance.
Income Taxes--The Company is comprised of an S corporation and two
partnerships for federal and state income tax purposes. The stockholders and
partners report any income or loss of the Company directly on their personal
tax returns. State income tax expense is computed using statutory tax rates
applicable to S corporations.
Interim Financial Statements--The accompanying combined balance sheet as of
June 30, 1997 and the combined statements of income, partners' capital and
stockholders' equity, and cashflows for the six months ended June 30, 1997 and
1996 are unaudited. In the opinion of management, such unaudited financial
statements include all adjustments necessary to present fairly the information
set forth therein. These adjustments consist of normal recurring adjustments.
The results of operations for such interim periods are not necessarily
indicative of results for the full year.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land.............................. $ 28,839 $ 28,839 $ 28,839
Antenna site equipment............ 2,258,476 2,518,713 2,315,813
Buildings and leasehold improve-
ments............................ 1,767,261 1,793,290 1,793,290
Office furniture, equipment and
automobiles...................... 259,586 247,260 248,342
Construction in progress.......... 195,787 687,006 1,167,466
----------- ---------- -----------
4,509,949 5,275,108 5,553,750
Less accumulated depreciation and
amortization..................... (1,986,020) (2,357,357) (2,406,058)
----------- ---------- -----------
$ 2,523,929 $2,917,751 $ 3,147,692
=========== ========== ===========
</TABLE>
F-57
<PAGE>
MERIDIAN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
3. LEASE COMMITMENTS
The Company leases office and antenna site facilities under operating lease
agreements through the year 2009. One of the facilities is leased from a
shareholder of MSSC for $28,800 annually. This lease expires December 31,
1997. The Company is committed to minimum rental payments under leases
(exclusive of real estate taxes, maintenance and other related charges) at
December 31, 1996, as follows:
Years Ended December 31:
<TABLE>
<S> <C>
1997............................................................ $ 512,706
1998............................................................ 495,449
1999............................................................ 441,866
2000............................................................ 319,169
2001............................................................ 275,987
Thereafter...................................................... 2,100,576
----------
$4,145,753
==========
</TABLE>
Rent expense charged to operations for the years ended December 31, 1995 and
1996 amounted to $629,242 and $727,427, respectively, of which $20,400 and
$28,800, respectively, was paid to the shareholder. Rent expense charged to
operations for the six months ended June 30, 1996 and 1997 amounted to
$311,266 and $414,990, respectively, of which $14,400 was paid to the
shareholder in both periods.
4. INCOME TAXES
The Company's provision for income taxes for the years ended December 31,
1995 and 1996 consists of a minimum state liability of $800 for each year
which is assessed to MSSC.
The Company does not pay federal corporate income taxes on its taxable
income. Instead, the stockholders and partners are liable for individual
federal and state income taxes on their respective shares of the Company's
taxable income. The Corporation continues to pay a California surtax of 1.5%
of taxable income or the minimum state tax, whichever is greater.
5. PROFIT SHARING PLAN
MSSC has a profit sharing plan (the "Plan") which covers all employees who
have accumulated a minimum amount of hours of service during a year. MSSC's
contribution to the Plan is determined annually by the Board of Directors.
Provisions for contributions to the profit sharing plan of $22,578 and
$21,457, respectively, were made for the years ended December 31, 1995 and
1996.
Effective July 1, 1997, there will be no additional contributions to the
Plan. Additionally, the Plan will be terminated and all assets distributed to
the participants as defined in the Plan.
6. RELATED PARTY TRANSACTIONS
The Company engages in transactions with a shareholder and partner whereby
working capital funds are loaned to the Company and repaid over terms agreed
to by both parties (see Note 7). Interest expense incurred on these loans
amount to $36,111 and $73,126 for the years ended December 31, 1995 and 1996,
respectively, and $36,712 and $61,968 for the six months ended June 30, 1996
and 1997, respectively.
Certain of the Company's buildings and equipment are regularly repaired and
maintained by Lee's Two-Way Radio, a California corporation owned and
controlled by Norman Kramer, a general partner. Payments to Lee's Two-Way
Radio for the years ended December 31, 1995 and 1996 were $31,369 and $34,765,
respectively.
Payments for administrative services in the amount of $16,194 and $14,466
for the years ended December 31, 1995 and 1996, respectively, were paid to
Norman Kramer, a general partner.
F-58
<PAGE>
MERIDIAN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
7. LONG-TERM LOANS PAYABLE TO SHAREHOLDER AND PARTNER
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
-------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured loan payable to shareholder in the
original amount of $310,000, payable in sixty
monthly installments of $6,857, including
interest at the rate of 10% per annum. Final
installment is due March 31, 2000............ $272,654 $ 218,440 $ 189,240
Unsecured loan payable to shareholder in the
original amount of $400,000 at December 31,
1995 and increased to $500,000 during 1996,
payable in sixty monthly installments of
$10,624 per month, including interest at the
rate of 10% per annum. Final installment due
August 31, 2001.............................. 400,000 473,848 432,956
Unsecured loan payable to shareholder in the
original amount of $55,000, interest payable
at the rate of 10% per annum, due November
27, 2001..................................... 55,000 55,000
Unsecured loan payable to shareholder in the
original amount of $500,000, interest payable
at the rate of 10% per annum, due December
31, 2001..................................... 500,000 500,000
Unsecured temporary loans payable to share-
holder and partner, at the rate of 10% per
annum, payable upon demand................... 219,000
-------- ---------- ----------
672,654 1,247,288 1,396,196
Less current maturities....................... 119,121 234,607 477,388
-------- ---------- ----------
$553,533 $1,012,681 $ 918,808
======== ========== ==========
</TABLE>
All loans to the shareholder and partner were paid in full following the
sale of the Company's assets and business to ATS (see Note 9).
8. SALE OF THE REPEATER BUSINESS
Effective December 1, 1996, the Company entered into a ten-year agreement
with an unrelated party granting the party the right to manage a repeater
system and granting the party an option to purchase the system. Under the
agreement, the Company received a non-refundable $300,000 option fee in the
first quarter of 1997 from the party. In addition, the Company receives
repeater service fees quarterly from the party. As of June 30, 1997, the
system is still being managed by the party and the purchase option has not
been exercised.
Effective February 19, 1997, the Company sold a repeater system to an
unrelated party for $3,000,000. As of June 30, 1997, the uncollected portion
of the purchase price, $2,250,000, was included in non-trade accounts
receivable. This amount was received during August 1997.
Effective February 28, 1997, the balance of the repeater business was sold
to a separate buyer for the assumption of certain liabilities regarding the
business.
Revenues for the repeater business which were transferred as a result of
these transactions are $140,945, $206,556 and $54,087 for the years and period
ended December 31, 1995 and 1996, and June 30, 1997, respectively.
F-59
<PAGE>
MERIDIAN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS
UNAUDITED)
9. SUBSEQUENT EVENT (UNAUDITED)
Effective July 1, 1997, the Company sold substantially all of its assets and
the business related to these assets to American Tower Systems, Inc. ("ATS").
The combined purchase price was $32,121,638 plus construction adjustments of
$581,042 for the acquisition and construction of certain new sites from June
14, 1996 through the date of the sale. Assets which were not sold to ATS
include cash, accounts receivable, and assets related to the repeater business
which were sold to unrelated buyers (see Note 8).
F-60
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Tower Systems, Inc.
We have audited the accompanying balance sheet of Tucson Communications
Company (the "Partnership") as of December 31, 1996, and the related
statements of income, partners' deficit, and cash flows for the year then
ended. The financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tucson Communications
Company at December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
San Diego, California
October 24, 1997
F-61
<PAGE>
TUCSON COMMUNICATIONS COMPANY
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 389 $ 591
PROPERTY AND EQUIPMENT, net.......................... 836 766
OTHER ASSETS......................................... 18 17
------- ------
TOTAL................................................ $ 1,243 $1,374
======= ======
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt.................. $ 180 $ 192
Accrued expenses................................... 18 16
------- ------
Total current liabilities........................ 198 208
LONG-TERM DEBT....................................... 2,065 1,919
OTHER LONG-TERM LIABILITIES.......................... 47 22
------- ------
Total long-term liabilities...................... 2,112 1,941
PARTNERS' DEFICIT.................................... (1,067) (775)
------- ------
TOTAL................................................ $ 1,243 $1,374
======= ======
</TABLE>
See accompanying notes to financial statements.
F-62
<PAGE>
TUCSON COMMUNICATIONS COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, --------------
1996 1997 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Tower revenues, including reimbursed expenses of
$116, $91 and $84, respectively................ $1,438 $1,201 $1,171
OPERATING EXPENSES:
Tower operations................................ 287 255 222
Depreciation and amortization................... 164 123 123
General and administrative...................... 84 88 70
------ ------ ------
Total operating expenses...................... 535 466 415
------ ------ ------
INCOME FROM OPERATIONS............................ 903 735 756
OTHER INCOME...................................... 19 7 16
INTEREST EXPENSE.................................. (213) (150) (161)
------ ------ ------
NET INCOME........................................ $ 709 $ 592 $ 611
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-63
<PAGE>
TUCSON COMMUNICATIONS COMPANY
STATEMENTS OF PARTNERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, DECEMBER 31, 1995............................................ $(1,151)
Net income............................................................ 709
Distributions......................................................... (625)
-------
BALANCE, DECEMBER 31, 1996............................................ (1,067)
Net income (Unaudited)................................................ 592
Distributions (Unaudited)............................................. (300)
-------
BALANCE, SEPTEMBER 30, 1997 (Unaudited)............................... $ (775)
=======
</TABLE>
See accompanying notes to financial statements.
F-64
<PAGE>
TUCSON COMMUNICATIONS COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
YEAR ENDED 30,
DECEMBER 31, ------------
1996 1997 1996
------------ ----- -----
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 709 $ 592 $ 611
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 164 123 123
Changes in assets and liabilities:
Accrued expenses................................ 12 (2) 11
Other long-term liabilities..................... (9) (26) (8)
----- ----- -----
Net cash provided by operating activities..... 876 687 737
----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment............... (12) (51) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt....................... (183) (134) (141)
Distributions..................................... (625) (300) (600)
----- ----- -----
Net cash used in financing activities......... (808) (434) (741)
----- ----- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 56 202 (4)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 333 389 333
----- ----- -----
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 389 $ 591 $ 329
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-65
<PAGE>
TUCSON COMMUNICATIONS COMPANY
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996 AND
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Partnership Structure--Tucson Communications Company (the
"Partnership") was organized as a limited partnership in the state of
California on October 6, 1983 for the purpose of developing, managing and
leasing a communications site located in the Tucson Mountains near Tucson,
Arizona. Income allocations and cash distributions are in accordance with the
partnership agreement.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates, and
such differences could be material to the financial statements.
Concentration of Credit Risk--The Partnership extends credit to customers on
an unsecured basis in the normal course of business. The Partnership has
policies governing the extension of credit and collection of amounts due from
customers.
Impairment of Long-Lived Assets--In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of ("FAS 121"). FAS 121 addresses the accounting for the
impairment of long-lived assets when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Partnership adopted this statement during 1996 and the impact on the
Partnership's results of operations, liquidity or financial position was not
material.
Cash and Cash Equivalents--Cash and cash equivalents includes cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less.
Property and Equipment--Property and equipment are recorded at cost. Cost
includes expenditures for tower and related assets. Depreciation is provided
using the double-declining balance method on equipment and straight-line
method on buildings over estimated useful lives ranging from seven to 31.5
years.
Fair Value of Financial Instruments--The Partnership believes that the
carrying value of all financial instruments is a reasonable estimate of fair
value as of December 31, 1996 and September 30, 1997.
Recognition of Revenues--Tower revenues are recognized when earned over the
lease terms.
Income Taxes--The financial statements contain no provision for income taxes
since the income or loss of the Partnership flows through to the Partners, who
are responsible for including their share of the taxable results of operations
on their respective tax returns.
Unaudited Interim Financial Information--The accompanying unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Article 10 of Regulations S-X. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine-
month periods ended September 30, 1997 and 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997.
F-66
<PAGE>
TUCSON COMMUNICATIONS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Land and improvements........................... $ 591 $ 591
Towers and buildings............................ 1,635 1,635
Technical equipment............................. 1,293 1,310
Construction in progress........................ 12 46
------- -------
Total......................................... 3,531 3,582
Less accumulated depreciation................... (2,695) (2,816)
------- -------
Property and equipment, net..................... $ 836 $ 766
======= =======
</TABLE>
The Partnership's property and equipment are generally leased to customers
under noncancelable operating leases with remaining terms ranging from one to
18 years. However, the leases allow cancellation under certain technical
circumstances as specified in the respective lease agreements. Many of the
leases also contain renewal options with specified increases in lease payments
upon exercise of the renewal option.
Future minimum tower revenues required to be paid by lessees under all
noncancelable leases in effect at December 31, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997.............................................. $ 1,349
1998.............................................. 1,362
1999.............................................. 1,401
2000.............................................. 1,444
2001.............................................. 1,489
Thereafter........................................ 9,066
-------
Total........................................... $16,111
=======
</TABLE>
The amounts for the following customer accounted for greater than 10% of
total operating revenues (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
YEAR ENDED
DECEMBER 31,
1996 1997 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Motorola........................................ $442 $ 436 $ 425
</TABLE>
3. OTHER ASSETS
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Prepaid loan fees............................... $ 31 $ 31
Less accumulated amortization................... (14) (15)
Deposits........................................ 1 1
---- ----
Other assets.................................... $ 18 $ 17
==== ====
</TABLE>
F-67
<PAGE>
TUCSON COMMUNICATIONS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT
On May 31, 1990, the Partnership entered into a loan agreement with a
financial institution to borrow $3,100,000. Every twelve months the loan bears
a new interest rate based on the one-year Constant Maturities, plus 3.5%. At
December 31, 1996, September 30, 1997 and 1996, the interest rates in effect
were 9.29%, 9.15% and 9.29%, respectively. The loan is secured by land and
equipment located on Tucson Mountain. Interest and principal payments are
payable monthly and the loan matures on July 1, 2005. Cash paid for interest
during the year ended December 31, 1996 and the nine months ended September
30, 1997 and 1996 was $214,000, $152,000 and $161,000, respectively.
Future principal payments required under the Company's financing agreement
at December 31, 1996 are approximately (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1997............................................... $ 180
1998............................................... 197
1999............................................... 216
2000............................................... 237
2001............................................... 260
Thereafter......................................... 1,155
------
Total............................................ $2,245
======
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Partnership pays an affiliated company for salaries, rent and utilities.
During the year ended December 31, 1996 and the nine months ended September
30, 1997 and 1996, the Partnership paid $65,000, $54,000 and $47,000,
respectively. In addition, the Partnership pays an affiliate of the general
partner on an hourly basis for management services. During the year ended
December 31, 1996 and the nine months ended September 30, 1997 and 1996, the
Partnership paid $29,000, $26,000 and $20,000, respectively.
6. PENDING TRANSACTION
In October 1997, the Partnership entered into an agreement with American
Tower Systems, Inc. to sell substantially all of the assets of the Partnership
for approximately $12,000,000.
7. CONTINGENCY
Subsequent to December 31, 1996, the Partnership received notification of a
matter involving threatened litigation relating to an on-site injury suffered
by an individual during 1996. The party has requested a settlement payment of
$800,000. Management of the Partnership believes any liability arising from
this matter will be covered by insurance and will not have a material impact
on the Partnership's financial statements.
F-68
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholder
Gearon & Co., Inc.:
We have audited the accompanying balance sheets of Gearon & Co., Inc. (the
"Company") as of September 30, 1997 and December 31, 1996, and the related
statements of income, changes in stockholder's equity, and cash flows for the
nine months ended September 30, 1997 and for the year ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 1997 and
December 31, 1996, and the results of its operations and its cash flows for
the nine months ended September 30, 1997 and for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Atlanta, Georgia
December 12, 1997 (January 22, 1998 as to the second,
third and fourth paragraphs of Note 1)
F-69
<PAGE>
GEARON & CO., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 1,792,242 $ 813,182
Accounts receivable--trade, net of allowance for
doubtful accounts of $216,686 and $129,650 in
1997 and 1996, respectively...................... 4,903,801 7,132,363
Unbilled receivables.............................. 3,008,163 515,688
Accounts receivable--other........................ 242,298 6,390
Receivable from related party..................... -- 200,000
----------- ----------
Total current assets............................ 9,946,504 8,667,623
PROPERTY AND EQUIPMENT, net......................... 1,871,731 561,028
OTHER ASSETS........................................ 141,772 27,530
----------- ----------
TOTAL............................................... $11,960,007 $9,256,181
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 916,617 $ 27,587
Accrued expenses.................................. 80,007 37,193
Deferred revenue.................................. 163,500 2,500
----------- ----------
Total current liabilities....................... 1,160,124 67,280
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDER'S EQUITY
Common stock, no par value, 10,000 shares
authorized;
7,500 issued and outstanding..................... 750 750
Retained earnings................................. 10,799,133 9,188,151
----------- ----------
Total stockholder's equity...................... 10,799,883 9,188,901
----------- ----------
TOTAL............................................... $11,960,007 $9,256,181
=========== ==========
</TABLE>
See notes to financial statements.
F-70
<PAGE>
GEARON & CO., INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
----------------------- DECEMBER 31,
1997 1996 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Fees and bonuses........................ $15,980,502 $11,050,147 $15,613,655
Pass-through revenues................... 2,760,271 3,425,276 5,349,795
Tower rentals........................... 105,623 30,850 53,200
Other................................... 215,546 150,502 467,785
----------- ----------- -----------
Total revenues........................ 19,061,942 14,656,775 21,484,435
OPERATING EXPENSES:
Operating expenses...................... 8,739,784 4,720,527 6,644,143
Pass-through expenses................... 2,760,271 3,425,276 5,349,795
----------- ----------- -----------
Total operating expenses.............. 11,500,055 8,145,803 11,993,938
----------- ----------- -----------
GROSS PROFIT.............................. 7,561,887 6,510,972 9,490,497
General and administrative expenses....... 1,532,485 864,021 1,411,569
----------- ----------- -----------
INCOME FROM OPERATIONS.................... 6,029,402 5,646,951 8,078,928
OTHER INCOME AND EXPENSES, NET............ 64,521 88,118 94,822
----------- ----------- -----------
NET INCOME................................ $ 6,093,923 $ 5,735,069 $ 8,173,750
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-71
<PAGE>
GEARON & CO., INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------
OUTSTANDING RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1996........... 7,500 $750 $ 8,783,131 $ 8,783,881
Distributions to stockholder..... (7,768,730) (7,768,730)
Net income....................... 8,173,750 8,173,750
----- ---- ----------- -----------
Balance, December 31, 1996......... 7,500 750 9,188,151 9,188,901
Distributions to stockholder..... (4,482,941) (4,482,941)
Net income....................... 6,093,923 6,093,923
----- ---- ----------- -----------
Balance, September 30, 1997........ 7,500 $750 $10,799,133 $10,799,883
===== ==== =========== ===========
</TABLE>
See notes to financial statements.
F-72
<PAGE>
GEARON & CO., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
------------------------ DECEMBER 31,
1997 1996 1996
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net income........................ $ 6,093,923 $ 5,735,069 $ 8,173,750
Adjustments to reconcile net in-
come to net cash provided by op-
erating activities:
Provision for doubtful ac-
counts......................... 87,036 97,238 129,650
Depreciation.................... 110,527 77,883 103,283
Changes in assets and liabili-
ties;
Decrease (increase) in ac-
counts receivable trade...... 2,141,526 501,666 (3,434,228)
Decrease (increase) in
unbilled receivables......... (2,492,475) (89,604) 782,867
(Increase) decrease in ac-
counts receivable other...... (235,908) (49,016) 20,307
(Increase) in other assets.... (114,242) (23,278) (21,748)
Increase (decrease) in ac-
counts payable............... 889,030 157,958 (35,463)
Increase (decrease) in accrued
expenses..................... 42,814 299,133 (25,023)
Increase in deferred revenue.. 161,000 2,500
----------- ----------- -----------
Net cash provided by operating ac-
tivities......................... 6,683,231 6,707,049 5,695,895
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVI-
TIES;
Acquisition of property and equip-
ment............................. (173,788) (73,894) (134,910)
Construction of towers............ (1,247,442) (336,242) (336,242)
----------- ----------- -----------
Net cash used in investing
activities................. (1,421,230) (410,136) (471,152)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Distributions to stockholder...... (4,482,941) (7,693,726) (7,768,730)
Repayments from (loans to) related
party............................ 200,000 (40,000) (170,000)
Loan from stockholder............. 500,000
Repayment to stockholder.......... (500,000)
----------- ----------- -----------
Net cash used in financing
activities................. (4,282,941) (7,733,726) (7,938,730)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 979,060 (1,436,813) (2,713,987)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD.......................... 813,182 3,527,169 3,527,169
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD............................. $ 1,792,242 $2,090,356 $ 813,182
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-73
<PAGE>
GEARON & CO., INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Corporate Structure--Gearon & Co., Inc. (the "Company"), a
Georgia corporation, was incorporated on September 6, 1991 and is engaged in
the site acquisition, development, construction and facility management, of
wireless network communication facilities on behalf of its customers. The
Company operates in markets throughout the United States. In addition, as of
September 30, 1997, the Company owned and operated four communications towers
with an additional twenty-seven towers in varying stages of development. The
towers are located in Georgia, Florida, and Tennessee.
On January 22, 1998, the Company merged into and became a part of American
Tower Systems, Inc. (ATSI) a subsidiary of American Radio Systems Corporation
(ARS), pursuant to an Agreement and Plan of Merger ("the Merger Agreement")
executed on November 21, 1997. Under the Merger Agreement, the holders' of the
Company's common stock at the effective date of the merger received a total of
$32,000,000 in cash and liabilities assumed by ATSI and 5,333,333 shares of
ATSI stock with an agreed-upon fair value of $48,000,000.
Prior to the closing of the merger, the Company awarded a total of 56,338
shares of Class B common stock valued at $5,600,000 (based on the share price
paid by ATSI in the merger) to certain key employees, paid cash bonuses
totaling approximately $7,667,000 to certain employees, and incurred
approximately $580,000 in other merger related expenses.
In addition, pursuant to the Merger Agreement, the Company borrowed a total
of $10,000,000 from ATSI in two $5,000,000 installments to fund working
capital and merger related expenses. Such borrowing was repaid at closing.
Unaudited Interim Information--In the opinion of management, the financial
statements for the unaudited period presented include all adjustments
necessary for a fair presentation in accordance with generally accepted
accounting principles, consisting solely of normal recurring accruals and
adjustments. The results of operations and cash flows for the nine months
ended September 30, 1997 are not necessarily indicative of results which would
be expected for a full year.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk--The Company extends credit to customers on an
unsecured basis in the normal course of business. Credit risk is limited due
to the financial reputation of the customers comprising the Company's customer
base. The Company has policies governing the extension of credit and
collection of amounts due from customers.
The following represents a summary of fees and bonuses earned from
individual customers in excess of 10% of total fees and bonuses:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
--------------------- DECEMBER 31,
1997 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Customer A.............................. $3,697,000 $3,557,000 $4,773,000
Customer B.............................. 5,018,000
Customer C.............................. 3,304,000
Customer D.............................. 1,922,000
Customer E.............................. 3,385,000 4,423,000
Customer F.............................. 1,691,000 1,752,000
</TABLE>
Impairment of Long-Lived Assets--In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and
F-74
<PAGE>
GEARON & CO., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
for Long-Lived Assets to be Disposed Of ("FAS 121"). FAS 121 addresses the
accounting for the impairment of long-lived assets, certain intangibles and
goodwill when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company adopted this statement
during 1996 and the impact on the Company's results of operations, liquidity
or financial position was not material.
Cash and Cash Equivalents--Cash and cash equivalents includes cash on hand,
demand deposits and short-term investments with original maturities of three
months or less.
Property and Equipment--Property and equipment are recorded at cost.
Ordinary repairs and maintenance are expensed as incurred; major replacements
and improvements are capitalized and depreciated over their estimated useful
lives. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets ranging from three to fifteen years.
Construction in Progress--The Company's tower construction expenditures are
recorded as construction in progress until the assets are placed in service.
When the assets are placed in service, they are transferred to the appropriate
property and equipment category and depreciated. The Company also capitalizes
subcontractor and employee labor and overhead costs incurred in connection
with the construction of towers.
Revenue Recognition--Revenues from fees and bonuses are recognized based
upon the completion of certain activities as defined by the respective
contracts with individual customers. Several of the contracts provide for
reimbursement by customers of certain costs in addition to fees earned. Such
costs are recognized on the accrual basis and are reflected as pass-through
revenues and expenses in the statements of income. Tower and sublease revenues
are recognized when earned over the terms of the related leases.
Income Taxes--At inception, the Company elected to be treated as a
Subchapter S Corporation (S Corporation) for income tax purposes. Accordingly,
no recognition has been given to income taxes in the financial statements
since the income is reportable on the individual tax return of the
stockholder. Two states in which the Company does business do not recognize S
Corporations for tax purposes and therefore the Company is liable for income
taxes in those states. The amounts paid or accrued for income taxes were not
material in relation to the financial statements.
Deferred Revenue--Deferred revenue represents advance payments from a
customer which will be applied to future billings upon the attainment of
certain billing milestones.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Land......................................... $ 25,813 $ --
Leasehold improvements....................... 66,307 60,902
Furniture and fixtures....................... 97,435 81,694
Machinery and equipment...................... 459,347 306,705
Cellular towers leased to unrelated third
parties..................................... 473,668 336,242
Construction in progress..................... 1,084,203 --
---------- ---------
Property and equipment, at cost.............. 2,206,773 785,543
Accumulated depreciation..................... (335,042) (224,515)
---------- ---------
Property and equipment--net.................. $1,871,731 $ 561,028
========== =========
</TABLE>
F-75
<PAGE>
GEARON & CO., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES
Lease Obligations--The Company currently leases office space, office
equipment and land for communications towers under operating leases that
expire at varying dates through 2002. The tower ground leases' contain options
for the Company to renew, at its discretion, for five-year periods up to a
maximum term of twenty-five years. The leases require the Company to maintain
certain insurance coverage and provide for maintenance and repairs. Future
minimum lease payments for noncancelable office, equipment and ground leases
are as follows for the periods ending December 31:
<TABLE>
<S> <C>
1997............................................................. $ 70,054
1998............................................................. 218,899
1999............................................................. 203,142
2000............................................................. 187,372
2001............................................................. 95,299
2002............................................................. 78,741
--------
Total............................................................ $853,507
========
</TABLE>
Aggregate rent expense under all operating leases for the nine months ended
September 30, 1997 and 1996 and for the year ended December 31, 1996
approximated $189,000, $35,800 and $50,800, respectively.
Customer Leases--The Company owns communications towers which it leases to
third parties. The leases which are noncancelable and expire at various dates
through 2002, contain options for the lessees to renew, at their discretion,
for five year periods up to a maximum term of twenty-five years.
Future minimum rental receipts expected to be received from customers under
noncancelable leases are as follows for the periods ending December 31:
<TABLE>
<S> <C>
1997............................................................. $ 40,557
1998............................................................. 164,184
1999............................................................. 166,849
2000............................................................. 169,592
2001............................................................. 89,207
2002............................................................. 12,033
--------
Total............................................................ $642,422
========
</TABLE>
Purchase Commitments--At September 30, 1997, the Company had entered into an
agreement to acquire land for a communications tower for a purchase price of
$100,000.
Employment Agreement--In August 1997, the Company entered into an employment
agreement with an officer of the Company. The Agreement is for a term of one
year and is renewable for successive one-year terms. The agreement contains
provisions for compensation in the event of termination or a change in control
of the Company.
F-76
<PAGE>
GEARON & CO., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)
Legal Matters--The Company is a party to certain legal matters arising in
the ordinary course of business. In the opinion of management, none of these
matters are expected to have a material effect on the financial position,
results of operations, or cash flows of the Company.
4. RETIREMENT PLAN
On September 1, 1996, the Company established the Gearon & Co., Inc.
Employee Savings and Retirement Plan (the "Plan"), a 401(k) plan. Employees of
the Company are eligible for participation in the Plan subject to certain
minimum age and length of employment requirements. Plan participants can
contribute from 2% to 15% of their compensation, as defined. The Company
matches 25% of the participants' contributions up to 10% of compensation. The
Plan's assets are invested in equity, bond, balanced, and money market mutual
funds. The Company contributed approximately $56,000 and $24,000 for the nine
months ended September 30, 1997 and for the year ended December 31, 1996. No
contributions were made by the Company for the nine months ended September 30,
1996.
5. COMMON STOCK
Effective October 23, 1997, the Company authorized the issuance of 10,000
shares of Class A common stock and 1,000,000 shares of Class B common stock.
Class A has voting privileges while Class B common stock is nonvoting. On
October 23, 1997, all 7,500 shares of common stock previously outstanding were
exchanged for 7,500 shares of Class A common stock and 742,500 shares of Class
B common stock which were transferred to the sole stockholder and a trust
related to the sole stockholder.
6. RELATED PARTY TRANSACTIONS
The receivable from a related party totaling $200,000 at December 31, 1996
was repaid in full in January 1997.
F-77
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Tower Corporation:
We have audited the accompanying consolidated balance sheets of American
Tower Corporation and Subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows -- Predecessor for the period from January 1, 1994 to October
14, 1994 -- Successor for the period from October 15, 1994 to December 31,
1994 and the years ended December 31, 1995 and 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Tower Corporation and Subsidiaries as of December 31, 1995 and 1996 and the
results of their operations and their cash flows -- Predecessor for the period
from January 1, 1994 to October 14, 1994 -- Successor for the period from
October 15, 1994 to December 31, 1994 and the years ended December 31, 1995
and 1996 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Houston, Texas
January 17, 1997
F-78
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............. $ 1,905 $ 92 $ 464
Accounts receivable, net of allowance
for doubtful accounts
of $30, $104 and $53, respectively... 598 816 976
Prepaid expenses and other current
assets............................... 682 793 965
Assets held for resale................ -- 700 --
------- ------- --------
Total current assets................. 3,185 2,401 2,405
Land................................... 4,177 5,301 6,124
Rental towers and related fee based
assets, net of accumulated
depreciation of $1,729, $3,984 and
$7,365, respectively.................. 42,056 61,556 105,106
Other assets, net of accumulated
amortization of $486, $836 and $1,670,
respectively.......................... 4,364 6,269 6,563
------- ------- --------
Total assets.......................... $53,782 $75,527 $120,198
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 489 $ 720 $ 1,652
Accrued interest payable.............. 539 598 977
Deferred revenues and other current
liabilities.......................... 1,395 978 1,742
Current portion of long-term debt..... 1,580 1,075 1,000
------- ------- --------
Total current liabilities............. 4,003 3,371 5,371
Long-term debt, less current portion... 31,875 49,771 67,817
Other liabilities...................... 541 450 173
Deferred income taxes.................. 6,306 6,337 6,601
------- ------- --------
Total liabilities..................... 42,725 59,929 79,962
------- ------- --------
Commitments and contingencies (Note 11)
Redeemable preferred stock, $.01 par
value. Authorized 5,000,000 shares,
issued and outstanding, 22,500
shares................................ 3,633 4,000 4,000
Stockholders' equity:
Common stock, $.01 par value.
Authorized 250,000 shares; 67,500,
75,331 and 149,548 shares issued and
outstanding, respectively............ 1 1 2
Additional paid-in capital............ 7,924 12,051 36,204
Retained earnings (accumulated
deficit)............................. (501) (454) 30
------- ------- --------
Total stockholders' equity........... 7,424 11,598 36,236
------- ------- --------
Total liabilities and stockholders'
equity.............................. $53,782 $75,527 $120,198
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-79
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -------------------------------------------------
JANUARY 1, OCTOBER 15,
1994 1994 YEAR ENDED NINE MONTHS ENDED
THROUGH THROUGH DECEMBER 31, SEPTEMBER 30,
OCTOBER 14, DECEMBER 31, --------------- -------------------
1994 1994 1995 1996 1996 1997
----------- ------------ ------ ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $ 5,218 $1,948 $8,277 $12,366 $ 8,356 $ 14,491
Operating expenses:
Direct tower costs..... 1,151 402 1,868 2,849 1,968 2,924
Selling, general and
administrative........ 2,137 380 1,601 2,049 1,485 2,347
Depreciation and amor-
tization.............. 2,106 403 1,908 2,709 1,839 3,369
-------- ------ ------ ------- -------- ---------
Total operating ex-
penses............. 5,394 1,185 5,377 7,607 5,292 8,640
-------- ------ ------ ------- -------- ---------
Operating income
(loss)................. (176) 763 2,900 4,759 3,064 5,851
Interest expense........ 2,117 576 3,068 3,808 2,630 3,900
Other expenses.......... 93 66 414 150 113 213
-------- ------ ------ ------- -------- ---------
Income (loss) before
taxes and extraordinary
items.................. (2,386) 121 (582) 801 321 1,738
Income tax (expense)
benefit................ -- (50) 217 (303) (121) (660)
-------- ------ ------ ------- -------- ---------
Income (loss) before ex-
traordinary items...... (2,386) 71 (365) 498 200 1,078
Extraordinary loss, net
of tax benefit of $117,
$272 and $395
respectively........... -- -- (207) (451) -- (594)
-------- ------ ------ ------- -------- ---------
Net income (loss)....... $ (2,386) $ 71 $ (572) $ 47 $ 200 $ 484
======== ====== ====== ======= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-80
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------------------
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1993...... $ -- $ -- $(1,716) $(1,716)
Net loss........................... -- -- (2,386) (2,386)
---- ---- ------- -------
Balances at October 14, 1994....... $ -- $ -- $(4,102) $(4,102)
==== ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR
--------------------------------------------
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT) EQUITY
------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
Beginning balances at October 15,
1994............................. $-- $ -- $ -- $ --
Sale of 67,500 shares of common
stock............................ 1 6,749 -- 6,750
Allocation of warrant value to
equity........................... -- 675 675
Net income........................ -- -- 71 71
--- ------- ----- -------
Balances at December 31, 1994..... 1 7,424 71 7,496
Allocation of warrant value to eq-
uity............................. -- 500 -- 500
Net loss.......................... -- -- (572) (572)
--- ------- ----- -------
Balances at December 31, 1995..... 1 7,924 (501) 7,424
Common stock issued in connection
with acquisition, 6,481 shares .. -- 4,127 -- 4,127
Conversion of warrants to 1,350
shares of common stock........... -- -- -- --
Net income........................ -- -- 47 47
--- ------- ----- -------
Balances at December 31, 1996..... 1 12,051 (454) 11,598
Conversion of warrants to 24,084
shares of common stock
(unaudited)...................... -- -- -- --
Conversion of warrants with put
feature to 12,642 shares of com-
mon stock (unaudited)............ -- 174 -- 174
Sale of 36,049 shares of common
stock, net of issuance costs (un-
audited)......................... 1 22,979 -- 22,980
Common stock issued in connection
with tower acquisition, 1,442
shares (unaudited)............... -- 1,000 -- 1,000
Net income (unaudited)............ -- -- 484 484
--- ------- ----- -------
Balances at September 30, 1997
(unaudited)...................... $ 2 $36,204 $ 30 $36,236
=== ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-81
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------------------------------
JANUARY 1, OCTOBER 15, NINE MONTHS
1994 1994 YEAR ENDED ENDED
THROUGH THROUGH DECEMBER 31, SEPTEMBER 30,
OCTOBER 14, DECEMBER 31, --------------- -----------------
1994 1994 1995 1996 1996 1997
----------- ------------ ------ ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)...... $(2,386) $ 71 $ (572) $ 47 $ 200 $ 484
Adjustments to recon-
cile net income (loss)
to net cash provided
by operating activi-
ties:
Depreciation and amor-
tization.............. 2,106 403 1,908 2,709 1,839 3,369
Accretion of dis-
counts................ -- 41 202 808 606 339
Deferred income tax-
es.................... -- 50 (334) 31 121 (132)
Deferred loan costs
written-off........... -- -- 324 -- -- 990
Increase in accounts
receivable, net....... (47) (14) (203) (218) (155) (160)
(Increase)/decrease in
prepaid expenses and
other current as-
sets.................. (142) (143) (109) (111) 68 (172)
Increase in accounts
payable............... 51 23 59 231 479 932
Increase (decrease) in
accrued interest pay-
able.................. (81) 380 14 59 102 379
Increase (decrease) in
deferred revenues and
other................. 235 (469) 332 (417) (131) 955
Accrual for imputed
interest on Predeces-
sor subordinated
debt.................. 2,000 -- -- -- -- --
------- -------- ------ ------- ------- --------
Total adjustments.... 4,122 271 2,193 3,092 2,929 6,500
------- -------- ------ ------- ------- --------
Net cash provided by
operating activi-
ties................ 1,736 342 1,621 3,139 3,129 6,984
------- -------- ------ ------- ------- --------
Cash flows from invest-
ing activities:
Payment for purchase of
towers and related as-
sets.................. (999) (444) (7,351) (14,249) (6,240) (46,140)
Proceeds from the sale
of land............... 48 -- 24 -- --
Purchases of land...... -- (55) (500) (1,124) -- (921)
Payment for acquisition
of predecessor........ -- (9,692) -- -- -- --
------- -------- ------ ------- ------- --------
Net cash used in in-
vesting activities.. (951) (10,191) (7,827) (15,373) (6,240) (47,061)
------- -------- ------ ------- ------- --------
Cash flows from financ-
ing activities:
Proceeds from
borrowings on long-
term debt............. -- 21,000 4,646 39,850 2,365 40,100
Net payments on Prede-
cessor revolving line
of credit............. (440) -- -- -- -- --
Proceeds from Predeces-
sor expansion loan.... 486 -- -- -- -- --
Proceeds from issuance
of Successor common
stock................. -- 6,750 -- -- -- 22,980
Proceeds from issuance
of preferred stock.... -- -- 4,133 367 368 --
Payments of long-term
debt.................. -- -- (1,680) (28,736) (1,063) (21,667)
Payments of deferred
loan costs and inter-
est rate cap.......... -- (496) (98) (1,060) (164) (964)
Payments of Predecessor
long-term debt........ (1,116) (14,699) -- -- -- --
Payment of Predecessor
employment contracts.. -- (941) -- -- -- --
Payment of Predecessor
selling costs......... -- (744) -- -- -- --
------- -------- ------ ------- ------- --------
Net cash provided by
(used in) financing
activities.......... (1,070) 10,870 7,001 10,421 1,506 40,449
------- -------- ------ ------- ------- --------
Net increase (de-
crease) in cash and
cash equivalents.... (285) 1,021 795 (1,813) (1,605) 372
Cash and cash equiva-
lents at beginning of
period................. 374 89 1,110 1,905 1,905 92
------- -------- ------ ------- ------- --------
Cash and cash equiva-
lents at end of peri-
od..................... $ 89 $ 1,110 $1,905 $ 92 $ 300 $ 464
======= ======== ====== ======= ======= ========
Supplemental disclosure
of cash flow
information-- cash paid
during the period for
interest............... $ 197 $ -- $2,915 $ 2,925 $ 1,846 $ 3,032
======= ======== ====== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-82
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Formation and Organization
The accompanying consolidated financial statements reflect the financial
position, results of operations, and cash flows of American Tower Corporation
and its wholly-owned subsidiaries, collectively referred to as ATC or the
Company. All significant intercompany transactions and balances have been
eliminated.
ATC was created for the purpose of acquiring 100% of the outstanding common
stock of Bowen-Smith Holdings, Inc., which was completed in October 1994. This
acquisition was accounted for as a purchase. The cost of the acquisition was
allocated on the basis of the estimated fair values of the assets acquired and
the liabilities assumed. The financial information for the period from January
1, 1994 to October 14, 1994 reflects Bowen-Smith Holdings, Inc.'s historical
cost of the assets and liabilities. As a result of the acquisition and
different cost basis with respect to the assets and liabilities of the
Company, financial information for periods before and after October 15, 1994
is not comparable. For purposes of identification and description, Bowen-Smith
Holdings, Inc. is referred to as the "Predecessor" for the period prior to the
acquisition; ATC is the "Successor" for the period subsequent to the
acquisition.
(b) Description of Business
The primary business of the Company is the leasing of antenna and
transmitter space on communication towers to companies using or providing
cellular telephone, paging, microwave and specialized mobile radio services.
ATC currently owns and operates communication tower sites located primarily in
the western, eastern and southern United States.
(c) Interim Financial Information
The unaudited financial statements for the nine months ended September 30,
1996 and 1997 are presented for comparative purposes only and have been
prepared on a basis substantially consistent with that of the audited
financial statements included herein. In the opinion of management, such
unaudited financial statements include all adjustments, which are of a normal
and recurring nature, considered necessary for a fair presentation. Operating
results for the nine-month periods ended September 30, 1997 and 1996 are not
necessarily indicative of the results that may be expected for a full year.
(d) Cash Equivalents
Cash equivalents consist of short-term investments with an original maturity
of three months or less. Cash equivalents include an interest-bearing money
market account with a balance of approximately $1,834,000 at December 31, 1995
and $12,000 at December 31, 1996.
(e) Rental Towers and Related Fee Based Assets
Rental towers and related fee based assets are stated at cost. Depreciation
on rental towers and related fee based assets is calculated on the straight-
line method over the estimated useful lives of the assets which range from 3
to 25 years.
(f) Other Assets
Other assets include licenses and permits which are amortized on a straight-
line basis over their expected period of benefit, 25 years, and a noncompete
agreement with the Predecessor majority stockholder which is amortized on a
straight-line basis over its seven year term. Also included are deferred loan
costs associated with various debt issuances which are amortized over the
terms of the related debt based on the amount of outstanding debt using the
interest method.
F-83
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
on January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or the fair
value less costs of disposal. Adoption of this Statement did not have a
material impact on the Company's financial position, results of operations, or
liquidity.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(i) Fair Value of Financial Instruments
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 107, Disclosure about Fair Value of
Financial Instruments. This Statement requires the Company to disclose
estimated fair values for its financial instruments.
Fair value estimates are made at discrete points in time based on relevant
market information. These estimates may be subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be
determined with precision.
The Company believes that the carrying amounts of its current assets and
current liabilities approximate the fair value of such items due to their
short-term nature. The carrying amount of long-term debt approximates its fair
value because the interest rates approximate market.
(j) Revenue Recognition
Revenues are recognized as tower services are provided. Amounts billed or
received prior to services being performed are deferred until such time as the
revenue is earned.
(k) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-
Based Compensation, which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
F-84
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
(l) Interest Rate Cap Agreements
The Company is party to a financial instrument to reduce its exposure to
fluctuations in interest rates. The purchase price of the interest rate cap
agreements is capitalized and included in prepaid expenses in the accompanying
consolidated balance sheets and amortized over the life of the agreements
using the straight-line method.
(m) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(n) Reclassifications
Certain reclassifications have been made to prior period amounts in order to
conform to the current presentation.
(2) RENTAL TOWERS AND RELATED FEE BASED ASSETS
Asset Acquisitions
In December 1995, the Company acquired in a single transaction substantially
all of the tower sites and locations of CSX Realty Development Corporation
(CSX) for $9,750,000 which was funded through cash and seller financed debt.
In addition during 1995, the Company acquired 81 other tower sites in several
unrelated transactions.
In October 1996, the Company acquired in a single transaction substantially
all of the tower sites and locations of Prime Communications Sites Holding,
L.L.C. and its subsidiary (Prime) for approximately $15.3 million which was
funded through borrowings under the Company's credit facility, seller financed
debt and the issuance of common stock of the Company to the seller. In
addition, during 1996 the Company acquired four other tower sites in two
unrelated transactions. The purchase price for all acquisitions has been
allocated to the land, towers and related fee based assets and licenses and
permits based on their respective estimated fair values.
The following unaudited proforma consolidated results of operations give
effect to the above acquisitions as though the 1995 and 1996 acquisitions had
occurred on January 1, 1995:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C> <C>
Rental revenues............................................ $10,575 $13,565
Operating income........................................... $ 3,737 $ 4,855
Net loss................................................... $(1,492) $ (346)
</TABLE>
F-85
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
During the nine months ended September 30, 1997, the Company acquired in a
single transaction 32 tower sites for approximately $11.8 million. In
addition, during 1997 the Company acquired 45 tower sites in several unrelated
transactions.
Tower Disposal
On January 13, 1997, the Company entered into a binding letter agreement
with a related shareholder and director to sell 45 communication towers for a
purchase price of $700,000. The closing of this transaction occurred during
March 1997. At the closing, the Company sold the communication towers to the
shareholder in exchange for a $700,000 reduction in payments owed under the
subordinated note payable issued in October 1994. See Note 6 for further
discussion. Due to the agreement, the related assets have been reflected as
assets held for resale on the December 31, 1996 balance sheet.
(3) PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Prepaid land leases................. $474 $619 $778
Materials and supplies.............. 52 -- --
Other current assets................ 156 174 187
---- ---- ----
$682 $793 $965
==== ==== ====
</TABLE>
(4) OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred loan costs, net............. $ 145 $1,009 $ 778
Licenses and permits, net............ 3,366 4,428 4,944
Non-compete costs, net............... 823 623 573
Other assets......................... 30 209 268
------ ------ ------
$4,364 $6,269 $6,563
====== ====== ======
</TABLE>
(5) DEFERRED REVENUES AND OTHER CURRENT LIABILITIES
Deferred revenues and other current liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred revenues................... $ 447 $201 $ 886
Deferred compensation contracts..... 525 300 150
Accrued expenses and other.......... 423 477 706
------ ---- ------
$1,395 $978 $1,742
====== ==== ======
</TABLE>
F-86
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
(6) LONG-TERM DEBT
On June 30, 1997, the Company entered into a new senior credit agreement
(credit agreement). The credit agreement includes a $100 million revolving
line of credit, which included a sub-allotment for letters of credit and a $25
million term loan facility. In connection with entering into the credit
agreement, the Company expensed $594,000, net of taxes, of deferred loan and
other financing costs associated with the prior credit facility. These
deferred loan and other financing costs written off in 1997 have been
reflected as extraordinary loss in the consolidated statements of operations.
On October 11, 1996, the Company entered into a senior credit facility
(credit facility) in connection with the acquisition of the communication
towers from Prime as discussed in Note 2.
The credit facility included a $23 million revolving line of credit, which
included a sub-allotment for letters of credit, and a $37 million term loan
facility. The Company utilized the proceeds of the term loan to (i) repay
$21.6 million of principal and interest to its existing senior lenders, (ii)
prepay in full $6.1 million of principal and interest to its senior
subordinated lender, and (iii) to fund $8.6 million of the purchase price for
the Prime acquisition. The Company had borrowed an additional $2.8 million
under the revolving credit facility as of December 31, 1996.
The credit facility incurred interest at LIBOR plus 275 basis points for
interest periods ranging up to five months; thereafter, the credit facility
incurred interest at LIBOR plus an applicable margin, not to exceed 275 basis
points, based upon a defined leverage ratio, for interest periods of one,
three or six months. The term loan portion of the credit facility required
principal amortization with quarterly payments totaling $5.6 million in 1999,
$7.4 million in 2000 and 2001, $9.3 million in 2002 and $7.3 million in 2003.
The revolving credit facility required the maximum amount outstanding to be
reduced quarterly beginning in January 1999. The maximum amount allowed to be
outstanding under the revolving credit facility in 1999 is $22.4 million, in
2000 is $19.6 million, in 2001 is $15.0 million, in 2002 is $10.4 million, in
2003 is $4.6 million with a final maturity of October 2003. The credit
facility contained restrictions on payment of dividends, and set forth minimum
operating cash flows, as defined, to be attained by the Company.
Immediately prior to entering into the credit facility in October 1996, the
Company owed its senior lenders $21.5 million under a term loan, revolving
line of credit and acquisition line of credit facilities which had been
amended and extended in December 1995. The outstanding balance of the prior
senior agreement bore interest at LIBOR plus 275 basis points. In connection
with entering into the credit facility, the Company expensed $451,000, net of
taxes, of deferred loan and other financing costs associated with prior credit
facilities. In connection with the amendment of the Company's senior credit
agreement in December 1995, the Company expensed $207,000, net of taxes, of
deferred loan and other financing costs associated with prior credit
facilities. Such deferred loan and other financing costs written off in 1996
and 1995 have been reflected as extraordinary losses in the consolidated
statements of operations.
Seller Acquisition Financing
In connection with the acquisition of the towers and related sites in
October 1996 as more fully discussed in Note 2 and above, the Company issued
an aggregate of $2.5 million of subordinated term notes to certain sellers.
Payment terms require (i) a single installment on October 11, 2004 or (ii)
immediate payment upon an initial public offering. The subordinated term notes
bear interest at 11% payable quarterly commencing January 1997. During 1997
these notes were fully repaid.
F-87
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Term note payable, due in quarterly
payments beginning in September
1999, interest at a base rate, as
defined........................... $ -- $ -- $63,300
Term note payable, due in quarterly
payments beginning in January
1999, interest at 8.38% until May
1997 at which time interest is
LIBOR plus a maximum of 2.75%..... 18,480 39,850 --
Seller financing, noninterest
bearing secured note payable, due
in annual installments commencing
December 20, 1996 through December
20, 2000.......................... 7,313 6,313 6,313
Senior subordinated note, interest
payable in quarterly installments
at 12.75% per annum; principal
payments due and payable in
prescribed amounts beginning on
April 1, 2001; original principal
reduced by value of stock warrant
(see Note 9)...................... 6,000 -- --
Subordinated note payable to
shareholder, interest payable in
quarterly installments at 10.5%
per annum; payment of principal
due in annual installments
beginning November 15, 2001;
original principal reduced by
value of stock warrant (see Note
9)................................ 3,000 3,000 --
Subordinated notes payable,
interest payable in quarterly
installments at 11.0% per annum;
single installment due October
2004, or immediately upon an
initial public offering........... -- 2,561 --
Noninterest bearing unsecured note
payable, maturing in 1999......... 500 500 500
Noninterest bearing unsecured note
payable, due in two installments
on July 1, 1995 and January 1,
1996.............................. 500 -- --
Note payable, due in quarterly
installments commencing January 1,
1995 bearing interest at 10.0%.... 400 300 --
Other.............................. 129 43 43
Discounts associated with
noninterest bearing obligations... (2,221) (1,671) (1,339)
Discount assigned to stock warrants
(see Note 9)...................... (646) (50) --
------- ------- -------
Total long-term debt........... 33,455 50,846 68,817
Less current portion............... 1,580 1,075 1,000
------- ------- -------
Long-term debt excluding current
portion.......................... $31,875 $49,771 $67,817
======= ======= =======
</TABLE>
The Company is a party to a financial instrument in order to reduce its
exposure to fluctuations in interest rates. The agreement provides for the
third parties to make payments to the Company whenever a defined floating
interest rate exceeds 10 percent per annum. No such payments were made in 1995
or 1996. Payments on the interest rate cap agreements are based on the
notional principal amount of the agreements; no funds were actually borrowed
or are to be repaid as of December 31, 1996. The unamortized portion of the
purchase price was
F-88
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
approximately $107,000 and $50,000 at December 31, 1995 and 1996,
respectively. $5,000,000 under this interest rate cap agreement expired in
1995 and the remaining $9,000,000 agreement expires in December 1997.
The aggregate annual maturities of long-term debt (not reduced for discount
rates on non-interest bearing obligations) as of September 30, 1997 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1997.............................. $ 1,000
1998.............................. 1,007
1999.............................. 2,757
2000.............................. 4,134
2001.............................. 6,010
Thereafter........................ 55,248
-------
$70,156
=======
</TABLE>
(7) FEDERAL INCOME TAXES
Income tax expense for the successor period ended December 31, 1994, and the
years ended December 31, 1995 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ----- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current..................................................... $-- $ -- $--
Deferred.................................................... 50 (217) 303
---- ----- ----
$ 50 $(217) $303
==== ===== ====
</TABLE>
Income tax expense at December 31, 1994, 1995 and 1996 differed from the
amounts computed by applying the U.S. federal income tax rate of 34% to income
before taxes and extraordinary items as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ----- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit).................. $41 $(198) $272
State taxes................................................ 2 29 28
Other...................................................... 7 (48) 3
--- ----- ----
Total...................................................... $50 $(217) $303
=== ===== ====
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards
(NOLs) of approximately $9,258,000 for U.S. Federal income tax purposes. The
NOLs, if unused, will expire between 2004 and 2008. The portion of the NOLs
which existed prior to October 15, 1994 are subject to annual limitations
imposed by the Internal Revenue Code under Section 382.
F-89
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Operating loss and alternative minimum tax credit
carryforward................................................ $1,968 $3,472
Accrued liabilities.......................................... 400 64
Other........................................................ 27 72
------ ------
Deferred tax assets......................................... 2,395 3,608
Deferred tax liability - rental towers and related fee based
assets,
principally due to differences in basis for financial
reporting purposes and tax purposes.......................... 8,701 9,945
------ ------
Net deferred tax liability................................... $6,306 $6,337
====== ======
</TABLE>
There is no valuation allowance at December 31, 1995 and 1996 recorded
against the deferred tax assets. It is the opinion of management that the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies will more likely than not result in the
realization of the deferred tax assets.
(8) REDEEMABLE PREFERRED STOCK
In December 1995, the Company commenced a private placement offering to its
existing security holders to sell up to 22,500 newly created shares of Series
A Redeemable Preferred Stock, $0.01 par value (Series A Preferred Stock), at
$200 per share. Net proceeds to the Company were approximately $4,500,000. As
of December 31, 1995, the Company had received $4,133,000 in cash for the
offering. The remaining $367,000 was received in January 1996.
The shares of Series A Preferred Stock were sold together with 10-year
warrants to purchase a total of 22,500 shares of Common Stock at a nominal
exercise price. The Company determined the warrants to have an estimated fair
value of $500,000 at the offering date which was recorded as additional paid-
in capital and a reduction of the outstanding Series A Preferred Stock. As of
September 30, 1997, all of these warrants had been exercised.
Each share of Series A Preferred Stock has a liquidation preference of $200
per share. The Company at its option can redeem any or all the outstanding
shares of preferred stock for $200 per share. The Company is required to
redeem all such shares at a price of $200 per share upon the occurrence of (i)
a public offering or (ii) a change of control. The preferred shares have no
voting or dividend rights.
(9) STOCKHOLDERS' EQUITY
In June 1997, the Company completed a private placement offering of common
stock with Clear Channel Communications, Inc. whereby the Company raised net
proceeds of $23 million. The Company utilized the private placement proceeds
in connection with securing the new senior credit agreement described in Note
6.
In conjunction with the purchase of the common stock of the predecessor, the
Company issued warrants to the senior subordinated debt holder for 12,642
shares of common stock with an exercise price of $.01 per share. This warrant
is immediately exercisable into common stock of the Company. The Company
determined this warrant to have an estimated value of $600,000 at the
acquisition date which was recorded as additional paid-in
F-90
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
capital and a reduction of the outstanding principal of the senior
subordinated note payable. The Company recorded accretion of the debt discount
of $16,000, $75,000 and $59,000 for the successor period ended December 31,
1994, and the years ended December 31, 1995 and 1996, respectively. As
discussed further in Note 6, the Company prepaid the senior subordinated debt
holder in connection with the October 1996 amendment and extension of the
Company's senior credit facility. The remaining unamortized debt discount of
$450,000 was included as an extraordinary loss on the consolidated statement
of operations for the year ended December 31, 1996. The senior subordinated
warrant holder can require the Company to purchase the stock warrants
beginning in October 2002 (put right). The put amount is defined in the
warrant agreement with the senior subordinated lender. At December 31, 1995
and 1996, the accompanying consolidated financial statements include an
accrual for $115,000 and $174,000, respectively, related to the put feature of
the warrants granted to the senior subordinated lender. These warrants were
exercised on June 30, 1997.
A warrant was also issued to one of the previous sellers for 3,115 shares of
common stock with a nominal exercise price. Due to certain restrictions as to
the exercisability of this warrant, it was determined to have a value of
$75,000. This amount is reduced against the principal amount of the seller
note. The Company recorded accretion of the debt discount of $12,000 for each
of the years ended December 31, 1995 and 1996. This warrant was exercised in
1997 in connection with the retirement of the subordinated note payable to
shareholder.
(10) STOCK OPTION PLAN
In 1995, the Company adopted a stock option plan (the Plan) pursuant to
which the Company's Board of Directors may grant stock options to officers and
key employees. The Plan authorizes grants of options to purchase up to 9,231
shares of common stock. Stock options are granted with an exercise price equal
to the stock's fair market value at the date of grant. All stock options have
10-year terms and vest and become fully exercisable after a range of 3 to 4
years from the date of grant.
At December 31, 1996, there were 2,981 additional shares available for grant
under the Plan. The per share weighted-average value of stock options granted
during 1995 and 1996 was $37 and $192, respectively, on the date of grant,
using the Black Scholes model with the following assumptions: risk-free
interest rate of 5.71% for the 1995 options and 6.58% for the 1996 options,
expected life of 8 years, expected volatility of 0%, and an expected dividend
yield of 0%.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS No. 123, the Company's net income would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
----- -----
(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net income(loss)
As reported................................................... $(572) $ 47
Pro forma..................................................... (579) (231)
</TABLE>
F-91
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
At December 31, 1996 the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $100-$475 and 3.7 years,
respectively. Stock option activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
NUMBER
OF WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ ----------------
<S> <C> <C>
Balance at December 31, 1994........................ -- $--
Granted............................................ 1,100 100
----- ----
Balance at December 31, 1995........................ 1,100 100
Granted............................................ 5,650 475
Forfeited.......................................... (500) 100
----- ----
Balance at December 31, 1996........................ 6,250 $439
===== ====
</TABLE>
At December 31, 1996, the number of options exercisable was 166 and the
weighted-average exercise price of these options was $100 per share. During
the first quarter of 1997, the Company granted an additional 250 options at an
exercise price of $475.
(11) RELATED PARTY TRANSACTIONS AND COMMITMENTS
Leases
In the ordinary course of business the Company leases land and buildings
under long-term (ranging from one to ten years) operating leases. Total rent
expense relating to land and building leases was approximately $112,000,
$459,000, $665,000 and $946,000 for the successor period ended December 31,
1994 and the years ending December 31, 1995 and 1996 and the nine months ended
September 30, 1997, respectively.
Minimum future lease payments for the years ending December 31, are as
follows:
<TABLE>
<S> <C>
1997.......................... $1,107,000
1998.......................... 787,000
1999.......................... 677,000
2000.......................... 600,000
2001.......................... 623,000
Thereafter.................... 2,738,000
----------
Total minimum lease
payments................... $6,532,000
==========
</TABLE>
Related Party Transactions
The Company has entered into consulting agreements with three shareholders.
The total management payments under these agreements was approximately $38,000
for the successor period ended December 31, 1994, $300,000 for each of the
years ended December 31, 1995 and 1996, respectively, and $225,000 for the
nine months ended September 30, 1997, and future minimum payments required by
these management agreements are $300,000, $300,000 and $262,500 for the years
ended December 31, 1997, 1998 and 1999, respectively.
The Company has entered into a management agreement with a private
investment firm which is a significant shareholder of the Company. The Company
paid $121,000, $127,000 and $341,000 to this investment firm during the years
ended December 31, 1995 and 1996 and the nine months ended September 30, 1997,
respectively. In addition, the Company paid the investment firm a financial
advisory fee of $600,000 in
F-92
<PAGE>
AMERICAN TOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996 AND SEPTEMBER 30, 1996 AND 1997 (UNAUDITED)
connection with the Bowen-Smith Holdings, Inc. acquisition in October 1994.
The Company's president and chairman, as well as another director are the
principal executive officers in the private investment firm.
The Company leases land for certain of its tower sites from an entity owned
by a shareholder. During the period from October 15 to December 31, 1994 and
the years ended December 31, 1995 and 1996, rental expense relating to these
land leases totaled $12,500, $33,000 and $35,000, respectively. Additionally,
prior to 1997, the Company leased its office facility from the same entity.
Annual expense for the office facility approximated $48,000 per year. The same
shareholder is President of a tower fabrication and construction company. The
Company has acquired the majority of its new towers from this entity at prices
and on terms it considers no less favorable than could have been obtained from
other vendors. During the years ended 1995 and 1996 and the nine months ended
September 30, 1997, the Company made payments of $304,000, $1,710,000 and
$2,124,000, respectively, to this entity.
(12) SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
The Company had the following noncash financing and investing activities:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable issued for CSX acquisition................ $ -- $7,664 $ --
Notes payable issued for tower acquisitions............ -- 500 2,361
Common stock issued for Prime acquisition.............. -- -- 4,127
Notes payable issued for noncompete agreements......... 1,000 160 --
Accrued acquisition costs.............................. -- 150 --
Accrued debt refinancing costs......................... -- 100 --
Note payable issued in acquisition..................... 3,000 -- --
Note payable to employee trust assumed................. 500 -- --
Deferred compensation contracts assumed................ 846 -- --
</TABLE>
(13) SUBSEQUENT EVENTS (UNAUDITED)
In December 1997, the Company entered into a Merger Agreement with American
Tower Systems Corporation (ATS), which subject to certain significant
conditions, will result in the merger of the Company into ATS. The merger is
scheduled to be completed during the first half of 1998.
F-93
<PAGE>
APPENDIX I
<PAGE>
BUSINESS OF AMERICAN RADIO
GENERAL
American Radio is a national radio broadcasting company committed to
developing and operating clusters of complementary radio stations in major and
growing advertising markets. ARS is among the five largest radio groups in the
nation owning and/or programming approximately 90 radio stations in 19 markets
across the United States. Consistent with its strategy of operating in the top
60 markets, American Radio owns or programs pursuant to LMAs stations in the
following markets: Boston/Worcester, Seattle, St. Louis, Baltimore,
Cincinnati, Portland, Pittsburgh, Sacramento, Charlotte, Kansas City,
Hartford, Austin, Buffalo, Las Vegas, San Jose, West Palm Beach, Rochester,
Fresno and Riverside/San Bernardino. American Radio station groups ranked
first or second among station operators in radio advertising revenues in 18 of
its 19 markets, based on the Duncan Guide.
The following table sets forth certain information regarding ARS and its
markets, assuming all of the Recent Transactions had been consummated as of
January 1, 1996.
<TABLE>
<CAPTION>
NUMBER OF
MARKET ARS STATIONS
RANKING BY REVENUE ---------
REVENUE RANK FM AM
---------- ------- ---- ----
<S> <C> <C> <C> <C>
Boston(1)........................................ 9 2 3 4
Seattle.......................................... 13 2 4 1
St. Louis........................................ 18 1 4 0
Cincinnati....................................... 20 2 3 --
Baltimore........................................ 21 1 3 2
Portland......................................... 22 1 5 1
Pittsburgh....................................... 24 2 3 --
Sacramento....................................... 25 1 5 2
Charlotte........................................ 27 1 5 2
Kansas City...................................... 29 2 4 1
Hartford......................................... 35 1 3 1
Austin........................................... 37 4 3 1
Las Vegas........................................ 39 1 4 2
Buffalo.......................................... 42 2 3 1
San Jose(2)...................................... 43 1 4 --
West Palm Beach.................................. 49 2 2 --
Rochester........................................ 53 1 4 --
Fresno........................................... 62 1 5 2
Riverside/San Bernardino/Sun City................ 64 1 3 --
</TABLE>
- --------
(1) Includes one AM station and one FM station in Worcester, MA. This includes
stations in a regional market that do not necessarily constitute a
"market" under the definition of overlapping principal community contours
of the FCC.
(2) Includes one FM station in the Fremont/San Francisco area and one FM
station in the Monterey area. This includes stations in a regional market
that does not necessarily constitute a "market" under the definition of
overlapping principal community contours of the FCC.
RECENT TRANSACTIONS
Since January 1, 1997, American Radio has consummated transactions relating
to the acquisition of approximately 50 stations (before giving effect to
subsequent exchanges and dispositions) for an aggregate
I-1
<PAGE>
acquisition price of approximately $1.1 billion. For additional information
with respect to recent acquisitions, see the ARS 10-K and the ARS September
1997 10-Q.
Other Transactions. American Radio may, from time to time, pursue the
acquisition, exchanges and disposition of other stations, although there are
no definitive binding agreements with respect to any such transactions, except
as reflected in Recent Transactions. Any such acquisitions, exchanges or
dispositions will require the approval of CBS under the provisions of the
Merger Agreement as well as that of the FCC.
I-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS OF AMERICAN RADIO
The following unaudited pro forma condensed consolidated financial
statements of American Radio consist of an unaudited pro forma balance sheet
as of September 30, 1997 and unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1996 and for the nine
months ended September 30, 1997. With respect to acquisitions, the pro forma
statements give effect only to the ARS Pro Forma Transactions and the ATS Pro
Forma Transactions (as defined in the Notes hereto) based on their
significance in relation to all of ARS' acquisitions, including the Recent
Transactions. The unaudited pro forma balance sheet and the unaudited pro
forma condensed consolidated statements of operations should be read in
conjunction with ARS' consolidated financial statements and notes thereto, as
well as the consolidated financial statements and notes thereto of EZ and
certain businesses that have been or may be acquired, which are incorporated
by reference in this Prospectus. For purposes of presenting the unaudited pro
forma balance sheet and the unaudited pro forma condensed statements of
operations, the pro forma amounts included for EZ do not give effect to
acquisitions consummated during 1996 or 1997. See Note 3 to the consolidated
financial statements of EZ in the EZ 10-K incorporated herein by reference.
The unaudited pro forma condensed consolidated balance sheet and the unaudited
pro forma condensed consolidated statements of operations are not necessarily
indicative of the financial condition or the results that would have been
reported had such events actually occurred on the date specified, nor are they
indicative of ARS' future results of operations.
I-3
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR ARS
AND ATS ADJUSTMENTS
PRO FORMA ARS FOR THE TOWER
HISTORICAL TRANSACTIONS(A) PRO FORMA SEPARATION(B) PRO FORMA
---------- --------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 13,822 $ 464 $ 14,286 $ (2,759) $ 11,527
Accounts receivable,
net.................... 84,159 976 85,135 (2,536) 82,599
Other current assets.... 9,640 965 10,605 (1,675) 8,930
Property and equipment,
net.................... 180,657 179,916 360,573 (228,023) 132,550
Restricted cash......... 34,441 34,441 34,441
Station investment
notes.................. 25,756 25,756 25,756
Intangible assets, net.. 1,592,772 527,794 2,120,566 (587,613) 1,532,953
Deposits and other
assets................. 21,678 (2,000) 19,678 (1,015) 18,663
---------- -------- ---------- --------- ----------
Total................. $1,962,925 $708,115 $2,671,040 $(823,621) $1,847,419
========== ======== ========== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities,
excluding current
portion of long-term
debt................... $ 47,742 $ 5,371 $ 53,113 $ (10,516) $ 42,597
Deferred income taxes... 203,835 29,657 233,492 (30,741) 202,751
Other long-term
liabilities............ 11,072 173 11,245 (202) 11,043
Long-term debt,
including current
portion................ 809,015 266,817 1,009,232 (202,420) 873,412
Minority interest....... 774 78,200 78,974 (78,974) 0
Cumulative Preferred
Stock.................. 215,550 215,550 215,550
Stockholders' equity.... 674,937 327,897 1,069,434 (500,768) 502,066
---------- -------- ---------- --------- ----------
Total................. $1,962,925 $708,115 $2,671,040 $(823,621) $1,847,419
========== ======== ========== ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet of
American Radio.
I-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) The ARS Pro Forma Transactions and ATS Pro Forma Transactions will be
accounted for under the purchase method of accounting. The following
adjustments have been recorded as of September 30, 1997: (i) ARS borrowed
approximately $118.8 million, net and used currently outstanding escrow
deposits to finance the ATS Pro Forma Transactions; (ii) ARS borrowed
approximately $107.6 million, net and used currently outstanding escrow
deposits to finance the ARS Pro Forma Transactions relating to American Radio;
and (iii) minority interests attributable to the ATS Common Stock issued upon
consummation of the Gearon Transaction (valued at $48.0 million) and for cash
($30.2 million) upon consummation of the ATS Stock Purchase Agreement (the
remaining proceeds of the ATS Stock Purchase Agreement represent secured notes
of $49.4 million and have been recorded as credit to stockholders' equity).
The preliminary estimates of fair value of property, plant and equipment and
FCC licenses may change upon final appraisal.
(b) The accounts of ATS and its subsidiaries have been eliminated pursuant
to the assumed consummation of the Tower Separation. The Tower Separation
reflects the recapitalization of ATS prior to the Tower Separation, as if the
Tower Separation occurred on September 30, 1997, including: (i) a capital
contribution of $98.6 million (including the $118.8 million referred to in
clause (i) of (a) above), representing the difference between the aggregate
amount invested by ARS in ATS at September 30, 1997 of $51.4 million and the
maximum amount ($150.0 million) permitted by the Merger Agreement; (ii)
payment of the $49.4 million of secured notes referred to in clause (iii) of
note (a) above; and (iii) a tax liability attributed to the Tower Separation
of $20.0 million which is the maximum amount required to be borne by ARS
pursuant to the provisions of the Merger Agreement. The table above reflects
elimination of the intercompany balance through an ARS capital contribution
and the incurrence by ATS of external borrowings.
I-5
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR ARS FOR THE
AND ATS PRO FORMA ARS TOWER
HISTORICAL TRANSACTIONS(A)(B) PRO FORMA SEPARATION(B) PRO FORMA
---------- ------------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............ $178,019 $203,759 $381,778 $(65,873) $315,905
Operating expenses...... 120,004 127,127 247,131 (37,633) 209,498
Net LMA expenses........ 8,128 8,128 8,128
Depreciation and
amortization........... 17,810 91,371 109,181 (49,906) 59,275
Corporate general and
administrative
expenses............... 5,046 1,000 6,046 (830) 5,216
-------- -------- -------- -------- --------
Operating income
(loss)................. 27,031 (15,739) 11,292 22,496 33,788
-------- -------- -------- -------- --------
Other (income) expense:
Interest expense,
net.................. 16,762 47,743 64,505 (9,971) 54,534
(Gains) losses on sale
of assets, net....... 308 308 (149) 159
-------- -------- -------- -------- --------
Total other
expense............ 17,070 47,743 64,813 (10,120) 54,693
-------- -------- -------- -------- --------
Income (loss) before
income taxes........... 9,961 (63,482) (53,521) 32,616 (20,905)
Provision (benefit) for
income taxes(c)........ 4,826 (23,117)(c) (18,291) 7,580 (10,711)
-------- -------- -------- -------- --------
Net income (loss)....... 5,135 (40,365) (35,230) 25,036 (10,194)
Preferred stock
dividends.............. (4,973) (22,750) (27,723) (27,723)
-------- -------- -------- -------- --------
Net income (loss)
applicable to common
stockholders........... $ 162 $(63,115) $(62,953) $ 25,036 $(37,917)
======== ======== ======== ======== ========
Net income (loss) per
common share........... $ 0.01 $ (2.26) $ (1.36)
======== ======== ========
Weighted average common
shares outstanding..... 20,510 7,383 27,893 27,893
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
of American Radio.
I-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1996 gives effect to (i) the EZ Merger, the
Hartford Transaction, the HBC Merger (excluding the Omaha stations all of
which have been sold), the BayCom Transaction and the Baltimore Transaction
(collectively, the "ARS Pro Forma Transactions"); (ii) the ATS Pro Forma
Transactions; and (iii) the Tower Separation, as if each of the foregoing had
occurred on January 1, 1996. See the Unaudited Pro forma Condensed
Consolidated Financial Statements of ATS in the Information Statement for
information with respect to the ATS Pro Forma Transactions.
ARS PRO FORMA TRANSACTIONS
EZ Merger: Pursuant to the consummation of the EZ Merger on April 4, 1997,
ARS acquired 18 FM and six AM stations in eight markets: Seattle, St. Louis,
Pittsburgh, Sacramento, Charlotte, Kansas City, New Orleans and Philadelphia,
assumed approximately $222.4 million of long-term debt, paid approximately
$108.9 million and issued approximately 8.3 million shares of ARS Class A
Common Stock to the EZ stockholders. The foregoing station information does
not give effect to the consummation of certain then prospective EZ
transactions which were subsequently consummated. The aggregate purchase price
was approximately $830.0 million, including goodwill, assumed liabilities and
transaction costs.
Baltimore Transaction: In February 1997, ARS acquired WWMX-FM and WOCT-FM
serving Baltimore (the "Baltimore Transaction") for approximately $90.0
million. ARS began programming and marketing the stations pursuant to an LMA
in November 1996.
HBC Merger: In July 1996, ARS consummated a merger (the "HBC Merger")
pursuant to which Henry Broadcasting Company ("HBC") merged into ARS. Pursuant
to the HBC Merger, ARS issued an aggregate of 1,879,034 shares of ARS Class A
Common Stock valued at $64.0 million, paid approximately $10.4 million in
cash, and assumed long-term debt of approximately $37.3 million which was paid
in full at closing. As part of a related transaction, ARS acquired certain
real estate used in the business of HBC for approximately $2.0 million and
obtained a five-year option to acquire certain other real estate for
approximately $1.0 million. HBC owned an aggregate of 12 stations, of which
nine were included as part of the HBC Merger as follows: KUFO-FM and KUPL-AM
in Portland, Oregon, KYMX-FM and KCTC-AM in Sacramento, KGOR-FM and KFAB-AM in
Omaha and KSKS-FM, KRNC-FM and KMJ-AM in Fresno.
Hartford Transaction: In May 1996, ARS consummated the acquisition of WTIC-
FM and WTIC-AM in Hartford. In August 1995, ARS had entered into a series of
transactions (the "Hartford Transaction") with the owner of those stations and
certain affiliates, pursuant to which, among other things, ARS agreed to
purchase the assets of those stations for approximately $39.0 million,
including approximately $1.1 million of working capital and an obligation to
make payments aggregating $8.5 million pursuant to a consulting and non-
competition agreement with an affiliate of the owner of the stations. Also as
part of the Hartford Transaction, ARS paid $1.0 million for a two-year option
to purchase for $1.00 the New England Weather Service (which provides weather
information to subscribers). ARS exercised its option and consummated the
acquisition in the fourth quarter of 1997. Because ARS was prevented under the
then current FCC regulations from acquiring these stations, it loaned an
aggregate of $35.5 million to the owner of such stations and an affiliate
thereof and made a $2.0 million escrow deposit. A portion of the loans was
used to finance the acquisition of the stations and the balance was used to
satisfy ARS' obligations under the consulting and non-competition agreement.
ARS also paid $3.5 million to purchase the tower of one of the stations in
October 1995.
BayCom Transaction: In August 1996, ARS acquired KUPL-FM and KKJZ-FM,
serving Portland, Oregon, and KSJO-FM and KBAY(FM) (formerly KUFX-FM), serving
San Jose (the "BayCom Transaction"), for an aggregate purchase price of
approximately $103.0 million.
I-7
<PAGE>
ATS PRO FORMA TRANSACTIONS
Meridian Transaction: In July 1997, ATS acquired 56 sites and a tower site
management business in southern California for an aggregate purchase price of
approximately $33.5 million.
Diablo Transaction: In October 1997, ATS acquired 110 sites and a site
management business primarily in northern California for an aggregate purchase
price of approximately $45.0 million.
Tucson Transaction: In October 1997, ATS entered into an agreement to
purchase six towers in Tucson for approximately $12.0 million. Consummation of
the transaction, which is subject to certain conditions, is expected to occur
in the first quarter of 1998.
MicroNet Transaction: In October 1997, ATS acquired 128 owned or leased
tower sites, principally in the Mid-Atlantic region, with the remainder in
California and Texas for an aggregate purchase price of approximately $70.25
million. The acquisition also included ATS' video, voice and data transmission
business.
Gearon Transaction: In January 1997, ATS acquired (through a merger with
American Tower Systems (Delaware), Inc., a wholly-owned subsidiary of ATS) a
company engaged primarily in the site acquisition business for unaffiliated
third parties that also owns or has under construction approximately 40 tower
sites. The merger price of approximately $80.0 million was paid by delivery of
5.3 million shares of ATS Class A Common Stock and approximately $32.0 million
in cash and assumed liabilities.
ATC Merger: In December 1997, ATS entered into an agreement to acquire
(through the ATC Merger) a company which is a leading independent owner and
operator of wireless communications towers with more than 650 towers on
approximately 618 sites in 31 states. Pursuant to the ATC Merger, ATS will
issue an aggregate of approximately 31.1 million shares of ATS Common Stock
(including shares issuable upon exercise of options). Consummation of the ATC
Merger, is conditioned on, among other things, the expiration or earlier
termination of the waiting period under the HSR Act, and consummation of the
Tower Separation and, accordingly is not expected to take place until the
spring of this year.
Tower Separation: ARS will distribute all of the ATS Common Stock owned by
it to the holders of ARS Common Stock, to the holders of options to acquire
ARS Common Stock and to the holders of ARS Convertible Preferred Stock upon
conversion of ARS Convertible Preferred Stock, pursuant to either the Merger
or the Tower Merger.
(a) To record the results of operations for the ARS Pro Forma Transactions.
The results of operations have been adjusted to (i) reverse historical
interest expense of $25.9 million and $1.3 million of interest income recorded
on the Hartford Transaction station investment notes, (ii) record interest
expense of $41.0 million for the year ended December 31, 1996, as a result of
approximately $162.8 million of additional debt and the refunding of
approximately $72.4 million of existing EZ debt, both bearing interest at an
assumed rate of 8.75%, and the assumption of $150.0 million principal amount
of notes bearing interest at 9.75%, all to be incurred in connection with the
ARS Pro Forma Transactions. Weighted average common shares outstanding have
been adjusted to reflect approximately 8.3 million shares issued in the EZ
Merger; because the pro forma adjustments result in a loss, approximately
900,000 common equivalent shares have been excluded from pro forma earnings
per share as they become anti-dilutive. Each 1/4% change in the interest rate
applicable to the change in floating rate debt would increase or decrease, as
appropriate, the net adjustment to interest expense by approximately $0.6
million.
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $13.4 million for the year ended
December 31, 1996 and record depreciation and amortization expense of $42.6
million for the year ended December 31, 1996 based on estimated allocations of
purchase prices. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of ten years. Costs of
acquired FCC licenses and goodwill for the transactions are amortized over 25
and 40 years, respectively. The preliminary estimates of the fair value of
property, plant and equipment, FCC licenses and goodwill may change upon final
appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to
I-8
<PAGE>
owners and/or executives not retained by ARS. Because ARS maintains a separate
corporate headquarters which provides services substantially similar to those
represented by these costs, they are not expected to recur following
acquisition. After giving effect to an estimated $1.0 million of incremental
costs, ARS believes that it has existing management capacity sufficient to
provide such services without incurring additional incremental costs.
The following table sets forth the historical results of operations for the
ARS Pro Forma Transactions for the periods in which they were not owned by ARS
for the year ended December 31, 1996.
<TABLE>
<CAPTION>
EZ HARTFORD HBC BAYCOM BALTIMORE PRO FORMA
MERGER TRANSACTION MERGER TRANSACTION TRANSACTION ADJUSTMENTS TOTAL
-------- ----------- ------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $105,963 $4,117 $8,371 $ 9,789 $13,253 $141,493
Operating expenses...... 68,084 2,594 4,762 7,358 8,800 91,598
Depreciation and
amortization........... 9,104 129 374 2,012 1,829 $ 29,222 42,670
Merger costs............ 10,433 (10,433)
Corporate general and
administrative......... 3,808 1,913 441 1,943 (7,105) 1,000
-------- ------ ------ ------- ------- -------- --------
Operating income
(loss)................. 14,534 1,394 1,322 (22) 681 (11,684) 6,225
Other (income) expense
Interest expense, net.. 20,360 1,395 4,105 16,536 42,396
Other expense (income).. 450 7 (22) 104 (539)
-------- ------ ------ ------- ------- -------- --------
Income (loss) from
operations before
income taxes........... $ (6,276) $1,387 $ (73) $(4,105) $ 577 $(27,681) $(36,171)
======== ====== ====== ======= ======= ======== ========
</TABLE>
Merger costs of EZ have not been carried forward into the pro forma
condensed financial statements as these costs represent direct costs incurred
by EZ as a result of the EZ Merger. Such costs consist primarily of
professional fees, compensation to employees of EZ and regulatory related
costs, including $4.5 million that was paid to settle a license renewal
proceeding; satisfactory arrangements with respect to the station involved
were a condition precedent to closing.
(b) To record the results of operations for the ATS Pro Forma Transactions.
The results of operations have been adjusted to: (i) reverse historical
interest expense of $4.2 million; (ii) record interest expense of $11.7
million for the year ended December 31, 1996, as a result of approximately
$128.4 million of additional net debt to be incurred in connection with the
ATS Pro Forma Transactions and payment of the estimated tax liability
attributable to the Tower Separation of approximately $66.6 million (net of
the $20.0 million to be borne by ARS pursuant to the provisions of the Merger
Agreement), after giving effect to (x) capital contributions by ARS of $146.1
million, representing the difference between the aggregate amount invested by
ARS in ATS at January 1, 1996 of $3.9 million and the maximum amount ($150.0
million) permitted by the Merger Agreement, and (y) the proceeds from the
issuance of ATS Common Stock pursuant to the ATS Stock Purchase Agreement for
an aggregate purchase price of $80.0 million, $79.4 million net of expenses
(of which $49.4 million was paid in the form of secured notes and the balance
in cash); (iii) and the historical depreciated book value of $4.2 million of
an aggregate of 16 towers transferred or to be transferred by American to ATS
representing an additional ARS equity investment in ATS. Each 1/4% change in
the interest rate applicable to the change in floating rate debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.3 million. The estimated tax liability shown in clause (i)
preceding is based on an assumed fair market value of the ATS Common Stock of
$10.00 per share which is the price at which shares were issued pursuant to
the consummation of the transactions contemplated by the ATS Stock Purchase
Agreement. Such estimated tax liability would increase or decrease by
approximately $14.8 million for each $1.00 per share increase or decrease in
the fair market value of the ATS Common Stock. No adjustment has been included
in the pro forma information with respect to certain adjustment provisions in
the Merger Agreement relating to the Working Capital and Debt Amount (each as
defined in the Merger Agreement) of ARS at the time of the consummation of the
Merger, because ARS estimates that the payment, if any, required by such
provisions to be paid or received by ATS will not be material. For information
with respect to such adjustments, see "The Merger and Tower Separation--ARS-
ATS Separation Agreement--Closing Date Adjustments".
I-9
<PAGE>
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $7.7 million for the year ended
December 31, 1996 and record depreciation and amortization expense of $48.7
million for the year ended December 31, 1996 based on estimated allocations of
purchase prices. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of fifteen years. Costs
of acquired intangible assets for the transactions are amortized over 15
years. The preliminary estimates of the fair market value of property, plant
and equipment and intangible assets may change upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by ATS. Because ATS maintains a separate corporate
headquarters that provides services substantially similar to those represented
by these costs, they are not expected to recur following acquisition. After
giving effect to an estimated $2.0 million of incremental costs, ATS believes
that it has existing management capacity sufficient to provide such services
without incurring additional incremental costs.
The following table sets forth the historical results of operations for the
ATS Pro Forma Transactions for the periods in which they were not owned by ATS
for the year ended December 31, 1996.
<TABLE>
<CAPTION>
MERIDIAN DIABLO MICRONET TUCSON GEARON ATC TRANSFER OF PRO FORMA
TRANSACTION TRANSACTION TRANSACTION TRANSACTION TRANSACTION MERGER TOWERS ADJUSTMENTS TOTAL
----------- ----------- ----------- ----------- ----------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues..... $4,498 $7,422 $15,058 $1,438 $21,484 $12,366 $ 710 $ 62,976
Operating
expenses........ 3,218 5,922 9,867 371 13,302 2,849 742 36,271
Depreciation and
amortization.... 416 417 3,936 164 103 2,709 215 $ 40,956 48,916
Corporate general
and
administrative.. 776 2,049 (825) 2,000
------ ------ ------- ------ ------- ------- ------ -------- --------
Operating income
(loss).......... 864 307 1,255 903 8,079 4,759 (247) (40,131) (24,211)
Other (income)
expense.........
Interest
expense, net... 70 81 213 3,808 8,536 12,708
Other expense
(income)....... 294 (43) (19) (95) 150 (287)
------ ------ ------- ------ ------- ------- ------ -------- --------
Income (loss)
from operations
before income
taxes........... $ 794 $ (68) $ 1,298 $ 709 $ 8,174 $ 801 $(247) $(48,380) $(36,919)
====== ====== ======= ====== ======= ======= ====== ======== ========
</TABLE>
(c) To record the tax effect of the pro forma adjustments and impact on the
estimated effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
I-10
<PAGE>
AMERICAN RADIO SYSTEMS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR ARS FOR THE
AND ATS PRO FORMA ARS TOWER
HISTORICAL TRANSACTIONS(a)(b) PRO FORMA SEPARATION(b) PRO FORMA
---------- ------------------ --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............ $260,512 $ 80,295 $340,807 $(65,981) $274,826
Operating expenses...... 172,018 45,452 217,470 (33,186) 184,284
Net LMA expenses........ 1,914 1,914 1,914
Depreciation and
amortization........... 42,974 44,728 87,702 (38,873) 48,829
Merger Expenses......... 300 300 300
Corporate general and
administrative
expenses............... 6,601 500 7,101 (919) 6,182
-------- -------- -------- -------- --------
Operating income
(loss)................. 36,705 (10,385) 26,320 6,997 33,317
Other (income) expense:
Interest expense,
net.................. 38,562 24,385 62,947 (8,218) 54,729
(Gains) losses on sale
of assets, net....... (455) (455) (224) (679)
-------- -------- -------- -------- --------
Total other
expense............ 38,107 24,385 62,492 (8,442) 54,050
Income (loss) before
income taxes........... (1,402) (34,770) (36,172) 15,439 (20,733)
Provision (benefit) for
income taxes(c)........ (774) (12,103) (12,877) 2,077 (10,800)
-------- -------- -------- -------- --------
Net income (loss)....... (628) (22,667) (23,295) 13,362 (9,933)
Preferred stock
dividends.............. (22,770) (1,896) (24,666) (24,666)
-------- -------- -------- -------- --------
Loss applicable to
common stockholders.... $(23,398) $(24,563) $(47,961) $ 13,362 $(34,599)
======== ======== ======== ======== ========
Loss before
extraordinary loss per
common share........... $ (.88) $ (1.63) $ (1.17)
======== ======== ========
Weighted average common
shares outstanding..... 26,549 2,905 29,454 29,454
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
of American Radio.
I-11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations for
the nine months ended September 30, 1997 gives effect to (i) the EZ Merger and
the Baltimore Transaction; (ii) the ATS Pro Forma Transactions; and (iii) the
Tower Separation, as if they had occurred on January 1, 1997.
(a) To record the results of operations for the EZ Merger. The Baltimore
Transaction has not been given pro forma effect for any items other than
depreciation and amortization, interest expense and income taxes as the
revenues and operating expenses are included in the historical numbers
pursuant to the pre-existing LMA. The results of operations have been adjusted
to record interest expense of $10.1 million for the nine months ended
September 30, 1997, as a result of approximately $200.9 million of additional
debt and the refunding of approximately $72.4 million of existing EZ debt,
both bearing interest at an assumed rate of 8.25%, and the assumption of
$150.0 million principal amount of notes bearing interest at 9.75%, incurred
in connection with the EZ Merger. Weighted average common shares outstanding
have been adjusted to reflect 8.3 million shares issued in the EZ Merger. Each
1/4% change in the interest rate applicable to the change in floating rate
debt would increase or decrease, as appropriate, the net adjustment to
interest expense by approximately $0.34 million.
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $2.5 million for the nine months
ended September 30, 1997 and record depreciation and amortization expense of
$8.7 million for the nine months ended September 30, 1997 based on estimated
allocations of purchase prices. Depreciation expense for property, plant and
equipment acquired has been determined based on an average life of ten years.
Costs of acquired FCC licenses and goodwill for the transactions are amortized
over 25 and 40 years, respectively. The preliminary estimates of the fair
value of property, plant and equipment, FCC licenses and goodwill may change
upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by ARS. Because ARS maintains a separate corporate
headquarters that provides services substantially similar to those represented
by these costs, they are not expected to recur following acquisition. After
giving effect to an estimated $0.5 million of incremental costs, ARS believes
that it has existing management capacity sufficient to provide such services
without incurring additional incremental costs.
The following table sets forth the historical results of operations for the
ARS Pro Forma Transactions for the periods in which they were not owned or
operated by ARS for the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
EZ PRO FORMA
MERGER ADJUSTMENTS TOTAL
------- ----------- --------
<S> <C> <C> <C>
Net revenues................................... $22,748 $ 22,748
Operating expenses............................. 16,411 16,411
Depreciation and amortization.................. 2,549 $ 6,173 8,722
Corporate general and administrative........... 756 (256) 500
------- -------- --------
Operating income (loss)........................ 3,032 (5,917) (2,885)
Interest expense, net........................ 5,186 4,883 10,069
Other expense (income)....................... (88) 88
------- -------- --------
Income (loss) from operations before income
taxes......................................... $(2,066) $(10,888) $(12,954)
======= ======== ========
</TABLE>
I-12
<PAGE>
(b) To record the results of operations for the ATS Pro Forma Transactions.
The results of operations have been adjusted to: (i) reverse historical
interest expense of $4.2 million; (ii) record interest expense of $8.2 million
for nine months ended September 30, 1997, as a result of approximately $118.8
million of additional net debt to be incurred in connection with the ATS Pro
Forma Transactions, and payment of the estimated tax liability attributable to
the Tower Separation of approximately $66.6 million (net of $20.0 million to
be borne by ARS pursuant to the provisions of the Merger Agreement) after
giving effect to (x) capital contributions by ARS of $98.6 million,
representing the difference between the aggregate amount invested by ARS in
ATS at September 30, 1997 of $51.4 million and the maximum amount ($150.0
million) permitted by the Merger Agreement, and (y) the proceeds from the
issuance of ATS Common Stock pursuant to the ATS Stock Purchase Agreement for
an aggregate purchase price of $80.0 million, $79.4 million net of expenses
(of which $49.4 million was be paid in the form of secured notes and balance
in cash); and (iii) the historical depreciated book value of $4.2 million of
an aggregate of 16 towers transferred or to be transferred by American to ATS
representing an additional ARS equity investment in ATS. Each 1/4% change in
the interest rate applicable to the change in floating rate debt would
increase or decrease, as appropriate, the net adjustment to interest expense
by approximately $0.2 million. The estimated tax liability shown in clause (i)
preceding is based on an assumed fair market value of the ATS Common Stock of
$10.00 per share which is the price at which shares are proposed to be issued
pursuant to the consummation of the transactions contemplated by the ATS Stock
Purchase Agreement. Such estimated tax liability would increase or decrease by
approximately $14.8 million for each $1.00 per share increase or decrease in
the fair market value of the ATS Common Stock. No adjustment has been included
in the pro forma information with respect to certain adjustment provisions in
the Merger Agreement relating to the Working Capital and Debt Amount (each as
defined in the Merger Agreement) of ARS at the time of the consummation of the
Merger, because ARS estimates that the payment, if any, required by such
provisions to be paid or received by ATS will not be material. For information
with respect to such adjustments, see "The Merger and Tower Separation--ARS-
ATS Separation Agreement--Closing Date Adjustments".
The results of operations have also been adjusted to reverse historical
depreciation and amortization expense of $6.8 million for the year ended
September 30, 1997 and record depreciation and amortization expense of $36.0
million for the year ended September 30, 1997 based on estimated allocations
of purchase prices. Depreciation expense for property, plant and equipment
acquired has been determined based on an average life of fifteen years. Costs
of acquired intangible assets for the transactions are amortized over 15
years. The preliminary estimates of the fair market value of property, plant
and equipment and intangible assets may change upon final appraisal.
Corporate general and administrative expenses of the prior owners have not
been carried forward into the pro forma condensed financial statements as
these costs represent duplicative facilities and compensation to owners and/or
executives not retained by ATS. Because ATS maintains a separate corporate
headquarters which provides services substantially similar to those
represented by these costs, they are not expected to recur following
acquisition. After giving effect to an estimated $1.5 million of incremental
costs, ATS believes that it has existing management capacity sufficient to
provide such services without incurring additional incremental costs.
The following table sets forth the historical results of operations for the
ATS Pro Forma Transactions for the periods in which they were not owned by ATS
for the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
TRANSFER
MERIDIAN DIABLO MICRONET TUCSON GEARON ATC OF PRO FORMA
TRANSACTION TRANSACTION TRANSACTION TRANSACTION TRANSACTION MERGER TOWERS ADJUSTMENTS TOTAL
----------- ----------- ----------- ----------- ----------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......... $2,385 $6,930 $13,477 $1,201 $19,062 $14,491 $ 533 $ 58,079
Operating expenses... 1,730 3,309 7,900 255 12,922 2,924 558 29,598
Depreciation and
amortization........ 211 393 2,638 123 111 3,369 162 $ 29,160 36,167
Corporate general and
administrative...... 1,802 88 2,347 (2,737) 1,500
------ ------ ------- ------ ------- ------- ----- -------- --------
Operating income
(loss).............. 444 1,426 2,939 735 6,029 5,851 (187) (26,423) (9,186)
Other (income)
expense.............
Interest expense,
net................ 80 110 150 3,900 4,782 9,022
Other expense
(income)........... (30) (7) (65) 213 (111)
------ ------ ------- ------ ------- ------- ----- -------- --------
Income (loss) from
operations before
income taxes........ $ 364 $1,316 $ 2,969 $ 592 $ 6,094 $ 1,738 $(187) $(31,094) $(18,208)
====== ====== ======= ====== ======= ======= ===== ======== ========
</TABLE>
(c) To record the tax effect of the pro forma adjustments and impact on ARS'
estimated effective tax rate. The actual effective tax rate may be different
once the final allocation of purchase price is determined.
I-13
<PAGE>
PRINCIPAL STOCKHOLDERS OF AMERICAN RADIO
The following information sets forth certain information known to American
Radio as of February 1, 1998, with respect to the shares of ARS Common Stock
beneficially owned by (i) each person known by American Radio to own more than
5% of the outstanding ARS Common Stock, (ii) each director of American Radio,
(iii) each executive officer of American Radio, and (iv) all directors and
executive officers of American Radio as a group. The number of shares
beneficially owned by each director or executive officer is determined
according to the rules of the Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the
individual or entity has sole or shared voting power or investment power and
also any shares which the individual or entity has the right to acquire within
sixty days of February 1, 1998 through the exercise of an option, conversion
feature or similar right. Except as noted below, each holder has sole voting
and investment power with respect to all shares of ARS Common Stock listed as
owned by such person or entity.
<TABLE>
<CAPTION>
SHARES OF ARS COMMON STOCK BENEFICIALLY OWNED
-----------------------------------------------------
PERCENT OF
PERCENT OF TOTAL
PERCENT OF PERCENT OF COMMON VOTING
NUMBER CLASS A CLASS B STOCK POWER
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Steven B. Dodge(1)....... 2,287,946 * 60.17 7.71 35.95
Thomas H. Stoner(2)...... 915,967 * 26.12 3.10 15.31
Don P. Bouloukos(3)...... 22,000 * -- * *
Alan L. Box(4)........... 398,428 1.61 -- 1.35 *
John R. Gehron(5)........ 237,650 * 5.66 * 3.44
David Pearlman(6)........ 264,520 * 6.93 * 4.19
Joseph L. Winn(7)........ 191,048 * 5.09 * 3.05
Charlton H. Buckley(8)... 1,811,957 7.33 -- 6.14 3.03
Arnold Chavkin/CEA(9).... 1,323,429 * -- 4.48 *
James H. Duncan,
Jr.(10)................. 14,878 * * * *
Arthur C. Kellar(11)..... 2,068,257 8.33 -- 6.98 3.46
Charles D. Peebler,
Jr.(12)................. 10,200 * * * *
Lance R. Primis(13)...... -- -- -- -- --
All executive officers
and directors as a group
(13 persons)(14)........ 9,707,280 18.45 87.98 31.62 62.32
FIVE PERCENT STOCKHOLDERS
Baron Capital Group,
Inc.(15)................ 5,620,000 22.72 -- 19.03 9.40
Wellington Management
Company LLP(16)......... 1,929,676 7.80 -- 6.53 3.23
Massachusetts Financial
Services Company(17).... 3,157,679 12.77 -- 10.69 5.28
Lehman Brothers Holding
Inc.(18)................ 2,050,000 8.29 -- 6.94 3.43
</TABLE>
- --------
* Less than 1%.
(1) Mr. Dodge is Chairman of the Board, President and Chief Executive Officer
of American Radio. His address is 116 Huntington Avenue, Boston,
Massachusetts 02116. Includes 75,950 shares of ARS Class A Common Stock
owned by Mr. Dodge. Does not include 60,000 shares of ARS Class B Common
Stock purchasable under an option granted on October 1, 1994, 24,000
shares ARS Class B Common Stock purchasable under an option granted on
January 18, 1996 and 80,000 shares of ARS Class B Common Stock
purchasable under an option granted on January 2, 1997; includes 90,000
shares as to which the October option, 16,000 shares as to which the
January 18 option and 20,000 shares as to which the January 2 option are
exercisable. Includes an aggregate of 25,050 shares of ARS Class A Common
Stock and 20,832 shares of ARS Class B Common Stock owned by three trusts
for the benefit of Mr. Dodge's children and 3,000 shares of ARS Class A
Common Stock owned by Mr. Dodge's wife. Mr. Dodge disclaims beneficial
ownership in all shares owned by such trusts and his wife. Does not
include 170 shares of ARS Class A Common Stock held by Thomas S. Dodge,
an adult child of Mr. Dodge, with respect to which Mr. Dodge disclaims
beneficial ownership.
I-14
<PAGE>
(2) Mr. Stoner is Chairman of the Executive Committee of the ARS Board. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Does not
include 4,000 shares of ARS Class A Common Stock purchasable under an
option granted on January 2, 1997. Includes 1,000 shares purchasable
under the January option and 23,811 shares of ARS Class B Common Stock
owned by his wife, an aggregate of 261,998 shares of ARS Class B Common
Stock owned by trusts of which he and/or certain other persons are
trustees. Mr. Stoner disclaims beneficial ownership of 160,540 shares of
ARS Class B Common Stock owned by such trusts. Does not include 61,454
shares of ARS Class B Common Stock and 9,125 shares of ARS Class A Common
Stock owned by Mr. Stoner's adult children.
(3) Mr. Bouloukos is Co-Chief Operating Officer of American Radio. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Includes
182,000 shares of ARS Class A Common Stock purchasable under an option
granted on December 31, 1996.
(4) Mr. Box is a director and Executive Vice President of American Radio. His
address is 116 Huntington Avenue, Boston, Massachusetts 02116. Does not
include 100,000 shares of ARS Class A Common Stock purchasable under an
option granted on April 22, 1997. Includes 84,010 shares of ARS Class A
Common Stock purchasable under options.
(5) Mr. Gehron is Co-Chief Operating Officer of American Radio. His address
is 116 Huntington Avenue, Boston, Massachusetts 02116. Includes 7,650
shares of ARS Class A Common Stock owned by Mr. Gehron. Includes 160,000
shares of ARS Class B Common Stock purchasable under an option granted on
May 23, 1994, 40,000 shares of ARS Class B Common Stock purchasable under
an option granted on February 15, 1995, 10,000 shares of ARS Class B
Common Stock purchasable under an option granted on January 18, 1996 and
20,000 shares of ARS Class A Common Stock purchasable under an option
granted on January 2, 1997.
(6) Mr. Pearlman is Co-Chief Operating Officer of American Radio. His address
is 116 Huntington Avenue, Boston, Massachusetts 02116. Includes 3,000
shares of ARS Class A Common Stock owned individually by Mr. Pearlman and
520 shares of ARS Class A Common Stock held for the benefit of his
children. Includes 156,000 shares of ARS Class B Common Stock purchasable
under an option granted on December 16, 1993, 50,000 shares of ARS Class
B Common Stock purchasable under an option granted on February 15, 1995,
5,000 shares of ARS Class B Common Stock purchasable under an option
granted on May 18, 1995, 30,000 shares of ARS Class B Common Stock
purchasable under an option granted on June 15, 1995 and 20,000 shares of
ARS Class B Common Stock purchasable under an option granted on January
18, 1996.
(7) Mr. Winn is a director, Treasurer and Chief Financial Officer of American
Radio. His address is 116 Huntington Avenue, Boston, Massachusetts 02116.
Includes 2,000 shares of ARS Class A Common Stock and 7,948 shares of ARS
Class B Common Stock owned individually by Mr. Winn and 100 shares of ARS
Class A Common Stock held for the benefit of his children. Does not
include 32,000 shares of ARS Class B Common Stock purchasable under an
option granted on December 16, 1993, 24,000 shares of ARS Class B Common
Stock purchasable under an option granted on February 15, 1995, 3,000
shares of ARS Class B Common Stock purchasable under an option granted on
May 18, 1995, 12,000 shares of ARS Class B Common Stock purchasable under
an option granted on January 18, 1996 and 21,544 shares of ARS Class B
Common Stock and 8,070 shares of ARS Class A Common Stock purchasable
under options granted on January 2, 1997; includes 128,000 shares as to
which the December option, 36,000 shares as to which the February option,
2,000 at to which the May option, 8,000 shares as to which the January 18
option and 5,386 shares as to which the January 2 option are exercisable.
(8) Mr. Buckley is a director of American Radio. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Does not include 4,000
shares of ARS Class A Common Stock purchasable under
I-15
<PAGE>
an option granted on January 2, 1997. Does not include 6,053 shares of ARS
Class A Common Stock which are held by an adult child of Mr. Buckley and
in which Mr. Buckley disclaims beneficial ownership. Includes 1,000 shares
purchasable under the January option.
(9) Mr. Chavkin is a director of American Radio. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Mr. Chavkin, as a general
partner of CCP, which is the general partner of CEA, may be deemed to own
beneficially shares held by CEA. Mr. Chavkin disclaims such beneficial
ownership. CEA is the sole holder of ARS Class C Common Stock and owns
26,911 shares of ARS Class A Common Stock. The address of CCP and CEA is
380 Madison Avenue, 12th Floor, New York, New York 10017. Does not
include 4,000 shares of ARS Class A Common Stock purchasable under an
option granted on January 2, 1997. Includes 1,000 shares purchasable
under the January option.
(10) Mr. Duncan is a director of American Radio. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Does not include 2,000 shares of ARS
Class B Common Stock purchasable under an option granted on December 16,
1993, 1,600 shares of ARS Class B Common Stock purchasable under an
option granted on February 15, 1995, 1,800 shares of ARS Class B Common
Stock purchasable under an option granted on January 18, 1996 and 4,000
shares of ARS Class A Common Stock purchasable under an option granted on
January 2, 1997; includes 4,000 shares as to which the December option,
1,600 shares as to which the February option, 1,200 shares as to which
the January 18 option and 1,000 shares as to which the January 2 option
are exercisable. Includes (a) 3,500 shares of ARS Class A Common Stock
and 6,578 shares of ARS Class B Common Stock owned directly and (b) 400
shares of ARS Class A Common Stock owned as follows: (i) 200 shares of
ARS Class A Common Stock held by Mr. Duncan's spouse, (ii) 100 shares of
ARS Class A Common Stock held by one of his daughters, and (iii) 100
shares of ARS Class A Common Stock held by his spouse for his stepson.
Mr. Duncan has disclaimed beneficial ownership of these shares.
(11) Mr. Kellar is a director of American Radio. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Mr. Kellar owns ARS Class A Common
Stock. Does not include 5,000 shares of ARS Class A Common Stock
purchasable under an option granted April 15, 1997. Includes 84,010
shares of ARS Class A Common Stock purchasable under options.
(12) Mr. Peebler is a director of American Radio. His address is 116
Huntington Avenue, Boston, Massachusetts 02116. Includes 2,000 shares of
ARS Class A Common Stock owned by Mr. Peebler. Does not include 4,000
shares of ARS Class B Common Stock purchasable under an option granted
February 15, 1995, 1,800 shares of ARS Class B Common Stock purchasable
under an option granted on January 18, 1996 and 6,000 shares of ARS Class
A Common Stock purchasable under an option granted January 2, 1997;
includes 4,000 shares as to which the February option, 1,200 shares as to
which the January 18 option and 1,000 shares as to which the January 2
option are exercisable.
(13) Mr. Primis is a director of American Radio. His address is 116 Huntington
Avenue, Boston, Massachusetts 02116. Does not include 4,000 shares of ARS
Class A Common Stock purchasable under an option granted April 15, 1997.
Includes 1,000 shares purchasable under the January option.
(14) Includes all shares stated to be owned in the preceding notes.
(15) The address of Baron Capital Group, Inc. is 767 Fifth Avenue, New York,
New York 10153. Based on Baron's Amendment No. 2 to Schedule 13D dated
February 2, 1998 Mr. Baron, the president of Baron, has sole voting power
over 180,000 shares of ARS Class A Common Stock, shared voting power over
1,896,000 shares of ARS Class A Common Stock, sole dispositive power over
180,000 shares of ARS Class A Common Stock and shared dispositive power
over 1,896,000 shares of ARS Class A Common Stock. Mr. Baron disclaims
beneficial ownership of 5,620,000 shares of ARS Class A Common Stock.
(16) The address of Wellington Management Company LLP is 75 State Street,
Boston, Massachusetts 02109. Based on its Schedule 13G (Amendment No. 2)
dated August 8, 1997, Wellington has shared voting power over 985,313
shares of ARS Class A Common Stock and shared dispositive power over
1,929,676 shares of ARS Class A Common Stock.
(17) The address of Massachusetts Financial Services Company is 500 Boylston
Street, Boston, Massachusetts 02116-3741. Based on its Schedule 13G
(Amendment No. 2) dated February 12, 1998, MFS has sole voting power over
3,132,749 shares of ARS Class A Common Stock and sole dispositive power
over 3,157,679 shares of ARS Class A Common Stock.
I-16
<PAGE>
(18) The address of Lehman Brothers Holding Inc. is 3 World Financial Center,
24th Floor, New York, New York 10285. Based on its Schedule 13D dated
January 23, 1998, Lehman has shared voting power over 2,050,000 shares of
ARS Class A Common Stock and shared dispositive power over 2,050,000
shares of ARS Class A Common Stock.
On February 9, 1998, FMR filed Amendment No. 1 to its Schedule 13G. Based on
its filing, FMR has sole voting power over 206,790 shares of ARS Class A
Common Stock and sole dispositive power over 1,716,690 shares of ARS Class A
Common Stock representing 6.94%, 5.81% and 2.87% of the ARS Class A Common
Stock, ARS Common Stock and Voting Power, respectively.
I-17
<PAGE>
APPENDIX II
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN RADIO SYSTEMS CORPORATION,
CBS CORPORATION
AND
R ACQUISITION CORP.
DATED AS OF
DECEMBER 18, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE 1 DEFINED TERMS................................................ II-1
ARTICLE 2 THE MERGER................................................... II-1
2.1 The Merger............................................. II-1
2.2 Closing................................................ II-2
2.3 Effective Time......................................... II-2
2.4 Effect of the Merger................................... II-2
2.5 Certificate of Incorporation........................... II-2
2.6 Bylaws................................................. II-2
2.7 Directors and Officers................................. II-2
ARTICLE 3 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES............... II-2
3.1 Conversion of Capital Stock............................ II-2
3.2 Exchange of Certificates............................... II-3
3.3 Closing of American's Transfer Books................... II-5
3.4 Dissenting Shares...................................... II-5
3.5 Tower Merger........................................... II-6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AMERICAN.................. II-7
4.1 Organization and Business; Power and Authority; Effect
of Transaction........................................ II-7
4.2 Financial and Other Information........................ II-10
4.3 Changes in Condition................................... II-10
4.4 Properties............................................. II-10
4.5 Compliance with Private Authorizations................. II-10
4.6 Compliance with Governmental Authorizations and
Applicable Law; Litigation............................ II-11
4.7 Related Transactions................................... II-12
4.8 Taxes and Tax Matters.................................. II-12
4.9 Employee Retirement Income Security Act of 1974........ II-13
4.10 Insurance.............................................. II-15
4.11 Authorized Capital Stock............................... II-15
4.12 Employment Arrangements................................ II-16
4.13 Voting Requirements.................................... II-16
4.14 Brokers................................................ II-16
4.15 Information Supplied................................... II-17
4.16 Ordinary Course of Business............................ II-17
4.17 Environmental Matters.................................. II-18
4.18 Opinion of Financial Advisor........................... II-18
4.19 Contracts; Debt Instruments............................ II-18
4.20 State Takeover Statutes................................ II-19
4.21 Appraisal Rights....................................... II-19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF MERGEPARTY................ II-19
5.1 Organization and Business; Power and Authority; Effect
of Transaction........................................ II-19
5.2 Compliance with Governmental Authorizations and
Applicable Law; Litigation............................ II-20
5.3 Mergeparty Financing................................... II-20
ARTICLE 6 COVENANTS................................................... II-20
6.1 Access to Information; Confidentiality................. II-20
6.2 Agreement to Cooperate................................. II-21
6.3 Public Announcements................................... II-23
6.4 Notification of Certain Matters........................ II-23
6.5 Stockholder Approval................................... II-24
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
6.6 Proxy Statement; Registration Statement............... II-24
6.7 Miscellaneous......................................... II-25
6.8 Option Plans.......................................... II-25
6.9 Conduct of Business by Mergeparty Pending the Merger.. II-26
6.10 Conduct of Business by American Pending the Merger.... II-26
6.11 Control of Operations................................. II-28
6.12 Directors', Officers' and Employees' Indemnification
and Insurance........................................ II-28
6.13 Solicitation of Employees............................. II-29
6.14 Change of Name........................................ II-29
6.15 Benefit Plans......................................... II-29
6.16 American Cumulative Preferred Stock................... II-30
6.17 American Tower Transaction............................ II-30
6.18 Purchase Price Adjustment............................. II-35
6.19 Tower Leases.......................................... II-37
6.20 Affiliates of American................................ II-38
ARTICLE 7 CLOSING CONDITIONS........................................... II-38
7.1 Conditions to Obligations of Each Party to Effect the
Merger............................................... II-38
7.2 Conditions to Obligations of Mergeparty............... II-39
7.3 Conditions to Obligations of American................. II-39
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER............................ II-40
8.1 Termination........................................... II-40
8.2 Effect of Termination................................. II-40
ARTICLE 9 GENERAL PROVISIONS.......................................... II-41
9.1 Amendment............................................. II-41
9.2 Waiver................................................ II-41
9.3 Fees, Expenses and Other Payments..................... II-41
9.4 Notices............................................... II-41
9.5 Specific Performance; Other Rights and Remedies....... II-42
9.6 Survival of Representations, Warranties, Covenants and
Agreements........................................... II-42
9.7 Severability.......................................... II-43
9.8 Counterparts.......................................... II-43
9.9 Section Headings...................................... II-43
9.10 Governing Law......................................... II-43
9.11 Further Acts.......................................... II-43
9.12 Entire Agreement; No Other Representations or
Agreements........................................... II-43
9.13 Assignment............................................ II-44
9.14 Parties in Interest................................... II-44
9.15 Mutual Drafting....................................... II-44
9.16 Obligations of American and of Mergeparty............. II-44
9.17 Mergeparty Agent for Mergeparty Subsidiary............ II-44
9.18 Original Merger Agreement............................. II-44
</TABLE>
<TABLE>
<C> <S> <C>
APPENDIX A: Definitions
EXHIBITS:
EXHIBIT A: Restated Certificate of Incorporation
EXHIBIT B: Market Fee Schedule
EXHIBIT C: Form of Opinion of FCC Counsel to American
EXHIBIT D: Tower Merger Agreement
SCHEDULES: Schedule 4.1(e)
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
Amended and Restated Agreement and Plan of Merger, dated as of December 18,
1997, by and among American Radio Systems Corporation, a Delaware corporation
("American"), CBS Corporation (formerly, Westinghouse Electric Corporation), a
Pennsylvania corporation ("Mergeparty"), and R Acquisition Corp., a Delaware
corporation ("Mergeparty Subsidiary").
W I T N E S S E T H:
WHEREAS, American, Mergeparty and Mergeparty Subsidiary are parties to an
Agreement and Plan of Merger, dated as of September 19, 1997 (the "Original
Merger Agreement"), providing for the merger of Mergeparty Subsidiary with and
into American on the terms and conditions set forth therein; and
WHEREAS, American, Mergeparty and Mergeparty Subsidiary desire to amend and
restate the Original Merger Agreement in its entirety to make certain changes
to the Original Merger Agreement; and
WHEREAS, American, Mergeparty and Mergeparty Subsidiary have entered into
this Amended and Restated Agreement and Plan of Merger (this "Agreement")
providing that Mergeparty Subsidiary shall be merged with and into American,
which shall be the surviving corporation, on the terms and conditions set
forth in this Agreement (the "Merger").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto hereby, intending to be legally bound, represent, warrant,
covenant and agree as follows:
ARTICLE 1
Defined Terms
As used herein, unless the context otherwise requires, the terms defined in
Appendix A shall have the respective meanings set forth therein. Terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa, and the reference to any gender shall be deemed to include all
genders. Unless otherwise defined or the context otherwise clearly requires,
terms for which meanings are provided in this Agreement shall have such
meanings when used in either Disclosure Schedule and each Collateral Document
executed or required to be executed pursuant hereto or thereto or otherwise
delivered, from time to time, pursuant hereto or thereto. References to
"hereof," "herein" or similar terms are intended to refer to the Agreement as
a whole and not a particular section, and references to "this Section" or
"this Article" are intended to refer to the entire section or article and not
a particular subsection thereof. The term "either party" shall, unless the
context otherwise requires, refer to American, on the one hand, and Mergeparty
and Mergeparty Subsidiary, on the other hand.
ARTICLE 2
The Merger
2.1 The Merger. (a) Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DCL"), at the Effective Time, Mergeparty Subsidiary shall be merged with
and into American. As a result of the Merger, the separate corporate existence
of Mergeparty Subsidiary shall cease and American shall continue as the
surviving corporation in the Merger (sometimes referred to, as such, as the
"Surviving Corporation").
II-1
<PAGE>
2.2 Closing. Unless this Agreement shall have been terminated pursuant to
Section 8.1 and subject to the satisfaction or, to the extent permitted by
Applicable Law, waiver of the conditions set forth in Article 7, the closing
of the Merger (the "Closing") will take place, at 10:00 a.m., on the Closing
Date, at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York,
New York 10019, on the date that is the second (2nd) day after the date on
which all of the conditions set forth in Article 7 (other than those which
require delivery of opinions or documents at the Closing) shall have been
satisfied or waived, unless another date, time or place is agreed to in
writing by the parties. The date on which the Closing occurs is herein
referred to as the "Closing Date."
2.3 Effective Time. Subject to the provisions of this Agreement, as promptly
as practicable after the Closing, the parties hereto shall cause the Merger to
be consummated by filing a certificate of merger (the "Certificate of Merger")
and any related filings required under the DCL with the Secretary of State of
the State of Delaware. The Merger shall become effective at such time as such
documents are duly filed with the Secretary of State of the State of Delaware,
or at such later time as is specified in such documents (the "Effective
Time").
2.4 Effect of the Merger. The Merger shall have the effects provided for
under the DCL.
2.5 Certificate of Incorporation. The Certificate of Incorporation of
American, as in effect immediately prior to the Effective Time, shall be
amended as of the Effective Time to read in its entirety as set forth in
Exhibit A and, as so amended, such Certificate of Incorporation, together with
the Certificates of Designation of (i) 11 3/8% Series B Cumulative
Exchangeable Preferred Stock, par value $.01 per share, of American ("American
Cumulative Preferred Stock") and (ii) 7% Convertible Exchangeable Preferred
Stock, par value $.01 per share, of American ("American Convertible Preferred
Stock" and, collectively with American Cumulative Preferred Stock, "American
Preferred Stock"), shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
Applicable Law. Such amendment shall not be deemed to affect in any manner the
Certificates of Designation of American Preferred Stock.
2.6 Bylaws. The bylaws of American in effect at the Effective Time shall be
the bylaws of the Surviving Corporation until amended in accordance with
Applicable Law and the Organic Documents of the Surviving Corporation.
2.7 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified, or upon their earlier
resignation or removal, in accordance with Applicable Law and the Organic
Documents of the Surviving Corporation, (a) the directors of Mergeparty
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation, and (b) the officers of American at the Effective Time shall be
the officers of the Surviving Corporation.
ARTICLE 3
Conversion of Shares; Exchange of Certificates
3.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Mergeparty, Mergeparty Subsidiary
or American or their respective stockholders:
(a) Each share of Common Stock, par value $1.00 per share, of Mergeparty
Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation;
(b) Each share of American Cumulative Preferred Stock issued and
outstanding immediately prior to the Effective Time shall remain
outstanding;
(c) Each share of American Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time shall remain
outstanding;
II-2
<PAGE>
(d) Subject to paragraph (e) below, each share of Class A Common Stock,
par value $.01 per share ("American Class A Common"), each share of Class B
Common Stock, par value $.01 per share ("American Class B Common"), and
each share of Class C Common Stock, par value $.01 per share ("American
Class C Common" and, collectively with American Class A Common and American
Class B Common, "American Common Stock"), of American issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall be converted into the right to receive the following:
(i) if the Tower Merger Effective Time shall not have occurred, (A)
$44.00 in cash and (B) one share of Tower Common Stock, with (x) each
share of American Class A Common being converted into the right to
receive one share of Class A Common Stock, par value $.01 per share
("Tower Class A Common"), of American Tower Systems Corporation, a
Delaware corporation and a wholly-owned Subsidiary of American
("American Tower"), (y) each share of American Class B Common being
converted into the right to receive one share of Class B Common Stock,
par value $.01 per share ("Tower Class B Common"), of American Tower,
and (z) each share of American Class C Common being converted into the
right to receive one share of Class C Common Stock, par value $.01 per
share ("Tower Class C Common" and, collectively with Tower Class A
Common and Tower Class B Common, "Tower Common Stock"), of American
Tower (collectively, the "Tower Stock Consideration"); or
(ii) if the Tower Merger Effective Time shall have occurred, an
amount in cash determined by dividing $44.00 by the American Conversion
Fraction.
The term "Cash Consideration" shall mean the following: (x) if the Tower
Merger Effective Time shall not have occurred, $44.00, and (y) if the Tower
Merger Effective Time shall have occurred, the amount of cash determined
pursuant to the provisions of clause (ii) preceding. The term "Merger
Consideration" shall mean the Cash Consideration and, if the Tower Merger
Effective Time shall not have occurred, the Tower Stock Consideration.
(e) Each share of American Common Stock owned by American or any of its
Subsidiaries or Mergeparty or any of its Subsidiaries immediately prior to
the Effective Time shall automatically be canceled and extinguished without
any conversion thereof and no payment shall be made with respect thereto.
As a result of the Merger and without any action on the part of the holder
thereof, at the Effective Time all shares of American Common Stock shall cease
to be outstanding and shall be canceled and retired and shall cease to exist,
and each holder of any certificates formerly representing such shares shall
thereafter cease to have any rights with respect to such shares, except,
subject to paragraph (e) above, the right to receive, without interest, the
Merger Consideration, or, in the case of a holder of Dissenting Shares, the
right to perfect the right to receive payment for Dissenting Shares pursuant
to Section 262 of the DCL.
3.2 Exchange of Certificates.
(a) From time to time, on or prior to or after the Effective Time,
Mergeparty shall deposit or cause to be deposited with an exchange agent
selected by Mergeparty and not reasonably disapproved of by American (the
"Exchange Agent") in trust for the benefit of the holders of American Common
Stock cash in amounts and at times necessary for the prompt payment of the
Cash Consideration, and American shall deposit or cause to be deposited with
the Exchange Agent in trust for the benefit of the holders of American Common
Stock shares of Tower Common Stock in amounts and at times necessary for the
prompt delivery of the Tower Stock Consideration, if any, upon the surrender
of Certificates.
(b) Not more than five (5) business days subsequent to the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of American Common Stock (the "Certificates") (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as American and Mergeparty may agree) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange
II-3
<PAGE>
for the Merger Consideration. Upon surrender of Certificates for cancellation
to the Exchange Agent, together with a duly executed letter of transmittal and
such other documents as the Exchange Agent shall reasonably require, the
holder of such Certificate shall receive in exchange therefor the Merger
Consideration multiplied by the number of shares of American Common Stock
formerly represented by such Certificates. The amount of Cash Consideration
paid to the holder of Certificates shall be in the form of a wire transfer of
immediately available funds if so requested by any holder entitled to receive
not less than $500,000 in cash, and the cost of such wire transfers shall be
borne by the Surviving Corporation. Such letter of transmittal and
instructions shall be available at the Closing for holders of American Common
Stock. Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of American Common Stock for any
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar Laws.
(c) Promptly following the date which is six (6) months after the Closing
Date, the Exchange Agent shall deliver to Mergeparty all cash and any shares
of Tower Common Stock in its possession relating to the transactions described
in this Agreement that remain unclaimed, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a Certificate may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar Laws) receive in exchange therefor the aggregate
Merger Consideration to which such holder is entitled, without any interest
thereon, but together with dividends and distributions, if any, paid by
American Tower on or with respect to the Tower Common Stock in accordance with
the provisions of Section 3.2(d).
(d) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the earlier to occur of the Tower Merger
Effective Time or the Effective Time on Tower Common Stock shall be paid with
respect to any shares of Tower Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein or, if the
Tower Merger Effective Time shall have occurred, as provided in the Tower
Merger Agreement. Subject to the effect of Applicable Laws, following
surrender of any such Certificate, there shall be paid to the holder of the
shares of Tower Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the earlier to occur of the Tower
Merger Effective Time or the Effective Time theretofore payable with respect
to such shares of Tower Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the earlier to occur of the Tower Merger Effective Time or the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such shares of Tower Common Stock, less the
amount of any withholding taxes which may be required thereon.
(e) If the Merger Consideration (or any portion thereof) is to be delivered
to a Person other than the Person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the delivery of
the Merger Consideration that the Certificate so surrendered shall be properly
endorsed or accompanied by appropriate stock powers (with signatures
guaranteed in accordance with the transmittal letter) and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the Person
requesting such transfer pay to the Exchange Agent any transfer or other Taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or are not required to be paid.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and subject to such other
reasonable conditions as the Exchange Agent may impose, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration (to the extent applicable) deliverable in respect thereof
as determined in accordance with this Article. When authorizing such issue of
the Merger Consideration in exchange therefor, the Exchange Agent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate (if other than a
recognized financial institution) to give the Exchange Agent a bond or other
surety in such sum as it may reasonably direct as indemnity against any Claim
that may be made against the Exchange Agent with respect to the Certificate
alleged to have been lost, stolen or destroyed.
II-4
<PAGE>
(g) At and after the Effective Time, the holder of a Certificate shall cease
to have any rights as a holder of shares of American Common Stock, except for
the right to surrender Certificates in the manner prescribed by Section 3.2 in
exchange for delivery of the Merger Consideration, or, in the case of a holder
of Dissenting Shares, the right to perfect the right to receive payment for
Dissenting Shares pursuant to Section 262 of the DCL.
(h) The Surviving Corporation shall be entitled to, or shall be entitled to
cause the Exchange Agent to, deduct and withhold from the consideration
otherwise deliverable pursuant to this Agreement to any holder of shares of
American Common Stock such amounts as are required to be deducted and withheld
with respect to the making of such payment under the Code, or any provision of
state, local or foreign Tax Law. To the extent that amounts are so withheld by
the Surviving Corporation or the Exchange Agent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been delivered to the holder of the shares of American Common Stock in respect
of which such deduction and withholding was made by the Surviving Corporation
or the Exchange Agent.
(i) The Exchange Agent shall invest any funds held by it for purposes of
this Section 3.2 as directed by Mergeparty, on a daily basis. Any interest and
other income resulting from such investments shall be paid to Mergeparty and
any risk of loss resulting from such investments shall be borne by Mergeparty.
3.3 Closing of American's Transfer Books. At the Effective Time, the stock
transfer books of American relating to American Common Stock shall be closed
and no transfer of shares of American Common Stock which were outstanding
immediately prior to the Effective Time shall thereafter be made. If, after
the Effective Time, subject to the terms and conditions of this Agreement,
Certificates formerly representing American Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration in accordance with the provisions of this Article.
3.4 Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the contrary,
shares of American Common Stock that are outstanding immediately prior to the
Effective Time and which are held by American stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall be
entitled to and shall have demanded properly in writing appraisal rights for
such shares of American Common Stock in accordance with Section 262 of the DCL
and who shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "Dissenting Shares"), shall not be
converted into or represent the right to receive the Merger Consideration
payable in respect of each share of American Common Stock represented thereby.
Such American stockholders shall be entitled to receive payment of the
appraised value of such shares of American Common Stock held by them in
accordance with the provisions of the DCL; provided, however, that all
Dissenting Shares held by American stockholders who shall have failed to
perfect or who effectively shall have withdrawn, forfeited or lost their
appraisal rights with respect to such shares of American Common Stock under
the DCL shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive,
without any interest thereon, the Merger Consideration upon surrender, in the
manner provided in Section 3.2, of the Certificates with respect to such
shares.
(b) American shall give Mergeparty prompt notice of any demands for
appraisal rights received by it, withdrawals of such demands, and any other
instruments served pursuant to the DCL and received by American and relating
thereto. American shall give Mergeparty the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal rights
under the provisions of the DCL. American shall not, except with the prior
written consent of Mergeparty, make any payment with respect to any demands
for appraisal rights, or offer to settle, or settle, any such demands.
(c) If the Tower Merger Effective Time shall not have occurred and the
Delaware Court of Chancery (the "Court") conducts an appraisal proceeding
pursuant to Section 262 of the DCL relating to an obligation to pay the
appraised value per share of American Common Stock ("Appraised Total Value")
to the holders of the Dissenting Shares, American Tower shall promptly pay to
American the portion of the Appraised Total Value
II-5
<PAGE>
attributable to the Tower Stock Consideration (the "Tower Stock Payment") and
American shall contribute (without the payment of any amount or the issuance
of any securities by American Tower) to the capital of American Tower such
shares of Tower Common Stock owned by American that the holders of the
Dissenting Shares would have been entitled to receive had they not exercised
their appraisal rights. The Tower Stock Payment shall be determined pursuant
to the following provisions:
(i) American shall request the Court to determine in writing the Tower
Stock Payment. If the Court shall make such determination the Tower Stock
Payment shall be the amount so determined; and
(ii) If the Court shall not make such determination within a 30-day
period following such request (at which time such request shall be
withdrawn) (the "Determination Deadline"), American, American Tower and
Mergeparty shall submit to an arbitrator (the "Arbitrator") for review and
resolution the determination of the Tower Stock Payment. The Arbitrator
shall be a nationally recognized investment banking firm which shall be
agreed upon by American, Mergeparty and American Tower in writing. The
Arbitrator shall be requested to render a decision resolving the amount of
the Tower Stock Payment within 30 days following the date of its selection.
If the parties cannot agree on the firm to be selected as Arbitrator within
15 days following the Determination Deadline, then American and Mergeparty,
on the one hand, and American Tower, on the other hand, shall each choose
one such firm within 10 days following the expiration of such 15-day period
to review, resolve and agree on the determination of the Tower Stock
Payment, which determination, once agreed to in writing by both such firms,
shall be final, conclusive and binding on the parties. If such two firms
cannot agree on the amount of the Tower Stock Payment within 30 days
following the date on which the second of such firms is selected, then such
two firms shall promptly select a third such firm to make such
determination, which determination shall be made by such third firm within
30 days of the date on which such third firm is selected. The determination
of such third firm of the amount of the Tower Stock Payment shall be final,
conclusive and binding on the parties. The cost of any such arbitration
(including the fees of the Arbitrator and any other firm selected
hereunder) shall be borne 50% by American and 50% by American Tower.
American Tower shall promptly pay to American the amount of the Tower Stock
Payment once such amount is determined in accordance with this clause (ii).
3.5 Tower Merger. Anything in this Agreement to the contrary
notwithstanding, if the Effective Time shall not have occurred by May 31, 1998
(as such date may be extended by American with the written consent of
Mergeparty, such consent not to be unreasonably withheld, delayed or
conditioned), on June 1, 1998 (or the date following the date, if any, to
which the May 31, 1998 date shall have been so extended), the Board of
Directors of American shall, in its sole discretion, either (i) consummate the
merger of ATS Merger Corporation, a Delaware corporation and a wholly-owned
subsidiary of American ("ATS Mergercorp"), with and into American, which will
be the surviving corporation (the "Tower Merger"), pursuant to the agreement
and plan of merger between American and ATS Mergercorp dated as of the date
hereof and set forth as Exhibit D hereto (the "Tower Merger Agreement"), or
(ii) irrevocably elect to abandon the Tower Merger. Pursuant to the Tower
Merger Agreement, each share of ATS Mergercorp Common Stock issued and
outstanding immediately prior to the effective time of the Tower Merger (the
"Tower Merger Effective Time") shall, by virtue of the Tower Merger and
without any action on the part of the holder thereof, be automatically
canceled and extinguished and each share of American Common Stock issued and
outstanding immediately prior to the Tower Merger Effective Time shall be
converted into the right to receive:
(a) one share of Tower Common Stock, with (i) each share of American
Class A Common being converted into the right to receive one share of Tower
Class A Common, (ii) each share of American Class B Common being converted
into the right to receive one share of Tower Class B Common, and (iii) each
share of American Class C Common being converted into the right to receive
one share of Tower Class C Common (collectively, the "Tower Merger Tower
Consideration"); and
(b) a fraction (the "American Conversion Fraction") of a share of
American Common Stock of the same class as the class of American Common
Stock being converted, (i) the numerator of which is the difference between
(A) the denominator and (B) the value (determined as set forth below) of
one share of Tower Class A Common immediately prior to the Tower Merger
Effective Time, and (ii) the denominator of which is the value (determined
as set forth below) of one share of American Class A Common
II-6
<PAGE>
immediately prior to the Tower Merger Effective Time (collectively with the
Tower Merger Tower Consideration, the "Tower Merger Consideration").
For purposes of determining the value of the American Class A Common and the
Tower Class A Common immediately prior to the Tower Merger Effective Time the
following principles shall apply:
(x) each share of American Class A Common shall be valued at an amount
equal to the average closing sales price of the American Class A Common on
the NYSE, as reported by the Wall Street Journal, for the ten (10)
consecutive trading days immediately preceding the second trading date
prior to the Tower Merger Effective Time; and
(y) each share of Tower Class A Common shall be valued at the amount
determined in good faith by the American Radio Board of Directors to be its
fair market value immediately prior to the Tower Merger Effective Time.
No certificates in respect of fractional shares of American Common Stock
shall be issued in the Tower Merger, and cash shall be paid in lieu thereof as
provided in the Tower Merger Agreement. The certificates that immediately
prior to the Tower Merger Effective Time represented outstanding shares of
American Common Stock shall be deemed, without any action of the holders
thereof, to represent that number of shares of American Common Stock that the
holder thereof has the right to receive pursuant to clause 3.5(b), together
with cash in lieu of fractional shares as provided in the Tower Merger
Agreement.
Immediately prior to the Tower Merger Effective Time, American shall
contribute to ATS Mergercorp a number of shares of Tower Common Stock equal to
the Tower Merger Tower Consideration.
ARTICLE 4
Representations and Warranties of American
Except as set forth with respect to specifically identified representations
and warranties in the American Disclosure Schedule or as otherwise
contemplated by this Agreement, American hereby represents and warrants to
Mergeparty and Mergeparty Subsidiary as follows:
4.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) American is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority (corporate and other) to own or hold under lease its
properties and to conduct its business as now conducted and as presently
proposed to be conducted. American is duly qualified and in good standing as a
foreign corporation in each other jurisdiction (as shown on Section 4.1(a) of
the American Disclosure Schedule) in which the character of the property owned
or leased by it or the nature of its business or operations requires such
qualification, with full power and authority (corporate and other) to carry on
the business in which it is engaged, except in such jurisdictions where the
failure to be so qualified or in good standing, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on
American.
(b) Each of American and its Subsidiaries has all requisite power and
authority (corporate and other) to execute, deliver and perform its
obligations under this Agreement and each Collateral Document executed or
required to be executed by such party pursuant hereto or thereto and to
consummate the Merger and the other transactions contemplated hereby and
thereby, and the execution, delivery and performance of this Agreement and
each Collateral Document executed or required to be executed pursuant hereto
or thereto have been duly authorized by all requisite corporate or other
action on the part of American and its Subsidiaries, other than the approval
of the holders of shares of American Common Stock contemplated by Section
4.13, and no other corporate proceedings on the part of American or any of its
Subsidiaries are necessary to authorize this Agreement or the transactions
contemplated hereby or to consummate the Merger or the other transactions so
contemplated (other than, with respect to the Merger, the Required Vote and
with respect to the Tower Merger,
II-7
<PAGE>
the Required Tower Vote). This Agreement has been duly executed and delivered
by American and constitutes, and each Collateral Document executed or required
to be executed by American and its Subsidiaries pursuant hereto or to
consummate the Merger when executed and delivered by American and its
Subsidiaries, as applicable, will constitute, a valid and binding obligation
of American and its Subsidiaries, as applicable, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency and similar laws affecting the rights and
remedies of creditors and obligations of debtors generally and by general
principles of equity. As of the date hereof, the Board of Directors of
American, at a meeting duly called and held at which a quorum was present
throughout, has approved the Merger and this Agreement, and the Tower Merger
and the Tower Merger Agreement, and has recommended that the holders of shares
of American Common Stock approve and adopt this Agreement, the Tower Merger
Agreement and the transactions contemplated hereby and thereby, including
without limitation the Merger and the Tower Merger.
(c) The execution, delivery and performance by American and its
Subsidiaries, as applicable, of this Agreement and any Collateral Document
executed or required to be executed by such parties pursuant hereto or thereto
do not, and the consummation by American of the Merger and the other
transactions contemplated hereby and thereby, and compliance with the terms,
conditions and provisions hereof or thereof by such parties will not:
(i) (A) Except as set forth in Section 4.1(c) of the American Disclosure
Schedule, conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of American or its
Subsidiaries, as applicable, or (B) conflict with, or result in a breach or
violation of, or constitute a default under, or permit the termination,
cancellation or acceleration of any obligation or liability in, or but for
any requirement of the giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default under,
or permit any such termination, cancellation or acceleration of, any
agreement, arrangement, contract, undertaking, understanding, Applicable
Law or other obligation or Private Authorization of American or its
Subsidiaries, as applicable, except, in the case of clause (B), for such
conflicts, breaches, violations, terminations, cancellations, defaults or
accelerations that would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on American; or
(ii) result in or permit the creation or imposition of any Lien upon any
property now owned or leased by American except for such Liens that would
not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on American; or
(iii) require any Governmental Authorization or Governmental Filing
except for (A) the FCC Consents, (B) filings under the Hart-Scott-Rodino
Act, (C) the filing with the Commission of (I) the Proxy Statement, (II)
the Tower Proxy Statement, (III) the Registration Statement and (IV) such
reports under Section 13(a) or 15(d) of the Exchange Act as may be required
in connection with this Agreement and the transactions contemplated by this
Agreement, (D) the filing of the Certificate of Merger and a certificate of
merger relating to the Tower Merger with the Delaware Secretary of State
and appropriate documents with the relevant authorities of other states in
which American is qualified to do business and (E) such other Governmental
Authorizations and Governmental Filings the failure of which to be made or
obtained would not be individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on American.
(d) American does not have any direct or indirect Subsidiaries other than
those set forth on Section 4.1(d) of the American Disclosure Schedule (read
without the last three lines of the first page thereof) (and other than ATS
Mergercorp, American Tower, American Tower Systems (Delaware), Inc., ATS
Needham, LLC, Tower, LLC and Communications Systems Development, LLC). Each
direct or indirect Subsidiary of American (and other than ATS Mergercorp,
American Tower, American Tower Systems (Delaware), Inc., ATS Needham, LLC,
Tower, LLC and Communications Systems Development, LLC) is (i) wholly-owned
unless noted otherwise in Section 4.1(d) of the American Disclosure Schedule,
(ii) a corporation which is duly organized, validly existing and in good
standing under the laws of the respective state of incorporation set forth
opposite its name on Section 4.1(d) of the American Disclosure Schedule, and
(iii) duly qualified and in good standing as a foreign corporation in each
other jurisdiction (as shown on Section 4.1(d) of the American Disclosure
Schedule) in which the character of the property owned or leased by it or the
nature of its business or operations requires such
II-8
<PAGE>
qualification, with full power and authority (corporate and other) to carry on
the business in which it is engaged, except where the failure to be so
qualified or in good standing, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect on American. American
owns, directly or indirectly, all of the outstanding capital stock and equity
interests (as shown in Section 4.1(d) of the American Disclosure Schedule) of
such Subsidiaries, free and clear of all Liens (except as set forth in the
American Financial Statements or Section 4.1(d) of the American Disclosure
Schedule), and all such stock has been duly authorized and validly issued and
is fully paid and nonassessable. There are no outstanding Option Securities or
Convertible Securities, or agreements or understandings of any nature
whatsoever, relating to the authorized and unissued or outstanding capital
stock of such Subsidiaries (except as set forth in the American Financial
Statements or Section 4.1(d) of the American Disclosure Schedule.
(e) Each of ATS Mergercorp and American Tower is (i) a wholly-owned
subsidiary of American (in the case of American Tower, as of the date hereof)
and (ii) a corporation which is duly organized, validly existing and in good
standing under the DCL. American owns, directly or indirectly, all of the
outstanding capital stock and equity interests of each of ATS Mergercorp and
American Tower, free and clear of all Liens, subject, in the case of ATS
Mergercorp, to the receipt of Amendment No. 2 to American's Credit Agreements
referred to in Section 4.1(d) of the American Disclosure Schedule, a copy of
which has been delivered to Mergeparty prior to the date hereof, and all such
stock has been duly authorized and validly issued, is fully paid and
nonassessable and is not subject to any preemptive or similar rights. There
are no outstanding Option Securities or Convertible Securities, or agreements
or understandings of any nature whatsoever, relating to the authorized and
unissued outstanding capital stock of such Subsidiaries (except, with respect
to American Tower, pursuant to the following: (i) the Agreement and Plan of
Merger, dated as of December 12, 1997 (the "ATC Merger Agreement"), by and
between American Tower and American Tower Corporation, an unaffiliated
Delaware corporation, a copy of which has been delivered to Mergeparty prior
to the date hereof, (ii) the Agreement and Plan of Merger, dated as of
November 21, 1997, by and among American Tower, American Tower Systems
(Delaware), Inc., Gearon & Co., Inc., and J. Michael Gearon, Jr., a copy of
which has been delivered to Mergeparty prior to the date hereof, (iii) the
proposed issue and sale of shares of Tower Common Stock to certain officers
and directors of American Tower (and their affiliates) for an aggregate
consideration of approximately $80,000,000, (iv) employee stock options
outstanding to purchase shares of American Tower Systems (Delaware), Inc.
which will be converted into options to acquire Tower Common Stock, and (v) as
contemplated by Section 6.8(b)). The authorized capital stock of (i) ATS
Mergercorp consists of 3,000 shares of common stock, par value $.01 per share
(the "ATS Mergercorp Common Stock"), and (ii) American Tower consists of
20,000,000 shares of preferred stock, 200,000,000 shares of Tower Class A
Common, 50,000,000 shares of Tower Class B Common, and 10,000,000 shares of
Tower Class C Common, and the terms of the Restated Certificate of
Incorporation of American Tower, a copy of which has been delivered to
Mergeparty prior to the date hereof, relating to each of the shares of Tower
Class A Common, Tower Class B Common and Tower Class C Common (other than
those relating to the number of authorized shares) are identical to the terms
of the Restated Certificate of Incorporation of American as in effect on the
date of the Original Merger Agreement relating to the shares of American Class
A Common, American Class B Common and American Class C Common, respectively,
except for the following terms: (i) terms which permit dividends and other
distributions of securities of Persons other than American Tower (including
Subsidiaries of American Tower) to be made in the form of different classes of
securities of such Persons, (ii) terms which provide that if a holder of Tower
Common Stock grants a proxy, whether revocable or irrevocable, and whether
general or specific to a particular transaction, the granting of such proxy
does not constitute a transfer for purposes of requiring conversion of Tower
Class B Common to Tower Class A Common, (iii) terms which permit any CEA
Holder (as defined in the Restated Certificate of Incorporation of American
Tower) to convert shares of Tower Class C Common Stock into shares of Tower
Class A Common Stock upon approval of the Board of Directors of American
Tower, and (iv) terms clarifying the fact that holders of Tower Class A Common
Stock and Tower Class B Common Stock vote as a single class on all matters
submitted for a stockholder vote, including, notwithstanding the first
sentence of Section 242(b)(2) of the DCL, any amendment of the Restated
Certificate of Incorporation of American Tower which would increase or
decrease the number of authorized shares of any class of Tower Common Stock.
The number of shares of American Tower which are authorized and outstanding
and owned by American is equal to
II-9
<PAGE>
the number of authorized and outstanding shares of American Common Stock and
the number of shares of American Common Stock issuable upon the exercise of
Option Securities and upon the conversion of Convertible Securities (except
with respect to shares of American Common Stock subject to American Options
set forth on Schedule 4.1(e) to this Agreement which are held by Tower
Employees who have stated that they will enter into definitive agreements to
have such American Options assumed by American Tower and converted into
options to acquire Tower Common Stock in accordance with Section 6.8(b)).
4.2 Financial and Other Information. American has heretofore furnished to
Mergeparty copies of the audited consolidated financial statements of American
and its Subsidiaries set forth in its Annual Report on Form 10-K (the
"American 10-K") for the fiscal year ended December 31, 1996 and the unaudited
consolidated financial statements of American and its Subsidiaries set forth
in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1997 and its Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1997 (the "American September 10-Q") (collectively, the
"American Financial Statements"). The American Financial Statements, including
in each case the notes thereto, comply as to form, in all material respects,
with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, except as otherwise noted therein, and fairly present in all
material respects the financial condition, results of operations and cash
flows of American and its Subsidiaries on the bases therein stated, as of the
respective dates thereof, and for the respective periods covered thereby
subject, in the case of unaudited financial statements, to normal year-end
audit adjustments and accruals. American has filed all required reports and
other documents with the Commission since July 1, 1995 (the "American SEC
Documents"). Except as set forth in the American SEC Documents filed and
publicly available prior to the date of the Original Merger Agreement (the
"Filed American SEC Documents"), neither American nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect on American. None of the
American Disclosure Schedule or the American SEC Documents contains or will
contain any untrue statement of a material fact or omits or will omit to state
a material fact required to be stated herein or therein or necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
4.3 Changes in Condition. Except as set forth in Section 4.3 of the American
Disclosure Schedule, between June 30, 1997 and the date of the Original Merger
Agreement, there has been no Material Adverse Change in American.
4.4 Properties. (a) American and each of its Subsidiaries (other than the
Tower Subsidiaries) has good and marketable title to all material parcels of
real property owned by it and good and merchantable title to all material
items of property and assets, tangible and intangible, (i) reflected in the
financial statements of American as of June 30, 1997, and (ii) acquired after
June 30, 1997, except in each case for those sold or otherwise disposed of
since June 30, 1997, in each case free and clear of all Liens, except (x)
Permitted Liens and (y) Liens set forth in the American Financial Statements
or Section 4.4 of the American Disclosure Schedule.
(b) All of the assets of American and its Subsidiaries material to the
continued operation of their respective businesses are in good operating
condition, reasonable wear and tear excepted, and usable in the ordinary
course of business, except where the failure to be in such condition or so
usable would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on American.
4.5 Compliance with Private Authorizations. American and each of its
Subsidiaries (other than the Tower Subsidiaries) has obtained all Private
Authorizations which are necessary for the ownership and operation by American
or its Subsidiaries of the business of American and its Subsidiaries, taken as
a whole, and the conduct of business thereof as now conducted and which, if
not obtained and maintained, would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on American. All such
Private Authorizations
II-10
<PAGE>
are, to American's knowledge, in full force and effect, and neither American
nor any of its Subsidiaries (other than the Tower Subsidiaries) is, to
American's knowledge, in breach or violation of, or in default in the
performance, observance or fulfillment of, any such Private Authorization,
and, to American's knowledge, no Event exists or has occurred, which
constitutes, or but for any requirement of the giving of notice or passage of
time or both would constitute, such a breach, violation or default, under any
such Private Authorization, except for such defaults, breaches or violations
as would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on American.
4.6 Compliance with Governmental Authorizations and Applicable Law;
Litigation.
(a) Section 4.6(a) of the American Disclosure Schedule contains a list of
each material Governmental Authorization (including without limitation all
material American FCC Licenses) required under Applicable Laws to own and
operate the business of American and its Subsidiaries (other than the Tower
Subsidiaries), including without limitation each of the American Stations, as
currently operated, all of which are in full force and effect, subject to such
qualifications and exceptions as may be set forth in Section 4.6(a) of the
American Disclosure Schedule. Certain of the Subsidiaries of American (other
than any of the Tower Subsidiaries) are the authorized legal holders of the
American FCC Licenses listed in Section 4.6(a) of the American Disclosure
Schedule, none of which is subject to any restriction or condition which would
limit in any material respect the operations of any of the American Stations
as currently conducted except as noted in Section 4.6(a) of the American
Disclosure Schedule. The American FCC Licenses listed in Section 4.6(a) of the
American Disclosure Schedule are valid and in full force and effect and are
not impaired in any material respect by any act or omission of American or any
of its Subsidiaries, subject to such qualifications and exceptions as may be
set forth in Section 4.6(a) of the American Disclosure Schedule; and the
operation of each of the American Stations is in accordance with such American
FCC Licenses in all material respects, except to the extent so listed in
Sections 4.6(a) and (b) of the American Disclosure Schedule. American is fully
qualified to be the transferor of control of the American FCC Licenses. All
material reports, forms and statements required to be filed by American or any
of its Subsidiaries with the FCC with respect to each of the American Stations
have been filed and are true, complete and accurate in all material respects.
American or one of its Subsidiaries (other than the Tower Subsidiaries) has
obtained all Governmental Authorizations in addition to the American FCC
Licenses listed in Section 4.6(a) of the American Disclosure Schedule which
are necessary for the ownership or operations or the conduct of the business
of American and its Subsidiaries, taken as a whole (except with respect to the
American Brokered Stations), as now conducted and which, if not obtained and
maintained, would, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on American and American's performance with
respect thereto, and the operation of the American Brokered Stations is in
accordance with all applicable Governmental Authorizations except where the
failure to be so in accordance would not be reasonably likely to have a
Material Adverse Effect on American. As of the date of the Original Merger
Agreement, except as noted in Section 4.6(a) of the American Disclosure
Schedule, no application, action or proceeding is pending for the renewal or
material modification of any of the American FCC Licenses and, to American's
knowledge, except as noted in Section 4.6(b) of the American Disclosure
Schedule, there was not as of the date of the Original Merger Agreement before
the FCC any material investigation, proceeding, notice of violation, order of
forfeiture or complaint against American or any of its Subsidiaries relating
to any of the American Stations or other FCC licensed facilities that, if
adversely decided, would be reasonably likely to have a Material Adverse
Effect on American (and as of the date of the Original Merger Agreement
American did not have knowledge of any basis that would cause the FCC not to
renew any of the American FCC Licenses). Except as noted in Schedule 4.6(b) of
the American Disclosure Schedule, as of the date of the Original Merger
Agreement, there was not then pending and, to American's knowledge, there was
not threatened, any action by or before the FCC to revoke, suspend, cancel,
rescind or modify in any material respect any of the American FCC Licenses
that, if adversely decided, would be reasonably likely to have a Material
Adverse Effect on American (other than proceedings to amend FCC rules of
general applicability to the radio industry).
(b) Except as otherwise specifically set forth in Section 4.6(b) of the
American Disclosure Schedule, since January 1, 1996, American and its
Subsidiaries (other than the Tower Subsidiaries) have conducted its and each
of their respective businesses and owned and operated its and each of their
respective properties in accordance
II-11
<PAGE>
with all Applicable Laws (excluding Environmental Laws) and Governmental
Authorizations, except for such breaches, violations and defaults as,
individually or in the aggregate, have not had and are not reasonably likely
to have a Material Adverse Effect on American. Except as otherwise
specifically described in Section 4.6(b) of the American Disclosure Schedule
and except with respect to Environmental Laws, neither American nor any of its
Subsidiaries is in or is charged in writing by any Authority with, or, to
American's knowledge, is threatened or under investigation by any Authority
with respect to, any breach or violation of, or default in the performance,
observance or fulfillment of, any Applicable Law relating to the ownership and
operation of American's and its Subsidiaries' properties or the conduct of
American's and its Subsidiaries' business which will, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on American.
Except as otherwise specifically described in Section 4.6(b) of the American
Disclosure Schedule and except with respect to Environmental Laws, no Event
exists or has occurred, which constitutes, or but for any requirement of
giving of notice or passage of time or both would constitute, such a breach,
violation or default, under any Governmental Authorization or any Applicable
Law, except for such breaches, violations or defaults as, individually or in
the aggregate, have not had and would not be reasonably likely to have a
Material Adverse Effect on American. With respect to matters, if any, of a
nature referred to in Section 4.6(b) of the American Disclosure Schedule,
except as otherwise specifically described in Section 4.6(b) of the American
Disclosure Schedule, all such information and matters set forth in the
American Disclosure Schedule, if adversely determined against American or one
of its Subsidiaries (other than the Tower Subsidiaries), individually or in
the aggregate, would not be reasonably likely to have a Material Adverse
Effect on American.
(c) Except as disclosed in the Filed American SEC Documents or in Section
4.6(c) of the American Disclosure Schedule, there are no Legal Actions pending
or, to the knowledge of American, threatened against or affecting American or
any of its Subsidiaries (other than the Tower Subsidiaries) including any
action by or before the FCC to revoke, suspend, cancel, rescind or modify in
any material respect any of the American FCC Licenses, except for Legal
Actions that, individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect on American.
4.7 Related Transactions. Except as set forth in Section 4.7 of the American
Disclosure Schedule, as contemplated herein or as disclosed in the Filed
American SEC Documents, no director, officer, Affiliate or "associate" (as
such term is defined in Rule 12b-2 under the Exchange Act) of American or any
of its Subsidiaries is currently a party to any transaction which would be
required to be disclosed under Item 404 of Regulation S-K of the Securities
Act.
4.8 Taxes and Tax Matters. Except as provided in Section 4.8 of the American
Disclosure Schedule:
(a) American has filed completely and correctly in all material respects
all Tax Returns which are required by all Applicable Laws to be filed by
it, and has paid, or made adequate provision for the payment of, all
material Taxes which have or may become due and payable pursuant to said
Tax Returns and all other Taxes, governmental charges and assessments
received to date other than those Taxes being contested in good faith for
which adequate provision has been made on the most recent balance sheet
forming part of the American Financial Statements. The Tax Returns of
American have been prepared, in all material respects, in accordance with
all Applicable Laws and generally accepted principles applicable to
taxation consistently applied;
(b) all material Taxes which American is required by law to withhold and
collect have been duly withheld and collected, and have been paid over, in
a timely manner, to the proper Taxing Authorities to the extent due and
payable;
(c) American has not executed any waiver to extend, or otherwise taken or
failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax liabilities of
American for the fiscal years prior to and including the most recent fiscal
year;
(d) American is not a "consenting corporation" within the meaning of
Section 341(f) of the Code. American has at all times been taxable as a
Subchapter C corporation under the Code;
II-12
<PAGE>
(e) American has never been a member of any consolidated group (other
than with American and its Subsidiaries) for Tax purposes. American is not
a party to any tax sharing agreement or arrangement, other than with its
Subsidiaries;
(f) no Liens for Taxes exist with respect to any of the assets or
properties of American, except for statutory Liens for Taxes not yet due or
payable or that are being contested in good faith;
(g) all of the U.S. Federal income Tax Returns filed by or on behalf of
each of American and its Subsidiaries have been examined by and settled
with the Internal Revenue Service, or the statute of limitations with
respect to the relevant Tax liability expired, for all taxable periods
through and including the period ending on the date on which the Effective
Time occurs;
(h) all Taxes due with respect to any completed and settled audit,
examination or deficiency litigation with any Taxing Authority have been
paid in full;
(i) there is no audit, examination, deficiency, or refund litigation
pending with respect to any Taxes and during the past three years no Taxing
Authority has given written notice of the commencement of any audit,
examination or deficiency litigation, with respect to any Taxes;
(j) American is not bound by any currently effective private ruling,
closing agreement or similar agreement with any Taxing Authority relating
to a material amount of Taxes;
(k) except with respect to like-kind exchanges pursuant to Section 1031
of the Code, American shall not be required to include in a taxable period
ending after the Effective Time, any taxable income attributable to income
that economically accrued in a prior taxable period as a result of Section
481 of the Code, the installment method of accounting or any comparable
provision of state or local Tax law;
(l) (A) no material amount of property of American is "tax exempt
property" within the meaning of Section 168(h) of the Code, (B) no material
amount of assets of American is subject to a lease under Section 7701(h) of
the Code, and (C) American is not a party to any material lease made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect prior to the date of enactment of the Tax Equity and
Fiscal Responsibility Act of 1982; and
(m) immediately following the Merger, American will not have any material
amount of income or gain that has been deferred under Treasury Regulation
Section 1.1502-13, or any material excess loss account in a Subsidiary
under Treasury Regulation Section 1.1502-19.
4.9 Employee Retirement Income Security Act of 1974.
(a) American (which for purposes of this Section 4.9 shall include any ERISA
Affiliate) currently sponsors, maintains and contributes only to the Plans and
Benefit Arrangements set forth in Section 4.9(a) of the American Disclosure
Schedule. American has delivered or made available to Mergeparty true,
complete and correct copies of (1) each Plan and Benefit Arrangement (or, in
the case of any unwritten Plans or Benefit Arrangements, reasonable
descriptions thereof), (2) the two most recent annual reports on Form 5500
(including all schedules and attachments thereto) filed with the Internal
Revenue Service with respect to each Plan (if any such report was required by
Applicable Law), (3) the most recent summary plan description (or similar
document) for each Plan for which such a summary plan description is required
by Applicable Law or was otherwise provided to plan participants or
beneficiaries and (4) each trust agreement and insurance or annuity contract
or other funding or financing arrangement relating to any Plan. To the
knowledge of American, each such Form 5500 and each such summary plan
description (or similar document) does not, as of the date hereof, contain any
material misstatements. Except as set forth in Section 4.9(a) of the American
Disclosure Schedule, as to all Plans and Benefit Arrangements listed in
Section 4.9(a) of the American Disclosure Schedule:
(i) all such Plans and Benefit Arrangements comply and have been
administered in form and in operation in accordance with their respective
terms, and with all Applicable Laws, in all material respects, and American
has not received any notice from any Authority disputing or investigating
such compliance;
(ii) all such Plans maintained by American that are intended to comply
with Sections 401 and 501 of the Code comply in all material respects with
all applicable requirements of such sections, and no Event
II-13
<PAGE>
has occurred which is known to American which will give rise to
disqualification of any such Plan under such sections or to a tax under
Section 511 of the Code and each such Plan has been the subject of a
determination letter from the Internal Revenue Service to the effect that
such Plan and related trust is qualified and exempt from Federal income
Taxes under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked, and, to the knowledge of American,
revocation has not been threatened. American has delivered or made
available to Mergeparty a copy of the most recent determination letter
received with respect to each Plan for which such a letter has been issued,
as well as a copy of any pending application for a determination letter.
American has also provided or made available to Mergeparty a list of all
Plan amendments as to which a favorable determination letter has not yet
been received;
(iii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iv) there are no Claims (other than routine Claims for benefits or
actions seeking qualified domestic relations orders) pending or, to
American's knowledge, threatened involving such Plans or the assets of such
Plans, and, to American's knowledge, no facts exist which are reasonably
likely to give rise to any such Claims (other than routine Claims for
benefits or actions seeking qualified domestic relations orders);
(v) no such Plan is subject to Title IV of ERISA, and American has no
actual or potential liability thereunder;
(vi) all group health Plans of American have been operated in compliance
in all material respects with the group health plan continuation coverage
requirements of COBRA;
(vii) neither American nor, to its knowledge, any of its directors,
officers, employees or any other fiduciary has committed any breach of
fiduciary responsibility imposed by ERISA or any similar Applicable Law
that would subject American or any of its respective directors, officers or
employees to liability under ERISA or any similar Applicable Law;
(viii) American is not and never has been a party to any Multiemployer
Plan or made contributions to any such Plan;
(ix) except as set forth in the American Financial Statements and
pursuant to the provisions of COBRA, American does not maintain any Plan
that provides for post-retirement medical or life insurance benefits, and
American does not have any obligation or liability with respect to any such
Plan previously maintained by it, except as the provisions of COBRA may
apply to any former employees or retirees of American;
(x) all material contributions to, and material payments from, the Plans
and Benefit Arrangements that may have been required to be made in
accordance with the terms of the Plans and Benefit Arrangements, and any
applicable collective bargaining agreement, have been made. All such
contributions to, and payments from, the Plans and Benefit Arrangements,
except those payments to be made from a trust qualified under Section
401(a) of the Code, for any period ending before the Closing Date that are
not yet, but will be, required to be made, will be properly accrued and
reflected in the Closing Balance Sheet;
(xi) (1) no "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred that involves the assets of any
Plan; (2) no prohibited transaction has occurred that could subject
American, any of its employees, or, to the knowledge of American, a
trustee, administrator or other fiduciary of any trust created under any
Plan to the tax or sanctions on prohibited transactions imposed by Section
4975 of the Code or Title I of ERISA; (3) none of American, any of its
ERISA Affiliates or, to the knowledge of American, any trustee,
administrator or other fiduciary of any Plan or any agent of any of the
foregoing has engaged in any transaction or acted in a manner that could,
or has failed to act so as to, subject American or any trustee,
administrator or other fiduciary to any liability for breach of fiduciary
duty under ERISA or any other Applicable Law;
(xii) American has not incurred any material liability to a Plan (other
than for contributions not yet due) which liability has not been fully paid
or accrued for payment as of the date of the Original Merger Agreement;
II-14
<PAGE>
(xiii) except as otherwise contemplated by this Agreement, no current or
former employee of American will be entitled to any additional benefits or
any acceleration of the time of payment or vesting of any benefits under
any Plan or Benefit Arrangement as a result of the transactions
contemplated by this Agreement;
(xiv) no compensation payable by American to any of its employees under
any existing Plan, Benefit Arrangement (including by reason of the
transactions contemplated hereby) will be subject to disallowance under
Section 162(m) of the Code;
(xv) any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or
independent contractor of American who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment arrangement would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code);
(xvi) no Plan which is an employee stock ownership plan (an "ESOP")
constitutes a leveraged employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code and there are no unallocated shares of stock
of American currently held under any such ESOP in a suspense account; and
(xvii) there are no outstanding options (or contractual obligations to
issue options) to acquire American Common Stock or other American
securities other than options held by employees or directors of American
and issued under Benefit Arrangements (the aggregate number of which are as
set forth in Section 4.11 of the American Disclosure Schedule).
(b) The execution, delivery and performance by American of this Agreement
and the Collateral Documents executed or required to be executed by American
pursuant hereto and thereto will not involve any prohibited transaction within
the meaning of ERISA or Section 4975 of the Code.
4.10 Insurance. All material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by American or any of its Subsidiaries (other than the
Tower Subsidiaries) are with reputable insurance carriers, provide full and
adequate coverage, for American and such Subsidiaries (other than the Tower
Subsidiaries) and their respective properties and assets, and are in character
and amount at least equivalent to that carried by Persons engaged in similar
businesses and subject to the same or similar perils or hazards, except where
the failure to maintain such insurance policies, either individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect on
American.
4.11 Authorized Capital Stock. The authorized and outstanding capital stock,
Option Securities and Convertible Securities of American, as of September 18,
1997, are as set forth in Section 4.11 of the American Disclosure Schedule.
Except as set forth in Section 4.11 of the American Disclosure Schedule, since
September 18, 1997, American has not issued any shares of capital stock of any
class, any Option Securities or any Convertible Securities, except for the
issue of American Common Stock pursuant to the conversion of Convertible
Securities or the exercise of Option Securities outstanding on September 18,
1997 and in each case in accordance with their present terms or as otherwise
described or contemplated by the Filed American SEC Documents. All of such
outstanding capital stock has been duly authorized and validly issued, is
fully paid and nonassessable and is not subject to any preemptive or similar
rights. American had, prior to the date of the Original Merger Agreement, made
available to Mergeparty a true and correct copy of the Restated Certificate of
Incorporation of American (the "Restated Certificate") as in effect on the
date of the Original Merger Agreement. Except as set forth in Section 4.11 of
the American Disclosure Schedule, there are no bonds, debentures, notes or
other indebtedness of American outstanding having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of American may vote. Except as set forth in
Section 4.11 of the American Disclosure Schedule, or, except as set forth in
the Restated Certificate, there are no contractual obligations of American or
any of its Subsidiaries outstanding to repurchase, redeem or otherwise acquire
any shares of capital stock of American or any of its Subsidiaries. Except as
otherwise contemplated by this Agreement or as set forth in Section 4.11 of
the American Disclosure Schedule, there are no contractual obligations of
American to vote or to dispose of any shares of the capital
II-15
<PAGE>
stock of any of its Subsidiaries. No adjustment in either the conversion price
or the amount or nature of the securities or other property issuable upon
conversion of the shares of American Convertible Preferred Stock is required
as a result of (i) the Tower Merger, other than an adjustment to the effect
that, upon conversion, the holders thereof shall have the right to receive the
Tower Merger Consideration upon any conversion following the Tower Merger
Effective Time, as if such conversion had been effected immediately prior to
the Tower Merger Effective Time, and (ii) the Merger, other than an adjustment
to the effect that, upon conversion, the holders thereof shall have the right
to receive the Merger Consideration upon any conversion following the
Effective Time as if such conversion had been effected immediately prior to
the Effective Time. No adjustment in the exercise price or the number of
shares of American Common Stock or the amount or nature of any other
securities or property issuable upon the exercise of the American Options is
required as result of (i) the Tower Merger, other than an adjustment to the
effect that, upon exercise, the holders thereof shall have the right to
receive the Tower Merger Consideration upon any exercise following the Tower
Merger Effective Time, as if such exercise had been effected immediately prior
to the Tower Merger Effective Time and (ii) the Merger, other than an
adjustment to the effect that, upon exercise, the holders thereof shall have
the right to receive the Merger Consideration upon any exercise following the
Effective Time as if such exercise had been effected immediately prior to the
Effective Time.
4.12 Employment Arrangements. Except as described in the Filed American SEC
Documents or in Section 4.12 of the American Disclosure Schedule, as of the
date of the Original Merger Agreement (i) none of the employees of American or
any of its Subsidiaries (other than the Tower Subsidiaries) was, or, to
American's knowledge, since November 1, 1993 and while an employee of American
or any of its Subsidiaries had been, represented by any labor union or other
employee collective bargaining organization, or were, as of the date of the
Original Merger Agreement, or, to American's knowledge, since November 1, 1993
to such date had been, parties to any labor or other collective bargaining
agreement, (ii) there are, to American's knowledge, no pending labor strikes,
work stoppages, lockouts, slow downs, grievances (including unfair labor
charges), disputes or controversies with any union or any other employee or
collective bargaining organization of such employees, or threats of such labor
strikes, work stoppages, lockouts or slowdowns or any pending demands for
collective bargaining by any union or other such organization, and (iii)
neither American nor any of its Subsidiaries (other than the Tower
Subsidiaries) nor any of its or any of their employees was, as of the date of
the Original Merger Agreement, or, to American's knowledge, since November 1,
1993 to such date had been, subject to or involved in or, to American's
knowledge, threatened with, any union elections, petitions therefor or other
organizational or recruiting activities. American and its Subsidiaries (other
than the Tower Subsidiaries) have performed all obligations required to be
performed under all Employment Arrangements and none of them is in breach or
violation of or in default or arrears under any of the terms, provisions or
conditions thereof, except for such breaches, violations, defaults and
arrears, which either individually or in the aggregate, have not had and are
not reasonably likely to have a Material Adverse Effect on American.
4.13 Voting Requirements. The affirmative vote of the holders of shares of
American Common Stock, representing a majority of the outstanding voting power
of American Common Stock, voting as a single class, is (i) the only vote
necessary to approve and adopt this Agreement and the transactions
contemplated by this Agreement (other than the Tower Merger Agreement) (the
"Required Vote") and (ii) the only vote necessary to approve and adopt the
Tower Merger Agreement and the transactions contemplated by the Tower Merger
Agreement (the "Required Tower Vote").
4.14 Brokers. No broker, investment banker, financial advisor or other
person, other than Credit Suisse First Boston Corporation ("CSFB"), the fees
and expenses of which will be paid by American, and Merrill Lynch Pierce
Fenner & Smith Incorporated, the fees and expenses of which will be paid by
American Tower (or reimbursed to American by American Tower) following the
Effective Time in accordance with the provisions of Section 9.3(b), is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated or permitted by
this Agreement. American has furnished to Mergeparty true and complete copies
of all agreements under which any such fees or expenses may be payable
II-16
<PAGE>
and all indemnification and other agreements related to the engagement of the
persons to whom such fees may be payable.
4.15 Information Supplied.
(a) Each of the Proxy Statement and the Tower Proxy Statement will not, at
the date it is first mailed to the holders of American Common Stock and at the
time of the American Stockholders Meeting (in the case of the Proxy Statement)
and the American Stockholders Tower Meeting (in the case of the Tower Proxy
Statement), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. For purposes of the foregoing, the truth of any
information or the existence of any omissions at the time of the American
Stockholders Meeting and the American Stockholders Tower Meeting shall be
determined with reference to the Proxy Statement and the Tower Proxy
Statement, respectively, as then amended or supplemented. The Proxy Statement
and the Tower Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, no representation or warranty is
made by American with respect to statements made or incorporated by reference
therein based on information specifically supplied by Mergeparty or Mergeparty
Subsidiary for inclusion or incorporation by reference in the Proxy Statement
or the Tower Proxy Statement.
(b) The Registration Statement to be filed with the Commission by American
Tower pursuant to the provisions of Section 6.6(b) will not (except to the
extent revised or superseded by amendments or supplements contemplated
hereby), at the time such Registration Statement is filed with the Commission,
at the time such Registration Statement is amended or supplemented or at the
time such Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.16 Ordinary Course of Business. Except as may be described in the Filed
American SEC Documents or in Section 4.9(a) or Section 4.16 of the American
Disclosure Schedule, since June 30, 1997 to the date of the Original Merger
Agreement, (i) each of American and its Subsidiaries (other than the Tower
Subsidiaries) has operated its business in the normal, usual and customary
manner in the ordinary and regular course of business, consistent with prior
practice (it being understood and agreed for purposes of this Section 4.16 by
the parties that the acquisition, disposition and exchange of radio stations
is in the ordinary course of business) and (ii) there has not been by American
and its Subsidiaries (other than the Tower Subsidiaries) (a) any declaration,
setting aside or payment of any dividend or other distribution payable in
cash, stock, property or otherwise except for (x) the payment of dividends or
the making of distributions by a direct or indirect wholly-owned Subsidiary of
American and (y) the payment of dividends on shares of American Preferred
Stock in accordance with their terms, (b) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (c) (I) any granting to
any executive officer or other key employee of American or any of its
Subsidiaries of any increase in compensation, except for normal increases in
the ordinary course of business consistent with past practice or as required
under Benefit Arrangements, (II) any granting to any such executive officer of
any increase in severance or termination pay, except as was required under any
Benefit Arrangement, (III) except in the ordinary course, any entering into,
amendment in any material respect or termination of any Governmental
Authorization, Private Authorization or material agreement, arrangement,
contract, undertaking, understanding or other obligation, or (IV) any adoption
or amendment of any Plan or Benefit Arrangement (including changing any
actuarial or other assumption used to calculate funding obligations with
respect to any Plan, or changing the manner in which contributions to any Plan
are made or the basis on which such contributions are determined) except as
required to comply with changes in Applicable Law, (d) except insofar as may
have been disclosed in the Filed American SEC Documents or required by a
change in GAAP, any change in accounting methods, principles or practices by
American materially affecting its assets, liabilities or business, (e) any
sale, disposition or contract to dispose of any of its properties or assets
having a value in excess of $1,000,000 other than in the
II-17
<PAGE>
ordinary course, and (f) any damage, destruction or loss, whether or not
covered by insurance, that has had a Material Adverse Effect on American.
4.17 Environmental Matters. Except as set forth in the American SEC
Documents or Section 4.17 of the American Disclosure Schedule, American:
(a) (i) has not been notified in writing that it is potentially liable
and, has not received any written request for information or other
correspondence concerning its potential liability with respect to any site
or facility, under or pursuant to any Environmental Law, (ii) to the
knowledge of American, is not a potentially "responsible party" under, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation and Recovery Act, as amended,
or any similar state Law, and (iii) to the knowledge of American, is not
the subject of or, to the knowledge of American, threatened with any Legal
Action involving a demand for damages or other potential liability,
including any Lien, with respect to violations or breaches of any
Environmental Law;
(b) to the knowledge of American, is in compliance with all Environmental
Laws and has obtained all Environmental Permits required under
Environmental Laws, except for such noncompliances and failures to obtain
Environmental Permits as, individually or in the aggregate, have not had
and would not be reasonably likely to have a Material Adverse Affect on
American;
(c) (i) has not entered into or received any consent decree, compliance
order or administrative order issued pursuant to any Environmental Law, and
(ii) is not a party in interest or in default under any judgment, order,
writ, injunction or decree of any Final Order issued pursuant to any
Environmental Law; and
(d) to the knowledge of American, there have not been any releases,
spills or disposal activities of or involving Hazardous Materials,
including without limitation from underground storage tanks, on or from any
property owned, operated or leased by American which releases, spills or
disposal activities resulted or could reasonably be expected to result in
investigation and cleanup expenditures which upon payment of such
expenditures would be reasonably likely to have a Material Adverse Effect
on American.
Notwithstanding anything to the contrary contained in this Agreement,
American makes no representation or warranty with respect to its compliance
with Environmental Laws or environmental matters generally, except as
specifically set forth in this Section 4.17.
4.18 Opinion of Financial Advisor. American has received the opinion of
CSFB, dated the date of the Original Merger Agreement, to the effect that, as
of such date, the Merger Consideration (as defined in the Original Merger
Agreement) to be received by the holders of American Common Stock in the
Merger is fair from a financial point of view to the holders of American
Common Stock.
4.19 Contracts; Debt Instruments.
(a) Except as set forth in Section 4.20 of the American Disclosure Schedule,
neither American nor any of its Subsidiaries is in violation of or in default
under (nor does there exist any condition which upon the passage of time or
the giving of notice, or both, would cause such a violation of or default
under) any material agreement, arrangement, contract, undertaking,
understanding or other obligation, including the American Preferred Stock
("Contracts"), to which it is a party or by which it or any of its properties
or assets is bound, except for violations or defaults, that individually or in
the aggregate, would not be reasonably likely to have a Material Adverse
Effect on American, and none of the Contracts prohibits American from
incurring an additional $1.00 of indebtedness.
(b) American has made available to Mergeparty (i) true and correct copies of
all Contracts to which any indebtedness of American or any of its Subsidiaries
(other than the Tower Subsidiaries) in an aggregate principal amount in excess
of $1,000,000 is outstanding or may be incurred and (ii) accurate information
regarding the respective principal amounts currently outstanding as of the
date of the Original Merger Agreement thereunder.
II-18
<PAGE>
4.20 State Takeover Statutes. Except for Section 203 of the DCL, to
American's knowledge, no other state takeover Law, statute or similar statute
or regulation applies or purports to apply to the Merger, this Agreement or
any of the transactions contemplated by this Agreement.
4.21 Appraisal Rights. No appraisal rights under Section 262 of the DCL are
applicable to the Tower Merger or the Tower Merger Consideration.
ARTICLE 5
Representations and Warranties of Mergeparty
Except as set forth with respect to specifically identified representations
and warranties in the Mergeparty Disclosure Schedule, Mergeparty represents
and warrants to American as follows:
5.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) Each of Mergeparty and Mergeparty Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite power and authority
(corporate and other) to own or hold under lease its properties and to conduct
its business as now conducted and as presently proposed to be conducted. Each
of Mergeparty and Mergeparty Subsidiary is duly qualified and in good standing
as a foreign corporation in each other jurisdiction (as shown on Section
5.1(a) of the Mergeparty Disclosure Schedule) in which the character of the
property owned or leased by it or the nature of its business or operations
requires such qualification, with full power and authority (corporate and
other) to carry on the business in which it is engaged, except in such
jurisdictions where the failure to be so qualified and in good standing,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on Mergeparty.
(b) Each of Mergeparty and Mergeparty Subsidiary has all requisite power and
authority (corporate and other) to execute, deliver and perform its
obligations under this Agreement and each Collateral Document executed or
required to be executed by Mergeparty and/or Mergeparty Subsidiary pursuant
hereto or thereto or to consummate the Merger and the other transactions
contemplated hereby and thereby, and the execution, delivery and performance
of this Agreement and each Collateral Document executed or required to be
executed pursuant hereto have been duly authorized by all requisite corporate
or other action on the part of Mergeparty and/or Mergeparty Subsidiary, and no
other corporate proceedings on the part of Mergeparty and/or Mergeparty
Subsidiary are necessary to authorize this Agreement or the transactions
contemplated hereby or to consummate the Merger or the other transactions so
contemplated. This Agreement has been duly executed and delivered by each of
Mergeparty and Mergeparty Subsidiary and constitutes, and each Collateral
Document executed or required to be executed pursuant hereto or to consummate
the Merger when executed and delivered by Mergeparty and/or Mergeparty
Subsidiary will constitute, a valid and binding obligation of Mergeparty
and/or Mergeparty Subsidiary, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, moratorium,
insolvency and similar laws affecting the rights and remedies of creditors and
obligations of debtors generally and by general principles of equity.
(c) At the time of execution of this Agreement, Mergeparty and all of its
Affiliates or "associates" (as defined in the Exchange Act) collectively
beneficially own less than 5% of the outstanding shares of American Common
Stock.
(d) The execution, delivery and performance by each of Mergeparty and/or
Mergeparty Subsidiary of this Agreement and any Collateral Document executed
or required to be executed by such party pursuant hereto or thereto, do not,
and the consummation by Mergeparty Subsidiary of the Merger and the other
transactions hereby and thereby and compliance with the terms, conditions and
provisions hereof or thereof by Mergeparty and/or Mergeparty Subsidiary will
not:
(i) (A) conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of Mergeparty or
Mergeparty Subsidiary or (B) any Applicable Law applicable to Mergeparty or
II-19
<PAGE>
Mergeparty Subsidiary, or conflict with, or result in a breach or violation
of, or constitute a default under, or permit the termination, cancellation
or acceleration of any obligation or liability in, or but for any
requirement of the giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default under,
or permit any such termination, cancellation or acceleration of, any
Contract or Private Authorization of Mergeparty or Mergeparty Subsidiary,
except, in the case of clause (B), for such conflicts, breaches,
violations, terminations, cancellations or accelerations that would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on Mergeparty; or
(ii) result in or permit the creation or imposition of any Lien upon any
property now owned or leased by Mergeparty or Mergeparty Subsidiary except
for such Liens that would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on Mergeparty or
Mergeparty Subsidiary; or
(iii) require any Governmental Authorization or Governmental Filing
except for (A) the FCC Consents, (B) filings under the Hart-Scott-Rodino
Act, (C) the filing with the Commission of such reports under Section 13(a)
or 15(d) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (D) the
filing of the Certificate of Merger with the Delaware Secretary of State
and appropriate documents with the relevant authorities of other states in
which American is qualified to do business and (E) such other Governmental
Authorizations and Governmental Filings the failure of which to be made or
obtained would, individually or in the aggregate, not be reasonably likely
to have a Material Adverse Effect on American.
(e) Mergeparty Subsidiary was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated by this Agreement.
5.2 Compliance with Governmental Authorizations and Applicable Law;
Litigation. Except as disclosed in any report or other document filed by
Mergeparty with the SEC prior to the date of the Original Merger Agreement or
in Section 5.2 of the Mergeparty Disclosure Schedule, there are no Legal
Actions pending or, to the knowledge of Mergeparty, threatened against
Mergeparty or any of its Subsidiaries, except for Legal Actions that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect on Mergeparty or prevent or materially burden or
materially impair the ability of Mergeparty to consummate the transactions
contemplated by this Agreement. Except as set forth in Section 5.2 of the
Mergeparty Disclosure Schedule, there are not facts relating to Mergeparty (or
any Affiliate thereof) under the FCA that would disqualify it (or any
Affiliate or assignee) from obtaining control of the American FCC Licenses or
that would prevent it (or any Affiliate or assignee) from consummating the
transactions contemplated by this Agreement or, to Mergeparty's knowledge,
materially delay the grant of the FCC Consents. Except as may be set forth in
Section 5.2 of the Mergeparty Disclosure Schedule, it is not necessary for
Mergeparty or any of its Subsidiaries or other Affiliates (or assigns) to (a)
seek or obtain any waiver from the FCC, (b) dispose of any interest in any
media or communications property or interest (including without limitation any
of the American Stations or the American Brokered Stations), (c) terminate any
venture or arrangement, or (d) effectuate any change or restructuring of
ownership (including without limitation the removal or withdrawal of officers
or directors or the conversion or repurchase of equity securities in
Mergeparty or any Affiliate) to obtain, or to avoid any delay in obtaining,
the FCC Consents. Mergeparty is able to certify on an FCC Form 315 that it is
financially qualified.
5.3 Mergeparty Financing. On the Closing Date, Mergeparty will have
sufficient funds to consummate the transactions contemplated by this
Agreement, including without limitation the Merger, and to pay all related
fees and expenses.
ARTICLE 6
Covenants
6.1 Access to Information; Confidentiality. American shall afford to
Mergeparty and its accountants, counsel, investment bankers, financial
advisors and other agents and representatives (the "Representatives") full
II-20
<PAGE>
access during normal business hours throughout the period prior to the Closing
Date to all of its (and its Subsidiaries', other than those of the Tower
Subsidiaries) properties, books, contracts, commitments and records (including
without limitation Tax Returns) and, during such period, shall furnish
promptly upon request (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of any Applicable Law
(including without limitation the FCA) or filed by it or any of its
Subsidiaries (other than the Tower Subsidiaries) with any Authority in
connection with the Merger or which may have a material effect on it or its
business, financial condition or results of operations, and (ii) such other
information concerning any of the foregoing as Mergeparty shall reasonably
request; provided, however, that the foregoing shall not require American to
permit any disclosure or to disclose any information, that in the reasonable
judgment of American would result in the disclosure of any trade secrets of
third parties or violate any of its obligations with respect to
confidentiality if American shall have used its best efforts to obtain the
consent of such third party to such inspections or disclosure. All requests
for information shall be directed to an executive officer of American or such
other Persons as may be designated by American. All information disclosed
pursuant to this Section or otherwise shall be governed by the terms of the
Confidentiality Agreement, the terms and provisions of which are incorporated
herein by reference with the same force and effect as though set forth here in
their entirety. No investigation pursuant to this Section or otherwise shall
affect any representation or warranty of American in this Agreement or any
condition to the obligations of Mergeparty hereto.
6.2 Agreement to Cooperate.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties hereto shall use best efforts (x) to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate the Merger and (y) to refrain
from taking, or cause to be taken, any action and to refrain from doing or
causing to be done, any thing which could impede or impair the consummation of
the Merger, including, in all cases, without limitation using its best efforts
(i) to prepare and file with the applicable Authorities as promptly as
practicable after the execution of this Agreement all requisite applications
and amendments thereto, together with related information, data and exhibits,
necessary to request issuance of orders approving the Merger by all such
applicable Authorities, (ii) to obtain all necessary or appropriate waivers,
consents and approvals, (iii) to effect all necessary registrations, filings
and submissions, (iv) to defend any suit, action or proceeding, whether
judicial or administrative, challenging the Merger or any of the transactions
contemplated by the Merger Agreement, including seeking to lift any injunction
or other legal bar to the Merger (and, in such case, to proceed with the
Merger as expeditiously as possible), and (v) to obtain the satisfaction of
the conditions specified in Article 7, including without limitation the
securing of all authorizations, consents, waivers, modifications, order or
approvals referred to in Sections 7.1(b) and 7.1(d) and, without limiting the
generality of the foregoing, and notwithstanding any provision contained in
this Agreement to the contrary, including without limitation the last sentence
of Section 6.10, American shall not, and shall not permit any Tower Subsidiary
to, take any action or enter into any agreement, plan or arrangement to take
any action (a "Prohibited Transaction") which could reasonably be expected to
materially delay the date of the American Stockholders Meeting or the
Effective Time (it being understood that any delay in excess of fifteen (15)
business days which would arise as a result of any such action shall be deemed
"material" for purposes hereof). American hereby agrees to provide Mergeparty
with prior written notification of any proposed action which could reasonably
be expected to constitute a Prohibited Transaction.
(b) Without limiting the generality of the foregoing, the parties
acknowledge and agree that the transfer of control of the American FCC
Licenses as contemplated by this Agreement is subject to the prior consent and
approval of the FCC. American and Mergeparty acknowledge that they have
heretofore filed with the FCC appropriate applications requesting the FCC's
written consent to the transfer of control of the American FCC Licenses
pursuant to this Agreement and have caused all necessary persons to join in
one or more such applications filed with the FCC (the "Applications").
American and Mergeparty will use their best efforts to take such steps as may
be necessary (i) diligently to prosecute the Applications and to prepare and
file any further Applications or amendments as may be necessary to obtain the
consent for the transfer of control to Mergeparty of the licenses held by the
American Brokered Stations to be acquired by American and (ii) to obtain the
FCC Consents, including action by Mergeparty, at its sole cost and expense
(except as provided elsewhere in this
II-21
<PAGE>
Agreement), to satisfy or cause to be removed all Divestiture Conditions, if
any. The failure by American or Mergeparty to use its best efforts to timely
file or diligently prosecute its portion of any Application or, in the case of
Mergeparty, the failure to use its best efforts to make any Required
Divestiture or otherwise satisfy or cause to be removed all Divestiture
Conditions on or before the Termination Date, shall be a material breach by
American or Mergeparty, as the case may be, of this Agreement. American agrees
that any delay in prosecuting the Applications or obtaining the FCC Consents
resulting from Mergeparty's good faith negotiations, subject to Applicable
Law, with the FCC, Antitrust Division or FTC with respect to the imposition of
a Divestiture Condition shall not constitute a failure by Mergeparty to use
its best efforts diligently to prosecute the Applications or obtain the FCC
Consents and so long as such negotiations do not interfere with satisfaction
of all conditions to Closing prior to the Termination Date. If reconsideration
or judicial review is sought with respect to any FCC Consent, American and
Mergeparty shall (promptly and with all due efforts) oppose such efforts to
obtain reconsideration or judicial review.
(c) Without limiting the generality of Section 6.2(a), the parties undertake
and agree to file as soon as practicable after the date hereof, and in any
event within sufficient time to be able to consummate the Merger prior to the
Termination Date, a Notification and Report Form under the Hart-Scott-Rodino
Act with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division"). Each of the parties
shall (i) use its best efforts to comply as expeditiously as possible with all
lawful requests of the FTC or the Antitrust Division for additional
information and documents and (ii) not extend any waiting period under the
Hart-Scott-Rodino Act or enter into any agreement with the FTC or the
Antitrust Division not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other party hereto;
provided, however, that nothing shall limit the ability of Mergeparty to
extend the 20-day waiting period under the Hart-Scott-Rodino Act following
substantial compliance with any request for additional information that may be
forthcoming, if such extension is reasonably necessary to allow the
continuation of good-faith negotiations intended to remove any objection to
the transaction that the FTC or Antitrust Division may have asserted, and if
such extension will expire not less than 30 days prior to the Termination
Date.
(d) Anything in this Agreement, including without limitation Section 6.2(b),
to the contrary notwithstanding, Mergeparty shall obtain the FCC Consents and
clearances under the Hart-Scott-Rodino Act and the grant of any waivers in
connection therewith prior to the Termination Date in accordance with this
Agreement unless the failure to obtain such FCC Consents, clearances and
waivers is primarily the result of one or more Uncontrollable Events. For
purposes of this Agreement, the term "Uncontrollable Events" shall mean (i)
acts or omissions on the part of American or any of its Subsidiaries in
conducting its respective operations other than those relating to the number
of American FCC Licenses or amount of revenues in a particular market, (ii) an
unremedied or unwaived material breach by American of its obligations under
this Agreement, or (iii) any change in or enactment of Applicable Law by
Congress and signed by the President and which (A) has the effect of
decreasing the number of radio licenses which a Person may own nationally or
locally or (B) materially and adversely relates to the concentration of radio
licenses which a Person may own in a market, and as a result of the change or
enactment referred to in either clause (A) or (B) above, Mergeparty's
performance of its obligations under this Agreement would have a Material
Adverse Effect on Mergeparty's radio and television broadcasting business.
Mergeparty shall file with the FCC, within sufficient time to permit timely
grant of the Applications, applications for consent to assign or transfer,
pursuant to trust arrangements satisfying the FCC's local multiple ownership
rules and policies, such radio broadcast stations as Mergeparty may designate,
so that the radio broadcast stations of Mergeparty and American not designated
for such trust arrangements may be held by the Surviving Corporation in
compliance with the FCC's local multiple ownership rules and policies.
Mergeparty shall, to the extent necessary to obtain grant of the trust
applications, thereafter promptly file or cause to be filed any further
applications (including applications to assign radio broadcast stations to
third party purchasers for value) that may be required by the FCC.
Notwithstanding the two preceding sentences, with regard to stations located
in the San Jose market, the obligations of Mergeparty to submit trust or sale
applications shall be excused for such stations to the extent and for the
duration of the period that Mergeparty is unable to identify the stations
II-22
<PAGE>
to be placed in trust or sold because of the failure of American to notify
Mergeparty of the resolution of the Antitrust Division impediment impacting
the American transactions pending in the San Jose market.
(e) If Mergeparty or any of its Affiliates receives an administrative or
other order or notification relating to any violation or claimed violation of
the rules and regulations of the FCC, or of any other Authority (including
without limitation seeking or relating to a Divestiture Condition), that could
affect Mergeparty's or Mergeparty Subsidiary's ability to consummate the
transactions contemplated hereby, or if Mergeparty or any other Affiliate of
Mergeparty should become aware of any fact relating to the qualifications of
Mergeparty or any of its Affiliates that reasonably could be expected to cause
the FCC to withhold its consent to the assignment of the American FCC
Licenses, Mergeparty shall promptly notify American thereof and American shall
do likewise with Mergeparty and Mergeparty shall use its best efforts, and
take such steps as are necessary, in order to satisfy or remove the
Divestiture Conditions to enable the Closing to occur prior to the Termination
Date. Mergeparty covenants and agrees to keep American fully informed as to
all matters concerning all Required Divestitures and shall promptly notify
American in writing of any and all significant developments relating thereto
and American agrees to do likewise with Mergeparty.
(f) Mergeparty acknowledges and agrees that certain of the American Stations
and American Brokered Stations may file applications for renewal of license
during the time that an application for the FCC Consents is pending before the
FCC. To the extent any such application for renewal may be filed, Mergeparty
agrees to amend the transferee's portion of any application for the FCC
Consents and, as may be required, to amend any license renewal applications
for all of the American Stations or American Brokered Stations, to confirm
Mergeparty's intention to consummate this Agreement during the pendency of
such license renewal application, and to agree to assume the consequences
associated with succeeding to the place of American in such license renewal
applications. The making of this statement shall not be deemed to limit or
waive any other rights that Mergeparty may otherwise have under this
Agreement.
(g) The parties shall cooperate with one another in the preparation,
execution and filing of all Tax Returns, questionnaires, applications, or
other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the Merger that are required or permitted to be
filed on or before the Closing Date.
(h) Subject to Applicable Laws relating to the exchange of information,
American, on the one hand, and Mergeparty, on the other hand, shall have the
right to review in advance, and to the extent practicable each will consult
the other with respect to, all the information relating to American or
Mergeparty, as the case may be, and any of their respective Subsidiaries, that
appear in any filing made with, or written materials submitted to, any
Authority and/or other Person in connection with the Merger and the other
transactions contemplated by this Agreement. In exercising the foregoing
right, each of American and Mergeparty shall act reasonably and as promptly as
practicable.
6.3 Public Announcements. Until the Closing, or in the event of termination
of this Agreement, each party shall consult with the other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger and shall not issue any such press release or make any
such public statement without the prior consent of the other. Notwithstanding
the foregoing, the parties acknowledge and agree that they may, without each
other's prior consent, issue such press releases or make such public
statements as may be required by Applicable Law, in which case, to the extent
practicable, they will consult with the other regarding the nature, content
and form of such press release or public statement.
6.4 Notification of Certain Matters. Each party shall give prompt notice to
the other, of the occurrence or non-occurrence of any Event the occurrence or
non-occurrence of which would be reasonably likely to cause (i) any
representation or warranty made by it contained in this Agreement to be untrue
or inaccurate in any material respect or (ii) any failure made by it to comply
with or satisfy, or be able to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this
II-23
<PAGE>
Agreement in any material respect, such that, in any such case, one or more of
the conditions of Closing would not be satisfied; provided, however, that the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the rights and remedies available hereunder to the party receiving such
notice or the obligations of the party delivering such notice and shall not,
in any event, affect the representations, warranties, covenants and agreements
of the parties or the conditions to their respective obligations under this
Agreement.
6.5 Stockholder Approval. American will, as soon as practicable following
the date thereof, establish separate record dates (which will be as soon as
practicable following the date hereof) for, duly call, give notice of, convene
and hold (on separate dates) (i) a meeting (the "American Stockholders
Meeting") of the holders of shares of American Common Stock for the purpose of
obtaining the Required Vote and (ii) a meeting (the "American Stockholders
Tower Meeting") of holders of shares of American Common Stock for the purpose
of obtaining the Required Tower Vote. American will, through its Board of
Directors, recommend to the holders of shares of American Common Stock
approval and adoption of this Agreement and the Tower Merger Agreement,
subject, with respect to approval and adoption of this Agreement, to the
fiduciary duties of the Board of Directors of American under Applicable Law.
6.6 Proxy Statement; Registration Statement.
(a) American shall prepare and file with the Commission as soon as is
reasonably practicable after the date hereof a proxy statement in connection
with the American Stockholders Meeting (the "Proxy Statement") and a proxy
statement in connection with the American Stockholders Tower Meeting (the
"Tower Proxy Statement"), in each case complying with applicable rules and
regulations of the Commission and the DCL.
(b) American shall cause American Tower to prepare and file with the
Commission as soon as is reasonably practicable after the date hereof a
registration statement on Form S-4 (the "Registration Statement") complying
with applicable rules and regulations of the Commission. The Registration
Statement shall cover the registration under the Securities Act of the shares
of Tower Common Stock to be delivered as the Tower Stock Consideration or
Tower Merger Tower Consideration to the holders of shares of American Common
Stock at the Effective Time or the Tower Merger Effective Time, as the case
may be.
(c) Mergeparty and American shall, and American shall cause American Tower
to, promptly furnish to the other all information, and take such other
actions, as may reasonably be requested in connection with any action taken to
comply with the provisions of this Section 6.6. Each of American and
Mergeparty shall, and American shall cause American Tower to, correct promptly
any information provided by it to be used specifically in the Proxy Statement,
the Tower Proxy Statement or the Registration Statement that shall have become
false or misleading in any material respect and shall take all steps necessary
to file with the Commission and have cleared by the Commission any amendment
or supplement to the Proxy Statement, the Tower Proxy Statement or the
Registration Statement so as to correct such Proxy Statement, such Tower Proxy
Statement or such Registration Statement and cause it to be disseminated to
the stockholders of American, to the extent required by Applicable Law.
Without limiting the generality of the foregoing, American shall, and American
shall cause American Tower to, notify Mergeparty promptly of the receipt of
the comments of the Commission and of any request by the Commission for
amendments or supplements to the Proxy Statement, the Tower Proxy Statement or
the Registration Statement, or for additional information, and shall supply
Mergeparty with copies of all correspondence between it or its
representatives, on the one hand, and the Commission or members of its staff,
on the other hand, with respect to the Proxy Statement, the Tower Proxy
Statement or the Registration Statement. Whenever any event occurs which
should be described in an amendment or a supplement to the Proxy Statement,
the Tower Proxy Statement or the Registration Statement, American shall, and
American shall cause American Tower to, upon learning of such event, promptly
prepare, file and clear with the Commission and, if prior to the Effective
Time, mail to the holders of shares of American Common Stock such amendment or
supplement; provided, however, that, prior to such mailing, (i) American
shall, and American shall cause American Tower to, consult with Mergeparty
with respect to such amendment or supplement, (ii) shall afford Mergeparty
reasonable opportunity to comment thereon, and (iii) each such amendment or
supplement shall be reasonably satisfactory to Mergeparty.
II-24
<PAGE>
6.7 Miscellaneous. Nothing contained in this Agreement shall prohibit
American from (a) taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
(b) making any disclosure to American's stockholders if, in the good faith
judgment of the majority of the members of the Board of Directors of American,
after consultation with independent counsel, failure to so disclose would be
inconsistent with Applicable Laws.
6.8 Option Plans.
(a) All unexpired options to purchase American Common Stock that are
outstanding immediately prior to the Effective Time (each, an "American
Option"), except as provided otherwise in this Section 6.8, will be canceled
by American immediately prior to the Effective Time. Each employee or director
of American or any of its Subsidiaries immediately prior to the Effective Time
(each, an "Optionholder") shall receive, with respect to each share of
American Common Stock subject to an unexpired American Option of the
Optionholder so canceled by American, the Merger Consideration, or, if the
Tower Merger Effective Time shall have occurred, the cash that the
Optionholder would have received pursuant to the Merger and shares of American
Tower Common Stock that the Optionholder would have received pursuant to the
Tower Merger, in each case with respect to each share of American Common Stock
subject to an unexpired American Option of the Optionholder had such American
Option been exercised immediately prior to the Tower Merger Effective Time, in
all cases reduced by an amount of cash (and, to the extent necessary, Tower
Common Stock) equal to the exercise price per share of American Common Stock
subject to such American Option. Except as provided in the preceding sentence,
no other consideration will be paid by American to an Optionholder in respect
of his or her canceled American Options. If the Merger is not consummated, the
cancellation of the Optionholder's American Options shall be rescinded and the
Optionholder shall continue to hold such American Options upon their original
terms and conditions. At the election of any Optionholder who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1), this Section 6.8(a) will be inoperative with
respect to such American Options as he or she may specify to the extent that
the acceleration, vesting cancellation and cash-out of American Options at the
Effective Time as provided herein would constitute an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code). Any
Optionholder who makes such election shall forfeit the American Options which
are subject to such election and shall receive no consideration therefor.
(b) With respect to American Options held by Tower Employees,
notwithstanding the foregoing provisions of this Section 6.8 and in lieu
thereof, and subject to the approval of the provisions of this Section 6.8 by
the Board of Directors of American and the Compensation Committee thereof,
such Tower Employees may elect to have their American Options assumed by
American Tower and converted into options to acquire Tower Common Stock as of
the earlier to occur of the Tower Merger Effective Time and the Effective
Time, such conversion to be effectuated in a manner that will preserve the
spread in such American Options between the option exercise price and the fair
market value of American Common Stock at the time of such conversion, and the
ratio of the spread to the exercise price prior to such conversion and, to the
extent applicable, otherwise in conformity with the rules under Section 424(a)
of the Code and the regulations promulgated thereunder. To the extent that
Tower Employees elect to so convert their American Options into options to
acquire Tower Common Stock, American shall contribute (without the payment of
any amount or the issuance of any securities by American Tower) to the capital
of American Tower at the time of such conversion a number of shares of Tower
Common Stock equal to the excess, if any, of (i) the number of shares of Tower
Common Stock owned by American immediately prior to the Tower Merger Effective
Time or the Effective Time, as the case may be, over (ii) the number of shares
of Tower Common Stock required to be delivered (x) to the holders of shares of
American Common Stock, (y) to holders of American Options pursuant to the
provisions of Section 6.8(a), and (z) upon conversion of American Convertible
Preferred Stock. If the Tower Employees set forth on Schedule 4.1(e) do not
enter into definitive agreements prior to the earlier to occur of the Tower
Merger Effective Time and the Effective Time to convert the American Options
which are held by such Tower Employees and set forth on such Schedule into
options to acquire Tower Common Stock in accordance with this Section 6.8(b),
American shall, prior to the earlier to occur of the Tower Merger Effective
Time and the Effective Time, cause American Tower to issue to American in
exchange for payment of the par value thereof a number of shares of Tower
Common Stock equal to the aggregate number of shares of American Common Stock
subject to such American Options set forth on
II-25
<PAGE>
such Schedule. American shall cause American Tower to file with, and cause to
be declared effective prior to the earlier to occur of the Tower Merger
Effective Time or the Effective Time under the Securities Act by, the
Commission, a registration statement on Form S-8 to register the shares of
Tower Common Stock subject to such converted American Options under the
Securities Act.
(c) American will use its best efforts (including best efforts to obtain any
consents of Optionholders, if required) to cause the cancellation of all of
the American Options immediately prior to the Effective Time.
(d) Notwithstanding the foregoing provisions of this Section 6.8, in the
event that any amount payable under Section 6.8(a) to an Optionholder in
respect of his American Options would fail to be deductible by American (or
any successor thereto) solely by reason of (S)162(m) of the Code (after taking
into account all amounts paid or reasonably expected to be payable to the
Optionholder in the same taxable year in which the payments under Section
6.8(a) are made to the Optionholder and which are not otherwise exempt from
Code (S)162(m) in determining whether any amount payable to the Optionholder
will fail to be deductible thereunder), then, with respect to such portion of
the Optionholder's American Options the cancellation and cash-out of which
would be nondeductible under said (S)162(m) (the "(S)162(m) Options"), such
(S)162(m) Options shall be canceled in accordance with the foregoing
provisions of this Section 6.8, but the payments contemplated in Section
6.8(a) in respect of the Optionholder's (S)162(m) Options shall be made to the
Optionholder on the 110th day following the Effective Time. American shall use
its best efforts to obtain the written consent of each Optionholder affected
by this Section 6.8(e) to the foregoing provisions hereof.
(e) All amounts payable hereunder to an Optionholder shall be reduced by any
applicable withholding taxes.
Notwithstanding anything to the contrary in this Agreement, American shall
have the right, in its sole and absolute discretion, to accelerate, on such
terms and conditions as it shall determine, in whole or in part, the vesting
of any or all of the American Options outstanding on the date hereof (other
than the (S)162(m) Options) so that such American Options are exercisable in
full prior to the Effective Time.
6.9 Conduct of Business by Mergeparty Pending the Merger. Except as
otherwise contemplated by this Agreement, or as has been publicly disclosed
prior to the date of the Original Merger Agreement, after the date of the
Original Merger Agreement and prior to the Closing Date or earlier termination
of this Agreement unless American shall otherwise agree in writing, with
respect to Mergeparty's media business, Mergeparty shall, and shall cause its
Subsidiaries, to:
(i) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice, which includes the
acquisition of other radio broadcasting stations;
(ii) not amend or propose to amend its Organic Documents in any manner
materially adverse to the holders of the American Preferred Stock;
(iii) use all best efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with
them and not engage in any action, directly or indirectly, with the intent
to adversely affect the transactions contemplated by this Agreement; and
(iv) not authorize or enter into any agreement that would violate any of
the foregoing.
6.10 Conduct of Business by American Pending the Merger. Except as set forth
in Section 6.10 of the American Disclosure Schedule or as otherwise
contemplated by this Agreement, including without limitation the transactions
contemplated by the Tower Documentation and Section 6.19 hereof, after the
date of the Original Merger Agreement and prior to the Closing Date or earlier
termination of this Agreement, unless Mergeparty shall otherwise consent in
writing, American shall, and shall cause its Subsidiaries, to:
(i) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
II-26
<PAGE>
(ii) not (A) amend or propose to amend their respective Organic
Documents, (B) split, combine or reclassify (whether by stock dividend or
otherwise) their outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in
substitution for shares of its capital stock, or (C) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise, except for (x) the payment of dividends or the making of
distributions by a direct or indirect wholly-owned Subsidiary of American
and (y) the payment of dividends on shares of the American Preferred Stock
in accordance with their terms;
(iii) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of its capital stock, Convertible
Securities or Option Securities, except that American may issue shares of
American Common Stock upon conversion of Convertible Securities and
exercise of Option Securities outstanding on the date hereof and in
accordance with their present terms;
(iv) not (A) incur or become contingently liable with respect to any
indebtedness other than (x) short-term borrowings not to exceed $25 million
in the aggregate outstanding at any one time, (y) borrowings to finance
pending acquisitions of radio stations set forth in Section 6.10 of the
American Disclosure Schedule and, pursuant to agreements in effect on the
date of the Original Merger Agreement and (z) borrowings not to exceed $120
million to finance a capital contribution by American to Tower, (B) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock, Convertible Securities or Option Securities, except pursuant to the
conversion or exercise thereof, as the case may be, or except to the extent
required by the present terms thereof, (C) sell, lease, license, pledge,
dispose of or encumber any properties or assets or sell any businesses
other than pursuant to agreements in effect on the date of the Original
Merger Agreement and set forth in Section 6.10 of the American Disclosure
Schedule or Liens arising in accordance with the provisions of indebtedness
in effect on the date of the Original Merger Agreement and in accordance
with their present terms, or (D) make any loans, advances or capital
contributions to, or investments in, any other Person, other than to any
direct or indirect wholly owned Subsidiary of American (other than the
Tower Subsidiaries) and, except as provided in clause (z) above, or to
officers and employees of American or any of its Subsidiaries for travel,
business or relocation expenses in the ordinary course of business;
(v) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(vi) confer on a regular and frequent basis with one or more
representatives of Mergeparty to report material operational matters and
the general status of ongoing operations;
(vii) not adopt, enter into, amend or terminate any employment,
severance, special pay arrangement with respect to termination of
employment or other similar arrangements or agreements with any directors,
officers or key employees;
(viii) maintain with financially responsible insurance companies
insurance on their respective tangible assets and their respective
businesses in such amounts and against such risks and losses as are
consistent with past practice;
(ix) not make any Tax election that could reasonably be likely to have a
Material Adverse Effect on American or settle or compromise any material
income Tax liability;
(x) except in the ordinary course of business or except as would not
reasonably be likely to have a Material Adverse Effect on American, not
modify, amend or terminate any Material Agreement to which American or any
Subsidiary is a party or waive, release or assign any material rights or
claims thereunder;
(xi) not make any material change to its accounting methods, principles
or practices, except as may be required by GAAP;
(xii) not acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any Person or other business
II-27
<PAGE>
organization or division thereof or (y) any assets that, individually or in
the aggregate, are material to American and its Subsidiaries taken as a
whole, in each case, other than pursuant to agreements in effect on the
date of the Original Merger Agreement and set forth in the Section 6.10 of
the American Disclosure Schedule (Mergeparty agrees not to unreasonably
withhold, delay or condition a consent to any matters described in this
paragraph);
(xiii) except as set forth in Section 4.9(a) or Section 4.16 of the
American Disclosure Schedule, (a) not grant to any executive officer or
other key employee of American or any of its Subsidiaries any increase in
compensation, except for normal increases in the ordinary course of
business consistent with past practice or as required under Benefit
Arrangements in effect as of June 30, 1997, (b) not grant to any such
executive officer any increase in severance or termination pay, except as
was required under any Benefit Arrangements in effect as of June 30, 1997,
(c) not adopt or amend any Plan or Benefit Arrangement (including change
any actuarial or other assumption used to calculate funding obligations
with respect to any Plan, or change the manner in which contributions to
any Plan are made or the basis on which such contributions are determined)
and (d) except in the ordinary course, not enter into, amend in any
material respect or terminate any Governmental Authorization (except as
would not be reasonably likely to have a Material Adverse Effect on
American), material Private Authorization or Contract; and
(xiv) not authorize or enter into any agreement that would violate any of
the foregoing.
Anything in this Section to the contrary notwithstanding, the provisions of
this Section (other than clause (ii) hereof) shall not apply to any of the
Tower Subsidiaries.
6.11 Control of Operations. Nothing contained in this Agreement shall give
to Mergeparty, directly or indirectly, rights to control or direct American's
operations prior to the Effective Time. Prior to the Effective Time, American
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision of its operations. Nothing contained in this
Agreement shall give to American, directly or indirectly, rights to control or
direct Mergeparty's operations prior to the Effective Time. Prior to the
Effective Time, Mergeparty shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
6.12 Directors', Officers' and Employees' Indemnification and Insurance.
(a) The Organic Documents of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set
forth in the Organic Documents of American, as in effect on the date of the
Original Merger Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six (6) years from the Effective Time in
any manner that would affect adversely the rights thereunder of individuals
who at any time prior to the Effective Time were directors, officers or
employees of American or any of its Subsidiaries, unless such modification
shall be required by Applicable Law.
(b) From and after the Effective Time, Mergeparty shall indemnify, defend
and hold harmless the present and former officers, directors and employees of
American or any of its Subsidiaries (collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages, liabilities or amounts that are
paid in settlement of, or otherwise in connection with any claim, action,
suit, proceeding or investigation (as used in this Section, a "claim")
(including, without limitation, in connection with this Agreement, the Merger
and the transactions contemplated hereby), based in whole or in part on the
fact that the Indemnified Party (or the Person controlled by the Indemnified
Party) is or was a director, officer or employee of American or any of its
Subsidiaries and arising out of actions or omissions occurring at or prior to
the Effective Time whether asserted or claimed prior to, at or after the
Effective Time, in each case to the fullest extent permitted under the DCL
(and shall pay any expenses, as incurred, in advance of the final disposition
of any such action or proceeding to each Indemnified Party to the fullest
extent permitted under the DCL). Without limiting the foregoing, in the event
any such claim is brought against any of the Indemnified Parties, (i) such
Indemnified Parties may retain counsel (including local counsel) satisfactory
to them and which shall be reasonably satisfactory to Mergeparty and they
shall pay all reasonable fees and expenses of such counsel for such
Indemnified Parties; and (ii) Mergeparty shall use its best efforts to assist
in the defense of any such claim; provided, however, that
II-28
<PAGE>
Mergeparty shall not be liable for any settlement effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Notwithstanding the foregoing, nothing contained in this Section
shall be deemed to grant any right to any Indemnified Party which is not
permitted to be granted to an officer, director or employee of Mergeparty
under the DCL, assuming for such purposes that Mergeparty's Organic Documents
provide for the maximum indemnification permitted by the DCL.
(c) Mergeparty will cause to be maintained for a period of not less than six
(6) years from the Effective Time American's current directors' and officers'
insurance and indemnification policy to the extent that it provides coverage
for events occurring prior to the Effective Time ("D&O Insurance") for all
Persons who are directors and officers of American on the date of this
Agreement, so long as the annual premium therefor would not be in excess of
200% of the last annual premium therefor paid prior to the date of the
Original Merger Agreement (the "Maximum Premium"); provided, however, that if
the annual premiums of such insurance coverage exceed such amount, Mergeparty
shall only be obligated to obtain the greatest coverage available under such
policy for a cost not exceeding such amount, provided further, however, that
Mergeparty may, in lieu of maintaining such existing D&O Insurance as provided
above, cause coverage to be provided under any policy maintained for the
benefit of Mergeparty or any of its Subsidiaries, so long as the terms thereof
are no less advantageous to the intended beneficiaries thereof than the
existing D&O Insurance. If the existing D&O Insurance expires, is terminated
or canceled during such six-year period, Mergeparty will use its best efforts
to cause to be obtained as much D&O Insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the
Maximum Premium, on terms and conditions no less advantageous to the covered
Persons than the existing D&O Insurance. American represents to Mergeparty
that the Maximum Premium is not greater than $500,000.
(d) In the event Mergeparty or Mergeparty Subsidiary or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then and in each such case,
proper provisions shall be made so that the successors and assigns of
Mergeparty or Mergeparty Subsidiary, as the case may be, shall assume the
obligations set forth in this Section.
(e) This Section is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on Mergeparty, Mergeparty Subsidiary and
their respective successors and assigns.
6.13 Solicitation of Employees. If this Agreement is terminated, Mergeparty
agrees that neither it nor any of its Subsidiaries or other Affiliates will,
for a period of eighteen (18) months from the date of such termination,
solicit or actively seek to hire any key employees (including without
limitation any station manager, sales manager, program director or any
individual senior to any of such individuals) who during such period is
employed by American or any of its Subsidiaries, whether or not such
individual would commit breach of such individual's employment agreement or
contract in leaving such employment; provided, however, that the foregoing
shall not prevent Mergeparty from taking any action permitted by the
Confidentiality Agreement.
6.14 Change of Name. Within ten (10) days after the Closing, Mergeparty
shall cause each of its Subsidiaries, if necessary, to file certificates of
amendment with the appropriate Secretary of State, amending such company's
Organic Documents to change the name of such company to any name which does
not include the words "American Radio". Immediately prior to the Closing,
American will assign to American Tower or its designee all right, title and
interest, including all the goodwill related thereto, in and for past
infringements of the name "American Radio" and related trademarks, service
marks, logos and the like. As soon as commercially practicable, but in no
event later than six (6) months from the Closing Date, Mergeparty Subsidiary
and its Subsidiaries shall cease all use of the name "American Radio" in all
modes.
6.15 Benefit Plans. Mergeparty shall take such action as may be necessary so
that on and after the Effective Time and for one (1) year thereafter, officers
and employees of American and its Subsidiaries (other than Tower Employees)
shall be provided employee benefits, plans and programs (excluding equity
incentive
II-29
<PAGE>
arrangements) which are no less favorable in the aggregate than those
generally available pursuant to those employee benefit plans and programs in
effect for such officers and employees immediately prior to the Effective
Time; it being understood that Mergeparty shall determine the types and levels
of specific benefits to be so provided. For purposes of eligibility to
participate and vesting in all benefits provided to officers and employees of
American and its Subsidiaries (other than Tower Employees), such officers and
employees of American and its Subsidiaries will be credited with their years
of service with American and its Subsidiaries and prior employers to the
extent service with American and its Subsidiaries and prior employers is taken
into account under the applicable plans of American and its Subsidiaries as in
effect as of the date of the Original Merger Agreement. Upon termination of
any health plan of American or any of its Subsidiaries, individuals who were
officers or employees of American or its Subsidiaries at the Effective Time
(other than Tower Employees) shall if employed by Mergeparty or its
Subsidiaries become eligible to participate in such health plans as may be
established or maintained by Mergeparty or its Subsidiaries to the extent that
such individuals were eligible to participate in the applicable health plan of
American or its Subsidiaries immediately prior to the Effective Time. Amounts
paid during the calendar year in which the Effective Time occurs, but before
the Effective Time, by officers and employees of American and its Subsidiaries
(other than Tower Employees) under any health plans of American shall after
the Effective Time be taken into account in applying deductible and out-of-
pocket limits applicable under the health plans of Mergeparty or its
Subsidiaries provided during such calendar year to the same extent as if such
amounts had been paid under such health plans of Mergeparty or its
Subsidiaries and Mergeparty shall cause to be waived under its health plans
any pre-existing conditions as of the date of termination of the American
health plan and eligibility to participate in such health plan to the extent
such conditions would be waived under the applicable plans of American and its
Subsidiaries as in effect on the date of the Original Merger Agreement.
Nothing in this Agreement shall be construed as granting to any employee of
American or its Subsidiaries any rights of continuing employment.
6.16 American Cumulative Preferred Stock. To the extent permitted under
Contracts, pursuant to which any indebtedness for money borrowed of American
or any of its Subsidiaries is outstanding as of the date of the Original
Merger Agreement, and by the American Preferred Stock, American shall pay all
dividends in respect of the American Cumulative Preferred Stock in cash.
6.17 American Tower Transaction. As soon as practicable following the
execution of the Original Merger Agreement and in any event prior to the
consummation of the Merger, American shall prepare, in consultation with
Mergeparty and its counsel, the definitive documentation to be executed by
American and American Tower to effect the delivery of the shares of Tower
Common Stock as part of the Tower Merger Consideration or the Merger
Consideration, as the case may be (the "Tower Separation"), and submit such
documentation to Mergeparty for its approval, which approval shall not be
unreasonably withheld, delayed or conditioned (as approved, the "Tower
Documentation"), and American and American Tower shall execute and deliver the
Tower Documentation in the form so approved. Mergeparty and American agree
that the Tower Documentation shall include or be prepared on a basis
consistent with the following:
(a) American Tower shall indemnify, defend and hold Mergeparty, American
and Subsidiaries of American (other than the Tower Subsidiaries,
collectively in this Section the "American Tower Group") harmless from and
against any liabilities to which American or any of its Subsidiaries (other
than the American Tower Group or, in the case of clauses (B) and (C) below
of this paragraph (a), any of their officers or directors) may be or become
subject that relate to or arise from the assets, business, operations,
debts or liabilities of ATS Mergercorp or the American Tower Group (other
than, in the case of the American Tower Group, income tax liabilities),
including without limitation (i) the assets to be transferred to American
Tower pursuant to Section 6.17(f), (ii) liabilities (A) in connection with
the distribution of the shares of Tower Common Stock as part of the Tower
Merger Consideration or the Merger Consideration, as the case may be, (B)
relating to or arising from any agreement, arrangement or understanding
(other than the Tower Documentation) entered into by American, ATS
Mergercorp or any member of the American Tower Group (x) for the benefit of
any member of the American Tower Group, (y) in contemplation of the Tower
Separation, or (z) with respect to the sale, assignment, transfer or other
disposition of shares of American Tower Common Stock, (C) relating to or
arising from any untrue statement or alleged untrue
II-30
<PAGE>
statements of a material fact contained in the Proxy Statement, the Tower
Proxy Statement, the Registration Statement or in any document filed or
required to be filed in connection with the Merger, or in any document
filed or required to be filed by American, ATS Mergercorp or any member of
the American Tower Group in connection with the preceding clause (B) or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except with
respect to information provided by or relating solely to American
(excluding ATS Mergercorp and the American Tower Group) which is contained
in or expressly consistent with the Filed American SEC Documents or the
American September 10-Q, (iii) any economic impact related to or arising
from the failure to obtain any Governmental Authorizations, Private
Authorizations or other third party consents, or to make any Governmental
Filings, necessary to consummate the Tower Separation, and (iv) the rental
and related expenses for the relevant portion of the leased premises
located at 116 Huntington Avenue, Boston, Massachusetts in the event of the
failure to obtain the landlord's consent to the assignment of the
obligations relating to, or sublease of, such relevant portion of such
premises.
(b) American shall indemnify, defend and hold the American Tower Group
harmless from and against any liabilities (other than income tax
liabilities) to which the American Tower Group may be or become subject
that relate to or arise from the assets, business, operations, debts or
liabilities of American or its Subsidiaries (other than the American Tower
Group) whether arising prior to, concurrent with or after the Merger.
(c) The Tower Documentation shall include an agreement that addresses
issues of the allocation of Tax liabilities and deconsolidation of American
and the American Tower Group which shall contain principles to the
following effect:
(i) The tax sharing agreement among members of the American Tower
Group and American and its other Subsidiaries shall be terminated as of
the earlier of (x) the effective date of the Merger, and (y) the date
(the "Tower Deconsolidation Date") that the American Tower Group is no
long eligible to be included in the consolidated tax returns of
American and its other Subsidiaries under Sections 1501 to 1504 of the
Code (the "Tower Deconsolidation") and will have no further effect for
any taxable year (whether the current year, a future year, or a past
year).
(ii) American shall include the income of the American Tower Group
(including any deferred income triggered into income by Reg. (S)1.1502-
13 and Reg. (S)1.1502-14 and any excess loss accounts taken into income
under Reg. (S)1.1502-19) on American's consolidated federal income Tax
returns and consolidated or combined state and local income Tax returns
to the extent such income is properly includible thereon for all
periods through the Tower Deconsolidation Date, and pay any income
Taxes attributable to such income. American Tower shall reimburse
American for any such federal, state and local income Taxes payable by
the American Tax Group attributable to such income, as determined on a
separate company basis; provided, however, that American Tower shall
have no reimbursement obligation if American has no income Tax
liability on a consolidated basis as a result of a net operating loss
or to the extent that the income of the American Tower Group is offset
by a net operating loss under the principles of clause 6.17(c)(v). The
American Tower Group will furnish Tax information to American for
inclusion in American's federal consolidated income Tax return for the
period through the Tower Deconsolidation Date in accordance with
American Tower's past custom and practice. The income of the American
Tower Group will be apportioned to the period up to and including the
Tower Deconsolidation Date and the period after the Tower
Deconsolidation Date by closing the books of the American Tower Group
as of the end of such date.
(iii) American Tower shall indemnify the American Tax Group and
Mergeparty for all Taxes imposed by any Taxing Authority on any member
of the American Tax Group or on Mergeparty (or on any member of its
consolidated tax group) as a result of or in connection with the sale
or transfer of assets to the American Tower Group pursuant to Section
6.17(g) (or between members of the American Tax Group prior to the
final transfer to a member of the American Tower Group or between
members of the American Tower Group), the Merger, the Tower Merger, the
Tower Separation, any other
II-31
<PAGE>
disposition or issuance of stock of American Tower contemplated or
permitted hereby, or the merger of American Tower with any other
Person, as the case may be, including without limitation any Taxes on
any gain to any member of the American Tax Group arising under Section
311 of the Code, any Taxes on any deferred gain to any member of the
American Tax Group triggered as a result of or upon any such event, any
gain attributable to any excess loss account triggered upon any such
event, any Taxes arising as a result of the election or other
transactions contemplated by clause 6.17(c)(xii), income or gain
arising as a result of transactions described in Section 3.4(c) or the
second sentence of Section 6.8(a), and gain on the conversion of
American Convertible Preferred Stock into Tower Common Stock and any
transfer Taxes arising from any such event; provided, however, that
such indemnity shall only apply to the extent that the additional
liability for such Taxes payable by the American Tax Group as a
consequence of such events (on a "but for" basis) exceeds $20,000,000.
(iv) If, as a result of any payment by American Tower to any member
of the American Tax Group or to Mergeparty pursuant to this Section
6.17(c) (including this clause (iv)), Mergeparty (or any member of its
consolidated group for Federal income tax purposes) or any member of
the American Tax Group becomes liable in any taxable year to pay any
Taxes in excess of the Taxes they would have owed in the absence of any
such payment by American Tower, American Tower will indemnify such
Person for such Tax liability and make such Person whole on an after-
tax basis for such Tax liability.
(v) For the purposes of clauses 6.17(c)(ii) and (iii), net operating
losses of the American Tax Group shall be reduced and deemed absorbed
in the following order for each taxable year of the American Tax Group:
first, by all income unrelated to the transactions contemplated by this
Agreement of members of the American Tax Group other than members of
the American Tower Group for the entire applicable taxable year of the
American Tax Group; second, by income of the American Tower Group
described in clause 6.17(c)(ii); and third, by income of the American
Tax Group described in Section 6.17(c)(iii). Neither the American Tax
Group nor Mergeparty (or any member of its consolidated group for
Federal income tax purposes) shall have any claim under either Section
6.17(c)(ii) or (iii) for additional Tax liability arising in subsequent
taxable years solely as a result of the absorption of net operating
losses of the American Tax Group in this manner.
(vi) American shall control any audit or contest relating to Taxes
attributable to the American Tax Group. To the extent such audit or
contest relates to Taxes that American Tower is obligated to reimburse
or indemnify American under this agreement, American shall (x)
regularly consult with American Tower in connection with such audit or
contest; (y) provide American Tower with periodic reports on the status
of such audit or contest; and (z) not enter into a settlement agreement
relating to such audit or contest that materially prejudices American
Tower without American Tower's consent.
(vii) If pursuant to any Tax audit or contest there is an adjustment
to any Taxes that are reimbursable or indemnifiable by the American
Tower Group to any member of the American Tax Group under this
Agreement, including clauses 6.17(c)(ii), (iii) and (iv), then (x) any
additional Taxes imposed on the American Tax Group as a result of such
adjustment shall be indemnified by the American Tower Group; and (y)
any refund of Taxes paid to the American Tax Group as a result of such
adjustment of amounts previously indemnified by American Tower shall be
promptly paid over to American Tower (including additional amounts to
make American Tower whole on an after-Tax basis, not exceeding amounts
previously paid by American Tower Group with regard to such Taxes).
(viii) American Tower shall not have the right to any refund, credit
(or other reduction) of Taxes realized by the American Tax Group
resulting from a carry back of a post-acquisition Tax attribute of any
of the American Tower Group into a Tax Return filed by the American Tax
Group.
(ix) American Tower, American and Mergeparty agree to attempt in good
faith to mutually agree on such terms as promptly as practicable after
the date hereof. If American Tower, American and Mergeparty cannot
agree on such terms, then any disagreement shall be resolved by an
arbitrator jointly selected by American Tower, American and Mergeparty.
The arbitrator shall be a law or accounting
II-32
<PAGE>
firm nationally recognized in tax matters. The costs of such
arbitration shall be shared equally by American Tower and American. The
decision of the arbitrator shall be binding on all parties.
(x) American shall not elect to retain any net operating loss
carryovers or capital loss carryovers of the American Tower Group.
(xi) The indemnities of the American Tower Group described in this
Section 6.17(c) shall apply to all applicable Taxes whenever they shall
arise.
(xii) At the request of any member of the American Tower Group,
American agrees that it shall, and shall cause its Subsidiaries or
other appropriate Affiliates to, make and/or cooperate with members of
the American Tower Group (x) in making an election under Section 336(e)
of the Code with respect to the Tower Separation, or (y) in effecting
intercompany sales or exchanges of assets designed to achieve a
comparable effect whereby deferred intercompany gains are recognized
immediately prior to the Tower Deconsolidation.
(d) The Tower Documentation shall provide that American shall obtain all
Governmental Authorizations, Private Authorizations or other third party
consents, and make any necessary Governmental Filings, necessary to
consummate the Tower Separation, except where the failure to obtain such
consents, in the aggregate, would not (i) be reasonably likely to have any
adverse effect on American, (ii) materially impair the ability of American
to perform its obligations under this Agreement or the Tower Documentation,
or (iii) materially delay or prevent the consummation of the Merger. The
Tower Documentation shall provide that the Tower Separation shall be done
in compliance with American's certificate of incorporation and by-laws and
in material compliance with all Applicable Laws.
(e) At the Effective Time, a member of the American Tower Group shall
assume (i) to the extent permitted by the landlord, the obligations under
the lease of 116 Huntington Avenue, Boston, Massachusetts, with respect to
the relevant portion of such leased premises or, if such permission is not
obtained, sublease such relevant portion, and (ii) all liabilities with
respect to which indemnification is provided under Section 6.17(a).
American shall cause all members of the American Tower Group to be released
from all other liabilities; provided, however, that American Tower agrees
to reimburse American for any expenses incurred in obtaining such release.
American and its Subsidiaries (other than the American Tower Group) shall
release the American Tower Group from all Claims by American or its
Subsidiaries (other than the American Tower Group), and the American Tower
Group shall release American and its other Subsidiaries from all Claims by
the American Tower Group, in each case except for Claims arising from or
attributable to the transactions contemplated by this Agreement or any
Collateral Document or otherwise asserted prior to the Effective Time.
(f) Except as otherwise provided by Section 6.19, American shall, or
shall cause its Subsidiaries to, as applicable, contribute, transfer or
convey to American Tower the assets described in Section 6.17 of the
American Disclosure Schedule, and American Tower shall assume all of
American's and such Subsidiaries' obligations with respect to such assets
to the extent so set forth.
(g) The Tower Documentation shall not include any representations or
warranties by American or American Tower relating to the business,
operations, assets, debts or liabilities of American and its Subsidiaries
(other than the American Tower Group) or the American Tower Group.
(h) On the Closing Date, the employees of American listed in Section 6.17
of the American Disclosure Schedule (the "Tower Employees") shall be
offered full-time employment by American Tower or one of its Subsidiaries.
Effective immediately prior to the Effective Time, American Tower shall
assume all obligations arising under any Plan or Benefit Arrangement
between American or any of its Subsidiaries and the Tower Employees other
than the rights, if any, of the Tower Employees with respect to the
American Options (which are being satisfied by American as provided in
Section 6.8) and all existing rights to indemnification. Such assumption
agreement shall provide that American and its Subsidiaries, effective as of
the Effective Time shall be indemnified by American Tower from all
obligations arising under such employment agreements or arrangements
(except in respect of any American Option which is not converted into an
option to acquire Tower Common Stock in accordance with the provisions of
Section 6.8(b) and all
II-33
<PAGE>
existing rights to indemnification). For a period of eighteen (18) months
following the consummation of the Merger, members of the American Tower
Group shall not actively solicit or seek to hire any employees of American
or its Subsidiaries not currently engaged in the Tower Business, other than
the Tower Employees, it being understood and agreed that such agreement
shall not be deemed to prevent members of the American Tower Group from
placing general advertisements in publications or on the Internet or
soliciting any such employee who (i) initiates employment discussions with
a member of the American Tower Group or (ii) is not employed by American or
Mergeparty or any of their respective Subsidiaries on the date such a
member first solicits such employee.
(i) At the request of American Tower and subject to the requirements and
restrictions imposed on American by any of its financing documents (as from
time to time amended), American shall, from time to time after the date of
the Original Merger Agreement and prior to the Effective Time, permit
American Tower to (i) acquire (whether by merger, stock or asset
acquisition or otherwise) additional businesses engaged in the business in
which American Tower is engaged, (ii) construct additional communication
towers, or (iii) make other capital improvements on assets owned or leased
by American Tower or its Subsidiaries, and in each such case make
additional capital contributions in American Tower, or make loans to
American Tower, of the funds.
(j) The indemnification and other obligations referred to in this Section
shall survive the consummation of the Merger.
(k) The Tower Documentation shall provide that prior to the Effective
Time, American shall amend (i) its Section 401(k) Plan to permit a transfer
of the assets held thereunder for the benefit of the Tower Employees to a
Section 401(k) Plan to be established by American Tower and, prior to the
Effective Time, such assets will be so transferred (along with any
outstanding qualified domestic relations orders and loans) and (ii) any
other Benefit Plan arrangements with respect to Tower Employees to reflect
the Merger.
(l) The Tower Documentation shall provide that prior to the Effective
Time American shall, to the extent requested by Mergeparty, cause the
American Tower Group to perform its obligations under the Tower
Documentation.
(m) Mergeparty shall, at the written request of American in its sole and
absolute discretion, immediately prior to the Merger, and subject to the
satisfaction of all of the conditions to the consummation of the
transactions contemplated hereby, purchase, at their then fair market
value, shares of a new class of American preferred stock that constitutes
"Junior Securities" (as defined in the American Cumulative Preferred Stock)
in an amount (which shall not in the aggregate exceed $200,000,000)
necessary to enable (i) the Tower Stock Consideration to be delivered to
the holders of shares of American Common Stock and holders of American
Options pursuant to the Merger, and (ii) Tower Common Stock to be delivered
upon conversion of the American Convertible Preferred Stock, without
causing any conflict with, or breach or violation of, or default under, or
creating any right to accelerate any obligation or liability in, or causing
or creating any of the foregoing after the giving of notice or passage of
time or both with, of, under or in any indebtedness of American or the
American Cumulative Preferred Stock; provided, however, that anything in
this Section or elsewhere in this Agreement to the contrary
notwithstanding, in such event such new class of American preferred stock
shall remain outstanding immediately following the Effective Time.
(n) The Tower Documentation shall provide that American shall cause
American Tower to file with, and cause to be declared effective under the
Securities Act prior to the Effective Time by, the Commission a
registration statement to permit the delivery of shares of Tower Common
Stock by American upon conversion of American Convertible Preferred Stock
following the Effective Time under the Securities Act. Such Tower
Documentation shall further provide that American Tower shall maintain, on
customary terms, the effectiveness of such registration statement under the
Securities Act until such time as American Tower shall deliver to American
an opinion of legal counsel reasonably satisfactory to American and
Mergeparty that such registration statement is no longer required to permit
such delivery in accordance with the Securities Act.
II-34
<PAGE>
6.18 Purchase Price Adjustment. (a) Within 90 days after the Closing Date,
Mergeparty shall prepare and deliver to American Tower (i) a consolidated
balance sheet (the "Closing Balance Sheet") of American and its Subsidiaries
(other than the Tower Subsidiaries) (the "Post-Closing American Group"),
prepared from the books and records of the Post-Closing American Group, and
(ii) a statement (the "Closing Statement") setting forth (A) Working Capital
(as defined below) as of the Effective Time ("Closing Working Capital") and
(B) Net Debt (as defined below) as of the Effective Time ("Closing Net Debt"),
together with a certificate of Mergeparty's chief financial officer that the
Closing Statement has been prepared in accordance with this Section 6.18.
During the 45-day period following American Tower's receipt of the Closing
Statement, American Tower shall be permitted to review (and make copies of)
the working papers of Mergeparty relating to the Closing Statement. The
Closing Statement shall become final and binding upon the parties on the
forty-sixth day following delivery thereof, unless American Tower gives
written notice of its disagreement with the Closing Statement ("Notice of
Disagreement") to Mergeparty prior to such date. Any Notice of Disagreement
shall (i) specify in reasonable detail the nature of any disagreement so
asserted, (ii) only include disagreements based on Closing Working Capital or
Closing Net Debt (or the components thereof) not being calculated in
accordance with this Section 6.18 and (iii) be accompanied by a certificate of
American Tower's chief financial officer that he or she concurs with each of
the positions taken by American Tower in the Notice of Disagreement. If a
Notice of Disagreement is received by Mergeparty in a timely manner, then the
Closing Statement (as revised in accordance with clause (A) or (B) immediately
following) shall become final and binding on the earlier of (A) the date
Mergeparty and American Tower resolve in writing any differences they have
with respect to the matters specified in the Notice of Disagreement or (B) the
date any disputed matters are finally resolved in writing by the Accounting
Firm (as defined below).
During the 30-day period following delivery of a Notice of Disagreement,
Mergeparty and American Tower shall seek in good faith to resolve in writing
any differences which they may have with respect to the matters specified in
the Notice of Disagreement. During such period Mergeparty shall have access to
(and shall be permitted to make copies of) the working papers of American
Tower prepared in connection with the Notice of Disagreement. At the end of
such 30-day period, Mergeparty and American Tower shall submit to an
independent accounting firm (the "Accounting Firm") for review and resolution
any and all matters which remain in dispute and which were properly included
in the Notice of Disagreement and each of Mergeparty and American Tower shall
submit a memorandum setting forth in reasonable detail the basis for its
positions. The Accounting Firm shall be a nationally recognized independent
public accounting firm agreed upon by Mergeparty and American Tower in
writing. Mergeparty and American Tower shall jointly use all reasonable
efforts to cause the Accounting Firm to render a decision within thirty (30)
days following submission or as promptly thereafter as is practicable.
Mergeparty and American Tower agree that judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction over the
party against which such determination is to be enforced. The cost of any
dispute resolution (including the fees and expenses of the Accounting Firm and
reasonable attorney fees and expenses of the parties) pursuant to this Section
6.18 shall be borne by Mergeparty and American Tower in inverse proportion as
they may prevail on matters resolved by the Accounting Firm, which
proportionate allocations shall also be determined by the Accounting Firm at
the time the determination of the Accounting Firm is rendered on the merits of
the matters submitted.
(b) Subject to Section 6.18(d), if Closing Working Capital is less than (i)
$60,000,000 in the event the Closing Date is on or prior to March 31, 1998 or
(ii) $70,000,000 in the event the Closing Date is after March 31, 1998 (the
"WC Amount"), American Tower shall, and if Closing Working Capital is greater
than the WC Amount, Mergeparty shall, owe the other the amount of such
difference. The term "Working Capital" shall mean Current Assets minus
Liabilities (in each case as defined below). The terms "Current Assets" and
"Liabilities" shall mean the current assets and liabilities of the Post-
Closing American Group calculated in accordance with GAAP except that (i)
outstanding principal amount of indebtedness and liquidation preference of
preferred stock shall be excluded, (ii) cash shall be excluded, (iii) accruals
for Taxes shall be included, except that (A) Tax liabilities which American
Tower is obligated to indemnify American and its Subsidiaries (other than the
American Tower Group) pursuant to the provisions of the Tower Documentation,
and deferred income
II-35
<PAGE>
Tax assets and liabilities that exist or arise from differences in basis for
Tax and financial reporting purposes attributable to acquisitions, exchanges
and dispositions or attributable to depreciation and amortization, shall not
be taken into account, (B) Tax benefits arising from the exercise or
cancellation of options between the date of the Original Merger Agreement and
the Effective Time shall not be taken into account, and (C) accruals for Taxes
relating to acquisitions, exchanges or dispositions shall be determined in
accordance with American's past accounting practices, (iv) Current Assets
shall be increased by an amount equal to the sum of (x) the amount derived by
multiplying the Cash Consideration by the number of shares of American Common
Stock held in its treasury as of the Effective Date and (y) the aggregate
amount of the spread of $44.00 over the exercise price of each American Option
outstanding on the date of the Original Merger Agreement terminated or
cancelled prior to the Effective Time or for which the holder has elected to
receive an option to acquire Tower Common Stock in lieu thereof, less the Tax
benefit that would have been received with respect to the exercise of such
options, (v) Current Assets shall be (A) increased (if the number of shares of
American Common Stock issuable upon conversion of the American Convertible
Preferred Stock is fewer than 3,750,000 (or if the Tower Merger Effective Time
shall have occurred, 3,750,000 multiplied by the American Conversion
Fraction)) by an amount equal to the amount derived by multiplying the Cash
Consideration by the excess of (I) 3,750,000 (or if the Tower Merger Effective
Time shall have occurred, 3,750,000 multiplied by the American Conversion
Fraction) less (II) the number of shares of American Common Stock issuable
upon conversion of the American Convertible Preferred Stock or (B) decreased
(if the number of shares of American Common Stock issuable upon conversion of
the American Convertible Preferred Stock is greater than 3,750,000 (or if the
Tower Merger Effective Time shall have occurred, 3,750,000 multiplied by the
American Conversion Fraction) by an amount equal to the amount derived by
multiplying the Cash Contribution by the excess of (I) the number of shares of
American Common Stock issuable upon conversion of the American Convertible
Preferred Stock less (II) 3,750,000 (or if the Tower Merger Effective Time
shall have occurred, 3,750,000 multiplied by the American Conversion
Fraction), (vi) liabilities from the radio broadcasting rights contracts for
St. Louis Rams games shall be limited to $3,300,000 and (vii) amounts owed by
American Tower to American pursuant to Section 9.3(b) shall be excluded from
Current Assets, and liabilities of American, if any, with respect to such
amounts shall be excluded from Liabilities (it being understood that neither
American nor Mergeparty shall be responsible for any such liabilities).
(c) Subject to Section 6.18(d), if Closing Net Debt is greater than the Debt
Amount (as defined below) minus $50,419,000, minus cash received by the Post-
Closing American Group in respect of options exercised between the date of the
Original Merger Agreement and the Effective Time (the "CD Amount"), American
Tower shall, and if Closing Net Debt is less than the CD Amount, Mergeparty
shall, owe the other the amount of such difference. "Debt Amount" shall mean
$1,066,721,000, minus the consideration that was expected to be paid (as set
forth on Section 6.10(a) of the American Disclosure Schedule) with respect to
all acquisitions set forth in Section 6.10(a) of the American Disclosure
Schedule which were not consummated prior to the Closing Date, plus the
consideration that was expected to be received (as set forth in Section
6.10(a) of the American Disclosure Schedule) with respect to all dispositions
set forth in Section 6.10(a) of the American Disclosure Schedule which were
not consummated prior to the Closing Date, plus the consideration paid in
connection with acquisitions consummated prior to the Closing Date which were
not listed in Section 6.10(a) of the American Disclosure Schedule, minus the
consideration received in connection with dispositions consummated prior to
the Closing Date which were not listed in Section 6.10(a) of the American
Disclosure Schedule. The term "Net Debt" shall mean outstanding principal
amount of indebtedness (including, without duplication, guarantees of
indebtedness) plus outstanding liquidation preference of all preferred stock
(other than the American Convertible Preferred Stock) minus cash.
(d) Amounts owed pursuant to the first sentence of Section 6.18(b) and the
first sentence of 6.18(c) shall be aggregated or netted, as appropriate (the
resulting amount, the "Adjustment Amount"). In the event that the Adjustment
Amount minus $10,000,000 is greater than $0 (the "Final Adjustment Amount"),
the party that owes the Final Adjustment Amount shall make payment by wire
transfer of immediately available funds of the Final Adjustment Amount
together with interest thereon at a rate of interest equal to the lesser of
(i) 10% per annum and (ii) if American Tower is being charged a rate of
interest by a financial institution, such rate, but in
II-36
<PAGE>
no event lower than the prime rate as reported in the Wall Street Journal on
the date the Closing Statement becomes final and binding on the parties,
calculated on the basis of the actual number of days elapsed divided by 365,
from the date of the Effective Time to the date of actual payment.
(e) The scope of the disputes to be resolved by the Accounting Firm is
limited to whether the Closing Statement was prepared in compliance with the
requirements of this Section 6.18 and the allocation of the costs of dispute
resolution, and the Accounting Firm is not to make any other determination.
(f) During the period of time from and after the delivery of the Closing
Statement to American Tower through the date the Closing Statement becomes
final and binding on Mergeparty, American and American Tower, Mergeparty shall
cause the Post-Closing American Group to afford to American Tower and any
accountants, counsel or financial advisors retained by American Tower in
connection with the adjustment contemplated by this Section 6.18 reasonable
access (with the right to make copies) during normal business hours to the
books and records of the Post-Closing American Group to the extent relevant to
the adjustment contemplated by this Section 6.18.
(g) Any adjustment pursuant to this Section 6.18 shall be taken into account
in the calculation of Tax liability pursuant to clause 6.17(c)(iii), and any
increase or decrease in the amount of Taxes that are reimbursable or
indemnifiable by the American Tower Group as a result of any such adjustment
shall be treated as an adjustment to Taxes for purposes of clause 6.17(c)(vii)
6.19 Tower Leases. In connection with the Tower Separation, Mergeparty and
American shall agree on the definitive documentation ("Tower Leases") to be
executed by American and American Tower with respect to certain broadcasting
towers set forth in Section 6.17(i) of the American Disclosure Schedules
("Towers"). The markets in which such Towers are located and the annual
"market price" for each antenna are set forth in Exhibit "B." Except as set
forth in Section 6.17(i) of the American Disclosure Schedule, such Towers are
now owned or leased by American and shall become the property of American
Tower. Each of the Tower Leases shall contain standard and customary terms and
conditions and Mergeparty and American specifically agree to the inclusion of
the following in each of the Tower Leases:
(a) except as provided in clause (b) below with respect to those Tower
Leases set forth in Section 6.19 of the American Disclosure Schedule, each
Tower Lease shall be for a term of twenty (20) years with four (4) renewal
periods of five (5) years each, each such renewal to be upon the same terms
and conditions as the original Tower Lease;
(b) Prior to the Effective time, American shall use its best efforts to
extend the term of each lease set forth in Section 6.19 of the American
Disclosure Schedule ("Land Leases") to a minimum duration of twenty (20)
years, inclusive of renewal periods, if any, and provide Mergeparty with
respect to the Towers subject to the extended Land Leases, tower leases
with the equivalent benefits set forth in clauses (c), (d) and (e) and for
a minimum duration of twenty (20) years ("Extended Tower Leases"). With
respect to any such Land Lease that is not so extended (except with respect
to the Land Lease for KUFX(FM), which present term of approximately
eighteen (18) remaining years shall be deemed to satisfy the foregoing
requirement of a minimum duration of twenty (20) years), American, American
Tower and Mergeparty shall negotiate in good faith to agree upon definitive
documentation to provide Mergeparty with respect to the Towers subject to
such Land Leases, tower leases with the benefits equivalent of such
Extended Tower Leases or mutually agreed to alternative arrangements
providing equivalent value to Mergeparty;
(c) each Tower Lease shall provide that no payments shall be payable by
Mergeparty for a period of three (3) years from the Effective Time; for the
next three (3) years the payments shall be as follows: one-third ( 1/3) of
the market price as set forth in Exhibit B corresponding to each FM antenna
(or AM/FM antenna) for year four (4); two-thirds ( 2/3) for year five (5)
and full market price for year six (6); thereafter, for the balance of the
term and any renewals thereof, the payments shall be the market price,
together with an annual increase every year, beginning for year seven (7),
of the lesser of five percent (5%) or the Consumer Price Index for all
Urban Consumers over the previous year's payments (except with respect to
II-37
<PAGE>
San Jose (KUFX) and Boston (WNFT) which such payments shall begin at the
Effective Time, with respect to Mergeparty, and will begin on January 1,
1998 as between American and American Tower). Notwithstanding the
foregoing, Mergeparty acknowledges that Tower Lease payments at the full
"market price" indicated on Exhibit B by American to American tower may
commence upon such leases becoming the property of American Tower and shall
continue until the Effective Time;
(d) all expenses for taxes, insurance, maintenance and utilities in
respect of each Tower shall be paid by American Tower; and
(e) American Tower will assume the obligation and responsibility for
complying with all Applicable Law with respect to the Towers.
6.20 Affiliates of American. American shall use its best efforts to cause
each principal executive officer, each director and each other person who is
an "affiliate" of American for purposes of Rule 145 under the Securities Act
at the times each of this Agreement and the Tower Merger Agreement is
submitted for a vote of the holders of shares of American Common Stock to
deliver to American Tower on or prior to the Effective Time and the Tower
Merger Effective Time, respectively, a written agreement (an "Affiliate
Agreement"), reasonably satisfactory in form, scope and substance to American
and Mergeparty, to the effect that such Person will not offer to sell, assign,
transfer or otherwise dispose of any shares of Tower Common Stock issued in
the Merger or the Tower Merger, as the case may be, except, in each case,
pursuant to an effective registration statement or in compliance with Rule
145, or in a transaction which, in the opinion of legal counsel reasonably
satisfactory to American and Mergeparty, is exempt from the registration
requirements of the Securities Act.
ARTICLE 7
Closing Conditions
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall, except as
hereinafter provided in this Section, be subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by Applicable Law:
(a) the Required Vote shall have been obtained;
(b) the FCC shall have issued the FCC Order (as defined below) approving
the applications for transfer of control of American's FCC Licenses in
connection with the transactions contemplated herein, and the FCC Order
shall have been obtained without the imposition of conditions that would
have a Material Adverse Effect on Mergeparty's television and radio
broadcasting business; provided that without triggering Mergeparty's right
to approve such conditions or restrictions, the FCC Order (i) may condition
consummation of the Merger on Mergeparty complying with the numerical
limits on local multiple radio ownership imposed by 47 C.F.R.
(S) 73.3555(a) by affording Mergeparty a period of at least six (6) months
following the Effective Time within which to comply with such rule through
the use of divestiture trusts on terms and conditions required by the FCC,
provided further, however, that to the extent that the FCC authority for
such divestiture trusts provides for a period of less than six (6) months,
(A) American has the right to postpone the Effective Time (and, to the
extent necessary, the Termination Date), so that Mergeparty is afforded the
six (6) month divestiture period, whether before or after the Effective
Time and (B) if American exercises such right, Mergeparty's right to
approve such condition shall not be triggered, and (ii) may grant
Mergeparty temporary, rather than permanent, waivers of the "one-to-a-
market" rule, 47 C.F.R. (S) 73.3555(c), so long as such temporary waivers
shall remain in effect until at least six (6) months following the
effective date of FCC action concluding the ongoing rulemaking proceeding
in MM Docket Nos. 91-221, 87-8 (FCC 94-322) or a successor rulemaking
proceeding pending at the time of the grant of the FCC Order, that
considers the "one-to-a-market" rule. The "FCC Order" shall be an action by
the FCC approving the transfer of the American FCC Licenses with respect to
which, except as may be waived in writing by Mergeparty in its sole
discretion, (i) no timely request for stay, petition for reconsideration or
II-38
<PAGE>
appeal or sua sponte action of the FCC with comparable effect is pending,
or (ii) if any of the foregoing is pending, in the judgment of Mergeparty
it lacks any substantial merit or is contrary to established FCC precedent,
or (iii) if it were to be so granted, it would not have a Material Adverse
Effect on Mergeparty's television and radio broadcasting business; and as
to which the thirty (30) day time period specified in 47 U.S.C. (S) 405(a)
for initiating a petition for reconsideration of the grant of the FCC Order
has expired;
(c) no Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) that remains in effect and restrains, enjoins or otherwise
prohibits consummation of the Merger; and
(d) the waiting period applicable to the consummation of the Merger under
the Hart-Scott-Rodino Act shall have expired or been terminated.
7.2 Conditions to Obligations of Mergeparty. The obligation of Mergeparty
and Mergeparty Subsidiary to effect the Merger shall be subject to the
satisfaction of the following conditions, any or all of which may be waived,
in whole or in part, to the extent permitted by Applicable Law:
(a) American shall have furnished Mergeparty, with an opinion, dated the
Closing Date of Dow, Lohnes & Albertson, FCC counsel for American,
substantially in the form attached hereto as Exhibit C;
(b) (i) the representations and warranties of American set forth in this
Agreement (other than in Sections 4.1(e), 4.11 and 4.13) shall be true and
correct as of the date of the Original Merger Agreement and as of the
Closing Date as though made on and as of the Closing Date except (x) to the
extent such representations and warranties expressly speak as of an earlier
date (in which case such representations and warranties shall be true and
correct as of such earlier date) and (y) to the extent that the failure of
such representations and warranties to be true and correct, individually or
in the aggregate, would not have a Material Adverse Effect on American;
provided, however, that for the purpose of this clause (y), representations
and warranties that are qualified as to materiality (including by reference
to "Material Adverse Effect") shall not be deemed to be so qualified, and
(ii) the representations and warranties of American set forth in Sections
4.1(e), 4.11 and 4.13 of this Agreement shall be true and correct in all
material respects as of the date of the Original Merger Agreement and as of
the Closing Date; and
(c) American shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date;
(d) between the date of the Original Merger Agreement and the Closing
Date, except as contemplated by this Agreement, and except as set forth in
Section 4.3 of the American Disclosure Schedule, there shall not have
occurred and be continuing any Material Adverse Change in American.
7.3 Conditions to Obligations of American. The obligation of American to
effect the Merger shall be subject to the satisfaction of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) the representations and warranties of Mergeparty set forth in this
Agreement shall be true and correct as of the date of the Original Merger
Agreement and as of the Closing Date as though made on and as of the
Closing Date except (x) to the extent such representations and warranties
expressly speak as of an earlier date (in which case such representations
and warranties shall be true and correct as of such earlier date) and (y)
to the extent that the failure of such representations and warranties to be
true and correct, individually or in the aggregate, would not have a
Material Adverse Effect on Mergeparty; provided, however, that for the
purpose of this clause (y), representations and warranties that are
qualified as to materiality (including by reference to "Material Adverse
Effect") shall not be deemed to be so qualified.; and
(b) Mergeparty shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date.
II-39
<PAGE>
ARTICLE 8
Termination, Amendment and Waiver
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after receipt by American of the Required
Vote:
(a) by mutual written consent of American, Mergeparty and Mergeparty
Subsidiary;
(b) by either Mergeparty or American if any Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Law that shall have become final and nonappealable and that restrains,
enjoins or otherwise prohibits consummation of the Merger, unless the party
seeking such restraint, injunction or prohibition or any Affiliate thereof
was the terminating party;
(c) by either Mergeparty or American if the Merger shall not have been
consummated by the Termination Date for any reason; provided, however, that
the right to terminate this Agreement under this Section 8.1(c) shall not
be available to any party whose action or failure to act (or the action or
failure to act of any Affiliate) has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;
(d) by either Mergeparty or American if the Required Vote shall not have
been obtained at the American Stockholders Meeting duly convened therefor
or at any adjournment or postponement thereof or by written consent;
(e) by American in the event (i) American is not in material breach of
this Agreement and none of its representations or warranties shall have
been or become and continue to be untrue in any material respect, and (ii)
Mergeparty is in material breach of this Agreement or any of its
representations or warranties shall have become and continue to be untrue
in any manner that would cause the condition in Section 7.3(a) not to be
satisfied, and such a breach or untruth exists and is not capable of being
cured by and will prevent or delay consummation of the Merger by or beyond
the Termination Date; or
(f) by Mergeparty in the event (i) Mergeparty is not in material breach
of this Agreement and none of its representations or warranties shall have
been or become and continue to be untrue in any material respect, and (ii)
American is in material breach of this Agreement or any of its
representations or warranties shall have become and continue to be untrue
in any manner that would cause the condition in Section 7.2(b) not to be
satisfied, and such a breach or untruth exists and is not capable of being
cured by and will prevent or delay consummation of the Merger by or beyond
the Termination Date.
The term "Termination Date" shall mean December 31, 1998, as such date may
from time to time be extended pursuant to the provisions of Section 7.1(b) or
by mutual agreement of the parties.
The right of Mergeparty or American to terminate this Agreement pursuant to
this Section shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of either party, any Person controlling
any such party or any of their respective Representatives, whether prior to or
after the execution of this Agreement.
8.2 Effect of Termination.
Except as provided in Sections 6.1 (Access to Information; Confidentiality),
6.3 (Public Announcements), and 9.3 (Fees, Expenses and other Payments) and
this Section, in the event of the termination of this Agreement pursuant to
Section 8.1, or in the event the Merger shall not have become effective prior
to the end of business on the day prior to the Termination Date, this
Agreement shall forthwith become void and have no effect, without any
liability on the part of any party, or any of its respective stockholders,
officers or directors, to the other; provided, however, that such termination
shall not relieve any party from liability for any breach of any of its
warranties, covenants or agreements set forth in this Agreement and, provided,
however that such termination will not terminate the Confidentiality
Agreement.
II-40
<PAGE>
ARTICLE 9
General Provisions
9.1 Amendment. This Agreement may be amended from time to time by the
parties hereto at any time prior to the Closing Date but only by an instrument
in writing signed by the parties hereto and, after receipt of the Required
Vote, subject, in the case of American, to Applicable Law.
9.2 Waiver. At any time prior to the Closing Date, except to the extent not
permitted by Applicable Law, Mergeparty or American may, either generally or
in a particular instance and either retroactively or prospectively, extend the
time for the performance of any of the obligations or other acts of the other,
subject, however, to the provisions of Section 8.1, waive any inaccuracies in
the representations and warranties of the other contained herein or in any
document delivered pursuant hereto, and waive compliance by the other with any
of the agreements, covenants, conditions or other provision contained herein.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
9.3 Fees, Expenses and Other Payments. (a) Subject to the provisions of
paragraph (b) of this Section 9.3, all costs and expenses incurred in
connection with any filing fees (including without limitation Hart-Scott-
Rodino Act filings and FCC filing fees), transfer Taxes, sales Taxes, document
stamps or other charges levied by any Authority in connection with this
Agreement and the Merger shall be borne equally by Mergeparty and American.
Subject as aforesaid, all other costs and expenses incurred in connection with
the negotiation, preparation, performance and enforcement of this Agreement
(including all fees and expenses of counsel, financial advisors, accountants,
and other consultants, advisors and representatives for all activities of such
persons undertaken pursuant to this Agreement) incurred by the parties hereto,
shall be borne solely and entirely by the party which has incurred such costs
and expenses, except to the extent, if any, otherwise specifically set forth
in this Agreement.
(b) Promptly following the Effective Time, American Tower shall pay to
American in immediately available funds (and make American whole on an after-
tax basis under the principles set forth in Section 6.17(c)(iv)) an amount
equal to the aggregate costs and expenses incurred by American in connection
with any agreement, arrangement or understanding (other than the Tower
Documentation) entered into by American, ATS Mergercorp or any member of the
American Tower Group following the date of the Original Merger Agreement (x)
for the benefit of any member of the American Tower Group, (y) in
contemplation of the Tower Separation or (z) in connection with the sale,
assignment, transfer or other disposition of shares of American Tower Common
Stock, including without limitation such costs and expenses incurred by
American to Merrill Lynch Pierce Fenner & Smith Incorporated and any such
costs and expenses incurred by American to CSFB in excess of those set forth
in the engagement letter between American and CSFB provided by American to
Mergeparty in accordance with Section 4.14 of the Original Merger Agreement.
(c) In the event that this Agreement is terminated by any party pursuant to
8.1(d), American shall promptly, but in no event later than two (2) days after
the date of such termination, pay Mergeparty a fee equal to $35 million in
immediately available funds, plus Expenses. "Expenses" shall mean reasonable
and reasonably documented out-of-pocket fees and expenses incurred or paid by
or on behalf of Mergeparty in connection with the Merger or the consummation
of any of the transactions contemplated by this Agreement, including all fees
and expenses of counsel, commercial banks, investment banking firms,
accountants, experts and consultants to Mergeparty in an aggregate amount not
to exceed $5 million.
9.4 Notices. All notices and other communications which by any provision of
this Agreement are required or permitted to be given shall be given in writing
and shall be (a) mailed by first-class or express mail, postage prepaid, or by
recognized courier service, (b) sent by telecopy or other form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid, or by recognized courier service) written confirmation at
substantially the same time as such rapid transmission, or (c) personally
delivered to the receiving party (which
II-41
<PAGE>
if, other than an individual, shall be an officer or other responsible party
of the receiving party). All such notices and communications shall be mailed,
sent or delivered as follows:
(a) If to Mergeparty:
CBS Corporation
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
Attention: Louis J. Briskman, Esq.
Telecopier No.: (412) 642-5224
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopier No.: (212) 474-3700
(b) If to American:
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Steven B. Dodge, President and Chief Executive Officer
Telecopier No.: (617) 375-7575
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
or to such other person(s), telex or facsimile number(s) or address(es) as the
party to receive any such communication or notice may have designated by
written notice to the other party.
9.5 Specific Performance; Other Rights and Remedies. Each party recognizes
and agrees that in the event the other party should refuse to perform any of
its obligations under this Agreement or any Collateral Document, the remedy at
law would be inadequate and agrees that for breach of such provisions, each
party shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in Article 8, be entitled to injunctive relief
and to enforce its rights by an action for specific performance to the extent
permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable
relief. Nothing herein contained shall be construed as prohibiting each party
from pursuing any other remedies available to it under Applicable Law or
pursuant to the provisions of this Agreement for such breach or threatened
breach, including without limitation the recovery of damages, including, to
the extent awarded in any Legal Action, punitive, incidental and consequential
damages (including without limitation damages for diminution in value and loss
of anticipated profits) or any other measure of damages permitted by
Applicable Law.
9.6 Survival of Representations, Warranties, Covenants and Agreements. None
of the representations and warranties in this Agreement shall survive the
Merger, and after effectiveness of the Merger neither Mergeparty, American or
their respective officers, directors or shareholders shall have any further
obligation with respect thereto. This Section 9.6 shall not limit any covenant
or agreement of the parties which by its terms contemplates performance after
the Effective Time.
II-42
<PAGE>
9.7 Severability. If any term or provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any
other case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative, illegal or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative, illegal or unenforceable provision had never been contained
herein and such provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction or in such
case. Notwithstanding the foregoing, in the event of any such determination,
the parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by Applicable Law in an acceptable manner to the end
that the Merger is fulfilled and consummated to the maximum extent possible.
9.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, binding upon all of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one of such counterparts.
9.9 Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.10 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in
accordance with, the Applicable Laws of the United States of America and the
laws of the State of New York applicable to contracts made and performed in
such State and, in any event, without giving effect to any choice or conflict
of laws provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction, except to the extent the corporate
laws of the State of Delaware are applicable. Anything in this Agreement to
the contrary notwithstanding, in the event of any dispute between the parties
which results in a Legal Action, the prevailing party shall be entitled to
receive from the non-prevailing party reimbursement for reasonable legal fees
and expenses incurred by such prevailing party in such Legal Action.
9.11 Further Acts. Each party agrees that at any time, and from time to
time, before and after the consummation of the transactions contemplated by
this Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as the other party or its counsel
reasonably deems necessary or desirable in order to carry out the terms and
conditions of this Agreement and the transactions contemplated hereby or to
facilitate the enjoyment of any of the rights created hereby or to be created
hereunder.
9.12 Entire Agreement; No Other Representations or Agreements. This
Agreement (together with the Disclosure Schedules and the Exhibits and the
other Collateral Documents delivered or to be delivered in connection
herewith) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements, arrangements,
covenants, promises, conditions, undertakings, inducements, representations,
warranties and negotiations, expressed or implied, oral or written, between
the parties, with respect to the subject matter hereof. Each of the parties is
a sophisticated legal entity that was advised by experienced counsel and, to
the extent it deemed necessary, other advisors in connection with this
Agreement. Each of the parties hereby acknowledges that (a) neither party has
relied or will rely in respect of this Agreement or the transactions
contemplated hereby upon any document or written or oral information
previously furnished to or discovered by it or its representatives, other than
this Agreement (including the Exhibits and the Disclosure Schedules and the
other Collateral Documents) or such of the foregoing as are delivered at the
Closing, (b) there are no covenants or agreements by or on behalf of either
party hereto or any of its respective Affiliates or representatives other than
those expressly set forth in this Agreement and the Collateral Documents, and
(c) the parties' respective rights and obligations with respect to this
Agreement and the events giving rise thereto will
II-43
<PAGE>
be solely as set forth in this Agreement and the Collateral Documents. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY HERETO AGREES THAT,
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER AMERICAN NOR MERGEPARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES,
AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY
ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND
LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
9.13 Assignment. This Agreement shall not be assignable by any party and any
such assignment shall be null and void, except that it shall inure to the
benefit of and be binding upon any successor to each party by operation of
Law, including by way of merger, consolidation or sale of all or substantially
all of its assets, and each party may assign its rights and remedies hereunder
to any bank or other financial institution which has loaned funds or otherwise
extended credit to it.
9.14 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party and their permitted successors and
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as otherwise provided
in Articles 2 and 3 and Sections 6.8(d), 6.12 and 9.13.
9.15 Mutual Drafting. This Agreement is the result of the joint efforts of
Mergeparty and American, and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of the parties and there shall
be no construction against either party based on any presumption of that
party's involvement in the drafting thereof.
9.16 Obligations of American and of Mergeparty. Whenever this Agreement
requires a Subsidiary of American to take any action, such requirement shall
be deemed to include an undertaking on the part of American to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary
of Mergeparty to take any action, such requirement shall be deemed to include
an undertaking on the part of Mergeparty to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.17 Mergeparty Agent for Mergeparty Subsidiary. Anything in this Agreement
to the contrary notwithstanding, Mergeparty Subsidiary hereby grants
Mergeparty an irrevocably power of attorney and hereby irrevocably appoints
Mergeparty its agent for all purposes of this Agreement, including without
limitation for the purpose of executing and delivering extensions of the time
for the performance of any of the obligations or other acts of Mergeparty,
waivers, terminations or amendments, and any action taken by Mergeparty
pursuant to such power of attorney and agency, and any such extension, waiver,
termination or amendment executed and delivered by Mergeparty, shall be
binding upon Mergeparty Subsidiary whether or not it has specifically approved
such action or executed such extension, waiver, termination or amendment.
9.18 Original Merger Agreement. Notwithstanding anything to the contrary in
Section 9.3 of the Original Merger Agreement, this Agreement shall not amend
or restate the Original Merger Agreement, and the Original Merger Agreement
shall continue in full force and effect without any amendment or modification
thereof pursuant to the provisions of this Agreement, until such time as this
Agreement shall have been approved and adopted by the Required Vote.
II-44
<PAGE>
IN WITNESS WHEREOF, American, Mergeparty and Mergeparty Subsidiary have
caused this Amended and Restated Agreement and Plan of Merger to be executed,
pursuant to the authority and approval of each of their respective Boards of
Directors, as of the date first written above by their respective officers
thereunto duly authorized.
American Radio Systems Corporation
By: _________________________________
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief
Executive Officer
CBS Corporation
By: _________________________________
Name:
Title:
R Acquisition Corp.
By: _________________________________
Name:
Title:
II-45
<PAGE>
APPENDIX A
DEFINITIONS
ACCOUNTING FIRM shall have the meaning given to it in Section 6.18.
ADJUSTMENT AMOUNT shall have the meaning given to it in Section 6.18(d).
ADVERSE, ADVERSELY, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean any
Event that has adversely affected or is reasonably likely to adversely affect
(a) the validity or enforceability of this Agreement or the likelihood of
consummation of the Merger, (b) the business, properties, financial condition
or results of operations of American and its Subsidiaries, taken as a whole,
or the Mergeparty and its Subsidiaries, taken as a whole, as the case may be,
or (c) American's or Mergeparty's, as the case may be, ability to fulfill its
obligations under the terms of this Agreement. Notwithstanding the foregoing,
and anything in this Agreement to the contrary notwithstanding, any Event
affecting the radio broadcasting industry or the national or any regional or
market economy generally shall not be deemed to constitute an Adverse Change,
have an Adverse Effect or to Adversely Affect within the meaning of any of the
foregoing clauses (a) through (c).
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, any other Person of which
such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
AFFILIATE AGREEMENT shall have the meaning given to it in Section 6.20.
AGREEMENT shall have the meaning given to it in the third "Whereas"
paragraph and shall include any amendments executed and delivered by the
parties pursuant to the provisions of Section 9.1.
AMERICAN shall have the meaning given to it in the Preamble.
AMERICAN BROKERED STATIONS shall mean the radio broadcast stations which
American has the right to acquire, but which as of the date of the Original
Merger Agreement it is operating pursuant to time brokerage, local marketing
or other similar agreements.
AMERICAN CLASS A COMMON shall have the meaning given to it in Section
3.1(d).
AMERICAN CLASS B COMMON shall have the meaning given to it in Section
3.1(d).
AMERICAN CLASS C COMMON shall have the meaning given to it in Section
3.1(d).
AMERICAN COMMON STOCK shall have the meaning given to it in Section 3.1(d).
AMERICAN CONVERSION FRACTION shall have the meaning given to it in Section
3.5.
AMERICAN CONVERTIBLE PREFERRED STOCK shall have the meaning given to it in
Section 2.5.
AMERICAN CUMULATIVE PREFERRED STOCK shall have the meaning given to it in
Section 2.5.
AMERICAN DISCLOSURE SCHEDULE shall mean the American Disclosure Schedule
dated as of the date of the Original Merger Agreement delivered by American to
Mergeparty simultaneously with the execution and delivery of the Original
Merger Agreement.
II-46
<PAGE>
AMERICAN FCC LICENSES means all FCC Licenses issued to American or any of
its Subsidiaries and used in the business or operations of any of the American
Stations, including those listed on Section 4.6(a) of the American Disclosure
Schedule (other than those relating to the American Brokered Stations, which
shall be deemed American FCC Licenses only upon consummation of the
acquisition of the applicable American Brokered Station), and any additions
thereto between the date of the Original Merger Agreement and the Closing
Date. Auxiliary broadcast licenses issued pursuant to 47 C.F.R. Part 74 shall
not be deemed to be material American FCC Licenses.
AMERICAN FINANCIAL STATEMENTS shall have the meaning given to it in Section
4.2.
AMERICAN OPTIONS shall have the meaning given to it in Section 6.8.
AMERICAN PREFERRED STOCK shall have the meaning given to it in Section 2.5.
AMERICAN SEC DOCUMENTS shall have the meaning given to it in Section 4.2.
AMERICAN SEPTEMBER 10-Q shall have the meaning given to it in Section 4.2.
AMERICAN STATIONS means the radio broadcast stations owned by American, or
which it has the right to acquire (and acquires prior to the Closing Date but
only from and after such acquisition) as of the date of the Original Merger
Agreement; provided, however, that American Stations shall not include any
American Station disposed of by American subsequent to the date of the
Original Merger Agreement not in violation of the provisions of this
Agreement; further, provided, that American Stations shall include American
Brokered Stations if the context so requires.
AMERICAN STOCK means the American Common Stock and the American Preferred
stock.
AMERICAN STOCKHOLDERS MEETING shall have the meaning given to it in Section
6.5.
AMERICAN STOCKHOLDERS TOWER MEETING shall have the meaning given to it in
Section 6.5.
AMERICAN 10-K shall have the meaning given to it in Section 4.2.
AMERICAN TAX GROUP shall mean American and those of its Subsidiaries as are
included in the consolidated Federal Income Tax Returns of American.
AMERICAN TOWER shall have the meaning given to it in Section 3.1(d).
AMERICAN TOWER GROUP shall have the meaning given to it in Section 6.17.
AMERICAN'S KNOWLEDGE (including the term "to the knowledge of American")
means the actual knowledge of the Chief Executive Officer or the Chief
Financial Officer of American, and that such Officer shall have reason to
believe and shall believe that the subject representation or warranty is true
and accurate as stated.
ANTITRUST DIVISION shall have the meaning given to it in Section 6.2(c).
APPLICABLE LAW shall mean, with respect to any Person, any Law of any
Authority, whether domestic or foreign, to which such Person is subject or by
which it or any of its business or operations is subject or any of its
property or assets is bound.
APPLICATIONS shall have the meaning given to it in Section 6.2(b).
APPRAISED TOTAL VALUE shall have the meaning given to it in Section 3.4(c).
ARBITRATOR shall have the meaning given to it in Section 3.4(c).
II-47
<PAGE>
ATC MERGER AGREEMENT shall have the meaning given to it in Section 4.1(e).
ATS MERGERCORP shall have the meaning given to it in Section 3.5.
ATS MERGERCORP COMMON STOCK shall have the meaning given to it in Section
4.1(e).
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
BENEFIT ARRANGEMENT shall mean, with respect to any Person, any benefit
arrangement that is not a Plan, including (a) any employment, severance or
consulting agreement, (b) any arrangement providing for insurance coverage or
workers' compensation benefits, (c) any incentive bonus or deferred bonus
arrangement, (d) any arrangement providing termination allowance, severance or
similar benefits, (e) any equity compensation plan, and (f) any deferred
compensation plan which American or any ERISA Affiliate maintains, contributes
to or is required to contribute to for the benefit of any current or former
officers, employees, agents, directors or independent contractors of American
or any of its ERISA Affiliates.
CASH CONSIDERATION shall have the meaning given to it in Section 3.1(d).
CERTIFICATE OF MERGER shall have the meaning given to it in Section 2.3.
CERTIFICATES shall have the meaning given to it in Section 3.2(b).
CD AMOUNT shall have the meaning given to it in Section 6.18(c).
CLAIMS shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and
nature relating thereto, and all fees, costs, expenses and disbursements
(including without limitation reasonable attorneys' and other legal fees,
costs and expenses) relating to any of the foregoing.
CLOSING shall have the meaning given to it in Section 2.2.
CLOSING BALANCE SHEET shall have the meaning given to it in Section 6.18.
CLOSING DATE shall have the meaning given to it in Section 2.2.
CLOSING NET DEBT shall have the meaning given to it in Section 6.18.
CLOSING STATEMENT shall have the meaning given to it in Section 6.18.
CLOSING WORKING CAPITAL shall have the meaning given to it in Section 6.18.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA.
CODE shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
COLLATERAL DOCUMENT shall mean any agreement, certificate, contract,
instrument, notice, opinion or other document delivered pursuant to the
provisions of this Agreement, including without limitation, the
Confidentiality Agreement, the Tower Documentation and the Tower Merger
Agreement.
II-48
<PAGE>
COMMISSION OR SEC shall mean the Securities and Exchange Commission and
shall include any successor Authority.
CONTRACTS shall have the meaning given to it in Section 4.19(a).
CONFIDENTIALITY AGREEMENT shall mean the letter agreement, dated August 21,
1997 between American and Mergeparty.
CONTROL (including the terms "controlled," "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or
properties, whether through the ownership of stock, equity or other ownership,
by contract, arrangement or understanding, or as trustee or executor, by
contract or credit arrangement or otherwise.
CONVERTIBLE SECURITIES shall mean any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for shares of capital stock,
whether or not the right to convert or exchange thereunder is immediately
exercisable or is conditioned upon the passage of time, the occurrence or non-
occurrence or existence or non-existence of some other Event, or both.
COURT shall have the meaning given to it in Section 3.4(c).
CSFB shall have the meaning given to it in Section 4.14.
CURRENT ASSETS shall have the meaning given to it in Section 6.18(b).
DCL shall have the meaning given to it in Section 2.1.
DEBT AMOUNT shall have the meaning given to it in Section 6.18(c).
DETERMINATION DEADLINE shall have the meaning given to it in Section 3.4(c).
DISCLOSURE SCHEDULE shall mean the Mergeparty Disclosure Schedule, if any,
or the American Disclosure Schedule, as the case may be.
DISSENTING SHARES shall have the meaning given to it in Section 3.4(a).
DIVESTITURE CONDITION means any condition imposed or required by the FCC
(including conditions required by the FCC's multiple ownership rules or
policies), the Antitrust Division or the FTC as a condition to its consent to
or approval of the transfer of control of any of the American FCC Licenses or
otherwise to the transactions (or any of them) contemplated by this Agreement,
including without limitation the Merger, or as a condition to its agreement
not to institute any Legal Action to prevent the transfer of control of any of
the American FCC Licenses or otherwise to prevent any of the transactions
contemplated hereby, which would require Mergeparty or any of its Subsidiaries
or any of its other Affiliates to dispose of one or more of the American
Stations or American Brokered Stations, or in Mergeparty's sole discretion,
one or more of the radio broadcast stations owned by Mergeparty and operating
in the same Arbitron Survey area as any of the American Stations or American
Brokered Stations; provided, however, that with respect to compliance with any
condition imposed by the FCC, Mergeparty shall have been afforded a period of
six months, from Closing, through the use of trusts or otherwise, within which
to comply with the radio duopoly overlap rule, 47 C.F.R. (S) 73.3555(a), and
Mergeparty shall have been afforded temporary, rather than permanent, waivers
of the one-to-a-market rule, 47 C.F.R. (S) 73.3555(c), so long as such
temporary waivers shall remain in effect until at least 6 months following the
effective date of FCC action concluding the ongoing proceeding in MM Docket
Nos. 91-221, 87-8 (FCC 94-322) or a successor rulemaking proceeding pending at
the time of the grant of the FCC Order, that considers the one-to-a-market
rule.
II-49
<PAGE>
D&O INSURANCE shall have the meaning given to it in Section 6.12(c).
EFFECTIVE TIME shall have the meaning given to it in Section 2.3.
ENTITY SHALL mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization,
entity or business, whether acting in an individual, fiduciary or other
capacity, or any Authority.
ENVIRONMENTAL LAW excluding any regulations issued by the FCC shall mean any
Law relating to or otherwise imposing liability or standards of conduct
concerning pollution or protection of the environment, including without
limitation, Laws relating to emissions, discharges, releases or threatened
releases of Hazardous Materials into the environment (including, without
limitation, ambient air, surface water, ground water, mining or reclamation of
mined land, land surface or subsurface strata) or otherwise that relate to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances, materials or wastes.
Environmental Laws shall include without limitation the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 6901
et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Occupational
Safety and Health Act (29 U.S.C. Section 651 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.), and
the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. Section 1201
et seq.), and any analogous federal, state, local or foreign Laws, and the
rules and regulations promulgated thereunder, all as from time to time in
effect, and any reference to any such statutory or regulatory provision shall
be deemed to be a reference to any successor statutory or regulatory
provision.
ENVIRONMENTAL PERMIT shall mean, with respect to any Person, any
Governmental Authorization required by or pursuant to any Environmental Law.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any such
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
ERISA AFFILIATE shall mean any Person that is treated as a single employer
with American under Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA.
ESOP shall have the meaning given to it in Section 4.9(a)(xvi).
EVENT shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any such statutory
or regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
EXCHANGE AGENT shall have the meaning given to it in Section 3.2(a).
EXPENSES shall have the meaning given to it in Section 9.3.
EXTENDED TOWER LEASE shall have the meaning given to it in Section 6.19(b).
II-50
<PAGE>
FCA shall mean the Communication Act of 1934, and the rules and regulations
thereunder, all as from time to time in effect, or any successor law, rules or
regulations, and any reference to any such statutory or regulatory provision
shall be deemed to be a reference to any successor statutory or regulatory
provision.
FCC shall mean the Federal Communications Commission and shall include any
successor Authority.
FCC CONSENTS means actions by the FCC (including the Chief, Mass Media
Bureau, acting under delegated authority) granting its consent to the transfer
of control of the American FCC Licenses for each of the American Stations to
Mergeparty as contemplated by this Agreement whether or not such consent has
become a Final Order.
FCC LICENSES means all of the licenses, permits and other authorizations
issued by the FCC to an owner and operator of radio broadcast stations.
FCC ORDER shall have the meaning given to it in Section 7.1(b).
FILED AMERICAN SEC DOCUMENTS shall have the meaning given to it in Section
4.2.
FINAL ADJUSTMENT AMOUNT shall have the meaning given to it in Section
6.18(d).
FINAL ORDER shall mean, with respect to any Authority, including without
limitation the FCC, a consent or approval with respect to which no appeal, no
stay, no petition or application for rehearing, reconsideration, review or
stay, whether on motion of the applicable Authority or other Person or
otherwise, and no other Legal Action contesting such consent or approval, is
in effect or pending and as to which the time or deadline for filing any such
appeal, petition or application or other Legal Action has expired or, if
filed, has been denied, dismissed or withdrawn, and the time or deadline for
instituting any further Legal Action has expired.
FTC shall have the meaning given to it in Section 6.2(c).
GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.
GOVERNMENTAL AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations
of all Authorities, including the FCC Licenses, issued by the FCC, the Federal
Aviation Administration and any other Authority in connection with the conduct
of business or operations of any of the Stations.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
HART-SCOTT-RODINO ACT shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the rules and regulations thereunder, all as
from time to time in effect, or any successor law, rules or regulations, and
any reference to any such statutory or regulatory provision shall be deemed to
be a reference to any successor statutory or regulatory provision.
HAZARDOUS MATERIALS shall mean and include any substance, material, waste,
constituent, compound, chemical, natural or man-made element or force (in
whatever state of matter): (a) the presence of which requires investigation or
remediation under any Environmental Law; or (b) that is defined as a
"hazardous waste" or "hazardous substance" under any Environmental Law; or (c)
that is toxic, explosive, corrosive, etiologic, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is regulated
by any applicable Authority or subject to any Environmental Law; or (d) that
poses or threatens to pose a hazard to the health or safety of persons; or (e)
that contains gasoline, diesel fuel or other petroleum hydrocarbons, or any
by-products or fractions thereof, natural gas, polychlorinated biphenyls
("PCBs") and PCB-containing equipment,
II-51
<PAGE>
radon or other radioactive elements, ionizing radiation, lead, asbestos or
asbestos- containing materials, or urea formaldehyde foam insulation.
INDEBTEDNESS shall mean, with respect to any Person, without duplication,
(A) all obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind to such Person, (B) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (C) all
obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person, (D) all obligations
of such Person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such Person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
Person's business), (E) all capitalized lease obligations of such Person, (F)
all obligations of others secured by any Lien on property or assets owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (G) all obligations of such Person under interest rate or
currency hedging transactions (valued at the termination value thereof), (H)
all letters of credit issued for the account of such Person and (I) all
guarantees and arrangements having the economic effect of a guarantee of such
Person or any indebtedness of any other Person.
INDEMNIFIED PARTIES shall have the meaning given to it in Section 6.12(b).
LAW shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order,
ordinance, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic or foreign; (b) the common law, or other legal or quasi-
legal precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation.
LEGAL ACTION shall mean, with respect to any Person, any and all litigation
or legal or other actions, arbitrations, counterclaims, hearings,
investigations, proceedings or suits, at law or in arbitration, equity or
admiralty, whether or not purported to be brought on behalf of such Person, by
or before any Authority, against such Person or involving any of such Person's
business or assets.
LIABILITIES shall have the meaning given to it in Section 6.18(b).
LIEN shall mean any of the following: mortgage; lien (statutory or other) or
other security agreement, arrangement or interest; hypothecation, pledge or
other deposit arrangement; assignment; charge; levy; executory seizure;
attachment; garnishment; encumbrance (including any easement, exception,
reservation or limitation, right of way, and the like); conditional sale,
title retention or other similar agreement, arrangement, device or
restriction; any financing lease involving substantially the same economic
effect as any of the foregoing; the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction; or
restriction on sale, transfer, assignment, disposition or other alienation.
MATERIAL, MATERIALLY OR MATERIALITY for the purposes of this Agreement,
shall, unless specifically stated to the contrary, be determined without
regard to the fact that various provisions of this Agreement set forth
specific dollar amounts.
MATERIAL AGREEMENT shall mean, with respect to any Person, any agreement,
arrangement, contract, undertaking, understanding or other obligation or
liability which (a) was not entered into in the ordinary course of business,
it being understood and agreed by the parties that the acquisition,
disposition or exchange of radio stations is in the ordinary course of
business, (b) was entered into in the ordinary course of business which (i)
involved the purchase, sale or lease of goods or materials, or purchase of
services, aggregating more than $10,000,000 during any of the last three
fiscal years of such Person, (ii) extends for more than six (6) months from
the date of the Original Merger Agreement, or (iii) is not terminable on
thirty (30) days or less notice without material penalty or other payment, (c)
involves indebtedness aggregating more than $10,000,000, (d) is or otherwise
constitutes a written agency, broker, dealer, license, distributorship, sales
representative or similar written agreement, or (e) accounted for more than
ten percent (10%) of the revenues of Mergeparty or American
II-52
<PAGE>
Stations, as the case may be, in the last fiscal year of such Person or is
likely to account for more than ten percent (10%) of revenues of Mergeparty or
American, as the case may be, during the current fiscal year of such Person.
MAXIMUM PREMIUM shall have the meaning given to it in Section 6.12(c).
MERGER CONSIDERATION shall have the meaning given to it in Section 3.1(d).
MERGEPARTY shall have the meaning given to it in the Preamble.
MERGEPARTY BROKERED STATIONS shall mean the radio broadcast stations which
Mergeparty has the right to acquire but which as of the date of the Original
Merger Agreement it is operating pursuant to time brokerage, local marketing
or other similar agreements.
MERGEPARTY DISCLOSURE SCHEDULE shall mean the Mergeparty Disclosure Schedule
dated as of the date of the Original Merger Agreement delivered by Mergeparty
to American simultaneously with the execution and delivery of the Original
Merger Agreement.
MERGEPARTY STATIONS means the radio broadcast stations owned by Mergeparty,
or which it has the right to acquire (and acquires prior to the Closing Date
but only from and after such acquisition) as of the date of the Original
Merger Agreement; provided, however, that Mergeparty Stations shall not
include any Mergeparty Station disposed of by Mergeparty subsequent to the
date of the Original Merger Agreement not in violation of the provisions of
this Agreement; provided further, however, that the term Mergeparty Stations
shall include Mergeparty Brokered Stations if the context so requires.
MERGEPARTY SUBSIDIARY shall have the meaning given to it in the Preamble.
MERGEPARTY'S KNOWLEDGE (including the term "to the knowledge of Mergeparty")
means the actual knowledge of the Chief Executive Officer or the Chief
Financial Officer of Mergeparty, and that such Officer shall have reason to
believe and shall believe that the subject representation or warranty is true
and accurate as stated.
MERGER shall have the meaning given to it in the third "Whereas" paragraph.
MERGER CONSIDERATION shall have the meaning given to it in Section 3.1(d).
MULTIEMPLOYER PLAN shall mean a Plan which is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA.
NET DEBT shall have the meaning given to it in Section 6.18(c).
NOTICE OF DISAGREEMENT shall have the meaning given to it in Section 6.18.
NYSE shall mean the New York Stock Exchange.
OPTION SECURITIES shall mean all rights, options, calls, contracts,
agreements, warrants, understandings, restrictions, arrangements or
commitments, including without limitation, any rights plan or other anti-
takeover agreement or arrangement, evidencing the right to subscribe for,
purchase or otherwise acquire, or otherwise providing for the issuance of
shares of capital stock, voting securities or Convertible Securities, whether
or not the right to subscribe for, purchase or otherwise acquire, or otherwise
providing for the issuance, is immediately exercisable or is conditioned upon
the passage of time, the occurrence or non-occurrence or the existence or non-
existence of some other Event.
OPTIONHOLDER shall have the meaning given to it in Section 6.8(a).
II-53
<PAGE>
ORGANIC DOCUMENT shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
ORIGINAL MERGER AGREEMENT shall have the meaning given to it in the first
"Whereas" paragraph.
PERMITTED LIENS shall mean (a) Liens for current Taxes not yet due and
payable, and (b) such imperfections of title, easements, encumbrances and
mortgages or other Liens, if any, as are not, individually or in the
aggregate, substantial in character, amount or extent and do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby, or otherwise materially impair
the business or operations of the American Stations or the Mergeparty
Stations, as the case may be.
PERSON shall mean any natural individual or any Entity.
PLAN shall mean, with respect to any Person and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Person or an ERISA Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, which American or any ERISA Affiliate
maintains, contributes to or is required to contribute to for the benefit of
any current or former officers, employees, agents, directors or independent
contractors of American or any of its ERISA Affiliates.
POST-CLOSING AMERICAN GROUP shall have the meaning given to it in Section
6.18
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to
copyrights, computer software programs, patents, service marks, trademarks,
trade names, technology and know-how.
PROHIBITED TRANSACTION shall have the meaning given to it in Section 6.2(a).
PROXY STATEMENT shall have the meaning given to it in Section 6.6(a).
REGISTRATION STATEMENT shall have the meaning given to it in Section 6.6(b).
REGULATIONS shall mean the federal income tax regulations promulgated under
the Code, as such Regulations may be amended from time to time. All references
herein to specific sections of the Regulations shall be deemed also to refer
to any corresponding provisions of succeeding Regulations, and all references
to temporary Regulations shall be deemed also to refer to any corresponding
provisions of final Regulations.
REPRESENTATIVES shall have the meaning given to it in Section 6.1.
REQUIRED DIVESTITURES means all divestitures, terminations, arrangements and
restructurings identified in Section 5.2c) of the Mergeparty Disclosure
Schedule, if any, and all other divestitures, terminations, arrangements or
restructurings, if any, arising after the date of the Original Merger
Agreement that would have been required to be listed on Section 5.2c) of the
Mergeparty Disclosure Schedule if known to be in existence as of such date or
that are necessary to satisfy any and all Divestiture Conditions.
REQUIRED TOWER VOTE shall have the meaning given to it in Section 4.13.
REQUIRED VOTE shall have the meaning given to it in Section 4.13.
REQUIRED DIVESTITURES means all divestitures, terminations, arrangements and
restructurings identified in Section 5.2c) of the Mergeparty Disclosure
Schedule, if any, and all other divestitures, terminations,
II-54
<PAGE>
arrangements or restructurings, if any, arising after the date of the Original
Merger Agreement that would have been required to be listed on Section 5.2c)
of the Mergeparty Disclosure Schedule if known to be in existence as of such
date or that are necessary to satisfy any and all Divestiture Conditions.
RESTATED CERTIFICATE shall have the meaning given to it in Section 4.11.
(S)162(M) OPTIONS shall have the meaning given to it in Section 6.8(e).
SECURITIES ACT shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as from time to time in effect,
or any successor law, rules or regulations, and any reference to any such
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
STATIONS shall mean, collectively, the American Stations and the Mergeparty
Stations.
SUBSIDIARY shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially,
by such Person or any other Person controlled by such Person.
SURVIVING CORPORATION shall have the meaning given to it in Section 2.1.
TAX (and "Taxable," which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other, including recapture of any tax
items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges,
penalties, additions to tax or additional amounts imposed by any Taxing
Authority, (b) any joint or several liability of such Person with any other
Person for the payment of any amounts of the type described in (a) of this
definition, and (c) any liability of such Person for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
TAX CLAIM shall mean any Claim which relates to Taxes.
TAX RETURN OR RETURNS shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
TAXING AUTHORITY shall mean any Authority responsible for the imposition of
any Tax.
TERMINATION DATE shall have the meaning given to it in Section 8.1.
TOWER BUSINESS shall mean the business conducted by the Tower Subsidiaries.
TOWER COMMON STOCK, TOWER CLASS A COMMON, TOWER CLASS B COMMON AND TOWER
CLASS C COMMON shall have the meaning given to such terms in Section 3.1(d).
TOWER DECONSOLIDATION shall have the meaning given to it in Section 6.17.
TOWER DECONSOLIDATION DATE shall have the meaning given to it in Section
6.17.
TOWER DOCUMENTATION shall have the meaning given to it in Section 6.17.
TOWER EMPLOYEES shall have the meaning given to it in Section 6.17.
II-55
<PAGE>
TOWER LEASES shall have the meaning given to it in Section 6.19.
TOWER MERGER shall have the meaning given to it in Section 3.5.
TOWER MERGER AGREEMENT shall have the meaning given to it in Section 3.5.
TOWER MERGER CONSIDERATION shall have the meaning given to it in Section 3.5.
TOWER MERGER EFFECTIVE TIME shall have the meaning given to it in Section
3.5.
TOWER MERGER TOWER CONSIDERATION shall have the meaning given to it in
Section 3.5.
TOWER PROXY STATEMENT shall have the meaning given to it in Section 6.6(a).
TOWER SEPARATION shall have the meaning given to it in Section 6.17.
TOWER STOCK CONSIDERATION shall have the meaning given to it in Section
3.1(d).
TOWER STOCK PAYMENT shall have the meaning given to it in Section 3.4(c).
TOWERS shall have the meaning given to it in Section 6.19.
TOWER SUBSIDIARIES shall mean American Tower and its Subsidiaries.
UNCONTROLLABLE EVENTS shall have the meaning given to it in Section 6.2(d).
WC AMOUNT shall have the meaning given to it in Section 6.18(b).
WORKING CAPITAL shall have the meaning given to it in Section 6.18(b).
II-56
<PAGE>
EXHIBIT D
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
AMERICAN RADIO SYSTEMS CORPORATION
AND
ATS MERGER CORPORATION
DATED AS OF
DECEMBER 18, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE 1 DEFINED TERMS............................................. II-60
ARTICLE 2 THE TOWER MERGER.......................................... II-61
2.1 The Tower Merger..................................... II-61
2.2 Closing.............................................. II-61
2.3 Effective Time....................................... II-61
2.4 Effect of the Tower Merger........................... II-61
2.5 Certificate of Designation........................... II-61
2.6 Bylaws............................................... II-61
2.7 Directors and Officers............................... II-61
ARTICLE 3 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES............ II-61
3.1 Conversion of Capital Stock.......................... II-61
3.2 Exchange of Certificates............................. II-63
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ATS MERGERCORP.......... II-65
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ARS..................... II-66
ARTICLE 6 CLOSING CONDITIONS........................................ II-67
6.1 Conditions to Obligations of Each Party to Effect the
Tower Merger........................................ II-67
6.2 Conditions to Obligations of ATS Mergercorp.......... II-67
6.3 Conditions to Obligations of ARS..................... II-67
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER......................... II-68
7.1 Termination.......................................... II-68
7.2 Effect of Termination................................ II-68
ARTICLE 8 GENERAL PROVISIONS........................................ II-68
8.1 Amendment............................................ II-68
8.2 Waiver............................................... II-68
8.3 Fees, Expenses and Other Payments.................... II-68
8.4 Notices.............................................. II-68
8.5 Specific Performance; Other Rights and Remedies...... II-69
8.6 Survival of Representations, Warranties, Covenants
and Agreements...................................... II-69
8.7 Severability......................................... II-69
8.8 Counterparts......................................... II-70
8.9 Section Headings..................................... II-70
8.10 Governing Law........................................ II-70
8.11 Further Acts......................................... II-70
8.12 Entire Agreement; No Other Representations or
Agreements.......................................... II-70
8.13 Assignment........................................... II-71
8.14 Parties in Interest.................................. II-71
APPENDIX A: Definitions............................................... II-73
</TABLE>
II-59
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of December 18, 1997, by and
between ATS Merger Corporation., a Delaware corporation ("ATS Mergercorp"),
and American Radio Systems Corporation, a Delaware corporation ("ARS").
W I T N E S S E T H:
WHEREAS, ARS, CBS Corporation (formerly, Westinghouse Electric Corporation),
a Pennsylvania corporation ("CBS") and R Acquisition Corp., a Delaware
corporation ("CBS Sub") are parties to an Agreement and Plan of Merger, dated
as of September 19, 1997 (the "Original Merger Agreement"); and
WHEREAS, ARS, CBS and CBS Sub have simultaneously with the execution and
delivery of this Agreement entered into the Amended and Restated Agreement and
Plan of Merger (the "Restated Merger Agreement") providing for the merger of
CBS Sub with and into ARS on the terms and conditions set forth therein ("CBS
Merger");
WHEREAS, the Restated Merger Agreement provides that, under certain
circumstances, the distribution of ARS' tower business to the holders of ARS
Common Stock may be effect separate and apart from consummation of the CBS
Merger through the merger of ATS Mergercorp with and into ARS (the "Tower
Merger"); and
WHEREAS, the Boards of Directors of ARS and ATS Mergercorp have determined
that the Tower Merger on the terms and conditions set forth in this Agreement
and Plan of Merger (this "Agreement") is consistent with and in furtherance of
the long-term business strategy of each, and is fair to, and in the best
interests of, ATS Mergercorp, ARS and the stockholders of each; and
WHEREAS, ARS and ATS Mergercorp intend that the Tower Merger shall, for
federal income tax purposes, qualify as a tax-free reorganization under the
provisions of Section 368(a) of the Code; and
WHEREAS, the Boards of Directors of ARS and ATS Mergercorp have approved and
adopted this Agreement and the Tower Merger and the Board of Directors of ARS
has directed that this Agreement be submitted to its stockholders for their
adoption and approval; ARS, as the sole stockholder of ATS Mergercorp has
approved and adopted this Agreement;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto hereby, intending to be legally bound, represent, warrant,
covenant and agree as follows:
ARTICLE 1
Defined Terms
As used herein, unless the context otherwise requires, the terms defined in
Appendix A shall have the respective meanings set forth therein. Terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa, and the reference to any gender shall be deemed to include all
genders. Unless otherwise defined or the context otherwise clearly requires,
terms for which meanings are provided in this Agreement shall have such
meanings when used in each Collateral Document executed or required to be
executed pursuant hereto or thereto or otherwise delivered, from time to time,
pursuant hereto or thereto. References to "hereof," "herein" or similar terms
are intended to refer to the Agreement as a whole and not a particular
section, and references to "this Section" of "this Article" are intended to
refer to the entire section
II-60
<PAGE>
or article and not a particular subsection thereof. The term "either party"
shall, unless the context otherwise requires, refer to ARS and ATS Mergercorp.
ARTICLE 2
The Tower Merger
2.1 The Tower Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DCL"), at the Effective Time, ATS Mergercorp shall be merged with and
into ARS. As a result of the Tower Merger, the separate existence of ATS
Mergercorp shall cease and ARS shall continue as the surviving corporation in
the Tower Merger (sometimes referred to, as such, as the "Surviving
Corporation").
2.2 Closing. The closing of the Tower Merger (the "Closing") will take
place, on the Closing Date, at the offices of Sullivan & Worcester LLP, One
Post Office Square, Boston, Massachusetts, on the date that is the tenth
(10th) day after the date on which all of the conditions set forth in Article
6 (other than those which require delivery at the Closing) shall have been
satisfied or waived, unless another date, time or place is agreed to in
writing by the parties or provided for herein. The date on which the Closing
occurs is herein referred to as the "Closing Date."
2.3 Effective Time. Subject to the provisions of this Agreement, as promptly
as practicable after the Closing, the parties hereto shall cause the Tower
Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") and any related filings required under the DCL with the Secretary
of State of the State of Delaware. The Tower Merger shall become effective at
such time as such documents are duly filed with the Secretary of State of the
State of Delaware or at such later time as is specified in such documents (the
"Effective Time").
2.4 Effect of the Tower Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties
of ATS Mergercorp and ARS, and the Tower Merger shall otherwise have the
effects provided for under the DCL.
2.5 Certificate of Incorporation. The Restated Certificate of Incorporation
of ARS in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation unless amended in accordance with
Applicable Law.
2.6 Bylaws. The bylaws of ARS in effect at the Effective Time shall be the
bylaws of the Surviving Corporation unless amended in accordance with
Applicable Law.
2.7 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified, or upon their earlier
resignation or removal, in accordance with Applicable Law, (a) the directors
of ARS at the Effective Time shall be the directors of the Surviving
Corporation, and (b) the officers of ARS at the Effective Time shall be the
officers of the Surviving Corporation.
ARTICLE 3
Conversion of Shares; Exchange of Certificates
3.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Tower Merger and without any action on the part of ATS Mergercorp or ARS or
their respective stockholders:
(a) Each share of the 11% Series B Cumulative Exchangeable Preferred
Stock, par value $.01 per share, of ARS (the "ARS Cumulative Preferred
Stock") issued and outstanding immediately prior to the Effective Time
shall remain outstanding;
II-61
<PAGE>
(b) Each share of the 7% Convertible Exchangeable Preferred Stock, par
value $.01 per share, of ARS (the "ARS Convertible Preferred Stock") issued
and outstanding immediately prior to the Effective Time shall remain
outstanding;
(c) Each share of Class A Common Stock, par value $.01 per share ("ARS
Class A Common Stock"), each share of Class B Common Stock, par value $.01
per share ("ARS Class B Common Stock") and each share of Class C Common
Stock, par value $.01 per share ("ARS Class C Common Stock"), of ARS
(collectively, the "ARS Common Stock"), issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Tower Merger and
without any action on the part of the holder thereof, be converted into the
right to receive:
(i) one share of Common Stock, par value $.01 per share ("Tower
Common Stock") of American Tower Systems Corporation ("American Tower
Systems"), with (i) each share of ARS Class A Common Stock being
converted into the right to receive one share of Class A Common Stock,
par value $.01 per share ("Tower Class A Common Stock") of American
Tower Systems, (ii) each share of ARS Class B Common Stock being
converted into the right to receive one share of Class B Common Stock,
par value $.01 per share ("Tower Class B Common Stock") of American
Tower Systems, and (iii) each share of ARS Class C Common being
converted into the right to receive one share of Class C Common Stock,
par value $.01 per share ("Tower Class C Common Stock") of American
Tower Systems; and
(ii) a fraction (the "ARS Conversion Fraction") of a share of ARS
Common Stock of the same class as the class of ARS Common Stock being
converted, (i) the numerator of which is the difference between (A) the
denominator and (B) the value (determined as set forth below) of one
share of Tower Class A Common Stock immediately prior to the Effective
Time, and (ii) the denominator of which is the value (determined as set
forth below) of one share of ARS Class A Common Stock immediately prior
to the Effective Time (the consideration set forth in paragraph (a)
above and this paragraph (b) being herein collectively referred to as
the "Merger Consideration").
For purposes of determining the value of the ARS Class A Common Stock and
the Tower Common Stock immediately prior to the Effective Time the
following principles shall apply:
(x) each share of ARS Class A Common Stock shall be valued at an
amount equal to the average closing sales price of the ARS Class A
Common Stock on the New York Stock Exchange (the "NYSE"), as reported
by the Wall Street Journal, for the ten (10) consecutive trading days
immediately preceding the second trading date prior to the Effective
Time; and
(y) each share of Tower Class A Common Stock shall be valued at the
amount determined in good faith by the ARS Board of Directors to be its
fair market value immediately prior to the Effective Time.
(d) Each share of Common Stock, par value $.01 per share of ATS
Mergercorp (the "ATS Mergercorp Common Stock") owned by ARS immediately
prior to the Effective Time shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made
with respect thereto.
(e) The shares of ARS Common Stock owned by ARS as treasury shares
immediately prior to the Effective Time shall automatically, by virtue of
the Tower Merger and without any action on the part of ARS, be converted
into a number of shares of ARS Common Stock of the same class equal to the
number of shares owned by American immediately prior to the Effective Time
multiplied by the ARS Conversion Fraction.
As a result of the Tower Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of ARS Common Stock issued
and outstanding shall cease to be outstanding and shall be canceled and
retired and shall cease to exist, and each holder of shares of ARS Common
Stock shall thereafter cease to have any rights with respect to such shares of
ARS Common Stock, except the right to receive, without interest, the Merger
Consideration and cash for fractional shares of ARS Common Stock in accordance
with the provisions of Section 3.2(d) upon the surrender of a certificate
representing such shares of ARS Common Stock.
II-62
<PAGE>
3.2 Exchange of Certificates.
(a) Pursuant to an agreement reasonably satisfactory to ARS and ATS
Mergercorp (the "Exchange Agent Agreement") to be entered into at or prior to
the Closing Date between ARS, ATS Mergercorp and the transfer agent for the
ARS Common Stock (the "Exchange Agent"), at or immediately following the
Effective Time, ARS shall deposit or cause to be deposited in trust for the
benefit of the ARS common stockholders shares of Tower Class A Common Stock,
Tower Class B Common Stock and Tower Class C Common Stock representing the
aggregate Merger Consideration to which holders of ARS Common Stock shall be
entitled at the Effective Time pursuant to the provisions of this Article.
(b) Not less than five (5) business days subsequent to the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of ARS Common Stock (the "Certificates") (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of ARS Common Stock and Tower Class A Common Stock, Tower
Class B Common Stock and Tower Class C Common Stock and cash in lieu of
fractional shares as hereinafter provided. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal and such other documents as the Exchange Agent shall reasonably
require, the holder of such Certificates shall be entitled to receive in
exchange therefor (i) a certificate representing that number of whole shares
of ARS Common Stock to be received pursuant to the provision of Section
3.1(c)(ii), (ii) cash in lieu of fractional shares as hereinafter provided and
(iii) certificates representing the number of shares of Tower Class A Common
Stock, Tower Class B Common Stock and Tower Class C Common Stock into which
the shares of ARS Common Stock, theretofore represented by the Certificates so
surrendered, shall have been converted pursuant to the provisions of Section
3.1(c)(i), and the Certificates so surrendered shall be canceled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of ARS Common Stock for any shares of
ARS Common Stock or Tower Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable abandoned property,
escheat or similar Laws.
(c) Promptly following the date which is six (6) months after the Closing
Date, the Exchange Agent shall deliver to ARS all cash, certificates
(including any ARS Common Stock and ATS Mergercorp Class A Common Stock) and
other documents in its possession relating to the transactions described in
this Agreement, and the Exchange Agent's duties shall terminate. Thereafter,
each holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
Laws) receive in exchange therefor the Tower Merger Consideration to which
such holder is entitled, without any interest thereon. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to
a holder of ARS Common Stock for any ARS Common Stock or Tower Common Stock
delivered to a public official pursuant to applicable abandoned property,
escheat or similar Laws.
(d) No certificates or scrip representing fractional shares of ARS Common
Stock shall be issued upon the surrender for exchange of Certificates, and
such fractional share interests shall not entitle the owner thereof to vote or
to any rights of a stockholder of ARS. As promptly as practicable following
the Effective Time, the Exchange Agent shall determine the excess of (i) the
number of shares of ARS Common Stock delivered to the Exchange Agent by ARS
pursuant to Section 3.2(a) over (ii) the aggregate number of whole shares of
ARS Common Stock to be distributed to holders of the Certificates pursuant to
Section 3.2(b) (such excess being herein called the "Excess Shares"). As soon
after the Effective Time as practicable, the Exchange Agent, as agent for the
holders of the Certificates, shall sell the Excess Shares at then prevailing
prices on the NYSE all in the manner provided in this Section 3.2((d). The
sale of the Excess Shares by the Exchange Agent shall be executed on the NYSE
through one or more member firms of the NYSE and shall be executed in round
lots to the extent practicable. The proceeds from such sale or sales available
for distribution to the holders of Certificates shall be reduced by the
compensation payable to the Exchange Agent and the expenses incurred by the
Exchange Agent, in each case, in connection with such sale or sales of the
Excess Shares, including all related
II-63
<PAGE>
commissions, transfer taxes and other out-of-pocket transaction costs. Until
the net proceeds of such sale or sales have been distributed to the holders of
the Certificates, the Exchange Agent shall hold such proceeds in trust for the
holders of the Certificates (the "Common Shares Trust"). The Exchange Agent
shall determine the portion of the Common Shares Trust to which each holder of
a Certificate shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction, the
numerator of which is the amount of the fractional share interest to which
such holder of a Certificate is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of the
Certificates are entitled. As soon as practicable after the determination of
the amount of cash, if any, to be paid to holders of the Certificates in lieu
of any fractional share interests, the Exchange Agent shall make available
such amounts, without interest, to such holders of the Certificates who have
surrendered their Certificates in accordance with this Article III.
(e) If the Tower Merger Consideration (or any portion thereof) is to be paid
to a Person other than the Person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the payment of the
Tower Merger Consideration that the Certificate so surrendered shall be
properly endorsed or accompanied by appropriate stock powers (with signatures
guaranteed in accordance with the transmittal form) and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the Person
requesting such transfer pay to the Exchange Agent any transfer or other Taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or are not required to be paid.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and subject to such other
reasonable conditions as the Board of Directors of the Surviving Corporation
may impose, the Surviving Corporation shall issue in exchange for such lost,
stolen or destroyed Certificate the Tower Merger Consideration deliverable in
respect thereof as determined in accordance with this Article. When
authorizing such issue of the Tower Merger Consideration in exchange therefor,
the Board of Directors of the Surviving Corporation may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to give the Surviving Corporation a bond
or other surety in such sum as it may reasonably direct as indemnity against
any Claim that may be made against the Surviving Corporation with respect to
the Certificate alleged to have been lost, stolen or destroyed.
(g) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on ARS Common Stock
shall be paid with respect to any whole shares of ARS Common Stock or Tower
Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of
Applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the shares of ARS Common Stock and Tower Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of ARS Common Stock or Tower Common Stock, as the case may be, and not paid,
less the amount of any withholding taxes which may be required thereon, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of ARS Common Stock or Tower Common Stock, as the case may
be, less the amount of any withholding taxes which may be required thereon.
(h) ARS shall be entitled to, or shall be entitled to cause the Exchange
Agent to, deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of ARS Common Stock such
amounts as are required to be deducted and withheld with respect to the making
of such payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by ARS or the Exchange
Agent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
ARS Common Stock in respect of which such deduction and withholding was made
by ARS or the Exchange Agent.
II-64
<PAGE>
ARTICLE 4
Representations and Warranties of ATS Mergercorp
ATS Mergercorp hereby represents, warrants and covenants to, and agrees
with, ARS as follows:
(a) ATS Mergercorp is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, has all requisite
power and authority (corporate and other) to own or hold under lease its
properties and to conduct its business as now conducted and as presently
proposed to be conducted, with full power and authority (corporate and other)
to carry on the business in which it is engaged, except where the failure to
be so qualified and in good standing, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on ATS Mergercorp.
(b) ATS Mergercorp has all requisite power and authority (corporate and
other) to execute, deliver and perform its obligations under this Agreement
and each Collateral Document executed or required to be executed by ATS
Mergercorp pursuant hereto or thereto or to consummate the Tower Merger, and
the execution, delivery and performance of this Agreement and each Collateral
Document executed or required to be executed pursuant hereto or thereto have
been duly authorized by all requisite corporate or other action on the part of
ATS Mergercorp, other than the approval of the sole stockholder of ATS
Mergercorp contemplated by this Agreement. This Agreement has been duly
executed and delivered by ATS Mergercorp and constitutes, and each Collateral
Document executed or required to be executed pursuant hereto or thereto or to
consummate the Tower Merger when executed and delivered by ATS Mergercorp will
constitute, valid and binding obligations of ATS Mergercorp, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, moratorium, insolvency and similar laws affecting the
rights and remedies of creditors and obligations of debtors generally and by
general principles of equity. The provisions of Section 203 of the DCL will
not apply to this Agreement or the Tower Merger. As of the date hereof, the
Board of Directors of ATS Mergercorp, at a meeting duly called and held at
which a quorum was present throughout, has unanimously (i) determined that
this Agreement and the transactions contemplated hereby, including without
limitation the Tower Merger, are fair to and in the best interests of the
holder of the ATS Mergercorp Common Stock and have approved the same, and (ii)
resolved to recommend that the sole stockholder of ATS Mergercorp approve this
Agreement and the transactions contemplated hereby, including without
limitation the Tower Merger.
(c) Except for such consents, the failure of which to obtain would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on ATS Mergercorp, the execution and delivery by ATS Mergercorp
of this Agreement and any Collateral Document executed or required to be
executed by it pursuant hereto or thereto, do not, and the consummation by ATS
Mergercorp of the Tower Merger and compliance with the terms, conditions and
provisions hereof or thereof by ATS Mergercorp will not:
(i) conflict with, or result in a breach or violation of, or constitute a
default under, any Organic Document of ATS Mergercorp or any Applicable Law
applicable to ATS Mergercorp, or conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration of
any obligation or liability in, or but for any requirement of the giving of
notice or passage of time or both would constitute such a conflict with,
breach or violation of, or default under, or permit any such acceleration
in, any Indebtedness for Money Borrowed of ATS Mergercorp, except for such
conflicts, breaches, violations or accelerations that would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on ATS Mergercorp; or
(ii) result in or permit the creation or imposition of any Lien upon any
property now owned or leased by ATS Mergercorp; or
(iii) require any Governmental Authorization or Governmental Filing or
Private Authorization, except for the FCC Consents, filings under the Hart-
Scott-Rodino Act, and other filing requirements under Applicable Law in
connection with the consummation of the Tower Merger.
II-65
<PAGE>
ARTICLE 5
Representations and Warranties of ARS
ARS hereby represents, warrants and covenants to, and agrees with, ATS
Mergercorp as follows:
(a) ARS is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, has all requisite power
and authority (corporate and other) to own or hold under lease its
properties and to conduct its business as now conducted and as presently
proposed to be conducted, with full power and authority (corporate and
other) to carry on the business in which it is engaged, except where the
failure to be so qualified or in good standing, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on
ARS.
(b) ARS has all requisite power and authority (corporate and other) to
execute, deliver and perform its obligations under this Agreement and each
Collateral Document executed or required to be executed by ARS pursuant
hereto or thereto or to consummate the Tower Merger, and the execution,
delivery and performance of this Agreement and each Collateral Document
executed or required to be executed pursuant hereto or thereto have been
duly authorized by all requisite corporate or other action on the part of
ARS, other than the approval of the ARS stockholders contemplated by this
Agreement. This Agreement has been duly executed and delivered by ARS and
constitutes, and each Collateral Document executed or required to be
executed pursuant hereto or thereto or to consummate the Tower Merger when
executed and delivered by ARS will constitute, valid and binding
obligations of ARS, enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, moratorium,
insolvency and similar laws affecting the rights and remedies of creditors
and obligations of debtors generally and by general principles of equity.
The provisions of Section 203 of the DCL will not apply to this Agreement
or the Tower Merger. As of the date hereof, the Board of Directors of ARS,
at a meeting duly called and held at which a quorum was present throughout,
has unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including without limitation the Tower Merger, are
fair to and in the best interests of the holders of the ARS Common Stock
and have approved the same, and (ii) resolved to recommend that the ARS
stockholders approve this Agreement and the transactions contemplated
hereby, including without limitation the Tower Merger.
(c) Except for consents and authorizations, the failure of which to
obtain, would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect on ARS, the execution and delivery by ARS
of this Agreement and any Collateral Document executed or required to be
executed by it pursuant hereto or thereto do not, and the consummation by
ARS of the Tower Merger, and compliance with the terms, conditions and
provisions hereof or thereof by ARS will not:
(i) conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of ARS or any
Applicable Law, or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any requirement of the
giving of notice or passage of time or both would constitute such a
conflict with, breach or violation of, or default under, or permit any
such acceleration in, any Indebtedness for Money Borrowed of ARS,
except for such conflicts, breaches, violations or accelerations that
would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on ARS; or
(ii) result in or permit the creation or imposition of any Lien upon
any property now owned or leased by ARS; or
(iii) require any Governmental Authorization or Governmental Filing
or Private Authorization, except for the FCC Consents, filings under
the Hart-Scott-Rodino Act, and other filing requirements under
Applicable Law in connection with the consummation of the Tower Merger.
II-66
<PAGE>
ARTICLE 6
Closing Conditions
6.1 Conditions to Obligations of Each Party to Effect the Tower Merger. The
respective obligations of each party to effect the Tower Merger shall, except
as hereinafter provided in this Section, be subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by Applicable Law:
(a) The CBS Merger shall not have been consummated by 11:59 p.m. on May
31, 1998;
(b) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of ARS
and ATS Mergercorp under Applicable Law;
(c) The waiting period applicable to the consummation of the Tower Merger
under the Hart-Scott-Rodino Act shall have expired or been terminated; and
(d) No Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) that remains in effect and restrains, enjoins or otherwise
prohibits consummation of the Tower Merger.
6.2 Conditions to Obligations of ATS Mergercorp. The obligation of ATS
Mergercorp to effect the Tower Merger shall be subject to the satisfaction of
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by Applicable Law:
(a) The representations and warranties of ARS set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date except (i) to the
extent such representations and warranties expressly speak as of an earlier
date (in which case such representations and warranties shall be true and
correct as of such earlier date) and (ii) to the extent that the failure of
such representations and warranties to be true and correct, individually or
in the aggregate, would not have a Material Adverse Effect on ARS;
provided, however, that for the purpose of this clause (ii),
representations and warranties that are qualified as to materiality
(including by reference to "Material Adverse Effect") shall not be deemed
to be so qualified;
(b) ARS shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date; and
(c) Between the date of this Agreement and the Closing Date, except as
contemplated by this Agreement, as the case may be, there shall not have
occurred and be continuing any Material Adverse Change in ARS.
6.3 Conditions to Obligations of ARS. The obligation of ARS to effect the
Tower Merger shall be subject to the satisfaction of the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by Applicable Law:
(a) The representations and warranties of ATS Mergercorp set forth in
this Agreement shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
except (i) to the extent such representations and warranties expressly
speak as of an earlier date (in which case such representations and
warranties shall be true and correct as of such earlier date) and (ii) to
the extent that the failure of such representations and warranties to be
true and correct, individually or in the aggregate, would not have a
Material Adverse Effect on ATS Mergercorp; provided, however, that for the
purpose of this clause (ii), representations and warranties that are
qualified as to materiality (including by reference to "Material Adverse
Effect") shall not be deemed to be so qualified;
(b) ATS Mergercorp shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date; and
(c) The Board of Directors of ARS shall not have determined to abandon
the Tower Merger.
II-67
<PAGE>
ARTICLE 7
Termination, Amendment and Waiver
7.1 Termination. This Agreement shall terminate automatically, without any
action of either of the parties, upon consummation of the CBS Merger and may
be terminated at any time prior to the Closing Date, whether before or after
approval by the stockholders of ARS:
(a) by mutual written consent of ARS and ATS Mergercorp;
(b) by either ATS Mergercorp or ARS if any Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Law that shall have become final and nonappealable and that restrains,
enjoins or otherwise prohibits consummation of the Tower Merger, unless the
party seeking such restraint injunction or prohibition or any Affiliate
thereof was the terminating party; and
(c) by ARS in the event it determines to abandon the Tower Merger as not
being in the best interests of the ARS common stockholders.
The term "Termination Date" shall mean December 31, 1998, as such date may
from time to time be extended by mutual agreement of the parties.
7.2 Effect of Termination. Except as provided in Section 8.3 (Fees, Expenses
and other Payments), in the event of the termination of this Agreement
pursuant to Section 7.1, or in the event the Tower Merger shall not have
become effective prior to the end of business on the day prior to the
Termination Date, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party, or any of its
respective stockholders, officers or directors, to the other.
ARTICLE 8
General Provisions
8.1 Amendment. This Agreement may be amended from time to time by the
parties hereto at any time prior to the Closing Date but only by an instrument
in writing signed by the parties hereto and, subject, to Applicable Law.
8.2 Waiver. At any time prior to the Closing Date, except to the extent not
permitted by Applicable Law, ATS Mergercorp or ARS may, either generally or in
a particular instance and either retroactively or prospectively, extend the
time for the performance of any of the obligations or other acts of the other,
subject, however, to the provisions of Section 7.1, waive any inaccuracies in
the representations and warranties of the other contained herein or in any
document delivered pursuant hereto, and waive compliance by the other with any
of the agreements, covenants, conditions or other provision contained herein.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
8.3 Fees, Expenses and Other Payments. All costs and expenses incurred in
connection with the negotiation, preparation, performance and enforcement of
this Agreement (including all fees and expenses of counsel, financial
advisors, accountants, and other consultants, advisors and representatives for
all activities of such persons undertaken pursuant to this Agreement) incurred
by the parties hereto shall be borne by ARS.
8.4 Notices. All notices and other communications which by any provision of
this Agreement are required or permitted to be given shall be given in writing
and shall be (a) mailed by first-class or express mail, postage prepaid, or by
recognized courier service, (b) sent by telecopy or other form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid, or by recognized courier service) written confirmation at
substantially the same time as such rapid transmission, or (c) personally
delivered to the receiving party (which if, other than an individual, shall be
an officer or other responsible party of the receiving party). All such
notices and communications shall be mailed, sent or delivered as follows:
II-68
<PAGE>
(a) If to ATS Mergercorp:
ATS Mergercorp Merger Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Steven B. Dodge, President and Chief Executive Officer
Telecopier No.: (617) 375-7575
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
(b) If to ARS:
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Steven B. Dodge, President and Chief Executive Officer
Telecopier No.: (617) 375-7575
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
or to such other person(s), telex or facsimile number(s) or address(es) as the
party to receive any such communication or notice may have designated by
written notice to the other party.
8.5 Specific Performance; Other Rights and Remedies. Each party recognizes
and agrees that in the event the other party should refuse to perform any of
its obligations under this Agreement or any Collateral Document, the remedy at
law would be inadequate and agrees that for breach of such provisions, each
party shall, in addition to such other remedies as may be available to it at
law or in equity or as provided in Article 7, be entitled to injunctive relief
and to enforce its rights by an action for specific performance to the extent
permitted by Applicable Law. Each party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable
relief. Nothing herein contained shall be construed as prohibiting each party
from pursuing any other remedies available to it under Applicable Law or
pursuant to the provisions of this Agreement for such breach or threatened
breach, including without limitation the recovery of damages, including, to
the extent awarded in any Legal Action, punitive, incidental and consequential
damages (including without limitation damages for diminution in value and loss
of anticipated profits) or any other measure of damages permitted by
Applicable Law.
8.6 Survival of Representations, Warranties, Covenants and Agreements. None
of the representations and warranties in this Agreement shall survive the
Tower Merger, and after effectiveness of the Tower Merger neither of the
parties or their respective officers, directors or stockholders shall have any
further obligation with respect thereto.
8.7 Severability. If any term or provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any
II-69
<PAGE>
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or
provisions in question invalid, inoperative, illegal or unenforceable in any
other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative, illegal
or unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute or rule of public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative, illegal or unenforceable provision had
never been contained herein and such provision reformed so that it would be
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case. Notwithstanding the foregoing, in the event of
any such determination, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Tower Merger is fulfilled and consummated to the
maximum extent possible.
8.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, binding upon all of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one of such counterparts.
8.9 Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.10 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in
accordance with, the Applicable Laws of the United States of America and the
laws of the State of Delaware applicable to contracts made and performed in
such State and, in any event, without giving effect to any choice or conflict
of laws provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction. Anything in this Agreement to the
contrary notwithstanding, in the event of any dispute between the parties
which results in a Legal Action, the prevailing party shall be entitled to
receive from the non-prevailing party reimbursement for reasonable legal fees
and expenses incurred by such prevailing party in such Legal Action.
8.11 Further Acts. Each party agrees that at any time, and from time to
time, before and after the consummation of the transactions contemplated by
this Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as the other party or its counsel
reasonably deems necessary or desirable in order to carry out the terms and
conditions of this Agreement and the transactions contemplated hereby or to
facilitate the enjoyment of any of the rights created hereby or to be created
hereunder.
8.12 Entire Agreement; No Other Representations or Agreements. This
Agreement (together with the other Collateral Documents delivered or to be
delivered in connection herewith) constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements, arrangements, covenants, promises, conditions, undertakings,
inducements, representations, warranties and negotiations, expressed or
implied, oral or written, between the parties, with respect to the subject
matter hereof. Each of the parties is a sophisticated legal entity that was
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Each of the parties hereby
acknowledges that (a) neither party has relied or will rely in respect of this
Agreement or the transactions contemplated hereby upon any document or written
or oral information previously furnished to or discovered by it or its
representatives, other than this Agreement (including the other Collateral
Documents) or such of the foregoing as are delivered at the Closing, (b) there
are no covenants or agreements by or on behalf of either party hereto or any
of its respective Affiliates or representatives other than those expressly set
forth in this Agreement and the Collateral Documents, and (c) the parties'
respective rights and obligations with respect to this Agreement and the
events giving rise thereto will be solely as set forth in this Agreement and
the Collateral Documents. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER ARS NOR ATS Mergercorp MAKES ANY OTHER
REPRESENTATIONS OR WARRANTIES, AND EACH
II-70
<PAGE>
HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY
OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR
OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE
DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING.
8.13 Assignment. This Agreement shall not be assignable by any party and any
such assignment shall be null and void, except that it shall inure to the
benefit of and be binding upon any successor to each party by operation of
Law, including by way of merger, consolidation or sale of all or substantially
all of its assets, and each party may assign its rights and remedies hereunder
to any bank or other financial institution which has loaned funds or otherwise
extended credit to it.
8.14 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party and their permitted successors and
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as otherwise provided
in Section 8.13.
II-71
<PAGE>
IN WITNESS WHEREOF, ARS and ATS Mergercorp have caused this Agreement and
Plan of Merger to be executed, pursuant to the authority and approval of each
of their respective Boards of Directors, as of the date first written above by
their respective officers thereunto duly authorized.
American Radio Systems Corporation
By:
---------------------------------
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief Executive
Officer
ATS Merger Corporation
By:
---------------------------------
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief Executive
Officer
II-72
<PAGE>
APPENDIX A
DEFINITIONS
ADVERSE, ADVERSELY, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean any
Event that has adversely affected or is reasonably likely to adversely affect
(a) the validity or enforceability of this Agreement or the likelihood of
consummation of the Tower Merger, or (b) the financial condition or results of
operation of the ATS Mergercorp and its Subsidiaries, taken as a whole, or the
ARS and its Subsidiaries, taken as a whole, as the case may be, or (c) ARS' or
ATS Mergercorp', as the case may be, ability to fulfill its obligations under
the terms of this Agreement. Notwithstanding the foregoing, and anything in
this Agreement to the contrary notwithstanding, neither (i) any Event
affecting the radio broadcasting industry or the national or any regional or
market economy generally.
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, any other Person of which
such Person at the time owns, or has the right to acquire, directly or
indirectly, twenty percent (20%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, twenty percent (20%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
AGREEMENT shall have the meaning given to it in the third "Whereas"
paragraph and shall include any amendments executed and delivered by the
parties pursuant to the provisions of Section 8.1.
AMERICAN TOWER SYSTEMS shall have the meaning given to it in Section
3.1(c)(i).
APPLICABLE LAW shall mean, with respect to any Person, any Law of any
Authority, whether domestic or foreign, to which such Person is subject or by
which it or any of its business or operations is subject or any of its
property or assets is bound.
ARS shall have the meaning given to it in the Preamble.
ARS CLASS A COMMON STOCK shall have the meaning given to it in Section
3.1(c).
ARS CLASS B COMMON STOCK shall have the meaning given to it in Section
3.1(c).
ARS CLASS C COMMON STOCK shall have the meaning given to it in Section
3.1(c).
ARS COMMON STOCK shall have the meaning given to it in Section 3.1(c).
ARS CONVERSION FRACTION shall have the meaning given to it in Section
3.1(c)(ii).
ARS CONVERTIBLE PREFERRED STOCK shall have the meaning given to it in
Section 3.1(b).
ARS CUMULATIVE PREFERRED STOCK shall have the meaning given to it in Section
3.1(a).
ATS MERGERCORP shall have the meaning given to it in the Preamble.
ATS MERGERCORP COMMON STOCK shall have the meaning given to it in Section
3.1(d).
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation,
II-73
<PAGE>
court, department, instrumentality, master, mediator, panel, referee, system
or other political unit or subdivision or other Entity of any of the
foregoing, whether domestic or foreign.
CBS shall have the meaning given to it in the first "Whereas" paragraph.
CBS MERGER shall have the meaning given to it in the first "Whereas"
paragraph.
CBS SUB shall have the meaning given to it in the first "Whereas" paragraph.
CERTIFICATE OF MERGER shall have the meaning given to it in Section 2.3.
CERTIFICATES shall have the meaning given to it in Section 3.2(b).
CLOSING shall have the meaning given to it in Section 2.2.
CLOSING DATE shall have the meaning given to it in Section 2.2.
CODE shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
COLLATERAL DOCUMENT shall mean any agreement, certificate, contract,
instrument, notice, opinion or other document delivered pursuant to the
provisions of this Agreement.
COMMON SHARES TRUST shall have the meaning given to it in Section 3.2(d).
CONTROL (including the terms "controlled," "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or
properties, whether through the ownership of stock, equity or other ownership,
by contract, arrangement or understanding, or as trustee or executor, by
contract or credit arrangement or otherwise.
DCL shall have the meaning given to it in Section 2.1.
EFFECTIVE TIME shall have the meaning given to it in Section 2.3.
ENTITY shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization,
entity or business, whether acting in an individual, fiduciary or other
capacity, or any Authority.
EVENT shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
EXCESS SHARES shall have the meaning given to it in Section 3.2(d).
EXCHANGE AGENT shall have the meaning given to it in Section 3.2(a).
EXCHANGE AGENT AGREEMENT shall have the meaning given to it in Section
3.2(a).
FCC CONSENTS means actions by the FCC (including the Chief, Mass Media
Bureau, acting under delegated authority) granting its consent to the transfer
of control of the American FCC Licenses for each of the American Stations to
Mergeparty as contemplated by this Agreement whether or not such consent has
become a Final Order.
II-74
<PAGE>
GOVERNMENTAL AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, plans, registrations and other authorizations
of all Authorities, including the FCC Licenses, issued by the FCC, the Federal
Aviation Administration and any other Authority in connection with the conduct
of business or operations of any of the Stations.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
HART-SCOTT-RODINO ACT shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the rules and regulations thereunder, all as
from time to time in effect, or any successor law, rules or regulations, and
any reference to any such statutory or regulatory provision shall be deemed to
be a reference to any successor statutory or regulatory provision.
LAW shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order,
ordinance, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic or foreign; (b) the common law, or other legal or quasi-
legal precedent; or (c) arbitrator's, mediator's or referee's award, decision,
finding or recommendation.
LEGAL ACTION shall mean, with respect to any Person, any and all litigation
or legal or other actions, arbitrations, counterclaims, hearings,
investigations, proceedings or suits, at law or in arbitration, equity or
admiralty, whether or not purported to be brought on behalf of such Person, by
or before any Authority, against such Person or involving any of such Person's
business or assets.
LIEN shall mean any of the following: mortgage; lien (statutory or other) or
other security agreement, arrangement or interest; hypothecation, pledge or
other deposit arrangement; assignment; charge; levy; executory seizure;
attachment; garnishment; encumbrance (including any easement, exception,
reservation or limitation, right of way, and the like); conditional sale,
title retention or other similar agreement, arrangement, device or
restriction; any financing lease involving substantially the same economic
effect as any of the foregoing; the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction; or
restriction on sale, transfer, assignment, disposition or other alienation.
MATERIAL, MATERIALLY OR MATERIALITY for the purposes of this Agreement,
shall, unless specifically stated to the contrary, be determined without
regard to the fact that various provisions of this Agreement set forth
specific dollar amounts.
MERGER shall have the meaning given to it in the third "Whereas" paragraph.
MERGER CONSIDERATION shall have the meaning given to it in Section
3.1(e)(ii).
NYSE shall have the meaning given to it in Section 3.1(c).
ORGANIC DOCUMENT shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all stockholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
PERSON shall mean any natural individual or any Entity.
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to
copyrights, computer software programs, patents, service marks, trademarks,
trade names, technology and know-how.
II-75
<PAGE>
REGULATIONS shall mean the federal income tax regulations promulgated under
the Code, as such Regulations may be amended from time to time. All references
herein to specific sections of the Regulations shall be deemed also to refer
to any corresponding provisions of succeeding Regulations, and all references
to temporary Regulations shall be deemed also to refer to any corresponding
provisions of final Regulations.
REPRESENTATIVES shall have the meaning given to it in Section 6.1(a).
RESTATED MERGER AGREEMENT shall have the meaning given to it in the second
"Whereas" paragraph.
SUBSIDIARY shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially,
by such Person or any other Person controlled by such Person.
SURVIVING CORPORATION shall have the meaning given to it in Section 2.1.
TAX (and "Taxable," which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other, including recapture of any tax
items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges,
penalties, additions to tax or additional amounts imposed by any Taxing
Authority, (b) any joint or several liability of such Person with any other
Person for the payment of any amounts of the type described in (a) of this
definition, and (c) any liability of such Person for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
TAXING AUTHORITY shall mean any Authority responsible for the imposition of
any Tax.
TERMINATION DATE shall have the meaning given to it in Section 7.1.
TOWER CLASS A COMMON STOCK shall have the meaning given to it in Section
3.1(c)(i).
TOWER CLASS B COMMON STOCK shall have the meaning given to it in Section
3.1(c)(i).
TOWER CLASS C COMMON STOCK shall have the meaning given to it in Section
3.1(c)(i).
TOWER COMMON STOCK shall have the meaning given to it in Section 3.1(c)(i).
II-76
<PAGE>
SCHEDULE 4.1(E)
TO
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN RADIO SYSTEMS CORPORATION
CBS CORPORATION
AND
R ACQUISITION CORP.
DATED AS OF
DECEMBER 18, 1997
<TABLE>
<CAPTION>
NAME OF OPTIONEE NUMBER AND CLASS OF AMERICAN COMMON STOCK
---------------- -----------------------------------------
<S> <C>
Steven B. Dodge.............. 290,000 shares of American Class B Common Stock
Alan L. Box.................. 100,000 shares of American Class A Common Stock
</TABLE>
II-77
<PAGE>
APPENDIX IIB
<PAGE>
FIRST AMENDMENT, dated as of December 19, 1997 (this "Amendment"), to the
Amended and Restated Agreement and Plan of Merger, dated as of December 18,
1997, by and among American Radio Systems Corporation, a Delaware corporation
("American"), CBS Corporation (formerly, Westinghouse Electric Corporation), a
Pennsylvania corporation ("Mergeparty"), and R Acquisition Corp., a Delaware
corporation ("Mergeparty Subsidiary").
W I T N E S S E T H:
WHEREAS, American, Mergeparty and Mergeparty Subsidiary are parties to an
Agreement and Plan of Merger, dated as of September 19, 1997 (the "Original
Merger Agreement"), providing for the merger of Mergeparty Subsidiary with and
into American on the terms and conditions set forth therein; and
WHEREAS, American, Mergeparty and Mergeparty Subsidiary have entered into an
Amended and Restated Agreement and Plan of Merger, dated as of December 18,
1997 (the "Restated Merger Agreement"), to make certain changes to the
Original Merger Agreement; and
WHEREAS, American, Mergeparty and Mergeparty Subsidiary desire to amend the
Restated Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto hereby, intending to be legally bound, represent, warrant,
covenant and agree as follows:
1. Capitalized terms used and not defined herein shall have the meanings
given to such terms in the Restated Merger Agreement.
2. American hereby represents and warrants to Mergeparty and Mergeparty
Subsidiary as follows, which representations and warranties shall be deemed
to form part of the representations and warranties of American included in
Article Four of the Restated Merger Agreement for all purposes of the
Restated Merger Agreement: (a) Annex 1 to this Amendment sets forth a list
of certain stockholders of American (the "Consenting Stockholders") and the
number of shares of American Class A Common and American Class B Common
owned of record by each such stockholder on the date hereof, (b) on the
date hereof, 29,966,377 votes constituted a majority of the outstanding
voting power of American Common Stock and (c) on the date hereof the
Consenting Stockholders have delivered written consents to American
approving and adopting the Restated Merger Agreement and the Tower Merger
Agreement in accordance with Applicable Law, including without limitation
the DCL, such consents will, upon mailing by American of the notice as
described in paragraph 3 below, constitute the Required Vote and no other
approvals of the stockholders of American other than such consents are
required to effect either the Merger or the Tower Merger.
3. American will, promptly after the execution of this Amendment, mail,
in accordance with Section 228(d) of the DCL, notice of the corporate
action without a meeting taken by the Consenting Stockholders to those
American stockholders who have not consented to such action in writing and
who, if the action had been taken at a meeting of American stockholders,
would have been entitled to notice of the meeting if the record date for
such meeting had been the date that written consents signed by a sufficient
number of holders to take such action were delivered to American in
accordance with Section 228(c) of the DCL. The covenant of American in this
Section 3 shall be deemed to form part of the covenants of American
included in Article Six of the Restated Merger Agreement for all purposes
of the Restated Merger Agreement.
4. All references to "Proxy Statement" in the Restated Merger Agreement
shall be deemed in all cases in the Restated Merger Agreement to be
references to "Information Statement" and all references to "Tower Proxy
Statement" shall be deemed in all cases in the Restated Merger Agreement to
be references to "Tower Information Statement."
IIB-1
<PAGE>
5. Notwithstanding anything contained in the Restated Merger Agreement to
the contrary, including without limitation Section 6.5 thereof, American
shall not be required to hold either the American Stockholders Meeting or
the American Stockholders Tower Meeting.
6. This Amendment shall constitute a Collateral Document for all purposes
of the Restated Merger Agreement.
7. The validity, interpretation, construction and performance of this
Amendment shall be governed by, and construed in accordance with, the
Applicable Laws of the United States of America and the laws of the State
of New York applicable to contracts made and performed in such State and,
in any event, without giving effect to any choice or conflict of laws
provision or rule that would cause the application of domestic substantive
laws of any other jurisdiction, except to the extent the corporate laws of
the State of Delaware are applicable.
8. This Amendment may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
9. Except as expressly modified and amended by this Amendment, the
Restated Merger Agreement shall continue in full force and effect and is
hereby ratified and confirmed in all respects.
IIB-2
<PAGE>
IN WITNESS WHEREOF, American, Mergeparty and Mergeparty Subsidiary have
caused this Amendment to be executed, pursuant to the authority and approval
of each of their respective Boards of Directors, as of the date first written
above by their respective officers thereunto duly authorized.
American Radio Systems Corporation
By: _________________________________
Name: Steven B. Dodge
Title: Chairman of the Board,
President and Chief
Executive Officer
CBS Corporation
By: _________________________________
Name: Frederic G. Reynolds
Title:
Acquisition Corp.
By: _________________________________
Name: Frederic G. Reynolds
Title:
IIB-3
<PAGE>
APPENDIX III
<PAGE>
Board of Directors
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
September 19, 1997
Dear Sirs:
You have asked Credit Suisse First Boston Corporation ("CSFB," "we" or "us")
to advise you with respect to the fairness to the stockholders of American
Radio Systems Corporation (the "Company") from a financial point of view of
the Merger Consideration to be received by such stockholders pursuant to the
terms of the Agreement and Plan of Merger, dated as of September 18, 1997 (the
"Merger Agreement"), among the Company, Westinghouse Electric Corporation (the
"Acquiror") and the Acquiror's wholly-owned subsidiary (the "Sub"). The Merger
Agreement provides for, among other things, (i) the merger (the "Merger") of
the Sub with and into the Company pursuant to which the Company will become a
subsidiary of the Acquiror and each outstanding share of common stock, par
value $0.01 per share, of the Company will be converted into the right to
receive $44.00 in cash (the "Merger Consideration") and (ii) prior to the
Merger, the distribution by the Company of all of the capital stock of the
Company's wholly-owned subsidiary American Tower Systems Inc. or the net
proceeds from the sale thereof to the stockholders of the Company on a pro
rata basis (the "Distribution").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. We have also reviewed certain other information, including
financial forecasts and pro forma financial information concerning the Company
after giving effect to the Distribution, provided to us by the Company and
have met with the Company's management to discuss the business and prospects
of the Company.
We have also considered certain financial and stock market data of the Company
and compared those data with similar data for other publicly held companies in
similar businesses, and we have considered the financial terms of certain
other business combinations and other transactions which have recently been
effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on it being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company nor have we been furnished with any
such evaluations or appraisal. Our opinion is necessarily based upon
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties,
which discussions, at your request, were not completed prior to the date
hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the past, we have performed certain investment banking services for the
Company and the Acquiror and have received customary fees for such services.
III-1
<PAGE>
In the ordinary course of business, CSFB and its affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for their
own accounts and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed Merger and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration to be received by the stockholders of
the Company in the Merger is fair to such stockholders from a financial point
of view.
Very truly yours,
Credit Suisse First Boston Corporation
III-2
<PAGE>
APPENDIX IV
<PAGE>
DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS
262 APPRAISAL RIGHTS--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
IV-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affadavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
IV-2
<PAGE>
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation
IV-3
<PAGE>
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
IV-4
<PAGE>
APPENDIX V
<PAGE>
DESCRIPTION OF AMERICAN TOWER CORPORATION
GENERAL
American Tower Corporation ("ATC") is a leading independent owner and
operator of wireless communications towers with more than 775 towers in 31
states, including approximately 125 towers managed for a third party. ATC has
agreed to acquire an additional 125 towers pursuant to letters of intent which
are expected to be consummated, subject to negotiation and execution of
definitive agreements and satisfaction of closing conditions, including, in
certain cases, expiration or earlier termination of the HSR Act waiting
period, in the first half of 1998. During 1997, ATC acquired or agreed to
acquire 192 towers and constructed or had, at year end, under construction an
aggregate of 64 towers; ATC plans to construct approximately 125 towers in
1998. ATC rents tower space and provides related services to wireless
communications service providers, as well as operators of private networks and
government agencies, for a diverse range of applications including paging,
cellular, PCS, fixed microwave, SMR and ESMR. ATC owns and operates towers in
45 of the top 100 metropolitan statistical areas in the United States and has
clusters of towers in cities such as Albuquerque, Atlanta, Baltimore, Dallas,
Houston, Jacksonville, Kansas City, Nashville, San Antonio and San Diego.
ATC's customers (which aggregate more than 680) include Bell South Mobility,
CSX Transportation, GTE Mobilnet, Houston Cellular, Nextel, PageMart, Pagenet,
Pittencrief Communications, SBC Communications, Shell Offshore, and various
federal and local government agencies. While none of ATC's customers accounted
for more than 10% of its pro forma revenues for the nine months ended
September 30, 1997, most of the named customers accounted for more than 1% of
such revenues and each is considered by ATC to be an important customer.
ATC believes that it is well positioned to capitalize on the continued
growth in wireless communications. ATC's strategy for growth is to focus its
internal sales and marketing activities on maximizing the capacity utilization
of its towers. In addition, ATC has experience in the construction and
acquisition of towers which it believes will allow ATC to increase its
penetration of existing markets and expansion into new markets.
HISTORY OF ATC
ATC was organized in October 1994 by an investor group led by Summit Capital
Inc. of Houston and Chase Manhattan Capital Corporation ("Chase Capital") to
acquire Bowen-Smith. Bowen-Smith had been in the tower rental business since
1966, initially serving the communications tower requirements of two-way radio
and microwave transmission users. At the time of the Bowen-Smith Acquisition,
Bowen-Smith owned 184 towers on 175 sites located primarily in Texas,
Louisiana and Oklahoma. Within the first year after the Bowen-Smith
Acquisition, ATC acquired or constructed more than 75 communications towers.
In December 1995, ATC acquired 103 towers from CSX, and in October 1996, ATC
acquired 154 towers from Prime. In June 1997, ATC completed a private
placement of common stock with Clear Channel resulting in net proceeds to ATC
of $23.0 million.
V-1
<PAGE>
ATC's principal executive offices are located at 3411 Richmond Avenue, Suite
400, Houston, Texas 77046 and its telephone number is (713) 693-0000.
PROPERTIES
ATC's interests in its tower sites are comprised of a variety of fee
interests, leasehold interests created by long-term lease agreements, private
easements, and easements, licenses or rights-of-way granted by government
entities. In rural areas, a tower site typically consists of a three to five
acre tract which supports towers, equipment shelters and guy wires to
stabilize the structure. Less than 3,000 square feet are required for a self-
supporting tower structure of the kind typically used in metropolitan areas.
ATC's land leases generally have five- or ten-year terms and frequently
contain one or more renewal options. Some land leases provide "trade-out"
arrangements whereby ATC allows the landlord to use tower space in lieu of
paying all or part of the land rent. Pursuant to ATC's credit facility, ATC's
senior lenders have liens on a substantial number of ATC's land leases and
other property interests.
V-2
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of ATC as of and for
each of the periods indicated. The selected financial data as of and for the
five years ended December 31, 1996 and for the nine months ended September 30,
1996 and 1997 were derived from the Consolidated Financial Statements of ATC
and its Predecessor. The following table should be read in conjunction with
ATC's audited and unaudited financial statements and the notes thereto
included in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of American Tower Corporation"
included in this Appendix V.
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR(1) ATC(1)
------------------------------- -------------------------------------------------
OCTOBER 15,
YEAR ENDED JANUARY 1,1994 1994 YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, THROUGH THROUGH DECEMBER 31, SEPTEMBER 30,
--------------- OCTOBER 14, DECEMBER 31, --------------- -------------------
1992 1993 1994 1994 1995 1996 1996 1997
------ ------- -------------- ------------ ------ ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Total revenues.......... $3,393 $ 6,744 $ 5,218 $1,948 $8,277 $12,366 $8,356 $ 14,491
Operating expenses:
Direct tower costs..... 765 1,434 1,151 402 1,868 2,849 1,968 2,924
Selling, general and
administrative........ 943 2,014 2,137 380 1,601 2,049 1,485 2,347
Depreciation and
amortization.......... 1,199 2,586 2,106 403 1,908 2,709 1,839 3,369
------ ------- ------- ------ ------ ------- -------- ---------
Total operating
expenses.............. 2,907 6,034 5,394 1,185 5,377 7,607 5,292 8,640
------ ------- ------- ------ ------ ------- -------- ---------
Operating income
(loss)................. 486 710 (176) 763 2,900 4,759 3,064 5,851
Interest expense, net... 780 2,026 2,117 576 3,068 3,808 2,630 3,900
Other expenses.......... 100 193 93 66 414 150 113 213
------ ------- ------- ------ ------ ------- -------- ---------
Income (loss) before
income taxes and
extraordinary item..... (394) (1,509) (2,386) 121 (582) 801 321 1,738
Income tax (expense)
benefit................ 237 500 -- (50) 217 (303) (121) (660)
------ ------- ------- ------ ------ ------- -------- ---------
Income (loss) before
extraordinary item..... (157) (1,009) (2386) 71 (365) 498 200 1,078
Extraordinary loss,
net(2)................. -- -- -- -- (207) (451) -- (594)
------ ------- ------- ------ ------ ------- -------- ---------
Net income (loss)....... $ (157) $(1,009) $(2,386) $ 71 $ (572) $ 47 $200 $ 484
====== ======= ======= ====== ====== ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR(1) ATC(1)
---------------- -------------------------------------
DECEMBER 31,
-----------------------------------------
SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Land, rental towers and
related fee-based
assets, net............ $15,463 $13,943 $35,109 $42,056 $61,566 $105,106
Total assets............ 18,343 16,600 39,599 53,782 75,527 120,198
Long-term debt, less
current portion........ 12,590 11,719 23,116 31,875 49,771 67,817
Redeemable preferred
stock.................. -- -- -- 3,633 4,000 4,000
Total stockholders'
equity ................ (707) (1,716) 7,496 7,424 11,598 36,236
</TABLE>
- --------
(1) ATC was organized in connection with the Bowen-Smith Acquisition in
October 1994, at which time the book values of the assets and liabilities
acquired were adjusted to their estimated fair values on the basis of
purchase accounting. In addition, upon the closing of the Bowen-Smith
Acquisition, ATC entered into new debt and equity financing arrangements,
adjusted the depreciation period for towers and related fee-based assets,
outsourced its tower maintenance services and implemented other
significant changes in ATC's operations. Each of these factors affects the
comparability of periods prior to the Bowen-Smith Acquisition with periods
since October 1994. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of American Tower Corporation--
Overview".
(2) Reflects extraordinary charges resulting from prepayment of indebtedness
in 1995, 1996, and 1997, net of related income tax benefits. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations of American Tower Corporation".
V-3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF AMERICAN TOWER CORPORATION
The following discussion is intended to assist in an understanding of ATC's
historical financial position and results of operations for each year of the
three-year period ended December 31, 1996 and for the nine months ended
September 30, 1996 and 1997. ATC's Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus contain detailed information
that should be read in conjunction with the following discussion.
OVERVIEW
ATC was organized to acquire the stock of Bowen-Smith in October 1994.
Bowen-Smith was a closely held company which owned and operated 175 tower
sites in Texas, Louisiana and Oklahoma. At the time of the Bowen-Smith
Acquisition, the book values of the acquired assets and liabilities were
adjusted to their estimated fair values and the depreciation period for towers
and related assets was extended to better reflect the estimated useful lives
of such assets. At such time, ATC also implemented significant management and
operational changes to the business. ATC outsourced its tower maintenance
functions during the first quarter of 1995 which resulted in a reduction in
personnel. In addition, ATC's new management undertook increased marketing
activities for its existing tower network and began to pursue tower
acquisitions, including opportunities outside ATC's traditional Gulf Coast
market. Finally, borrowings to facilitate the Bowen-Smith Acquisition resulted
in an increase in ATC's interest expense. The financial results for ATC
described herein for the period prior to October 15, 1994 are the results of
ATC's predecessor, Bowen-Smith, and may not be comparable to ATC's results
since that date for the reasons described herein.
During 1995 and 1996, ATC acquired 297 towers, net of dispositions. In
December 1995, ATC acquired 103 towers from CSX, the real estate affiliate of
the railroad transportation company. In October 1996, ATC acquired 109 towers
(net of dispositions of non-strategic towers) from Prime, an independent tower
operator. The remaining 85 acquired towers were purchased in 16 separate
acquisitions ranging in size from one to 50 towers. During 1997 ATC has
acquired 77 towers and entered into commitments to acquire an additional 115
towers. In addition, during 1996 ATC began a significant tower construction
program. By September 1997, ATC had completed construction of 57 new towers,
had 38 towers under construction, and owned approximately 650 towers,
including those under construction.
Since completing the Bowen-Smith Acquisition in October 1994, ATC's
financial objective has been to increase revenues on existing towers through
improved marketing efforts and to acquire and construct new towers which meet
ATC's economic return criteria. Accordingly, ATC believes that EBITDA is a key
measure of its economic performance and an indicator of the availability of
funds to service indebtedness and to invest in continued internal growth and
acquisition and construction opportunities. ATC's EBITDA increased from $3.1
million for the year ended December 31, 1994 to $7.5 million for the year
ended December 31, 1996 (a compound annual growth rate of 56%) and increased
from $4.9 million for the nine months ended September 30, 1996 to $9.2 million
for the nine months ended September 30, 1997 (a compound annual growth rate of
88%). ATC's growth strategy and investment in additional towers has negatively
affected net income during these periods primarily as a result of increased
depreciation and interest expense, and extraordinary charges related to the
write off of unamortized debt financing costs. See Notes 6 and 9 of Notes to
Consolidated Financial Statements of American Tower Corporation.
ATC's primary business is the rental of antenna and transmitter space on
communications towers to wireless communication companies, including paging,
cellular, PCS, fixed microwave, SMR and ESMR, as well as operators of private
and governmental communications systems. A majority of ATC's customers enter
into one-year rental agreements with ATC. Substantially all of ATC's
agreements exceeding one year include price escalation and 90-day cancellation
clauses. A majority of ATC's contracts provide for monthly invoicing payable
on or before the tenth day of the calendar month. ATC operators have been
historically characterized by
V-4
<PAGE>
(i) minimal inventory levels; (ii) low levels of accounts receivable; and
(iii) customer turnover rates of less than 1% per year (based on revenues).
Accordingly, ATC has minimal working capital requirements.
Direct tower costs consist primarily of land leases, tower inspections and
maintenance, utilities, insurance and tower monitoring costs. The most
significant of such costs are land leases and tower inspections and
maintenance. ATC outsources its tower inspections and maintenance requirements
which consist of scheduled site visits to perform ground and tower
maintenance, tower and shelter inspections and inventories of installed
customer equipment. On a per tower basis, ATC's direct tower costs are
relatively fixed and are not subject to incremental increase as ATC adds
additional customers.
Selling, general and administrative expenses consist primarily of wages and
benefits for management, sales and marketing and operations, and professional
fees, advertising, travel, bad debts and office-related expenses.
ATC's depreciation and amortization charges result primarily from the fixed
capital required to operate in the tower industry and complete acquisitions
and constructions. The principal components of depreciation and amortization
relate to individual towers and related assets, buildings, site upgrades,
computer monitoring systems and licenses and permits. In connection with the
Bowen-Smith Acquisition, in order to better reflect the useful life of towers
and related assets, ATC adjusted its depreciation period for such assets from
15 years to 25 years. Amortization relates to financing costs associated with
ATC's credit facilities and non-competition agreements entered into in
connection with the Bowen-Smith Acquisition.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from ATC's Consolidated Statements of Operations, expressed as a
percentage of revenue.
<TABLE>
<CAPTION>
PREDECESSOR ATC
----------- ------------------------------------------------
JANUARY 1, OCTOBER 15, NINE MONTHS
1994 1994 YEAR ENDED ENDED
THROUGH THROUGH DECEMBER 31, SEPTEMBER 30,
OCTOBER 14, DECEMBER 31, ---------------- ---------------
1994 1994 1995 1996 1996 1997
----------- ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... 100 % 100 % 100 % 100 % 100% 100%
Operating expenses:
Direct tower costs...... 22 21 23 23 24 20
Selling, general and ad-
ministrative........... 41 20 19 17 18 16
Depreciation and amorti-
zation................. 40 21 23 22 22 23
--- --- ------ ------ ------ ------
Total operating ex-
penses............... 103 61 65 62 63 60
--- --- ------ ------ ------ ------
Operating income
(loss)................. (3) 39 35 38 37 40
Interest expense, net... 41 30 37 31 32 27
Other expense........... 2 3 5 1 1 2
--- --- ------ ------ ------ ------
Income (loss) before in-
come taxes and extraor-
dinary item............ (46) 6 (7) 6 4 12
Income tax (expense)
benefit................ -- (3) 3 (2) (2) (5)
Extraordinary loss,
net.................... -- -- (3) (4) -- (4)
--- --- ------ ------ ------ ------
Net income (loss)....... (46)% 4 % (7)% 0 % 2% 3%
=== === ====== ====== ====== ======
</TABLE>
V-5
<PAGE>
Nine Months Ended September 30, 1997 to Nine Months Ended September 30, 1996
Revenues. Total revenues increased $6.1 million or 73% to $14.5 million in
the nine months ended September 30, 1997 from $8.4 million in the nine months
ended September 30, 1996. Revenue growth of $2.9 million was attributable to
acquisitions consummated since October 1996. The remainder of the increase in
revenues was primarily attributable to increased utilization and price
increases on towers owned by ATC at September 30, 1997.
Direct Tower Costs. Direct tower costs increased 49% to $2.9 million in the
nine months ended September 30, 1997 from $2.0 million in the nine months
ended September 30, 1996. The increase in direct tower costs was primarily
attributable to tower acquisitions consummated since October 1996. As a
percentage of revenues, direct tower costs decreased due to the relatively
fixed nature of the costs relative to revenue increases.
Selling, General and Administrative. Selling, general and administration
expenses increased 57% to $2.3 million in the nine months ended September 30,
1997 from $1.5 million in the nine months ended September 30, 1996. The
increase was primarily from the addition of personnel related to ATC's
increased sales, marketing and construction activities. The decrease as a
percentage of revenues was attributable to accelerated growth in revenue
increases relative to additional selling, general and administrative expenses.
Depreciation and Amortization. Depreciation and amortization expenses
increased 83% to $3.4 million in the nine months ended September 30, 1997 from
$1.8 million in the nine months ended September 30, 1996. The increase in
depreciation and amortization expenses of $1.6 million resulted primarily from
tower acquisitions consummated since October 1996 and constructed towers
placed in operation.
Interest Expense. Interest expense increased 48% to $3.9 million in the nine
months ended September 30, 1997 from $2.6 million in the nine months ended
September 30, 1996. The increase in interest expense was due primarily to
increased borrowings associated with tower acquisitions and constructions
consummated since October 1996.
Income Taxes. Income taxes for the nine months ended September 30, 1997 was
$0.7 million as compared to $0.1 for the nine months ended September 30, 1996.
The increase is attributable to increased operating income applied against
ATC's effective tax rate, which is not materially different from the statutory
rate.
Extraordinary Loss. ATC recognized an extraordinary loss of $0.6 million in
the nine months ended September 30, 1997. The loss resulted from ATC
restructuring and refinancing its debt arrangements in June 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Total revenues. Revenue growth consisted of $2.8 million attributable to
increased utilization and price increases on towers owned by ATC at the
beginning of 1995 or acquired during 1995 as well as the full year effect of
towers acquired during 1995. Total revenues increased $4.1 million or 49% to
$12.4 million in 1996 from $8.3 million in 1995. The remainder of the increase
in revenues was attributable to $0.6 million associated with 159 towers
acquired during 1996, $0.6 million attributable to 103 towers acquired in
December 1995 and $0.1 million associated with 27 towers constructed during
1996.
Direct tower costs. Direct tower costs increased 53% to $2.8 million in 1996
from $1.9 million in 1995. The increase in direct tower costs consisted of
$0.2 million associated with 159 towers acquired during 1996, $0.7 million
attributable to towers acquired during 1995 and expenses incurred during ATC's
establishment of its automated tower monitoring services. As a percentage of
revenues, direct tower costs remained relatively constant.
V-6
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 28% to $2.0 million in 1996 from $1.6
million in 1995. The increase was primarily from the addition of personnel
related to ATC's increased sales, marketing and construction activities. The
decrease as a percentage of revenues was due to operating efficiencies on
existing towers as well as the construction and acquisition of new towers.
Depreciation and amortization expense. Depreciation and amortization expense
increased 42% to $2.7 million in 1996 from $1.9 million in 1995. The increase
in depreciation and amortization expense of $0.8 million resulted primarily
from the effect of a full year of depreciation on towers acquired in 1995.
Interest expense. Interest expense increased 24% to $3.8 million in 1996
from $3.1 million in 1995. The increase in interest expense was due primarily
to increased borrowing associated with ATC's acquisitions in 1995 and 1996 and
construction of new towers in 1996.
Income taxes. Income tax expense for 1996 was $0.3 million as compared to a
benefit of $0.2 million in 1995. ATC's effective tax rate is not materially
different from the statutory rate.
Extraordinary loss. ATC recognized an extraordinary loss of $0.5 million in
1996 and $0.2 million in 1995. These losses resulted from ATC restructuring
and refinancing its debt arrangements in both years in conjunction with
acquisitions.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
As described in "--Overview" above, ATC completed the Bowen-Smith
Acquisition on October 15, 1994. The results described herein for 1994 reflect
the addition of the historical results for ATC's predecessor prior to the
Bowen-Smith Acquisition with ATC's results from October 15, 1994 to year end.
The changes in ATC's operating and capital structure described in "--Overview"
have a significant impact on the comparability of the results for the year
ended December 31, 1994 with results for the year ended December 31, 1995.
Total revenues. Total revenues increased 16% to $8.3 million in 1995 from
$7.2 million in 1994. Revenue growth consisted of $0.4 million associated with
towers acquired during 1995 and $0.7 million attributable to increased
utilization and price increases on ATC's existing towers which resulted
primarily from a build-up of ATC's marketing efforts during 1995.
Direct tower costs. Direct tower costs increased 20% to $1.9 million in 1995
from $1.6 million in 1994. The increase in direct tower costs was primarily
related to front-end costs associated with ATC's decision to outsource tower
maintenance services effective during the second quarter of 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased 36% to $1.6 million in 1995 from $2.5
million in 1994. The decrease was primarily attributable to overhead charges
related to the elimination of certain management and administrative personnel.
V-7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
ATC has historically funded its operations, acquisitions and construction of
towers and site upgrade capital expenditures from bank borrowings, cash flow
from operations, private placements of equity securities and the issuance of
subordinated notes to sellers of tower sites. ATC had a working capital
deficit of $1.0 million and $0.8 million, respectively, as of December 31,
1996 and 1995 and a working capital deficit of $3.0 million at September 30,
1997. ATC's ratio of total debt to stockholders' equity was 4.38 to 1 as of
December 31, 1996 compared with 4.51 to 1 at year-end 1995, and 1.9 to 1 as of
September 30, 1997.
ATC's primary sources of funds have been as follows:
<TABLE>
<CAPTION>
OCTOBER 15 TO YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1997
-------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Bank borrowings......... $ 21,000 $ 4,600 $ 21,600 $40,100
Seller financing........ 4,500 7,300 2,600 --
Sales of Preferred
Stock.................. -- 4,100 400 --
Sales of Common Stock... 6,800 -- 4,100 26,300
Net cash provided by op-
erating activities..... 300 1,600 3,100 7,000
-------- -------- -------- -------
$ 32,600 $ 17,600 $ 31,800 $73,400
======== ======== ======== =======
</TABLE>
ATC's principal operating subsidiary is the borrower under a $125.0 million
credit facility (the "ATC Credit Facility") which is guaranteed by ATC. At
September 30, 1997, outstanding borrowings under the ATC Credit Facility were
$63.3 million. Borrowings under the ATC Credit Facility currently bear
interest at LIBOR plus a maximum of 200 basis points. The ATS Credit Facility
is divided between a $25.0 million term loan and a $100.0 million revolving
line of credit. The term loan requires principal amortization beginning in
1999 with quarterly payments totaling $1.3 million in 1999, $3.1 million in
2000, $5.0 million in 2001, $6.3 million in 2002 and 2003 and $3.0 million in
2004. The maximum amount outstanding under the revolving credit facility is
required to be reduced quarterly beginning in September 1999 with a final
maturity in June 2004. The ATC Credit Facility includes financial and
operating covenants, including requirements that ATC maintain certain
financial ratios and limitations on ATC's ability to incur certain other
indebtedness, pay dividends, engage in transactions with affiliates, sell
assets and engage in mergers, consolidations and other acquisitions. In
addition, the ATC Credit Facility requires ATC to apply a certain portion of
the proceeds of any equity offering to prepay borrowings under the ATC Credit
Facility.
ATC issued a subordinated note to CSX in connection with the acquisition of
tower sites in December 1995. This note is non-interest bearing and has an
aggregate principal amount of $6.3 million. The note is repayable in annual
installments of $1.0 million each in December 1997, 1998 and 1999 and in a
final payment of $3.3 million in December 2000.
In December 1995, ATC issued 22,500 shares of its Series A Preferred Stock,
together with warrants to purchase 22,500 shares of Common Stock at a nominal
exercise price per share, in a private placement to its existing stockholders.
ATC received proceeds of $4.5 million in exchange for the securities, which is
equal to the redemption and liquidation value of the Series A Preferred Stock.
The proceeds were used to pay part of the purchase price for the CSX
Acquisition and for general working capital purposes. All outstanding warrants
to purchase Common Stock have been exercised.
In June 1997, ATC completed a private placement offering of common stock
with Clear Channel whereby ATC raised net proceeds of $23 million. ATC
utilized the private placement proceeds in connection with securing its $125
million senior credit facility discussed herein.
V-8
<PAGE>
Beginning with the Bowen-Smith Acquisition, ATC has made significant capital
investments in site upgrades, new tower construction and tower acquisitions.
The following table describes ATC expenditures, including the Bowen-Smith
Acquisition, since October 1994:
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
-------------------------------------
NINE MONTHS
OCTOBER 15 TO YEAR ENDED DECEMBER 31, ENDED
DECEMBER 31, ----------------------- SEPTEMBER 30,
1994 1995 1996 1997
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Construction and Site
Upgrades............... $ 400 $ 1,900 $ 7,800 $14,400
Acquisitions............ 31,300 12,700 15,400 32,700
------- ----------- ----------- -------
$31,700 $ 14,600 $ 23,200 $47,100
======= =========== =========== =======
</TABLE>
ATC plans to construct 125 towers in 1998 and has budgeted site upgrade and
new construction activities for 1998 of approximately $28.0 million. ATC's
actual levels of capital expenditures relative to new sites may vary from
these estimates depending upon the availability of suitable construction
opportunities. ATC also presently has pending acquisitions of existing sites
totaling approximately $40.0 million. While ATC continually reviews
acquisition opportunities, ATC is unable to estimate the total amount expected
to be expended on acquisitions of existing sites due to the inability to
predict the availability of economically viable acquisition opportunities. ATC
believes that bank borrowings and cash flow from operations will be sufficient
to finance debt service obligations and budgeted capital expenditures during
1998. However, because ATC's acquisition and construction opportunities can be
unpredictable resulting in additional capital requirements, ATC may seek
additional debt or equity financing as required. There can be no assurance
that such financing will be available on terms ATC considers acceptable.
V-9
<PAGE>
PRINCIPAL STOCKHOLDERS OF AMERICAN TOWER CORPORATION
The following table sets forth certain information regarding the beneficial
ownership of Common Stock, par value $.01 per share of ATC (the "ATC Common
Stock") as of February 1, 1998, and in American Tower Systems (assuming
consummation of the ATC Merger) by (i) each director; (iii) each person who is
known by ATC to own beneficially 5% or more of the Common Stock; and (iv) all
directors and officers as a group.
<TABLE>
<CAPTION>
AMERICAN TOWER
CURRENT ATC OWNERSHIP SYSTEMS OWNERSHIP
-----------------------------------------
NAME OF BENEFICIAL OWNER(1) SHARES PERCENT SHARES PERCENT
- --------------------------- ----------- --------------------- -------
<S> <C> <C> <C> <C>
Clear Channel Communications,
Inc.(9)............................ 46,814 31.30 9,328,290 11.91
Chase Manhattan Capital Corpora-
tion(2)............................ 33,745 22.56 6,724,124 8.58
Equus Equity Appreciation Fund,
L.P.(3)............................ 9,655 6.46 1,923,883 2.46
Max Bowen Enterprises(10)........... 9,235 6.18 1,840,192 2.35
RHS Investments, L.L.C.(4).......... 7,625 5.10 1,519,379 1.94
Archery Partners(5)................. 33,745 22.56 6,724,124 8.58
Carlyle-Prime Investors, L.P.(6).... 3,324 2.22 662,350 0.85
Carlyle-Prime Partners I, L.P.(6)... 4,599 3.08 916,410 1.17
Fred R. Lummis(7)................... 7,155 4.78 1,874,067 2.37
Randall Mays(9)..................... 46,814 31.30 9,328,290 11.91
Max Bowen(10)....................... 9,235 6.18 1,840,192 2.35
Michael Hannon(2)................... 26,995 18.05 5,379,100 6.87
Mark D. Ein(6)...................... 7,923 5.30 1,578,759 2.01
William K. Luby(5).................. 6,750 4.51 1,345,024 1.72
George B. Kelly(8).................. 6,635 4.44 1,322,109 1.69
Richard H. Stewart(4)............... 7,625 5.10 1,519,379 1.94
All officers and directors as a
group (8 persons)(2)(4)(5)(6)(7)
(8)(9)(10)......................... 114,132 76.32 22,742,266 29.03
</TABLE>
- --------
(1) Except as otherwise noted, each stockholder has sole voting and investment
power with respect to the shares beneficially owned.
(2) Mr. Hannon is a director of ATC. The address of Mr. Hannon and Chase
Capital Corporation is 380 Madison Avenue, 12th Floor, New York, New York
10017. The ATC shares indicated beneficially owned by Mr. Hannon are
shares held by Chase Capital and Archery Partners. Of the 33,745 shares,
26,995 shares are included because of Mr. Hannon's affiliation with Chase
Manhattan and 6,750 shares because of Chase Capital's affiliation with
Archery Partners. Mr. Hannon disclaims beneficial ownership of these
shares within the meaning of Rule 13d-3 under the Exchange Act. Ownership
in American Tower Systems includes existing ownership therein of Chase
Equity Associates. See "Principal Stockholders of American Tower Systems"
elsewhere in this Prospectus.
(3) The address of Equus Capital Corporation is 2929 Allen Parkway, Suite
2500, Houston, Texas 77019. Equus Equity Appreciation Fund, L.P. is a
limited partnership, the general partner of which is Equus Capital
Corporation.
(4) Mr. Stewart is a director of ATC. The address of Mr. Stewart and RHS
Investments, L.L.C. is 77 East Crossville Road, Suite 310, Roswell,
Georgia 30075. RHS Investments, L.L.C. is a limited liability company,
the managing member of which is Richard H. Stewart.
(5) Mr. Luby is a director of ATC. The address of Mr. Luby and Archery
Partners is 179 Bingham Avenue, Rumson, New Jersey 07760. The ATC shares
indicated beneficially owned by Mr. Luby are shares held by Chase Capital
and Archery Partners. Of the 33,745 shares, 26,995 shares are included
because of Archery Partner's affiliation with Chase Capital and 6,750
shares because of Mr. Luby's affiliation, as general partner with Archery
Partners. Mr. Luby disclaims beneficial ownership of these shares within
the meaning of Rule 13d-3 under the Exchange Act.
(6) Mr. Ein is a director of ATC. The address of Mr. Ein, Carlyle-Prime
Investors, L.P. and Carlyle-Prime Partners I, L.P. is 1001 Pennsylvania
Avenue, N.W., Washington, D.C. 20004. Of the shares indicated
V-10
<PAGE>
beneficially owned by Mr. Ein, 3,324 shares are held by Carlyle-Prime
Investors, L.P. and 4,599 are held by Carlyle-Prime Partners I, L.P. Both
Carlyle-Prime Investors, L.P. and Carlyle-Prime Partners I, L.P. are
limited partnerships and the general partner of each is TCG Towers L.L.C.
Mr. Ein disclaims beneficial ownership of these shares within the meaning
of Rule 13d-3 under the Exchange Act.
(7) Mr. Lummis is Chairman, Chief Executive Officer and President of ATC. The
address of Mr. Lummis is 3411 Richmond Avenue, Suite 400, Houston, Texas
77046. Of the shares indicated beneficially owned by Mr. Lummis, 5,000
shares are held by Summit Capital and are included because of Mr. Lummis'
affiliation therewith. Of the remaining 2,155 shares, 750 shares are
issuable within 60 days upon the exercise of stock options, 75 shares are
held by Mr. Lummis, 730 shares are held by a trust for the benefit of Mr.
Lummis who is the trustee and 600 shares are held by several trusts, of
which Mr. Lummis is the trustee, for the benefit of Mr. Lummis' children.
Does not include 2,250 shares purchasable under an option granted by ATC.
(8) Mr. Kelly is a director of ATC. The address of Mr. Kelly and GBK Tower
Partners is Eight Greenway Plaza, Suite 714, Houston, Texas 77046. Of the
shares indicated beneficially owned by Mr. Kelly, 5,000 shares are held
by Summit Capital and are included because of Mr. Kelly's affiliation
therewith. Of the remaining 1,635 shares, 75 shares are held by Mr.
Kelly, and 1,560 are held by GBK Tower Partners, a partnership of which
Mr. Kelly is the general partner. Mr. Kelly disclaims beneficial
ownership of the 1,560 shares held by GBK Tower Partners within the
meaning of Rule 13d-3 under the Exchange Act.
(9) Mr. Mays is a director of ATC. The address of Mr. Mays and Clear Channel
is 200 Concord Plaza, Suite 600, San Antonio, Texas 78216-6940. All of the
shares indicated beneficially owned by Mr. Mays are held by Clear Channel
Communications, Inc. and are included because of Mr. Mays' affiliation
therewith. Mr. Mays disclaims beneficial ownership of these shares within
the meaning of Rule 13d-3 under the Exchange Act.
(10) Mr. Bowen is a director of ATC. The address of Mr. Bowen and Max Bowen
Enterprises is 12450 Old Galveston Road, Webster, Texas 77598. All of the
shares indicated beneficially owned by Mr. Bowen are shares held by Max
Bowen Enterprises and are included because of Mr. Bowen's affiliation
therewith. Mr. Bowen disclaims beneficial ownership of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
V-11
<PAGE>
DELAWARE BUSINESS COMBINATION STATUTE
ATC is subject to the provisions of Section 203 of the DGCL ("Business
Combination Statute"). In general, the Business Combination Statute prohibits
a publicly-held Delaware corporation from engaging in certain "business
combinations" with an "interested stockholder" for a period of three years
after the date such person became an interested stockholder, unless (i) before
such person became a stockholder, the board of directors approved either the
proposed business combination or the proposed acquisition of stock resulting
in such person's becoming an interested stockholder; (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation in
the transaction in which it became an interested stockholder; or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of the holders of two-thirds of the outstanding shares
of the corporation's voting stock other than shares held by the interested
stockholder at a meeting of the stockholders. A "business combination" is
defined broadly to include a merger, consolidation, sale or other disposition
of assets and certain other transactions resulting in the receipt of financial
benefits by the interested stockholder. An "interested stockholder" is defined
as a person who, together with affiliates and associates, beneficially owns
(or within the preceding three years, did beneficially own) 15% or more of the
corporation's voting stock.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement
or notification of one of certain extraordinary transactions involving ATC and
a person who was not an interested stockholder during the previous three years
or who became an interested stockholder with the approval of a majority of
ATC's directors, if that extraordinary transaction is approved or not opposed
by a majority of the directors who were directors before any person became an
interested stockholder in the previous three years or who were recommended for
election or elected to succeed such directors by a majority of such directors
then in office.
CHASE CAPITAL'S ACQUISITION OF THE INTEREST PURSUANT TO WHICH IT BECAME AN
"INTERESTED STOCKHOLDER" WAS APPROVED BY THE ATC BOARD AND, THEREFORE, THE
MERGER WITH AMERICAN TOWER SYSTEMS IS NOT SUBJECT TO THE BUSINESS COMBINATION
STATUTE.
V-12
<PAGE>
APPENDIX VI
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
AMERICAN TOWER SYSTEMS CORPORATION
AND
AMERICAN TOWER CORPORATION
DATED AS OF
DECEMBER 12, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
ARTICLE 1 DEFINED TERMS................................................ VI-1
ARTICLE 2 THE MERGER................................................... VI-1
2.1 The Merger.............................................. VI-1
2.2 Closing................................................. VI-2
2.3 Effective Time.......................................... VI-2
2.4 Effect of the Merger.................................... VI-2
2.5 Certificate of Incorporation............................ VI-2
2.6 Bylaws.................................................. VI-2
2.7 Directors and Officers.................................. VI-2
ARTICLE 3 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES............... VI-2
3.1 Conversion of Capital Stock............................. VI-2
3.2 Surrender of Certificates; Payment of Merger
Consideration and Preferred Stock Merger
Consideration.......................................... VI-4
3.3 Stock Transfer Books.................................... VI-4
3.4 Dissenting Shares....................................... VI-4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ATC........................ VI-5
4.1 Organization and Business; Power and Authority; Effect
of Transaction......................................... VI-5
4.2 Financial and Other Information. The financial
statements of ATC, furnished by ATC, and included in
the ATS Information Statement (the "ATC Financial
Statements")........................................... VI-6
4.3 Material Statements and Omissions; Absence of Events.... VI-6
4.4 Title to Properties; Leases............................. VI-7
4.5 Compliance with Private Authorizations.................. VI-7
4.6 Compliance with Governmental Authorizations and
Applicable Law......................................... VI-8
4.7 Intangible Assets....................................... VI-8
4.8 Related Transactions.................................... VI-8
4.9 Insurance............................................... VI-9
4.10 Tax Matters............................................. VI-9
4.11 Employee Retirement Income Security Act of 1974......... VI-9
4.12 Absence of Sensitive Payments........................... VI-11
4.13 Bank Accounts, Etc...................................... VI-11
4.14 Employment Arrangements................................. VI-11
4.15 Material Agreements..................................... VI-11
4.16 Ordinary Course of Business............................. VI-12
4.17 Material and Adverse Restrictions....................... VI-12
4.18 Broker or Finder........................................ VI-13
4.19 Solvency................................................ VI-13
4.20 Environmental Matters................................... VI-13
4.21 Capital Stock........................................... VI-14
4.22 State Takeover Statutes................................. VI-14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ATS........................ VI-14
5.1 Organization and Business; Power and Authority; Effect
of Transaction......................................... VI-14
5.2 Financial and Other Information......................... VI-15
5.3 Material Statements and Omissions; Absence of Events.... VI-15
5.4 Title to Properties; Leases............................. VI-16
5.5 Compliance with Private Authorizations.................. VI-16
5.6 Compliance with Governmental Authorizations and
Applicable Law......................................... VI-17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
5.7 Intangible Assets...................................... VI-17
5.8 Related Transactions................................... VI-17
5.9 Insurance.............................................. VI-18
5.10 Tax Matters............................................ VI-18
5.11 Employee Retirement Income Security Act of 1974........ VI-18
5.12 Absence of Sensitive Payments.......................... VI-20
5.13 Employment Arrangements................................ VI-20
5.14 Material Agreements.................................... VI-20
5.15 Ordinary Course of Business............................ VI-21
5.16 Material and Adverse Restrictions...................... VI-21
5.17 Broker or Finder....................................... VI-22
5.18 Solvency............................................... VI-22
5.19 Environmental Matters.................................. VI-22
5.20 Capital Stock.......................................... VI-23
5.21 State Takeover Statutes................................ VI-23
5.22 ATS Private Placement.................................. VI-23
5.23 ARS Organization and Business; Power and Authority;
Effect of Transaction................................. VI-23
ARTICLE 6 COVENANTS................................................... VI-24
6.1 Access to Information; Confidentiality................. VI-24
6.2 Agreement to Cooperate................................. VI-25
6.3 Public Announcements................................... VI-26
6.4 Notification of Certain Matters........................ VI-26
6.5 No Solicitation........................................ VI-26
6.6 Conduct of Business by ATS Pending the Merger.......... VI-27
6.7 Conduct of Business by ATC Pending the Merger.......... VI-28
6.8 Directors', Officers' and Employees' Indemnification
and Insurance......................................... VI-30
6.9 ATC Employees and Benefit Plans........................ VI-31
6.10 ATC Stock Options...................................... VI-32
6.11 ATS Voting Agreement................................... VI-33
6.13 Registration Statement and Proxy/Information
Statement............................................. VI-33
6.14 Listing of ATS Class A Common Stock.................... VI-34
6.15 Solicitation of Employees.............................. VI-34
6.16 Additional Tax Matters................................. VI-34
6.17 ATS Registration Rights Agreement...................... VI-34
6.18 Charter Amendment...................................... VI-34
6.19 Conversion of Class B Common Stock..................... VI-34
6.20 ATS Separation Agreement............................... VI-35
6.21 CBS Merger or Tower Distribution Related Actions....... VI-35
6.22 Efforts Regarding Pending Transactions................. VI-35
6.23 Certain Closing Certificates........................... VI-35
6.25 Issue of ATS Class B Common Stock...................... VI-35
6.26 Election of ATS Directors.............................. VI-35
6.27 Employee List.......................................... VI-35
6.28 Certificates of Non-Foreign Status..................... VI-36
ARTICLE 7 CLOSING CONDITIONS.......................................... VI-36
7.1 Conditions to Obligations of Each Party................ VI-36
7.2 Conditions to Obligations of ATS....................... VI-36
7.3 Conditions to Obligations of ATC....................... VI-37
</TABLE>
VI-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER......................... VI-38
8.1 Termination.......................................... VI-38
8.2 Effect of Termination................................ VI-39
ARTICLE 9 GENERAL PROVISIONS........................................ VI-39
9.1 Waivers; Amendments.................................. VI-39
9.2 Fees, Expenses and Other Payments.................... VI-40
9.3 Notices.............................................. VI-40
9.4 Specific Performance; Other Rights and Remedies...... VI-41
9.5 Severability......................................... VI-41
9.6 Counterparts......................................... VI-41
9.7 Section Headings..................................... VI-41
9.8 Governing Law........................................ VI-41
9.9 Further Acts......................................... VI-41
9.10 Entire Agreement..................................... VI-42
9.11 Assignment........................................... VI-42
9.12 Parties in Interest.................................. VI-42
9.13 Non-Survival of Representations, Warranties,
Covenants and Agreements............................ VI-42
APPENDIX A: Definitions
EXHIBITS:
EXHIBIT A: Certificate of Merger (Section 2.3).
EXHIBIT B-1: Existing ATS Restated Certificate of Incorporation
(Section 2.5).
EXHIBIT B-2: Principles on which to restate Existing ATS
Restated Certificate of Incorporation (Section
2.5).
EXHIBIT C: ATS Voting Agreement (Section 6.11).
EXHIBIT D: ATS Registration Rights Agreement (Section 6.17)
EXHIBIT E: ATC Affiliate Agreement (Section 6.24).
EXHIBIT F: Opinion of Vinson & Elkins LLP (Section 7.2(a)).
EXHIBIT G: Tax Certificate of ATC and the ATC stockholders
(Section 7.2(d)).
EXHIBIT H: Opinion of Sullivan & Worcester LLP (Section
7.3(a)).
EXHIBIT I: Tax Certificate of ATS (Section 7.3(f)).
</TABLE>
VI-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of December 12, 1997, by and among
American Tower Systems Corporation, a Delaware corporation ("ATS"), and
American Tower Corporation, a Delaware corporation ("ATC").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of ATC and ATS have determined that the
merger (the "Merger") of ATC into ATS on the terms and conditions set forth in
this Agreement and Plan of Merger (this "Agreement") is consistent with and in
furtherance of the long-term business strategy of each, and is fair to, and in
the best interests of, ATS, ATC and the stockholders of each; and
WHEREAS, this Agreement provides that ATC shall be merged with and into ATS,
and ATS shall be the surviving corporation; and
WHEREAS, the Boards of Directors of ATC and ATS have approved and adopted
this Agreement and have directed that this Agreement be submitted to the
stockholders of ATC and ATS, respectively, for their adoption and approval;
and
WHEREAS, the Board of Directors of American Radio Systems Corporation, a
Delaware corporation ("ARS"), has approved and adopted this Agreement and
approved the Merger on behalf of ARS as the sole stockholder of ATS;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto hereby, intending to be legally bound, represent, warrant,
covenant and agree as follows:
ARTICLE 1
Defined Terms
As used herein, unless the context otherwise requires, the terms defined in
Appendix A shall have the respective meanings set forth therein. Terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa, and the reference to any gender shall be deemed to include all
genders. Unless otherwise defined or the context otherwise clearly requires,
terms for which meanings are provided in this Agreement shall have such
meanings when used in the ATC Disclosure Schedule, the ATS Disclosure Schedule
and each Collateral Document executed pursuant hereto or thereto or otherwise
delivered pursuant hereto or thereto. References to "hereof," "herein" or
similar terms are intended to refer to the Agreement as a whole and not a
particular section, and references to "this Section" or "this Article" are
intended to refer to the entire section or article and not a particular
subsection thereof.
ARTICLE 2
The Merger
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law
(the "DCL"), ATC shall be merged with and into ATS. As a result of the Merger,
the separate corporate existence of ATC shall cease and ATS shall continue as
the surviving corporation in the Merger (sometimes referred to, as such, as
the "Surviving Corporation").
<PAGE>
2.2 Closing. Unless this Agreement shall have been terminated pursuant to
Section 8.1 and subject to the satisfaction or, to the extent permitted by
Applicable Law, waiver of the conditions set forth in Article 7, the closing
of the Merger (the "Closing") will take place, at 10:00 a.m., on the Closing
Date, at the offices of Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109, on the date on which the Tower Distribution
occurs (whether by reason of the CBS Merger or otherwise), unless another
date, time or place is agreed to in writing by the parties. The date on which
the Closing occurs is herein referred to as the "Closing Date."
2.3 Effective Time. Subject to the provisions of this Agreement, as promptly
as practicable after the Closing, the parties hereto shall cause the Merger to
be consummated by filing a Certificate of Merger in the form attached hereto
as Exhibit A and made a part hereof (the "Certificate of Merger") and any
related filings required under the DCL with the Secretary of State of the
State of Delaware. The Merger shall become effective at such time as such
documents are duly filed as aforesaid, or at such later time as is specified
in such documents (the "Effective Time").
2.4 Effect of the Merger. The Merger shall have the effects provided for
under the DCL.
2.5 Certificate of Incorporation. Subject to the consummation of the Merger,
ATS shall file with the Secretary of State of the State of Delaware an Amended
and Restated Certificate of Incorporation, in the form attached hereto as
Exhibit B-1 and made a part hereof (the "ATS Existing Restated Certificate"),
as amended to incorporate the principles set forth on Exhibit B-2 and made a
part hereof, which principles will be incorporated in an Amended and Restated
Certificate of Incorporation of ATS (the "ATS Restated Certificate") and which
principles will control over any provision in the Existing ATS Restated
Certificate, which shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
Applicable Law.
2.6 Bylaws. The bylaws of ATS in the form included as part of Section 2.5 of
the ATS Disclosure Schedule modified to reflect the change of ATS' name to
"American Tower Corporation" shall be the bylaws of the Surviving Corporation
until amended in accordance with Applicable Law and the Organic Documents of
ATS.
2.7 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified, or upon their earlier
resignation or removal, in accordance with Applicable Law and the Organic
Documents of ATS, (a) the directors of ATS at the Effective Time shall be the
directors of the Surviving Corporation and Fred. R. Lummis and Randall Mays,
and (b) the officers of ATS at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE 3
Conversion of Shares; Exchange of Certificates
3.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of ATS or ATC or their respective
stockholders:
(a) Each share of Common Stock, par value $.01 per share, of ATS (the
"ATS Common Stock") issued and outstanding immediately prior to the
Effective Time shall remain outstanding.
(b) Each share (each, an "ATC Share" and collectively the "ATC Shares")
of Class A Common Stock, par value $.01 per share, of ATC and Class B
Common Stock, par value $.01 per share, of ATC (collectively for both such
classes, the "ATC Common Stock") issued and outstanding immediately prior
to the Effective Time (other than Dissenting Shares) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive the number of shares (the "Merger
Consideration") of Class A Common Stock, par value $.01 per share, of ATS
(the "ATS Class A Common Stock") obtained by dividing the Aggregate Merger
Shares by the number of shares of ATC Common Stock
VI-2
<PAGE>
determined on a Fully-Diluted Basis immediately prior to the Effective Time
(the "Exchange Ratio"). The parties acknowledge that the Exchange Ratio has
been determined to give the ATC stockholders (assuming there are no
Dissenting Shares) in the aggregate shares of ATS Class A Common Stock
representing 35% of the Surviving Corporation's outstanding common stock
determined on a Fully-Diluted Basis.
(c) Each share of ATC Common Stock owned by ATS or any of its
Subsidiaries or ATC or any of its Subsidiaries immediately prior to the
Effective Time shall automatically be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(d) Each share of Senior Preferred Stock, par value $.01 per share, of
ATC (the "ATC Preferred Stock"), issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive
cash or other immediately available funds in the amount of $200.00 (the
"Preferred Stock Merger Consideration").
In the event either the Gearon Transaction or the ATS Private Placement has
not been consummated prior to the Effective Time, the parties hereto will
negotiate in good faith to determine the net effect, if any, of the failure to
so consummate either or both of the foregoing on the enterprise value of ATS.
If the parties agree that the net effect of the failure of either or both of
the Gearon Transaction and the ATS Private Placement to occur is a reduction
in the ATS enterprise value, the parties shall also determine an appropriate
adjustment of the number of Aggregate Merger Shares so that the Aggregate
Merger Shares, as adjusted, constitute a higher percentage to reflect the
relative enterprise values of ATS and ATC. The parties shall negotiate in good
faith for fifteen (15) days following the request by either party to do so.
Any mater not resolved within such fifteen (15)-day period shall be submitted
to a nationally recognized, independent investment banking firm selected by
agreement of the parties hereto. Within five (5) days after the selection of
such firm, ATC and ATS shall each submit to such firm and the other its
calculation of its proposed adjustment, together with its methodology. The
parties shall instruct such to render a final and binding decision by
selecting one of the two submitted adjustment proposals that more fairly
represents, in the opinion of such firm, the adjustment required by reason of
the enterprise reductions solely attributable to the items set forth above.
The investment banking firm shall not have any discretion to select an
adjustment other than one of the two proposed. The parties shall instruct such
firm to render its decision within fifteen (15) days after submission of the
adjust. Each party shall cooperate in all reasonable respects with such firm
in making its determination. The Termination Date shall be extended to allow
for the foregoing discussions for the later of the fifteen (15)-day period the
parties negotiate in good faith or, if they fail to reach agreement, for the
period required by the investment banking firm to render its decision.
At the Effective Time, all ATC Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
certificates previously evidencing any such ATC Shares (each, a "Certificate")
shall thereafter represent the right to receive, upon the surrender of such
Certificate in accordance with the provisions of Section 3.2, the Merger
Consideration multiplied by the number of ATC Shares represented by such
Certificate, and a holder of more than one Certificate shall have the right to
receive the Merger Consideration multiplied by the number of ATC Shares
represented by all such Certificates, or, in the case of a holder of
Dissenting Shares, the right to perfect the right to receive payment for
Dissenting Shares pursuant to Section 262 of the DCL. In lieu of any such
fractional shares, each holder of ATC Common Stock who would otherwise have
been entitled to receive a fraction of a share of ATS Class A Common Stock,
upon surrender of Certificates for exchange pursuant to this Article, shall be
entitled to receive a cash payment equal to such fraction multiplied by the
closing price per share of ATS Class A Common Stock on the Nasdaq National
Market ("Nasdaq") or, if not then traded on Nasdaq, on the principal stock
exchange on which the ATS Class A Common Stock is admitted to trading, as
reported by the Wall Street Journal, for the first trading day immediately
following the Effective Time, and the Merger Consideration to which a holder
is entitled shall be deemed to be such number of shares of ATS Class A Common
Stock and such cash. The holders of such Certificates previously evidencing
ATC Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such ATC Shares, except as otherwise provided
herein or by Applicable Law.
At the Effective Time, all shares of ATC Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and certificates previously evidencing any such
VI-3
<PAGE>
shares shall thereafter represent the right to receive, upon the surrender of
certificates representing such shares in accordance with the provisions of
Section 3.2, the Preferred Stock Merger Consideration multiplied by the number
of shares of ATC Preferred Stock represented by such certificate, and a holder
of more than one certificate shall have the right to receive the Preferred
Stock Merger Consideration multiplied by the number of ATC Preferred Stock
represented by all such certificates. The holders of such certificates
previously evidencing shares of ATC Preferred Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
such shares, except as otherwise provided herein or by Applicable Law.
3.2 Surrender of Certificates; Payment of Merger Consideration and Preferred
Stock Merger Consideration. At and after the Effective Time, the Surviving
Corporation shall issue to each holder of ATC Common Stock, upon surrender of
each of his or its Certificates, a certificate of ATS Class A Common Stock
representing the Merger Consideration with respect to the ATC Shares
represented by such Certificate in accordance with the provisions of Section
3.1, plus cash in amount sufficient to make payment for fractional shares. In
addition, the Surviving Corporation shall pay to each holder of ATC Preferred
Stock, upon surrender of his or its stock certificate evidencing ownership of
ATC Preferred Stock, in cash or immediately available funds by wire transfer
to an account or accounts designated by ATC to ATS at least two (2) Business
Days prior to the Closing, the sum of $200.00 multiplied by the number of
shares of ATC Preferred Stock evidenced by such certificate. In the event any
ATC stockholder has not delivered the certificate referred to in Section 6.28,
the Surviving Corporation shall be entitled to withhold from delivery
certificates for the ATS Class A Common Stock to which such stockholder would
otherwise be entitled, a number of shares of ATS Class A Common Stock required
to enable the Surviving Corporation to comply with the applicable provisions
of the Code.
3.3 Stock Transfer Books. At the Effective Time, the stock transfer books of
ATC shall be closed, and there shall be no further transfer of shares of ATC
Common Stock or ATC Preferred Stock thereafter on the records of ATC. Any
Certificates representing ATC Shares or certificates representing shares of
ATC Preferred Stock presented after the Effective Time for transfer shall be
canceled and exchanged for the amount to which the ATC Shares or shares of ATC
Preferred Stock represented thereby shall be entitled pursuant to Sections 3.1
and 3.2.
3.4 Dissenting Shares.
(a) Notwithstanding any other provision of this Agreement to the
contrary, shares of ATC Common Stock that are outstanding immediately prior
to the Effective Time and which are held by ATC stockholders who shall have
not voted in favor of the Merger or consented thereto in writing and who
shall be entitled to and shall have demanded properly in writing appraisal
rights for such shares of ATC Common Stock in accordance with Section 262
of the DCL and who shall not have withdrawn such demand or otherwise have
forfeited appraisal rights (collectively, the "Dissenting Shares"), shall
not be converted into or represent the right to receive the Merger
Consideration payable in respect of each share of ATC Common Stock
represented thereby. Such ATC stockholders shall be entitled to receive
payment of the appraised value of such shares of ATC Common Stock held by
them in accordance with the provisions of the DCL; provided, however, that
all Dissenting Shares held by ATC stockholders who shall have failed to
perfect or who effectively shall have withdrawn, forfeited or lost their
appraisal rights with respect to such shares of ATC Common Stock under the
DCL shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive,
without any interest thereon, the Merger Consideration upon surrender, in
the manner provided in Section 3.2, of the Certificates with respect to
such shares.
(b) ATC shall give ATS prompt notice of any demands for appraisal rights
received by it, withdrawals of such demands, and any other instruments
served pursuant to the DCL and received by ATC and relating thereto. ATC
shall give ATS the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal rights under the provisions of the
DCL. ATC shall not, except with the prior written consent of ATS, make any
payment with respect to any demands for appraisal rights, or offer to
settle, or settle, any such demands.
VI-4
<PAGE>
3.5 Option Securities and Convertible Securities; Payment Rights. At the
Effective Time, subject to the provisions of Section 6.10, each outstanding
Option Security and each Convertible Security of ATC, if any, whether or not
then exercisable for or convertible into ATC Shares or other ATC securities,
outstanding immediately prior to the Effective Time, shall be canceled and
retired and shall cease to exist, and the holder thereof shall not be entitled
to receive any consideration therefor.
ARTICLE 4
Representations and Warranties of ATC
ATC hereby represents and warrants to ATS as follows (it being understood
and agreed by the parties that, except as the context otherwise requires, the
representations and warranties of ATC set forth in this Article shall apply to
each of its Subsidiaries with the same force and effect as though each of them
were named in each Section hereof):
4.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) ATC is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all
requisite power and authority (corporate and other) to own or hold under
lease its properties and to conduct its business as now conducted and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction (as shown on Section 4.1(a) of the ATC Disclosure Schedule) in
which the character of the property owned or leased by it or the nature of
its business or operations requires such qualification, except for such
qualifications the failure of which to obtain, individually or in the
aggregate, would not have a Material Adverse Effect on ATC.
(b) ATC has all requisite power and authority (corporate and other) and
has in full force and effect all Governmental Authorizations and Private
Authorizations necessary to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Transactions to which ATC is a party; and the execution,
delivery and performance of this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto have
been duly authorized by all requisite corporate or other action on the part
of ATC, other than the approval of the stockholders of ATC, and no other
corporate proceedings on the part of ATC are necessary to authorize this
Agreement or the transactions contemplated hereby or to consummate the
Merger or the other transactions so contemplated (other than, with respect
to the Merger, the ATC Required Vote). This Agreement has been duly
executed and delivered by ATC and constitutes, and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto or to
consummate the Transactions when executed and delivered by ATC will
constitute, legal, valid and binding obligations of ATC, enforceable in
accordance with their respective terms, except as such enforceability may
be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement, voidable preference, fraudulent conveyance and other similar
laws relating to or affecting the rights of creditors and except as the
same may be subject to the effect of general principles of equity. The
provisions of Section 203 of the DCL will not apply to ATC by reason of
this Agreement or the Merger. As of the date hereof, the Board of Directors
of ATC, at a meeting duly called and held at which a quorum was present
throughout, has approved the Merger and this Agreement, and has recommended
that the ATC stockholders approve and adopt this Agreement and the
transactions contemplated hereby, including without limitation the Merger
and the ATC Voting Agreement and the acquisition by ATS of the "beneficial"
ownership contemplated thereby.
(c) Except as set forth in Section 4.1(c) of the ATC Disclosure Schedule,
neither the execution and delivery by ATC of this Agreement or any
Collateral Document executed or required to be executed by it pursuant
hereto or thereto, nor the consummation of the Transactions by ATC, nor
compliance with the terms, conditions and provisions hereof or thereof by
ATC:
VI-5
<PAGE>
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of ATC or any
Applicable Law, or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any requirement of giving
of notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such
acceleration in, any Material Agreement of ATC; or
(ii) will require ATC to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization including
without limitation under the FCA, except as required by the Hart-Scott-
Rodino Act and other than any of the foregoing that have been obtained.
(d) Except as set forth in Section 4.1(d) of the ATC Disclosure Schedule,
ATC does not have any Subsidiaries, each of which is (i) wholly-owned
unless noted otherwise in Section 4.1(d) of the ATC Disclosure Schedule,
(ii) a corporation which is duly organized, validly existing and in good
standing under the laws of the respective state of incorporation set forth
opposite its name on Section 4.1(d) of the ATC Disclosure Schedule, and
(iii) duly qualified and in good standing as a foreign corporation in each
other jurisdiction (as shown on Section 4.1(d) of the ATC Disclosure
Schedule) in which the character of the property owned or leased by it or
the nature of its business or operations requires such qualification, with
full power and authority (corporate and other) to carry on the business in
which it is engaged, except for such qualifications the failure of which to
obtain, individually or in the aggregate, would not have a Material Adverse
Effect on ATC. ATC owns, directly or indirectly, all of the outstanding
capital stock and equity interests (as shown in Section 4.1(d) of the ATC
Disclosure Schedule) of each Subsidiary, free and clear of all Liens
(except for Permitted Liens or except as described in the notes to the ATC
Financial Statements or set forth in Section 4.1(d) of the ATC Disclosure
Schedule), and all such stock or other equity interests has been duly
authorized and validly issued and is fully paid and nonassessable. There
are no outstanding Option Securities or Convertible Securities, or
agreements or understandings of any nature whatsoever, relating to the
authorized and unissued or outstanding capital stock or equity interests of
any Subsidiary of ATC.
4.2 Financial and Other Information. The financial statements of ATC,
furnished by ATC, and included in the ATS Information Statement (the "ATC
Financial Statements"), including in each case the notes thereto, have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, except as otherwise noted therein or as set forth in
Section 4.2 of the ATC Disclosure Schedule, and fairly present in all material
respects the financial condition and the results of operations and cash flow
of ATC, on the bases therein stated, as of the respective dates thereof, and
for the respective periods covered thereby subject, in the case of unaudited
financial statements, to normal nonmaterial year-end audit adjustments and
accruals.
4.3 Material Statements and Omissions; Absence of Events. Neither any
representation or warranty made by ATC contained in this Agreement or any
certificate, document or other instrument or other information furnished or to
be furnished by ATC pursuant to the provisions hereof (including without
limitation information with respect to ATC furnished for inclusion in the ATS
Prospectus and the ATS Registration Statement) nor the ATC Disclosure Schedule
or the ATC Business Description contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required
to make any statement contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that to the extent that any such information contains any financial
projections, ATC represents and warrants only that such projections have been
prepared in good faith on the basis of the ATC Financial Statements and other
information and assumptions which ATC believes to be reasonable. Since the
date of the most recent financial statements constituting a part of the ATC
Financial Statements, except to the extent specifically described in Section
4.3 of the ATC Disclosure Schedule, there has been no change in ATC which has
had a Material Adverse Effect on ATC. There is no Event known to ATC which has
had, or (so far as ATC can now reasonably foresee) is likely to have, a
Material Adverse Effect on ATC, except to the extent specifically described in
Section 4.3 of the ATC Disclosure Schedule and except for matters affecting
the tower rental, ownership and construction
VI-6
<PAGE>
industry generally, including without limitation competition, regulation and
resources or events arising out of the execution or public announcement of
this Agreement.
4.4 Title to Properties; Leases.
(a) ATC has, to ATC's knowledge, good and indefeasible title to all of
its real property (other than leasehold real property) and good title to
all of its other assets (other than real property), tangible and intangible
(the "ATC Assets"); all of such real property and other assets are so
owned, in each case, free and clear of all Liens, except (i) Permitted
Liens, and (ii) Liens described in the notes to the ATC Financial
Statements or set forth on Section 4.4(a) of the ATC Disclosure Schedule.
Except for financing statements evidencing Liens referred to in the
preceding sentence, no financing statements under the Uniform Commercial
Code and no other filing which names ATC as debtor or which covers or
purports to cover any of the ATC Assets is on file in any state or other
jurisdiction, and ATC has not signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party
thereunder to file any such financing statement or filing. Except as
disclosed in Section 4.4(a) of the ATC Disclosure Schedule, all
improvements on the real property owned or leased by ATC are, to ATC's
knowledge, in compliance with applicable zoning, wetlands and land use
laws, ordinances and regulations and applicable title covenants,
conditions, restrictions and reservations in all respects necessary to
conduct the operations as presently conducted, except for any instances of
non-compliance which do not and will not in the aggregate have a Material
Adverse Effect on ATC. Except as described in the notes to the ATC
Financial Statements or disclosed in Section 4.4(a) of the ATC Disclosure
Statement, all such improvements comply with all Applicable Laws, ATC
Governmental Authorizations and ATC Private Authorizations, except where
noncompliance is not reasonably likely to have a Material Adverse Effect on
ATC. There is no pending or, to ATC's knowledge, threatened or contemplated
action to take by eminent domain or otherwise to condemn any part of any
real property constituting a material portion of the real property owned by
ATC or, to ATC's knowledge, any real property leased by ATC. Except as
described in the notes to the ATC Financial Statements or set forth in
Section 4.4(a) of the ATC Disclosure Schedule, such real property (other
than land), fixtures, fixed assets and other material items of personal
property, including equipment, have, in ATC's reasonable business judgment,
been maintained in a manner consistent with customary industry practices
and currently permit the business of ATC (the "ATC Business") to be
operated in all material respects in accordance with the terms and
conditions of all Applicable Laws, ATC Governmental Authorizations and ATC
Private Authorizations.
(b) Each Lease or other occupancy or other agreement under which ATC
holds real or personal property constituting a part of the ATC Assets has
been duly authorized, executed and delivered by or assigned to ATC and, to
ATC's knowledge, each of the other parties thereto, and is a legal, valid
and binding obligation of ATC, and, to ATC's knowledge, each of the other
parties thereto, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and
similar laws affecting the rights and remedies of creditors and obligations
of debtors generally and by general principles of equity, and except for
such exceptions to the foregoing as, individually or in the aggregate, have
not had and will not have any Material Adverse Effect on ATC. ATC has a
valid leasehold interest in and enjoys peaceful and undisturbed possession
under all Leases pursuant to which it holds any such real property or
tangible personal property, subject to the terms of each such Lease and
Applicable Law and except for such exceptions to the foregoing as,
individually or in the aggregate, have not had and will not have any
Material Adverse Effect on ATC. All of such Leases are valid and subsisting
and in full force and effect, and neither ATC nor, to ATC's knowledge, any
other party thereto, is in material default in the performance, observance
or fulfillment of any obligation, covenant or condition contained in any
such Lease, except for such exceptions to the foregoing as, individually or
in the aggregate, have not had and will not have any Material Adverse
Effect on ATC.
4.5 Compliance with Private Authorizations. ATC has obtained all Private
Authorizations (collectively, the "ATC Private Authorizations") which are
necessary for the ownership or operation of the ATC Assets or the conduct of
the ATC Business which, if not obtained and maintained, could, individually or
in the aggregate,
VI-7
<PAGE>
be reasonably likely to have a Material Adverse Effect on ATC. All of the ATC
Private Authorizations are valid and in good standing and are in full force
and effect, except for such exceptions as are not reasonably likely to have a
Material Adverse Effect on ATC. ATC is not in breach or violation of, or in
default in the performance, observance or fulfillment of, any ATC Private
Authorization, and no Event exists or has occurred, which constitutes, or but
for any requirement of giving of notice or passage of time or both would
constitute, such a breach, violation or default, under any ATC Private
Authorization, except for such defaults, breaches or violations as do not and
are not reasonably likely to have in the aggregate a Material Adverse Effect
on ATC. No ATC Private Authorization is the subject of any pending or, to
ATC's knowledge, threatened attack, revocation or termination, except for such
exceptions as are not reasonably likely to have a Material Adverse Effect on
ATC.
4.6 Compliance with Governmental Authorizations and Applicable Law.
(a) ATC has obtained all Governmental Authorizations (collectively, the
"ATC Governmental Authorizations") which are necessary for the ownership or
operation of the ATC Assets or the conduct of the ATC Business as now
conducted and which, if not obtained and maintained, would, individually or
in the aggregate, have any Material Adverse Effect on ATC. None of the ATC
Governmental Authorizations is subject to any restriction or condition
which would limit in a material respect the ownership or operations of the
ATC Assets or the conduct of the ATC Business as currently conducted,
except for restrictions and conditions generally applicable to ATC
Governmental Authorizations of such type. The ATC Governmental
Authorizations are valid and in good standing, are in full force and effect
and are not impaired by any act or omission of ATC or its officers,
directors, employees or agents, and the ownership or operation of the ATC
Assets or the conduct of the ATC Business are in accordance with the ATC
Governmental Authorizations, except for such exceptions to the foregoing
as, individually or in the aggregate, have not had and will not have any
Material Adverse Effect on ATC. All material reports, forms and statements
required to be filed by ATC with all Authorities with respect to the ATC
Business have been filed and are true, complete and accurate in all
material respects. No ATC Governmental Authorization is the subject of any
pending or, to ATC's knowledge, threatened challenge or proceeding to
revoke or terminate any ATC Governmental Authorization which, if revoked or
terminated, would have a Material Adverse Effect on ATC.
(b) ATC is in compliance with all Applicable Laws, except where such
noncompliance, individually or in the aggregate, has not had and is not
reasonably like to have a Material Adverse Effect on ATC. Except as set
forth in Section 4.6(b) of the ATC Disclosure Schedule, there are no Legal
Actions of any kind pending or, to the knowledge of ATC, threatened at law,
in equity or before any Authority against ATC.
4.7. Intangible Assets. Except as set forth in Section 4.7 of the ATC
Disclosure Schedule, no Intangible Assets (except ATC Governmental
Authorizations and ATC Private Authorizations) are required for the ownership
or operation of the ATC Assets or the conduct of the ATC Business as currently
owned, operated and conducted, except for such exceptions to the foregoing as,
individually or in the aggregate, have not had and will not have any Material
Adverse Effect on ATC. ATC does not, to its knowledge, wrongfully infringe
upon or unlawfully use any Intangible Assets owned or claimed by another, and
ATC has not received any notice of any claim or infringement relating to any
such Intangible Asset, except from ATS and except for such exceptions to the
foregoing as, individually or in the aggregate, have not had and will not have
any Material Adverse Effect on ATC.
4.8 Related Transactions. ATC is not a party or subject to any Contractual
Obligation relating to the ownership or operation of the ATC Assets or the
conduct of the ATC Business between ATC and any of its officers, directors or
stockholders or, to the knowledge of ATC, any Affiliate of any thereof,
including without limitation any Contractual Obligation providing for the
furnishing of services to or by, providing for rental of property, real,
personal or mixed, to or from, or providing for the lending or borrowing of
money to or from or otherwise requiring payments to or from, any such Person,
other than (i) Employment Arrangements listed or described in Section 4.14 of
the ATC Disclosure Schedule, (ii) Contractual Obligations between ATC and any
of its directors, stockholders or officers or any Affiliate of any of the
foregoing, which will be terminated, at no
VI-8
<PAGE>
cost or expense to ATC, prior to the Closing, (iii) as specifically set forth
in Section 4.8 of the ATC Disclosure Schedule, or (iv) transactions related to
payments that are a part of the $5.0 million allowance described in Section
6.0(a)(iv)(A).
4.9 Insurance. ATC maintains, with respect to the ATC Assets and the ATC
Business, policies of fire and extended coverage and casualty, liability and
other forms of insurance in such amounts and against such risks and losses as
are customary for companies engaged in similar businesses.
4.10 Tax Matters.
(a) ATC has in accordance with all Applicable Laws filed all Tax Returns
which are required to be filed, and has paid, or made adequate provision
for the payment of, all Taxes which have become due and payable pursuant to
said Tax Returns and all other governmental charges and assessments
received to date other than those Taxes being contested in good faith for
which adequate provision has been made on the most recent balance sheet
forming part of ATC Financial Statements. The Tax Returns of ATC have been
prepared in all material respects in accordance with all Applicable Laws.
All Taxes which ATC is required by law to withhold and collect have been
duly withheld and collected, and have been paid over, in a timely manner,
to the proper Authorities to the extent due and payable. ATC has not
executed any waiver to extend, or otherwise taken or failed to take any
action that would have the effect of extending, the applicable statute of
limitations in respect of any Tax liabilities of ATC for the fiscal years
prior to and including the most recent fiscal year. ATC is not a
"consenting corporation" within the meaning of Section 341(f) of the Code.
ATC has at all times been taxable as a Subchapter C corporation under the
Code, and has never been a member of any consolidated group for Tax
purposes, except as otherwise set forth in Section 4.10(a) of the ATC
Disclosure Schedule.
(b) Federal and state income Tax Returns of ATC have not been examined by
the IRS or applicable state Authority, and ATC has not been notified of any
proposed examination, except as shown in Section 4.10(b) of the ATC
Disclosure Schedule.
(c) ATC is not a party to any tax sharing agreement or arrangement with
any other Person.
(d) All of the ATC stockholders are "U.S. persons" within the meaning of
Section 7701(a)(30) of the Code.
4.11 Employee Retirement Income Security Act of 1974.
(a) ATC (which for purposes of this Section shall include any ERISA
Affiliate of ATC) currently sponsors, maintains and contributes only to the
Plans and Benefit Arrangements set forth in Section 4.11(a) of the ATC
Disclosure Schedule. ATC has delivered or made available to ATS true,
complete and correct copies of (i) each Plan and Benefit Arrangement (or,
in the case of any unwritten Plans or Benefit Arrangements, reasonable
descriptions thereof), (ii) the two most recent annual reports on Form 5500
(including all schedules and attachments thereto) filed with the Internal
Revenue Service with respect to each Plan (if any such report was required
by Applicable Law), (iii) the most recent summary plan description (or
similar document) for each Plan for which such a summary plan description
is required by Applicable Law or was otherwise provided to plan
participants or beneficiaries, and (iv) each trust agreement and insurance
or annuity contract or other funding or financing arrangement relating to
any Plan. To the knowledge of ATC, each such Form 5500 and each such
summary plan description (or similar document) does not, as of the date
hereof, contain any material misstatements. ATC does not contribute to or
have an obligation to contribute to, and has not at any time within six (6)
years prior to the date of this Agreement contributed to or had an
obligation to contribute to, and no Plan listed in Section 4.11(a) of the
ATC Disclosure Schedule is, (i) an employee pension benefit plan within the
meaning of Section 3(2) of ERISA, (ii) a Multiemployer Plan, or (iii) a
Plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV
of ERISA. ATC has no actual or potential liability under Title IV of ERISA.
ATC does not maintain any Plan that provides for post-retirement medical or
life insurance benefits, and ATC does not have any obligation or liability
with respect to any such Plan previously maintained by ATC, except as the
provisions of COBRA may apply to any former employees of ATC. Except as set
forth in Section 4.11(a)
VI-9
<PAGE>
of the ATC Disclosure Schedule, as to all Plans and Benefit Arrangements
listed in Section 4.11(a) of the ATC Disclosure Schedule:
(i) all such Plans and Benefit Arrangements comply and have been
administered in form and in operation in accordance with their
respective terms, and with all Applicable Laws, in all material
respects, and ATC has not received any notice from any Authority
disputing or investigating such compliance;
(ii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iii) there are no Claims (other than routine Claims for benefits or
actions seeking qualified domestic relations orders) pending or, to
ATC's knowledge, threatened involving such Plans or the assets of such
Plans, and, to ATC's knowledge, no facts exist which are reasonably
likely to give rise to any such Claims (other than routine Claims for
benefits or actions seeking qualified domestic relations orders);
(iv) all material contributions to, and material payments from, the
Plans and Benefit Arrangements that may have been required to be made
in accordance with the terms of the Plans and Benefit Arrangements, and
any applicable collective bargaining agreement, have been made. All
such contributions to, and payments from, the Plans and Benefit
Arrangements, except those payments to be made from a trust qualified
under Section 401(a) of the Code, for any period ending before the
Closing Date that are not yet, but will be, required to be made, will
be properly accrued and reflected on the financial books and records of
ATC;
(v) No act, omission or transaction has occurred which would result
in imposition on ATC of (A) any breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (C)
a tax imposed pursuant to Chapter 43 of Subtitle D of the Code;
(vi) ATC has not incurred any material liability to a Plan (other
than for contributions not yet due) which liability has not been fully
paid or accrued for payment as of the date hereof;
(vii) except as otherwise contemplated by this Agreement or the ATC
Disclosure Schedule, no current or former employee of ATC will be
entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any Plan or Benefit
Arrangement as a result of the transactions contemplated by this
Agreement;
(viii) no compensation payable by ATC to any of its employees under
any existing Plan, Benefit Arrangement (including by reason of the
transactions contemplated hereby) will be subject to disallowance under
Section 162(m) of the Code;
(ix) any amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or
independent contractor of ATC who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment arrangement would not be characterized as an
"excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code), except for any amount that is approved by the
stockholders of ATC on or before the Closing Date in the manner
provided in Section 280G(b)(5) of the Code; and
(x) there are no outstanding options (or contractual obligations to
issue options) to acquire ATC Common Stock or other ATC securities
other than options held by employees or directors of ATC and issued
under Benefit Arrangements (the aggregate number of which are as set
forth in Section 4.11(a) of the ATC Disclosure Schedule).
(b) The execution, delivery and performance by ATC of this Agreement and
the Collateral Documents executed or required to be executed by ATC
pursuant hereto and thereto will not involve any prohibited transaction
within the meaning of ERISA or Section 4975 of the Code with respect to any
Plan listed in Section 4.11(a) of the ATC Disclosure Schedule.
VI-10
<PAGE>
4.12 Absence of Sensitive Payments. Neither ATC nor, to ATC's knowledge, any
of its officers, directors, employees, agents or other representatives, has
with respect to the ATC Assets or the ATC Business (a) made any contributions,
payments or gifts to or for the private use of any governmental official,
employee or agent where either the payment or the purpose of such
contribution, payment or gift is illegal under the laws of the United States
or the jurisdiction in which made or (b) established or maintained any
unrecorded fund or asset for any illegal purpose or made any false or
artificial entries on its books.
4.13 Bank Accounts, Etc. Section 4.13 of the ATC Disclosure Schedule
contains a true, accurate and complete list as of the date hereof of all
banks, trust companies, savings and loan associations and brokerage firms in
which ATC has an account or a safe deposit box and the names of all Persons
authorized to draw thereon, to have access thereto, or to authorize
transactions therein, the names of all Persons, if any, holding valid and
subsisting powers of attorney from ATC and a summary statement as to the terms
thereof.
4.14 Employment Arrangements. Section 4.14 of the ATC Disclosure Schedule
contains a true, accurate and complete list of all employees of ATC and its
Subsidiaries as of the date of this Agreement (the "ATC Employees"), together
with each such employee's title or the capacity in which he or she is employed
and each such employee's compensation. ATC has no obligation or liability,
contingent or other, under any Employment Arrangement with any ATC Employee,
other than (i) those listed or described in Section 4.11(a) or Section 4.14 of
the ATC Disclosure Schedule, (ii) those incurred in the ordinary and usual
course of business, or (iii) such obligations or liabilities as do not and
will not have, in the aggregate, any Material Adverse Effect on ATC. Except as
described in Section 4.14 of the ATC Disclosure Schedule, (a) none of the ATC
Employees is now, or since January 1, 1995 has been, represented by any labor
union or other employee collective bargaining organization, and ATC is not,
and never has been, a party to any labor or other collective bargaining
agreement with respect to any of the ATC Employees, (b) there are no pending
grievances, disputes or controversies with any union or any other employee or
collective bargaining organization of such employees, or threats of strikes,
work stoppages or slowdowns or any pending demands for collective bargaining
by any such union or other organization, (c) neither ATC nor any of such
employees is now, or since January 1, 1995 has been, subject to or involved in
or, to ATC's knowledge, threatened with, any union elections, petitions
therefor or other organizational or recruiting activities, in each case with
respect to the ATC Employees, and (d) none of the ATC Employees has notified
ATC that he or she does not intend to continue employment with ATC until the
Closing or with ATS following the Closing. ATC has performed in all material
respects all obligations required to be performed under all Employment
Arrangements of ATC and is not in material breach or violation of or in
material default or arrears under any of the terms, provisions or conditions
thereof.
4.15 Material Agreements. Listed on Section 4.15 of the ATC Disclosure
Schedule are all Material Agreements relating to the ownership or operation of
the ATC Assets or the conduct of the ATC Business or to which ATC is a party
or to which it is bound or which any of the ATC Assets is subject. True,
accurate and complete copies of each of such Material Agreements have been
made available by ATC to ATS. All of such Material Agreements are valid,
binding and legally enforceable obligations of ATC, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and
similar laws affecting the rights and remedies of creditors and obligations of
debtors generally and by general principles of equity. ATC has complied with
all of the material terms and conditions of each such Material Agreement and
has not done or performed, or failed to do or perform (and there is no pending
or, to the knowledge of ATC, threatened in writing Claim with which ATC has
not so complied, done and performed or failed to do and perform) any act which
would invalidate or provide grounds for the other party thereto to terminate
(with or without notice, passage of time or both) such Material Agreement or
impair the rights or benefits, or increase the costs, of ATC under any of such
Material Agreements, except for such noncompliances, acts or omissions that,
individually or in the aggregate, have not had and will not have a Material
Adverse Effect on ATC. Without limiting the generality of the foregoing,
Section 4.15 of the ATC Disclosure Schedule sets forth a true, correct and
complete description of all material acquisitions pending or which are
actively being negotiated and the current status of all such acquisitions,
except for those which ATC cannot disclose due to its obligations to maintain
the same in confidence, none of which, if consummated on the terms and
conditions currently being negotiated, will have a Material Adverse Effect on
ATC.
VI-11
<PAGE>
4.16 Ordinary Course of Business. Since September 30, 1997, except (i) as
may be described on Section 4.16 of the ATC Disclosure Schedule, or (ii) as
may be required or expressly permitted or contemplated by the terms of this
Agreement, ATC:
(a) has operated its business in all material respects in the normal,
usual and customary manner in the ordinary and regular course of business,
consistent with past practice, it being understood that the acquisition and
financing of communications sites and related assets and other business
involved in the communications sites industry and the construction of
communications towers and related assets is part of the ordinary course of
business of ATC;
(b) except in each case in the ordinary course of business, consistent
with past practice, it being understood that the acquisition and financing
of communications sites and related assets and other business involved in
the communications sites industry and the construction of communications
towers and related assets is part of the ordinary course of business of
ATC:
(i) has not incurred any obligation or liability (fixed, contingent
or other) individually having a value in excess of $100,000;
(ii) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any of its properties or assets having a value in
excess of $100,000;
(iii) has not entered into any individual commitment having a value
in excess of $100,000; and
(iv) has not canceled any debts or claims;
(c) has not created or permitted to be created any Lien on any of its
property, except for Permitted Liens;
(d) has not made or committed to make any additions to its property or
any purchases of equipment, except in the ordinary course of business
consistent with past practice or for normal maintenance and replacements;
(e) except in the ordinary course of business consistent with past
practice, has not increased the compensation payable or to become payable
to any of the ATC Employees or otherwise materially altered, modified or
changed the terms of their employment;
(f) has not suffered any damage, destruction or loss (whether or not
covered by insurance) or any acquisition or taking of property by any
Authority that has had or is reasonably likely to have a Material Adverse
Effect on ATC;
(g) has not waived any rights of material value without fair and adequate
consideration;
(h) has not experienced any work stoppage;
(i) except in the ordinary course of business, has not entered into,
amended or terminated any Lease, Governmental Authorization, Private
Authorization, Material Agreement or Employment Arrangement, or any
transaction, agreement or arrangement with any Affiliate of ATC; and
(j) has not made, paid or declared any Distribution.
4.17 Material and Adverse Restrictions. ATC is not a party to or subject to,
nor is any of the ATC Assets subject to, any Applicable Law, Governmental
Authorization, Contractual Obligation, Employment Arrangement, Material
Agreement or Private Authorization, or any other obligation or restriction of
any kind or character, which now has or, as far as ATC can now reasonably
foresee, at any time in the future, individually or in the aggregate, is
likely to have, any Material Adverse Effect on ATC, except as set forth in
Section 4.17 of the ATC Disclosure Schedule and except for matters affecting
the tower rental and construction industry generally.
VI-12
<PAGE>
4.18 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Merger in the capacity of broker, agent
or finder or in any similar capacity on behalf of ATC or, to the knowledge of
ATC, any of the ATC stockholders which, in any case, will result in liability
to the Surviving Corporation which was not reflected in the financial
information heretofore furnished by ATC to ATS.
4.19 Solvency. As of the execution and delivery of this Agreement, ATC is,
and immediately prior to the consummation of the Merger will be, Solvent.
4.20 Environmental Matters. Except as set forth in Section 4.20 of the ATC
Disclosure Schedule, with respect to the ATC Assets and the ATC Business, ATC:
(a) has not been notified that it is potentially liable under, has not
received any request for information or other correspondence concerning its
potential liability with respect to any site or facility under, and, to
ATC's knowledge, is not a "potentially responsible party" under, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act, as amended, or
any similar state law;
(b) has not entered into or received any consent decree, compliance order
or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment, order,
writ, injunction or decree of any Final Order issued pursuant to any
Environmental Law;
(d) has obtained all Environmental Permits required under Environmental
Laws, and has filed all applications, notices and other documents required
to be filed prior to the date of this Agreement to effect the timely
renewal or issuance of all Environmental Permits for the continued conduct
of its business in the manner now conducted;
(e) is in compliance in all material respects with all Environmental
Laws, and is not the subject of or, to ATC's knowledge, threatened with any
Legal Action involving a demand for damages or other potential liability,
including any Lien, with respect to violations or breaches of any
Environmental Law;
(f) has provided ATS with copies of all environmental site assessments,
audits or other investigatory reports in its possession that pertain to any
property currently owned, leased, operated or occupied by ATC;
(g) has not installed or used any above ground or underground storage
tanks, friable asbestos, polychlorinated biphenyls or urea formaldehyde
foam insulation on any property currently owned, leased or operated by ATC
and, to ATC's knowledge, there are no above ground or underground storage
tanks, friable asbestos, polychlorinated biphenyls or urea formaldehyde
foam insulation or any property currently owned, leased or operated by ATC;
(h) has not disposed of, released, spilled or buried any Hazardous
Materials (nor has any Person acting on its behalf done so) in violation of
Environmental Laws on any property or facility owned, leased, operated or
occupied by ATC or to ATC's knowledge at any facility or site to which
Hazardous Materials from or generated by ATC may have been taken at any
time in the past;
(i) has no knowledge of any disposal, release, spill or burial of any
Hazardous Materials by ATC (or any Person acting on its behalf) on any
property which could reasonably be expected to result or has resulted in
contamination which requires investigation, remediation or other response
activity on or beneath any properties or facilities currently owned,
leased, operated or occupied by ATC; and
(j) has no knowledge of any past or present Event related to ATC's
properties, operations or business, which Event, individually or in the
aggregate, could reasonably be expected to interfere with or prevent
continued material compliance with all Environmental Laws applicable to the
conduct of ATC's business in the manner now conducted, or which,
individually or in the aggregate, could reasonably be expected to form the
basis of any material Claim against ATC in connection with the release or
threatened release into the environment of any Hazardous Material.
VI-13
<PAGE>
4.21 Capital Stock. The authorized and outstanding capital stock of ATC is
as set forth in Section 4.21 of the ATC Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is
fully paid and nonassessable and is owned of record and, to ATC's knowledge,
beneficially as shown in Section 4.21 of the ATC Disclosure Schedule. Except
as described in Section 4.21 of the ATC Disclosure Schedule, ATC has not
granted or issued, nor has ATC agreed to grant or issue, any shares of its
capital stock or any Option Security or Convertible Security, and ATC is not a
party to or bound by any agreement, put or commitment pursuant to which it is
obligated to purchase, redeem or otherwise acquire any shares of capital stock
or any Option Security or Convertible Security. The affirmative vote of the
holders of a majority of the shares of ATC Common Stock (the "ATC Required
Vote") is the only unobtained vote necessary to approve and adopt this
Agreement and the transactions contemplated by this Agreement. As of the date
of this Agreement, [e] votes constituted a majority of the outstanding voting
power of the ATC Common Stock.
4.22 State Takeover Statutes. To ATC's knowledge, no state takeover Law,
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated by this
Agreement.
ARTICLE 5
Representations and Warranties of ATS
ATS hereby represents and warrants to ATC as follows (it being understood
and agreed by the parties that, except as the context otherwise requires, the
representations and warranties of ATS set forth in this Article shall apply to
each of its Subsidiaries with the same force and effect as though each of them
were named in each Section hereof):
5.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) ATS is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all
requisite power and authority (corporate and other) to own or hold under
lease its properties and to conduct its business as now conducted and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which the character of the property owned or leased by it
or the nature of its business or operations requires such qualification,
except for such qualifications the failure of which to obtain, individually
or in the aggregate, would not have a Material Adverse Effect on ATS.
(b) ATS has all requisite power and authority (corporate and other) and
has in full force and effect all Governmental Authorizations and Private
Authorizations necessary to enable it to execute and deliver, and to
perform its obligations under, this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto and to
consummate the Transactions to which ATS is a party; and the execution,
delivery and performance of this Agreement and each Collateral Document
executed or required to be executed by it pursuant hereto or thereto have
been duly authorized by all requisite corporate or other action on the part
of ATS, including without limitation by the requisite approval of ARS, as
the sole stockholder of ATS, and no other corporate proceedings on the part
of ATS are necessary to authorize this Agreement or the transactions
contemplated hereby or to consummate the Merger or the other transactions
so contemplated. This Agreement has been duly executed and delivered by ATS
and constitutes, and each Collateral Document executed or required to be
executed by it pursuant hereto or thereto or to consummate the Transactions
when executed and delivered by ATS will constitute, legal, valid and
binding obligations of ATS, enforceable in accordance with their respective
terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement, voidable preference,
fraudulent conveyance and other similar laws relating to or affecting the
rights of creditors and except as the same may be subject to the effect of
general principles of equity.
(c) Except as set forth in Section 5.1(c) of the ATS Disclosure Schedule,
neither the execution and delivery by ATS of this Agreement or any
Collateral Document executed or required to be executed by it
VI-14
<PAGE>
pursuant hereto or thereto, nor the consummation of the Transactions by
ATS, nor compliance with the terms, conditions and provisions hereof or
thereof by ATS:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of ATS or any
Applicable Law, or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any requirement of giving
of notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such
acceleration in, any Material Agreement of ATS; or
(ii) will require ATS to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization including
without limitation under the FCA, except as required by the Hart-Scott-
Rodino Act and other than any of the foregoing that have been obtained.
(d) Except as set forth in Section 5.1(d) of the ATS Disclosure Schedule,
ATS does not have any Subsidiaries, each of which is (i) wholly-owned
unless noted otherwise in Section 5.1(d) of the ATS Disclosure Schedule,
(ii) an Entity which is duly organized, validly existing and in good
standing under the laws of the respective state of organization, and (iii)
duly qualified and in good standing as a foreign corporation or other
Entity in each other jurisdiction in which the character of the property
owned or leased by it or the nature of its business or operations requires
such qualification, with full power and authority (corporate and other) to
carry on the business in which it is engaged, except for such
qualifications the failure of which to obtain, individually or in the
aggregate, would not have a Material Adverse Effect on ATS. ATS owns,
directly or indirectly, all of the outstanding capital stock and equity
interests of each Subsidiary, free and clear of all Liens (except for
Permitted Liens or except as set forth on Section 5.1(d) of the ATS
Disclosure Schedule), and all such stock or other equity interests has been
duly authorized and validly issued and is fully paid and nonassessable.
There are no outstanding Option Securities or Convertible Securities, or
agreements or understandings of any nature whatsoever, relating to the
authorized and unissued or outstanding capital stock or equity interests of
any Subsidiary of ATS, except as set forth in Section 5.1(d) of the ATS
Disclosure Schedule with respect to the noncorporate Subsidiaries of ATS.
5.2 Financial and Other Information. The financial statements of ATS,
furnished by ATS, and included in the ATS Information Statement (the "ATS
Financial Statements"), including in each case the notes thereto, have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, except as otherwise noted therein or as set forth in
Section 5.2 of the ATS Disclosure Schedule, and fairly present in all material
respects the financial condition and the results of operations and cash flow
of ATS, on the bases therein stated, as of the respective dates thereof, and
for the respective periods covered thereby subject, in the case of unaudited
financial statements, to normal nonmaterial year-end audit adjustments and
accruals.
5.3 Material Statements and Omissions; Absence of Events. Neither any
representation or warranty made by ATS contained in this Agreement or any
certificate, document or other instrument or other information furnished or to
be furnished by ATS pursuant to the provisions hereof (including without
limitation information with respect to ATS included in the ATS Prospectus and
the ATS Registration Statement) nor the ATS Disclosure Schedule or the ATS
Information Statement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact required to
make any statement contained herein or therein, in light of the circumstances
under which they were made, not misleading; provided, however, that to the
extent that any such information contains any financial projections, ATS
represents and warrants only that such projections have been prepared in good
faith on the basis of the ATS Financial Statements and other information and
assumptions which ATS believes to be reasonable. Since the date of the most
recent financial statements constituting a part of the ATS Financial
Statements, except to the extent specifically described in Section 5.3 of the
ATS Disclosure Schedule, there has been no change in ATS which has had a
Material Adverse Effect on ATS. There is no Event known to ATS which has had,
or (so far as ATS can now reasonably foresee) is likely to have, a Material
Adverse Effect on ATS, except to the extent specifically described in Section
5.3 of the ATS Disclosure Schedule and except for matters affecting the tower
rental, ownership and construction
VI-15
<PAGE>
industry generally, including without limitation competition, regulation and
resources or events arising out of the execution or public announcement of
this Agreement.
5.4 Title to Properties; Leases.
(a) ATS has, to ATS' knowledge, good and indefeasible title to all of its
real property (other than leasehold real property) and good title to all of
its other assets (other than real property), tangible and intangible (the
"ATS Assets"); all of such real property and other assets are so owned, in
each case, free and clear of all Liens, except (i) Permitted Liens, and
(ii) Liens set forth on Section 5.4(a) of the ATS Disclosure Schedule.
Except for financing statements evidencing Liens referred to in the
preceding sentence, no financing statements under the Uniform Commercial
Code and no other filing which names ATS as debtor or which covers or
purports to cover any of the ATS Assets is on file in any state or other
jurisdiction, and ATS has not signed or agreed to sign any such financing
statement or filing or any agreement authorizing any secured party
thereunder to file any such financing statement or filing. Except as
disclosed in Section 5.4(a) of the ATS Disclosure Schedule, all
improvements on the real property owned or leased by ATS are, to ATS'
knowledge, in compliance with applicable zoning, wetlands and land use
laws, ordinances and regulations and applicable title covenants,
conditions, restrictions and reservations in all respects necessary to
conduct the operations as presently conducted, except for any instances of
non-compliance which do not and will not in the aggregate have a Material
Adverse Effect on ATS. Except as disclosed in Section 5.4(a) of the ATS
Disclosure Statement, all such improvements comply with all Applicable
Laws, ATS Governmental Authorizations and ATS Private Authorizations,
except where noncompliance is not reasonably likely to have a Material
Adverse Effect on ATS. There is no pending or, to ATS' knowledge,
threatened or contemplated action to take by eminent domain or otherwise to
condemn any part of any real property constituting a material portion of
the real property owned by ATS or, to ATS' knowledge, any real property
leased by ATS. Except as set forth in Section 5.4(a) of the ATS Disclosure
Schedule, such real property (other than land), fixtures, fixed assets and
other material items of personal property, including equipment, have, in
ATS' reasonable business judgment, been maintained in a manner consistent
with customary industry practices and currently permit the business of ATS
(the "ATS Business") to be operated in all material respects in accordance
with the terms and conditions of all Applicable Laws, ATS Governmental
Authorizations and ATS Private Authorizations.
(b) Each Lease or other occupancy or other agreement under which ATS
holds real or personal property constituting a part of the ATS Assets has
been duly authorized, executed and delivered by or assigned to ATS and, to
ATS' knowledge, each of the other parties thereto, and is a legal, valid
and binding obligation of ATS, and, to ATS' knowledge, each of the other
parties thereto, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and
similar laws affecting the rights and remedies of creditors and obligations
of debtors generally and by general principles of equity, and except for
such exceptions to the foregoing as, individually or in the aggregate, have
not had and will not have any Material Adverse Effect on ATS. ATS has a
valid leasehold interest in and enjoys peaceful and undisturbed possession
under all Leases pursuant to which it holds any such real property or
tangible personal property, subject to the terms of each such Lease and
Applicable Law and except for such exceptions to the foregoing as,
individually or in the aggregate, have not had and will not have any
Material Adverse Effect on ATS. All of such Leases are valid and subsisting
and in full force and effect, and neither ATS nor, to ATS' knowledge, any
other party thereto, is in material default in the performance, observance
or fulfillment of any obligation, covenant or condition contained in any
such Lease, except for such exceptions to the foregoing as, individually or
in the aggregate, have not had and will not have any Material Adverse
Effect on ATS.
5.5 Compliance with Private Authorizations. ATS has obtained all Private
Authorizations (collectively, the "ATS Private Authorizations") which are
necessary for the ownership or operation of the ATS Assets or the conduct of
the ATS Business which, if not obtained and maintained, could, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect on
ATS. All of the ATS Private Authorizations are valid and in good standing and
are in full force and effect, except for such exceptions as are not reasonably
likely to
VI-16
<PAGE>
have a Material Adverse Effect on ATS. ATS is not in breach or violation of,
or in default in the performance, observance or fulfillment of, any ATS
Private Authorization, and no Event exists or has occurred, which constitutes,
or but for any requirement of giving of notice or passage of time or both
would constitute, such a breach, violation or default, under any ATS Private
Authorization, except for such defaults, breaches or violations as do not and
are not reasonably likely to have in the aggregate a Material Adverse Effect
on ATS. No ATS Private Authorization is the subject of any pending or, to ATS'
knowledge, threatened attack, revocation or termination, except for such
exceptions as are not reasonably likely to have a Material Adverse Effect on
ATS.
5.6 Compliance with Governmental Authorizations and Applicable Law.
(a) ATS has obtained all Governmental Authorizations (collectively, the
"ATS Governmental Authorizations") which are necessary for the ownership or
operation of the ATS Assets or the conduct of the ATS Business as now
conducted and which, if not obtained and maintained, would, individually or
in the aggregate, have any Material Adverse Effect on ATS. None of the ATS
Governmental Authorizations is subject to any restriction or condition
which would limit in a material respect the ownership or operations of the
ATS Assets or the conduct of the ATS Business as currently conducted,
except for restrictions and conditions generally applicable to ATS
Governmental Authorizations of such type. The ATS Governmental
Authorizations are valid and in good standing, are in full force and effect
and are not impaired by any act or omission of ATS or its officers,
directors, employees or agents, and the ownership or operation of the ATS
Assets or the conduct of the ATS Business are in accordance with the ATS
Governmental Authorizations, except for such exceptions to the foregoing
as, individually or in the aggregate, have not had and will not have any
Material Adverse Effect on ATS. All material reports, forms and statements
required to be filed by ATS with all Authorities with respect to the ATS
Business have been filed and are true, complete and accurate in all
material respects. No ATS Governmental Authorization is the subject of any
pending or, to ATS' knowledge, threatened challenge or proceeding to revoke
or terminate any ATS Governmental Authorization which, if revoked or
terminated, would have a Material Adverse Effect on ATS.
(b) ATS is in compliance with all Applicable Laws, except where such
noncompliance, individually or in the aggregate, has not had and is not
reasonably like to have a Material Adverse Effect on ATS. Except as set
forth in Section 5.6(b) of the ATS Disclosure Schedule, there are no Legal
Actions of any kind pending or, to the knowledge of ATS, threatened at law,
in equity or before any Authority against ATS.
5.7 Intangible Assets. Except as set forth in Section 5.7 of the ATS
Disclosure Schedule, no Intangible Assets (except ATS Governmental
Authorizations and ATS Private Authorizations) are required for the ownership
or operation of the ATS Assets or the conduct of the ATS Business as currently
owned, operated and conducted, except for such exceptions to the foregoing as,
individually or in the aggregate, have not had and will not have any Material
Adverse Effect on ATS. ATS does not, to its knowledge, wrongfully infringe
upon or unlawfully use any Intangible Assets owned or claimed by another, and
ATS has not received any notice of any claim or infringement relating to any
such Intangible Asset, except for such exceptions to the foregoing as,
individually or in the aggregate, have not had and will not have any Material
Adverse Effect on ATS.
5.8 Related Transactions. ATS is not a party or subject to any material
Contractual Obligation relating to the ownership or operation of the ATS
Assets or the conduct of the ATS Business between ATS and any of its officers,
directors or stockholders or, to the knowledge of ATS, any Affiliate of any
thereof, including without limitation any Contractual Obligation providing for
the furnishing of services to or by, providing for rental of property, real,
personal or mixed, to or from, or providing for the lending or borrowing of
money to or from or otherwise requiring payments to or from, any such Person,
other than (i) Employment Arrangements listed or described in Section 5.13 of
the ATS Disclosure Schedule, (ii) Contractual Obligations between ATS and any
of its directors, stockholders or officers or any Affiliate of any of the
foregoing, which are on arms' length terms and conditions, (iii) as
specifically set forth in Section 5.8 of the ATS Disclosure Schedule;
provided, however, that the foregoing representation and warranty shall not
apply to the fact that prior to the consummation of the CBS Merger, all
administrative, accounting, corporate, data processing and other
informational, financial, human resources services, legal and other support
services will have been provided by ARS to ATS and without which
VI-17
<PAGE>
services ATS could not operate in the ordinary course of business. Following
consummation of the Merger, a sufficient number of the individuals presently
providing such services to ATS on behalf of ARS will continue to be available
to provide services consistent with past practice to ATS so that ATS will be
able to operate in the ordinary course of business.
5.9 Insurance. ATS maintains, with respect to the ATS Assets and the ATS
Business, policies of fire and extended coverage and casualty, liability and
other forms of insurance in such amounts and against such risks and losses as
are customary for companies engaged in similar businesses.
5.10 Tax Matters.
(a) ATS has in accordance with all Applicable Laws filed all Tax Returns
which are required to be filed, and has paid, or made adequate provision
for the payment of, all Taxes which have become due and payable pursuant to
said Tax Returns and all other governmental charges and assessments
received to date other than those Taxes being contested in good faith for
which adequate provision has been made on the most recent balance sheet
forming part of ATS Financial Statements. The Tax Returns of ATS have been
prepared in all material respects in accordance with all Applicable Laws.
All Taxes which ATS is required by law to withhold and collect have been
duly withheld and collected, and have been paid over, in a timely manner,
to the proper Authorities to the extent due and payable. ATS has not
executed any waiver to extend, or otherwise taken or failed to take any
action that would have the effect of extending, the applicable statute of
limitations in respect of any Tax liabilities of ATS for the fiscal years
prior to and including the most recent fiscal year. ATS is not a
"consenting corporation" within the meaning of Section 341(f) of the Code.
ATS has at all times been taxable as a Subchapter C corporation under the
Code, and has never been a member of any consolidated group for Tax
purposes, except as a member of the consolidated group with ARS and all of
its Subsidiaries which can be consolidated for Federal income tax purposes.
(b) Federal and state income Tax Returns of ATS have not been examined by
the IRS or applicable state Authority, and ATS has not been notified of any
proposed examination, except as shown in Section 5.10(b) of the ATS
Disclosure Schedule.
(c) ATS is not a party to any tax sharing agreement or arrangement with
any other Person, except as set forth in Section 5.10(c) of the ATS
Disclosure Schedule.
5.11 Employee Retirement Income Security Act of 1974.
(a) ATS (which for purposes of this Section shall include any ERISA
Affiliate of ATS) currently sponsors, maintains and contributes only to the
Plans and Benefit Arrangements set forth in Section 5.11(a) of the ATS
Disclosure Schedule. ATS has delivered or made available to ATC true,
complete and correct copies of (i) each Plan and Benefit Arrangement (or,
in the case of any unwritten Plans or Benefit Arrangements, reasonable
descriptions thereof), (ii) the two most recent annual reports on Form 5500
(including all schedules and attachments thereto) filed with the Internal
Revenue Service with respect to each Plan (if any such report was required
by Applicable Law), (iii) the most recent summary plan description (or
similar document) for each Plan for which such a summary plan description
is required by Applicable Law or was otherwise provided to plan
participants or beneficiaries, and (iv) each trust agreement and insurance
or annuity contract or other funding or financing arrangement relating to
any Plan. To the knowledge of ATS, each such Form 5500 and each such
summary plan description (or similar document) does not, as of the date
hereof, contain any material misstatements. ATS does not contribute to or
have an obligation to contribute to, and has not at any time within six (6)
years prior to the date of this Agreement contributed to or had an
obligation to contribute to, and no Plan listed in Section 5.11(a) of the
ATS Disclosure Schedule is, (i) a Multiemployer Plan, or (ii) a Plan
subject to Section 412 of the Code, Section 302 of ERISA or Title IV of
ERISA. ATS has no actual or potential liability under Title IV of ERISA.
ATS does not maintain any Plan that provides for post-retirement medical or
life insurance benefits, and ATS does not have any obligation or liability
with respect to any such Plan previously maintained by ATS, except as the
provisions of COBRA may apply to any former employees of ATS. Except as set
forth
VI-18
<PAGE>
in Section 5.11(a) of the ATS Disclosure Schedule, as to all Plans and
Benefit Arrangements listed in Section 5.11(a) of the ATS Disclosure
Schedule:
(i) all such Plans and Benefit Arrangements comply and have been
administered in form and in operation in accordance with their
respective terms, and with all Applicable Laws, in all material
respects, and ATS has not received any notice from any Authority
disputing or investigating such compliance;
(ii) none of the assets of any such Plan are invested in employer
securities or employer real property;
(iii) there are no Claims (other than routine Claims for benefits or
actions seeking qualified domestic relations orders) pending or, to
ATS' knowledge, threatened involving such Plans or the assets of such
Plans, and, to ATS' knowledge, no facts exist which are reasonably
likely to give rise to any such Claims (other than routine Claims for
benefits or actions seeking qualified domestic relations orders);
(iv) all material contributions to, and material payments from, the
Plans and Benefit Arrangements that may have been required to be made
in accordance with the terms of the Plans and Benefit Arrangements, and
any applicable collective bargaining agreement, have been made. All
such contributions to, and payments from, the Plans and Benefit
Arrangements, except those payments to be made from a trust qualified
under Section 401(a) of the Code, for any period ending before the
Closing Date that are not yet, but will be, required to be made, will
be properly accrued and reflected on the financial books and records of
ATS;
(v) No act, omission or transaction has occurred which would result
in imposition on ATS of (A) any breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (C)
a tax imposed pursuant to Chapter 43 of Subtitle D of the Code;
(vi) ATS has not incurred any material liability to a Plan (other
than for contributions not yet due) which liability has not been fully
paid or accrued for payment as of the date hereof;
(vii) except as otherwise contemplated by this Agreement or the ATS
Disclosure Schedule, no current or former employee of ATS will be
entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any Plan or Benefit
Arrangement as a result of the transactions contemplated by this
Agreement;
(viii) no compensation payable by ATS to any of its employees under
any existing Plan, Benefit Arrangement (including by reason of the
transactions contemplated hereby) will be subject to disallowance under
Section 162(m) of the Code;
(ix) any amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or
independent contractor of ATS who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment arrangement would not be characterized as an
"excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code);
(x) all such Plans maintained by ATS that are intended to comply with
Sections 401 and 501 of the Code comply in all material respects with
all applicable requirements of such sections, and no Event has occurred
which is known to ATS which will give rise to disqualification of any
such Plan under such sections or to a tax under Section 511 of the Code
and each such Plan has been the subject of a determination letter from
the Internal Revenue Service to the effect that such Plan and related
trust is qualified and exempt from Federal income Taxes under Sections
401(a) and 501(a), respectively, of the Code; no such determination
letter has been revoked, and, to the knowledge of ATS, revocation has
not been threatened. ATS has delivered or made available to ATC a copy
of the most recent determination letter received with respect to each
Plan for which such a letter has been issued, as well as a copy of any
pending application for a determination letter. ATS has also provided
or made
VI-19
<PAGE>
available to ATC a list of all Plan amendments as to which a favorable
determination letter has not yet been received;
(xi) no Plan which is an employee stock ownership plan (an "ESOP")
constitutes a leveraged employee stock ownership plan within the
meaning of Section 4975(e)(7) of the Code and there are no unallocated
shares of stock of ATS currently held under any such ESOP in a suspense
account; and
(xii) there are no outstanding options (or contractual obligations to
issue options) to acquire ATS Common Stock or other ATS securities
other than options held by employees or directors of ATS and issued
under Benefit Arrangements (the aggregate number of which are as set
forth in Section 5.11(a) of the ATS Disclosure Schedule).
(b) The execution, delivery and performance by ATS of this Agreement and
the Collateral Documents executed or required to be executed by ATS
pursuant hereto and thereto will not involve any prohibited transaction
within the meaning of ERISA or Section 4975 of the Code with respect to any
Plan listed in Section 5.11(a) of the ATS Disclosure Schedule.
5.12 Absence of Sensitive Payments. Neither ATS nor, to ATS' knowledge, any
of its officers, directors, employees, agents or other representatives, has
with respect to the ATS Assets or the ATS Business (a) made any contributions,
payments or gifts to or for the private use of any governmental official,
employee or agent where either the payment or the purpose of such
contribution, payment or gift is illegal under the laws of the United States
or the jurisdiction in which made or (b) established or maintained any
unrecorded fund or asset for any illegal purpose or made any false or
artificial entries on its books.
5.13 Employment Arrangements. ATS has no obligation or liability, contingent
or other, under any Employment Arrangement with any employee of ATS or any of
its Subsidiaries (the "ATS Employees"), other than (i) those listed or
described in Section 5.11(a) or Section 5.13 of the ATS Disclosure Schedule,
(ii) those incurred in the ordinary and usual course of business, or (iii)
such obligations or liabilities as do not and will not have, in the aggregate,
any Material Adverse Effect on ATS. Except as described in Section 5.13 of the
ATS Disclosure Schedule, (a) none of the ATS Employees is now, or since its
organization has been, represented by any labor union or other employee
collective bargaining organization, and ATS is not, and never has been, a
party to any labor or other collective bargaining agreement with respect to
any of the ATS Employees, (b) there are no pending grievances, disputes or
controversies with any union or any other employee or collective bargaining
organization of such employees, or threat of strikes, work stoppages or
slowdowns or any pending demands for collective bargaining by any such union
or other organization, (c) neither ATS nor any of such employees is now, or
since its organization has been, subject to or involved in or, to ATS'
knowledge, threatened with, any union elections, petitions therefor or other
organizational or recruiting activities, in each case with respect to the ATS
Employees, and (d) none of the ATS Employees has notified ATS that he or she
does not intend to continue employment with ATS until the Closing or with ATS
following the Closing. ATS has performed in all material respects all
obligations required to be performed under all Employment Arrangements of ATS
and is not in material breach or violation of or in material default or
arrears under any of the terms, provisions or conditions thereof.
5.14 Material Agreements. Listed on Section 5.14 of the ATS Disclosure
Schedule are all Material Agreements relating to the ownership or operation of
the ATS Assets or the conduct of the ATS Business or to which ATS is a party
or to which it is bound or which any of the ATS Assets is subject. True,
accurate and complete copies of each of such Material Agreements have been
made available by ATS to ATC. All of such Material Agreements are valid,
binding and legally enforceable obligations of ATS, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and
similar laws affecting the rights and remedies of creditors and obligations of
debtors generally and by general principles of equity. ATS has complied with
all of the material terms and conditions of each such Material Agreement and
has not done or performed, or failed to do or perform (and there is no pending
or, to the knowledge of ATS, threatened in writing Claim with which ATS has
not so complied, done and performed or failed to do and perform) any act which
would invalidate or provide grounds for the other party thereto to terminate
(with or without notice, passage of time or both) such
VI-20
<PAGE>
Material Agreement or impair the rights or benefits, or increase the costs, of
ATS under any of such Material Agreements, except for such noncompliances,
acts or omissions that, individually or in the aggregate, have not had and
will not have a Material Adverse Effect on ATS. Without limiting the
generality of the foregoing, Section 5.14 of the ATS Disclosure Schedule sets
forth a true, correct and complete description of all material acquisitions
pending or which are actively being negotiated and the current status of all
such acquisitions, except for those which ATS cannot disclose due to its
obligations to maintain the same in confidence, none of which, if consummated
on the terms and conditions currently being negotiated, will have a Material
Adverse Effect on ATS.
5.15 Ordinary Course of Business. Since September 30, 1997, except (i) as
may be described on Section 5.15 of the ATS Disclosure Schedule, or (ii) as
may be required or expressly permitted or contemplated by the terms of this
Agreement, ATS:
(a) has operated its business in all material respects in the normal,
usual and customary manner in the ordinary and regular course of business,
consistent with past practice, it being understood that the acquisition and
financing of communications sites and related assets and other business
involved in the communications sites industry and the construction of
communications towers and related assets is part of the ordinary course of
business of ATS;
(b) except in each case in the ordinary course of business, consistent
with past practice, it being understood that the acquisition and financing
of communications sites and related assets and other business involved in
the communications sites industry and the construction of communications
towers and related assets is part of the ordinary course of business of
ATS:
(i) has not incurred any obligation or liability (fixed, contingent
or other) individually having a value in excess of $100,000;
(ii) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any of its properties or assets having a value in
excess of $100,000;
(iii) has not entered into any individual commitment having a value
in excess of $100,000; and
(iv) has not canceled any debts or claims;
(c) has not created or permitted to be created any Lien on any of its
property, except for Permitted Liens;
(d) has not made or committed to make any additions to its property or
any purchases of equipment, except in the ordinary course of business
consistent with past practice or for normal maintenance and replacements;
(e) except in the ordinary course of business consistent with past
practice, has not increased the compensation payable or to become payable
to any of the ATS Employees or otherwise materially altered, modified or
changed the terms of their employment;
(f) has not suffered any damage, destruction or loss (whether or not
covered by insurance) or any acquisition or taking of property by any
Authority that has had or is reasonably likely to have a Material Adverse
Effect on ATS;
(g) has not waived any rights of material value without fair and adequate
consideration;
(h) has not experienced any work stoppage;
(i) except in the ordinary course of business, has not entered into,
amended or terminated any Lease, Governmental Authorization, Private
Authorization, Material Agreement or Employment Arrangement, or any
transaction, agreement or arrangement with any Affiliate of ATS; and
(j) has not made, paid or declared any Distribution.
5.16 Material and Adverse Restrictions. ATS is not a party to or subject to,
nor is any of the ATS Assets subject to, any Applicable Law, Governmental
Authorization, Contractual Obligation, Employment Arrangement, Material
Agreement or Private Authorization, or any other obligation or restriction of
any kind or
VI-21
<PAGE>
character, which now has or, as far as ATS can now reasonably foresee, at any
time in the future, individually or in the aggregate, is likely to have, any
Material Adverse Effect on ATS, except as set forth in Section 5.16 of the ATS
Disclosure Schedule and except for matters affecting the tower rental and
construction industry generally.
5.17 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Merger in the capacity of broker, agent
or finder or in any similar capacity on behalf of ATS or, to the knowledge of
ATS, ARS which, in each case, will result in liability to the Surviving
Corporation which was not reflected in the financial information heretofore
furnished by ATS to ATC.
5.18 Solvency. As of the execution and delivery of this Agreement, ATS is,
and immediately prior to the consummation of the Merger will be, Solvent.
5.19 Environmental Matters. Except as set forth in Section 5.19 of the ATS
Disclosure Schedule, with respect to the ATS Assets and the ATS Business, ATS:
(a) has not been notified that it is potentially liable under, has not
received any request for information or other correspondence concerning its
potential liability with respect to any site or facility under, and, to
ATS' knowledge, is not a "potentially responsible party" under, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act, as amended, or
any similar state law;
(b) has not entered into or received any consent decree, compliance order
or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment, order,
writ, injunction or decree of any Final Order issued pursuant to any
Environmental Law;
(d) has obtained all Environmental Permits required under Environmental
Laws, and has filed all applications, notices and other documents required
to be filed prior to the date of this Agreement to effect the timely
renewal or issuance of all Environmental Permits for the continued conduct
of its business in the manner now conducted;
(e) is in compliance in all material respects with all Environmental
Laws, and is not the subject of or, to ATS' knowledge, threatened with any
Legal Action involving a demand for damages or other potential liability,
including any Lien, with respect to violations or breaches of any
Environmental Law;
(f) has provided ATC with copies of all environmental site assessments,
audits or other investigatory reports in its possession that pertain to any
property currently owned, leased, operated or occupied by ATS;
(g) has not installed or used any above ground or underground storage
tanks, friable asbestos, polychlorinated biphenyls or urea formaldehyde
foam insulation on any property currently owned, leased or operated by ATS
and, to ATS' knowledge, there are no above ground or underground storage
tanks, friable asbestos, polychlorinated biphenyls or urea formaldehyde
foam insulation or any property currently owned, leased or operated by ATS;
(h) has not disposed of, released, spilled or buried any Hazardous
Materials (nor has any Person acting on its behalf done so) in violation of
Environmental Laws on any property or facility owned, leased, operated or
occupied by ATS or to ATS' knowledge at any facility or site to which
Hazardous Materials from or generated by ATS may have been taken at any
time in the past;
(i) has no knowledge of any disposal, release, spill or burial of any
Hazardous Materials by ATS (or any Person acting on its behalf) on any
property which could reasonably be expected to result or has resulted in
contamination which requires investigation, remediation or other response
activity on or beneath any properties or facilities currently owned,
leased, operated or occupied by ATS; and
(j) has no knowledge of any past or present Event related to ATS'
properties, operations or business, which Event, individually or in the
aggregate, could reasonably be expected to interfere with or prevent
continued material compliance with all Environmental Laws applicable to the
conduct of ATS' business in the manner now conducted, or which,
individually or in the aggregate, could reasonably be expected to form
VI-22
<PAGE>
the basis of any material Claim against ATS in connection with the release
or threatened release into the environment of any Hazardous Material.
5.20 Capital Stock. The authorized and outstanding capital stock of ATS is
as set forth in Section 5.20 of the ATS Disclosure Schedule. All of such
outstanding capital stock has been duly authorized and validly issued, is
fully paid and nonassessable and is owned of record and, to ATS' knowledge,
beneficially by ARS. Except as described in Section 5.20 of the ATS Disclosure
Schedule, ATS has not granted or issued, nor has ATS agreed to grant or issue,
any shares of its capital stock or any Option Security or Convertible
Security, and ATS is not a party to or bound by any agreement, put or
commitment pursuant to which it is obligated to purchase, redeem or otherwise
acquire any shares of capital stock or any Option Security or Convertible
Security. The shares of ATS Class A Common Stock to be issued pursuant to
consummation of the Merger or upon exercise of the ATS Options have been duly
authorized and, when so issued, will be validly issued, fully paid and
nonassumable, and all such shares have been duly reserved for issuance
pursuant to such consummation or exercise.
5.21 State Takeover Statutes. To ATS' knowledge, no state takeover Law,
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement or any of the transactions contemplated by this
Agreement.
5.22 ATS Private Placement. ATS and the Persons named in the ATS Information
Statement (and possible other Persons) intend to enter into binding and
definitive documentation substantially on the terms and conditions described
in the ATS Information Statement with respect to the ATS Private Placement.
Pursuant to such documentation, ATS and such Persons will have agreed to
purchase shares of ATS Class B Common Stock for a per share purchase price of
not less than $9.00 per share and for an aggregate purchase price equal to not
less than $80.0 million on such other terms and conditions not materially less
favorable, in the aggregate, to ATS than those described in the ATS
Information Statement.
5.23 ARS Organization and Business; Power and Authority; Effect of
Transaction.
(a) ARS is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all
requisite power and authority (corporate and other) to own or hold under
lease its properties and to conduct its business as now conducted and is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which the character of the property owned or leased by it
or the nature of its business or operations requires such qualification,
except for such qualifications the failure of which to obtain, individually
or in the aggregate, would not have a Material Adverse Effect on ARS.
(b) ARS has all requisite power and authority (corporate and other) and
has in full force and effect all Governmental Authorizations and Private
Authorizations necessary to enable it to execute and deliver, and to
perform its obligations under, the CBS Merger Agreement and each agreement
or other document executed or required to be executed by it pursuant
thereto, including without limitation the ATS Separation Agreement, and to
consummate the CBS Merger and the Tower Distribution; and the execution,
delivery and performance of the CBS Merger Agreement and each agreement or
other document executed or required to be executed by ARS pursuant thereto,
including without limitation the ATS Separation Agreement, have been duly
authorized by all requisite corporate or other action on the part of ARS,
and no other corporate proceedings on the part of ARS, including without
limitation that of the ARS common stockholders, are necessary to authorize
the CBS Merger Agreement or the transactions contemplated thereby,
including without limitation the ATS Separation Agreement, or to consummate
the CBS Merger and the Tower Distribution. The CBS Merger Agreement has
been duly executed and delivered by ARS and constitutes, and each agreement
or other document executed or required to be executed by it pursuant
thereto or to consummate the CBS Merger and the Tower Distribution, when
executed and delivered by ARS will constitute, legal, valid and binding
obligations of ARS, enforceable in accordance with their respective terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance and other similar laws relating to or affecting the rights of
creditors and except as the same may be subject to the effect of general
principles of equity. No
VI-23
<PAGE>
consent or approval from the stockholders of ARS is required to consummate
the Merger (including the issuance of the Merger Consideration) or the
Tower Distribution, except that a waiver of the restricted payments
covenant of the Certificate of Designation with respect to the ARS
Cumulative Preferred Stock (the "ARS Preferred Certificate") will be
required from the holders thereof in order to effect the Tower
Distribution, whether pursuant to the CBS Merger Agreement or otherwise.
(c) Except as set forth in Section 5.23(c) of the ATS Disclosure Schedule
or in Section 5.23(b), neither the execution and delivery by ARS of the CBS
Merger Agreement or any agreement or other document executed or required to
be executed by it pursuant thereto, nor the consummation of the CBS Merger
or the Tower Distribution by ARS, nor compliance with the terms, conditions
and provisions hereof or thereof by ARS:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of ARS or any
Applicable Law, or will conflict with, or result in a breach or
violation of, or constitute a default under, or permit the acceleration
of any obligation or liability in, or but for any requirement of giving
of notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such
acceleration in, any Material Agreement of ARS; or
(ii) will require ARS to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization including
without limitation under the FCA, except as required by the Hart-Scott-
Rodino Act and other than any of the foregoing that have been obtained.
ARTICLE 6
Covenants
6.1 Access to Information; Confidentiality.
(a) Each party shall afford to the other party and its accountants,
counsel, financial advisors and other representatives (the
"Representatives") full access during normal business hours throughout the
period prior to the Closing Date to all of its (and its Subsidiaries')
properties, books, contracts, commitments and records (including without
limitation Tax Returns), but excluding any of the foregoing that are or may
become the subject of, and not disclosable under, the terms of any
confidential agreement (the "Restricted Information") and, during such
period, shall furnish promptly upon request (i) a copy of each report,
schedule and other document filed or received by either party pursuant to
the requirements of any Applicable Law (including without limitation the
FCA) or filed by it with any Authority in connection with the Merger or any
other report, schedule or documents which may have a material effect on the
businesses, operations, properties, prospects, personnel, condition,
(financial or other), or results of operations of their respective
businesses, (ii) to the extent not provided for pursuant to the preceding
clause, all financial records, ledgers, work papers and other sources of
financial information possessed or controlled by it or its accountants
deemed by each party or its Representatives necessary or useful for the
purpose of performing an audit of the business and assets of ATC and ATS,
as applicable, and, in the case of ATS, certifying financial statements and
financial information pursuant to the provisions of Section 7.2(d), and
(iii) such other information concerning any of the foregoing as ATS or ATC
shall reasonably request, other than any Restricted Information. All
Confidential Information furnished pursuant to the provisions of this
Agreement, including without limitation this Section, will be kept
confidential and shall not, without the prior written consent of the party
disclosing such Confidential Information, which consent shall not be
unreasonably withheld, delayed or conditioned, be disclosed by the other
party in any manner whatsoever, in whole or in part, and, except as
required by Applicable Law, shall not be used for any purposes, other than
in connection with the Merger (including without limitation in connection
with any registration, proxy or information statement or similar document
filed pursuant to any federal or state securities Law). Except as otherwise
herein provided, each party agrees to reveal such Confidential Information
only to those of its Representatives or other Persons who need to know such
Confidential Information for the purpose of
VI-24
<PAGE>
evaluating and consummating the Merger who are informed of its confidential
nature. For purposes of this Agreement, "Confidential Information" shall
mean any and all information (excluding information that (i) has been or is
obtained from a source independent of the disclosing party, (ii) is or
becomes generally available to the public other than as a result of
unauthorized disclosure by the receiving party, or (iii) is independently
developed by the receiving party without reliance in any way on information
provided by the disclosing party) related to the business or businesses of
ATS and its Affiliates, on the one hand, or ATC and its Affiliates, on the
other hand, including any of their respective successors and assigns.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver all written Confidential
Information provided pursuant to this Section or any other provision of
this Agreement or otherwise in connection with the Merger and shall not
retain any copies, extracts or other reproductions in whole or in part of
such written material, other than, in the event any Legal Action or Claim
is then pending, threatened or reasonably likely to be asserted, one copy
thereof which shall be delivered to independent counsel for such party.
(c) No investigation pursuant to this Section or otherwise shall affect
any representation or warranty in this Agreement of either party or any
condition to the obligations of the parties hereto.
(d) The provisions of this Section shall apply to all Subsidiaries of ATC
and ATS.
6.2 Agreement to Cooperate.
(a) Each of the parties hereto shall use reasonable business efforts (x)
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable under Applicable Law to
consummate the Merger according to the terms and subject to the conditions
hereof, and (y) to refrain from taking, or cause to be taken, any action
and to refrain from doing or causing to be done, anything which could
impede or impair the consummation of the Merger according to the terms and
subject to the conditions hereof or the consummation of the other
Transactions according to the terms and subject to the conditions hereof,
including, in all cases, without limitation using its reasonable business
efforts (i) to prepare and file with the applicable Authorities as promptly
as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information,
data and exhibits, necessary to request issuance of orders approving the
Merger by all such applicable Authorities, (ii) to obtain all necessary or
appropriate waivers, consents and approvals, (iii) to effect all necessary
registrations, filings and submissions (including without limitation, if
required, filings within ten (10) business days of the date of this
Agreement under the Hart-Scott-Rodino Act and all filings necessary for ATS
to own and operate the ATC Assets and the ATC Business), (iv) to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible), and (v) to obtain the
satisfaction of the conditions specified in Article 7, including without
limitation the truth and correctness as of the Closing Date as if made on
and as of the Closing Date (other than those that speak as of a specific
date which need only be true and correct as of such date) of the
representations and warranties of such party and the performance and
satisfaction as of the Closing Date of all agreements and conditions to be
performed or satisfied by such party.
(b) ATC shall cooperate and use its reasonable business efforts to cause
its independent accountants to reasonably cooperate with ATS, and at ATS'
expense, in order to enable ATS to have ATC's or ATS' independent
accountants prepare audited financial statements for ATC described in
Section 7.2(d). ATC will use its reasonable business efforts to ensure that
such financial statements will have been prepared in accordance with GAAP
applied on a basis consistent with the ATC Financial Statements and will
present fairly in all material respects the financial condition, results of
operation and cash flow of ATC. Without limiting the generality of the
foregoing, ATC agrees that it will (i) consent to the use of such audited
financial statements in any registration, proxy or information statement or
other document filed by ATS or any of its Affiliates under the Securities
Act or the Exchange Act and (ii) execute and deliver, and cause its
officers to execute and deliver, such "representation" letters as are
customarily delivered in connection with audits and as ATS' or ATC's
independent accountants may reasonably request under the circumstances.
VI-25
<PAGE>
(c) Without limiting the generality of the foregoing, as promptly as
practicable after the execution of this Agreement, ATS and ATC shall, at
the written request of the other made from time to time within thirty (30)
days of the date of this Agreement, deliver or cause to be delivered to ATC
or ATS, as the case may be, copies of (i) all title report and title
insurance and (ii) Phase I environmental site assessment reports or other
environmental reports or studies in their possession with respect to real
property owned or leased by such party. Each of ATS and ATC (an
"investigating party") may at its own cost and expense obtain, and deliver
to the other party (the "owning party") full and complete copies of,
preliminary title reports and/or Phase I environmental site assessment
reports (or other environmental reports or studies) with respect to any
real property owned or leased by the owning party (i) which is not covered
by a title or environmental report delivered to the investigating party or
(ii) with respect to which the title or environment report so furnished, in
the reasonable business judgment of the investigating party, raises
questions of (x) defects in title, in the case of title reports, or (y)
potential liability, in the case of Phase I environmental site assessment
reports (or other environmental reports or studies) which, in the case of
title defects or potential liability has had or could reasonably be
expected to have a Material Adverse Effect on the owning or leasing party.
Site assessments shall be conducted by such consultants and professionals
as ATS and ATC shall mutually agree and shall be arranged at times mutually
convenient to the parties. Each of ATC and ATS shall be entitled to have
representatives present at the time such site assessments are conducted,
and to have copies of all correspondence with any environmental company
conducting the site assessment pursuant to the provisions of this Section.
(d) ATC agrees that prior to the Closing Date it will not make or permit
to be made any change affecting any bank, trust company, savings and loan
association, brokerage firm or safe deposit box or in the names of the
Persons authorized to draw thereon, to have access thereto or to authorize
transactions therein or in such powers of attorney, or open any additional
accounts or boxes or grant any additional powers of attorney, without in
each case notifying ATS in writing on or prior to the Closing Date.
6.3 Public Announcements. Until the Closing or the termination of this
Agreement, each party shall consult with the other before issuing any press
release or otherwise making any public statements with respect to this
Agreement or the Merger and shall not issue any such press release or make any
such public statement without the prior consent of the other. Notwithstanding
the foregoing, the parties acknowledge and agree that they may, without each
other's prior consent, issue such press releases or make such public
statements as may be required by Applicable Law, in which case the disclosing
party shall use its reasonable business efforts to consult with the other
party and agree upon the nature, content and form of such disclosure, press
release or other statement.
6.4 Notification of Certain Matters. Each party shall give prompt notice to
the other, of the occurrence or non-occurrence of any Event of which such
party becomes aware the occurrence or non-occurrence of which would be
reasonably likely to cause (a) any representation or warranty made by it
contained in this Agreement to be untrue or inaccurate in any material respect
or (b) any failure made by it to comply with or satisfy, or be able to comply
with or satisfy, in any material respect, any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement in any material
respect, such that, in any such case, one or more of the conditions of Closing
would not be satisfied; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the rights and
remedies available hereunder to the party receiving such notice or the
obligations of the party delivering such notice and shall not, in any event,
affect the representations, warranties, covenants and agreements of the
parties or the conditions to their respective obligations under this
Agreement.
6.5 No Solicitation. Neither ATC nor ATS shall, nor shall either of them
knowingly permit any of its or any of their Representatives or, with respect
to ATS, permit ARS (including, without limitation, any officer, director,
stockholder or any investment banker, broker, finder, attorney or accountant
retained by it) to, initiate, solicit or facilitate, directly or indirectly,
any inquiries or the making of any proposal with respect to any Alternative
Transaction applicable to it, engage in any discussions or negotiations
concerning, or provide to any other Person any information or data relating
to, it for the purposes of, or otherwise cooperate in any way with
VI-26
<PAGE>
or assist or participate in, or facilitate any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, a
proposal to seek or effect any Alternative Transaction applicable to it, or
agree to or endorse any Alternative Transaction applicable to it. If ATC or
ATS or any of its Representatives receives any inquiry with respect to an
Alternative Transaction applicable to it while this Agreement is in effect,
ATC or ATS, as the case may be, shall inform the inquiring party that it is
not entitled to enter into discussions or negotiations relating to such an
Alternative Transaction. The provisions of this Section shall apply to all
Subsidiaries of ATC and ATS.
6.6 Conduct of Business by ATS Pending the Merger. Without limiting any
other covenant or agreement of ATS set forth in this Agreement, except as
otherwise permitted or contemplated by this Agreement, including without
limitation pursuant to the ATS Separate Agreement and, in the case of
paragraphs (a) and (b)(ii) and (iii), the Tower Distribution, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement
unless ATC shall otherwise agree in writing, ATS shall, and shall cause its
Subsidiaries, to:
(a) conduct its business in the ordinary and usual course of business and
consistent with past practice, it being understood that the acquisition of
communications sites and related assets and other business involved in the
communications sites industry and the construction and maintenance of
communications towers and related assets is part of the ordinary course of
business of ATS; provided, however, that any such acquisition or
construction activity shall be subject to the other paragraphs of this
Section, including without limitation paragraphs (d) and (l);
(b) not (i) amend or propose to amend their respective Organic Documents,
(ii) split, combine or reclassify (whether by stock dividend or otherwise)
its outstanding capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of, or in substitution for shares
of its capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise;
(c) not issue, sell, transfer, assign, convey, pledge or dispose of, or
agree to issue, sell, transfer, assign, convey, pledge or dispose of, any
shares of ATS Common Stock, Convertible Securities, Option Securities or
other equity securities;
(d) not (i) incur or become contingently liable with respect to any
Indebtedness for Money Borrowed other than (x) borrowings, in addition to
those permitted or consented to pursuant to the provisions of clause (y)
immediately following, not to exceed the sum of (I) the principal amount of
borrowings presently outstanding and (II) $5.0 million in the aggregate
outstanding at any one time, and (y) borrowings necessary to finance
acquisitions and construction projects permitted or consented pursuant to
the provisions of paragraph (l) below, (ii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital stock, Convertible
Securities or Option Securities (iii) sell, lease, license, pledge, dispose
of or encumber any properties or assets or sell any businesses other than
(A) pursuant to agreements which are described in Section 6.6(d) of the ATS
Disclosure Schedule, (B) Liens arising in accordance with the provisions of
indebtedness in effect on the date hereof and in accordance with their
present terms, and (C) leases of towers and shelter space to third-party
customers, or (iv) make any loans, advances or capital contributions to, or
investments in, any other Person, except to officers and employees of ATS
for travel, business or relocation expenses in the ordinary course of
business consistent with past practices;
(e) use reasonable business efforts to preserve intact its business
organization and goodwill, keep available the services of its present
officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with
them and not engage in any action, directly or indirectly, with the intent
to adversely impact the transactions contemplated by this Agreement;
(f) at ATC's reasonable request, confer on a regular basis with one or
more representatives of ATC to report material operational matters and the
general status of ongoing operations, including without limitation the
status of pending and prospective acquisitions and of the CBS Merger,
including the satisfaction of the conditions to consummation thereof, to
the extent permitted or not restricted by confidentiality provisions;
VI-27
<PAGE>
(g) not adopt, enter into, amend or terminate any employment, severance,
special pay arrangement with respect to employment or termination of
employment or other similar arrangements or agreements with any directors,
officers or key employees;
(h) maintain with financially responsible insurance companies insurance
on the ATS Assets and the ATS Business in such amounts and against such
risks and losses as are consistent with past practice;
(i) not make any Tax election that could reasonably be likely to have a
Material Adverse Effect on ATS or settle or compromise any material income
Tax liability;
(j) except in the ordinary course of business, not modify or amend in any
material adverse manner or terminate any Material Agreement to which ATS is
a party or by which any of the ATS Assets may be bound or to which any of
them may be subject or waive, release or assign any material rights or
claims thereunder;
(k) not make any material change to its accounting methods, principles or
practices, except as may be required by GAAP;
(l) not enter into or agree to enter into any Restricted Transaction (or
group of related Restricted Transactions), whether for its own account or
for any other Person, if (i) the aggregate amount reasonably expected to be
expended by ATS or any of its Subsidiaries in connection with such
individual Restricted Transaction (together with any group of related
Restricted Transactions) exceeds $5.0 million, or (ii) the aggregate amount
to be expended in connection with all Restricted Transactions (together
with any group of related Restricted Transactions) exceeds $20.0 million;
provided, however, that the foregoing restriction shall not apply to any
Restricted Transaction pursuant to agreements which are described in
Section 6.6(l) of the ATS Disclosure Schedule. (ATC agrees not to
unreasonably withhold, delay or condition a consent to any Restricted
Transaction as to which ATS has requested its consent pursuant to the
provisions of this Section, it being understood that any such consent shall
not, however, relieve ATS from the obligation to comply with the provisions
of this Agreement (other than, to the extent so consented to, paragraph (d)
hereof) and shall not be deemed to be a waiver of any condition of ATC's
obligations to consummate the Merger set forth in Section 7.3);
(m) except as set forth in Section 5.13 of the ATS Disclosure Schedule,
(i) not grant to any executive officer or other key employee of ATS any
increase in compensation, except for normal increases in the ordinary
course of business consistent with past practice, (ii) not grant to any
such executive officer any increase in severance or termination pay, (iii)
not adopt or amend any Plan or Benefit Arrangement (including change any
actuarial or other assumption used to calculate funding obligations with
respect to any Plan, or change the manner in which contributions to any
Plan are made or the basis on which such contributions are determined) and
(iv) except in the ordinary course, not enter into, amend in any material
respect or terminate any Governmental Authorization, material Private
Authorization or Contract, except, for purposes of this clause (iv) only,
as would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on ATS;
(n) not voluntarily take or permit to be taken any action which if taken
between the end of its most recent fiscal quarter and prior to the date of
this Agreement would have been required to be noted as an exception on
Section 5.15 of the ATS Disclosure Schedule, other than as permitted or not
restricted by the preceding provisions of this Section 6.6; and
(o) not authorize or enter into any agreement that would violate any of
the foregoing.
6.7 Conduct of Business by ATC Pending the Merger. Without limiting any
other covenant or agreement of ATC set forth in this Agreement, except as
otherwise permitted or contemplated by this Agreement, or as set forth or
described in the ATC Disclosure Schedule, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless ATS shall
otherwise consent in writing, ATC shall, and shall cause its Subsidiaries to:
(a) conduct its business in the ordinary and usual course of business and
consistent with past practice, it being understood that the acquisition of
communications sites and related assets and other business
VI-28
<PAGE>
involved in the communications sites industry and the construction and
maintenance of communications towers and related assets is part of the
ordinary course of business of ATC; provided, however, that any such
acquisition or construction activity shall be subject to the other
paragraphs of this Section, including without limitation paragraphs (d) and
(l);
(b) not (i) amend or propose to amend their respective Organic Documents,
(ii) split, combine or reclassify (whether by stock dividend or otherwise)
its outstanding capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of, or in substitution for shares
of its capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise;
(c) not issue, sell, transfer, assign, convey, pledge or dispose of, or
agree to issue, sell, transfer, assign, convey, pledge or dispose of, any
shares of ATC Common Stock, Convertible Securities, Option Securities or
other equity securities;
(d) not (i) incur or become contingently liable with respect to any
Indebtedness for Money Borrowed other than (x) borrowings, in addition to
those permitted or consented to pursuant to the provisions of clause (y)
immediately following, not to exceed $2.5 million in the aggregate
outstanding at any one time, (y) borrowings necessary to fund finance
acquisitions or construction projects permitted pursuant to the provisions
of paragraph (l) below or to fund bonus payments and transaction fees
permitted by the provisions of this Agreement, and (z) up to $4.5 million
of subordinated borrowings to exercise redemption rights with respect to
ATC's preferred stock, (ii) redeem, purchase, acquire or offer to purchase
or acquire any shares of its capital stock, Convertible Securities or
Option Securities (iii) sell, lease, license, pledge, dispose of or
encumber any properties or assets (except for nonstrategic assets that in
the aggregate have a fair market value of less than $1.0 million) or sell
any businesses other than (A) pursuant to agreements which are described in
Section 6.7(d) of the ATC Disclosure Schedule, (B) Liens arising in
accordance with the provisions of indebtedness in effect on the date hereof
and in accordance with their present terms, and (C) leases of towers and
shelter space to third-party customers or (iv) make any loans, advances or
capital contributions to, or investments in, any other Person, except to
officers and employees of ATC for travel, business or relocation expenses
in the ordinary course of business consistent with past practices;
(e) use reasonable business efforts to preserve intact its business
organization and goodwill, keep available the services of its present
officers and key employees (other than individuals identified to ATS prior
to date hereof with specific reference to this provision), and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) at ATS' reasonable request, confer on a regular basis with one or
more representatives of ATS to report material operational matters and the
general status of ongoing operations, including without limitation the
status of pending and prospective acquisitions to the extent permitted or
not restricted by confidentiality provisions;
(g) not adopt, enter into, amend or terminate any employment, severance,
special pay arrangement with respect to employment or termination of
employment or other similar arrangements or agreements with any directors,
officers or key employees;
(h) maintain with financially responsible insurance companies insurance
on the ATC Assets and the ATC Business in such amounts and against such
risks and losses as are consistent with past practice;
(i) not make any Tax election that could reasonably be likely to have a
Material Adverse Effect on ATC or settle or compromise any material income
Tax liability;
(j) except in the ordinary course of business, not modify or amend in a
manner materially adverse to ATC or terminate any Material Agreement to
which ATC is a party or by which any of the ATC Assets may be bound or to
which any of them may be subject or waive, release or assign any material
rights or claims thereunder;
VI-29
<PAGE>
(k) not make any material change to its accounting methods, principles or
practices, except as may be required by GAAP;
(l) not enter into or agree to enter into any Restricted Transactions (or
group of related Restricted Transactions), whether for its own account or
for any other Person, if (i) the aggregate amount reasonably expected to be
expended by ATC or any of its Subsidiaries in connection with such
individual Restricted Transaction (together with any group of related
Restricted Transactions) exceeds $5.0 million, or (ii) the aggregate amount
to be expended in connection with all Restricted Transactions (together
with any group of related Restricted Transactions) exceeds $20.0 million;
provided, however, that the foregoing restriction shall not apply to any
Restricted Transaction pursuant to agreements which are described in
Section 6.7(l) of the ATC Disclosure Schedule. (ATS agrees not to
unreasonably withhold, delay or condition a consent to any Restricted
Transaction as to which ATC has requested its consent pursuant to the
provisions of this Section, it being understood that any such consent shall
not, however, relieve ATC from the obligation to comply with the provisions
of this Agreement (other than, to the extent so consented to, paragraph (d)
hereof) and shall not be deemed to be a waiver of any condition of ATS'
obligations to consummate the Merger set forth in Section 7.2);
(m) except as set forth in Section 4.14 of the ATC Disclosure Schedule,
(i) not grant to any executive officer or other key employee of ATC any
increase in compensation, except for normal increases in the ordinary
course of business consistent with past practice or as required under
Benefit Arrangements in effect as of September 30, 1997, (ii) not grant to
any such executive officer any increase in severance or termination pay,
except as was required under any Benefit Arrangements in effect as of
September 30, 1997, (iii) not adopt or amend any Plan or Benefit
Arrangement (including change any actuarial or other assumption used to
calculate funding obligations with respect to any Plan, or change the
manner in which contributions to any Plan are made or the basis on which
such contributions are determined) and (iv) except in the ordinary course,
not enter into, amend in any material respect or terminate any Governmental
Authorization, material Private Authorization or Contract, except, for
purposes of this clause (iv) only, as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on ATC;
(n) not voluntarily take or permit to be taken any action which if taken
between the end of its most recent fiscal quarter and prior to the date of
this Agreement would have been required to be noted as an exception on
Section 4.16 of the ATC Disclosure Schedule, other than as permitted or not
restricted pursuant to the provisions of this Section 6.7; and
(o) not authorize or enter into any agreement that would violate any of
the foregoing.
6.8 Directors', Officers' and Employees' Indemnification and Insurance.
(a) The Organic Documents of ATS shall contain provisions no less
favorable with respect to indemnification than are set forth in the Organic
Documents of ATS, as in effect on the date hereof, which provisions shall
not be amended, repealed or otherwise modified for a period of six (6)
years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time prior to the Effective
Time were directors, officers or employees of ATC or any of its
Subsidiaries, unless such modification shall be required by Applicable Law.
(b) From and after the Effective Time, ATS shall indemnify, defend and
hold harmless the present and former officers, directors and employees of
ATC or any of its Subsidiaries (collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages, liabilities or amounts that
are paid in settlement of, or otherwise in connection with any claim,
action, suit, proceeding or investigation (as used in this Section, a
"claim"), based in whole or in part on the fact that the Indemnified Party
(or the Person controlled by the Indemnified Party) is or was a director,
officer or employee of ATC or any of its Subsidiaries and arising out of
actions or omissions occurring at or prior to the Effective Time
(including, without limitation, in connection with this Agreement, the
Merger and the transactions contemplated hereby), whether asserted or
claimed prior to, at or after the Effective Time, in each case to the
fullest extent permitted under the DCL (and shall pay any expenses, as
incurred, in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
the DCL).
VI-30
<PAGE>
Without limiting the foregoing, in the event any such claim is brought
against any of the Indemnified Parties, (i) such Indemnified Parties may
retain counsel (including local counsel) satisfactory to them and which
shall be reasonably satisfactory to ATS and ATS shall pay all reasonable
fees and expenses of such counsel for such Indemnified Parties; and (ii)
ATS shall use its best efforts to assist in the defense of any such claim;
provided, however, that ATS shall not be liable for any settlement effected
without its written consent, which consent shall not be unreasonably
withheld, delayed or conditioned.
(c) ATS will use its best efforts to cause to be maintained for a period
of not less than six (6) years from the Effective Time a directors' and
officers' insurance and indemnification policy that provides coverage for
events occurring on or prior to the Effective Time ("D&O Insurance") for
all Persons who are directors and officers of ATC or any of its
Subsidiaries on the date of this Agreement, so long as the annual premium
therefor would not be in excess of $500,000. If any then existing D&O
Insurance expires, is terminated or canceled during such six-year period,
ATS will use its best efforts to cause to be obtained as much D&O Insurance
as can be obtained for the remainder of such period for an annualized
premium not in excess of $500,000, on terms and conditions no less
advantageous to the covered Persons than the then existing D&O Insurance.
(d) In the event ATS or any of their respective successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in each such case, proper provisions shall
be made so that the successors and assigns of ATS shall assume the
obligations set forth in this Section.
(e) This Section is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on ATS and its successors and assigns.
ATS shall furnish ATC with a copy of the D&O insurance complying with the
provisions of this Section 6.8 at or prior to the Closing.
6.9 ATC Employees and Benefit Plans.
(a) Notwithstanding any provision in this Agreement to the contrary, on
or prior to the Closing Date, ATC may (i) take any action permitted under
Paragraph VIII(c) of ATC's 1995 Stock Option Plan with respect to any or
all Option Securities issued and outstanding under such plan, (ii)
accelerate the vesting and exercisability of any or all of such Option
Securities, (iii) amend any or all such Option Securities to provide that
such Option Security shall continue to be exercisable for its entire stated
term without regard to the employment status or death of the holder of such
Option Security, and (iv) pay bonuses to the employees of ATC and its
Subsidiaries in such amounts as ATC shall determine in its sole discretion;
provided, however, that (A) the aggregate amount of the bonuses paid
pursuant to clause (iv) of this sentence, when added to any fees or expense
reimbursements paid or payable to any financial advisers in connection with
the Merger or related financial advice, shall not exceed $5.0 million
(which amount shall not include nor be reduced by any performance bonuses
paid to employees of ATC and its Subsidiaries with respect to calendar year
1997 on a basis consistent with past practices), and (B) ATC shall have any
action or payment described in this sentence approved by the stockholders
of ATC in accordance with the provisions of Section 280G(b)(5) of the Code
to the extent necessary to ensure that no actions taken with respect to the
employees of ATC and its Subsidiaries or payments made to such employees
would result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code. Any bonus paid pursuant to clause (iv) of the preceding
sentence may be paid in cash, by reducing the purchase price of shares of
ATC Common Stock that may be acquired under an Option Security issued under
ATC's 1995 Stock Option Plan, or any combination of the foregoing. Any
actions taken or payments made by ATC pursuant to the provisions of this
Section 6.9(a) may vary among the individual employees of ATC and its
Subsidiaries and may vary among the Option Securities held by any
individual employee, all as determined by ATC in its sole discretion.
(b) ATS shall take such action as may be necessary so that at the
Effective Time and for twelve (12) months thereafter the individuals
employed by ATC and its Subsidiaries immediately prior to the Effective
VI-31
<PAGE>
Time (the "Continued Employees") shall receive base compensation (i.e.,
salary and wages) at a rate that is not less than that received by such
Continued Employees immediately prior to the Closing Date; provided,
however, that the foregoing provisions shall not impair ATS' ability to
terminate any such Continued Employee for cause. If, within the twelve-
month period beginning at the Effective Time, the employment of any
Continued Employee is terminated by ATS or any of its Subsidiaries other
than for cause, or any Continued Employee is required to accept a material
reduction in his or her title or responsibilities or to transfer to a job
location that is more than thirty-five (35) miles from his or her job
location immediately prior to the Effective Time, but refuses such
reduction or transfer within fifteen (15) days of notice of such reduction
or transfer, then ATS shall continue to pay such Continued Employee his or
her base rate of pay for the balance of such twelve-month period (without
mitigation for any subsequent employment by such continued employee). The
provisions of this Section 6.9(b) shall not be applicable with respect to
Fred R. Lummis.
(c) ATS shall take such action as may be necessary so that on and after
the Effective Time and for twelve (12) months thereafter, officers and
employees of ATC and its Subsidiaries shall be provided employee benefits,
plans and programs (excluding equity incentive arrangements) which are no
less favorable in the aggregate than those generally available pursuant to
those employee benefit plans and programs in effect for such officers and
employees immediately prior to the Effective Time; it being understood that
ATS shall determine the types and levels of specific benefits to be so
provided. For purposes of eligibility to participate, vesting and benefit
determinations (other than benefit accruals under any defined benefit plan)
in all benefits provided to officers and employees of ATC and its
Subsidiaries, such officers and employees of ATC and its Subsidiaries will
be credited with their service with ATC and its Subsidiaries and their
respective predecessors. Upon termination of any health plan of ATC or any
of its Subsidiaries, individuals who were officers or employees of ATC or
its Subsidiaries at the Effective Time shall if employed by ATS or its
Subsidiaries become eligible to participate in such health plans as may be
established or maintained by ATS or its Subsidiaries to the extent that
such individuals and their eligible dependents were eligible to participate
in the applicable health plan of ATC or its Subsidiaries immediately prior
to the Effective Time. Amounts paid during the calendar year in which such
change of coverage occurs by officers and employees of ATC and its
Subsidiaries under any health plans of ATC shall after such change be taken
into account in applying deductible and out-of-pocket limits applicable
under the health plans of ATS or its Subsidiaries provided during such
calendar year to the same extent as if such amounts had been paid under
such health plans of ATS or its Subsidiaries and ATS shall cause to be
waived under its health plans any pre-existing conditions as of the date of
termination of the ATC health plan and eligibility to participate in such
health plan to the extent such conditions would be waived under the
applicable plans of ATC and its Subsidiaries as in effect on the date
hereof. Nothing in this Agreement shall be construed as granting to any
employee of ATC or its Subsidiaries any rights of continuing employment.
6.10 ATC Stock Options. Prior to the Effective Time, ATS and ATC shall take
such action as may be necessary to cause each unexpired and unexercised option
to purchase ATC Common Stock that is outstanding immediately prior to the
Merger (each, an "ATC Option" and collectively, the "ATC Options") to be
automatically converted at the Effective Time into an option (each, an "ATS
Option" and collectively, the "ATS Options") to purchase a number of shares of
ATS Class A Common Stock equal to the product of the number of shares of ATC
Common Stock which the holder is entitled to purchase under the ATC Option
multiplied by the Exchange Ratio, at a price per share equal to the quotient
obtained by dividing (a) the per share option exercise price determined
pursuant to the ATC Option by (b) the Exchange Ratio. Each ATS Option will
otherwise have the same terms and conditions as the ATC Option exchanged
therefor, including acceleration and period of exercise. At the Effective
Time, ATS will execute and deliver to each holder of an ATS Option a document
evidencing ATS' assumptions of ATC's obligations under the ATC Option and all
references in the stock option agreements to ATC shall be deemed to refer to
ATS. As of the Effective Time, ATS shall assume all of ATC's obligations with
respect to the ATC Options as so amended and shall, from and after the
Effective Time, have reserved for issuance upon exercise of the ATS Options
all shares of ATS Class A Common Stock
VI-32
<PAGE>
covered thereby and shall file a Registration Statement on Form S-8 to
register the shares of ATS Class A Common Stock subject to the ATS Options
granted in replacement of ATC Options. ATS shall take all actions reasonably
necessary to maintain the effectiveness of such Registration Statement (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such ATS Options remain outstanding. No fractional
shares of ATS Class A Common Stock will be issued upon the exercise of any ATS
Option, and instead the exercising holder of such ATS Option shall receive
cash for any fractional share amounts, based on the fair market value of the
ATS Class A Common Stock at the time of exercise.
6.11 ATS Voting Agreement. ATS shall use its best efforts to cause each of
the Persons named therein to execute and deliver to ATC an agreement
substantially in the form of Exhibit C attached hereto and made a part hereof
(collectively, the "ATS Voting Agreement").
6.12 Stockholder Approval. ATC will, as soon as practicable following the
date thereof, establish a record date (which will be as soon as practicable
following the date hereof) for, and, after the Registration Statement has
become effective, duly call, give notice of, convene and hold a meeting of its
stockholders (the "ATC Stockholders Meeting") for the purpose of obtaining the
approval and adoption of this Agreement and the approval of the Merger by the
ATC stockholders (the "ATC Stockholder Approval"). ATC will, through its Board
of Directors, recommend to its stockholders approval and adoption of this
Agreement and approval of the Merger.
6.13 Registration Statement and Proxy/Information Statement.
(a) ATS shall prepare and file with the Commission as soon as is
reasonably practicable after the date hereof a Registration Statement under
the Securities Act (the "ATS Registration Statement") on Form S-4 in
connection with the Merger for the purpose of registering all of the shares
of ATS Class A Common Stock to be issued in the Merger. ATS shall also take
any action required under Applicable Law in connection with causing the ATS
Registration Statement declared effective by the Commission as promptly as
practicable, including without limitation making all filings under
applicable state blue sky or securities laws in connection with the
issuance of ATS Class A Common Stock in the Merger. ATS shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with any action by either of them in
connection with the provisions of this Section.
(b) ATC shall, as soon as is reasonably practicable after the
effectiveness of the ATS Registration Statement, mail notice to the ATC
common stockholders of the ATC Stockholders Meeting. Such notice shall
comply with the provisions of Applicable Law. ATS and ATC shall promptly
furnish to the other all information, and take such other actions, as may
reasonably be requested in connection with any action taken to comply with
the provisions of this Section, including, in the case of ATS, the final
prospectus (the "ATS Prospectus" and, collectively with the notice
furnished to the ATC stockholders in connection with the ATC Stockholders
Meeting, the "ATC Stockholder Information") contained in the ATS
Registration Statement.
(c) Each of ATC and ATS shall correct promptly any information provided
by it to be used specifically in the ATS Registration Statement and the ATC
Stockholder Information that shall have become false or misleading in any
material respect and ATS shall take all steps necessary to file with the
Commission and have cleared by the Commission any amendment or supplement
to the ATS Registration Statement so as to correct such information and ATS
shall cause it to be disseminated to the ATC stockholders, to the extent
required by Applicable Law. Without limiting the generality of the
foregoing, ATS shall notify ATC promptly of the receipt of the comments of
the Commission and of any request by the Commission for amendments or
supplements to the ATS Registration Statement or the ATS Prospectus, or for
additional information, and shall supply ATC with copies of all
correspondence between it or its representatives, on the one hand, and the
Commission or members of its staff, on the other hand, with respect to the
ATS Registration Statement or the ATS Prospectus. Whenever any event occurs
which should be described in an amendment or a supplement to the ATS
Registration Statement or the ATS Prospectus, ATS shall, upon learning of
such event, promptly prepare, file and clear with the Commission and ATS
shall mail to the
VI-33
<PAGE>
ATC stockholders such amendment or supplement; provided, however, that,
prior to such mailing, (i) ATS shall consult with ATC with respect to such
amendment or supplement, (ii) shall afford ATC reasonable opportunity to
comment thereon, and (iii) each such amendment or supplement shall be
reasonably satisfactory to ATC.
(d) ATC shall use its reasonable business efforts to cause to be
delivered to ATS and its directors a letter of independent auditors, dated
(i) the date of the ATS Prospectus Statement, and (ii) the Closing Date,
and addressed to ATS and its directors, in form, scope and substance
customary for letters delivered by independent public accountants in
connection with registrations statements similar to the ATS Registration
Statement.
6.14 Listing of ATS Class A Common Stock. ATS shall use its reasonable
business efforts to effect, at or before the Effective Time, authorization for
listing on Nasdaq (or such stock exchange as ATS shall have reasonably
selected) upon official notice of issuance, of the additional shares of the
ATS Class A Common Stock to be issued pursuant to the Merger; provided,
however, that such efforts shall not require the elimination of the different
voting rights of the classes of ATS Common Stock.
6.15 Solicitation of Employees. If this Agreement is terminated, each of ATS
and ATC agrees that neither it nor any of its Affiliates will, for a period of
eighteen (18) months from the date of such termination, solicit or actively
seek to hire any person who during such period is employed by ATC or any of
its Affiliates or ATS or any of its Affiliates, as the case may be, whether or
not such individual would commit breach of such individual's employment
agreement or contact in leaving such employment; provided, however, that the
foregoing shall not prevent ATS or ATC (or any of its respective Affiliates)
from soliciting or actively seeking to hire any such key employee who (i)
initiates employment discussions with it, (ii) is not employed by ATS or ATC,
as the case may be, on the date ATC or ATS, as the case may be, first solicits
such key employee, or (iii) soliciting through general advertisement.
6.16 Additional Tax Matters.
(a) Except for transactions in the ordinary and usual course of business,
following the date on which, for purposes of Section 1504 of the Code, ATS
ceases to be a member of the "affiliated group" of corporations of which
ARS is the "common parent", ATS shall not engage in any transaction and
shall not permit an of its Subsidiaries to engage in any transaction that
would be treated as an "intercompany transaction" as defined in Treas. Reg.
(S) 1.1502-13.
(b) Each party hereto shall use all reasonable business efforts to cause
the Merger to qualify, and shall not take, and shall use all reasonable
business efforts to prevent any Affiliate of such party from taking, any
action which could prevent the Merger from qualifying, as a reorganization
under the provisions of Section 368(a) of the Code.
6.17 ATS Registration Rights Agreement. Subject to the satisfaction (or
waiver) of the conditions to closing set forth in (a) Sections 7.1 and 7.2
(the "ATS Conditions"), at or prior to the Closing, ATS shall execute and
deliver a registration rights agreement substantially in the form attached
hereto as Exhibit D and made a part hereof (the "ATS Registration Rights
Agreement") and permit the ATS Registration Statement to be executed by such
of the ATC stockholders as elect to be so included, and (b) Sections 7.1 and
7.3 (the "ATC Conditions"), ATC shall use its reasonable business efforts to
cause ATC's two largest stockholders and Fred R. Lummis to the extent any of
them may be an "affiliate", as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act, of ATS, to execute and deliver the ATS
Registration Rights Agreement.
6.18 Charter Amendment. Subject to the satisfaction (or waiver) of the ATS
Conditions, at or prior to the Closing, ATS shall cause the ATS Restated
Certificate to be approved by the Board of Directors and stockholders of ATS
and to be filed with the Secretary of State of the State of Delaware.
6.19 Conversion of Class B Common Stock. Subject to the satisfaction (or
waiver) of the ATS Conditions, at or prior to the Closing, ATS shall cause the
ATS Class B Common Stock issued to Steven B. Dodge in the
VI-34
<PAGE>
ATS Private Placement to be converted into a like number of shares of ATS
Class A Common Stock to the extent that, after giving effect to the
consummation of the Merger, Steven B. Dodge, Chairman of the Board and Chief
Executive Officer of ATS, would own more than 49.99% of the voting power of
the ATS Common Stock within the meaning of the ATS Restated Certificate. ATS
shall ensure that no ATS Class B Common Stock is issued in the ATS Private
Placement to any Person other than Steven B. Dodge and Thomas H. Stoner, in
each case, to the extent permitted by the provisions of this Section and
Section 6.25.
6.20 ATS Separation Agreement. Unless previously entered into and subject to
the satisfaction (or waiver) of the ATS Conditions, at or prior to the
Closing, ATS shall, and shall ARS to, execute and deliver the ATS Separation
Agreement.
6.21 CBS Merger or Tower Distribution Related Actions. Subject to the
satisfaction (or waiver) of the ATS Conditions, at or prior to the Closing,
ATS shall, and shall cause ARS to, use its reasonable business efforts to
cause (a) the CBS Merger to occur, or, if the Tower Distribution is required
in order to satisfy the ATC Conditions, and (b) the Tower Distribution to
occur, in each case, in a manner that does not result in a default in, or with
the passage of time or giving of notice would not result in a default in or
violation of any Material Agreement to which ATS or ARS is a party or by which
it is bound or the Organic Documents of ATS or ARS, including without
limitation the ATS Credit Agreement, the ARS Credit Agreement and the ARS
Cumulative Preferred Stock.
6.22 Efforts Regarding Pending Transactions. ATS shall use reasonable
business efforts to cause to be satisfied on or before the Termination Date
all conditions to closing applicable to the Gearon Transaction and the ATS
Private Placement and, upon satisfaction thereof, to consummate such
transactions.
6.23 Certain Closing Certificates. ATC shall cause its chief financial
officer to deliver to ATS and its counsel at the Closing a certificate showing
his calculation, in reasonable detail, of the number of shares of ATC Common
Stock determined on a Fully-Diluted Basis immediately prior to the Effective
Time. ATS shall cause its chief financial officer to deliver to ATC and its
counsel at the Closing a certificate showing his calculation, in reasonable
detail, of the number of shares of ATS Common Stock determined on a Fully-
Diluted Basis immediately prior to the Effective Time.
6.24 ATC Affiliates Agreements. ATC shall use its reasonable business
efforts to cause each executive officer, director and other Person who may be
an "affiliate," as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act, of ATC, to have executed and delivered to ATS an
agreement substantially in the form of Exhibit E attached hereto and made a
part hereof (collectively, the "ATC Affiliate Agreements").
6.25 Issue of ATS Class B Common Stock. Subject to the satisfaction of the
ATS Conditions, ATS shall not issue any shares of Class B Common Stock or any
Convertible Securities convertible or exchangeable into, or Option Securities
to purchase, any shares of ATS Class B Common Stock, except (a) to Steven B.
Dodge and, in the event Class B Common Stock shall not have been distributed
pursuant to the Tower Distribution, Thomas H. Stoner (but, with respect to Mr.
Stoner, in a number not more than he holds on the date hereof) pursuant to the
provisions of the ATS Private Placement, (b) Option Securities issued to the
holders of options to purchase Class B Common Stock of ARS, and (c) upon
consummation of the CBS Merger or the Tower Distribution to holders of Class B
Common Stock of ARS. ATS will furnish to ATC, if it has not already done so,
within five (5) business days of this Agreement, a list of the holders of
Class B Common Stock of ARS or of options to purchase Class B Common Stock of
ARS.
6.26 Election of ATS Directors. Subject to the satisfaction of the ATS
Conditions, ATS shall cause Fred R. Lummis and Randall Mays to be elected as
members of the Board of Directors of ATS.
6.27 Employee List. Within ten (10) days after the date hereof, ATS shall
furnish ATS with a list of all employees of ARS, ATS or their respective
Subsidiaries that are expected to be employed by the Surviving Company after
the Merger, the office or title of each and the compensation of each.
VI-35
<PAGE>
6.28 Certificates of Non-Foreign Status. Prior to the Closing Date, ATC
shall in respect of the conversion of ATC Common Stock pursuant to the Merger
use its reasonable to obtain on behalf of itself and ATS, from each person who
is a stockholder of ATC immediately prior to the Effective Time, a certificate
of non-foreign status of such stockholder that meets the requirements of
Section 1445 of the Code and Section 1.1445-2(b) of the Treasury Regulations
thereunder, it being understood that the failure to obtain any such
certificate shall not be deemed to be a breach of this Section. ATC shall
furnish to ATS on the Closing Date a copy of such certificates of non-foreign
status.
ARTICLE 7
Closing Conditions
7.1 Conditions to Obligations of Each Party. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by Applicable Law by
each party benefitting therefrom:
(a) As of the Closing Date, no temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect;
(b) The waiting period applicable to the consummation of the Merger and
the receipt by each ATC common stockholder of the Merger Consideration due
pursuant thereto, as the case may be, under the Hart-Scott-Rodino Act, to
the extent applicable, shall have expired or been terminated;
(c) The ATS Registration Statement shall have become effective in
accordance with the provisions of the Securities Act and in accordance with
the provisions of Section 6.13, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding
for that purpose shall have been instituted by the Commission or any state
regulatory authorities and all shares of ATS Common Stock to be issued to
the ATC stockholders pursuant to the Merger shall be covered by the ATS
Registration Statement;
(d) The shares of ATS Class A Common Stock to be issued in the Merger
shall have been approved for listing on Nasdaq (or such other national
stock exchange on which such stock is then approved for listing), upon
official notice of issuance; and
(e) The ATC Stockholder Approval shall have been obtained.
7.2 Conditions to Obligations of ATS. The obligation of ATS to effect the
Merger shall be subject to the satisfaction of the following conditions, any
or all of which may be waived, in whole or in part, by ATS to the extent
permitted by Applicable Law:
(a) ATC shall have furnished ATS and, at ATS' request, any bank or other
financial institution providing credit to ATS, with a favorable opinion,
dated the Closing Date, of Vinson & Elkins L.L.P., counsel for ATC,
substantially in the form attached hereto as Exhibit F and made a part
hereof;
(b) (i) The representations and warranties of ATC set forth in this
Agreement (other than in Section 4.21) shall be true and correct as of the
date hereof and as of the Closing Date as though made on and as of the
Closing Date except (x) to the extent such representations and warranties
expressly speak as of an earlier date (in which case such representations
and warranties shall be true and correct as of such earlier date) and (y)
to the extent that the failure of such representations and warranties to be
true and correct, individually or in the aggregate, would not have a
Material Adverse Effect on ATC; provided, however, that for the purpose of
this clause (y), representations and warranties that are qualified as to
materiality (including by reference to "Material Adverse Effect") shall not
be deemed to be so qualified; (ii) the representations and warranties of
ATC set forth in Section 4.21 of this Agreement shall be true and correct;
provided, however, such untruth shall be disregarded for purposes of this
Section 7.2(b) if, by adjusting the Exchange Ratio at Closing, the untruth
is rendered harmless and such adjustment either does not require the
approval of the
VI-36
<PAGE>
ATC stockholders, or such approval has been obtained, in accordance with
the DCL; (iii) each and all of the agreements and covenants to be performed
or satisfied by ATC or any of the ATC stockholders hereunder at or prior to
the Closing Date shall have been duly performed or satisfied in all
material respects; and (iv) an executive officer of ATC shall have
furnished ATS with his certificate, confirming, to his knowledge, the truth
of such representations and warranties and the performance of such
covenants and agreements;
(c) There has not occurred any Event (including without limitation the
failure to secure all authorizations, consents, waivers, orders or
approvals required to be obtained by ATC from all Authorities and other
Person, and all filings, submissions, registrations, notices or
declarations required to be made by any of the parties with any Authority,
or the imposition of any condition or requirement in connection therewith)
that has had, or is reasonably likely to have, a Material Adverse Effect on
ATC, other than an Event affecting the economy or the tower communications
business generally or an Event that would not have occurred but for the
execution of this Agreement and the announcement of the Merger; and
(d) ATS shall have received from its counsel, Sullivan & Worcester LLP, a
favorable opinion (dated as of the Closing Date) to the effect that the
Merger constitutes a reorganization within the meaning of Section 368 of
the Code and that, as a consequence, ATS will not recognize any gain or
loss for federal income tax purposes as a result of consummation of the
Merger, and, in connection with such opinion, ATC and such of its
stockholders as such counsel shall have reasonably requested shall have
executed and delivered to ATS and such counsel a certificate substantially
in the form attached hereto as Exhibit G and made a part hereof.
7.3 Conditions to Obligations of ATC. The obligation of ATC to effect the
Merger shall be subject to the satisfaction of the following conditions, any
or all of which may be waived, in whole or in part, by ATC to the extent
permitted by Applicable Law:
(a) ATS shall have furnished ATC, with favorable opinions, dated the
Closing Date, of Sullivan & Worcester LLP, counsel for ATS, substantially
in the form attached hereto as Exhibit H and made a part hereof, and with
respect to such other matters arising after the date of this Agreement and
incident to the Merger, as ATC or its counsel may reasonably request;
(b) (i) The representations and warranties of ATS set forth in this
Agreement (other than in Section 5.20) shall be true and correct as of the
date hereof and as of the Closing Date as though made on and as of the
Closing Date except (x) to the extent such representations and warranties
expressly speak as of an earlier date (in which case such representations
and warranties shall be true and correct as of such earlier date) and (y)
to the extent that the failure of such representations and warranties to be
true and correct, individually or in the aggregate, would not have a
Material Adverse Effect on ATS; provided, however, that for the purpose of
this clause (y), representations and warranties that are qualified as to
materiality (including by reference to "Material Adverse Effect") shall not
be deemed to be so qualified; (ii) the representations and warranties of
ATS set forth in Section 5.20 of this Agreement shall be true and correct;
provided, however, such untruth shall be disregarded for purposes of this
Section 7.3(b) if, by adjusting the Exchange Ratio at Closing, the untruth
is rendered harmless and such adjustment either does not require the
approval of the ATS or ARS stockholders, or such approval has been
obtained, in accordance with the DCL; (iii) each and all of the agreements
and conditions to be performed or satisfied by ATS or any of the ATS common
stockholders hereunder at or prior to the Closing Date (including without
limitation the execution and delivery of all collateral documents to be
executed and delivered by it or any of them) shall have been duly performed
or satisfied in all material respects; and (iv) an executive officer of ATS
shall have furnished ATC with his certificate confirming, to his knowledge,
the truth of such representations and warranties and the performance of
such covenants and agreements;
(c) There has not occurred any Event (including without limitation the
failure to secure all authorizations, consents, waivers, orders or
approvals required to be obtained by ATS from all Authorities and other
Person, and all filings, submissions, registrations, notices or
declarations required to be made by any of the parties with any Authority,
or the imposition of any condition or requirement in connection
VI-37
<PAGE>
therewith) that has had, or is reasonably likely to have, a Material
Adverse Effect on ATS, other than an Event affecting the economy or the
tower communications business generally or an Event that would not have
occurred but for the execution of this Agreement and the announcement of
the Merger;
(d) ATC shall have received evidence of the consummation of the Gearon
Transaction and the ATS Private Placement, all on the terms and conditions
set forth, in the case of the Gearon Transaction, in the Gearon Merger
Agreement, and, in the case of the ATS Private Placement, on the terms and
conditions described in the ATS Information Statement, or, in either case,
on such other terms and conditions not materially adverse to ATS, including
without limitation, but, in any event, in both cases, the issuance of
shares of ATS Class A Common Stock shall be at a price per share of not
less than $9.00 and, with respect to the ATS Private Placement for a total
purchase price of not less than $80.0 million;
(e) Fred R. Lummis, one of the stockholders of ATC, and Randall Mays, the
Chief Financial Officer of another of the stockholders of ATC, shall have
been elected as directors of ATS;
(f) ATC shall have received from its counsel, Vinson & Elkins L.L.P., a
favorable opinion (dated as of the Closing Date) to the effect that the
Merger constitutes a reorganization within the meaning of Section 368 of
the Code and that, as a consequence, ATC and its stockholders will not
recognize any gain or loss for federal income tax purposes as a result of
consummation of the Merger, and, in connection with such opinion, ATS shall
have executed and delivered to ATC and its counsel a certificate
substantially in the form of Exhibit I hereto and made a part hereof; and
(g) Either the CBS Merger shall be consummated on the terms set forth in
the CBS Merger Agreement, including execution and delivery of the ATS
Separation Agreement or the Tower Distribution shall have occurred.
ARTICLE 8
Termination, Amendment and Waiver
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of ATC and ATS; or
(b) by either ATS or ATC if any permanent injunction, decree or judgment
by any Authority preventing the consummation of the Merger shall have
become final and nonappealable; or
(c) by ATC in the event (i) ATC is not in breach of this Agreement and
none of its representations or warranties shall have become and continue to
be untrue in a manner that would cause the condition set forth in Section
7.2(b) not to be satisfied, and (ii) either (A) the Merger has not been
consummated prior to the Termination Date, or (B) ATS is in breach of this
Agreement or any of its representations or warranties shall have become and
continue to be untrue in a manner that would be reasonably likely to cause
the conditions set forth in Section 7.3(b) not to be satisfied, and such a
breach or untruth exists and is not capable of being cured, by and will
prevent or delay consummation of the Merger by or beyond, the Termination
Date; or
(d) by ATS in the event (i) ATS is not in breach of this Agreement and
none of its representations or warranties shall have become and continue to
be untrue in a manner that would cause the condition set forth in Section
7.3(b) not to be satisfied, and (ii) either (A) the Merger has not been
consummated prior to the Termination Date, or (B) ATC is in breach of this
Agreement or any of ATC's representations or warranties shall have become
and continue to be untrue in a manner that would be reasonably likely to
cause the conditions set forth in Section 7.2(b) not to be satisfied, and
such a breach or untruth exists and is not capable of being cured by, and
will prevent or delay consummation of the Merger by or beyond, the
Termination Date; or
(e) by ATS or ATC in the event (i) the ATC Stockholder Approval has not
been obtained prior to the Termination Date, (ii) neither the CBS Merger
nor the Tower Distribution has occurred prior to the Termination Date in
the manner described in Section 6.21, or (iii) prior to the Termination
Date, any consent
VI-38
<PAGE>
or approval from the ARS stockholders required to satisfy any of the
conditions in Article 7 or otherwise to consummate the Merger has not been
obtained.
The right of ATS or ATC to terminate this Agreement pursuant to this Section
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of either party, any Person controlling
either party or any of their respective Representatives whether prior to or
after the execution of this Agreement.
8.2 Effect of Termination.
(a) Except as provided in Sections 6.1 (solely with respect to
confidentiality), 6.3 and 6.15 and this Section and except as provided in
Section 8.2(b), in the event of the termination of this Agreement pursuant
to Section 8.1, or in the event the Merger shall not have been consummated
prior to the end of business on the Termination Date, except as otherwise
provided in this Section, this Agreement shall forthwith become void, there
shall be no liability on the part of either party, or any of its respective
shareholders, officers or directors, to the other and all rights and
obligations of either party shall cease; provided, however, that such
termination shall not relieve either party from liability for any willful
misrepresentation or willful breach of any of its warranties, covenants or
agreements set forth in this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, including
without limitation the provisions of Section 9.4, in the event this
Agreement is terminated (a) pursuant to the provisions of Section
8.1(e)(i), then ATC acknowledges and agrees that ATS shall be entitled to a
termination fee in an amount equal to $15,000,000, together with the
reasonable out of pocket fees and expenses (including without limitation
the reasonable out of pocket fees and expenses of accountants, attorneys,
financial advisors and printers and all registration and other filing
fees), not to exceed $1,000,000, incurred by ATS in connection with this
Agreement and the Merger, unless ATS has notified Fred R. Lummis (or the
then acting Chairman of ATC, if not Mr. Lummis) or ATC is otherwise
actually aware, at least five (5) business days in advance of the
Termination Date, that the ATS Registration Statement has been declared
effective, in which case ATS shall not be entitled to any termination fee,
expense reimbursement or other payment from ATC, or (b) pursuant to the
provisions of Section 8.1(e)(ii) or (iii), then ATS acknowledges and agrees
that ATC shall be entitled to a termination fee in an amount equal to
$15,000,000, together with the reasonable out of pocket fees and expenses
(including without limitation the reasonable out of pocket fees and
expenses of accountants, attorneys, financial advisors and printers and all
registration and other filing fees), not to exceed $1,000,000, incurred by
ATC in connection with this Agreement and the Merger. The parties agree
that, anything in Section 8.2(a), Section 9.4 or elsewhere in this
Agreement to the contrary notwithstanding, such amount shall be a sole and
exclusive remedy and constitute full payment for any and all damages
suffered by ATS or ATC, as the case may be, by reason of the events
referred to in the preceding sentence. ATS and ATC agree in advance that
actual damages would be difficult to ascertain and that such termination
fee is a fair and equitable amount to be paid by ATC or by ATS in order to
reimburse the other for damages sustained due to the failure of the Merger
to be consummated for the above-stated reasons.
ARTICLE 9
General Provisions
9.1 Waivers; Amendments. Changes in or additions to this Agreement may be
made, or compliance with any term, covenant, agreement, condition or provision
set forth herein may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively) with, but only with, the
consent in writing of the parties hereto. No delay on the part of either party
at any time or times in the exercise of any right or remedy shall operate as a
waiver thereof. Any consent may be given subject to satisfaction of conditions
stated therein. The failure to insist upon the strict provisions of any
covenant, term, condition or other provision of this Agreement or to exercise
any right or remedy thereunder shall not constitute a waiver of any such
covenant, term, condition or other provision thereof or default in connection
therewith. The waiver of any covenant, term,
VI-39
<PAGE>
condition or other provision thereof or default thereunder shall not affect or
alter this Agreement in any other respect, and each and every covenant, term,
condition or other provision of this Agreement shall, in such event, continue
in full force and effect, except as so waived, and shall be operative with
respect to any other then existing or subsequent default in connection
therewith.
9.2 Fees, Expenses and Other Payments. All costs and expenses incurred in
connection with this Agreement and the consummation of the Merger, including
without limitation fees and disbursements of counsel, financial advisors and
accountants incurred by the parties hereto, shall be borne solely and entirely
by the party which has incurred such costs and expenses or which is
responsible therefor under Applicable Law.
9.3 Notices. All notices and other communications which by any provision of
this Agreement are required or permitted to be given shall be given in writing
and shall be deemed to have been delivered (a) three (3) days after being
mailed by first-class or express mail, postage prepaid, (b) the next business
day when sent overnight by recognized courier service, (c) upon confirmation
when sent by telex, telegram, telecopy or other form of rapid transmission,
confirmed by mailing (by first class or express mail, postage prepaid, or by
recognized courier service) written confirmation at substantially the same
time as such rapid transmission, or (d) upon delivery when personally
delivered to the receiving party (which if other than an individual shall be
an officer or other responsible party of the receiving party). All such
notices and communications shall be mailed, sent or delivered as follows:
(a) If to ATS:
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Joseph L. Winn, Chief Financial Officer
Telecopier No.: (617) 375-7575
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
(b) If to ATC:
3411 Richmond Avenue,
Suite 400
Houston, Texas 77046
Attention: Marty L. Jimmerson, Chief Financial Officer
Telecopier No.: (713) 629-1189
with a copy to:
Vinson & Elkins L.L.P.
1001 Fannin
Suite 2300
Houston, Texas 70002-6170
Attention: Bruce C. Herzog, Esq.
Telecopier No.: (713) 615-5946
or to such other person(s), telex or facsimile number(s) or address(es) as the
party to receive any such communication or notice may have designated by
written notice to the other party given in accordance with this Section.
VI-40
<PAGE>
9.4 Specific Performance; Other Rights and Remedies. Each party recognizes
and agrees that in the event the other party should refuse to perform any of
its obligations under this Agreement or any Collateral Document, the remedy at
law would be inadequate and agrees that for breach of such provisions, each
party shall, in addition to such other remedies as may be available to it at
law or in equity, except as otherwise provided in Section 8.2(b), be entitled
to injunctive relief and to enforce its rights by an action for specific
performance to the extent permitted by Applicable Law. Each party hereby
waives any requirement for security or the posting of any bond or other surety
in connection with any temporary or permanent award of injunctive, mandatory
or other equitable relief. Except as otherwise provided in Section 8.2,
nothing herein contained shall be construed as prohibiting either party from
pursuing any other remedies available to it pursuant to the provisions of this
Agreement or Applicable Law for a breach by the other party, including without
limitation the recovery of damages, including, to the extent awarded in any
Legal Action, punitive, incidental and consequential damages (including
without limitation damages for diminution in value and loss of anticipated
profits) or any other measure of damages permitted by Applicable Law.
9.5 Severability. If any term or provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any
other case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative, illegal or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative, illegal or unenforceable provision had never been contained
herein and such provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction or in such
case. Notwithstanding the foregoing, in the event of any such determination
the effect of which is to affect materially and adversely either party, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest
extent permitted by Applicable Law in an acceptable manner to the end that the
Transactions are fulfilled and consummated to the maximum extent possible.
9.6 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, binding upon all of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one of such counterparts.
9.7 Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.8 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in
accordance with, the applicable laws of the United States of America and the
laws of the State of New York applicable to contracts made and performed in
such State and, in any event, without giving effect to any choice or conflict
of laws provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction, except to the extent that the DCL
or other laws of the State of Delaware shall be applicable.
9.9 Further Acts. Each party agrees that at any time, and from time to time,
before and after the consummation of the transactions contemplated by this
Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as the other party reasonably deems
necessary or desirable in order to carry out the terms and conditions of this
Agreement and the transactions contemplated hereby or to facilitate the
enjoyment of any of the rights created hereby or to be created hereunder.
VI-41
<PAGE>
9.10 Entire Agreement. This Agreement (together with the ATC Disclosure
Schedule, the ATS Disclosure Schedule, the Exhibits and the other Collateral
Documents delivered or to be delivered in connection herewith) constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements, covenants, promises,
conditions, undertakings, inducements, representations, warranties and
negotiations, expressed or implied, oral or written, between the parties, with
respect to the subject matter hereof. Each of the parties is a sophisticated
legal entity that was advised by experienced counsel and, to the extent it
deemed necessary, other advisors in connection with this Agreement. Each of
the parties hereby acknowledges that (a) neither of the parties has relied or
will rely in respect of this Agreement or the transactions contemplated hereby
upon any document or written or oral information previously furnished to or
discovered by it or its representatives, other than this Agreement (or such of
the foregoing as are delivered at the Closing, (b) there are no covenants or
agreements by or on behalf of either party or any of its respective Affiliates
or representatives other than those expressly set forth in this Agreement and
the Collateral Documents, and (c) the parties' respective rights and
obligations with respect to this Agreement and the events giving rise thereto
will be solely as set forth in this Agreement and the Collateral Documents.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY HERETO AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT, NEITHER OF THE PARTIES MAKES ON BEHALF OF ITSELF AND ITS DIRECTORS,
OFFICERS, STOCKHOLDERS AND OTHER AFFILIATES ANY OTHER REPRESENTATIONS OR
WARRANTIES, AND EACH HEREBY DISCLAIMS ON BEHALF OF ITSELF AND ITS OFFICERS,
DIRECTORS, STOCKHOLDERS AND OTHER AFFILIATES ANY OTHER REPRESENTATIONS OR
WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
9.11 Assignment. This Agreement shall not be assignable by either party and
any such assignment shall be null and void, except that it shall inure to the
benefit of and by binding upon any successor to either party by operation of
law, including by way of merger, consolidation or sale of all or substantially
all of its assets.
9.12 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, except
as otherwise provided in Sections 6.8, 6.9(b), 6.9(c), 6.10 and 8.11.
9.13 Non-Survival of Representations, Warranties, Covenants and
Agreements. Except for damages or other remedies attributable to or based upon
fraud, willful or intentional misrepresentation or willful or intentional
breach of warranty, covenant or agreement, none of the representations,
warranties, covenants and agreements in this Agreement shall survive the
Merger, and after effectiveness of the Merger neither party nor any of its
respective officers, directors or stockholders shall have any further
obligation with respect thereto. This Section shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
9.14 Mutual Drafting. This Agreement is the result of the joint efforts of
the parties, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of the parties and there shall be no
construction against either party based on any presumption of that party's
involvement in the drafting thereof.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
VI-42
<PAGE>
IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
American Tower Systems Corporation
By: _________________________________
Name: Joseph L. Winn
Title: Chief Financial Officer
American Tower Corporation
By: _________________________________
Name: Fred R. Lummis
Title: President
VI-43
<PAGE>
APPENDIX A
DEFINITIONS
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, ten percent (10%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, ten percent (10%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
AGREEMENT shall mean this Agreement as originally in effect, including,
unless the context otherwise specifically requires, this Appendix A, the ATC
Disclosure Schedule, the ATS Disclosure Schedule and all exhibits hereto, and
as any of the same may from time to time be supplemented, amended, modified or
restated in the manner herein or therein provided.
AGGREGATE MERGER SHARES shall mean the number obtained by solving the
following equation for "x":
x = (.5384615) multiplied by y, where "y" is the number of shares of
ATS Common Stock determined on a Fully-Diluted Basis immediately prior
to the Effective Time. Thus, in the event there were no Dissenting
Shares, the number of Aggregate Merger Shares would equal 35% of the
sum of the Aggregate Merger Shares and the number of shares of ATS
Common Stock determined on a Fully-Diluted Basis.
ALTERNATIVE TRANSACTION shall mean, with respect to any Person, a
transaction or series of related transactions (other than the Transactions)
resulting in or reasonably likely to result in (i) any change of control of
such Person, (ii) any merger, consolidation or other business combination of
such Person, regardless of whether such Person is the surviving Entity unless
the surviving Entity remains obligated under this Agreement to the same extent
as such Person was, (iii) any tender offer or exchange offer for, or any
acquisitions of, any securities of such Person, (iv) any sale or other
disposition of all or any substantial part of the assets or business of such
Person, (v) any issue or sale, or any agreement to issue or sell, any capital
stock, Convertible Securities, Option Securities or other equity securities by
such Person, or (vi) any issue, sale, transfer, pledge, assignment or other
conveyance or any agreement to issue, sell, transfer, pledge, assign or
otherwise convey, any capital stock, such Convertible Securities, Option
Securities or other equity securities of such Person.
APPLICABLE LAW shall mean any Law of any Authority, whether domestic or
foreign, including without limitation the FCA and all federal and state
securities and Environmental Laws, to which a Person is subject or by which it
or any of its business or operations is subject or any of its property or
assets is bound.
ARS shall have the meaning given to it in the fourth Whereas paragraph.
ARS CREDIT AGREEMENTS shall mean the two credit agreements of ARS with its
lending banks and other financial institutions.
ARS CUMULATIVE PREFERRED STOCK shall mean the 11 3/8% Cumulative
Exchangeable Preferred Stock, par value $.01 per share, of ARS.
ARS PREFERRED CERTIFICATE shall have the meaning given to it in Section
5.23(b).
ATC shall have the meaning given to it in the Preamble.
ATC AFFILIATE AGREEMENTS shall have the meaning given to it in Section 6.24.
VI-44
<PAGE>
ATC ASSETS shall have the meaning given to it in Section 4.4(a).
ATC BUSINESS shall have the meaning given to it in Section 4.4(a).
ATC BUSINESS DESCRIPTION shall mean the business description of ATC set
forth in the ATS Prospectus.
ATC COMMON STOCK shall have the meaning given to it in Section 3.1(b).
ATC CONDITIONS shall have the meaning given to it in Section 6.17.
ATC DISCLOSURE SCHEDULE shall mean the ATC Disclosure Schedule dated as of
the date of this Agreement delivered by ATC to ATS.
ATC EMPLOYEES shall have the meaning given it in Section 4.14.
ATC FINANCIAL STATEMENTS shall have the meaning given to it in Section 4.2.
ATC GOVERNMENTAL AUTHORIZATIONS shall have the meaning given to it in
Section 4.6(a).
ATC OPTION(S) shall have the meanings given to those terms in Section 6.10.
ATC PREFERRED STOCK shall have the meaning given to it in Section 3.1(d).
ATC PRIVATE AUTHORIZATION(S) shall have the meaning given to it in Section
4.5.
ATC REQUIRED VOTE shall have the meaning given to it in Section 4.21.
ATC SHARE(S) shall have the meanings given to them in Section 3.1(b).
ATC STOCKHOLDER APPROVAL shall have the meaning given to it in Section 6.12.
ATC STOCKHOLDER INFORMATION shall have the meaning given to it in Section
6.13(b)
ATC STOCKHOLDERS MEETING shall have the meaning given to it in Section 6.12.
ATC'S KNOWLEDGE (or words of similar import) shall mean the actual knowledge
of ATC or any ATC director or officer, as such knowledge exists on the date of
this Agreement, after reasonable review of appropriate ATC records and after
reasonable inquiry of appropriate ATC employees.
ATS shall have the meaning given to it in the Preamble.
ATS ASSETS shall have the meaning given to it in Section 5.4(a).
ATS BUSINESS shall have the meaning given to it in Section 5.4(a).
ATS EXISTING RESTATED CERTIFICATE shall have the meaning given to it in
Section 2.5.
ATS CLASS A COMMON STOCK shall have the meaning given to it in Section
3.1(b).
ATS CLASS B COMMON STOCK shall mean the Class B Common Stock, par value $.01
per share, of ATS.
ATS COMMON STOCK shall have the meaning given to it in Section 3.1(b).
ATS CONDITIONS shall have the meaning given to it in Section 6.17.
ATS DISCLOSURE SCHEDULE shall mean the ATS Disclosure Schedule dated as of
the date of this Agreement delivered by ATS to ATC.
VI-45
<PAGE>
ATS EMPLOYEES shall have the meaning given it in Section 5.13.
ATS FINANCIAL STATEMENTS shall have the meaning given to it in Section 5.2.
ATS GOVERNMENTAL AUTHORIZATIONS shall have the meaning given to it in
Section 5.6(a).
ATS INFORMATION STATEMENT shall mean the Information Statement draft, dated
December 12, 1997, describing the business of ATS and certain other matters
heretofore delivered by ATS to ATC.
ATS' KNOWLEDGE (or words of similar import) shall mean the actual knowledge
of any director or executive officer of ATS, as such knowledge exists on the
date of this Agreement, after reasonable review of appropriate ATS records and
after reasonable inquiry of appropriate ATS employees.
ATS NONCOMPETITION AGREEMENTS shall have the meaning given to it in Section
7.2(i).
ATS OPTION(S) shall have the meanings given to those terms in Section 6.10.
ATS PRIVATE AUTHORIZATIONS shall have the meaning given to it in Section
5.5.
ATS PRIVATE PLACEMENT shall mean the issue and sale by ATS of shares of ATS
Class A Common Stock to certain officers and directors of ATS (or their
Affiliates) for an aggregate consideration of not more than $80.0 million, at
a per share price of not less than $9.00, all as described in the ATS
Information Statement.
ATS PROSPECTUS shall have the meaning given to it in Section 6.13(b).
ATS REGISTRATION RIGHTS AGREEMENT shall have the meaning given to it in
Section 6.17.
ATS REGISTRATION STATEMENT shall have the meaning given to it in Section
6.13(a).
ATS RESTATED CERTIFICATE shall have the meaning given to it in Section 2.5.
ATS SEPARATION AGREEMENT shall mean the agreement referred to in Section
6.17 of the CBS Merger Agreement and which shall incorporate the provisions of
Section 6.17, 6.18 and 6.19 of the CBS Merger Agreement as they exist on the
date hereof or as they may be amended in a manner that does not increase
materially the obligations and liabilities of ATS.
ATS VOTING AGREEMENT shall have the meaning given to it in Section 6.11.
ATSI shall mean American Tower Systems, Inc., a Delaware corporation which
is wholly-owned by ATS and which conducts directly or through Subsidiaries
substantially all of the ATS Business and owns directly or through
Subsidiaries substantially all of the ATS Assets.
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or quasi-
governmental agency, arbitrator, authority, board, body, branch, bureau, or
comparable Person, whether domestic or foreign, including without limitation
the FCC.
BENEFIT ARRANGEMENT shall mean, with respect to any Person, any material
benefit arrangement that is not a Plan, including (a) any employment or
consulting agreement, (b) any arrangement providing for insurance coverage or
workers' compensation benefits, (c) any incentive bonus or deferred bonus
arrangement, (d) any arrangement providing termination allowance, severance or
similar benefits, (e) any equity compensation plan, (f) any deferred
compensation plan, and (g) any compensation policy and practice, but only to
the extent that it covers or relates to any officer, employee, individual or
Entity involved in the ownership and operation of the assets of such Person or
the conduct of the business of such Person.
VI-46
<PAGE>
CBS MERGER shall mean the merger of R Acquisition Corp. ("CBS Sub"), a
Delaware subsidiary wholly-owned by CBS Corporation (formerly Westinghouse
Electric Corporation), a Pennsylvania corporation ("CBS"), with and into ARS,
on the terms set forth in an Agreement and Plan of Merger, dated as of
September 19, 1997, by and among ARS, CBS and CBS Sub, as the same has
heretofore been amended or as it may from time to time be hereafter amended,
modified, supplemented and restated in a manner that does not increase
materially the obligations and liabilities of ATS (as so amended, modified,
supplemented and restated, the "CBS Merger Agreement").
CERTIFICATE shall have the meaning given to it in Section 3.1(i).
CERTIFICATE OF MERGER shall have the meaning given to it in Section 2.3.
CLAIMS shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and
nature relating thereto, and all fees, costs, expenses and disbursements
(including without limitation reasonable attorneys' and other legal fees,
costs and expenses) relating to any of the foregoing.
CLOSING shall have the meaning given to it in Section 2.2.
CLOSING DATE shall have the meaning given to it in Section 2.2.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Subtitle B
of Title I of ERISA.
CODE shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
COLLATERAL DOCUMENTS shall mean the ATC Affiliate Agreements, the ATS
Information Statement, the ATS Prospectus, the ATS Registration Rights
Agreement, the ATS Registration Statement, the ATS Restated Certificate, the
ATS Voting Agreement, the Certificate of Merger and any other agreement,
certificate, contract, instrument, notice, opinion or other document delivered
pursuant to the provisions of this Agreement.
COMMISSION shall mean the Securities and Exchange Commission and shall
include any successor Authority.
CONFIDENTIAL INFORMATION shall have the meaning given to it in Section
6.1(a).
CONTINUED EMPLOYEES shall have the meaning given to it in Section 6.9(b).
CONTRACT, CONTRACTUAL OBLIGATION shall mean, with respect to any Person, any
agreement, arrangement, commitment, contract, covenant, indemnity, undertaking
or other obligation or liability which involves the ownership or operation of
the assets of such Person or the conduct of the business of such Person.
CONTROL (including the terms "controlled," "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or
properties, whether through the ownership of stock, equity or other ownership,
by contract, arrangement or understanding, or as trustee or executor, by
contract or credit arrangement or otherwise.
CONVERTIBLE SECURITIES shall mean any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for shares of common stock,
whether or not the right to convert or exchange thereunder is immediately
exercisable or is conditioned upon the passage of time, the occurrence or non-
occurrence or existence or non-existence of some other Event, or both.
VI-47
<PAGE>
DCL shall have the meaning given to it in Section 2.1.
DISTRIBUTION shall mean, with respect to any Person, (a) the declaration or
payment of any dividend (except dividends payable in common stock of such
Person) on or in respect of any shares of any class of capital stock of such
Person or any shares of capital stock of any Subsidiary owned by a Person
other than such Person or a Subsidiary, (b) the purchase, redemption or other
retirement of any shares of any class of capital stock of such Person or any
shares of capital stock of any Subsidiary of such Person owned by a Person
other than such Person or a Subsidiary of such Person, and (c) any other
distribution on or in respect of any shares of any class of capital stock of
such Person or any shares of capital stock of any Subsidiary of such Person
owned by a Person other than such Person or a Subsidiary of such Person.
D&O QUESTIONNAIRE shall have the meaning given to it in Section 6.8(c).
EFFECTIVE TIME shall have the meaning given to it in Section 2.3.
EMPLOYMENT ARRANGEMENT shall mean, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within
thirty (30) days without liability, penalty or payment of any kind by such
Person or any Affiliate), or providing for severance, termination payments,
insurance coverage (including any self-insured arrangements), workers
compensation, disability benefits, life, health, medical, dental or
hospitalization benefits, supplemental unemployment benefits, vacation or sick
leave benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock purchase or appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA, but only to the extent that
it covers or relates to any officer, employee or other Person involved in the
ownership or operation of the assets or the conduct of the business of such
Person.
ENCUMBER shall mean to suffer, accept, agree to or permit the imposition of
a Lien.
ENTITY shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual,
business trust, joint stock company, joint venture or other organization,
entity or business, whether acting in an individual, fiduciary or other
capacity, or any Authority.
ENVIRONMENTAL LAW shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment, including without limitation Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials or other
chemicals or industrial pollutants, substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, mining or reclamation or mined land, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances, materials or wastes. Environmental Laws shall include
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 6901 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.), the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), and the Surface Mining Control and Reclamation Act of
1977 (30 U.S.C. Section 1201 et seq.), and any analogous federal, state, local
or foreign, Laws, and the rules and regulations promulgated thereunder as in
effect on the date hereof or on the Closing Date, as applicable, and any
reference to any statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.
VI-48
<PAGE>
ENVIRONMENTAL PERMIT shall mean any Governmental Authorization required by
or pursuant to any Environmental Law.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ERISA AFFILIATE shall mean, with respect to any Person, any individual or
Entity that is treated as a single employer with such Person under Sections
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA.
EVENT shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
EXCHANGE RATIO shall have the meaning given to it in Section 3.1(b).
FCA shall mean the Communications Act of 1934, and the rules and regulations
thereunder, all as from time to time in effect, or any successor law, rules or
regulations, and any reference to any statutory or regulatory provision shall
be deemed to be a reference to any successor statutory or regulatory
provision.
FCC shall mean the Federal Communications Commission and shall include any
successor Authority.
FINAL ORDER shall mean, with respect to any Authority, including without
limitation the FCC, one with respect to which no appeal, no stay, no petition
or application for rehearing, reconsideration, review or stay, whether on
motion of the applicable Authority or other Person or otherwise, and no other
Legal Action contesting such consent or approval, is in effect or pending and
as to which the time or deadline for filing any such appeal, petition or
application or other Legal Action has expired or, if filed, has been denied,
dismissed or withdrawn, and the time or deadline for instituting any further
Legal Action has expired.
FULLY-DILUTED BASIS shall mean, when applied to the ATC Common Stock or the
ATS Common Stock, the total number of shares of the issuer of such stock that
are outstanding as of the date of determination plus, without duplication, the
total number of all shares issuable in respect of securities convertible into
or exchangeable for ATC Common Stock or ATS Common Stock (excluding the ATS
Common Stock that may be issued upon exchange of membership interests issued
in Communications System Development, LLC, but including in both Convertible
Securities), as the case may be, or issuable upon exercise of stock
appreciation rights or options, warrants and other irrevocable rights to
purchase or subscribe for ATC Common Stock or ATS Common Stock, as the case
may be, including Option Securities. Without limiting the foregoing, the
parties agree that, if the Tower Distribution occurs before the CBS Merger,
the term "Fully-Diluted Basis" would take into account any Convertible
Securities or Option Securities that ATS or the Surviving Corporation may be
required to issue upon consummation of the Merger.
GAAP shall mean generally accepted accounting principles applied on a
consistent basis, (i) as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants ("AICPA")
and/or in statements of the Financial Accounting Standards Board that are
applicable in the circumstances as of the date in question, and (ii) when not
inconsistent with such opinions and statements, as set forth in other AICPA
publications and guidelines that otherwise arise by custom for the particular
industry, all as the same shall exist on the date of this Agreement.
VI-49
<PAGE>
GEARON TRANSACTION shall mean the merger of Gearon & Co., Inc., a Georgia
corporation ("Gearon"), with and into ATSI, pursuant to an Agreement and Plan
of Merger (the "Gearon Merger Agreement"), dated as of November 21, 1997, by
and among ATS, ATSI, Gearon and J. Michael Gearon Jr., as the same has may
from time to time be hereafter amended, modified, supplemented and restated in
a manner which would not have any significant adverse effect on ATS (as so
amended, modified, supplemented and restated, the "Gearon Merger Agreement").
GOVERNMENTAL AUTHORIZATIONS shall mean, with respect to any Person, all
approvals, concessions, consents, franchises, licenses, permits, plans,
registrations and other authorizations of all Authorities, including without
limitation the United States Forest Service and the Federal Aviation
Administration, in connection with the ownership or operation of the assets or
the conduct of the business of such Person.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and similar
Tax filings, and the payment of all fees, assessments, interest and penalties
associated with such filings, with all Authorities.
HART-SCOTT-RODINO ACT shall mean the Hart-Scott-Rodino Improvement Act of
1976, as from time to time in effect, or any successor law, and any reference
to any statutory provision shall be deemed to be a reference to any successor
statutory provision.
HAZARDOUS MATERIALS shall mean and include any substance, material, waste,
constituent, compound, chemical, natural or man-made element (in whatever
state of matter): (a) the presence of which requires investigation or
remediation under any Environmental Law, (b) that is defined as a "hazardous
waste" or "hazardous substance" under any Environmental Law; (c) that is
toxic, explosive, corrosive, etiologic, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
applicable Authority pursuant to any Environmental Law; (d) the presence of
which on the real property owned or leased by such Person causes or threatens
to cause a nuisance upon any such real property or to adjacent properties or
poses or threatens to pose a hazard to the health or safety of persons on or
about any such real property; or (e) that contains gasoline, diesel fuel or
other petroleum hydrocarbons, or any by-products or fractions thereof, natural
gas, polychlorinated biphenyls ("PCBs") and PCB-containing equipment,
radioactive material, lead, asbestos or asbestos-containing materials, or urea
formaldehyde foam insulation.
INDEBTEDNESS shall mean, with respect to any Person, (a) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves or any minority interest in any Subsidiary of such Person to the
extent such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of such Person, which in accordance with GAAP would
be included in determining total liabilities as shown on the liability side of
a balance sheet of such Person, (b) all obligations secured by any Lien to
which any property or asset owned or held by such Person is subject, whether
or not the obligation secured thereby shall have been assumed, and (c) to the
extent not otherwise included, all Contractual Obligations of such Person
constituting capitalized leases and all obligations of such Person with
respect to Leases constituting part of a sale and leaseback arrangement.
INDEBTEDNESS FOR MONEY BORROWED shall mean, with respect to any Person,
money borrowed and Indebtedness represented by notes payable and drafts
accepted representing extensions of credit, all obligations evidenced by
bonds, debentures, notes or other similar instruments, the maximum amount
currently or at any time thereafter available to be drawn under all
outstanding letters of credit issued for the account of such Person, all
Indebtedness upon which interest charges are customarily paid by such Person,
and all Indebtedness (including capitalized lease obligations and purchase
money Indebtedness) issued or assumed as full or partial payment for property
or services, whether or not any such notes, drafts, obligations or
Indebtedness represent Indebtedness for Money Borrowed, but shall not include
(a) trade payables, (b) expenses accrued in the ordinary course of business,
(c) customer advance payments and customer deposits received in the ordinary
course of business, or (d) conditional sales agreements not prohibited by the
terms of this Agreement.
INDEMNIFIED PARTY shall have the meaning given to it in Section 6.8(b).
VI-50
<PAGE>
INTANGIBLE ASSETS shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained
by independent registration, documentation, certification, recordation or
other means, and shall include, without limitation, concessions, copyrights,
franchises, license, patents, permits, service marks, trademarks, trade names,
and applications with respect to any of the foregoing, technology and know-
how.
LAW shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic or foreign; (b) the common law, or other legal precedent;
or (c) arbitrator's, mediator's or referee's award, decision, finding or
recommendation.
LEASE shall mean any lease of property, whether real, personal or mixed, and
all amendments thereto.
LEGAL ACTION shall mean, with respect to any Person, any and all litigation
or legal or other actions, arbitrations, counterclaims, investigations,
proceedings, requests for material information by or pursuant to the order of
any Authority or suits, at law or in arbitration, equity or admiralty, whether
or not purported to be brought on behalf of such Person, affecting such Person
or any of such Person's business, property or assets.
LIEN shall mean any of the following: mortgage; lien (statutory or other);
or other security agreement, arrangement or interest; hypothecation, pledge or
other deposit arrangement; assignment; charge; levy; executory seizure;
attachment; garnishment; encumbrance (including any easement, exception,
reservation or limitation, right of way, and the like); conditional sale,
title retention or other similar agreement, arrangement, device or
restriction; preemptive or similar right; any financing lease involving
substantially the same economic effect as any of the foregoing; the filing of
any financing statement under the Uniform Commercial Code or comparable law of
any jurisdiction; restriction on sale, transfer, assignment, disposition or
other alienation; or any option, equity, claim or right of or obligation to,
any other Person, of whatever kind and character.
MATERIAL ADVERSE EFFECT shall mean, with respect to ATC or ATS, any Event
which is reasonably likely, in the reasonable business judgment of the
relevant party, to be expected to (a) materially and adversely affect the
validity or enforceability of this Agreement or the likelihood of consummation
of the Merger, or (b) materially and adversely affect the business,
operations, management, properties or prospects, or the condition, financial
or other, or results of operation of ATC and its Subsidiaries taken as a whole
or ATS and its Subsidiaries taken as a whole, as applicable, or (c) materially
impair ATC's or ATS' ability to fulfill its obligations under the terms of
this Agreement, or (d) materially and adversely affect the aggregate rights
and remedies of the other party (other under this Agreement. Notwithstanding
the foregoing, and anything in this Agreement to the contrary notwithstanding,
any Event generally affecting the economy or the tower communications business
shall not be deemed to have a Material Adverse Effect.
MATERIAL AGREEMENT shall mean, with respect to any Person, any Contractual
Obligation (other than Contractual Obligations under Contracts governing the
lease or rental of tower spaces to third-party customers) which (a) involves
the purchase, sale or lease of goods or materials, or purchase of services,
whether in or outside of the ordinary course of business (including, without
limitation, acquisitions of communications towers or tower businesses), that
individually involves a purchase price in excess of $2,000,000, (b) involves a
capitalized lease obligation or Indebtedness for Money Borrowed in excess of
$1,000,000, (c) involves a written agency, broker, dealer, license,
distributorship, sales representative or similar written agreement pursuant to
which such Person or its Subsidiaries made payments in excess of $1,000,000
during the preceding twelve-month period, (d) accounted for more than 3% of
the revenues of the business of such Person in any of the three fiscal years
or is likely to account for more than 3% of the revenues of the business of
such Person during the current fiscal year, (e) involves the management by
such Person of more than ten (10) communication towers for any other Person,
(f) is a partnership, limited liability company or other joint venture, (g)
grants any Person the exclusive right to represent ATS and its Subsidiaries of
ATC and its Subsidiaries, as the case may be, with respect to brokering
VI-51
<PAGE>
tower transactions, or marketing tower space or administering tower or (h)
limits the freedom to compete in any line of business or to conduct business
in any geographic location.
MERGER shall have the meaning given to it in the first Whereas paragraph.
MERGER CONSIDERATION shall have the meaning given to it in Section 3.1(b).
MULTIEMPLOYER PLAN shall mean a Plan which is a "multiemployer plan" within
the meaning of Section 3(37) or 4001(a)(3) of ERISA.
NASDAQ shall have the meaning given to it in Section 3.1.
OPTION SECURITIES shall mean all rights, options and warrants, and calls or
commitments evidencing the right, to subscribe for, purchase or otherwise
acquire shares of capital stock or Convertible Securities, whether or not the
right to subscribe for, purchase or otherwise acquire is immediately
exercisable or is conditioned upon the passage of time, the occurrence or non-
occurrence or the existence or non-existence of some other Event.
ORGANIC DOCUMENT shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all shareholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and,
with respect to a Person which is a partnership, its agreement and certificate
of partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
PERMITTED LIENS shall mean (a) Liens for current taxes not yet due and
payable, (b) such imperfections of title, easements, encumbrances and
mortgages or other Liens, if any, as, individually or in the aggregate, do not
materially detract from the value, or materially interfere with the present
use, of the ATC Assets or the ATS Assets, as the case may be, or otherwise
materially impair the conduct of the ATC Business or the ATS Business, as the
case may be, and (c) such other Liens as are permitted by the provisions of
this Agreement to be in place on the Closing Date.
PERSON shall mean any natural individual or any Entity.
PLAN shall mean, with respect to any Person and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Person or an ERISA Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA, but only to the extent that it covers or
relates to any officer, employee, individual or Entity involved in the
ownership and operation of the assets of such Person or the conduct of the
business of such Person.
PREFERRED STOCK MERGER CONSIDERATION shall have the meaning given to it in
Section 3.1(d).
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to
Intangible Assets.
REGULATIONS shall mean the federal income tax regulations promulgated under
the Code, as such Regulations may be amended from time to time. All references
herein to specific sections of the Regulations shall be deemed also to refer
to any corresponding provisions of succeeding Regulations, and all references
to temporary Regulations shall be deemed also to refer to any corresponding
provisions of final Regulations.
REPRESENTATIVES shall have the meaning given to it in Section 6.1(a).
RESTRICTED INFORMATION shall have the meaning given to it in Section 6.1.
VI-52
<PAGE>
RESTRICTED TRANSACTION shall mean any (i) acquisition or agreement to
acquire (x) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any Person
or other business organization or division thereof or (y) any assets (other
than in the ordinary course of business which for purposes of this definition
does not include the acquisition of communications sites and related assets
and other business involved in the communications sites industry or the
construction of communications towers and related assets), or (ii) any
undertaking or agreement to undertake the construction of one or more
communications towers.
SECURITIES ACT shall mean the Securities Act of 1933, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
SOLVENT shall mean, with respect to any Person on a particular date, that on
such date (i) the fair value of the assets of such Person (both at fair
valuation and at present fair saleable value) is, on the date of
determination, greater than the total amount of liabilities, including,
without limitation, contingent and unliquidated liabilities, of such Person,
(ii) such Person is able to pay all liabilities of such Person as they mature,
and (iii) such Person does not have unreasonably small capital with which to
carry on its business. In computing the amount of contingent or unliquidated
liabilities at any time, such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability. For purposes of this definition, "indebtedness" shall mean
any liability on a claim, and "claim" shall mean (a) right to payment, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal equitable, secured
or unsecured, or (b) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.
SUBSIDIARY shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially,
by such Person or any other Person controlled by such Person.
SURVIVING CORPORATION shall have the meaning given to it in Section 2.1.
TAX (and "Taxable", which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other including recapture of any tax
items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty or other tax, or other like assessment or charge of any kind
whatsoever, together with any interest, levies, assessments, charges,
penalties, addition to tax or additional amount imposed by any Taxing
Authority, (b) any joint or several liability of such Person with any other
Person for the payment of any amounts of the type described in (a) and (c) any
liability of such Person for the payment of any amounts of the type described
in (a) as a result of any express or implied obligation to indemnify any other
Person.
TAX RETURN OR RETURNS shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
TAXING AUTHORITY shall mean any Authority responsible for the imposition of
any Tax.
TERMINATION DATE shall mean May 31, 1998 or such other date as the parties
may, from time to time, mutually agree.
VI-53
<PAGE>
TRANSACTIONS shall mean the transactions contemplated by this Agreement to
be consummated on or prior to the Closing Date, including without limitation
the Merger and the execution, delivery and performance of the Collateral
Documents.
TOWER DISTRIBUTION shall mean the pro rata distribution by ARS to each ARS
common stockholder of a umber of shares of ATS Common Stock such that, after
giving to such distribution, (i) immediately prior to the Merger, such ARS
common stockholder will own the same percentage of ATS as it owned of ARS
determined as if all Convertible Securities of ARS had been so converted and
all Option Securities of ARS had been exercised, (ii) neither ARS nor any of
its Subsidiaries owns any capital stock in ATS or its Subsidiaries, other than
shares of ATS Common Stock (a) required to satisfy ARS Convertible Securities
and ARS Option Securities in the manner contemplated by the CBS Merger
Agreement or (b) owned with respect to (x) shares of ARS Common Stock as to
which appraisal rights have been asserted as a consequence of the Tower
Distribution or (y) ARS Option Securities which have been converted to ATS
Option Securities, and (iii) the Tower Distribution will have been made in all
material respects in accordance with Applicable Law including Federal
securities laws.
VI-54
<PAGE>
AMERICAN TOWER SYSTEMS CORPORATION
REGISTRATION STATEMENT ON FORM S-4
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact
that he is or was a director, officer, employee or agent of ATS may and, in
certain cases, must be indemnified by ATS against, in the case of a non-
derivative action, judgments, fines, amounts paid in settlement and reasonable
expenses (including attorney's fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of ATS and, in a non-derivative action, which involves a
criminal proceeding, in which such person had no reasonable cause to believe
his conduct was unlawful. This indemnification does not apply, in a derivative
action, to matters as to which it is adjudged that the director, officer,
employee or agent is liable to ATS, unless upon court order it is determined
that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to indemnity
for expenses.
Article XII of ATS' By-Laws provides that ATS shall indemnify each person
who is or was an officer or director of ATS to the fullest extent permitted by
Section 145 of the DGCL.
Article Sixth of the ATS' Restated Certificate states that no director of
ATS shall be personally liable to ATS or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for (i) breach of the
director's duty of loyalty to ATS or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, (iii) liability under Section 174 of the DGCL relating to certain
unlawful dividends and stock repurchases, or (iv) any transaction from which
the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Listed below are the exhibits which are filed as part of this registration
statement (according to the number assigned to them in Item 601 of Regulation
S-K). Each exhibit marked by a (*) has been previously filed as an exhibit as
part of the Registration Statement (File No. 333-46001) filed on February 10,
1998.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
2.1 Agreement and Plan of Merger,
dated as of November 21,
1997, by and among ATS,
American Tower Systems, Inc.
, a Delaware corporation
("ATSI"), Gearon & Co., Inc.,
a Georgia corporation
("Gearon") and J. Michael
Gearon, Jr. (the "Gearon
Stockholder"). (Schedules and
Exhibits omitted)............ Filed herewith as Exhibit 2.1*
2.2 Amendment No. 1 to Agreement
and Plan of Merger, dated as
of January 22, 1998, among
ATS, American Tower Systems
(Delaware), Inc., a Delaware
corporation (formerly known
as American Tower Systems,
Inc.), Gearon and the Gearon
Stockholder.................. Filed herewith as Exhibit 2.2*
2.3 Agreement and Plan of Merger,
dated as of December 12,
1997, by and among ATS and
American Tower Corporation, a
Delaware corporation ("ATC").
(Schedules and Exhibits
omitted)..................... Filed herewith as Exhibit 2.3*
3(i).1 Restated Certificate of
Incorporation, as filed with
the Secretary of State of the
State of Delaware on November
20, 1997..................... Filed herewith as Exhibit 3(i).1*
3(ii).2 By-Laws of ATS............... Filed herewith as Exhibit 3(ii).2*
5 Opinion of Sullivan &
Worcester LLP................ Filed herewith as Exhibit 5*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
8 Tax Opinion of Sullivan &
Worcester LLP................... Filed herewith as Exhibit 8*
10.1 Loan Agreement, dated as of
November 22, 1996, by and among
ATS, Toronto Dominion (Texas),
Inc., as Administrative Agent,
and the other Banks parties
thereto......................... Filed herewith as Exhibit 10.1*
10.2 Amended and Restated Loan
Agreement, dated as of October
15, 1997, by and among ATSI,
Toronto Dominion (Texas), Inc.
as Administrative Agent and the
Banks parties thereto.
(Schedules and Exhibits
omitted)........................ Filed herewith as Exhibit 2*
10.3 First Amendment to Amended and
Restated Loan Agreement
Agreement, dated as of December
31, 1997, by and among ATSI,
Toronto Dominion (Texas), Inc.,
as Administrative Agent and the
Banks parties thereto........... Filed herewith as Exhibit 3*
10.4 Assumption Agreement, dated as
of January , 1998, by and among
ATS, ATSI, American Tower
Systems, L.P., a Delaware
limited partnership, Toronto
Dominion (Texas), Inc., as
Administrative Agent and the
Banks parties thereto........... Filed herewith as Exhibit 4*
10.5 Asset Purchase Agreement, dated
as of February 5, 1997, by and
between ATSI and Meridian Radio
Sites, a California general
partnership ("Meridian Radio").
(Schedules and Exhibits
omitted)........................ Filed herewith as Exhibit 10.5*
10.6 First Amendment to Asset
Purchase Agreement, dated as of
February 10, 1997, by and
between ATSI and Meridian
Radio........................... Filed herewith as Exhibit 10.6*
10.7 Second Amendment to Asset
Purchase Agreement, dated as of
June 24, 1997, by and between
ATSI and Meridian Radio......... Filed herewith as Exhibit 10.7*
10.8 Asset Purchase Agreement, dated
as of February 5, 1997, by and
between ATSI and Meridian Sales
and Services Company, a
California corporation
("Meridian Sales"). (Schedules
and Exhibits omitted)........... Filed herewith as Exhibit 10.8*
10.9 First Amendment to Asset
Purchase Agreement, dated as of
February 10, 1997, by and
between ATSI and Meridian
Sales........................... Filed herewith as Exhibit 10.9*
10.10 Second Amendment to Asset
Purchase Agreement, dated as of
June 24, 1997, by and between
ATSI and Meridian Sales......... Filed herewith as Exhibit 10.10*
10.11 Asset Purchase Agreement, dated
as of February 5, 1997, by and
between ATSI and Meridian
Communications North, a
California general partnership
("Meridian North"). (Schedules
and Exhibits omitted)........... Filed herewith as Exhibit 10.11*
10.12 First Amendment to Asset
Purchase Agreement, dated as of
February 10, 1997, by and
between ATSI and Meridian
North........................... Filed herewith as Exhibit 10.12*
10.13 Second Amendment to Asset
Purchase Agreement, dated as of
June 24, 1997, by and between
ATSI and Meridian North......... Filed herewith as Exhibit 10.13*
10.14 Asset Purchase Agreement, dated
as of May 13, 1997, by and
between ATSI and Towers L.L.C.,
a South Carolina limited
liability company. (Schedules
and Exhibits omitted, except for
Employment Agreement)........... Filed herewith as Exhibit 10.14*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
10.15 Asset Purchase Agreement, dated
as of May 27, 1997, by and
between ATSI and B & E
Associates, Inc., a
Massachusetts corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.15*
10.16 Asset Purchase Agreement, dated
as of May 21, 1997, by and
between ATSI and DB
Consultants, Inc., a Texas
corporation. (Schedules and
Exhibits omitted).............. Filed herewith as Exhibit 10.16*
10.17 Asset Purchase Agreement, dated
as of May 27, 1997, by and
between ATSI and Communication
Systems Development, Inc., a
California corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.17*
10.18 Agreement of Limited Liability
Company of Communication
Systems Development, LLC, dated
May 30, 1997, by and among ATSI
and Communications Development
Corporation, Inc., a California
corporation.................... Filed herewith as Exhibit 10.18*
10.19 Asset Purchase Agreement, dated
as of June 25, 1997, by and
between ATSI and Fernand E.
Phaneuf, Jr. and Lorraine
Phaneuf, being all of the
shareholders of Tower Sites,
Inc., d/b/a Tower Sites, Inc. a
Connecticut corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.19*
10.20 Asset Purchase Agreement, dated
as of July 8, 1997, by and
between ATSI and Diablo
Communications, Inc., a
California corporation
("Diablo"). (Schedules and
Exhibits omitted).............. Filed herewith as Exhibit 10.20*
10.21 Asset Purchase Agreement, dated
as of July 8, 1997, by and
between ATSI and Diablo
Communications of Southern
California, Inc., a California
corporation ("DCSC").
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.21*
10.22 Asset Purchase Agreement, dated
as of July 8, 1997, by and
between ATSI and Suburban Cable
T.V. Co. Inc. ................. Filed herewith as Exhibit 10.22*
10.23 Asset Purchase Agreement, dated
as of July 31, 1997, by and
between ATSI and John C.
Santangelo and Gerald Harkins,
being all of the shareholders
of Southeast Communications,
Inc., and Southeast
Communications, Inc., a
Massachusetts corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.23*
10.24 Stock Purchase Agreement, dated
as of September 30, 1997, by
and between ATSI, OPM-USA-INC.,
a Florida corporation ("OPM"),
and the Stockholders of OPM.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.24*
10.25 Asset Purchase Agreement, dated
as of October 4, 1997, by and
between ATSI and Tucson
Communications Company, L.P, a
California limited partnership.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.25*
10.26 American Tower Systems
Corporation 1997 Stock Option
Plan, dated as of November 5,
1997, as amended............... Filed herewith as Exhibit 26*
10.27 American Tower Systems
Corporation Stock Purchase
Agreement, dated as of January
8, 1998, by and among ATS and
the Purchasers................. Filed herewith as Exhibit 27*
10.28 Employment Agreement, dated as
of January 22, 1998, by and
between ATSI and J. Michael
Gearon, Jr. ................... Filed herewith as Exhibit 28*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
10.29 Asset Purchase Agreement,
dated as of January 23, 1998,
by and among ATSI,
Midcontinent Media, Inc., a
South Dakota corporation
("Midcontinent"),
Midcontinent Teleport Co., a
South Dakota corporation and
a wholly-owned subsidiary of
Midcontinent ("MTC"), Wit
Communications, Inc., a
Delaware corporation and a
wholly-owned subsidiary of
MTC ("Wit"), and Washington
International Teleport, Inc.,
a Delaware corporation and a
wholly-owned subsidiary of
Wit.......................... Filed herewith as Exhibit 29*
10.30 Proposed form of ARS-ATS
Separation Agreement, dated
as of January , 1998 by and
among American Radio Systems
Corporation, a Delaware
Corporation, ATS, and CBS
Corporation, a Pennsylvania
corporation.................. Filed herewith as Exhibit 30*
21 Subsidiaries of ATS.......... Filed herewith as Exhibit 21*
23.0 Consents of Sullivan & Filed herewith as part of Exhibit 5
Worcester LLP................ and Exhibit 8*
23.1 Independent Auditors'
Consents--Deloitte & Touche
LLP.......................... Filed herewith as Exhibit 23.1*
23.2 Consent of Pressman Ciocca
Smith LLP.................... Filed herewith as Exhibit 23.2
23.3 Consent of Rooney, Ida, Nolt
& Ahern...................... Filed herewith as Exhibit 23.3*
23.4 Consent of Ernst & Young
LLP.......................... Filed herewith as Exhibit 23.4
23.5 Consent of KPMG Peat Marwick
LLP.......................... Filed herewith as Exhibit 23.5*
23.6 Consent of Ernst & Young
LLP.......................... Filed herewith as Exhibit 23.6
23.7 Consent of Price Waterhouse
LLP.......................... Filed herewith as Exhibit 23.7
23.8 Consent of Fred R. Lummis.... Filed herewith as Exhibit 23.8*
23.9 Consent of Randall Mays...... Filed herewith as Exhibit 23.9*
24 Power of Attorney............ Filed herewith as page II-6 of the
Registration Statement*
27 Financial Data Schedule...... Filed herewith as Exhibit 27*
99 Consent of Credit Suisse
First Boston................. Filed herewith as Exhibit 99*
99.1 Form of American Tower
Corporation Written Consent
of Stockholders in lieu of
Meeting...................... Filed herewith as Exhibit 99.1*
99.2 Form of Third Amendment to
Securityholders Agreement, by
and among ATC and the
Securityholders named
therein...................... Filed herewith as Exhibit 99.2
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) 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;
(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:
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
II-4
<PAGE>
(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;
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment, all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(g) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BOSTON, COMMONWEALTH OF MASSACHUSETTS, ON THE 13TH
DAY OF FEBRUARY, 1998.
AMERICAN TOWER SYSTEMS CORPORATION
/s/ Steven B. Dodge*
By: __________________________________
STEVEN B. DODGE CHAIRMAN OF THE
BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT ON FORM S-4 HAS BEEN SIGNED BELOW ON
FEBRUARY 13, 1998 BY THE FOLLOWING PERSONS ON BEHALF OF THE COMPANY AND IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE
Chairman,
/s/ Steven B. Dodge* President, Chief
- ------------------------------------ Executive Officer
STEVEN B. DODGE and Director
Chief Financial
/s/ Joseph L. Winn* Officer and
- ------------------------------------ Director
JOSEPH L. WINN
Vice President and
/s/ Justin D. Benincasa Corporate
- ------------------------------------ Controller
JUSTIN D. BENINCASA
Chief Operating
/s/ Alan L. Box* Officer and
- ------------------------------------ Director
ALAN L. BOX
Director
/s/ Arnold L. Chavkin*
- ------------------------------------
ARNOLD L. CHAVKIN
/s/ J. Michael Gearon, Jr.* Executive Vice
- ------------------------------------ President and
J. MICHAEL GEARON, JR. Director
Director
/s/ Thomas H. Stoner*
- ------------------------------------
THOMAS H. STONER
/s/ Justin D. Benincasa
- ------------------------------------
JUSTIN D. BENINCASA
INDIVIDUALLY AND AS ATTORNEY-IN-
FACT
II-6
<PAGE>
SCHEDULE I
AMERICAN TOWER SYSTEMS CORPORATION
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
ASSETS
Investments in and advances to subsidiaries......... $30,536,512 $51,523,118
Deferred income taxes............................... -- 440,522
----------- -----------
TOTAL......................................... $30,536,512 $51,963,640
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred income taxes............................... $ 279,218 $ 1,084,052
Minority interest in subsidiaries................... 528,928 774,317
Commitments and Contingencies.......................
Stockholder's Equity (Note Below):
Common Stock, $.01 Par Value, 10,000,000 Shares
authorized,
3,000 shares outstanding......................... 30 30
Additional paid-in capital........................ 30,318,420 51,403,212
Accumulated deficit............................... (590,084) (1,297,971)
----------- -----------
Total stockholder's equity...................... 29,728,366 50,105,271
----------- -----------
TOTAL......................................... $30,536,512 $51,963,640
=========== ===========
</TABLE>
Note: Please see page F-6, "Consolidated Statements of Stockholder's Equity,"
for activity occurring in the equity section of American Tower Systems
Corporation (ATS).
Note: ATS is currently a wholly-owned subsidiary of American Radio Systems
Corporation. In connection with a loan agreement maintained by the ATS'
wholly owned subsidiary, American Tower Systems (Delaware), Inc. ATS has
pledged its interest in such subsidiary.
See Notes to Consolidated Financial Statements.
S-1
<PAGE>
SCHEDULE I
AMERICAN TOWER SYSTEMS CORPORATION
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE
JULY 17, 1995 TO YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
---------------- ------------ -------------
<S> <C> <C> <C>
Revenues.......................... $ -- $ -- $ --
Equity in net loss as of subsidi-
aries............................ (110,411) (479,673) (707,887)
--------- --------- ---------
Net Loss.......................... $(110,411) $(479,673) $(707,887)
========= ========= =========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE
JULY 17, 1995 TO YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
---------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net loss.......................... $(110,411) $ (479,673) $ (707,887)
Adjustments to reconcile net loss
to cash flows from operating
activities:
Equity in net losses of sub-
sidiaries.................... 110,411 479,673 707,887
--------- ---------- -----------
Cash flows from operating ac-
tivities..................... -- -- --
--------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Cash transfers to Parent.......... (179,426) (4,866,226) (4,150,000)
Investments by Parent............. 242,215 2,548,557 25,959,792
--------- ---------- -----------
Cash Flows from investing activ-
ities.......................... 62,789 (2,317,669) 21,809,792
--------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Cash transfers from subsidiary.... 179,426 4,866,226 --
Investments in subsidiary......... (242,215) (2,548,557) (21,809,792)
--------- ---------- -----------
Cash flows from financing activ-
ities.......................... (62,789) 2,317,669 (21,809,792)
--------- ---------- -----------
CASH AND CASH EQUIVALENTS......... $ -- $ -- $ --
========= ========== ===========
</TABLE>
Note: As of September 30, 1997, ATS was a holding company whose only asset
consists of the stock of its wholly owned subsidiary American Tower
Systems (Delaware), Inc. (ATSI). As of such date, ATSI held all
operating assets of the consolidated group. ATS' income or loss is
limited to the income or loss of ATSI, after elimination of income or
loss attributable to minority investors in subsidiaries and investments
of ATSI.
See Notes to Consolidated Financial Statements.
S-2
<PAGE>
SCHEDULE II
AMERICAN TOWER SYSTEMS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
PERIOD FROM JULY 17, 1995 (INCORPORATION) TO DECEMBER 31, 1995,
THE YEAR ENDED DECEMBER 31, 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ---------- -------- ---------- ----------
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Ac-
counts:
Period from July 17,
1995 to December 31,
1995................... $ -- $ -- $-- $ -- $ --
Year Ended December 31,
1996................... $ -- $47,044 $-- $ -- $47,044
Nine Months Ended
September 30, 1997..... $47,044 $74,794 $-- $41,854 $79,984
</TABLE>
S-3
<PAGE>
EXHIBIT INDEX
Listed below are the exhibits which are filed as part of this registration
statement (according to the number assigned to them in Item 601 of Regulation
S-K). Each exhibit marked by a (*) has been previously filed as an exhibit as
part of the Registration Statement (File No. 333-46001) filed on February 10,
1998.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
2.1 Agreement and Plan of Merger,
dated as of November 21,
1997, by and among ATS,
American Tower Systems, Inc.
, a Delaware corporation
("ATSI"), Gearon & Co., Inc.,
a Georgia corporation
("Gearon") and J. Michael
Gearon, Jr. (the "Gearon
Stockholder"). (Schedules and
Exhibits omitted)............ Filed herewith as Exhibit 2.1*
2.2 Amendment No. 1 to Agreement
and Plan of Merger, dated as
of January 22, 1998, among
ATS, American Tower Systems
(Delaware), Inc., a Delaware
corporation (formerly known
as American Tower Systems,
Inc.), Gearon and the Gearon
Stockholder.................. Filed herewith as Exhibit 2.2*
2.3 Agreement and Plan of Merger,
dated as of December 12,
1997, by and among ATS and
American Tower Corporation, a
Delaware corporation ("ATC").
(Schedules and Exhibits
omitted)..................... Filed herewith as Exhibit 2.3*
3(i).1 Restated Certificate of
Incorporation, as filed with
the Secretary of State of the
State of Delaware on November
20, 1997..................... Filed herewith as Exhibit 3(i).1*
3(ii).2 By-Laws of ATS............... Filed herewith as Exhibit 3(ii).2*
5 Opinion of Sullivan & Filed herewith as Exhibit 5*
Worcester LLP................
8 Tax Opinion of Sullivan &
Worcester LLP................ Filed herewith as Exhibit 8*
10.1 Loan Agreement, dated as of
November 22, 1996, by and
among ATS, Toronto Dominion
(Texas), Inc., as
Administrative Agent, and the
other Banks parties
thereto...................... Filed herewith as Exhibit 10.1*
10.2 Amended and Restated Loan
Agreement, dated as of
October 15, 1997, by and
among ATSI, Toronto Dominion
(Texas), Inc. as
Administrative Agent and the
Banks parties thereto.
(Schedules and Exhibits
omitted)..................... Filed herewith as Exhibit 10.2*
10.3 First Amendment to Amended
and Restated Loan Agreement
Agreement, dated as of
December 31, 1997, by and
among ATSI, Toronto Dominion
(Texas), Inc., as
Administrative Agent and the
Banks parties thereto........ Filed herewith as Exhibit 10.3*
10.4 Assumption Agreement, dated
as of January , 1998, by and
among ATS, ATSI, American
Tower Systems, L.P., a
Delaware limited partnership,
Toronto Dominion (Texas),
Inc., as Administrative Agent
and the Banks parties
thereto...................... Filed herewith as Exhibit 10.4*
10.5 Asset Purchase Agreement,
dated as of February 5, 1997,
by and between ATSI and
Meridian Radio Sites, a
California general
partnership ("Meridian
Radio"). (Schedules and
Exhibits omitted)............ Filed herewith as Exhibit 10.5*
10.6 First Amendment to Asset
Purchase Agreement, dated as
of February 10, 1997, by and
between ATSI and Meridian
Radio........................ Filed herewith as Exhibit 10.6*
10.7 Second Amendment to Asset
Purchase Agreement, dated as
of June 24, 1997, by and
between ATSI and Meridian
Radio........................ Filed herewith as Exhibit 10.7*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
10.8 Asset Purchase Agreement, dated
as of February 5, 1997, by and
between ATSI and Meridian Sales
and Services Company, a
California corporation
("Meridian Sales"). (Schedules
and Exhibits omitted).......... Filed herewith as Exhibit 10.8*
10.9 First Amendment to Asset
Purchase Agreement, dated as of
February 10, 1997, by and
between ATSI and Meridian
Sales.......................... Filed herewith as Exhibit 10.9*
10.10 Second Amendment to Asset
Purchase Agreement, dated as of
June 24, 1997, by and between
ATSI and Meridian Sales........ Filed herewith as Exhibit 10.10*
10.11 Asset Purchase Agreement, dated
as of February 5, 1997, by and
between ATSI and Meridian
Communications North, a
California general partnership
("Meridian North"). (Schedules
and Exhibits omitted).......... Filed herewith as Exhibit 10.11*
10.12 First Amendment to Asset
Purchase Agreement, dated as of
February 10, 1997, by and
between ATSI and Meridian
North.......................... Filed herewith as Exhibit 10.12*
10.13 Second Amendment to Asset
Purchase Agreement, dated as of
June 24, 1997, by and between
ATSI and Meridian North........ Filed herewith as Exhibit 10.13*
10.14 Asset Purchase Agreement, dated
as of May 13, 1997, by and
between ATSI and Towers L.L.C.,
a South Carolina limited
liability company. (Schedules
and Exhibits omitted, except
for Employment Agreement)...... Filed herewith as Exhibit 10.14*
10.15 Asset Purchase Agreement, dated
as of May 27, 1997, by and
between ATSI and B & E
Associates, Inc., a
Massachusetts corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.15*
10.16 Asset Purchase Agreement, dated
as of May 21, 1997, by and
between ATSI and DB
Consultants, Inc., a Texas
corporation. (Schedules and
Exhibits omitted).............. Filed herewith as Exhibit 10.16*
10.17 Asset Purchase Agreement, dated
as of May 27, 1997, by and
between ATSI and Communication
Systems Development, Inc., a
California corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.17*
10.18 Agreement of Limited Liability
Company of Communication
Systems Development, LLC, dated
May 30, 1997, by and among ATSI
and Communications Development
Corporation, Inc., a California
corporation.................... Filed herewith as Exhibit 10.18*
10.19 Asset Purchase Agreement, dated
as of June 25, 1997, by and
between ATSI and Fernand E.
Phaneuf, Jr. and Lorraine
Phaneuf, being all of the
shareholders of Tower Sites,
Inc., d/b/a Tower Sites, Inc. a
Connecticut corporation.
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.19*
10.20 Asset Purchase Agreement, dated
as of July 8, 1997, by and
between ATSI and Diablo
Communications, Inc., a
California corporation
("Diablo"). (Schedules and
Exhibits omitted).............. Filed herewith as Exhibit 10.20*
10.21 Asset Purchase Agreement, dated
as of July 8, 1997, by and
between ATSI and Diablo
Communications of Southern
California, Inc., a California
corporation ("DCSC").
(Schedules and Exhibits
omitted)....................... Filed herewith as Exhibit 10.21*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
10.22 Asset Purchase Agreement,
dated as of July 8, 1997, by
and between ATSI and
Suburban Cable T.V. Co.
Inc. ....................... Filed herewith as Exhibit 10.22*
10.23 Asset Purchase Agreement,
dated as of July 31, 1997,
by and between ATSI and John
C. Santangelo and Gerald
Harkins, being all of the
shareholders of Southeast
Communications, Inc., and
Southeast Communications,
Inc., a Massachusetts
corporation. (Schedules and
Exhibits omitted)........... Filed herewith as Exhibit 10.23*
10.24 Stock Purchase Agreement,
dated as of September 30,
1997, by and between ATSI,
OPM-USA-INC., a Florida
corporation ("OPM"), and the
Stockholders of OPM.
(Schedules and Exhibits
omitted).................... Filed herewith as Exhibit 10.24*
10.25 Asset Purchase Agreement,
dated as of October 4, 1997,
by and between ATSI and
Tucson Communications
Company, L.P, a California
limited partnership.
(Schedules and Exhibits
omitted).................... Filed herewith as Exhibit 10.25*
10.26 American Tower Systems
Corporation 1997 Stock
Option Plan, dated as of
November 5, 1997, as
amended..................... Filed herewith as Exhibit 26*
10.27 American Tower Systems
Corporation Stock Purchase
Agreement, dated as of
January 8, 1998, by and
among ATS and the
Purchasers.................. Filed herewith as Exhibit 27*
10.28 Employment Agreement, dated
as of January 22, 1998, by
and between ATSI and J.
Michael Gearon, Jr. ........ Filed herewith as Exhibit 28*
10.29 Asset Purchase Agreement,
dated as of January 23,
1998, by and among ATSI,
Midcontinent Media, Inc., a
South Dakota corporation
("Midcontinent"),
Midcontinent Teleport Co., a
South Dakota corporation and
a wholly-owned subsidiary of
Midcontinent ("MTC"), Wit
Communications, Inc., a
Delaware corporation and a
wholly-owned subsidiary of
MTC ("Wit"), and Washington
International Teleport,
Inc., a Delaware corporation
and a wholly-owned
subsidiary of Wit........... Filed herewith as Exhibit 29*
10.30 Proposed form of ARS-ATS
Separation Agreement, dated
as of January , 1998 by and
among American Radio Systems
Corporation, a Delaware
Corporation, ATS, and CBS
Corporation, a Pennsylvania
corporation................. Filed herewith as Exhibit 30*
21 Subsidiaries of ATS......... Filed herewith as Exhibit 21*
23.0 Consents of Sullivan & Filed herewith as part of Exhibit 5
Worcester LLP............... and Exhibit 8*
23.1 Independent Auditors'
Consents--Deloitte & Touche
LLP......................... Filed herewith as Exhibit 23.1*
23.2 Consent of Pressman Ciocca
Smith LLP................... Filed herewith as Exhibit 23.2
23.3 Consent of Rooney, Ida, Nolt
& Ahern..................... Filed herewith as Exhibit 23.3*
23.4 Consent of Ernst & Young
LLP......................... Filed herewith as Exhibit 23.4
23.5 Consent of KPMG Peat Marwick
LLP......................... Filed herewith as Exhibit 23.5*
23.6 Consent of Ernst & Young
LLP......................... Filed herewith as Exhibit 23.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT EXHIBIT FILE NO.
----------- ----------------------- ----------------
<C> <S> <C>
23.7 Consent of Price Waterhouse
LLP........................... Filed herewith as Exhibit 23.7
23.8 Consent of Fred R. Lummis..... Filed herewith as Exhibit 23.8*
23.9 Consent of Randall Mays....... Filed herewith as Exhibit 23.9*
24 Power of Attorney............. Filed herewith as page II-6 of the
Registration Statement*
27 Financial Data Schedule....... Filed herewith as Exhibit 27*
99 Consent of Credit Suisse First
Boston........................ Filed herewith as Exhibit 99*
99.1 Form of American Tower
Corporation Written Consent of
Stockholders in lieu of
Meeting....................... Filed herewith as Exhibit 99.1*
99.2 Form of Third Amendement to
Securityholders Agreement, by
and among ATC and the
Securityholders named
therein....................... Filed herewith as Exhibit 99.2
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our report and to all references to our Firm included in or made part of this
registration statement.
Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
February 13, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" and to
the incorporation by reference herein of our report dated February 9, 1996,
with respect to the consolidated financial statements and schedule of EZ
Communications, Inc. as of and for the two years in the period ended December
31, 1995 incorporated by reference in Amendment No. 1 to the Registration
Statement (Form S-4 No. 333-46001) and related Prospectus of American Tower
Systems Corporation for the registration of 32,000,000 shares of Class A
common stock.
Ernst & Young LLP
Vienna, Virginia
February 13, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4 No. 333-46001) and related Prospectus of
American Tower Systems Corporation for the registration of 32,000,000 shares
of its common stock and to the inclusion herein of our report dated October
24, 1997, with respect to the financial statements of Tucson Communications
Company included in such Registration Statement for the year ended December
31, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
San Diego, California
February 12, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-4 (related to
"American Tower Corporation Merger Agreement") of American Tower Systems
Corporation of our report dated April 3, 1997 relating to the combined
financial statements of CBC of Baltimore, Inc. (d/b/a WOCT-FM) and WWMX-FM,
Inc. (wholly-owned subsidiaries of Capitol Broadcasting Company, Inc.), which
appears in American Radio Systems Corporation's Current Report on Form 8-K/A
(Amendment No. 1) dated April 17, 1997. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Raleigh, North Carolina
February 13, 1998
<PAGE>
EXHIBIT 99.2
FORM OF
THIRD AMENDMENT TO SECURITYHOLDERS AGREEMENT
This Third Amendment to Securityholders Agreement, dated as of February ,
1998 (the "Amendment"), is entered into among American Tower Corporation, a
Delaware corporation (the "Corporation") and the persons and entities whose
signatures appear on the signature pages hereto (collectively, the
"Securityholders") and, where applicable, the respective spouses of the
Securityholders.
RECITAL
A Securityholders Agreement, dated as of October 12, 1994 (the "Original
Securityholders Agreement") was entered into among the Corporation and the
Securityholders signatories thereto. The Original Securityholders Agreement
was amended by an amendment dated on or about December 19, 1995 (the "First
Amendment") and further amended by an amendment dated on or about June , 1997
(the "Second Amendment"). The Corporation and the Securityholders now desire
to further amend the Original Securityholders Agreement, as amended by the
First Amendment and the Second Amendment.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Amendment. Section 18.5 of the Original Securityholders Agreement is
hereby amended and restated in its entirety as follows to add clause (c)
thereto:
18.5. This Agreement shall terminate automatically upon (a) the
dissolution of the Corporation, (b) the completion of an Initial Public
Offering, provided however, that Section 7 of this Agreement shall
survive any such termination pursuant to this clause (b) to the extent
and for the periods set forth in such Section or (c) the consummation of
the merger contemplated by the Agreement and Plan of Merger, dated as of
December 12, 1997 between the Corporation and American Tower Systems
Corporation.
2. Ratification. Except as expressly amended by this Amendment, the Original
Securityholders Agreement, as amended by the First Amendment and the Second
Amendment, shall remain in full force and effect and its terms, as further
modified by this Amendment, are hereby ratified and confirmed.
3. Miscellaneous. This Amendment shall become effective upon the signing by
holders of two-thirds of the outstanding common stock of the Corporation. This
Amendment may be executed in multiple counterparts which, when taken together,
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the first
date written above.
AMERICAN TOWER CORPORATION
By:
Name: Fred R. Lummis
Title: President and CEO
[Signature pages of Securityholders follow this page]
