<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1998
REGISTRATION STATEMENT NO. 333-49147
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PINNACLE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
--------------------
<S> <C> <C>
DELAWARE 4899 65-0652634
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
--------------------
1549 RINGLING BOULEVARD, 3RD FLOOR
SARASOTA, FLORIDA 34236
(941) 364-8886
(Address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)
STEVEN DAY
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
PINNACLE HOLDINGS INC.
1549 RINGLING BOULEVARD, 3RD FLOOR
SARASOTA, FLORIDA 34236
(941) 364-8886
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
CHESTER E. BACHELLER, ESQ.
HOLLAND & KNIGHT LLP
400 NORTH ASHLEY DRIVE, SUITE 2300
TAMPA, FLORIDA 33602
PHONE: (813) 227-8500
FAX: (813) 229-0134
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with the +
+ Securities and Exchange Commission. These securities may not be sold nor may +
+ offers to buy be accepted prior to the time the registration statement +
+ becomes effective. This prospectus shall not constitute an offer to sell or +
+ the solicitation of an offer to buy nor shall there be any sale of these +
+ securities in any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration or qualification under the securities laws of +
+ any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION DATED JUNE , 1998
- ----------
$325,000,000
PINNACLE HOLDINGS INC.
OFFER TO EXCHANGE ITS 10% SENIOR DISCOUNT NOTES DUE 2008,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY
AND ALL OF ITS OUTSTANDING 10% SENIOR DISCOUNT NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME
ON _________________, 1998, UNLESS EXTENDED
-------------------
Pinnacle Holdings Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal, to exchange (the
"Exchange Offer") up to $325,000,000 in aggregate principal amount of the
Company's new 10% Senior Discount Notes due 2008 (the "New Notes"), that have
been registered under the Securities Act of 1933, as amended (the "Securities
Act") for up to $325,000,000 in aggregate principal amount of the Company's
outstanding 10% Senior Discount Notes due 2008 (the "Original Notes"). The
Original Notes and the New Notes are sometimes referred to herein collectively
as the "Notes."
The terms of the New Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the New Notes will be freely transferable by holders thereof (other
than as provided in the next paragraph) and issued free of any covenant
restricting transfer absent registration. The New Notes will evidence the same
debt as the Original Notes and contain terms which are substantially identical
to the terms of the Original Notes for which they are to be exchanged. For a
complete description of the terms of the New Notes, see "Description of the
Notes". There will be no cash proceeds to the Company from the Exchange Offer.
The New Notes represent general unsecured obligations of the Company and rank
pari passu in right of payment to all current and future senior obligations of
the Company, including any Original Notes that are not exchanged in the Exchange
Offer. The operations of the Company are conducted through its subsidiaries,
and the Company's subsidiaries will not be guarantors of the Notes. Accordingly
the New Notes are effectively subordinated to indebtedness and other liabilities
of the such subsidiaries. Pinnacle Towers Inc. (the principal subsidiary and
operating company of the Company) entered into the Senior Credit Facility (as
defined herein), which is senior to the New Notes. The commitment under the
Senior Credit Facility is currently $150.0 million and the amount outstanding is
$55.2 million. Advances under the Senior Credit Facility accrue interest at the
Company's option at either LIBOR or a base rate, plus a margin. The Senior
Credit Facility is secured by a lien on substantially all of the assets of the
Company and its subsidiaries and a pledge of substantially all of the capital
stock of the subsidiaries.
The Original Notes were sold on March 17, 1998, in a transaction not
registered under the Securities Act in reliance upon the exemption provided in
the Securities Act (the "Private Offering"). Accordingly, the Original Notes may
not be offered, resold or otherwise pledged, hypothecated or transferred in the
United States unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The New Notes are being offered to satisfy the obligations of the Company under
the Exchange and Registration Rights Agreement relating to the Original Notes.
See "The Exchange Offer -- Purpose and Effect of
(continued on next page)
HOLDERS OF ORIGINAL NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH
UNDER "RISK FACTORS" BEGINNING ON PAGE 19.
-------------------
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 June __, 1998
<PAGE>
the Exchange Offer." Every holder receiving New Notes, other than a broker-
dealer, will represent that they are not engaging in or intending to engage in a
distribution of such New Notes. Based on certain no-action letters addressed to
other parties in other transactions, New Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be offered for resale, resold or
otherwise transferred by the holders thereof (other than any holder which is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder who acquired the Original Notes during the Private Offering
and who participates in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may not rely on these no-action letters and would
have to comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale. This Prospectus may not
be used by such holders to satisfy these requirements. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "The Exchange
Offer - Purpose and Effect of the Exchange Offer" and "Plan of Distribution."
Broker-dealers may use this Prospectus, as amended or supplemented, in
connection with resales of the New Notes received in exchange for the Original
Notes where such Original Notes were acquired by such broker-dealer as a result
of market making activities or other such trading. The Company has agreed that,
for a period of 180 days after the Expiration Date (as defined herein), it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale.
The Notes constitute securities for which there is no established trading
market. Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. The Company does not currently intend to list the New Notes
on any securities exchange. To the extent that any original Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered
Original Notes could be adversely affected. No assurances can be given as to the
liquidity of the trading market for either the Original Notes or the New
Notes.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 P.M., New York time, on _________, 1998, unless extended (the
"Expiration Date"). The date of acceptance for exchange of the original Notes
will be the first business day following the Expiration Date. Original Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date, otherwise, such tenders are irrevocable. The Company will
pay all expenses incident to the Exchange Offer.
No interest will accrue or be payable on the New Notes prior to March 15,
2003. Thereafter, interest on the New Notes will accrue at a rate of 10% per
annum and will be payable in cash semi-annually in arrears on March 15 and
September 15 of each year, commencing September 15, 2003. If a Change of Control
(as defined under "Description of Notes - Change of Control") occurs there is no
assurance that the Company will have, or will have access to, sufficient funds
to enable it to repurchase the Notes. See "Description of Notes - Change of
Control."
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration Statement on Form S-4 with respect to the New Notes
being offered hereby (including all exhibits and amendments thereto the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
to the exhibits filed therewith. All material terms of the material contracts
or other documents referred to in this Prospectus have been summarized herein,
however, the statements made in this Prospectus relating to the terms of any
such contract or other document are not necessarily complete, and where
applicable reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement is
qualified by such reference.
At any time prior to the second anniversary of the closing of the offering of
the Original Notes, if the Company is not subject to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), the
Company has agreed to (i) file with the Commission to the extent permitted, and
distribute to holders of the Notes, reports, information and documents specified
in Section 13 and 15(d) of the Exchange Act and (ii) make available, upon
request, to any holder of the Notes, the information required pursuant to Rule
144A(d)(4) under the Exchange Act. Any such request should be directed to the
Secretary of the Company at 1549 Ringling Boulevard, Third Floor, Sarasota, FL
34236.
-----------------
Market data used throughout this Prospectus was obtained from industry
publications. These publications generally state that the sources used to
acquire such data are believed to be reliable, but that the accuracy and
completeness of such data is not guaranteed. Although the Company believes the
data to be reliable,it has not independently verified such data and does not
assume the responsibility for the accuracy and completeness of such published
data.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements contained elsewhere in this Prospectus. Except as otherwise indicated
by the context, references in this Prospectus to the "Company" include Pinnacle
Holdings, Inc. and its direct and indirect wholly-owned subsidiaries.
Capitalized terms used without definition in the following summary are defined
elsewhere in this Prospectus.
The Company
The Company is the leading provider of wireless communications rental tower
space in the Southeastern United States. Since commencing operations
approximately three years ago, as of June 9, 1998, the Company has completed 175
acquisitions through which it has acquired 568 towers and has constructed an
additional 42 towers in such high growth markets as Orlando, Atlanta, Birmingham
and Tampa. As a result, the Company believes it is well positioned to continue
to capitalize on the rapid consolidation of the highly fragmented tower rental
industry.
The Company leases tower space to its customers and receives rental payments
under tower leases that generally range in duration from three to five years. In
addition, a majority of the Company's leases provide for scheduled minimum rent
increases of the greater of a specified percentage (which typically ranges from
3-5%) or the change for the relevant period in the Consumer Price Index ("CPI").
The Company experiences negligible customer churn. The Company has a diversified
base of over 724 customers, only one of which accounts for more than 5% of the
Company's total revenue. The Company's customers are a broad base of wireless
communication providers, operators of private networks and government agencies
that include Nextel, Sprint PCS, Motorola, PageNet, BellSouth Mobility, PrimeCo,
AT&T Wireless, Southern Communications Services, Inc. ("Southern
Communications"), Georgia Power, Alabama Power, U.S. Coast Guard, Internal
Revenue Service, Federal Bureau of Investigation and Bureau of Alcohol, Tobacco
& Firearms.
The Company's objective is to create substantial value from its position as
the leading rental tower owner in the Southeastern United States. In order to
achieve its objective, the Company has designed and implemented a three-tiered
growth strategy of (i) capitalizing on the operating leverage of its business by
aggressively marketing available rental space on its towers, (ii) rapidly
acquiring towers in key markets and (iii) implementing a selective tower
construction program. Pursuant to this strategy, the Company recently acquired
201 towers from Southern Communications (the "Southern Towers Acquisition"). The
Company paid $83.5 million for these towers plus fees and expenses, which
complement the Company's existing inventory and significantly accelerate its
progress in achieving its objective.
The Company has rapidly executed its strategy and today owns a significant
portfolio of high quality towers that generates increasing revenue and cash
flow. The Company believes that its portfolio of strategically located rental
towers exhibits the following economic characteristics: (i) high absolute and
incremental margins; (ii) stable and predictable cash flow; (iii) a diversified
customer base; (iv) high barriers to entry; (v) low customer churn; and (vi)
attractive underlying growth. The Company believes that this portfolio provides
the core asset base from which it will continue the ongoing strategy to acquire
and construct clusters of towers in attractive, high growth markets. Further,
the Company believes it has created a stable and long-term stream of tower
rental revenue that would continue to be generated even if the Company were to
discontinue pursuing its aggressive expansion strategy. In pursuing its
strategy, the Company has incurred a significant amount of indebtedness. As of
March 31, 1998, the Company's indebtedness was approximately $233.8 million, its
stockholders' equity was approximately $20.0 million and its ratio of debt to
equity, excluding redeemable stock, was 11.7. The Company expects to spend
approximately $7.8 million over the next month to complete
1
<PAGE>
acquisitions of rental towers that the Company currently believes are probable.
In addition, the Company expects to spend approximately $46.5 million over the
subsequent six months to complete acquisitions of rental towers that the Company
currently believes are probable. The Company expects to spend approximately
$20.3 million on capital expenditures over the next seven months. The Company
anticipates that it will have to borrow substantially all of the funds needed to
finance the above.
The Company is designed to be an efficient consolidator and operator of
rental towers. The Company has created a highly focused, structured
organization in which significant resources are devoted to acquiring or
constructing strategically located sites supported by customer demand. In
addition, the Company has the capability to "instantly integrate" new towers and
initiate sales and marketing efforts immediately following the acquisition or
construction of new towers.
INDUSTRY BACKGROUND
Communications towers are primary infrastructure components for wireless
communications services such as cellular, paging, personal communications
services ("PCS"), Specialized Mobile Radio ("SMR"), wireless data transmission
and radio and television broadcasting. Wireless communications companies require
specialized wireless transmission networks in order to provide service to their
customers. Each of these networks is configured specifically to meet the
coverage requirements of the particular carrier and includes transmission
equipment such as antennae, transmitters and receivers placed at various
locations throughout the covered area. These locations, or communications sites,
are critical to the operation of wireless communications networks and consist of
towers, rooftops and other structures upon which such equipment is placed.
Wireless communications providers design their network and select their
communications sites in order to optimize available frequencies relative to
projected usage patterns, topography and service requirements.
The wireless communications industry is growing rapidly as (i) consumers
become increasingly aware of the uses and benefits of wireless communications
services, (ii) the costs of wireless communications services decline and (iii)
new wireless communications technologies continue to be developed. Changes in
U.S. federal regulatory policy have led to a significant increase in the number
of competitors in the wireless communications industry, most recently through
the auction of radio spectrum for PCS. The resulting competition, combined with
increasing reliance on wireless communications by consumers and businesses, has
increased demand for higher quality networks characterized by uninterrupted
service and improved coverage. As new carriers build out networks and existing
carriers upgrade and expand their networks to maintain competitiveness, the
demand for communications sites has increased dramatically.
During the mid-to-late 1980s, a number of independent tower owners began to
emerge, marking the beginning of the tower rental industry. These independent
tower owners focused on owning and managing towers with multiple customers by
adding customers to existing and reconstructed towers. The Company believes the
majority of these tower operators were individuals with a small number of local
rental towers offering very limited coverage areas. In the last three years,
several larger independent tower owners have emerged as demand for wireless
communications services continued to grow and as additional high frequency
licenses were awarded for new wireless communications services each requiring
networks with extensive tower infrastructure. In addition, as the demand for
towers has been increasing there has been a growing trend by municipalities to
slow the proliferation of towers. These trends have contributed to a growing
need for towers that can accommodate co-location of wireless communications
providers. In this regard, an opportunity to acquire towers and lease space to
multiple wireless communications providers was created.
2
<PAGE>
Ownership of rental towers in many parts of the United States remains highly
fragmented. Only a few independent tower owners have accumulated a large number
of towers and the Company believes it is the only one to achieve a consolidated
position in the Southeastern United States. The pace of consolidation has begun
to accelerate as larger independent owners acquire small local owners in certain
regions. In individual markets that are consolidated, the consolidating owners
have created formidable competition for new potential rental tower owners.
BUSINESS AND GROWTH STRATEGY
The Company's objective is to create substantial value from its position as
the leading rental tower owner in the Southeastern United States. In order to
achieve its objective, the Company has designed and implemented a three-tiered
growth strategy. However, there can be no assurance that the Company will
successfully implement its strategy and achieve its objective.
I. MARKETING AND DEVELOPMENT STRATEGY
The Company seeks to capitalize on the operating leverage of its business by
increasing the utilization of rental space on its towers. The Company's
customers are generally responsible for the installation of their own equipment
and the incremental utility costs associated with that equipment. Furthermore,
there are no additional monitoring, maintenance or insurance costs to the
Company associated with additional customers. Accordingly, the Company believes
that when additional rental space is available on its towers, incremental
revenue can be achieved at low incremental costs, thereby yielding significant
incremental profit margin. The implementation of the Company's marketing and
development strategy includes the following:
. Offer Strategically Located Clusters of Towers. By owning and assembling
clusters of towers in strategically attractive regions, the Company believes it
is able to offer its customers the ability to rapidly fulfill their network
expansion plans. The Company believes that the ability to offer "one stop
shopping" services to customers on a local and regional basis provides the
Company a significant competitive advantage.
. Leverage Customer Relationships. The Company believes it has established
a reputation among its customers as a highly professional, responsive tower
space provider that routinely fulfills its commitments to its customers. This
has been achieved through ongoing investment in the development of multilevel
customer relationships. The Company believes that making customers' technical
and planning personnel aware of the quality of a particular site, the ease of
doing business with one lessor, the location of other Company-owned towers and
the Company's ability to construct new sites are important factors in generating
interest in the Company's towers.
. Track FCC Filings. All FCC licensees must file applications for site
locations. Utilizing its proprietary databases and publicly available
information, the Company tracks these filings closely to identify tower
acquisition and construction opportunities which, due to the site's appeal to a
broad base of customers, the Company believes will have significant and
predictable future revenue growth. Additionally, the Company closely monitors
FCC auctions in order to identify new market entrants.
. Promote Quality and Security of Facilities. The wireless communications
equipment typically stored in a tower building is becoming increasingly
sophisticated and is critical to a wireless communications provider's ability to
generate revenue. Accordingly, the Company believes it is of vital importance to
its
3
<PAGE>
customers that their equipment be in a well-maintained and secure building.
The Company believes it has developed a reputation as a provider of high quality
and secure sites.
. Dedicate Resources to Customer Service The Company employs a group of
individuals who are entirely dedicated to assisting customers with site location
and installation logistics. Management of the Company's technical data through
effective information systems enables the customer service group to respond
quickly and accurately to customers' needs before, during and after the
installation of customers' equipment.
II. ACQUISITION STRATEGY
The Company's acquisition strategy is focused on (i) the rapid acquisition of
towers in key markets as a means to quickly gain critical mass, thereby
discouraging other tower consolidators from entering its markets and (ii) the
completion of follow-on acquisitions to assist in completing coverage of the
selected market. The Company utilizes the following primary criteria in
evaluating the attractiveness of a potential acquisition:
. Target Attractive Wireless Geographic Markets. Within its targeted
region, the Company targets population centers and transportation corridors
where there is evidence of high growth in wireless communications services. The
Southeastern United States is generally characterized by a number of attractive
demographic trends including relatively high population and economic growth
rates. Today, the Company has strong market positions in many population centers
such as Orlando, Atlanta, Birmingham, Tampa and New Orleans. Further, the
Company has established a strong market position along several key traffic
corridors within its operating region.
. Compatibility with Existing Tower Network. The Company's marketing
activities provide information as to how a potential acquisition may enhance its
existing tower network. In evaluating a potential acquisition, the Company
considers whether that acquisition will, when combined with existing tower
inventory, result in the Company owning a cluster of towers in a given area,
thereby providing the Company with a stronger market position.
. Disciplined Valuation Process. The Company seeks to acquire towers that
have existing cash flow and the potential for significant future cash flow
growth. For each potential acquisition, the Company reviews the current
population coverage of each proposed tower, the nature and quality of the
customer base, coverage of current and future major transportation corridors and
the location and desirability of competing towers. The Company also makes an
assessment of potential cash flow growth and estimates whether additional
capital expenditures will be required to add capacity to accommodate future
growth.
. The Southern Towers Acquisition. On March 4, 1998, the Company completed
the acquisition of 201 towers from Southern Communications, a subsidiary of
Southern Company, one of the largest utility holding companies in the United
States and a large Enhanced Specialized Mobile Radio ("ESMR") provider in the
United States with a network in the Southeast. The Company paid $83.5 million
plus fees and expenses for these towers, which are located in Georgia, Alabama,
Mississippi and Florida, substantially all of which were constructed within the
last four years. Prior to the acquisition, these towers were principally for the
exclusive use of Southern Communications and its affiliates. Only a limited
number of third party tenants have been given access to these towers. The towers
were generally constructed with capacity significantly exceeding Southern
Communications' specific capacity requirements. Accordingly, the Company
believes that there is substantial additional revenue potential on these towers.
Acquisitions involve a number of potential risks, including the potential
loss of customers and unanticipated events or liabilities. Because of such
risks, there can be no assurance that the Company will be
4
<PAGE>
able to successfully implement its acquisition strategy. See "Risk Factors -
Dependence on Acquisitions; Integration of Acquisitions."
III. NEW TOWER CONSTRUCTION STRATEGY
The Company's tower site construction is not speculative. Construction is
only initiated after at least one anchor customer is identified and after the
Company has determined, based on market research, that the capital outlay for
the construction project would not exceed a maximum multiple of estimated Tower
Level Cash Flow after a given period of time. The elements of the Company's
tower build program include the following:
. Disciplined Build Selection Criteria. Through its sales and marketing
efforts, the Company seeks to identify suitable tower construction sites based
on information obtained from wireless communications providers regarding their
network construction plans. The Company evaluates those plans and ensures that
an effective solution to meeting customer requirements is employed, whether the
result is selling space on an existing tower, acquiring an existing tower,
augmenting an existing tower or constructing a new tower.
. Rapid Construction/Build Implementation. After identifying an attractive
construction opportunity, the Company moves quickly to: (i) secure access to the
site by either purchasing or entering into a long-term lease for a parcel of
land; (ii) select the appropriate type of tower based on structural capacity
needs; (iii) initiate sales and marketing efforts to rent space on the tower;
and (iv) complete necessary steps to obtain zoning approvals and building
permits. The Company then oversees the construction of the tower by hired sub-
contractors.
. Effective Tower Design and Sourcing. New tower structures are available
from a variety of manufacturers. The number of customer attachments that can be
installed on any individual tower (the tower's capacity) varies dramatically
depending on a number of factors including the original engineering and design
of the tower, the geographic area in which the tower is erected and the specific
nature of the attachments which customers wish to install. These factors also
influence the amount of capital which must be invested to build such towers.
Due to risks associated with new development and construction, there can be
no assurance that the Company's new tower construction strategy will be
successful. See "Risk Factors - Barriers to New Construction."
COMPANY STRENGTHS
The Company had a network of approximately 610 towers as of June 9, 1998,
geographically clustered in the Southeastern United States. With the Southern
Towers Acquisition, the Company believes that it has significantly accelerated
its progress in its objective to create substantial value from its position as
the leading rental tower owner in the Southeastern United States. In many areas
in which it operates, the Company provides "one stop shopping" by establishing a
critical mass of geographical clusters adequate to supply customer's site
requirements. The Company believes its portfolio of rental towers has the
following favorable economic characteristics:
. High Absolute and Incremental Margins. The Company's towers are fixed-
cost assets with minimal variable costs associated with revenue from leasing
available space to additional or existing customers, as each customer generally
assumes the costs of installation, utilities and equipment maintenance.
Accordingly, a rental
5
<PAGE>
tower owner can generate increasing operating margins when new customers are
added, resulting in high incremental free cash flow available to service debt.
For the quarter ended March 31, 1998, the Company's Tower Level Cash Flow Margin
was 80.6%.
. Stable and Predictable Cash Flow. The Company believes that it benefits
from the long-term contract nature of its tower rental business and the
predictability and stability of monthly, prepaid and recurring revenue. The
Company generally leases space on its towers to wireless communications
providers under three-to five-year leases. In addition, a majority of the
Company's leases provide built-in annual rate increases of the greater of a
specified percentage (which typically ranges from 3-5%) or the change for the
relevant period in the CPI. Furthermore, because a significant proportion of
tower rental revenue is received from customers that are predominantly large
companies and because towers provide a basic utility-like service (which can be
terminated by a tower owner if rent is not paid), the Company generally
experiences low levels of bad debt expense. In 1997, the Company's bad debt
expense as a percentage of revenue was 1.0%.
. Diversified Customer Base. There is broad representation of wireless
communications providers and underlying technologies reflected in the Company's
customer base. Accordingly, the Company believes that the stability and growth
of its revenue will reflect that of the wireless communications industry in
general, rather than any specific customer or segment within that industry. The
Company has a diversified base of over 724 customers, only one of which accounts
for more than 5% of the Company's total revenue.
. Barriers to Entry. Towers are subject to a variety of federal and local
regulations which make construction of towers difficult, expensive and time
consuming, especially in highly populated or high transmission areas. In
addition, in areas where the Company has established a critical mass of rental
tower inventory adequate to supply customers' site requirements, construction of
alternative towers will be less attractive to others due to the likelihood of
lower returns on those towers. Wireless communications providers seeking to
construct their own proprietary, limited use towers face continued opposition by
municipalities, which are reducing the opportunities for such new towers to be
built and supporting the trend toward co-location on rental towers.
. Low Customer Churn. The Company typically experiences low customer churn
as a result of the high relocation costs incurred by customers. When customers
enter into long-term contracts for tower space, those customers generally make
significant capital and network engineering commitments to the related site. The
Company believes that these levels of commitment made by its customers support
the long-term nature and predictability of the Company's revenue. Municipal
approvals are becoming increasingly difficult to obtain and may also affect the
carrier's decision to relocate. The costs associated with network
reconfiguration, obtaining FCC and municipal approval and the time required to
complete these activities may not be justified by any potential savings in
reduced tower operating expense. As a result, the Company experienced customer
churn of 0.8% in 1996 and 0.6% in 1997.
. Attractive Underlying Growth and Prospects. According to industry
publications, as of December 31, 1997, penetration for wireless services was
approximately 21.0% and is projected to grow to 53.0% by 2007. The Company's
rental towers are basic infrastructure components for all major wireless
communications services, including cellular, paging, two-way radio, broadcast
television, microwave, wireless data transmission and SMR customers. As a
result, the Company believes that its tower rental revenue will reflect the
growth of its customer base over the next several years.
FINANCING PLAN
Since the Company's inception in May 1995, the Company's operations have been
financed primarily
6
<PAGE>
through borrowings under the Senior Credit Facility and equity and bridge
financings provided by the Company's primary stockholder, ABRY Broadcast
Partners II, L.P. ("ABRY II").
In May 1995, the Company and ABRY II entered into a capital contribution
agreement whereby ABRY II committed to invest up to $20.0 million of equity in
the Company (as amended, the "Capital Contribution Agreement") and, at that
time, management invested $1.2 million in equity. In February 1996, the Capital
Contribution Agreement was amended to increase ABRY II's equity commitment to
$50.0 million to continue the Company's planned strategy of rapid growth. During
1997, management invested an additional $0.3 million. As of June 9, 1998, $36.0
million of the ABRY II equity commitment has been invested. Additionally, in
February 1998, the Company borrowed $12.5 million from ABRY II (the "ABRY Bridge
Loan") to partially fund the Southern Towers Acquisition. A portion of the net
proceeds from the Private Offering were used to repay in full and retire the
ABRY Bridge Loan. During April 1998, the Company borrowed $2.5 million from ABRY
II under this Bridge Loan to partially fund acquisitions.
In September 1995, Pinnacle Towers Inc. (the principal subsidiary and
operating company of the Issuer) entered into a credit agreement which provided
for $25.0 million of senior debt financing through a reducing revolving line of
credit and revolver/term loan (as amended, the "Senior Credit Facility"). In
September 1996, the Company and the lenders under the Senior Credit Facility
agreed to expand the commitment amount to $100.0 million. In connection with the
Southern Towers Acquisition, the Company and the lenders under the Senior Credit
Facility agreed to expand the commitment under the Senior Credit Facility to
$200.0 million initially, which has been amended to provide a $150.0 million
commitment upon the closing of the Offering. The commitment under the Senior
Credit Facility may be increased up to $250.0 million at the request of the
Company and at the option of the lenders. As of June 9, 1998, outstanding
borrowings and availability under the Senior Credit Facility were approximately
$55.2 million and $79.0 million, respectively, after giving effect to $15.8
million of outstanding letters of credit that reduce availability under the
Senior Credit Facility.
In September 1997, the Company completed arrangements with Goldman Sachs
Credit Partners L.P. and NationsBridge, L.L.C. for a $20.0 million term loan
(the "Subordinated Term Loan"), the proceeds of which were used to repay in full
and retire a $12.3 million bridge loan and related accrued interest totalling
$0.5 million from ABRY II and repay certain amounts outstanding under the Senior
Credit Facility. The Subordinated Term Loan was repaid in full and retired with
the net proceeds of the Private Offering.
The Company expects to have significant capital requirements over the next
several years, particularly in relation to the acquisition and construction of
new towers. The Company intends to fund such future capital requirements through
availability under the Senior Credit Facility, the remaining equity commitment
under the Capital Contribution Agreement and other externally generated sources
of available funding.
RECENT DEVELOPMENTS
From time to time, the Company has been approached by potential merger
partners and buyers. As a result, the Company has engaged the firm of Morgan
Stanley & Company Incorporated to assist the Company in considering its
strategic alternatives.
A sale or merger of the Company will only be permitted if the successor
entity expressly assumes, by a supplemental indenture, all of the Company's
obligations under the Indenture (as defined herein). Therefore, the successor
entity would assume all of the obligations relating to the New Notes, including
the due and punctual payment of the principal, premium, if any, and interest on
the New Notes. Additionally, the successor entity would succeed to all of the
rights and powers of the Company under the Indenture. See
7
<PAGE>
"Description of Notes-Mergers, Consolidations and Certain Sales of Assets."
If the Company was sold and such sale resulted in a Change of Control (as
defined herein), which includes a sale of all or substantially all of the
Company's assets, each holder of the New Notes will have the right to require
the Company to repurchase all or any part of such holder's New Notes at a price
in cash equal to 101% of the Accreted Value (as defined herein) thereof as of
the date of purchase plus accrued and unpaid Liquidated Damages (as defined
herein) thereon, if any, to the date of purchase. See "Description of Notes-
Change of Control."
There can be no assurance that any such sale or merger transaction may
occur.
The Company's headquarters are located at 1549 Ringling Boulevard, Third
Floor, Sarasota, Florida 34236, and its telephone number is (941) 364-8886.
8
<PAGE>
THE EXCHANGE OFFER
Resale................................ $325,000,000 in aggregate principal
amount of the Original Notes were
sold in the Private Offering by the
Company on March 17, 1998 to Goldman,
Sachs & Co. and NationsBanc
Montgomery Securities LLC (the
"Initial Purchasers"). The holders of
Original Notes and New Notes are
collectively referred to herein as
the "Holders." The Company is making
the Exchange Offer in reliance on the
position of the staff of the
Commission as set forth in certain
no-action letters addressed to other
parties in other transactions.
However, the Company has not sought
its own no-action letter, and there
can be no assurance that the staff of
the Commission would make a similar
determination with respect to the
Exchange Offer as in such other
circumstances. Based on these
interpretations by the staff of the
Commission, the Company believes that
New Notes issued pursuant to this
Exchange Offer in exchange for
Original Notes may be offered for
resale, resold and otherwise
transferred by a holder thereof other
than (i) a broker-dealer who
purchased such Original Notes
directly from the Company to resell
pursuant to Rule 144A or any other
available exemption under the
Securities Act or (ii) a person that
is an "affiliate" (as defined in Rule
405 of the Securities Act) of the
Company without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such New Notes are
acquired in the ordinary course of
such Holder's business and that such
Holder is not participating, and has
no arrangement or understanding with
any persons to participate, in the
distribution of such New Notes.
Holders of Original Notes accepting
the Exchange Offer will represent to
the Company in the Letter of
Transmittal that such conditions have
been met.
Any Holder who participates in the
Exchange Offer for the purpose of
participating in a distribution of
the New Notes may not rely on the
position of the staff of the
Commission as set forth in these
no-action letters and would have to
comply with the registration and
prospectus delivery requirements of
the Securities Act in connection with
any secondary resale transaction.
This prospectus may not be used by
such Holders
9
<PAGE>
for any secondary resale. A
secondary resale transaction in the
United States by a Holder who is
using the Exchange Offer to
participate in the distribution of
New Notes must be covered by a
registration statement containing the
selling securityholder information
required by Item 507 of Regulation
S-K of the Securities Act. Each
broker-dealer (other than an
"affiliate" of the Company) that
receives New Notes for its own
account pursuant to the Exchange
Offer must acknowledge that it
acquired the Original Notes as the
result of market-making activities or
other trading activities and will
deliver a prospectus in connection
with any resale of such New Notes.
The Letter of Transmittal states that
by so acknowledging and by delivering
a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of
the Securities Act. This Prospectus,
as it may be amended or supplemented
from time to time, may be used by a
broker-dealer in connection with
resales of New Notes received in
exchange for Original Notes where
such Original Notes were acquired by
such broker-dealer as a result of
market-making activities or other
trading activities. In addition,
pursuant to Section 4(3) under the
Securities Act, all dealers effecting
transactions in the New Notes,
whether or not participating in the
Exchange Offer, may be required to
deliver a Prospectus. The Company
has agreed that, for a period of 180
days after the date of this
Prospectus, it will make this
Prospectus available to any
broker-dealer for use in connection
with any such resale. See "Plan of
Distribution." Any broker-dealer who
is an affiliate of the Company may
not rely on such no-action letters
and must comply with the registration
and prospectus delivery requirements
of the Securities Act in connection
with any secondary resale
transaction. See "The Exchange Offer
- Purpose and Effect of the Exchange
Offer" and "Plan of Distribution."
The Exchange Offer.................... The Company is offering to exchange
pursuant to the Exchange Offer up to
$325,000,000 aggregate principal
amount of the New Notes for up to
$325,000,000 aggregate principal
amount of the Original Notes. The
terms of the New Notes are
substantially identical in all
respects (including principal amount,
interest rate and maturity) to
the
10
<PAGE>
terms of the Original Notes for which
they may be exchanged pursuant to the
Exchange Offer, except that the New
Notes are freely transferable by
Holders thereof (other than as
provided herein), and are not subject
to any covenant restricting transfer
absent registration under the
Securities Act. See "The Exchange
Offer - Terms of the Exchange" and
"The Exchange Offer -Procedures for
Tendering."
The Exchange Offer is not conditioned
upon any minimum aggregate principal
amount of Original Notes being
tendered for exchange.
Expiration Date....................... The Exchange Offer will expire at
5:00 p.m., New York City time on
, 1998, unless extended
(the "Expiration Date").
Conditions of the Exchange Offer...... The Company's obligations to
consummate the Exchange Offer are
subject to certain conditions. See
"The Exchange Offer - Conditions to
the Exchange Offer." The Company
reserves the right to terminate or
amend the Exchange Offer at any time
prior to the Expiration Date upon the
occurrence of any such conditions.
Withdrawal Rights..................... Tenders may be withdrawn at any time
prior to the Expiration Date;
otherwise, all tenders will be
irrevocable.
Procedures for Tendering Notes........ See "The Exchange Offer - Procedures
for Tendering."
Federal Income Tax Consequences....... The exchange of Original Notes for
New Notes should not be a taxable
exchange for federal income tax
purposes. See "Certain Federal Income
Tax Considerations."
Effect on Holders of the Original
Notes................................ As a result of the making of, and
upon acceptance for exchange of all
validly tendered Original Notes
pursuant to the terms of this
Exchange Offer, the Company will have
fulfilled its obligations contained
in the Registration Rights Agreement
and, accordingly, there will be no
increase in the interest rate on the
Original Notes pursuant to the
applicable terms of the Registration
Rights Agreement due to the Exchange
Offer. Holders of the Original Notes
who do not tender their Original
Notes will be entitled to all the
rights and
11
<PAGE>
limitations applicable thereto under
the Indenture, dated as of March 20,
1998, among the Company and The Bank
of New York, as trustee (the
"Trustee"), relating to the Original
Notes and the New Notes (the
"Indenture"), except for any rights
under the Indenture or the
Registration Rights Agreement, which
by their terms, terminate or cease to
have further effect as a result of
the making of, and the acceptance for
exchange of all validly tendered
Original Notes pursuant to, the
Exchange Offer. All untendered
Original Notes will continue to be
subject to the restrictions on
transfer provided for in the Original
Notes and in the Indenture. To the
extent that Original Notes are
tendered and accepted in the Exchange
Offer, the trading market for
untendered Original Notes could be
adversely affected.
Exchange Agent........................ The exchange agent with respect to
the Exchange Offer is The Bank of New
York (the "Exchange Agent"). The
address and telephone number of the
Exchange Agent are set forth in "The
Exchange Offer - Exchange Agent."
Use of Proceeds....................... There will be no cash proceeds to the
Company from the exchange pursuant to
the Exchange Offer.
12
<PAGE>
THE NEW NOTES
The Exchange Offer applies to the $325,000,000 aggregate principal amount at
maturity of the Original Notes outstanding as of the date hereof. The form and
the terms of the New Notes will be identical in all material respects to the
form and the terms of the Original Notes, except that the New Notes will have
been registered under the Securities Act and, therefore, will not contain
legends restricting the transfer thereof. The New Notes evidence the same debt
as the Original Notes exchanged for the New Notes and will be entitled to the
benefits of the same Indenture under which the Original Notes were issued. See
"Description of Notes." Certain capitalized terms listed below are defined
under the caption "Description of the Notes - Certain Definitions."
Issuer............... Pinnacle Holdings Inc., a Delaware corporation.
Securities Offered... $325.0 million aggregate principal amount at maturity of
10% Senior Discount Notes due 2008.
Maturity Date........ March 15, 2008.
Interest............. The New Notes will accrete (representing the
amortization of original issue discount) at a rate
of 10% on a semi-annual bond-equivalent basis,
to an aggregate principal amount at maturity of
$325,000,000 by March 15, 2003. No interest
will accrue on the New Notes prior to March
15, 2003. The New Notes will accrue cash
interest at the rate of 10% per annum from
March 15, 2003, payable semi-annually in
arrears on March 15 and September 15 of each
year, commencing September 15, 2003.
Effective Yield...... 10% per annum, computed on a semi-annual
bond-equivalent basis using a 360-day year
comprised of 12 30-day months and calculated
from March 17, 1998.
13
<PAGE>
Ranking.............. The New Notes will be senior unsecured
obligations of the Issuer and will rank pari
passu in right of payment with all existing and
future senior obligations of the Issuer,
including any Original Notes that are not
exchanged in the Exchange Offer. The New
Notes will be effectively subordinated to all
existing and future indebtedness of the Issuer's
subsidiaries. As of March 31, 1998, the
aggregate amount of outstanding indebtedness
and other liabilities of the Issuer's subsidiaries
was $233.8 million, $33.4 million of which
was secured obligations. See "Management's
Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and
Capital Resources" and "Description of Credit
Facilities".
Optional Redemption.. Except as described below, the Notes are not
redeemable at the Issuer's option prior to
March 15, 2003. The Notes will be
redeemable, in whole or in part, on or after
March 15, 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest,
including Liquidated Damages, if any, to the
date of redemption. In addition, at any time on
or prior to March 15, 2001, the Issuer may, at
its option, redeem up to 35% of the Notes with
the net cash proceeds from one or more Public
Equity Offerings at a redemption price equal to
110% of the Accreted Value thereof plus
accrued and unpaid Liquidated Damages, if
any, to the date of redemption; provided,
however, that, after giving effect to any such
redemption, at least 65% of the aggregate
principal amount of the Notes originally issued
on the Closing Date (as defined herein) remain
outstanding.
14
<PAGE>
Change of Control.... In the event of a Change of Control, the
holders of the Notes will have the right to
require the Issuer to purchase their Notes
pursuant to an Offer to Purchase (as defined
herein) at a price equal to 101% of the stated
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase or, if
such Offer to Purchase is to be consummated
prior to March 15, 2003, 101% of the
Accreted Value thereof on the date of purchase
plus accrued and unpaid Liquidated Damages
thereon, if any, to the date of purchase. See
"Risk Factors--Ability to Purchase Notes Upon
a Change of Control".
Covenants............ The Indenture contains certain covenants that,
among other things, limit the ability of the
Issuer and its subsidiaries to incur additional
indebtedness, pay dividends or make other
distributions, repurchase equity interests or
subordinated indebtedness, create certain liens,
enter into certain transactions with affiliates,
sell assets of the Issuer and its subsidiaries, and
enter into certain mergers and consolidations.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Notes.
15
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data for the period
of inception (May 3, 1995) through December 31, 1995 and for each of the two
years ended December 31, 1996 and 1997 has been derived from the Company's
consolidated financial statements which have been audited by Price Waterhouse
LLP, certified public accountants, that are included elsewhere herein. The
unaudited pro forma consolidated financial data as of and for the year ended
December 31, 1997 and the selected historical and unaudited pro forma
consolidated financial data as of and for the three months ended March 31, 1997
and 1998 has been derived from the Company's unaudited consolidated financial
statements and the Unaudited Pro Forma Consolidated Financial Statements
contained elsewhere herein. The summary financial information should be read in
conjunction with the information contained in the Company's consolidated audited
financial statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Unaudited Pro Forma
Consolidated Financial Statements" and "Selected Historical and Unaudited Pro
Forma Consolidated Financial Data" included elsewhere herein.
The following unaudited pro forma consolidated financial data has been
prepared to reflect the financial position and results of operations of the
Company as if each of the following had been completed on March 31, 1998 as
it related to balance sheet data and as of January 1, 1997 as it relates to
statement of operations data: (i) all acquisitions completed during 1997; (ii)
the Southern Towers Acquisition; (iii) acquisitions of other rental towers by
the Company completed from January 1, 1998 through June 9, 1998, in addition to
the Southern Towers Acquisition; (iv) other individually immaterial acquisitions
of rental towers for which the Company has entered into agreements or letters of
intent to acquire as of June 9, 1998, the acquisitions of which the Company
believes are probable; (v) the financing of the acquisitions referred to in (i)
through (iv) above; and (vi) the issuance of the Original Notes and the
application of the net proceeds therefrom as described under "Use of Proceeds"
(collectively, the "Transactions").
<TABLE>
<CAPTION>
PRO FORMA
PERIOD FROM AS ADJUSTED
INCEPTION FOR THREE
(MAY 3, 1995) PRO FORMA THREE MONTHS THREE MONTHS MONTHS
THROUGH YEAR ENDED YEAR ENDED AS ADJUSTED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997 1997(A) 1997 1998 1998 (B)
------------- ------------- ------------- --------------- ------------- ------------- ------------
(in Thousands)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Tower rental revenue...... $ 733 $ 4,842 $12,881 $ 26,130 $ 1,970 $ 5,373 $ 7,219
Tower operating
expenses, excluding
depreciation and
amortization............ 181 1,135 2,633 4,990 337 1,043 1,384
----- ------- ------- -------- ------- ------- -------
Gross profit, excluding
depreciation and
amortization............. 552 3,707 10,248 21,140 1,633 4,330 5,835
Other expenses:
General and
administrative(c)....... 306 923 1,385 1,768 312 298 313
Corporate
development(c).......... 369 1,440 3,772 3,772 848 1,289 1,289
Depreciation and
amortization............ 341 2,205 6,627 18,439 1,166 2,951 4,627
----- ------- ------- -------- ------- ------- -------
Loss from operations...... (464) (861) (1,536) (2,839) (693) (208) (394)
Interest expense.......... 181 1,155 6,925 26,348 856 3,103 2,567
Amortization of original
issue discount........... - - - - - 611 3,931
----- ------- ------- -------- ------- ------- -------
Net loss.................. $(645) $(2,016) $(8,461) $(29,187) $(1,549) $(3,922) $(6,892)
===== ======= ======= ======== ======= ======= =======
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
PERIOD FROM AS ADJUSTED
INCEPTION FOR THREE
(MAY 3, 1995) PRO FORMA THREE MONTHS THREE MONTHS MONTHS
THROUGH YEAR ENDED YEAR ENDED AS ADJUSTED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997 1997(A) 1997 1998 1998 (B)
------------- ------------- ------------- --------------- ------------- ------------- ------------
(in Thousands)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
Tower Level Cash
Flow(d)................. $ 552 $ 3,707 $10,248 $ 21,140 $ 1,633 $ 4,330 $ 5,835
Tower Level Cash Flow
Margin(e)............... 75.3% 76.6% 79.6% 80.9% 82.9% 80.6% 80.8%
Adjusted EBITDA(d)........ $ 246 $ 2,784 $ 8,863 $ 19,372 $ 1,321 $ 4,032 $ 5,522
Adjusted EBITDA
Margin(e)............... 33.6% 57.5% 68.8% 74.1% 67.1% 75.0% 76.5%
EBITDA(d)................. $(123) $ 1,344 $ 5,091 $ 15,600 $ 473 $ 2,743 $ 4,233
EBITDA Margin(e).......... -- 27.8% 39.5% 59.7% 24.0% 51.1% 58.6%
Ratio of earnings to
fixed charges(f)........ - - - N/A - - -
Number of Towers: -
Beginning of period..... 0 33 156 N/A 156 312 312
Towers acquired
during the period....... 29 119 134 N/A 31 240 319
-------
Towers constructed
during the period....... 4 4 22 N/A 3 9 9
-------
End of period........... 33 156 312 N/A 190 561 640
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, MARCH 31, AS ADJUSTED
-------------------------- ----------------- MARCH 31,
1995 1996 1997 1997 1998 1998 (B)
------- ------- -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... 31 47 1,694 - 3,319 3,319
Tower assets, net............ 11,551 48,327 127,946 64,427 231,856 269,857
Total assets................. 14,573 55,566 143,178 73,130 264,380 302,381
Total debt................... 6,124 30,422 120,582 48,957 233,761 271,762
Redeemable Stock:
Class B common stock......... 1,200 1,200 1,761 1,200 1,761 1,761
Class D common stock......... - - - - - -
Common stock................... - - - - - -
Additional paid-in capital..... 7,051 24,881 25,876 24,881 35,031 35,031
Stock subscription receivable.. (180) - - - - -
Accumulated deficit............ (645) (2,661) (11,123) (4,211) (15,045) (15,045)
------ ------ ------- ------ ------- -------
Stockholders' equity........... 6,226 22,220 14,753 20,670 19,986 19,986
</TABLE>
____________________
(a) Reflects historical amounts adjusted for the effects of the Transactions
(including the acquisitions of 201 towers in the Southern Towers Acquisition
and 85 other towers acquired in 1998 as of June 9, 1998, and the probable
acquisition of 33 additional towers for which the Company has obtained
letters of intent as of June 9, 1998), as further described in "Unaudited
Pro Forma Consolidated Financial Statements."
(b) Reflects historical amounts adjusted for the effects of the Transactions
(including the acquisitions of 85 other towers as of June 9, 1998 and the
probable acquisition as of June 9, 1998 of 33 additional towers for which
the Company has obtained letters of intent), as further described in
"Unaudited Pro Forma Consolidated Financial Statements".
(c) "General and administrative" expenses represent those costs directly related
to the day-to-day management and operation of towers
17
<PAGE>
owned by the Company. "Corporate development" expenses represent costs
incurred in connection with acquisitions and development of new business
initiatives, consisting primarily of allocated compensation, benefits and
overhead costs that are not directly related to the administration or
management of existing towers.
(d) "Tower Level Cash Flow" is defined as tower rental revenue minus tower
operating expenses, excluding depreciation and amortization. "Adjusted
EBITDA" represents loss from operations before depreciation, amortization
and corporate development expenses. "EBITDA" represents loss from operations
before depreciation and amortization. The Company has included Tower Level
Cash Flow, Adjusted EBITDA and EBITDA in Other Operating Data because the
Company believes such information may be useful to certain investors in
evaluating the Company's ability to service its debt. Tower Level Cash Flow,
Adjusted EBITDA and EBITDA should not be considered as an alternative to
Gross Profit, net loss or net cash provided by operating activities (or any
other measure of performance in accordance with generally accepted
accounting principles) as a measure of the Company's ability to meet its
cash needs.
(e) Represents Tower Level Cash Flow, Adjusted EBITDA and EBITDA each as a
percentage of tower rental revenue.
(f) As a result of the loss incurred in 1995, 1996 and 1997 and for the three
months ended March 31, 1997 and 1998, the Company was unable to fully cover
the indicated fixed charges. Earnings did not cover fixed charges by $645,
$2,016, $8,461, $1,549, $3,922 and $6,892 in 1995, 1996, 1997, for the three
months ended March 31, 1997 and 1998 and Pro Forma as Adjusted March 31,
1998.
18
<PAGE>
RISK FACTORS
An investment in the Notes offered hereby involves a high degree of risk. The
following factors, in addition to the other information contained in this
Prospectus, should be carefully considered in evaluating an investment in the
Notes offered hereby.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS
The Company has a significant amount of indebtedness. As of March 31, 1998,
the Company's indebtedness was approximately $233.8 million, its stockholders'
equity was approximately $20.0 million and its ratio of debt to equity
(excluding redeemable stock) was 11.7 to 1.0. In addition, after completion of
the Private Offering and the application of net proceeds therefrom as described
under "Use of Proceeds," the Company had approximately $119.2 million (after
giving effect to $15.2 million of outstanding letters of credit) of availability
under the Senior Credit Facility, all of which the Company is permitted to
borrow under the Indenture. Further, subject to the restrictions in the Senior
Credit Facility and the Indenture, the Company may incur additional indebtedness
from time to time to finance acquisitions, capital expenditures, working capital
or for other purposes.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the repayment of indebtedness and the payment of interest thereon and will
not be available for other purposes; (ii) the Company's future ability to obtain
additional debt financing for working capital, capital expenditures,
acquisitions or other purposes may be limited; and (iii) the Company's level of
indebtedness could limit its flexibility in reacting to changes in its industry
and general economic conditions and its ability to withstand a prolonged
downturn in the wireless communications or tower rental industries. Existing or
potential competitors of the Company may operate on a less leveraged basis and
have significantly greater operating and financing flexibility than the Company.
The Company's ability to service its debt obligations will depend upon its
future operating performance, which will be affected by prevailing economic
conditions in the wireless communications industry, and financial, business and
other factors, certain of which are beyond its control. If the Company is unable
to generate sufficient cash flow from operations to service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such as
reducing, delaying or eliminating acquisitions, tower construction and other
capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these alternative strategies could be effected on satisfactory
terms, if at all.
The Senior Credit Facility and the Indenture each contain certain restrictive
covenants. The Senior Credit Facility also requires the Company to maintain
specified financial ratios and satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those tests. A breach of any of these covenants could result in a default
under the Senior Credit Facility and the Indenture. If an event of default
should occur under the Senior Credit Facility, the lenders thereunder can elect
to declare all amounts of principal outstanding under the Senior Credit
Facility, together with all accrued interests, to be immediately due and
payable. This could also result in the triggering of cross-default or cross-
acceleration provisions in other instruments (including the Indenture), thereby
permitting acceleration of the maturity of additional indebtedness (including
the Notes). If the Company were unable to repay amounts that become due under
the Senior Credit Facility, the lenders thereunder could proceed against the
collateral granted to them to secure that indebtedness. If the indebtedness
under the Senior Credit Facility were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
such indebtedness and any other indebtedness of the Company, including the
Notes. Substantially all the assets of the Company are pledged as security under
the Senior Credit Facility. See "Description of Credit Facilities."
Prior to March 15, 2003, the Issuer's interest expense on the Notes will be
comprised solely of the accretion
19
<PAGE>
of original issue discount. Thereafter, the Notes will require annual cash
interest payments of $32.5 million. In addition, the Senior Credit Facility will
require periodic interest payments on amounts borrowed thereunder. The Company's
ability to make scheduled payments of principal of, or to pay interest on, its
debt obligations, and its ability to refinance any such debt obligations
(including the Notes), will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. As
discussed, the Company's business strategy contemplates substantial capital
expenditures in connection with execution of its business plan. There can be no
assurance that the Company will generate sufficient cash flow from operations in
the future, that anticipated revenue growth will be realized or that future
borrowings or equity contributions will be available in an amount sufficient to
service its indebtedness and make anticipated capital expenditures. The Company
anticipates that it may need to refinance all or a portion of its indebtedness
(including the Notes) on or prior to its scheduled maturity. There can be no
assurance that the Company will be able to effect any required refinancing of
its indebtedness (including the Notes) on commercially reasonable terms or at
all.
HOLDING COMPANY STRUCTURE
The Issuer is primarily a holding company with no material business
operations, sources of income or assets of its own other than the shares of its
subsidiaries. The New Notes are obligations exclusively of the Issuer. Because
substantially all of the Issuer's operations are conducted through subsidiaries,
the Issuer's cash flow and, consequently, its ability to meet its debt service
obligations, including payment of principal, premium, if any, and interest on
the Notes, is dependent upon the cash flow of its subsidiaries and the payment
of funds by those subsidiaries to the Issuer in the form of loans, dividends,
fees or otherwise. The Issuer's subsidiaries are separate and distinct legal
entities and will have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Notes or to make any funds available therefor,
whether in the form of loans, dividends or otherwise. Under the terms of the
Senior Credit Facility, the ability of the Issuer's subsidiaries to make loans
or distributions to the Issuer is restricted. Renewals or replacements of the
Senior Credit Facility and other agreements to which the Company may become a
party may contain similar prohibitions. The Issuer will need sufficient funds
available to pay cash interest on the Notes beginning in 2003 and to repay the
Notes when required. The Issuer would be unable to fulfill such obligations
under the current terms of the Senior Credit Facility unless it obtained a
waiver or refinanced the indebtedness borrowed under the Senior Credit Facility
or the Notes. There can be no assurance that the Issuer would be able to obtain
such waiver or refinancing on terms favorable to it, if at all.
In addition, because the Issuer's subsidiaries will not guarantee the payment
of principal of or interest on the Notes, any right of the Issuer to receive
assets of any of its subsidiaries upon its liquidation or reorganization (and
the consequent right of the holders of the Notes to participate in the
distribution of proceeds from those assets) will be structurally subordinated to
the claims of such subsidiary's creditors (including tax authorities, trade
creditors and lenders to such subsidiary), except to the extent that the Issuer
is itself a creditor of such subsidiary, in which case the Issuer's claims would
still be subordinated to any security interest in the assets of such subsidiary
and indebtedness of such subsidiary senior to that held by the Issuer. Pinnacle
Towers Inc. (the principal subsidiary and operating company of the Issuer) is
the borrower under the Senior Credit Facility and is obligated to repay the
indebtedness under the Senior Credit Facility, which obligations are secured by
such subsidiary's assets, which represent substantially all of the assets of the
Company. In the event of a default on secured indebtedness (whether as a result
of the failure to comply with a payment or other covenant, a cross-default or
otherwise), the parties granted such security interests will have a prior
secured claim on the assets of such subsidiary. If such parties should attempt
to foreclose on their collateral, the Issuer's financial condition and the value
of the Notes could be materially adversely affected. As of March 31, 1998, the
Issuer's subsidiaries was approximately $233.8 million of indebtedness and other
liabilities outstanding (including trade payables and capital lease
obligations), $33.4 million of which is secured and all of which was effectively
senior to the Notes. This amount includes substantially all of the Company's
indebtedness. The Indenture permits the Issuer's subsidiaries to incur
additional indebtedness under certain circumstances. See "Description of Notes."
20
<PAGE>
DEPENDENCE ON THE WIRELESS COMMUNICATIONS INDUSTRY; CURRENT INDUSTRY CONDITIONS
Substantially all of the Company's revenue is derived from leases of tower
space, most of which are with wireless communications providers. Accordingly,
the future growth of the Company depends, to a considerable extent, upon the
continued growth and increased availability of cellular and other wireless
communications providers, including PCS. There can be no assurance that the
wireless communications industry will not experience severe and prolonged
downturns in the future or that the wireless communications industry will expand
as quickly as forecasted. The wireless communications industry, which includes
paging, cellular, PCS, fixed microwave, SMR, ESMR and other wireless
communications providers, has undergone significant growth in recent years and
remains highly competitive, with service providers in a variety of technologies
and two or more providers of the same service (up to 6 for PCS) within a
geographic market competing for subscribers. The amount of tower leasing
business from wireless communications providers is dependent on a number of
factors beyond the Company's control, including demand for wireless services,
the financial condition and access to capital of wireless communications
providers, the strategy of wireless communications providers with respect to
owning or leasing towers, government licensing of broadcast rights, changes in
telecommunications regulations and general economic conditions. The demand for
space on the Company's towers is primarily dependent on the demand for wireless
communications services. A slowdown in the growth of the wireless communications
industry in the United States would depress network expansion activities and
reduce the demand for the Company's rental towers. In addition, a downturn in a
particular wireless segment as a result of technological competition or other
factors beyond the control of the Company could adversely affect the demand for
rental towers. Also, advances in technology could reduce the need for tower-
based transmission and reception. Furthermore, wireless communications providers
may increase the number of towers owned versus the number rented. The occurrence
of any of these factors could have a material adverse effect on the Company's
financial condition and results of operations. This Prospectus contains a number
of estimates by industry experts regarding expected growth rates and penetration
for wireless communications technologies. There can be no assurance that these
estimates will prove to be accurate.
DEPENDENCE ON ACQUISITIONS; INTEGRATION OF ACQUISITIONS
The Company's business plan is materially dependent upon the acquisition of
suitable communications towers at prices the Company considers reasonable in
light of the additional revenue it believes it will be able to generate from
such towers when acquired. Since the Company's inception, however, the price of
acquisitions within the industry have generally increased over time.
Additionally, the Company competes with certain wireless communications
providers, site developers and other independent tower owners and operators for
acquisitions of towers and it is possible such competition may increase.
Increased competition may result in fewer acquisition opportunities for the
Company as well as higher acquisition prices. The Company's inability to grow by
acquisition or to accurately estimate the amount of revenue that will be
generated from such acquisitions may have a material adverse effect on the
Company. Although the Company believes that opportunities may exist for the
Company to grow through acquisitions, there can be no assurance that the Company
will be able to identify and consummate sufficient appropriate acquisitions on
terms acceptable to the Company. Certain provisions of the Senior Credit
Facility or the Indenture may limit the Company's ability to effect
acquisitions. See "Risk Factors--Substantial Indebtedness; Ability to Service
Indebtedness". Further, there can be no assurance that the Company will be able
to profitably manage and market the space on additional towers acquired or
successfully integrate acquired towers with the Company's operations and sales
and marketing efforts without substantial costs or delays. Acquisitions involve
a number of potential risks, including the potential loss of customers and
unanticipated events or liabilities, some or all of which could have a material
adverse effect on the Company's financial condition and results of operations.
COMPETITION
The Company competes for customers with wireless communications providers and
utility companies that own and operate their own tower networks and lease tower
space to other carriers, site development companies which acquire space on
existing towers for wireless communications providers and manage new tower
construction, other
21
<PAGE>
independent tower companies and traditional local independent tower operators.
Wireless communications providers that own and operate their own tower networks
generally are substantially larger and have greater financial resources than the
Company. The Company believes that tower location and capacity, price, quality
of service, type of service and density within a geographic market historically
have been and will continue to be the most significant competitive factors
affecting tower rental companies. The Company believes that competition for
tower acquisitions will increase and that additional competitors will enter the
tower rental market, certain of which may have greater financial resources than
the Company.
SIGNIFICANT FUTURE CAPITAL REQUIREMENTS
The Company's acquisition and construction activities will create substantial
ongoing capital requirements. During 1996, 1997 and 1998 to June 9, 1998, the
Company made capital investments aggregating approximately $42.8 million, $88.4
million and $153.7 million, respectively, in tower acquisitions, site upgrades
and new tower construction. The Company historically has financed its capital
expenditures through a combination of borrowings under bank credit facilities,
bridge financings, equity issuances, seller financing and cash flow from
operations. However, significant acquisition or tower construction opportunities
could create a need for additional debt or equity financing. In addition, if the
Company's revenue and cash flow are not as expected, or if the Company's
borrowing base is reduced as a result of operating performance, the Company may
have limited ability to access necessary capital under its existing credit
facilities or otherwise. There can be no assurance that sufficient debt or
equity financing or cash generated by operations will be available to meet these
requirements.
RISKS ASSOCIATED WITH DAMAGE TO TOWERS
The Company's towers are subject to risks from vandalism and risks associated
with natural disasters such as tornados, hurricanes and earthquakes. The Company
maintains certain insurance to cover the cost of replacing damaged towers and
general liability insurance to protect the Company in the event of an accident
involving a tower, but the Company does not maintain business interruption
insurance. Accordingly, damage to a group of the Company's towers could result
in a significant loss of revenue and could have a material adverse effect on the
Company's results of operations and financial condition. In addition, a tower
accident for which the Company is uninsured or underinsured could have a
material adverse effect on the Company's financial condition or results of
operations.
PERCEIVED HEALTH RISKS ASSOCIATED WITH RADIO FREQUENCY EMISSIONS
The Company and the wireless communications providers that utilize the
Company's towers are subject to government requirements and other guidelines
relating to radio frequency ("RF") emissions. The potential connection between
RF emissions and certain negative health effects, including some forms of
cancer, has been the subject of substantial study by the scientific community in
recent years. To date, the results of these studies have been inconclusive.
Although the Company has not been subject to any claims relating to RF
emissions, there can be no assurance that it will not be subject to such claims
in the future, which could have a material adverse effect on the Company's
results of operations and financial condition. See "Business--Regulatory
Matters".
REGULATORY COMPLIANCE AND APPROVAL
Both the Federal Communications Commission (the "FCC") and the Federal
Aviation Administration (the "FAA") regulate towers used for wireless
communications transmitters and receivers. Such regulations control siting,
lighting and marking of towers and may, depending on the characteristics of the
tower, require registration of tower facilities. Wireless communications
equipment operating on towers is separately regulated and independently licensed
by the FCC. Certain proposals to construct new towers or to modify existing
towers are reviewed by the FAA to ensure that the tower will not present a
hazard to aviation. Tower owners may have an obligation to paint towers or
install lighting to conform to FAA standards and to maintain such painting and
lighting.
22
<PAGE>
Tower owners may also bear the responsibility of notifying the FAA of any tower
lighting failures. Failure to comply with existing or future applicable
requirements may lead to civil penalties or other liabilities. Such factors
could have a material adverse effect on the Company's financial condition or
results of operations.
Local regulations, including municipal or local ordinances, zoning
restrictions and restrictive covenants imposed by community developers, 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 the Company's 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 that increase such delays or result
in additional costs to the Company. Such factors could have a material adverse
effect on the Company's future growth. The Company's customers may also become
subject to new regulations or regulatory policies that adversely affect the
demand for tower sites.
The Company's growth strategy will be affected by its ability to obtain the
permits, licenses and zoning relief necessary to build new towers. The tower
rental industry often encounters significant public resistance when attempting
to obtain the necessary permits, licenses and zoning relief for construction or
improvements of towers. There can be no assurance that the Company can obtain
the permits, licenses and zoning relief necessary to continue the expansion of
its tower rental business. The failure of the Company to obtain such permits,
licenses and zoning relief would have a material adverse effect on the Company's
business, financial condition and results of operations.
CUSTOMER CONCENTRATION
The Company has certain customers that account for a significant portion of
its revenue. Currently, the Company has only one customer that accounts for more
than 5.0% of its revenue, Southern Communications and its affiliates, which
account for approximately 19.8% of the Company's revenue. The loss of one or
more of these major customers, or a reduction in their utilization of the
Company's tower rental space, could have a material adverse effect on the
Company's business, results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, customer
support and finance personnel, certain of whom may be difficult to replace. The
loss of the services of certain of these executives could have a material
adverse effect on the Company. There can be no assurance that the services of
such personnel will continue to be available to the Company. The Company does
not maintain key man life insurance policies on its executives that would
adequately compensate the Company for any loss of services of such executives.
See "Management--Employment Agreements" and "Certain Relationships and
Transactions."
BARRIERS TO NEW CONSTRUCTION
As of June 9, 1998, the Company had 14 towers under construction and has in
excess of 100 additional tower projects in various stages of development. The
success of the Company's growth strategy is dependent in part on its ability to
construct new towers. Such construction can be delayed by factors beyond the
control of the Company, including zoning and local permitting requirements,
availability of erection equipment and skilled construction personnel and
weather conditions. Certain communities have placed restrictions on new tower
construction or have delayed granting permits required for construction. 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.
The Company's expansion plans call for a significant increase in construction
activity. There can be no assurance that the Company will be able to overcome
the barriers to new construction or that the number of towers planned for
construction will be completed. The failure of the Company to complete the
necessary construction could
23
<PAGE>
have a material adverse effect on the Company's business, financial condition
and results of operations.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulations regarding the use, storage, disposal,
emission, release and remediation of hazardous and nonhazardous substances,
materials or wastes ("Environmental Laws"). Under certain Environmental Laws,
the Company could be held strictly, jointly and severally liable for the
remediation of hazardous substance contamination at its facilities or at third-
party waste disposal sites and could also be held liable for any personal or
property damage related to such contamination. Although the Company believes
that it is in substantial compliance with all applicable Environmental Laws,
there can be no assurance that the costs of compliance with existing or future
Environmental Laws will not have a material adverse effect on the Company's
financial condition and results of operations. See "Business--Regulatory
Matters."
CONTROLLING STOCKHOLDER
ABRY II holds approximately 81.3% of the units assigned to the Issuer's
outstanding voting stock as defined in the Stockholders' Agreement (as defined
herein), and controls four of seven seats on the board of directors. Therefore,
ABRY II has the power to control all matters submitted to stockholders of the
Issuer, to elect a majority of the directors of the Issuer and to exercise
control over the business, policies and affairs of the Issuer. The interests of
ABRY II, as an equity holder, may differ from the interests of the holders of
the Notes. See "Certain Relationships and Transactions".
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
The source of funds for any repurchase required as a result of a Change of
Control will be the Company's available cash or cash generated from operating or
other sources, including borrowings, sales of assets, sales of equity or funds
provided by a new controlling entity. Further, a Change of Control may trigger
an event of default under the Senior Credit Facility, which would permit the
lenders thereto to accelerate the debt under the Senior Credit Facility.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered and to repay debt under the Senior Credit Facility. Furthermore,
the use of available cash to fund the potential consequences of a Change of
Control may impair the Company's ability to obtain additional financing in the
future. Any future credit agreements or other agreements relating to
indebtedness to which the Company may become a party may contain similar
restrictions and provisions. See "Description of Notes" and "Description of
Credit Facilities".
RISKS ASSOCIATED WITH FRAUDULENT CONVEYANCE LIABILITY
If under relevant federal and state fraudulent conveyance statutes in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of the Issuer, a court were to find
that, at the time the Notes were issued (i) the Issuer issued the Notes with the
intent of hindering, delaying or defrauding current or future creditors or (ii)
(A) the Issuer received less than reasonably equivalent value or fair
consideration for issuing the Notes and (B) the Issuer (1) was insolvent or was
rendered insolvent by reason of the transactions contemplated in connection with
the Private Offering, (2) was engaged, or about to engage, in a business or
transaction for which its assets constituted unreasonably small capital, (3)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as such debts matured (as all of the foregoing terms are defined in or
interpreted under such fraudulent conveyance statutes) or (4) was a defendant in
an action for money damages, or had a judgment for money damages docketed
against it (if, in either case, after final judgment, the judgment is
unsatisfied), such court could avoid or subordinate the Notes to presently
existing and future indebtedness of the Issuer and take other action detrimental
to the holders of the Notes, including, under certain circumstances,
invalidating the Notes.
24
<PAGE>
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or local law that is being applied in any such
proceeding. Generally, however, the Issuer would be considered insolvent if, at
the time it incurs the indebtedness constituting the Notes, either (i) the fair
market value (or fair saleable value) of its assets is less than the amount
required to pay its total existing debts and liabilities (including the probable
liability on contingent liabilities) as they become absolute and mature or (ii)
it is incurring debts beyond its ability to pay as such debts mature.
The Issuer believes that at the time of its issuance of the Notes, the Issuer
(i) (A) was neither insolvent nor rendered insolvent thereby, (B) had sufficient
capital to operate its business effectively and (C) was incurring debts within
its ability to pay as the same mature or become due and (ii) had sufficient
resources to satisfy any probable money judgment against it in any pending
action. In reaching the foregoing conclusions, the Issuer has relied upon its
analysis of internal cash flow projections and estimated values of assets and
liabilities of the Issuer. There can be no assurance, however, that such
analysis will prove to be correct or that a court passing on such questions
would reach the same conclusions.
ABILITY TO WAIVE COMPLIANCE OR DEFAULT UNDER THE INDENTURE
Pursuant to the Indenture, the holders of a majority in aggregate principal
amount of the Notes, on behalf of all holders of the Notes, may waive the
Issuer's compliance with certain restrictive provisions of the Indenture.
Additionally, subject to certain rights of the Trustee, as provided in the
Indenture, the holders of a majority of the Notes, may waive any past default
under the Indenture, with certain exceptions. The interests of the majority of
the holders may differ from the interests of other holders. See "Description of
New Notes-Modification and Waiver."
ABSENCE OF PUBLIC MARKET
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. Although the New Notes are eligible
for trading in PORTAL by "qualified institutional buyers," as defined in Rule
144A under the Securities Act, there can be no assurance as to the liquidity of
any markets that may develop for the New Notes, the ability of Holders of the
New Notes to sell their New Notes or the price at which Holders would be able to
sell their New Notes. Future trading prices of the New Notes will depend on
many factors, including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes. However, the Initial Purchasers are not obligated to do so
and any market making may be discontinued at any time without notice. The
Company does not intend to apply for listing of the New Notes offered hereby on
any securities exchange. If a market for the New Notes does develop, the price
of the New Notes may fluctuate and liquidity may be limited. If a market for
the New Notes does not develop, Holders may be unable to resell such securities
for an extended period of time, if at all. If the market were to exist, the New
Notes could trade at prices lower than the initial offering price of the
Original Notes depending on many factors, including those described above.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will
not be subject to similar disruptions. Any such disruption may have an adverse
effect on Holders of the New Notes.
REIT STATUS
The Company has elected to be taxed as a Real Estate Investment Trust
("REIT") under Sections 856-860 of the Code. The Company believes that it has
been organized and operates in such a manner as to qualify for taxation as a
REIT, and it intends to continue to operate in such a manner. However,
prospective investors should be aware that the federal tax rules and regulations
relating to REITs are highly technical and complex, and that the Company's
25
<PAGE>
qualification as a REIT during each taxable year (including prior years) will
depend upon its ability to meet these requirements, through actual annual
operating results, income distribution levels, stock ownership requirements and
tests relating to the Company's assets and sources of income. Therefore, no
assurance can be given that the Company has operated or will operate in a manner
so as to qualify or remain qualified as a REIT. The Company could be subject to
a variety of taxes and penalties if it engages in certain prohibited
transactions, fails to satisfy certain REIT distribution requirements or
recognizes gain on the sale or other disposition of certain types of property.
See "Business--REIT Status" for a more detailed discussion of the consequences
to the Company of a loss of or failure to maintain the REIT status of the
Company.
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the offer or sale of the Original Notes pursuant to
an exemption from or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act or applicable state securities laws. The
Company does not currently anticipate that it will register the Original Notes
under the Securities Act. To the extent that the Original Notes are tendered
and accepted in connection with the Exchange Offer, any trading market for
remaining Original Notes could be adversely affected.
Issuance of the New Notes in exchange for the Original Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the
Original Notes desiring to tender such Original Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to tenders
of Original Notes for exchange. Original Notes that are not tendered or that
are tendered but not accepted by the Company for exchange, will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on March 17, 1998 to the Initial
Purchasers who resold them to certain accredited institutions in the Private
Offering. In connection with the Private Offering, the Company entered into the
Registration Rights Agreement, which requires that within sixty (60) days
following the issuance of the Original Notes, the Company file with the
Commission a registration statement under the Securities Act with respect to an
issue of New Notes of the Company identical in all material respects to the
Original Notes, use its best efforts to cause such registration statement to
become effective under the Securities Act with 150 days following the issuance
of the Original Notes, and upon the effectiveness of that registration
statement, offer to the Holders of the Original Notes the opportunity to
exchange their Original Notes for a like principal amount of such New Notes,
which will be issued without a restrictive legend. The purpose of the Exchange
Offer is to fulfill the Company's obligations under the Registration Rights
Agreement. The Original Notes were initially represented by two global Notes in
registered form, in the principal amounts of $200,000,000 and $125,000,000
registered in the name of Cede & Co., a nominatee of The Depository Trust
Company, New York, New York ("DTC"), as depositary.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set
26
<PAGE>
forth in Exxon Capital Holdings Corp., SEC No-Action Letter (April 13, 1989),
Morgan Stanley & Co. Inc., SEC No-Action Letter (June 5, 1991) and Shearman &
Sterling, SEC No-Action Letter (July 2, 1993). However, the Company has not
sought its own no-action letter, and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Based upon these interpretations by the
staff of the Commission, the Company believes that the New Notes issued pursuant
to this Exchange Offer in exchange for Original Notes may be offered for resale,
resold and otherwise transferred by a Holder thereof other than (i) a broker-
dealer who purchased such Original Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an "affiliate" (as defined in Rule 405 of the
Securities Act) of the Company without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and that
such Holder is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of such New Notes. Holders of
Original Notes accepting the Exchange Offer will represent to the Company in the
Letter of Transmittal that such conditions have been met. Any Holder who
participates in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may not rely on the position of the staff of the
Commission as set forth in these no-action letters and would have to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. This Prospectus may not be
used by such Holders for any secondary resale. A secondary resale transaction in
the United States by a Holder who is using the Exchange Offer to participate in
the distribution of New Notes must be covered by a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K of the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Original Notes as a
result of market-making activities or other trading activities and will deliver
a prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Original
Notes where such Original Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Letter of
Transmittal states that by acknowledging and delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Company has agreed that for a period of 180
days after the Expiration Date, they will make this Prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of New Notes.
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, Holders of Original Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
As described above, the Original Notes were sold to the Initial Purchasers
and resold by the Initial Purchasers to a small number of institutional
investors on March 17, 1998, and there is currently a limited trading market for
them. To the extent Original Notes are tendered and accepted in the Exchange
Offer, the principal amount of outstanding Original Notes will decrease.
Following the consummation of the Exchange Offer, Holders of Original Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market of the Original Notes could be adversely affected. See
"Risk Factors -- Consequence of Failure to Exchange."
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal (which together constitute the "Exchange Offer"),
the Company will accept any and all Original Notes validly tendered, and not
theretofore withdrawn, prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of outstanding
27
<PAGE>
Original Notes accepted in the Exchange Offer, as promptly as practicable after
the Expiration Date. Holders may tender some or all of their Original Notes
pursuant to the Exchange Offer, provided, however, that Original Notes may be
tendered only in integral multiples of $1,000. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Original Notes being
tendered for exchange.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Original Notes except that the New Notes will have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will not represent additional
indebtedness of the Company and will be entitled to the benefits of the
Indenture, which is the same Indenture as the one under which the Original Notes
were issued.
No interest will accrue or be payable on the New Notes prior to March 15,
2003. Thereafter, interest on the New Notes will accrue at a rate of 10% per
annum and will be payable in cash semi-annually in arrears on March 15 and
September 15 of each year, commencing September 15, 2003.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange and exchanged Original Notes validly tendered for exchange
when, as and if the Company gives oral or written notice to the Exchange Agent
of acceptance of the tenders of such Original Notes for exchange. Exchange of
Original Notes accepted for exchange pursuant to the Exchange Offer will be made
by deposit of tendered Original Notes with the Exchange Agent, which will act as
agent for the tendering Holders for the purpose of receiving New Notes from the
Company and transmitting such New Notes to tendering Holders. In all cases, any
exchange of New Notes for Original Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
certificates for such Original Notes (or of a confirmation of a book-entry
transfer of such Original Notes in the Exchange Agent's account at the Book-
Entry Transfer Facility (as defined in "--Procedures for Tendering" below)), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents. For a description of the procedures
for tendering Original Notes pursuant to the Exchange Offer, see "--Procedures
for Tendering."
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, or due to the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Notes will be
returned without expense to the tendering Holders thereof (or in the case of
Original Notes tendered by book-entry transfer, such Original Notes will be
credited to the account of such Holder maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Exchange Offer.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of a Letter of Transmittal (or facsimile
thereof), waive any right to receive notice of acceptance of their Original
Notes for exchange.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commission or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Original
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
This Prospectus, together with the Letter of Transmittal, is being sent to
registered Holders of Original Notes as of ___________, 1998.
28
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Expiration Date shall be 5:00 p.m. New York City time on ___________,
1998, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral (promptly confirmed in writing) or written notice
and will make a public announcement thereof, each prior to 9:00 a.m. New York
City time, on the next business day after the previously scheduled expiration
date of the Exchange Offer.
The Company reserves the right, at any time and from time to time, in its
sole discretion (subject to its obligations under the Registration Rights
Agreement) (i) to delay accepting any Original Notes or to delay the issuance
and exchange of New Notes for Original Notes, (ii) to extend the Exchange Offer
or, if any of the conditions set forth below under "--Conditions to the Exchange
Offer" shall not have been satisfied, to terminate the Exchange Offer by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, or (iii) to amend the terms of the Exchange Offer in any manner.
If the Company extends the period of time during which the Exchange Offer is
open, or if it is delayed in accepting for exchange of, or in issuing any
exchanging the New Notes for, any Original Notes, or is unable to accept for
exchange of, or issue New Notes for, any Original Notes pursuant to the Exchange
Offer for any reason, then, without prejudice to the Company's rights under the
Exchange Offer, the Exchange Agent may, on behalf of the Company, retain all
Original Notes tendered, and such Original Notes may not be withdrawn except as
otherwise provided below in "--Withdrawal of Tenders." The adoption by the
Company of the right to delay acceptance for exchange of, or the issuance and
the exchange of the New Notes, for any Original Notes is subject to applicable
law, including Rule 14e-1(c) under the Exchange Act, which requires that the
Company pay the consideration offered or return the Original Notes deposited by
or on behalf of the Holders thereof promptly after the termination or withdrawal
of the Exchange Offer.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period. The term "business day"
shall mean any day other than Saturday, Sunday or a federal holiday and shall
consist of the time period from 12:01 a.m. through 12:00 midnight, New York City
time.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to make public, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service. Any such announcement of an
extension of the Exchange Offer shall be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date of the Exchange Offer.
PROCEDURES FOR TENDERING
Only a Holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange offer, the Holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal, or such facsimile, together with
any other required documents, to the Exchange Agent so that delivery is received
prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered
effectively,
29
<PAGE>
the Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "- Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. In addition, either (i)
the certificates for the tendered Original Notes must be received by the
Exchange Agent along with the Letter of Transmittal, or such Original Notes must
be tendered pursuant to the procedures for book-entry transfer described below
and a confirmation of receipt of such tendered Original Notes must be received
by the Exchange Agent, in each case, prior to 5:00 p.m., New York City time, on
the Expiration Date, or (ii) the tendering Holder must comply with the
guaranteed delivery procedures described below.
NO LETTERS OF TRANSMITTAL, CERTIFICATES REPRESENTING ORIGINAL NOTES OR ANY
OTHER REQUIRED DOCUMENTATION SHOULD BE SENT TO THE COMPANY. SUCH DOCUMENTS
SHOULD BE SENT ONLY TO THE EXCHANGE AGENT.
The tender by a Holder of Original Notes made pursuant to any method of
delivery set forth in the Letter of Transmittal will constitute a binding
agreement between such tendering Holder and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
The method of delivery of Original Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date.
Holders may request their respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transaction for such Holders or for
assistance concerning the Exchange Offer.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivery such
owner's Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such owner's name or obtain a properly
completed bond power from the registered Holder. The transfer of registered
ownership may take considerable time.
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Original Notes (which term includes any participants in DTC whose
name appears on a security position listing as the owner of the Original Notes)
or if delivery of the Original Notes is to be made to a person other than the
registered Holder, such Original Notes must be endorsed or accompanied by a
properly completed bond power, in either case signed by such registered Holder
as such registered Holder's name appears on such Original Notes with the
signature on the Original Notes or the bond power guaranteed by an Eligible
Institution (as defined herein).
If the Letter of Transmittal or any Original Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorney-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit with the Letter of Transmittal evidence satisfactory to the Company of
their authority to so act.
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution unless the Original Notes
tendered pursuant thereto are (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal, (ii) for the account of an Eligible
Institution, or (iii) for the account of DTC. See Instruction 4 in the Letter
of Transmittal. In the event that signature on a Letter of Transmittal or a
notice of withdrawal, as the case may be, is required to be guaranteed, such
guarantee must be by a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (any of which is referred to herein as an "Eligible Institution").
30
<PAGE>
The Exchange Agent will establish an account with respect to the Original
Notes at DTC (the "Book-Entry Transfer Facility") for the purpose of the
Exchange Offer promptly after the date of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make delivery of the Original Notes by causing the Book-Entry Transfer
Facility to transfer such Original Notes into the Exchange Agent's Notes account
in accordance with the Book-Entry Transfer Facility's procedure for such
transfer. ALTHOUGH DELIVERY OF ORIGINAL NOTES MAY BE EFFECTED THROUGH BOOK-ENTRY
TRANSFER IN THE EXCHANGE AGENTS ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY, THE
LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) WITH ALL REQUIRED SIGNATURE
GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS MUST, IN ANY CASE, BE TRANSMITTED TO
AND RECEIVED AND CONFIRMED BY THE EXCHANGE AGENT AT ITS ADDRESS SET FORTH BELOW
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE, EXCEPT AS
OTHERWISE PROVIDED BELOW UNDER THE CAPTION "-GUARANTEED DELIVERY PROCEDURES."
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All questions as to the validity, form (including time of receipt),
acceptance and withdrawal of tendered Original Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Original Notes
determined by the Company not to be validly tendered or any Original Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the absolute right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived by the Company in its full discretion,
any defects or irregularities in connection with tenders of Original Notes will
render such tenders invalid unless such defects or irregularities are cured
within such time as the Company shall determine. Although the Company intends
to notify Holders of defects or irregularities with respect to tenders of
Original Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Any Original
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived, as provided
for herein, will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth herein, to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Original
Notes in the open market, privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available, or (ii) who cannot deliver their Original Notes
(or complete the procedures for book-entry transfer), the Letter of Transmittal
or any other required documents to the Exchange Agent prior to the Expiration
Date, may nevertheless effect a tender of Original Notes if all of the following
conditions are met:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail, hand delivery or
overnight courier) setting forth the name and address of the Holder, any
certificate number(s) of such Original Notes and the principal amount of
Original Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Original Notes
31
<PAGE>
(or a confirmation of a book-entry transfer of such Original Notes in the
Exchange Agent's account at the Book-Entry Transfer Facility) and any other
documents required by the Letter of Transmittal will be deposited Exchange
Agent's account at the Book-Entry Transfer Facility and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) as well as the certificate(s) representing all tendered
Original Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Original Notes into the Exchange Agent's Notes account at
the Book-Entry Transfer Facility) and all other documents required by the
Letter Transmittal are received by the Exchange Agent with five New York
Stock Exchange trading days after the Expiration Date.
A Notice of Guaranteed Delivery is being sent to Holders along with the
Prospectus and the Letter of Transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m. New York City time, on the Expiration
Date, as such term is defined above under the caption "--Expiration Date;
Extensions; Amendments; Termination." If the Company extends the period of time
during which the Exchange Offer is open, or if it is delayed in accepting for
exchange of, or in issuing and exchanging the New Notes for, any Original Notes
or are unable to accept for exchange of, or issue and exchange the New Notes
for, any Original Notes pursuant to the Exchange Offer for any reason, then
without prejudice to the Company's rights under the Exchange Offer, the Exchange
Agent may, on behalf of the Company, retain all Original notes tendered, and
such Original Notes may not be withdrawn except as otherwise provided herein,
subject to Rule 14e-1(c) under the Exchange Act, which provides that the person
making an issuer tender offer shall either pay the consideration offered or
return tendered securities, promptly after the termination or withdrawal of the
offer.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its offices as set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) specify the serial numbers on the particular certificates
evidencing the Original Notes to be withdrawn and the name of the registered
Holder thereof (if certificates have been delivered or otherwise identified to
the Exchange Agent) or the name and number of the account at DTC to be credited
with withdrawal of the Original Notes (if the Original Notes have been tendered
pursuant to the procedures for book-entry transfer), (iii) be signed by the
Holders in the same manner as the original signature on the Letter of
Transmittal by which Original Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the registrar (the "Registrar") with respect to the Original Notes register
the transfer of such Original Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Original Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company in its sole discretion, which determination shall
be final and binding on all parties. Any Original Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Notes will be issued with respect thereto unless the Original Notes so
withdrawn are validly tendered. Properly withdrawn Original Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer and without prejudice to
the Company's other rights under the Exchange Offer, the Company shall not be
required to accept for exchange, or exchange New Notes for any Original Notes,
and may amend or terminate the Exchange Offer as provided herein before the
acceptance of such Original Notes, if, among other things:
32
<PAGE>
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer,
which might materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the Exchange
Offer to the Company, or any material adverse development has occurred in any
existing action or proceeding with respect to the Company or any of its
subsidiaries; or
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred, which might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which might materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the Exchange
Offer to the Company; or
(d) the New Notes to be received by Holders of Original Notes in the
Exchange Offer, upon receipt, will not be transferable by such Holders (other
than as "affiliates" of the Company) without restriction under the Securities
Act and Exchange Act and without material restriction under the blue sky laws
of substantially all of the states of the United States (subject, in the case
of Restricted Holders, to any requirements that such persons comply with the
Prospectus Delivery Requirements).
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may, subject to its obligations under
the Registration Rights Agreement to use its best efforts to consummate the
Exchange Offer, (i) terminate the Exchange Offer and return all tendered
Original Notes to tendering Holders, (ii) extend the Exchange Offer and, subject
to withdrawal rights as set forth in "-- Withdrawal of Tenders" above, retain
all such Original Notes until the expiration of the Exchange Offer as so
executed, (iii) waive such condition and, subject to any requirement to extend
the period of time during which the Exchange Offer is open, exchange all
Original Notes validly tendered for exchange by the Expiration Date and not
withdrawn or (iv) delay acceptance or exchange of, or delay the issuance and
exchange of New Notes for, any Original Notes until satisfaction or waiver of
such conditions to the Exchange Offer even though the Exchange Offer has
expired. The Company's right to delay acceptance for exchange of, or delay the
issuance and exchange of New Notes for, Original Notes tendered for exchange
pursuant to the Exchange Offer is subject to provisions of applicable law,
including, to the extent applicable, Rule 14e-1(c) promulgated under the
Exchange Act, which requires that the Company pay the consideration offered or
return the Original Notes deposited by or on behalf of Holders of Original Notes
promptly after the termination or withdrawal of the Exchange Offer. For a
description of the Company's right to extend the period of time during which the
Exchange Offer is open and to amend, delay or terminate the Exchange Offer, see
"-- Expiration Date; Extensions; Amendments; Termination" above. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered Holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
33
<PAGE>
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Reorganization Section, Floor 21W
By Overnight Courier or By Hand
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Reorganization Section, Floor 21W
By Facsimile
(212) 571-3083
Confirm by Telephone
(212) 815-6333
FEES AND EXPENSES
The expense of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail, however, additional solicitation
may be made by telegraph, telephone or in person by officer and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or other soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$126,000. Such expenses include fees and expenses of the Exchange Agent,
Trustee, Paying Agent and Registrar, accounting and legal fees and printing
costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes, or Original Notes for principal amounts not tended or
acceptable for exchange, are to be delivered to, or are to be issued in the name
of, any person other than the registered Holders of the Original Notes tendered,
or if tendered Original Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Original Notes pursuant to the
Exchange Offer, then the amount of any such transfer
34
<PAGE>
taxes (whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the New Notes.
35
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the
Company as of March 31, 1998 and (ii) the pro forma capitalization of the
Company after giving effect to the Transactions as if they had been completed on
March 31, 1998. This table should be read in conjunction with the information
contained in the "Unaudited Pro Forma Consolidated Financial Statements" and the
Company's audited consolidated financial statements and notes thereto included
elsewhere herein.
As of March 31, 1998
Pro Forma
Actual as Adjusted
(Unaudited)
Debt (including current maturities): (dollars in thousands)
Senior Discount Notes................. $ 200,401 $ 200,401
Senior Credit Facility................ $ 15,650 $ 52,746
Notes payable (1)..................... 17,710 18,615
---------------- --------------
Total debt.................................... 233,761 271,762
---------------- --------------
Redeemable stock:
Class B common stock.................. 1,761 1,761
Class D common stock.................. -- --
---------------- --------------
1,761 1,761
---------------- --------------
Common stock.................................. -- --
Additional paid-in capital.................... 35,031 35,031
Accumulated deficit........................... (15,045) (15,045)
---------------- --------------
Stockholders' equity.......................... 19,986 19,986
---------------- --------------
Total capitalization.......................... $ 255,508 $ 293,509
================ ==============
(1) Notes payable consist of notes issued to tower sellers in the Company's
acquisition of towers. Interest rates range from 8.5% to 13.0% and the
notes mature at varying dates through December 2020.
USE OF PROCEEDS
The Company will receive no proceeds from the exchange of New Notes for
the Original Notes. The net proceeds from the sale by the Company of the
Original Notes, after deducting discounts and estimated fees and expenses, were
approximately $192.8 million. Such net proceeds were used: (i) to repay
approximately $158.6 million of outstanding borrowings under the Senior Credit
Facility, (ii) to repay in full and retire the $20.0 million of principal and
approximately $1.2 million of accrued interest outstanding under the
Subordinated Term Loan; (iii) to repay in full and retire the $12.5 million of
principal and approximately $0.1 million of accrued interest outstanding under
the ABRY Bridge Loan; and (iv) to pay approximately $0.4 million in the
aggregate to the holders of the Company's Class B common stock in settlement of
a distribution preference on such stock.
The Senior Credit Facility is a revolving line of credit for borrowings
initially, of up to $150.0 million. The Company may make borrowings and
repayments until March 31, 2000, at which time the facility will convert into a
term loan maturing on December 31, 2005. At the time of the consummation of the
Private Offering, loans under the Senior Credit Facility bore interest at a rate
per annum, at the borrower's request, equal to the agent bank's prime rate plus
a margin ranging from 0% to 1.75% or the 90-day London Interbank Offered Rate
("LIBOR") plus a margin ranging from 0% to 2.75%. Outstanding borrowings under
the Senior Credit Facility amounted to $15.7 million at March 31, 1998. Advances
under the Senior Credit Facility were used to fund acquisitions and
36
<PAGE>
construction of towers. Effective prior to closing of the Private Offering, the
Senior Credit Facility was amended to reduce the commitment amount to $150.0
million and to change the maximum LIBOR margin to 2.875%. Upon the closing of
the Private Offering, outstanding borrowings and availability under the Senior
Credit Facility were approximately $15.7 million and $119.1 million,
respectively, after giving effect to (i) repayment of $158.6 million of
outstanding borrowings with a portion of the proceeds of the Private Offering,
(ii) reduction of the Senior Credit Facility to a commitment of $150.0 million
and (iii) consideration of $15.2 million of outstanding letters of credit which
reduce availability under the Senior Credit Facility.
The ABRY Bridge Loan bore interest at a rate of 9.0% per annum and
matures on February 11, 1999. The Subordinated Term Loan is a $20.0 million term
loan maturing on September 22, 2000. Interest under this agreement is at a rate
equivalent to LIBOR plus a margin. The applicable margin under the agreement was
6.0%. The Company utilized the proceeds of that loan to repay in full and retire
a $12.5 million bridge loan and related accrued interest of $0.5 million from
ABRY II and repay certain amounts outstanding under the Senior Credit Facility.
See "Description of Credit Facilities."
RECENT DEVELOPMENTS
From time to time, the Company has been approached by potential merger
partners and buyers. As a result, the Company has engaged the firm of Morgan
Stanley & Company Incorporated to assist the Company in considering its
strategic alternatives.
A sale or merger of the Company will only be permitted if the successor
entity expressly assumes, by a supplemental indenture, all of the Company's
obligations under the Indenture. Therefore, the successor entity would assume
all of the obligations relating to the New Notes, including the due and punctual
payment of the principal, premium, if any, and interest on the New Notes.
Additionally, the successor entity would succeed to all of the rights and powers
of the Company under the Indenture. See "Description of Notes-Mergers,
Consolidations and Certain Sales of Assets."
If the Company was sold and such sale resulted in a Change of Control,
which includes a sale of all or substantially all of the Company's assets, each
holder of the New Notes will have the right to require the Company to repurchase
all or any part of such holder's New Notes at a price in cash equal to 101% of
the Accreted Value thereof as of the date of purchase plus accrued and unpaid
Liquidated Damages thereon, if any, to the date of purchase. See "Description of
Notes-Change of Control."
There can be no assurance that any such sale or merger transaction may
occur.
37
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet as of
March 31, 1998 has been prepared to reflect the financial position of the
Company as if the Transactions had been completed on March 31, 1998. The
following unaudited pro forma consolidated statement of operations for the year
ended December 31, 1997 and for the three months ended March 31, 1998 have been
prepared to reflect the results of operations as if the Transactions had been
completed on January 1, 1997.
Each of the acquisitions have or are anticipated to be accounted for
using the purchase method of accounting. The total cost of acquisitions has or
will be allocated to the tangible or intangible assets acquired based on their
respective fair values. The allocation of the respective purchase prices
included in the pro forma financial information is preliminary. The Company does
not expect that the final allocation of the purchase price will be materially
different from the preliminary allocation.
The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable under the
circumstances. The unaudited pro forma consolidated financial information should
be read in conjunction with the Company's audited consolidated financial
statements included elsewhere in this Private Offering. The unaudited pro forma
consolidated statement of operations data are not necessarily indicative of the
results that would have occurred if the Transactions had occurred on the dates
indicated, nor are they indicative of the Company's future results of
operations. There can be no assurance whether or when any of the probable
acquisitions reflected in the unaudited pro forma consolidated financial data
will be consummated.
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Balance Sheet
Adjustments for
Acquisitions
Pinnacle Completed Adjustments
Holdings Subsequent for Probable Pro Forma
March 31, 1998 March 31, 1998 (a) Acquisitions (a) as Adjusted
-------------- ------------------ ---------------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ...................................... $ 3,319 $ -- $ -- $ 3,319
Accounts receivable ............................................ 1,956 -- -- 1,956
Prepaid expenses and other current
assets ....................................................... 2,627 -- -- 2,627
--------- --------- --------- ---------
Total current assets ..................................... 7,902 -- -- 7,902
Restricted cash ................................................ 60 -- -- 60
Tower assets, net .............................................. 231,856 30,155 7,846 269,857
Fixed assets, net .............................................. 1,602 -- -- 1,602
Land ........................................................... 11,120 -- -- 11,120
Other assets ................................................... 11,840 -- -- 11,840
--------- --------- --------- ---------
$ 264,880 $ 30,155 $ 7,846 $ 302,381
========= ========= ========= =========
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable ............................................... $ 4,550 $ -- $ -- $ 4,550
Accrued expenses ............................................... 2,891 -- -- 2,891
Deferred revenue ............................................... 1,338 -- -- 1,338
Current portion of long-term debt .............................. 322 -- -- 322
--------- --------- --------- ---------
Total current liabilities ........................................ 9,101 -- -- 9,101
Long-term debt ................................................... 233,439 30,155 7,846 271,440
Other liabilities ................................................ 93 -- -- 93
--------- --------- --------- ---------
242,633 30,155 7,846 280,634
--------- --------- --------- ---------
Redeemable Stock:
Class B common stock ............................................. 1,761 -- -- 1,761
Class D common stock ............................................. -- -- -- --
--------- --------- --------- ---------
1,761 -- -- 1,761
--------- --------- ---------
Stockholders' Equity
Common stock ..................................................... -- -- -- --
Additional paid in capital ....................................... 35,031 -- -- 35,031
Accumulated deficit .............................................. (15,045) -- -- (15,045)
--------- --------- --------- ---------
Total stockholders' equity ............................... 19,986 -- -- 19,986
--------- --------- --------- ---------
$ 264,380 $ 30,155 $ 7,846 $ 302,381
========= ========= ========= =========
</TABLE>
38
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
<TABLE>
<CAPTION>
Adjustments
for Adjustments
Pinnacle Acquisitions Adjustments for other Adjustments
Holdings completed for Southern Acquisitions for Probable Pro Forma Adjustments Pro Forma
December 31, during Towers completed Acquisi- for for Issuance as
1997 1997(b) Acquisition(c) in 1998(c) tions(g) Acquisitions of Notes Adjusted
------------ --------- -------------- ------------ ---------- ------------ ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tower rental
revenue .......... $ 12,881 $ 2,789 $ 6,247 $ 3,581 $ 632 $ 26,130 $ -- $ 26,130
Tower operating
expenses excluding
depreciation and
amortization ..... 2,633 558 1,058 573 168 4,990 -- 4,990
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit
excluding
depreciation and
amortization ..... 10,248 2,231 5,189 3,008 464 21,140 -- 21,140
Other expenses:
General and
administrative ... 1,385 293 90 -- -- 1,768 -- 1,768
Corporate
development ...... 3,772 -- -- -- -- 3,772 -- 3,772
Depreciation and
amortization ..... 6,627 2,423 5,730 3,136 523 18,439 -- 18,439
--------- --------- --------- --------- --------- --------- --------- ---------
11,784 2,716 5,820 3,136 523 23,979 -- 23,979
Income (loss) from
operations ....... (1,536) (485) (631) (128) (59) (2,839) -- (2,839)
Interest expense ... 6,925 3,089 6,795 3,998 667 21,474 4,874(h) 26,348
--------- --------- --------- --------- --------- --------- --------- ---------
Net loss ... $ (8,461) $ (3,574) $ (7,426) $ (4,126) $ (726) $ (24,313) $ (4,874) $ (29,187)
========= ========= ========= ========= ========= ========= ========= =========
Net loss per common
share ............ $ (27.28) $ (94.12)
========= =========
Weighted average
number of common
shares
outstanding ...... $ 310,122 $ 310,122
========= =========
<CAPTION>
Adjustments
for Acquisitions Adjustments for
Pinnacle completed during Adjustments Acquisitions
Holdings the three for Southern Completed Adjustments Pro Forma
for the three months ended Towers Subsequent to for Probable for Adjustments Pro Forma
months ended March 31, Acquisi- March 31, Acquisi- Acquisi- for Issuance as
March 31, 1998 1998 (b) tion(d) 1998 (f) tions(g) tions of Notes Adjusted
-------------- --------------- ---------- ------------- ---------- -------- ------------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tower rental
revenue............ $ 5,373 $ 94 $ 1,041 $ 553 $ 158 $ 7,219 $ -- $ 7,219
Tower operating
expenses excluding
depreciation and
amortization....... 1,043 19 176 104 42 1,384 -- 1,384
--------- -------- -------- -------- -------- --------- ------- ---------
Gross profit excluding
depreciation and
amortization....... 4,330 75 865 449 116 5,835 -- 5,835
Other expenses:
General and
administrative..... 298 -- 15 -- -- 313 -- 313
Corporate
development........ 1,289 -- -- -- -- 1,289 -- 1,289
Depreciation and
amortization....... 2,951 87 955 503 131 4,627 -- 4,627
--------- -------- -------- -------- -------- --------- ------- ---------
4,538 87 970 503 131 6,229 -- 6,229
Loss from operations. (208) (12) (105) (54) (15) (394) -- (394)
Interest expense..... 3,103 113 1,133 641 167 5,157 (2,590) 5,274
--------- -------- -------- -------- -------- --------- ------- ---------
Amortization of
original issue
discount........... 611 -- -- -- -- 611 3,320 3,932
--------- -------- -------- -------- -------- --------- ------- ---------
Net loss..... $ (3,922) $ (125) $ (1,238) $ (695) $ (182) $ (6,162) $ (730) $ (6,892)
========= ======== ======== ======== ======== ========= ======= =========
Net loss per share... $ (11.58) $ (20.33)
========= =========
Weighted average
number of common
shares outstanding.. 338,608 338,608
========= =========
</TABLE>
39
<PAGE>
Notes to Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands)
(a) Reflects the acquisition of tower assets from (i) 26 acquisitions of an
aggregate of 46 towers as of June 9, 1998, each of which acquisitions
are individually immaterial (aggregate purchase price of $30.2 million
includes $0.7 million of related fees and expenses; purchase price was
paid in cash, obtained from debt) and (ii) 11 acquisitions pending as of
June 9, 1998 for an aggregate of 33 towers (for which the Company has
obtained letters of intent and are considered probable), each of which
acquisitions are individually immaterial (aggregate purchase price of
$7.8 million includes $0.4 million of related fees and expenses;
purchase price was paid in cash, obtained from debt).
(b) Reflects the historical, pre-acquisition results of operations (in
aggregate) for tower acquisitions for the period from January 1, 1997
through their respective date of acquisition.
<TABLE>
<CAPTION>
Other
Shore Tidewater Majestic Individually Pro Forma
for the period for the period for the period Immaterial Pro Forma Tower
ending 12/3/97 ending 7/31/97 ending 6/27/97 Acquisitions Adjustments Operations
-------------- -------------- -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tower rental revenues ...................... $ 667 $ 368 $ 192 $ 1,562 $ -- $ 2,789
Tower operating expenses, excluding
depreciation and amortization ...... 146 57 19 336 -- 558
------- ------- ------- ------- ------- -------
Gross profit excluding depreciation and
amortization ....................... 521 311 173 1,226 -- 2,231
General and administrative ................. 235 30 28 -- -- 293
Depreciation and amortization ............. 97 26 24 2,276 -- 2,423
------- ------- ------- ------- ------- -------
Income/(loss) from operations .............. 189 255 121 (1,050) -- (485)
Interest expense ........................... 198 14 6 2,871 -- 3,089
Income tax expense (benefit)................ (22) -- 10 -- 12 --
------- ------- ------- ------- ------- -------
Net income (loss) .......................... $ 13 $ 241 $ 105 $(3,921) $ (12) $(3,574)
======= ======= ======= ======= ======= =======
</TABLE>
(c) Reflects the historical operating results of Southern Towers plus
the pro forma effect of tower rental revenue, related operating expenses and
tower depreciation related to the lease of certain tower facilities by Southern
Communications and its affiliates (as set forth in the underlying purchase
agreement), assuming the transaction was completed as of January 1, 1997 as it
relates to statement of operations data.
<TABLE>
<CAPTION>
Southern
for the period Pro Forma
ending 12/31/97 Adjustments(1) Southern
--------------- -------------- ---------
<S> <C> <C> <C>
Tower rental revenues........................................................ $ 1,017 $ 5,230 $ 6,247
Tower operating expenses, excluding depreciation and amortization............ 877 181 1,058
--------------- ---------------- ------------
Gross profit excluding depreciation and amortization......................... 140 5,049 5,189
General and administration................................................... 90 -- 90
Depreciation and amortization................................................ 1,947 3,783 5,730
--------------- ---------------- ------------
Income/(loss) from operations................................................ (1,897) 1,266 (631)
Interest expense............................................................. -- 6,795 6,795
--------------- ---------------- ------------
Net loss..................................................................... $ (1,897) $ (5,529) $ (7,426)
=============== ================ ============
</TABLE>
40
<PAGE>
(1) Reflects increased revenue for lease agreements with Southern
Communications and its affiliates (as set forth in the underlying
purchase agreement), related increases to operating costs and
depreciation, increased expense associated with debt used to fund
the acquisition.
(d) Reflects the pro forma, pre-acquisition operating results of Southern
Towers, assuming the transaction was completed as of January 1, 1997.
(e) Reflects the aggregate adjustment to results of operations for 40
separate acquisitions of an aggregate 85 towers completed from January
1, 1998 through June 9, 1998, other than the Southern Towers
Acquisition, each of which acquisitions were individually immaterial,
assuming such transactions were completed as of January 1, 1997.
(f) Reflects the aggregate adjustment to results of operations for 26
separate acquisitions of an aggregate 46 towers completed from April 1,
1998 through June, 1998, each of which acquisitions were individually
immaterial, assuming such transactions were completed as of January 1,
1997.
(g) Reflects the adjustments to results of operations in connection with 11
separate acquisitions pending as of June 9, 1998 of an aggregate of 33
towers, each of which acquisitions are individually immaterial, assuming
such transactions were completed as of January 1, 1997.
(h) Reflects net increase in expense as a result of the issuance of the debt
in connection with the Private Offering, at an interest rate that
reflects a 1.5% incremental increase, interest expense on incremental
borrowings of $8,675 and amortization of debt issuance costs of $6,944.
41
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data for the
period of inception (May 3, 1995) through December 31, 1995 and for each of the
two years ended December 31, 1996 and 1997 has been derived from the Company's
consolidated financial statements which have been audited by Price Waterhouse
LLP, certified public accountants, that are included elsewhere herein. The
unaudited pro forma consolidated financial data as of and for the year ended
December 31, 1997 and the selected historical and unaudited pro forma
consolidated financial data as of and for the three months ended March 31, 1997
and 1998 has been derived from the Company's unaudited consolidated financial
statements and the Unaudited Pro Forma Consolidated Financial Statements
contained elsewhere herein. The selected financial information should be read in
conjunction with the information contained in the Company's consolidated audited
financial statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operation," and "Unaudited Pro Forma
Consolidated Financial Statements" included elsewhere herein.
The following unaudited pro forma consolidated statement of operations
for the year ended December 31, 1997 and for the three months ended March 31,
1998, has been prepared to reflect the results of operations as if the
Transactions had been completed on January 1, 1997. The following unaudited pro
forma consolidated balance sheet for the three months ended March 31, 1998 has
been prepared to reflect the financial position of the Company as if the
Transactions had been completed on March 31, 1998.
<TABLE>
<CAPTION>
Period from
Inception
(May 3, 1995) Pro Forma Three Months Three Months
through Year Ended Year Ended as Adjusted Ended Ended
December 31, December 31, December 31, December 31, March 31, March 31,
1995 1996 1997 1997(a) 1997 1998
------------ ------------ ------------ ------------ ------------ ------------
(in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Tower rental revenue ............. $ 733 $ 4,842 $ 12,881 $ 26,130 $ 1,970 $ 5,373
Tower operating expenses,
excluding depreciation and
amortization ................... 181 1,135 2,633 4,990 337 1,043
-------- -------- -------- -------- -------- --------
Gross profit, excluding
depreciation and
amortization .................... 552 3,707 10,248 21,140 1,633 4,330
Other expenses:
General and
administrative(c) ............. 306 923 1,385 1,768 312 298
Corporate development(c) ....... 369 1,440 3,772 3,772 848 1,289
Depreciation and
amortization .................. 341 2,205 6,627 18,439 1,166 2,951
-------- -------- -------- -------- -------- --------
Loss from operations ............. (464) (861) (1,536) (2,839) (693) (208)
Interest expense ................. 181 1,155 6,925 26,348 856 3,103
Amortization of original
issue discount .................. -- -- -- -- -- 611
-------- -------- -------- -------- -------- --------
Net loss ......................... $ (645) $ (2,016) $ (8,461) $(29,187) $ (1,549) $ (3,922)
======== ======== ======== ======== ======== ========
Other Operating Data:
Tower Level Cash
Flow(d) ........................ $ 552 $ 3,707 $ 10,248 $ 21,140 $ 1,633 $ 4,330
Tower Level Cash Flow
Margin(e) ...................... 75.3% 76.6% 79.6% 80.9% 82.9% 80.6%
Adjusted EBITDA(d) ............... $ 246 $ 2,784 $ 8,863 $ 19,372 $ 1,321 $ 4,032
Adjusted EBITDA
Margin(e) ...................... 33.6% 57.5% 68.8% 74.1% 67.1% 75.0%
EBITDA(d) ........................ $ (123) $ 1,344 $ 5,091 $ 15,600 $ 473 $ 2,743
EBITDA Margin(e) ................. -- 27.8% 39.5% 59.7% 24.0% 51.1%
Ratio of earnings to fixed
charges(f) ..................... -- -- -- N/A -- --
Number of Towers:
Beginning of period............. 0 33 156 N/A 156 312
Towers acquired during the
period......................... 29 119 134 N/A 31 240
Towers constructed during the
period......................... 4 4 22 N/A 3 9
End of period............. 33 156 312 N/A 190 561
<CAPTION>
Pro Forma
as Adjusted
from Three
Months
March 31,
1998 (b)
---------
<S> <C>
Statement of Operations
Data:
Tower rental revenue ............. $ 7,219
Tower operating expenses,
excluding depreciation and
amortization ................... 1,384
--------
Gross profit, excluding
depreciation and amortization ... 5,835
Other expenses:
General and administrative(c) .. 313
Corporate development(c) ....... 1,289
Depreciation and amortization .. 4,627
--------
Loss from operations ............. (394)
Interest expense ................. 2,567
Amortization of original
issue discount .................. 3,931
--------
Net loss ......................... $ (6,892)
========
Other Operating Data:
Tower Level Cash
Flow(d) ........................ $ 5,835
Tower Level Cash Flow
Margin(e) ...................... 80.8%
Adjusted EBITDA(d) ............... $ 5,522
Adjusted EBITDA
Margin(e) ...................... 76.5%
EBITDA(d) ........................ $ 4,233
EBITDA Margin(e) ................. 58.6%
Ratio of earnings to
fixed charges(f) ............... --
Number of Towers:
Beginning of period............. 312
Towers acquired
during the period............... 319
Towers constructed
during the period............... 9
End of period............. 640
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
as Adjusted
December 31, March 31, March 31,
---------------------------------------------- -------------------------- -----------
1995 1996 1997 1997 1998 1998
------------- -------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents....... 31 47 1,694 - 3,319 3,319
Tower assets, net............... 11,551 48,327 127,946 64,427 231,856 269,857
Total assets.................... 14,573 55,566 143,178 73,130 264,380 302,381
Total debt...................... 6,124 30,422 120,582 48,957 233,761 271,762
Redeemable Stock: - - - - - -
Class B common stock............ 1,200 1,200 1,761 1,200 1,761 1,761
Class D common stock............ - - - - - -
Common stock...................... - - - - - -
Additional paid-in capital........ 7,051 24,881 25,876 24,881 35,031 35,031
Stock subscription receivable (180) - - - - -
Accumulated deficit............... (645) (2,661) (11,123) (4,211) (15,045) (15,045)
Stockholders' equity.............. 6,226 22,220 14,753 20,670 19,986 19,986
</TABLE>
Notes to Selected Historical and Unaudited Pro Forma Consolidated Financial
Statements
(a) Reflects historical amounts adjusted for the effects of the
Transactions (including the acquisitions of 85 other towers as of June 9, 1998
and the probable acquisition as of June 9, 1998 of 33 additional towers for
which the Company has obtained letters of intent), as further described in
"Unaudited Pro Forma Consolidated Financial Statements."
(b) Reflects historical amounts adjusted for the effects of the
Transactions (including the acquisitions of 85 other towers as of June 9, 1998
and the probable acquisition as of June 9, 1998 of 33 additional towers for
which the Company has obtained letters of intent), as further described in
"Unaudited Pro Forma Consolidated Financial Statements."
(c) "General and administrative" expenses represent those costs directly
related to the day-to-day management and operation of towers owned by the
Company. "Corporate development" expenses represent costs incurred in connection
with acquisitions and development of new business initiatives, consisting
primarily of allocated compensation, benefits and overhead costs that are not
directly related to the administration or management of existing towers.
(d) "Tower Level Cash Flow" is defined as tower rental revenue minus
tower operating expenses, excluding
43
<PAGE>
depreciation and amortization. "Adjusted EBITDA" represents loss from operations
before depreciation, amortization and corporate development expenses. "EBITDA"
represents loss from operations before depreciation and amortization. The
Company has included Tower Level Cash Flow, Adjusted EBITDA and EBITDA in Other
Operating Data because the Company believes such information may be useful to
certain investors in evaluating the Company's ability to service its debt. Tower
Level Cash Flow, Adjusted EBITDA and EBITDA should not be considered as an
alternative to Gross Profit, net loss or net cash provided by operating
activities (or any other measure of performance in accordance with generally
accepted accounting principles) as a measure of the Company's ability to meet
its cash needs.
(e) Represents Tower Level Cash Flow, Adjusted EBITDA and EBITDA each as
a percentage of tower rental revenue.
(f) As a result of the loss incurred in 1995, 1996 and 1997 and for the
three months ended March 31, 1997 and 1998, the Company was unable to fully
cover the indicated fixed charges. Earnings did not cover fixed charges by $645,
$2,016, $8,461, $1,549, $3,922 and $6,892 in 1995, 1996, 1997, for the three
months ended March 31, 1997 and 1998 and Pro Forma as Adjusted March 31, 1998.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company as of and for the period from inception (May 3, 1995)
through December 31, 1995, for each of the two years ended December 31, 1996 and
1997 and as of and for the three months ended March 31, 1997 and 1998. The
discussion should be read in conjunction with the Financial Statements of the
Company and the notes thereto included in this Private Offering. The statements
in this discussion regarding the wireless communications industry, the Company's
expectations regarding its future performance and other non-historical
statements in this discussion are forward-looking statements. These forward-
looking statements include numerous risks and uncertainties, as described in
"Risk Factors."
OVERVIEW
The Company acquires and constructs rental towers and leases space on these
towers to a broad base of wireless communications providers, operators of
private networks, government agencies and other customers. The Company's
objective is to acquire or construct clusters of rental towers in areas where
there is significant existing and expected continued growth in the demand for
rental towers by wireless communications providers. The Company seeks to obtain
a significant ownership position of tower assets in such areas and as a result,
it is able to offer "one-stop shopping" to wireless communications providers who
are deploying or expanding wireless communications networks.
Since commencing operations in May 1995, the Company has completed
acquisitions and builds as follows:
<TABLE>
<CAPTION>
PERIODS ENDED
------------------------------------
<S> <C> <C> <C> <C> <C>
12/31/95 12/31/96 12/31/97 6/9/98 TOTAL
-------- -------- -------- ------ -----
Number of acquisition transactions.................... 13 49 72 41 175
Number of towers acquired............................. 29 119 134 286 568
Number of towers built................................ 4 4 22 12 42
-------- -------- -------- ------ ---
Number of towers acquired or built during the period..
33 123 156 298 610
</TABLE>
Additionally, as of June 9, 1998, the Company had a contract or letter of
intent with respect to 11 proposed acquisitions consisting of 33 towers and has
identified numerous additional acquisition candidates and had 14 towers under
construction and in excess of 100 additional tower projects in various stages of
development.
The Company's Annualized Run Rate Revenue is calculated as of a given date by
annualizing the monthly rental rates then in effect for customer lease contracts
in force as of such date. The Company believes that growth in its Annualized Run
Rate Revenue is a meaningful indicator of its performance. As of June 9, 1998,
the Company's Annualized Run Rate Revenue was $28.0 million, without giving
effect to adjustments totalling $0.6 million in pro forma revenue from probable
acquisitions. At June 9, 1998, the Company's inventory of 610 towers had an
average Annualized Run Rate Revenue per tower of $45,830. The Company also
believes that "same tower" revenue growth on towers (measured by comparing the
Annualized Run Rate Revenue of the Company's towers at the end of a period to
the Annualized Run Rate Revenue for the same towers at the end of a prior
period), is an indication of the quality of the Company's towers and its ability
to generate incremental revenue on such towers. The Company experienced
aggregate "same tower" revenue growth on towers of 26.3% in 1997 over 1996.
The Company's growth since its inception has primarily been based upon the
acquisition of rental towers as well as the subsequent improvement of the
financial performance of the towers. The pace and magnitude of the
45
<PAGE>
Company's previous acquisitions may hinder meaningful period-to-period
comparisons of results.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of each statement of operations item to total tower rental revenue.
The results of operations are not necessarily indicative of results for any
future period. The following data should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this Private
Offering.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
PERIOD ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- ------- --------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Tower rental revenue.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Tower operating expenses, excluding depreciation 17.1% 19.4%
and amortization....................... 24.7% 23.4% 20.4%
Gross profit...................................... 75.3% 76.6% 79.6% 82.9% 80.6%
Expenses:
General and administrative........................ 41.7% 19.1% 10.8% 15.8% 5.5%
Corporate development............................. 50.3% 29.7% 29.3% 43.0% 24.0%
Depreciation and amortization..................... 46.5% 45.5% 51.4% 59.2% 54.9%
Loss from operations................................. (63.2%) (17.7%) (11.9%) (35.1%) (3.8%)
Interest expense..................................... 24.7% 23.9% 53.8% 43.5% 57.8%
Amortization of original issue discount.............. - - - - 11.4%
Net loss............................................. (87.9%) (41.6%) (65.7%) (78.6%) (73.0%)
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Tower rental revenue increased 172.7% to $5.4 million for the three month
period ended March 31, 1998 from $2.0 million for the three month period ended
March 31, 1997. This increase is attributable to the acquisition and
construction of 122 towers during the nine months ended December 31, 1997, the
results of which are included for the entire three month period ended March 31,
1998, plus the tower rental revenue contribution from the acquisition and
construction of 249 more towers during the three months ended March 31, 1998. In
addition, the increase is a result of expanded marketing efforts to increase the
number of customers per tower, as well as regular, contractual price escalations
for existing customers.
Tower operating expenses, excluding depreciation and amortization, which
consist primarily of costs relating to the ongoing maintenance of properties
such as air conditioning and grounds maintenance, ground lease expense,
utilities, property taxes and other direct costs of tower operation, increased
209.5% to $1.0 million for the three month period ended March 31, 1998 from $.3
million for the three months ended March 31, 1997. This increase is
attributable to the acquisition and construction of 122 towers during the nine
months ended December 31, 1997, the results of which are included for the entire
three month period ended March 31, 1998, plus the tower operating expenses
contribution from the acquisition and construction of 249 more towers during the
three months ended March 31, 1998. Tower operating expenses, excluding
depreciation and amortization, increased as a percentage of tower rental revenue
from 17.1% for the three month period ended March 31, 1997 to 19.4% for the
three month period ended March 31, 1998. This increase resulted primarily from
the acquisition on February 14, 1997 of a group of managed towers. Such towers'
revenues represented approximately 8.7% of total revenues for the three months
ended March 31, 1998, and their margins are at approximately 50% of revenues.
General and administrative expenses, which are expenses associated with
supporting the Company's day-to-day management of its existing properties and
primarily consist of employee compensation and related benefits costs,
46
<PAGE>
advertising, professional and consulting fees, office rent and related expenses
and travel costs, remained relatively constant for the three month period ended
March 31, 1998 and 1997 at $.3 million.
Corporate development expenses, which represent costs incurred in connection
with acquisitions and construction of new towers, increased 52.0% to $1.3
million for the three month period ended March 31, 1998 from $.8 million for the
three month period ended March 31, 1997. The increase in corporate development
expenses reflects the higher costs associated with the Company's expansion of
its acquisition and construction strategies. Corporate development expenses
decreased as a percentage of tower rental revenue from 43.0% for the three
months ended March 31, 1997 to 24.0% for the three months ended March 31, 1998
because of the incremental increase in tower rental revenue from the comparative
period in 1997 and economics resulting from such growth.
Interest expense increased 262.5% to $3.1 million for the three months ended
March 31, 1998 from $.9 million for the three months ended March 31, 1997. The
increase in interest expenses was attributable to increased borrowing associated
with the Company's acquisitions during the period.
1997 COMPARED TO 1996
Tower rental revenue increased 166.0% to $12.9 million in 1997 from $4.8
million in 1996. This increase is attributable to the acquisition and
construction of 156 towers during 1997 and a result of expanded marketing
efforts to increase the number of customers per tower, as well as regular,
contractual price escalations for existing customers.
Tower operating expenses, excluding depreciation and amortization increased
132.0% to $2.6 million in 1997 from $1.1 million in 1996. This increase reflects
the addition of 156 towers during the year. Tower operating expenses, excluding
depreciation and amortization, decreased as a percentage of tower rental revenue
from 23.4% in 1996 to 20.4% in 1997, reflecting operating efficiencies gained on
existing towers as well as on new towers acquired or constructed.
General and administrative expenses increased 50.1% to $1.4 million in 1997
from $0.9 million in 1996. General and administrative costs decreased as a
percentage of tower rental revenue from 19.1% in 1996 as compared to 10.8% in
1997 because of lower overhead costs as a percentage of tower rental revenue.
Corporate development expenses increased 161.9% to $3.8 million in 1997 from
$1.4 million in 1996. The increase in corporate development expenses reflects
the higher costs associated with the Company's expansion of its acquisition and
construction strategies. Corporate development expenses remained relatively
constant as a percentage of tower rental revenue at 29.3% in 1997 compared to
29.7% in 1996.
Interest expense increased 499.6% to $6.9 million in 1997 from $1.2 million
in 1996. The increase in interest expense was attributable to increased
borrowing associated with the Company's acquisitions during the period.
1996 COMPARED TO 1995
The Company commenced operations on May 3, 1995. The results described herein
reflect the effect of a full year of operations in 1996 as compared to
approximately eight months of activity for the period from inception (May 3,
1995) through December 31, 1995.
Tower rental revenue increased 560.6% to $4.8 million in 1996 from $0.7
million in 1995. This increase is attributable to the acquisition and
construction of 123 towers during 1996 and a result of expanded marketing
efforts to increase the number of customers per tower, as well as regular,
contractual price escalations for existing customers.
47
<PAGE>
Tower operating expenses, excluding depreciation and amortization,
increased 527.1% to $1.1 million in 1996 from $0.2 million in 1995. This
increase is primarily attributable to the effect of a full year of operations in
1996 versus eight months in 1995 and the acquisition and construction of 123
towers. Tower operating expenses, excluding depreciation and amortization,
decreased as a percentage of tower rental revenue from 24.7% in 1995 to 23.4% in
1996. The decrease as a percentage of tower rental revenue was due primarily to
operating efficiencies resulting from a significantly increased number of
towers.
General and administrative expenses increased 201.6% to $0.9 million in
1996 from $0.3 million in 1995. This increase is attributable to the addition of
support personnel related to the Company's acquisition and construction efforts
during the period. General and administrative costs decreased as a percentage of
tower rental revenue from 41.7% in 1995 to 19.1% in 1996. The decrease as a
percentage of tower rental revenue was due to lower overhead costs as a
percentage of tower rental revenue.
Corporate development expenses increased 290.2% to $1.4 million in 1996
from $0.4 million in 1995. The increase in corporate development expenses
reflects the higher costs associated with the Company's expansion of its
acquisition and construction strategies. Corporate development expenses
decreased as a percentage of tower rental revenue from 50.3% in 1995 to 29.7% in
1996.
Interest expense increased 538.1% to $1.2 million in 1996 from $0.2 million
in 1995. This increase was attributable to increased borrowing associated with
the Company's acquisitions during the period.
Liquidity and Capital Resources
As of March 31, 1998, the Company had consolidated cash and cash
equivalents of $3.3 million, consolidated long-term debt of $233.8 million and
consolidated stockholders' equity of $20.0 million.
The Company has historically funded its operations, acquisitions and
construction of towers with proceeds from equity contributions, bank borrowings
and cash flow from operations. The Company had a working capital deficit of $1.2
million, $12.8 million and $1.5 million as of March 31, 1998, December 31, 1997
and 1996, respectively. Excluding the current portion of long-term debt, current
liabilities exceeded current assets by $.9 million, $1.7 million and $0.8
million as of March 31, 1998, December 31, 1997 and 1996, respectively. The
Company's ratio of total debt to stockholders' equity (excluding redeemable
stock) was 11.70 to 1 at March 31, 1998, 8.17 to 1 at December 31, 1997 and 1.37
to 1 as of December 31, 1996.
Capital expenditures for the three months ended March 31, 1998 were
$111.0 million, compared to $17.7 million in the comparable 1997 period. Capital
expenditures were $89.4 million, $42.8 million and $12.7 million for the periods
ended December 31, 1997, 1996 and 1995, respectively.
At March 31, 1998, $15.7 million of borrowings were outstanding under the
Senior Credit Facility. Additionally, the Company had outstanding letters of
credit issued by a bank totalling $15.2 million, which secured certain notes to
sellers. Advances under the Senior Credit Facility are limited to a borrowing
base, which is based on the Company's Annualized EBITDA (as defined in the
Senior Credit Facility). At March 31, 1998, advances under the Senior Credit
Facility subject to the base rate (as defined in the Senior Credit Facility)
bore interest, payable in quarterly installments, at the base rate plus a margin
ranging from 0% to 1.75%, and advances subject to LIBOR bore interest, payable
in installments at periods no greater than three months, at LIBOR plus a margin,
ranging from 0% to 2.875%.
On March 4, 1998, the Company amended the Senior Credit Facility to provide
for borrowings of up to $200.0 million. As a result of such amendment, advances
under the Senior Credit Facility bore interest at the Company's option at either
LIBOR plus a margin of up to 2.75% or the base rate plus a margin of up to
1.75%. Upon the
48
<PAGE>
closing of the Private Offering, the Senior Credit Facility was amended to
reduce the commitment amount to $150.0 million and to change the maximum LIBOR
margin to 2.875%. Upon the closing of the Private Offering, outstanding
borrowings and availability under the Senior Credit Facility were approximately
$15.7 million and $119.1 million, respectively, after giving effect to (i)
repayment of $158.6 million of outstanding borrowings with a portion of the
proceeds of the Private Offering, (ii) a reduction of the Senior Credit Facility
to a commitment of $150.0 million and (iii) consideration of $15.2 million of
outstanding letters of credit which reduce availability under the Senior Credit
Facility.
In September 1997, the Company entered into the $20.0 million Subordinated
Term Loan. Interest under this agreement was at a rate equivalent to LIBOR plus
a margin (as defined in the agreement). The applicable margin under the
agreement was 6.0%. The Company utilized the proceeds of this loan to repay
bridge loans which were outstanding from its principle investor and to fund
ongoing tower acquisitions. The Subordinated Term Loan was repaid in full and
retired with proceeds from the Private Offering.
In February 1998, the Company entered into the ABRY Bridge Loan with ABRY
II whereby the Company borrowed $12.5 million. Amounts outstanding under the
ABRY Bridge Loan bore interest at the rate of 9.0% per annum. Interest and
principal under the ABRY Bridge Loan were payable within one year from the date
of the related borrowing. The ABRY Bridge Loan was repaid in full and retired
with proceeds from the Private Offering. During April 1998, the Company borrowed
$2.5 million under this Bridge Loan to partially fund acquisitions.
The Company has entered into the Capital Contribution Agreement with ABRY
II, pursuant to which ABRY II has agreed to make equity contributions to the
Company, up to an aggregate capital contribution of $50.0 million, in an amount
equal to (i) 100% of the Company's general and administrative expenses and
corporate development, and (ii) the amount necessary to cure any payment or
financial covenant default under the Senior Credit Facility. As of March 31,
1998, ABRY II had contributed $36.0 million of the aggregate $50.0 million
capital contribution commitment. Additionally, ABRY II is the guarantor of a
note of the Company payable to a former tower owner in an amount totaling $3.9
million.
The Company uses seller financing in some of its tower acquisitions. The
Company had outstanding notes that it issued to sellers bearing interest at 8.5%
to 13.0% per annum in the aggregate amount of $17.7 million at March 31, 1998
and $28.6 million at December 31, 1997. Of the amount outstanding at
December 31, 1997, approximately $10.4 million was repaid through borrowings
under the Senior Credit Facility in January 1998.
The Company used the net proceeds from the Private Offering to repay a
portion of its outstanding borrowings under the Senior Credit Facility, to repay
in full and retire the Subordinated Term Loan and the ABRY Bridge Loan and to
make a payment to the holders of its Class B common stock in settlement of a
distribution preference on such stock. See "Use of Proceeds".
As of June 9, 1998, the Company and its subsidiaries expected to use the
$79.0 million of availability under the Senior Credit Facility to fund the
execution of the Company's business plan following the Private Offering. The
Company's plan anticipates substantial capital expenditures in connection with
the ongoing acquisition and construction of towers. In the event that the
Company needs additional debt or equity financing in the future, there can be no
assurance that such financing will be commercially available or permitted by the
terms of the Company's existing indebtedness. To the extent that the Company is
unable to finance future capital expenditures, it will be unable to achieve its
current business strategy.
Prior to March 15, 2003, the Issuer's interest expense on the Notes will be
comprised solely of the accretion of original issue discount. Thereafter, the
Notes will require annual cash interest payments of $32.5 million. In addition,
the Senior Credit Facility will require periodic interest and principal payments
on amounts borrowed thereunder. The Company's ability to make scheduled payments
of principal of, or to pay interest on, its debt obligations, and its ability to
refinance any such debt obligations (including the Notes), will depend on its
future
49
<PAGE>
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond its control. As discussed above, the Company's business strategy
contemplates substantial capital expenditures in connection with the execution
of its business plan. There can be no assurance that the Company will generate
sufficient cash flow from future operations, that anticipated revenue growth
will be realized or that future borrowings or equity contributions will be
available in an amount sufficient to service the Company's indebtedness and make
anticipated capital expenditures. The Company anticipates that it may need to
refinance all or a portion of its indebtedness (including the Notes) on or prior
to its scheduled maturity. There can be no assurance that the Company will be
able to effect any required refinancing of its indebtedness (including the
Notes) on commercially reasonable terms or at all. See "Risk Factors--
Substantial Indebtedness; Ability to Service Indebtedness".
Inflation
Because of the relatively low levels of inflation experienced in 1995,
1996, 1997 and as of March 31, 1998, inflation did not have a significant effect
on the Company's results in such years.
Year 2000
The Company 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 the Company's current information systems because its software is
either already Year 2000 compliant or required changes are not expected to be
material. Based on the nature of the Company's business, the Company 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, the Company
does not anticipate that incremental expenditures to address Year 2000
compliance will be material to the Company's liquidity, financial position or
results of operations over the next few years.
50
<PAGE>
BUSINESS
Company Background
As a result of rapid developments in the wireless communications industry,
the Company's founders recognized the opportunity to consolidate strategically
located wireless communications towers and enhance rental revenue on those
towers. The Company's founders developed their strategy of acquiring clusters of
towers that would provide strong positions in selected, high growth markets in
the Southeastern United States. To date, the Company has acquired 568 towers in
175 separate acquisitions and has built an additional 42 towers in 13 states. As
a result of these efforts, the Company believes it has established itself as the
leading rental tower owner in the Southeastern United States.
The Company's objective is to create substantial value from its position as
the leading rental tower owner in the Southeastern United States. In order to
achieve its objective, the Company has designed and implemented a three-tiered
growth strategy of (i) capitalizing on the operating leverage of its business by
aggressively marketing available rental space on its towers, (ii) rapidly
acquiring towers in key markets and (iii) implementing a selective tower
construction program.
The Company has rapidly executed its strategy and today owns a significant
portfolio of high quality towers that generates increasing revenue and cash
flow. The Company believes that its portfolio of strategically located rental
towers exhibits the following economic characteristics: (i) high absolute and
incremental margins; (ii) stable and predictable cash flow; (iii) a diversified
customer base; (iv) high barriers to entry; (v) low customer churn; and (vi)
attractive underlying growth. The Company anticipates that this portfolio
provides the core asset base from which it will continue the ongoing strategy to
acquire and construct clusters of towers in attractive, high growth markets.
Further, the Company believes it has created a stable and long-term stream of
tower rental revenue that would continue to be generated even if the Company
were to discontinue pursuing its aggressive expansion strategy.
The Company is designed to be an efficient consolidator and operator of
rental towers. The Company has created a highly focused, structured organization
in which significant resources are devoted to acquiring or constructing
strategically located sites supported by customer demand. In addition, the
Company has the capability to "instantly integrate" new towers and initiate
sales and marketing efforts immediately following the acquisition or
construction of new towers.
The success of the Company's focused efforts is illustrated by its
financial results. The Company believes that its "Annualized Run Rate Revenue",
calculated as of a given date by annualizing the monthly rental rates then in
effect for customer lease contracts in force as of such date, is a significant
indicator of its performance. As of June 9, 1998, the Company's Annualized Run
Rate Revenue was $28.0 million, without giving effect to adjustments totaling
$.2 million in pro forma revenue from probable acquisitions, and, based upon the
Company's current inventory of 610 towers, average Annualized Run Rate Revenue
per tower of $45,830. The Company also believes that "same tower" revenue growth
(measured by comparing the Annualized Run Rate Revenue of the Company's towers
at the end of a period to the Annualized Run Rate Revenue for the same towers at
the end of a prior period), is an indication of the quality of the Company's
towers and its ability to generate incremental revenue on such towers. The
Company experienced aggregate "same tower" revenue growth of 26.3% in 1997 over
1996.
Industry Background
Communications towers are primary infrastructure components for wireless
communications services such as cellular, paging, PCS, SMR, wireless data
transmission and radio and television broadcasting. Wireless communications
companies require specialized wireless transmission networks in order to provide
service to their
51
<PAGE>
customers. Each of these networks is configured specifically to meet the
coverage requirements of the particular carrier and includes transmission
equipment such as antennae, transmitters and receivers placed at various
locations throughout the covered area. These locations, or communications sites,
are critical to the operation of wireless communications networks and consist of
towers, rooftops and other structures upon which such equipment is placed.
Wireless communications providers design their network and select their
communications sites in order to optimize available frequencies relative to
their projected usage patterns, topography and service requirements.
The Wireless Communications Industry
The wireless communications industry is growing rapidly as (i) consumers
become increasingly aware of the uses and benefits of wireless communications
services, (ii) the costs of wireless communications services decline and
(iii) new wireless communications technologies continue to be developed. Changes
in U.S. federal regulatory policy have led to a significant increase in the
number of competitors in the wireless communications industry, most recently
through the auction of radio spectrum for PCS. This competition, combined with
an increasing reliance on wireless communications services by consumers and
businesses, has increased demand for higher quality networks characterized by
uninterrupted service and improved coverage. As new carriers build out their
networks and existing carriers upgrade and expand their networks to maintain
their competitiveness, the demand for communications sites has increased
dramatically.
The wireless communications industry is comprised of the following
segments:
. Cellular--currently each market in the United States has two
cellular operators. Cellular networks consist of numerous geographic
"cells" in which frequencies are reused every few miles. Each cell
includes a communications site which includes transmission equipment
generally residing on a wireless communications tower. According to
industry publications, as of June 30, 1997 there were 48.7 million
wireless telephone subscribers in the United States, representing a
27.5% growth rate over the prior 12 months, and an overall penetration
of approximately 18.0%. In addition, as the cellular market migrates
from an analog based transmission technology to a digital based
transmission technology, demand is expected to increase as prices
decline. In order to increase network capacity and improve service
quality, cellular carriers are re-engineering their networks to have
smaller and more numerous cells. While historically cellular operators
have generally built their own towers, the growing demand for tower
space and restrictions on new tower construction are making rental
towers an increasingly important component of their transmission
networks.
The following illustrates the growth in the United States' wireless
communications industry from 1987 to 1996.
<TABLE>
<CAPTION>
Number of Subscribers
Year (in millions)
---- ---------------------
<S> <C>
1987 .9
1988 1.6
1989 2.7
1990 4.4
1991 6.4
1992 8.9
1993 13.1
1994 19.3
1995 28.2
1996 38.2
</TABLE>
52
<PAGE>
Source: CTIA Reflects Cellular, ESMR, and PCS Subscribers
. PCS--PCS is an emerging wireless communications technology
competing with cellular that offers a digital signal that is
clearer and offers greater privacy than typical analog cellular
systems. Up to six PCS licenses have been issued by the FCC in
each market (versus two for cellular). PCS system construction
began in 1995, and due to their small cell size, PCS companies
are expected to be substantial users of tower space. According to
industry publications, there were approximately 2.2 million PCS
subscribers in the United States as of December 31, 1997. The
Personal Communications Industry Association ("PCIA") estimates
that on December 31, 1997 there were approximately 45,000
antennae sites (cellular and PCS) in the United States. PCIA
estimates that this number will increase by approximately 100,000
additional antennae sites over the next 10 years. While some of
these sites may use existing towers, it is expected that a large
number of new towers will be required for the deployment of PCS
networks. As an example, PrimeCo, Aerial and Sprint PCS are
currently building out PCS systems in the Company's target region
and are co-locating their equipment on many of the Company's
rental towers, as opposed to constructing their own towers.
. Paging--Paging has also enjoyed dramatic growth over the last
ten years. According to industry publications, there were 49.8
million pagers at the end of 1997, representing an average annual
growth rate of 26.8% since 1992. This growth was spurred by
declining prices, wider coverage and increasing expansion into
the consumer market. While network construction by the paging
industry appears to be reaching a certain level of maturity, the
increased number of subscribers is expected to require
utilization of additional channels and related transmitter
equipment. Utilization of these additional channels will result
in additional revenue on rental towers. Paging companies have
historically relied heavily on rental towers and are expected to
continue to do so.
. SMR / ESMR--SMR companies provide two-way radio communications
for primarily commercial purposes, especially fleet vehicles.
Two-way private business radio is used primarily for businesses
engaged in dispatching personnel or equipment to work sites and
includes construction and trucking companies, courier services,
hospitals and taxicabs. Each service provider holds an FCC radio
license that allows it to transmit over a particular frequency,
and most lease space on a local tower for transmission purposes.
As a result of advances in digital technology, some wireless
communications providers have begun to design or modify networks
that utilize SMR frequencies by deploying advanced digital
technologies called ESMR. ESMR increases the capacity of radio
networks allowing more efficient use of allocated frequencies.
These efficiencies and improvements allow ESMR to provide
wireless telephone service that can compete more effectively with
cellular and PCS. As more commercial users are attracted to such
enhanced services, the demand for tower space to support such
usage also continues to increase. Nextel and Southern
Communications are the leading ESMR providers in the United
States and are significant customers of the Company.
. Government Agencies--Federal, state and local government
agencies are major users of wireless communications services and
typically operate their own dedicated frequencies. These
government agencies, in certain circumstances, often find it
easier to lease rather than own tower space. As new technologies
are developed in law enforcement, emergency and other government
services, various municipalities and government agencies are
becoming more significant users of wireless communications
53
<PAGE>
services. Examples of government customers of tower space include
the Federal Bureau of Investigation, U.S. Coast Guard, U.S.
Secret Service and various municipal agencies.
. Broadcast And Wireless Cable--Broadcasters transmit AM/FM
radio signals and VHF and UHF television signals in order to
obtain the broadest, clearest coverage available. A broadcast
station's coverage is one of the primary factors that influences
the station's ability to attract advertising revenue. Once a
tower location is chosen, broadcasters rarely change sites due to
complex regulatory requirements, high switching costs and
business disruption. The U.S. broadcasting industry is generally
mature with respect to demand for transmission tower capacity.
However, a significant increase in demand for tower capacity may
occur when digital spectrum is used to deliver high definition
television ("HDTV") or digital multi-casting, i.e., multiple
"normal" definition television channels. In addition, wireless
cable television is being developed and positioned as a
potentially more accessible alternative to traditional cable
television. Wireless cable operates by receiving programming from
a satellite which is retransmitted from an antenna on a tower to
a receiving antenna on a subscriber's residence. Several wireless
cable companies are now in the process of constructing their
systems in the Company's region.
. Emerging Technologies and Availability of FCC Spectrum--
Several new entrants in the wireless communications industry are
emerging as new technology becomes available and additional radio
spectrum is authorized for use by the FCC. For example, Local
Multipoint Distribution Service ("LMDS"), has diverse
applications including wireless video, telephone, paging and
wireless local loop. Wireless local loop ("WLL") systems are seen
as an alternative to traditional copper and fiber-optic based
services with the potential to be implemented more quickly and at
lower costs than fixed wireline services. WLL systems provide
non-mobile telecommunications services to users by transmitting
voice messages over radio waves from the public switched network
to the location of the fixed telephone. The installation of WLL
systems minimizes the need to obtain right-of-ways and excavate
existing roads and infrastructure in order to install or upgrade
a local telephone system serving non-mobile telephones. Also,
wireless data transmission is widely viewed as being in its
infancy as the development of Personal Digital Assistants and a
variety of applications are being developed. In addition to
private networks, several companies are building national
wireless data transmission networks including Motorola's EMBARC
system, Nationwide Wireless Network (an affiliate of MTEL), RAM
Mobile Data (10% owned by BellSouth), and Racotek's and Geotek's
SMR based data networks. Automatic Vehicle Monitoring/Location
and Monitoring Services ("AVM/LMS") systems generally require a
minimum of three towers to band a coverage area. The Company
believes that AVM/LMS service providers will use the band to
provide fleet tracking, rail and container transportation
monitoring, security and access control, etc. Other new
developments including the auction of 220 and 450 Megahertz
spectrum are expected to increase available radio spectrum for
commercial applications.
These recent developments in the wireless communications industry indicate
continuing opportunities for the tower rental industry. Industry analysts
project rapid and continued growth in the major wireless communications industry
segments and these projections all share a common outcome: more equipment needs
to be installed on a limited supply of towers.
54
<PAGE>
The Tower Rental Industry
A typical tower consists of a compound enclosing the tower and an equipment
shelter which houses a variety of transmitting, receiving and switching
equipment. There are three types of towers: (i) guyed; (ii) self-supporting
lattice; and (iii) self-supporting monopole. Guyed towers gain their support
capacity from a series of cables attaching separate levels of the tower to
anchor foundations in the ground. A lattice model is usually tapered from the
bottom up and can have three or four legs. A monopole is a tubular structure
that typically accommodates fewer customers and may be used as a single purpose
tower or in locations where there are space constraints or a need to address
aesthetic concerns. Self-supporting towers typically range in height from 50-200
feet for monopoles and up to 1,000 feet for lattices, while guyed towers can
reach a height of up to 2,000 feet. Different wireless communications
technologies require that equipment be located at various heights to optimize
signal propagation. The Company's current tower inventory is comprised of 494
guyed, 90 self-supporting lattices and 12 monopoles.
Wireless communications equipment can also be placed on building rooftops.
Traditionally, rooftop sites have been common in urban downtown areas where tall
buildings are available and multiple communications sites are required because
of high wireless traffic density. Today, rooftop sites are used less for certain
types of customers as current technology requirements cause an increasing number
of providers to place antennae lower on buildings.
The value of a rental tower is principally determined by the desirability
of its location to customers and the amount of customer equipment installations
that it can support. Several customers may share one tower through "vertical
separation" with each type of customer on a different level. While many existing
towers were not originally built with the capacity to support multiple
customers, these towers can often be upgraded to support additional equipment.
Emergence of the Tower Rental Industry. Historically, wireless
communications providers and broadcasters built, owned and operated their own
towers, which were typically constructed and designed for their exclusive use.
As recent technologies emerged, the original equipment on many of these towers
became obsolete, resulting in these towers becoming available for other uses,
and in some cases, for acquisition . For example, fiber optic cables have
largely replaced transmission traffic traditionally carried by wireless
microwave networks. The paging and SMR industries were traditionally owned by
local or regional companies which constructed their own networks and
transmission towers. As these industries consolidated over the past ten years,
the acquiring companies typically purchased the radio licenses and subscriber
leases and entered into lease agreements with the original tower owner. Wireless
communications providers today are generally more focused on developing their
subscriber base and relatively less focused on building and owning tower
networks. An opportunity to acquire towers arose as a result of these
developments.
During the mid-to-late 1980s, a number of independent tower owners began
to emerge, marking the beginning of the tower rental industry. These independent
tower owners focused on owning and managing towers which could serve multiple
customers. The Company believes the majority of these tower operators were
individuals with a small number of local rental towers offering very limited
coverage areas. In the last three years, several larger independent tower owners
have emerged as demand for wireless communications services continued to grow
and as additional high frequency licenses were awarded for new wireless
communications services (including PCS, narrowband paging and LMDS) each
requiring networks with extensive tower infrastructure. As the demand for towers
has been increasing, there has been a growing trend by municipalities to slow
the proliferation of towers. These trends have contributed to a growing need for
towers that can accommodate co-location of wireless communications providers. In
this regard, an opportunity to acquire towers and lease space to multiple
wireless communications providers was created.
Ownership of rental towers in many parts of the United States remains
highly fragmented. Only a few
55
<PAGE>
independent tower owners have accumulated a large number of towers and the
Company believes it is the only one to achieve a consolidated position in the
Southeastern United States. The pace of consolidation has begun to accelerate as
larger independent owners acquire small local owners in certain regions. In
individual markets that are consolidated, the consolidating owners have created
formidable competition for new potential rental tower owners.
The Pinnacle Approach to the Tower Rental Industry
The Company is the leading provider of wireless communications rental tower
space in the Southeastern United States. Since commencing operations
approximately three years ago, as of June 9, 1998, the Company has completed 175
acquisitions through which it has acquired 568 towers within the Southeastern
United States and has constructed an additional 42 towers in such high growth
markets as Orlando, Atlanta, Birmingham and Tampa and believes it is well
positioned to continue to capitalize on the rapid consolidation of the highly
fragmented tower rental industry.
The Company leases tower space to its customers and receives rental
payments under tower leases that generally range in duration from three to five
years. In addition, a majority of the Company's leases provide for scheduled
minimum rent increases of the greater of a specified percentage (which typically
ranges from 3-5%) or the change for the relevant period in the CPI. The Company
experiences negligible customer churn. The Company has a diversified base of
over 724 customers, only one of which accounts for more than 5% of the Company's
total revenue. The Company's customers are a broad base of wireless
communications providers, operators of private networks and government agencies
that include Nextel, Sprint PCS, Motorola, PageNet, BellSouth Mobility, PrimeCo,
AT&T Wireless, Southern Communications, Georgia Power, Alabama Power, U.S. Coast
Guard, Internal Revenue Service, Federal Bureau of Investigation and Bureau of
Alcohol, Tobacco & Firearms.
The Company has rapidly executed its strategy and today owns a significant
portfolio of high quality towers that generates increasing revenue and cash
flow. The Company believes that its portfolio of strategically located rental
towers exhibits the following economic characteristics: (i) high absolute and
incremental margins; (ii) stable and predictable cash flow; (iii) a diversified
customer base; (iv) high barriers to entry; (v) low customer churn; and (vi)
attractive underlying growth. The Company anticipates that this portfolio
provides the core asset base from which it will continue the ongoing strategy to
acquire and construct clusters of towers in attractive, high growth markets.
Further, the Company believes it has created a stable and long-term stream of
tower rental revenue that would continue to be generated even if the Company
were to discontinue pursuing its aggressive expansion strategy.
The Company has established a strong market position throughout the
Southeastern United States and continues to execute its strategy through both
the acquisition and construction of rental towers. Upon completing an
acquisition or construction of a new tower, the Company attempts to enhance its
financial performance through the application of aggressive marketing techniques
and, in the case of acquisitions, through improved operational and engineering
management. All of the Company's functional business areas participate in the
assessment of all potential acquisition and construction projects and are
organized with a goal of rapidly and effectively integrating additional towers
into the Company's operations.
Unlike several industry competitors, the Company has not focused on the
rooftop ownership or management businesses as it believes these businesses do
not generate the same levels of cash-flow margin which the Company currently
experiences through the rental of tower space. However, the Company does own
selected rooftops in West Palm Beach, Florida and New Orleans, Louisiana that
have cash-flow margins similar to those of its rental towers. The Company also
manages a selected number of rooftops located in high profile areas where tower
construction and rooftop ownership have proven difficult, including the Empire
State Building, The Boca Raton Hotel and Resort and several sites within Disney
World in Florida.
56
<PAGE>
The Company has established a leading position within the tower rental
industry in the Southeastern United States. The Southeastern United States is
generally characterized by a number of attractive demographic trends including
relatively high population and economic growth rates. For example, according to
the U.S. Census Bureau, during the three years ending July 1, 1997 the
population growth rate in Florida was 5.0%, nearly double that of the overall
rate of 2.8% for the United States. Moreover, according to the U.S. Census
Bureau, 4 of the top 10 fastest growing cities in the United States are located
in the 12 state region targeted by the Company. As a result of this rapid
population growth, a large and affluent population base and high levels of
business and leisure travel, the Company believes that towers located in major
population centers and along major transportation corridors in the Southeastern
United States are and will continue to be highly pursued by wireless
communications providers and therefore have greater future revenue potential. In
addition, the Company believes that new tower construction in these areas is
more likely to face local zoning restrictions because of the aforementioned
characteristics of the region.
Business and Growth Strategy
The Company's objective is to create substantial value from its position
as the leading rental tower owner in the Southeastern United States. In order to
achieve its objective, the Company has designed and implemented a three-tiered
growth strategy of (i) capitalizing on the operating leverage of its business by
aggressively marketing available rental space on its towers, (ii) rapidly
acquiring towers in key markets and (iii) implementing a selective tower
construction program. However, there can be no assurance that the Company will
successfully implement its strategy and achieve its objective.
I. Marketing and Development Strategy
The Company seeks to capitalize on the operating leverage of its business
by increasing the utilization of rental space on its towers. The Company's
customers are generally responsible for the installation of their own equipment
and the incremental utility costs associated with that equipment. Furthermore,
there are no additional monitoring, maintenance or insurance costs to the
Company associated with additional customers. Accordingly, the Company believes
that when additional rental space is available on its towers, incremental
revenue can be achieved at low incremental costs, thereby yielding significant
incremental profit margin.
The implementation of the Company's marketing and development strategy
includes the following:
. Offer Strategically Located Clusters of Towers. By owning
and assembling clusters of towers in strategically attractive
regions, the Company believes it is able to offer its customers
the ability to rapidly fulfill their network expansion plans. The
Company believes that the ability to offer "one stop shopping"
services to customers on a local and regional basis provides the
Company a significant competitive advantage.
. Leverage Customer Relationships. The Company believes it has
established a reputation among its customers as a highly
professional, responsive tower space provider that routinely
fulfills its commitments to its customers. This has been achieved
through ongoing investment in the development of multilevel
customer relationships. The Company believes that making
customers' technical and planning personnel aware of the quality
of a particular site, the ease of doing business with one lessor,
the location of other Company-owned towers and the Company's
ability to construct new sites are important factors in
generating interest in the Company's towers.
. Track FCC Filings. All FCC licensees must file applications
for site locations. Utilizing its proprietary databases and
publicly available information, the Company tracks
57
<PAGE>
these filings closely to identify tower acquisition and
construction opportunities which, due to the site's appeal to a
broad base of customers, the Company believes will have
significant and predictable future revenue growth. Additionally,
the Company closely monitors FCC auctions in order to identify
new market entrants.
. Promote Quality and Security of Facilities. The wireless
communications equipment typically stored in a tower building is
becoming increasingly sophisticated and is critical to a wireless
communications provider's ability to generate revenue.
Accordingly, the Company believes it is of vital importance to
its customers that their equipment be in a well-maintained and
secure building. The Company believes it has developed a
reputation as a provider of high quality and secure sites.
. Dedicate Resources to Customer Service. The Company employs
a group of individuals who are entirely dedicated to assisting
customers with site location and installation logistics.
Management of the Company's technical data through effective
information systems enables the customer service group to respond
quickly and accurately to customers' needs before, during and
after the installation of customers' equipment.
II. Acquisition Strategy
The Company's acquisition strategy is focused on (i) the rapid acquisition
of towers in key markets as a means to quickly gain critical mass, thereby
discouraging other tower consolidators from entering its markets and (ii) the
completion of follow-on acquisitions combined with the selective construction of
new tower sites to complete coverage of the selected market. In executing its
acquisition strategy, the Company generally targets strategically located
individual towers or small groups of towers. Since commencing operations in
1995, the Company had completed the acquisition of 568 towers in 175 separate
transactions. As of June 9, 1998, the Company had a contract or a letter of
intent with respect to 11 proposed acquisitions consisting of 33 towers and
through June 9, 1998, had identified and initiated discussions concerning
numerous additional acquisition opportunities.
The Company conducts extensive due diligence prior to consummating an
acquisition, leveraging what the Company believes to be its competitive
advantage in terms of its experience in, and knowledge of, the tower rental
industry. Of the Company's 88 total employees, 23.0% are dedicated to completing
acquisitions. The Company utilizes nine full-time tower buyers, who spend
substantially all of their time in the field identifying, evaluating and
generating acquisition opportunities for the Company. The Company uses a
standardized process that it has developed to ensure that acquisitions are
evaluated, documented and rapidly processed. In order to execute and ensure the
integrity and quality of this process, the Company utilizes outside independent
professionals to verify certain accounting, legal and engineering data. The
Company believes that this approach has proven effective in permitting the
Company to more accurately predict the performance of acquired assets and reduce
the risks associated with the Company's acquisitions. However, acquisitions
involve a number of potential risks, including the potential loss of customers
and unanticipated events or liabilities. Because of such risks, there can be no
assurance that the Company will be able to successfully implement its
acquisition strategy. See "Risk Factors -Dependence on Acquisitions;
Integration of Acquisitions."
The Company utilizes the following primary criteria in evaluating the
attractiveness of a potential acquisition:
. Target Attractive Wireless Geographic Markets. Within its
targeted region, the Company targets population centers and
transportation corridors where there is evidence of high growth
in wireless communications services. The Southeastern United
States is
58
<PAGE>
generally characterized by a number of attractive demographic
trends including relatively high population and economic growth
rates. Today, the Company has strong market positions in many
population centers such as Orlando, Atlanta, Birmingham, Tampa
and New Orleans. Further, the Company has established a strong
market position along the following transportation corridors:
I-10 from Baton Rouge, Louisiana to Jacksonville, Florida
I-4 from Daytona Beach, Florida to Tampa, Florida
I-85 from Atlanta, Georgia to Montgomery, Alabama
I-75 from Atlanta, Georgia to Naples, Florida
I-65 from Birmingham, Alabama to Mobile, Alabama
I-16 from Atlanta, Georgia to Savannah, Georgia
I-59 from Birmingham, Alabama to New Orleans, Louisiana
. Compatibility with Existing Tower Network. The Company's
marketing activities provide information as to how a potential
acquisition may enhance its existing tower network. The Company
considers many factors when evaluating a potential acquisition.
For example, the Company considers whether an acquisition will,
when combined with existing tower inventory, result in the
Company owning a cluster of towers in a given area, thereby
providing the Company with a stronger market position. The
Company also considers whether the towers in a particular
acquisition meet demand for enhanced coverage which has been
previously identified by customers. In some instances, the
Company may acquire, as part of a group of towers being
purchased, an individual tower which falls outside of normal
acquisition parameters. Such acquisitions occur only when the
Company has determined that the overall transaction is
attractive.
. Disciplined Valuation Process. The Company seeks to acquire
towers that have existing cash flow and the potential for
significant future cash flow growth. The price paid for a
particular tower depends on many factors including the quality of
existing cash flow, location, land values, customer quality and
excess tower capacity. For each potential acquisition, the
Company reviews the current population coverage of each proposed
tower, the nature and quality of the customer base, coverage of
current and future major transportation corridors and the
location and desirability of competing towers. The Company also
makes an assessment of potential cash flow growth and estimates
whether additional capital expenditures will be required to add
capacity to accommodate future growth.
The Southern Towers Acquisition. In March 1998, the Company completed
the acquisition of 201 towers from Southern Communications, a subsidiary of
Southern Company, one of the largest utility holding companies in the United
States and a large ESMR provider in the United States with a network in the
Southeast. The Company paid $83.5 million plus fees and expenses for these
towers, which are located in Georgia, Alabama, Mississippi and Florida,
substantially all of which were constructed within the last four years. Prior to
the acquisition, these towers were principally for the exclusive use of Southern
Communications and its affiliates. Only a limited number of third party tenants
have been given access to these towers. The towers were generally constructed
with capacity significantly exceeding Southern Communications' specific capacity
requirements.
59
<PAGE>
Accordingly, the Company believes that there is substantial additional revenue
potential on these towers.
The Company believes that the Southern Towers Acquisition has
significantly accelerated its progress in achieving its goal to become the
leading provider of rental tower space in the Southeast United States. The
locations of the Southern towers are complementary to the Company's previously
existing inventory of towers and result in a level of geographic coverage which
the Company believes is far more comprehensive than that offered by any of its
competitors. In particular, the Southern Towers Acquisition provides the Company
with a strong market position in Atlanta, one of the fastest growing wireless
communications markets in the Southeast. The characteristics of the Southern
towers (predominately single tenant with significant remaining capacity) is
consistent with the Company's strategy to acquire towers with the potential for
substantial future growth.
In connection with the Southern Towers Acquisition, the Company and
Southern Communications have entered into leases whereby Southern Communications
or an affiliate is a customer on each of the 201 towers acquired. Under the
lease agreements, Southern Communications and its affiliates will pay annual
initial aggregate rents of $5.5 million. The leases have initial terms of ten
years with five optional renewal periods of five years each exercisable at the
customer's option on the same terms as the original leases. The Company is
currently in discussions with several large customers with respect to rental
space on these towers. Southern Communications has also indicated a desire to
lease space on these towers in addition to the space covered by the leases
referred to above. The Company has also entered into an option agreement with
Southern Communications whereby the Company may supply, acquire or construct an
additional 80 sites, the locations of which have been identified by Southern
Communications, for rental by Southern Communications or its affiliates. Any of
these additional sites would be rented under the same terms as the original
leases of the 201 towers described above.
III. NEW TOWER CONSTRUCTION STRATEGY
The Company's tower site construction is not speculative. Construction is
only initiated after at least one anchor customer is identified and after the
Company has determined, based on market research, that the capital outlay for
the construction project would not exceed a maximum multiple of estimated Tower
Level Cash Flow after a given period of time. As such, the Company's capital
investments are tailored to provide for anticipated demand with a goal of
ensuring the appropriate financial return on each tower constructed through its
build program. There are, however, risks associated with new development and
tower construction. Because of such barriers, there can be no assurance that
the Company's new tower construction strategy will be successful. See "Risk
Factors -- Barriers to New Construction."
The elements of the Company's tower build program include the following:
. DISCIPLINED BUILD SELECTION CRITERIA. Through its sales and
marketing efforts, the Company seeks to identify suitable tower
construction sites based on information obtained from wireless
communications providers regarding their network construction
plans. The Company evaluates those plans and ensures that an
effective solution to meeting customer requirements is employed,
whether the result is selling space on an existing tower,
acquiring an existing tower, augmenting an existing tower or
constructing a new tower. Once such opportunities are identified,
the Company acts quickly to select only those opportunities which
are financially attractive.
. RAPID CONSTRUCTION/BUILD IMPLEMENTATION. After identifying
an attractive construction opportunity, the Company moves quickly
to: (i) secure access to the site by either purchasing or
entering into a long-term lease for a parcel of land; (ii) select
the appropriate type of tower based on structural capacity needs;
(iii) initiate sales and marketing efforts to rent space on the
tower; and (iv) complete necessary steps to obtain
60
<PAGE>
zoning approvals and building permits. The Company then oversees
the construction of the tower by hired sub-contractors.
. EFFECTIVE TOWER DESIGN AND SOURCING. New tower structures
are available from a variety of manufacturers. The number of
customer attachments that can be installed on any individual
tower (the tower's capacity) varies dramatically depending on a
number of factors including the original engineering and design
of the tower, the geographic area in which the tower is erected
and the specific nature of the attachments (coaxial lines,
mounting devices and antennas) which customers wish to install.
These factors also influence the amount of capital which must be
invested to build such towers, which in the case of a 500-foot
guyed tower could range from $35,000 to $1,000,000. Tower rental
rates are a function of demand, the amount and type of equipment
to be installed and the degree of local competition.
While construction of new towers does not provide immediate cash flow like
that of existing towers, the Company believes that due to the generally lower
capital requirements for constructed towers versus acquired towers, new tower
construction generates a higher return than acquisitions once the new towers are
fully leased. Approximately 14 new towers are currently under construction by
the Company and there is in excess of 100 additional tower projects in various
stages of development.
COMPANY OPERATIONS
Through its centralized management structure, the Company is designed to
be an efficient consolidator and operator of rental towers. This is reflected in
the methods and processes that the Company employs in managing its day-to-day
operations, including the rapid integration of acquisition, tower construction
and sales and marketing data into the Company's proprietary management
information systems. This approach ensures that tower management is coordinated
across the Company's functional areas and that such information is accurate,
timely and easily available. The Company has invested heavily in its information
systems and believes that its investments in these areas will accommodate
significant additional growth.
The Company has two levels of non-tower operating expenses: corporate
development expenses and general and administrative expenses. Corporate
development expenses are associated with the Company's acquisition and
construction strategies. General and administrative expenses are associated with
supporting the Company's day-to-day management of its existing properties. If
the Company were to curtail its acquisition and construction activities, the
related corporate development costs could be avoided.
The key components of the Company's operations include (i) effective
integration of tower assets into the Company's existing portfolio, (ii) ongoing
monitoring of the Company's portfolio of tower assets and (iii) customer sales
and support.
INTEGRATION. The pace and level of activity which characterize the
Company's acquisition, construction and marketing strategies create certain
operational challenges including the efficient integration of the due diligence
data and other accounting, legal, regulatory, real estate, engineering and lease
information. In response to these challenges, two years ago the Company
committed substantial resources to the development of its proprietary management
information systems to accommodate the Company's overall acquisition,
construction and marketing strategies. As a result, the Company has developed
the capability to "instantly integrate" new acquisitions and tower construction
activity and initiate sales and marketing efforts immediately upon closing or
completion. This capability applies to an acquisition of a single tower as well
as the Southern Towers Acquisition, which added 201 towers to the Company's
portfolio of assets.
61
<PAGE>
ONGOING MONITORING. The Company's operations personnel perform routine,
ongoing monitoring to ensure the maintenance of accurate data with regard to the
Company's tower inventory. Such inventory management includes radio frequency
audits and regulatory compliance. The Company seeks to maintain accurate
information with regard to customers' equipment that is installed on its towers.
The Company believes that this area is overlooked by many rental tower owners,
resulting in erroneous information about the availability of tower space and
certain existing customers using more capacity than is reflected in their lease.
To minimize such errors, the Company conducts radio frequency audits and matches
each customer's equipment (which includes base stations, frequencies, coaxial
lines and antennas) to those allowed under the customer's lease. Discrepancies
are identified and customers are informed of required modifications to the lease
terms in order to provide for additional rent. In addition, the Company utilizes
this information to facilitate future capacity calculations and predict where
and when capital expenditures may be required to provide additional space to new
customers. Regulatory compliance and respect for the needs of the communities in
which the Company operates are essential to the Company as well as to its
customers. Operations personnel ensure that all sites are in compliance with all
FAA and FCC regulations and other local requirements. Regulatory data is
integrated into the Company's management information systems and is provided to
current and potential customers as part of equipment installation support
efforts.
CUSTOMER SALES AND SUPPORT. The Company's customer sales support group
is dedicated to responding to the needs of current and potential customers.
Support is offered to customers in connection with assessing a selected tower's
capacity, determining the potential for radio frequency interference from new
equipment and providing required documentation as to ownership and other
property issues. This service function seeks to facilitate the customer's
decision to initiate installation on the Company's tower and, the Company
believes, has enhanced the Company's reputation as a full-service and responsive
provider of rental tower space.
ECONOMICS OF PINNACLE'S BUSINESS
Today, the Company owns a portfolio of tower assets that it believes has
the following favorable economic characteristics:
. HIGH ABSOLUTE AND INCREMENTAL MARGINS. The Company's towers
are fixed-cost assets with minimal variable costs associated with
revenue from leasing available space to additional or existing
customers, as each customer generally assumes the costs of
installation, utilities and equipment maintenance. Accordingly, a
rental tower owner can generate increasing operating margins when
new customers are added, resulting in high incremental free cash
flow available to service debt. For the quarter ended March 31,
1998, the Company's Tower Level Cash Flow Margin was 80.6%.
. STABLE AND PREDICTABLE CASH FLOW. The Company believes that
it benefits from the long-term contract nature of its tower
rental business and the predictability and stability of monthly,
prepaid and recurring revenue. The Company generally leases space
on its towers to wireless communications providers under three to
five-year leases. In addition, a majority of the Company's leases
provide built-in annual rate increases of the greater of a
specified percentage, (which typically ranges from 3-5%), or the
change for the relevant period in the CPI. Furthermore, because a
significant proportion of tower rental revenue is received from
customers that are predominantly large companies and because
towers provide a basic utility-like service (which can be
terminated by a tower owner if rent is not paid), the Company
generally experiences low levels of bad debt expense. In 1997,
the Company's bad debt expense as a percentage of revenue was
1.0%.
. DIVERSIFIED CUSTOMER BASE. There is broad representation of
wireless
62
<PAGE>
communications providers and underlying technologies reflected in
the Company's customer base. Accordingly, the Company believes
that the stability and growth of its revenue will reflect that of
the wireless communications industry in general, rather than any
specific customer or segment within that industry. The Company
has a diversified base of over 724 customers, only one of which
accounts for more than 5% of the Company's total revenue.
. BARRIERS TO ENTRY. Towers are subject to a variety of
federal and local regulations which make construction of towers
difficult, expensive and time consuming, especially in highly
populated or high transmission areas. In addition, in areas where
the Company has established a critical mass of rental tower
inventory adequate to supply customers' site requirements,
construction of alternative towers will be less attractive to
others due to the likelihood of lower returns on those towers.
Wireless communications providers seeking to construct their own
proprietary, limited use towers face continued opposition by
municipalities, which are reducing the opportunities for such new
towers to be built and supporting the trend toward co-location on
rental towers.
. LOW CUSTOMER CHURN. The Company typically experiences low
customer churn as a result of the high relocation costs incurred
by customers. When customers enter into long-term contracts for
tower space, those customers generally make significant capital
and network engineering commitments to the related site. The
Company believes that these levels of commitment made by its
customers support the long-term nature and predictability of the
Company's revenue. Municipal approvals are becoming increasingly
difficult to obtain and may also affect the carrier's decision to
relocate. The costs associated with network reconfiguration,
obtaining FCC and municipal approval and the time required to
complete these activities may not be justified by any potential
savings in reduced tower operating expense. As a result, the
Company experienced customer churn of 0.8% in 1996 and 0.6% in
1997.
. ATTRACTIVE UNDERLYING GROWTH AND PROSPECTS. According to
industry publications, the paging industry has experienced annual
average growth rates of approximately 26.8% over the past few
years and, the cellular industry had a growth rate of 27.5% from
June 30,1996 to June 30, 1997. According to industry
publications, as of December 31, 1997, penetration for wireless
services was approximately 21.0% and is projected to grow to
53.0% by 2007. The Company's rental towers are basic
infrastructure components for all major wireless communications
services, including cellular, paging, two-way radio, broadcast
television, microwave, wireless data transmission and SMR
customers. As a result, the Company believes that its tower
rental revenue will reflect the growth of its customer base over
the next several years.
CUSTOMERS
As of June 9, 1998, the Company had over 2,750 separate tower space
leases. The Company has a diversified base of over 724 customers, only one of
which accounts for more than 5% of the Company's total revenue.
The Company has a diverse mix of customers representing the various
technologies and segments of the wireless communications industry. As a result,
the Company believes it is not dependent on any one segment of the
63
<PAGE>
wireless communications industry for future revenue growth. The following is a
summary of the Company's Annualized Run Rate Revenue by customer type and
approximate percentage of revenue derived therefrom as of June 9, 1998:
<TABLE>
<CAPTION>
CUSTOMER TYPE PERCENTAGE
--------------- OF REVENUE
-----------
<S> <C>
SMR...................................... 28%
Paging................................... 25%
Land Mobile.............................. 20%
PCS...................................... 12%
Cellular................................. 6%
Government............................... 4%
Broadcasting............................. 4%
Data..................................... 1%
---
Total................................. 100%
===
</TABLE>
The following is a summary of the Company's towers by state, as of June 9,
1998:
<TABLE>
<CAPTION>
STATE NUMBER
----- OF TOWERS
---------
<S> <C>
Florida 168
Georgia 139
Alabama 96
Louisiana 67
Mississippi 40
North Carolina 23
South Carolina 18
Virginia 18
Texas 15
Maryland 12
Tennessee 8
Arkansas 5
New York 1
---
Total 610
===
</TABLE>
The Company believes it has effectively executed its strategy to accumulate
clusters of towers in designated market areas especially with respect to certain
urban areas within its targeted region. For example, as of June 9, 1998, the
Company had 49 towers in the Orlando, Florida market, 48 towers in the Atlanta,
Georgia market, 37 towers in the Birmingham, Alabama market, 35 towers in the
Tampa/Sarasota, Florida market and 28 towers in the New Orleans, Louisiana
market.
PROPERTIES
The Company both owns and leases the real property upon which its towers
are located. As of June 9, 1998, the Company owned 372 towers on parcels of real
estate that are leased and 223 towers on parcels of real estate that are owned.
Additionally, the Company leases its corporate headquarters in Sarasota,
Florida. The aggregate square
64
<PAGE>
footage of office space under this lease is approximately 14,000. The lease term
ends on September 30, 2000, and rent paid by the Company for its headquarters
was approximately $159,200 in 1997. The Company believes that its facilities are
adequate for its short-term needs and does not expect difficulty replacing such
facilities or locating additional facilities, if needed.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company competes with wireless communications providers who own and operate
their own tower networks, site development companies which acquire space on
existing towers, rooftops and other sites, other independent tower companies and
traditional local independent tower operators. Wireless communications providers
who own and operate their own tower networks generally are larger and have
greater financial resources than the Company. The Company 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 tower rental companies. The Company believes that
competition for tower acquisitions will increase and that additional competitors
will enter the tower rental market, some of which may have greater financial
resources than the Company.
REGULATORY MATTERS
FEDERAL REGULATIONS. Both the FCC and FAA promulgate regulations relative
to towers used for wireless communications. Such regulations primarily relate to
the siting, lighting and marking of towers. Most proposed antenna structures
that are higher than 200 feet above ground level or that may interfere with the
flight path of a nearby airport must be studied by the FAA and registered with
the FCC. Upon notification to the FAA of a potential new tower or a proposed
change in the height or location of certain existing towers, the FAA assigns a
number to and conducts an aeronautical study. Upon the finding that a proposed
tower, new or modified, does not constitute a hazard to air navigation, the FAA
will require certain painting and lighting requirements to be met to maximize
the visibility of the tower. All towers subject to the FAA notification process
must be registered by the tower owner with the FCC. At FCC registration, the FCC
generally requires the painting and lighting requirements of the FAA to be met.
Tower owners may also bear the responsibility of notifying the FAA of any tower
lighting outage. The FCC enforces the tower painting and lighting requirements.
Failure to comply with applicable requirements may lead to civil liabilities.
Wireless communications devices operating on towers are separately regulated by
the FCC and independently licensed based upon the particular frequency used.
The Telecommunications Act of 1996 (the "Telecom Act") amended the
Communications Act of 1934 to prevent the FCC preemption of local and state land
use decisions and preserves the authority of state and local governments over
zoning and land use matters concerning the construction, modification and
placement of towers, except in limited circumstances. The Telecom Act prohibits
any action that would (i) discriminate between different wireless communications
providers or (ii) ban altogether the construction, modification or placement of
radio communications towers. The Telecom Act requires the federal government to
establish procedures to make available on a fair, reasonable and
nondiscriminatory basis property rights-of-way and easements under federal
control for the placement of new telecommunications services. This may require
that federal agencies and departments work directly with licensees to make
federal property available for tower facilities.
All towers must comply with the National Environmental Policy Act of 1969
as well as other federal environmental statutes. The FCC's environmental rules
place responsibility on each applicant to investigate any potential
environmental effect of tower placement and operations and to disclose any
significant effects on the environment in an environmental assessment prior to
constructing a tower. In the event the FCC determines the proposed tower would
have significant environmental impact based on the standards the FCC has
developed, the FCC would be required to prepare an environmental impact
statement. This process could significantly delay the licensing of a particular
tower site.
65
<PAGE>
LOCAL REGULATIONS. Local regulations include city, county 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 prior to tower construction.
ENVIRONMENTAL REGULATION. In addition to the FCC's environmental
regulations, the Company is subject to various other federal, state and local
health, safety and environmental laws and regulations. The Company believes that
it is in material compliance with existing applicable health, safety and
environmental laws and regulations and has all necessary permits and licenses.
EMPLOYEES
As of March 31, 1998, the Company had approximately 74 full-time employees,
of which 54 work in the Company's Sarasota, Florida headquarters office. None of
the Company's employees are unionized, and the Company considers its
relationship with its employees to be good.
REIT STATUS
The Company has elected, and intends to continue to elect, to be treated as
a REIT. A REIT is generally not subject to federal corporate income taxes on
that portion of its ordinary income or capital gain for a taxable year that is
distributed to stockholders within such year. To qualify and remain qualified as
a REIT, the Company is required for each taxable year to satisfy certain
requirements pertaining to organization, sources of income, distributions and
asset ownership. Among the numerous requirements which must be satisfied with
respect to each taxable year in order to qualify and remain qualified as such, a
REIT generally must (i) distribute to stockholders 95% of its taxable income
computed without regard to net capital gains and deductions for distributions to
stockholders, (ii) maintain at least 75% of the value of the Company's total
assets in real estate assets (generally real property and interests therein),
cash, cash items and government securities, (iii) derive at least 75% of its
gross income from investments in real property or mortgages on real property and
(iv) derive at least 95% of its gross income from real property investments
described in (iii) and from dividends, interest and gain from the sale or
disposition of stock and securities and certain other types of gross income.
Income tax regulations provide that the term "real property" for the foregoing
requirements means land or improvements thereon, such as buildings or other
inherently permanent structures thereon, including items which are structural
components of such buildings or structures. The IRS has ruled in a revenue
ruling that transmitting and receiving communications towers built upon pilings
or foundations similar to those of the Company as well as ancillary buildings,
heating and air conditioning systems and fencing constitutes inherently
permanent structures and are therefore real estate assets.
The Company could be subject to a variety of taxes and penalties if at any
time the Company engages in certain prohibited transactions, fails to satisfy
certain REIT distribution requirements or recognizes gain on the sale or
disposition of certain types of property. In addition, if the IRS determines
that the Company has failed to satisfy any of the requirements to maintain its
qualification as a REIT for any taxable year, and cannot utilize any of the
relief provisions which may be applicable, then the Company will be subject to
corporate level income tax at regular corporate rates on its net income
unreduced by distributions to stockholders, together with interest and
penalties. However, because the Company has not reported any net taxable income
(determined before the deduction for dividends paid) in its corporate income tax
returns following its filing of an election to be taxed as a REIT, unless its
reported net taxable loss is adjusted, the risk that any corporate income tax
liability would result from a retroactive determination by the IRS that the
Company has, to date, failed to satisfy all of the requirements for REIT
qualification during any such year would be minimal. However, with respect to
any year in which the Company recognizes positive net taxable income, the loss
of REIT status or a determination that the Company did not qualify as a REIT may
have a material adverse affect on the Company's financial condition or results
from operations. In such circumstances, the Issuer may have made the
distributions to its stockholders required for REIT status described above in an
attempt to qualify for REIT status but would not be entitled to receive such
distributions back from the stockholders or a tax deduction for such
distributions.
66
<PAGE>
In February 1998, President Clinton proposed the enactment of tax
legislation. Included in the President's proposal were certain provisions to
change the income tax treatment of REITs. One such provision would impose an
additional requirement for REIT qualification that no person can own either (i)
more than 50% of the total combined voting power of all classes of voting stock
of a REIT or (ii) more than 50% of the total value of shares of all classes of
stock of a REIT. As set forth under the caption "Principal Stockholders", over
80% of the stock of the Issuer is owned by ABRY II. However, as presently
proposed, such additional requirements for REIT qualification would be effective
only for entities electing REIT status for taxable years beginning on or after
the date of first committee action, thereby effectively grandfathering the
Issuer from such provision. There can be no assurance that any future tax
legislation will contain such a grandfathering provision or will not adversely
affect the continued qualification of the Company as a REIT.
LEGAL PROCEEDINGS
The Company is from time to time involved in ordinary litigation
incidental to the conduct of its business. The Company believes that none of its
pending litigation will have a material adverse effect on the Company's
business, financial condition or results of operations.
67
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Set forth below is certain information concerning the Company's directors,
executive officers and key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert Wolsey.......... 47 Director, President and Chief Executive Officer and
Chief Operating Officer
James Dell'Apa......... 40 Director, Executive Vice President
Steven Day............. 45 Director, Vice President, Secretary and Chief
Financial Officer
David Zahn............. 33 Vice President of Operations
Ben Gaboury............ 46 Vice President of Sales and Marketing
Martin Alvarez......... 43 Chief Information Officer
Andrew Banks........... 43 Director
Peni Garber............ 35 Director
Peggy Koenig........... 41 Director
Royce Yudkoff.......... 42 Director
</TABLE>
ROBERT WOLSEY is primarily responsible for the overall direction of the
Company's acquisitions and operations and has substantial experience in
consolidating fragmented industries. From 1990 to 1994, Mr. Wolsey, as Chief
Executive Officer of Pittencrieff Communications, Inc. (PCI), a regional
consolidator of SMR operators, spearheaded the acquisition of 28 SMR businesses
and related assets (including over 100 towers) for a purchase price of over $30
million. During Mr. Wolsey's tenure at PCI, revenue increased from $100,000 to
over $28 million. In June 1993, PCI completed its initial public offering in an
offering that raised over $74 million. At the time of Mr. Wolsey's departure
from PCI in April 1994, it had a market capitalization in excess of $200
million. From 1983 to 1989, Mr. Wolsey, as President of Pittencrieff PLC and a
predecessor company, negotiated and acquired over $30 million in oil and gas
assets in 16 separate transactions. He has a Bachelor of Science (Honors) degree
in Color Physics from the University of Manchester.
JAMES DELL'APA is principally responsible for managing the initiation and
negotiation of acquisitions. Mr. Dell'Apa has brokered SMR, tower, paging, and
two-way businesses since 1991 and has had various levels of involvement with
over 250 transactions with a combined valuation of over $650 million. Before his
acquisitions work, he was a technical consultant in Washington, D.C. responsible
for planning large-scale military networks for government consulting firms under
the employment of Booz Allen & Hamilton and Advanced Technology (later Planning
Research Corporation and Black and Decker). Mr. Dell'Apa also worked for
Georgetown University's International Law Institute developing long-term,
intensive training programs on Negotiation and Policy for Developing
Telecommunications Infrastructure for senior level government ministers. He has
a law degree from American University in Washington, D.C., a technical Masters
degree in Telecommunications from the University of Colorado (Boulder), and a
liberal arts/bachelors degree from the University of Northern Colorado.
68
<PAGE>
STEVEN DAY is primarily responsible for the Company's financial, legal and
administrative affairs and for the integration of acquired properties. Mr. Day
was a partner in the accounting firm of Price Waterhouse LLP until joining the
Company in February 1997. Since 1986, he has been involved with high-growth
companies principally in technology-based industries and, for the last several
years, worked with large venture capital and leveraged buyout firms in his role
in the Price Waterhouse Mergers and Acquisitions Group. Mr. Day has substantial
experience in dealing with companies which have filed initial public offerings
and public debt related registration statements. Mr. Day earned a Masters of
Business Administration at Loyola University of Chicago and a Bachelor of Arts
degree at the University of West Florida.
BEN GABOURY is primarily responsible for the sales and marketing operations
of the Company. Mr. Gaboury was employed for 17 years with Motorola Inc. in
various sales and sales management positions. Before joining the Company in
October 1996, Mr. Gaboury was responsible for planning the strategy that
Motorola employed in connection with the build out of its SMR network in New
York and the New England area. He then executed the plan to market SMR services
as well as related rental towers. Mr. Gaboury holds a Masters Degree from Jersey
City State College and a Bachelors Degree from Fairleigh Dickinson University.
DAVID ZAHN is primarily responsible for the ongoing maintenance of the
Company's existing tower inventory, new site construction, capacity augmentation
and new customer's equipment integration. He joined Pinnacle in September 1996.
From 1987 to 1996, Mr. Zahn worked for 360 (degree) Communications (formerly
Sprint Cellular and Centel Cellular) where he held a variety of positions
ranging from Project Manager, Transmission Engineer, Radio Frequency Engineering
Supervisor and Traffic Engineering Manager. His most recent management position
was Director of Engineering where he was responsible for a $50 million capital
program related to the construction of cellular transmission towers and the
associated communications network. Mr. Zahn earned his degrees in Bachelor of
Science in Electrical Engineering Technology and an Associate in Applied
Electronic Communications Engineering Technology from the Milwaukee School of
Engineering.
MARTIN ALVAREZ is primarily responsible for the Company's Information
Technology and Services. Prior to joining the Company in June 1997, Mr. Alvarez
was a Senior Manager in the Management Consulting Services division of Price
Waterhouse LLP. Mr. Alvarez has been involved with the growth and management of
Information Technology and Services at Pinnacle since April of 1996. His
experience includes work for a variety of industries that include
telecommunications, entertainment, manufacturing, utilities, among other
industries. Mr. Alvarez' experience includes management of various technology
areas, systems development and implementation, systems programming,
effectiveness evaluation and strategic planning. Mr. Alvarez earned his degree
in Bachelor of Science in Engineering Science, Computer Science Option from the
University of South Florida.
ANDREW BANKS is Chairman of ABRY Holdings Inc. Previously, Mr. Banks was
affiliated with Bain & Company, an international management consulting firm. At
Bain, where he was a partner from 1986 until 1988, he shared significant
responsibility for the firm's media practice. Mr. Banks is presently a director
of various companies, including DirecTel and Cat, Ltd. Mr. Banks is a graduate
of the Harvard Law School, a Rhodes Scholar holding a Master's degree from
Oxford University and a graduate of the University of Florida.
PENI GARBER is a principal at ABRY Partners, Inc. ("ABRY"). She joined ABRY
in 1990 from Price Waterhouse LLP where she served as Senior Accountant in the
Audit Division from 1985 to 1990. Ms. Garber is presently a director of Nexstar
Broadcasting Group, L.P. and Sullivan Broadcasting Company, Inc. Ms. Garber
graduated summa cum laude from Bryant College.
PEGGY KOENIG is a partner in ABRY. She joined ABRY in 1993. From 1988 to
1992, Ms. Koenig was a Vice President, partner and member of the Board of
Directors of Sillerman Communications Management Corporation, a merchant bank,
which made investments principally in the radio industry. Ms. Koenig was the
Director of Finance from 1986 to 1988 for Magera Management, an independent
motion picture financing company. She is presently a director of Sullivan
Broadcasting Company, Inc., Connoisseur Communications Partners, L.P.
69
<PAGE>
and Weather Services Corporation. She received her MBA from the Wharton Business
School and received an undergraduate degree from Cornell University.
ROYCE YUDKOFF is President and Managing Partner of ABRY. Previously, Mr.
Yudkoff was affiliated with Bain & Company, an international management
consulting firm. At Bain, where he was a partner from 1985 through 1988, he
shared significant responsibility for the firm's media practice. Mr. Yudkoff is
presently a director of various companies including Sullivan Broadcasting
Company, Inc., Nexstar Broadcasting Group, L.P. and Metrocall. He graduated as a
Baker Scholar from the Harvard Business School and is an honors graduate of
Dartmouth College.
BOARD COMMITTEES
The Company's Board of Directors has appointed an Audit Committee, a
Compensation Committee and an Executive Committee. The members of the Audit
Committee are Mr. Day, Ms. Garber and Ms. Koenig. The members of the
Compensation Committee are Mr. Yudkoff, Ms. Koenig and Mr. Day. The members of
the Executive Committee are Mr. Wolsey, Ms. Koenig and Mr. Yudkoff.
COMPENSATION OF DIRECTORS
All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board of Directors. No director
receives separate compensation for services rendered as a director.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation for
each of the last three years for the Chief Executive Officer and the four other
most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- -------------------------------------
AWARDS PAYOUTS
-------------------------- ---------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION(A) SATION AWARDS OPTIONS PAYOUTS SATION
- -------------------------------- YEAR SALARY ($) BONUS ($) ($) ($) (#) ($) ($)
---- ---------- --------- ---------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Wolsey................... 1997 $156,000 $70,000 6,500(b) -- -- -- --
Chief Executive Officer 1996 129,698 30,000 -- -- -- -- --
and President 1995 50,000 -- -- $10,000 -- -- --
James Dell'Apa.................. 1997 156,248 -- -- -- -- -- --
Vice President and 1996 128,125 30,000 -- -- -- -- --
Chief Operating Officer 1995 50,000 -- -- 10,000 -- -- --
Steven Day...................... 1997 131,250 -- -- 12,000 -- -- --
Vice President and 1996 -- -- -- -- -- -- --
Chief Financial Officer 1995 -- -- -- -- -- -- --
Ben Gaboury..................... 1997 126,094 -- -- -- -- -- --
Vice President 1996 31,789 -- -- 1,200 -- -- --
Sales and Marketing 1995 -- -- -- -- -- -- --
David Zahn...................... 1997 126,260 -- -- -- -- -- --
Vice President Operations 1996 36,102 -- -- 1,200 -- -- --
1995 -- -- -- -- -- -- --
</TABLE>
(a) See also, "Employment Agreements".
(b) Amount of reimbursement for payment of income taxes.
70
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with each of Messrs. Wolsey, Dell'Apa and Day (the "Principal
Employees"). The terms of the Employment Agreements are substantially similar.
The Employment Agreements provide that each of the Principal Employees will be
employed by the Company until his resignation, death or disability or other
incapacity, or until terminated by the Company. Under the Employment Agreements,
each of the Principal Employees will receive, among other things, (i) an annual
base salary and (ii) other benefits as described in the Employment Agreements
(including all employee benefit plans and arrangements that are generally
available to other employees). Each of the Employment Agreements includes
noncompetition and nonsolicitation provisions restricting the respective
employees' ability to engage in activities competitive with the Company for a
period of two years following termination of employment. In the event of the
termination of an executive, the agreements provide for severance benefits
including salary and health plan benefits for periods ranging from six to 18
months.
71
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of June 9, 1998, information as to the
Company's stock beneficially owned by (i) each director of the Company, (ii)
each executive officer named in the Summary Compensation Table, (iii) all
directors and executive officers of the Company as a group, and (iv) any person
who is known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's common stock. In addition to the common
stock, the Company's capital includes 100,000 shares of preferred stock. No
shares of the Company's preferred stock are issued or outstanding.
SHARES BENEFICIALLY OWNED
<TABLE>
<CAPTION>
PERCENTAGE
OF
ECONOMIC PERCENTAGE
NAME OF STOCKHOLDERS, OWNERSHIP OF VOTING
DIRECTORS AND EXECUTIVE CLASS A COMMON CLASS B COMMON CLASS D COMMON CLASS E COMMON OF ALL POWER OF
- --------------------------- ------------------ ------------------ ------------------ ------------------ COMMON ALL COMMON
OFFICERS(A) SHARES(B) % SHARES(B) % SHARES(B) % SHARES(B) % STOCK STOCK
- --------------------------- ----------- ----- ---------- ------ ---------- ------ ----------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABRY Broadcast Partners
II, L.P.(c)............... 200,000 98.8 -- -- -- -- 140,260 98.2 81.3 81.3
Robert Wolsey(d)........... -- -- 10,000 83.3 11,000 27.5 -- -- 6.4 6.4
James Dell'Apa............. -- -- 1,500 12.5 10,000 25.0 2,500 1.8 4.6 4.6
Steven Day(e).............. -- -- 500 4.2 10,000 25.0 -- -- 3.8 3.8
Ben Gaboury................ -- -- -- -- 1,000 2.5 -- -- * *
David Zahn................. -- -- -- -- 1,000 2.5 -- -- * *
Andrew Banks............... 25 * -- -- -- -- -- -- * *
Peni Garber................ 25 * -- -- -- -- -- -- * *
Peggy Koenig............... 50 * -- -- -- -- -- -- * *
Royce Yudkoff(f)........... 200,050 98.8 -- -- -- -- 140,260 98.2 81.3 81.3
All directors and
executive officers as a
group..................... 200,150 98.8 12,000 100 33,000 82.5 142,760 100 96.1 96.1
</TABLE>
* Indicates less than 1 percent.
(a) The address of all persons in this table is c/o Pinnacle Towers Inc., 1549
Ringling Blvd., Sarasota, Florida 34236.
(b) As used in this table, "beneficial ownership" means sole or shared power to
vote or direct the voting of a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose, or direct the
disposition, of a security). A person is deemed as of any date to have
"beneficial ownership" of any security that such person has a right to
acquire within 60 days after such date. For purposes of computing the
percentage of outstanding shares held by each person named above, any
security that such person has the right to acquire within 60 days of the
date of calculation is deemed to be outstanding, but is not deemed to be
outstanding for purposes of computing the percentage ownership of any other
person.
(c) ABRY Holdings, Inc., the general partner of ABRY Capital, which is the
general partner of ABRY II, is wholly-owned by Mr. Yudkoff.
(d) Mr. Wolsey is deemed the beneficial owner of his Class B common stock and
his Class D common stock through his control of Pantera, Inc. and Pantera
Partnership Ltd.
(e) Mr. Day is deemed the beneficial owner of his Class D common stock through
his control of South Creek, Inc. and South Creek Partnership Ltd.
(f) Mr. Yudkoff is deemed the beneficial owner of the Class A common stock and
Class E common stock held by ABRY II. See note (c) above.
72
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
SUBSCRIPTION AND STOCKHOLDERS AGREEMENT
The principal stockholders of the Issuer (ABRY II, and Messrs. Wolsey,
Dell'Apa and Day) are parties to the Subscription and Stockholders Agreement,
dated April 17, 1995, as amended May 3, 1995 and September 22, 1997, (the
"Stockholders' Agreement"). The Stockholders' Agreement gives such stockholders
the preemptive right, with some exceptions, to acquire their pro rata share of
future issuances of capital stock of the Issuer. The following issuances are
exempt from this preemptive right: (a) to any employee of the Issuer; (b) in
connection with an acquisition or merger; (c) pursuant to a public offering; (d)
upon the exercise, conversion, or exchange of any option or convertible
security; (e) of up to a total of 200,000 Class A common stock to ABRY II at a
price of $100 per share; (f) as a part of any recapitalization or
reorganization; (g) upon the conversion of Class D common stock into Class C
common stock; and (h) as a distribution to stockholders in the form of
securities of the Issuer.
Parties to the Stockholders' Agreement have certain rights and obligations
in connection with a sale by ABRY II of shares in the Issuer, a sale of the
Issuer and a reorganization or recapitalization of the Issuer in anticipation of
a sale of the Issuer or a public offering. In the case of a sale by ABRY II of
shares in the Issuer, stockholders party to the Stockholders' Agreement will
have the right to participate pro rata in such a sale. In the case of a sale of
the Issuer approved by its stockholders or a reorganization or recapitalization
in anticipation of a sale or a public offering, stockholders party to the
Stockholders' Agreement will have the obligation to participate in such
transaction.
The Stockholders' Agreement also governs the vesting of the Class D common
stock issued to certain executives and employees of the Issuer and provides for
certain put and call rights, among the Issuer and its current stockholders with
respect to the Class B common stock and Class D common stock upon the
termination of employment or death of Messrs. Wolsey, Dell'Apa, or Day.
CAPITAL CONTRIBUTION AGREEMENT
The Issuer has entered into the Capital Contribution Agreement with ABRY
II, pursuant to which ABRY II has agreed to make equity contributions to the
Issuer, up to an aggregate capital contribution of $50.0 million, in an amount
equal to (i) 100.0% of the Issuer's general and administrative expenses and
corporate development expenses and (ii) the amount necessary to cure any payment
or financial covenant default under the Senior Credit Facility. As of June 9,
1998, ABRY II has contributed $36.0 million of the aggregate $50.0 million
capital contribution commitment. Additionally, ABRY II is the guarantor of a
note of the Issuer payable to a former tower owner in an amount totaling
approximately $3.9 million.
PINNACLE TOWERS II INC.
In November 1997, certain of the stockholders of the Issuer formed a new
company, Pinnacle Towers II Inc. ("PTI II"). PTI II is an affiliate of the
Issuer as PTI II is an entity under common control with the Issuer, as ABRY II
and certain executives of the Issuer control a majority of PTI II stock. PTI II
was formed for the purpose of pursuing certain opportunities, such as potential
joint ventures and other businesses related to the tower rental industry. PTI II
has a $5.0 million credit facility with a bank.
In November 1997, the Issuer sold, for cash, certain of its towers and
projects-in-progress to PTI II. In this transaction, the Issuer sold 12 towers
and 34 projects which were in process. The purchase price was $2.2 million. In
connection with this sale, the Issuer entered into a management agreement with
PTI II, whereby the Issuer provides management services with regard to the PTI
II towers and projects. The term of the management agreement is one year and is
renewable annually upon notice by PTI II to the Issuer, on terms to be
determined upon renewal. Under the agreement, charges for services performed are
billed at the Issuer's cost, plus an agreed
73
<PAGE>
upon margin, as defined in the agreement. As of March 31, 1998, charges for
services under the agreement were insignificant.
MANAGEMENT INDEBTEDNESS
At March 31, 1998, the Company had a loan receivable from Mr.
Dell'Apa, a named executive officer, in the amount of $94,000. The loan to Mr.
Dell'Apa is secured by a mortgage on certain real property and by a pledge of
all of Mr. Dell'Apa's Class D common stock of the Company. The loan bears
interest payable quarterly at a rate equal to the Company's bank rate less 600
basis points. On June 9, 1998, the loan to Mr. Dell'Apa is accruing interest at
a rate of 7.8%.
74
<PAGE>
DESCRIPTION OF CREDIT FACILITIES
SENIOR CREDIT FACILITY
In September 1995, Pinnacle Towers Inc. (the principal subsidiary and
operating company of the Issuer) entered into the Senior Credit Facility which
provided for $25.0 million of senior debt financing through reducing revolving
line of credit and revolver/term loan. In September 1996, the Company and its
lenders agreed to expand the commitment amount to $100.0 million. In connection
with the Southern Towers Acquisition, the Company and its lenders agreed to
expand the commitment under the Senior Credit Facility to $200.0 million
initially, which was amended to provide a $150.0 million commitment upon the
closing of the Private Offering. The commitment under the Senior Credit Facility
may be increased up to $250.0 million at the request of the Company and at the
option of the lenders. Advances under the Senior Credit Facility are available
to fund acquisitions and construction of towers and for general corporate
purposes. Upon the closing of the Private Offering, outstanding borrowings and
availability under the Senior Credit Facility were approximately $14.2 million
and $120.6 million, respectively, after giving effect to (i) repayment of $158.6
million of outstanding borrowings with a portion of the proceeds of the Private
Offering, (ii) reduction of the Senior Credit Facility to a commitment of $150.0
million and (iii) consideration of $15.2 million of outstanding letters of
credit which reduce availability under the Senior Credit Facility.
Immediately prior to the closing of the Private Offering, advances under
the Senior Credit Facility accrued interest at the Company's option at either
LIBOR plus a margin of up to 2.75% or the base rate, plus a margin of up to
1.75%. In addition, the Company was required to pay commitment fees based on the
unused portion of the commitments and customary facility fees on the total
amount of the commitments. Upon closing of the Private Offering, the Senior
Credit Facility was amended to reduce the commitment amount to $150.0 million
and to change the maximum LIBOR margin to 2.875%. The Issuer has guaranteed the
Senior Credit Facility.
The Senior Credit Facility is secured by a lien on substantially all of
the assets of the Company and its subsidiaries and a pledge of substantially all
of the capital stock of its subsidiaries. The credit agreement contains
customary covenants such as limitations on the Company's ability to incur
indebtedness, to incur liens or encumbrances on assets, to make certain
investments, to make distributions to stockholders, or prepay subordinated debt.
Under the credit agreement, the Company may not permit the Leverage Ratio to
exceed certain amounts, as defined in the Senior Credit Facility.
ABRY BRIDGE LOAN
In February 1998, the Company entered into the ABRY Bridge Loan, whereby
the Company borrowed $12.5 million to partially finance the Southern Towers
Acquisition. Amounts outstanding under the ABRY Bridge Loan bore interest at the
rate of 9.0% per annum. Interest and principal under the ABRY Bridge Loan are
payable within one year from the date of the related borrowing. A portion of the
proceeds from the Private Offering were used to repay in full and retire the
ABRY Bridge Loan. During April 1998, the Company borrowed $2.5 million from ABRY
II under this Bridge Loan.
75
<PAGE>
DESCRIPTION OF NEW NOTES
GENERAL
The New Notes are to be issued under an Indenture, dated as of March 20,
1998 (the "Indenture"), between the Issuer and The Bank of New York, as trustee
(the "Trustee"). The Original Notes were also issued under the Indenture in a
private transaction that was not subject to the registration requirements of the
Securities Act. All material terms of the Notes and the Indenture have been
summarized herein, however, because the statements under this caption are
summaries, they are not purported to be complete, and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein. The Indenture is
by its terms subject to and governed by the Trust Indenture Act of 1939, as
amended. Unless otherwise indicated, references under this caption to sections,
"(S)" or articles are references to the Indenture. Where reference is made to
particular provisions of the Indenture or to defined terms not otherwise defined
herein, such provisions or defined terms are incorporated herein by reference.
Copies of the Indenture and the Exchange and Registration Rights Agreement
referred to below (see "--Registration Covenant; Exchange Offer" below) are
filed as exhibits to the Registration Statement filed with the Commission of
which this Prospectus is a part.
The New Notes will be senior unsecured obligations of the Issuer, will rank
pari passu in right of payment with all existing and future senior unsecured
indebtedness of the Issuer (including any Original Notes that remain outstanding
after the Exchange Offer) and senior in right of payment to all existing and
future subordinated debt of the Issuer.
The operations of the Issuer are conducted primarily through its
subsidiaries. As such, the Issuer is primarily dependent upon the cash flows of
its subsidiaries to meet its obligations, including its obligations under the
New Notes. As a result, the New Notes are effectively subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Issuer's subsidiaries. Any right of the Issuer to receive
assets of any of its subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the Holders of the New Notes to
participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors (including trade creditors), except to the extent
that the Issuer is itself recognized as a creditor of such Subsidiary, in which
case the claims of the Issuer would still be subordinate to any security in the
assets of such Subsidiary and any indebtedness of such Subsidiary senior to that
held by the Issuer.
As of the date of the Indenture, all of the Issuer's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Issuer will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries, which will not be subject to many of the restrictive covenants set
forth in the Indenture.
PRINCIPAL, INTEREST AND MATURITY
The Notes mature on March 15, 2008. The Notes are not limited in principal
amount. $325 million aggregate principal amount of Notes were initially issued
on the Closing Date. Thereafter, from time to time, the Issuer may issue
additional Notes subject (other than with respect to the issuance of the New
Notes) to compliance with the provisions of the Indenture described under "--
Covenants--Limitation on Consolidated Debt". The Notes are issued in
denominations of $1,000 and integral multiples thereof. The Original Notes were
offered at a discount from their principal amount at maturity with the initial
Accreted Value per $1,000 in principal amount of Notes equal to $614.74
(representing the original price at which the Notes are being offered). The
Notes accrete (representing the amortization of original issue discount) on a
semi-annual bond equivalent basis using a 360-day year comprised of twelve 30-
day months such that the Accreted Value shall be equal to the full principal
amount at maturity of the Notes on March 15, 2003 (the "Full Accretion Date").
No interest (other than Liquidated Damages, if any) is payable in cash on the
Notes prior to the Full Accretion Date. Beginning on the Full Accretion Date the
Notes will accrue interest at the rate of 10% per annum, which will be payable
in cash semi-annually in
76
<PAGE>
arrears on March 15 and September 15 of each year, commencing September 15,
2003, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the immediately preceding March 1 or
September 1, as the case may be. The Notes bear interest on overdue principal
and premium, if any, and, to the extent permitted by law, overdue interest at
the rate of 11 1/2% per annum. Interest on the Notes is computed on the basis of
a 360-day year comprised of twelve 30-day months. ((S)(S) 301, 307 and 310)
Principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes is payable, and the Notes may be presented for registration of transfer
and exchange, at the office or agency of the Issuer maintained for that purpose
in the Borough of Manhattan, The City of New York, provided that at the option
of the Issuer, payment of interest on the Notes may be made by check mailed to
the address of the Person entitled thereto as it appears in the Note Register.
Until otherwise designated by the Issuer, such office or agency will be the
corporate trust office of the Trustee, as Paying Agent and Registrar. ((S)(S)
301, 305 and 1002)
No service charge will be made for any registration of transfer or exchange
of Notes, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. ((S) 305)
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The New Notes will be represented by one or more Notes in registered,
global form without interest coupons (collectively, the "Global Notes"). The
Global Notes will be deposited upon issuance with the Trustee as custodian for
DTC in New York, New York, and registered in the name of DTC or its nominee, in
each case for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described below.
In addition, the transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Issuer that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests
77
<PAGE>
in the Global Notes).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Notes, see "--Exchange of Book-Entry Notes for
Certificated Notes".
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
Holders thereof under the Indenture for any purpose.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Note registered in the name of DTC or its nominee will be payable by
the Trustee to DTC or its nominee in its capacity as the registered Holder under
the Indenture. Under the terms of the Indenture, the Issuer and the Trustee
will treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, none of the Issuer,
the Trustee nor any agent of the Issuer or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Issuer that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Issuer. None of the Issuer or
the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Notes, and the Issuer and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the Notes for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, will be settled in same-day funds.
DTC has advised the Issuer that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default (as defined below) under the Notes, DTC
reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Issuer believes to be reliable, but the
Issuer takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes
78
<PAGE>
among participants in DTC, it is under no obligation to perform or to continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Issuer nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of its
obligations under the rules and procedures governing its operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Issuer that it is unwilling or
unable to continue as depository for such Global Note and the Issuer thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Issuer, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In addition,
beneficial interests in a Global Note may be exchanged for certificated Notes
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, certificated
Notes delivered in exchange for any Global Note or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depository (in accordance with its customary
procedures).
Optional Redemption
Except as described below, the Notes are not redeemable at the Issuer's
option prior to March 15, 2003.
The Notes are subject to redemption, at the option of the Issuer, in whole
or in part, at any time on or after March 15, 2003 and prior to maturity, upon
not less than 30 nor more than 60 days' notice mailed to each Holder of Notes to
be redeemed at such Holder's address appearing in the Note Register, in amounts
of $1,000 or an integral multiple of $1,000, at the following Redemption Prices
(expressed as percentages of the principal amount) plus accrued interest to but
excluding the Redemption Date (subject to the right of Holders of record on the
immediately preceding Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date), if redeemed during the 12-
month period beginning March 15 of the years indicated below:
REDEMPTION
YEAR PRICE
---- -----
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
The Notes are subject to redemption prior to March 15, 2003 only in the
event that on or before March 15, 2001 the Issuer receives net proceeds from the
sale of its Common Stock in one or more Public Equity Offerings, in which case
the Issuer may, at its option, use all or a portion of any such net proceeds to
redeem Notes in a principal amount of at least $5 million and up to an aggregate
amount equal to 35% of the Notes at a redemption price equal to 110% of the
Accreted Value of the Notes to but excluding the Redemption Date plus accrued
and unpaid Liquidated Damages thereon, if any, to the Redemption Date, provided,
however, that Notes in an amount equal to at least 65% of the principal amount
of the Notes originally issued on the Closing Date remain outstanding after such
redemption (excluding any Notes held by the Issuer or any of its subsidiaries).
Any such redemption must occur on a Redemption Date within 60 days of any such
sale and upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the Note
Register, in face amounts of $1,000 or an integral multiple of $1,000.
If less than all the Notes are to be redeemed, selection of Notes for
redemption will be made by the
79
<PAGE>
Trustee, in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed, or, if the Notes are
not so listed, on a pro rata basis, by lot or in such manner as it shall deem
fair and appropriate, the particular Notes to be redeemed or any portion thereof
that is an integral multiple of $1,000. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption and, unless the Issuer
defaults in the payment of the redemption price, Notes or portions of them
called for redemption will no longer be deemed outstanding. ((S)(S) 203, 1101,
1104, 1105 and 1107).
Mandatory Redemption
The Issuer is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuer to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the Offer to
Purchase described below at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase or, if such Offer to
Purchase is to be consummated prior to the Full Accretion Date, 101% of the
Accreted Value thereof on the date of purchase plus accrued and unpaid
Liquidated Damages thereon, if any, to the date of purchase. Within thirty days
following any Change of Control, the Issuer will mail an Offer to Purchase to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to purchase Notes on the date specified in such
Offer to Purchase, which date shall be no earlier than 20 business days and no
later than 60 days from the date such Offer to Purchase is mailed. The Issuer
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of the Notes pursuant
to the Offer to Purchase.
The Senior Credit Facility restricts the Issuer's ability to prepay debt,
including the Notes, and also provides that certain change of control events
with respect to the Issuer would constitute a default thereunder. Any future
credit agreements or other agreements to which the Issuer becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Issuer is prohibited from purchasing the Notes, the
Issuer could seek the consent of its lenders to the purchase of Notes or could
attempt to refinance the borrowings that contain such prohibition. If the Issuer
does not obtain such a consent or repay such borrowings, the Issuer will remain
prohibited from purchasing Notes. In such case, the Issuer's failure to purchase
tendered Notes would constitute an Event of Default under the Indenture, which
would, in turn, constitute a default under the Senior Credit Facility or such
other future agreements. See "Risk Factors--Ability to Purchase Notes Upon a
Change of Control".
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Issuer
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Issuer is not required to make an Offer to Purchase upon a Change of
Control if a third party makes the Offer to Purchase in the manner, at the times
and otherwise in compliance with the requirements set forth in the Indenture
applicable to the Offer to Purchase made by the Issuer and purchases all Notes
validly tendered and
80
<PAGE>
not withdrawn under such Offer to Purchase.
The consequences of a Change of Control may result in the use of a
substantial amount of the Company's available funds. The Company, therefore,
may not have sufficient funds necessary to obtain additional financing in the
future.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Issuer and its Subsidiaries, taken as a whole, to any Person or group of related
Persons, as defined in Section 13(d) of the Exchange Act (a "Group"), other than
to Permitted Holders; (ii) the approval by the holders of Capital Stock of the
Issuer of any plan or proposal for the liquidation or dissolution of the Issuer
(whether or not otherwise in compliance with the provisions of the applicable
Indenture); (iii) any Person or Group (other than Permitted Holders) shall
become the owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Voting Stock of the Issuer or any successor to all or
substantially all of its assets; or (iv) the first day on which a majority of
the members of the Board of Directors of the Issuer are not Continuing
Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuer and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all", there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Issuer to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Issuer and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Issuer who (i) was a member of such Board of
Directors on the date of the original issuance of the Notes or (ii) was
nominated for election or elected to such Board of Directors by any of the
Permitted Holders or with the approval of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election.
"Permitted Holders" means as of the date of determination (i) Andrew Banks,
Royce Yudkoff or Robert Wolsey and any of their respective spouses, estates,
lineal descendants (including adoptive children), heirs, executors, personal
representatives, administrators and trusts for any of their benefit and (ii) any
other Person, the majority of whose Voting Stock is directly or indirectly owned
by any Person described in clause (i) above.
Asset Dispositions
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, consummate an Asset Disposition unless (i) the Issuer
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Disposition at least equal to the fair
market value of the assets sold or otherwise disposed of (as evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee), (ii) except in the case of a Tower Asset Exchange, at
least 75% of the consideration received by the Issuer or the Restricted
Subsidiary, as the case may be, from such Asset Disposition shall be cash or
Cash Equivalents; provided that the amount of (a) any liabilities (as shown on
the Issuer's or such Restricted Subsidiary's most recent balance sheet) of the
Issuer or any such Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Issuer
or such Restricted Subsidiary from further liability, (b) any securities, notes
or other obligations received by the Issuer or any such Restricted Subsidiary
from such transferee that are converted by the Issuer or such Restricted
Subsidiary into cash (to the extent of the cash received) within 20 days of the
applicable Asset Disposition and (c) any liabilities (as shown on the Issuer's
or such Restricted Subsidiary's most recent balance sheet) of a Restricted
Subsidiary all of the Capital Stock of which is disposed of
81
<PAGE>
in such Asset Disposition, which liabilities have ceased to be liabilities of
the Issuer or any Restricted Subsidiary as a result of such Asset Disposition,
shall be considered cash for purposes of such provision, and (iii) after the
consummation of such Asset Disposition, the Issuer shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Disposition within 365 days of receipt thereof, less any amounts invested in
assets related to, or the majority voting Capital Stock of entities operating
in, the same line of business as the Issuer or a business reasonably ancillary
thereto, to permanently repay Debt under the Senior Credit Facility or any
renewal, extension, refinancing or refunding thereof to the extent that any such
instrument would require or, at the Issuer's option, permit such application or
prohibit the Offer to Purchase referred to below and, in the case of any Debt
under any revolving credit facility, effect a commitment reduction under such
revolving credit facility. Pending the final application of any such Net Cash
Proceeds, the Issuer or such Restricted Subsidiary may temporarily reduce
indebtedness under a revolving credit facility, if any, or otherwise invest such
Net Cash Proceeds in Cash Equivalents. Any Net Cash Proceeds from Asset
Dispositions that are not applied or invested as provided will be deemed to
constitute "Excess Proceeds," which shall be applied by the Issuer or such
Restricted Subsidiary to make an Offer to Purchase that amount of Notes equal to
the amount of Excess Proceeds at a price equal to 100% of the principal amount
of the Notes (or, if such Offer to Purchase is to be consummated prior to the
Full Accretion Date, 100% of the Accreted Value of Notes) to be purchased, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase and, to the extent required by the terms thereof, any other Debt of
the Issuer that is pari passu with the Notes or Debt of a Restricted Subsidiary
at a price no greater than 100% of the principal amount thereof plus accrued
interest to the date of purchase or, if such Debt was issued at a discount, 100%
of the accreted value thereof to the date of purchase on a pro rata basis with
the Notes; provided, however, that if at any time any non-cash consideration
received by the Issuer or any Restricted Subsidiary, as the case may be in
connection with any Asset Disposition is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such non-
cash consideration), then such conversion or disposition shall be deemed to
constitute an Asset Disposition hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. Each Offer to Purchase shall
be mailed within 390 days following the Asset Disposition that required such
Offer to Purchase. Following the completion of an Offer to Purchase, to the
extent there are any remaining Excess Proceeds the Issuer may use such Excess
Proceeds to any use which is not otherwise prohibited by the Indenture.
Notwithstanding the foregoing, if the Excess Proceeds resulting from an
Asset Disposition are less than $10.0 million, the application of such Excess
Proceeds to an Offer to Purchase may be deferred until such time as the sum of
such Excess Proceeds plus the aggregate amount of all Excess Proceeds arising
subsequent to such Asset Disposition from all subsequent Asset Dispositions by
the Issuer and its Restricted Subsidiaries aggregates at least $10.0 million, at
which time the Issuer or such Restricted Subsidiary shall apply all Excess
Proceeds that have been so deferred to make an Offer to Purchase as provided
above.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes pursuant to such Offer to Purchase.
Registration Covenant; Exchange Offer
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. The Issuer and the Initial Purchasers entered into the
Registration Rights Agreement pursuant to which the Issuer agreed, for the
benefit of the Holders of the Original Notes, to file with the Commission the
Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the New Notes. The registration statement of
which this Prospectus is a part, constitutes the Exchange Offer Registration
Statement. Upon the effectiveness of the Exchange Offer Registration Statement,
the Issuer will offer to the Holders of Transfer Restricted Securities the
opportunity to exchange their Transfer Restricted Securities for New Notes. The
Registration Rights Agreement provides that if (i) the Issuer is not required to
file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by
82
<PAGE>
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Issuer prior to the 20th day following consummation of
the Exchange Offer that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns Notes acquired directly from the Issuer or an affiliate
of the Issuer, the Issuer will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions relating to the provisions of information in connection with
the Shelf Registration Statement. The Issuer has agreed that it will use all
commercially reasonable efforts to cause any Shelf Registration Statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each Original Note until
(i) the date on which such Original Note has been exchanged by a person other
than a broker-dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Original Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Original Note is distributed to the public pursuant to Rule 144 under the
Act.
The Registration Rights Agreement provides that (i) the Issuer will file an
Exchange Offer Registration Statement with the Commission on or prior to 60 days
after the Closing Date, (ii) the Issuer will use all commercially available
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 150 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Issuer will commence the Exchange Offer and use its best efforts to issue on
or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, New Notes in
exchange for Original Notes tendered prior thereto in the Exchange Offer and
(iv) if obligated to file the Shelf Registration Statement, the Issuer will use
its best efforts to file the Shelf Registration Statement with the Commission on
or prior to 45 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Issuer fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Issuer fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Issuer will pay liquidated damages ("Liquidated Damages") to each
Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default, in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of the
Liquidated Damages will increase by a additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $.50 per week per $1,000 principal
amount of Notes. All accrued Liquidated Damages will be paid by the Issuer on
each Damages Payment Date to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Original Notes are required to make certain representations to
the Issuer (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights in order to have their Original
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages
83
<PAGE>
set forth above.
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Issuer may not, and may not permit any Restricted Subsidiary of the
Issuer to Incur any Debt unless the ratio of (a) the aggregate consolidated
principal amount of Debt of the Issuer and its Restricted Subsidiaries
outstanding as of the most recent available quarterly or annual balance sheet,
after giving pro forma effect to the Incurrence of such Debt and any other Debt
Incurred since such balance sheet date that remains outstanding and the receipt
and application of the proceeds thereof, less the principal amount of any Debt
that was outstanding as of such balance sheet date that no longer remains
outstanding, to (b) Adjusted Consolidated Cash Flow, determined on a pro forma
basis as if any such Debt had been incurred and the proceeds thereof had been
applied at the beginning of the relevant fiscal quarter, would be less than or
equal to 7.0 to 1.
Notwithstanding the foregoing limitation, the following Debt may be
Incurred:
(i) Permitted Senior Bank Debt;
(ii) Debt owed by the Issuer to any Wholly Owned Restricted
Subsidiary of the Issuer for which fair value has been received or Debt
owed by a Restricted Subsidiary of the Issuer to the Issuer or a Wholly
Owned Restricted Subsidiary of the Issuer; provided, however, that (a) any
such Debt owing by the Issuer to a Wholly Owned Restricted Subsidiary shall
be Subordinated Debt evidenced by an intercompany promissory note and (b)
upon either (1) the transfer or other disposition by such Wholly Owned
Restricted Subsidiary or the Issuer of any Debt so permitted to a Person
other than the Issuer or another Wholly Owned Restricted Subsidiary of the
Issuer or (2) the issuance (other than directors' qualifying shares), sale,
lease, transfer or other disposition of shares of Capital Stock (including
by consolidation or merger) of such Wholly Owned Restricted Subsidiary to a
Person other than the Issuer or another such Wholly Owned Restricted
Subsidiary, the provisions of this clause (ii) shall no longer be
applicable to such Debt and such Debt shall be deemed to have been Incurred
at the time of such transfer or other disposition;
(iii) Debt consisting of Permitted Interest Rate or Currency
Protection Agreements;
(iv) Debt which is exchanged for or the proceeds of which are used to
refinance or refund, or any extension or renewal of (each of the foregoing,
a "refinancing"), (a) the Notes, (b) Debt incurred pursuant to clause (v)
of this paragraph or (c) Debt that is not described in any other clause
hereof that is outstanding at the date of original issuance of the Notes
after giving effect to the application of the proceeds thereof (as
described in a schedule to the Indenture), in each case in an aggregate
principal amount not to exceed the principal amount of the Debt so
refinanced plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Debt so refinanced or
the amount of any premium reasonably determined by the Issuer as necessary
to accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the expenses of the Issuer or the Restricted
Subsidiary, as the case may be, Incurred in connection with such
refinancing; provided, however, that (A) Debt the proceeds of which are
used to refinance the Notes or Debt which is pari passu with or subordinate
in right of payment to the Notes shall only be permitted if (x) in the case
of any refinancing of the Notes or Debt which is pari passu to the Notes,
the refinancing Debt is Incurred by the Issuer and made pari passu to the
Notes or subordinated to the Notes, and (y) in the case of any refinancing
of Debt which is subordinated to the Notes, the refinancing Debt is
Incurred by the Issuer and constitutes Subordinated Debt; (B) the
84
<PAGE>
refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (1) does not provide for
payments of principal of such Debt at the stated maturity thereof or by way
of a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof (including any redemption,
defeasance, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder or a
redemption or retirement permitted in clause (2) below), in each case prior
to the stated maturity of the Debt being refinanced and (2) does not permit
redemption or other retirement (including pursuant to an offer to purchase)
of such debt at the option of the holder thereof prior to the final stated
maturity of the Debt being refinanced, other than a redemption or other
retirement at the option of the holder of such Debt (including pursuant to
an offer to purchase) which is conditioned upon provisions substantially
similar to those described under "Repurchase at Option of Holders"; (C) in
the case of any refinancing of Debt Incurred by the Issuer, the refinancing
Debt may be Incurred only by the Issuer, and in the case of any refinancing
of Debt Incurred by a Restricted Subsidiary, the refinancing Debt may be
Incurred only by such Restricted Subsidiary or the Issuer; and (D) in the
case of any refinancing of Preferred Stock of a Restricted Subsidiary, such
Preferred Stock may be refinanced only with Preferred Stock of such
Restricted Subsidiary or the Issuer;
(v) Acquisition Debt;
(vi) ABRY Subordinated Debt;
(vii) the New Notes issued in the Exchange Offer;
(viii) Subordinated Debt of the Issuer owed to any of its shareholders
not to exceed in principal face amount in the aggregate for any taxable
year the amount necessary to enable Pinnacle Towers to obtain the maximum
possible deduction for dividends paid, as defined in Section 561 of the
Code and further described in Section 857 of the Internal Revenue Code for
such year, taking into account the sum of all distributions previously made
to shareholders of the Issuer permitted by the provisions described in
clause (iii) of the second paragraph under "Limitation on Restricted
Payments" for such fiscal year, provided that, any determination under
Section 857 of the Internal Revenue Code shall take into consideration for
such purpose the necessity of increasing the aggregate amounts distributed
to reflect the fact that distributions in payment of any preferred return
on any class of stock will be treated as being made partly from earnings
and partly from capital. ((S) 1008)
LIMITATION ON SUBORDINATED DEBT OF RESTRICTED SUBSIDIARIES
The Issuer may not permit any Restricted Subsidiary to Incur any Debt that
is subordinated in right of payment to any other Debt of such Restricted
Subsidiary, other than Debt that is owed to the Issuer or any other Restricted
Subsidiary.
LIMITATION ON GUARANTEES OF ISSUER DEBT BY RESTRICTED SUBSIDIARIES
The Issuer may not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee, assume or in any other manner become liable for the
payment of any Debt of the Issuer unless: (i) (A) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture providing for a
Guarantee of payment of the Notes by such Restricted Subsidiary; and (B) with
respect to any Guarantee of Debt of the Issuer that is subordinate in right of
payment to the Notes, such Guarantee shall be subordinated to such Restricted
Subsidiary's Guarantee with respect to the Notes at least to the same extent as
such Debt is subordinated to the Notes, and (ii) such Restricted Subsidiary
waives, and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Issuer or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Guarantee until the Notes have
been paid in full. ((S) 1010)
85
<PAGE>
LIMITATION ON RESTRICTED PAYMENTS
The Issuer (i) may not, and may not permit any Restricted Subsidiary of the
Issuer to, directly or indirectly, declare or pay any dividend or make any
distribution (including any payment in connection with any merger or
consolidation derived from assets of the Issuer or any Restricted Subsidiary) in
respect of its Capital Stock or to the holders thereof, excluding (a) any
dividends or distributions by the Issuer payable solely in shares of its Capital
Stock (other than Redeemable Stock) or in options, warrants or other rights to
acquire its Capital Stock (other than Redeemable Stock), and (b) in the case of
a Restricted Subsidiary, dividends or distributions payable to the Issuer or a
Wholly Owned Restricted Subsidiary or pro rata dividends or distributions, (ii)
may not, and may not permit any Restricted Subsidiary to, purchase, redeem, or
otherwise acquire or retire for value (a) any Capital Stock of the Issuer or any
Related Person of the Issuer or (b) any options, warrants or other rights to
acquire shares of Capital Stock of the Issuer or any Related Person of the
Issuer or any securities convertible or exchangeable into shares of Capital
Stock of the Issuer or any Related Person of the Issuer, excluding any purchase
from the Issuer by a Wholly Owned Restricted Subsidiary of any Capital Stock of
the Issuer or options, warrants or other rights to acquire shares of Capital
Stock of the Issuer or any securities convertible or exchangeable into shares of
Capital Stock of the Issuer, (iii) may not make, or permit any Restricted
Subsidiary to make, any Investment in any Unrestricted Subsidiary or any
Affiliate or any Person that would become an Affiliate after giving effect
thereto or any Related Person, other than an Investment in the Issuer or a
Restricted Subsidiary or a Person that will become or be merged with or into or
consolidated with a Restricted Subsidiary as a result of such Investment and
which is not subject to any restriction that would prevent such Restricted
Subsidiary from repaying such Investment and (iv) may not, and may not permit
any Restricted Subsidiary to, redeem, repurchase, defease or otherwise acquire
or retire for value prior to any scheduled maturity, repayment or sinking fund
payment Debt of the Issuer (other than ABRY Subordinated Debt) which is pari
passu with or subordinate in right of payment to the Notes (each of clauses (i)
through (iv) being a "Restricted Payment") if:
(1) an Event of Default, or an event that with the passing of time or
the giving of notice, or both, would constitute an Event of Default, shall
have occurred and is continuing or would result from such Restricted
Payment, or
(2) after giving pro forma effect to such Restricted Payment as if
such Restricted Payment had been made at the beginning of the applicable
fiscal-quarter period, the Issuer could not Incur at least $1.00 of
additional Debt pursuant to the terms of the Indenture described in the
first paragraph of "Limitation on Consolidated Debt" above, or
(3) upon giving effect to such Restricted Payment, the aggregate of
all Restricted Payments from the date of original issuance of the Notes
exceeds the sum of: (a) cumulative Consolidated Cash Flow since the date of
original issuance of the Notes through the last day of the last full fiscal
quarter ending immediately preceding the date of such Restricted Payment
for which quarterly or annual financial statements are available; minus (b)
1.75 times cumulative Consolidated Interest Expense of the Issuer since the
date of original issuance of the Notes through the last day of the last
full fiscal quarter ending immediately preceding the date of such
Restricted Payment for which quarterly or annual financial statements are
available; plus (c) $10 million.
Prior to the making of any Restricted Payment, the Issuer shall deliver to the
Trustee an Officers' Certificate setting forth the computations by which the
determinations required by clauses (2) and (3) above were made and stating that
no Event of Default, or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default, has occurred and is
continuing or will result from such Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would constitute
an Event of Default, shall have occurred and is continuing or would result
therefrom:
86
<PAGE>
(i) the Issuer may make Restricted Payments in an aggregate amount
up to the amount of the net proceeds received by the Issuer after the date
of original issuance of the Notes, including the fair market value of
property other than cash (determined in good faith by the Board of
Directors as evidenced by a resolution of the Board of Directors filed with
the Trustee), from contributions of capital or the issuance and sale (other
than to a Subsidiary or from or to an employee stock ownership plan
financed by loans from the Issuer or a Subsidiary of the Issuer) of Capital
Stock (other than Redeemable Stock) of the Issuer, options, warrants or
other rights to acquire Capital Stock (other than Redeemable Stock) of the
Issuer and Debt of the Issuer that has been converted into or exchanged for
Capital Stock (other than Redeemable Stock and other than by or from a
Subsidiary) of the Issuer after the date of original issuance of the Notes;
(ii) the Issuer and any Restricted Subsidiary of the Issuer may pay
any dividend on Capital Stock of any class within 60 days after the
declaration thereof if, on the date when the dividend was declared, the
Issuer or such Restricted Subsidiary could have paid such dividend in
accordance with the foregoing provisions;
(iii)(a) the Issuer may use cash distributions received from Pinnacle
Towers to make distributions to shareholders of the Issuer, each such
distribution in an aggregate amount per taxable year equal to (1) the
amount of gross income actually includible by the shareholders of the
Issuer on their tax returns with respect to such taxable year solely as a
result of the operations of the Issuer and its Subsidiaries, multiplied by
(2) the sum of the highest marginal federal and highest marginal state
income tax rates applicable to one or more of the shareholders of the
Issuer; and (b) Pinnacle Towers may make one or more distributions with
respect to any taxable year, which distribution may consist of subordinated
debt of Pinnacle Towers, and, to the extent such distribution is made by
Pinnacle Towers, the Issuer may make one or more distributions to its
shareholders consisting of Subordinated Debt of the Issuer, each such
distribution constituting Subordinated Debt not to exceed in the aggregate
an amount necessary to enable the Issuer to obtain the maximum possible
deduction for dividends paid, as defined in Section 561 of the Internal
Revenue Code and further described in Section 857 of the Internal Revenue
Code, for such year, taking into account the sum of all distributions
previously paid to shareholders of the Issuer in accordance with the terms
of clause (a) of this clause (iii), provided that, in connection with any
such distribution, the Issuer shall take into consideration for such
purpose the necessity of increasing the aggregate amounts distributed to
reflect the fact that distributions in payment of any preferred return on
any class of stock will be treated as being made partly from earnings and
profits and partly from capital;
(iv) the Issuer may repurchase Capital Stock of the Issuer owned by
any deceased shareholder of the Issuer (a) to the extent that the Issuer or
any Restricted Subsidiary was the beneficiary of a key-man life insurance
policy on such shareholder and (b) in an amount not to exceed the net
proceeds received by the Issuer or such Restricted Subsidiary from such
key-man life insurance;
(v) the Issuer may repurchase Capital Stock of the Issuer owned by
either any deceased shareholder of the Issuer or former employee of the
Issuer, provided that the aggregate amount of such repurchases in any
twelve-month period may not exceed $1 million; and
(vi) the Issuer may refinance any Debt otherwise permitted by clause
(iv) of the second paragraph under "Limitation on Consolidated Debt" above.
Any payment made pursuant to clause (ii) of this paragraph shall be a Restricted
Payment for purposes of calculating aggregate Restricted Payments pursuant to
the requirements of clause (3) of the preceding paragraph and any payment made
pursuant to clauses (i), (iii), (iv), (v) and (vi) of this paragraph shall not
be a Restricted Payment for purposes of calculating aggregate Restricted
Payments pursuant to the requirements of clause (3) of the preceding paragraph.
((S) 1011)
87
<PAGE>
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Issuer may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary (i) to pay dividends (in cash or otherwise) or make any other
distributions in respect of its Capital Stock owned by the Issuer or any other
Restricted Subsidiary or pay any Debt or other obligation owed to the Issuer or
any other Restricted Subsidiary; (ii) to make loans or advances to the Issuer or
any other Restricted Subsidiary; or (iii) to transfer any of its property or
assets to the Issuer or any other Restricted Subsidiary. Notwithstanding the
foregoing, the Issuer may, and may permit any Restricted Subsidiary to, suffer
to exist any such encumbrance or restriction:
(a) pursuant to any agreement in effect on the date of original
issuance of the Notes (including the Senior Credit Facility and the
agreements executed in connection therewith) as described in a schedule to
the Indenture;
(b) pursuant to an agreement relating to any Debt Incurred by a Person
(other than a Restricted Subsidiary existing on the date of original
issuance of the Notes or any Restricted Subsidiary carrying on any of the
businesses of any such Restricted Subsidiary) prior to the date on which
such Person became a Restricted Subsidiary and outstanding on such date and
not Incurred in anticipation of becoming a Restricted Subsidiary, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired;
(c) pursuant to an agreement effecting a renewal, extension, refunding
or refinancing of Debt Incurred pursuant to an agreement referred to in
clause (a) or (b) above, provided, however, that the provisions contained
in such renewal, extension, refunding or refinancing agreement relating to
such encumbrance or restriction are no more restrictive in any material
respect than the provisions contained in the agreement the subject thereof,
as determined in good faith by the Board of Directors and evidenced by a
resolution of the Board of Directors filed with the Trustee;
(d) in the case of clause (iii) above, restrictions contained in any
security agreement (including a capital lease) securing Debt of a
Restricted Subsidiary otherwise permitted under the Indenture, but only to
the extent such restrictions restrict the transfer of the property subject
to such security agreement;
(e) in the case of clause (iii) above, customary nonassignment
provisions entered into in the ordinary course of business in leases and
other contracts to the extent such provisions restrict the transfer or
subletting of any such lease or the assignment of rights under any such
contract;
(f) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary, provided that consummation of such transaction
would not result in an Event of Default or an event that, with the passing
of time or the giving of notice or both, would constitute an Event of
Default, that such restriction terminates if such transaction is closed or
abandoned and that the closing or abandonment of such transaction occurs
within one year of the date such agreement was entered into; or
(g) such encumbrance or restriction is the result of applicable
corporate law or regulation relating to the payment of dividends or
distributions. ((S) 1012)
88
<PAGE>
LIMITATION ON LIENS
The Issuer may not, and may not permit any Restricted Subsidiary to, Incur
or suffer to exist any Lien on or with respect to any property or assets now
owned or hereafter acquired to secure any Debt without making, or causing such
Restricted Subsidiary to make, effective provision for securing the Notes (x)
equally and ratably with such Debt as to such property for so long as such Debt
will be so secured or (y) in the event such Debt is Debt of the Issuer which is
subordinate in right of payment to the Notes, prior to such Debt as to such
property for so long as such Debt will be so secured.
The foregoing restrictions shall not apply to:
(i) Liens in existence on the date of original issuance of the
Notes (other than Liens described in clause (iv) below), as described in a
schedule to the Indenture;
(ii) Liens securing only the Notes;
(iii) Liens in favor of the Issuer;
(iv) Liens to secure Debt under the Credit Agreement and any
extension, renewal, refinancing or refunding thereof (or successive
extensions, renewals, refinancings or refundings) so long as the Incurrence
of such Debt is permitted under the Indenture;
(v) Liens on real or personal property of the Issuer or a
Restricted Subsidiary as described in the definition of "Purchase Money
Secured Debt" to secure Purchase Money Secured Debt;
(vi) Liens on property existing immediately prior to the time of
acquisition thereof (and not Incurred in anticipation of the financing of
such acquisition);
(vii) Liens on property of a Person (a) existing at the time such
Person becomes a Restricted Subsidiary and not incurred in anticipation of
becoming a Restricted Subsidiary or (b) existing immediately prior to the
time such Person is merged or consolidated with or into the Issuer or any
Restricted Subsidiary and not incurred in anticipation of such merger or
consolidation;
(viii) any interest in or title of a lessor to any property subject to
a Capital Lease Obligation which is permitted under the Indenture; or
(ix) Liens to secure Debt Incurred to extend, renew, refinance or
refund (or successive extensions, renewals, refinancings or refundings), in
whole or in part, Debt secured by any Lien referred to in the foregoing
clauses (i), (ii), (v), (vi) and (vii) so long as such Lien does not extend
to any other property and the principal amount of Debt so secured is not
increased except as otherwise permitted under clause (iv) of "Limitation on
Consolidated Debt." ((S) 1013)
LIMITATION ON OWNERSHIP OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Issuer may not, and may not permit any Restricted Subsidiary to, issue,
transfer, convey, lease or otherwise dispose of any shares of Capital Stock of a
Restricted Subsidiary or securities convertible or exchangeable into, or
options, warrants, rights or any other interest with respect to, Capital Stock
of a Restricted Subsidiary to any person other than the Issuer or a Wholly Owned
Restricted Subsidiary except in a transaction consisting of a sale of all of the
Capital Stock of such Restricted Subsidiary owned by the Issuer and any
Restricted Subsidiary and that complies with the provisions described under "--
Limitation on Asset Dispositions" above to the extent such provisions apply.
((S) 1014)
89
<PAGE>
TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Issuer may not, and may not permit any Restricted Subsidiary to, enter
into any transaction (or series of related transactions) not in the ordinary
course of business with an Affiliate or Related Person of the Issuer (other than
the Issuer or a Wholly Owned Restricted Subsidiary) involving aggregate
consideration in excess of $1.0 million, including any Investment, either
directly or indirectly, unless such transaction is on terms no less favorable to
the Issuer or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or
Related Person and is in the best interests of the Issuer or such Restricted
Subsidiary. For any transaction (or series of related transactions) that
involves less than or equal to $10 million, the Chief Executive Officer or Chief
Operating Officer of the Issuer shall determine that the transaction satisfies
the above criteria and shall evidence such a determination by an Officer's
certificate filed with the Trustee. For any transaction that involves in excess
of $10 million, a majority of the disinterested members of the Board of
Directors shall determine that the transaction satisfies the above criteria and
shall evidence such a determination by a Board Resolution filed with the
Trustee. ((S) 1017)
PROVISION OF FINANCIAL INFORMATION
Whether or not the Issuer is required to be subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, or any successor provision
thereto, from and after the earlier of (a) the effectiveness of either the
Exchange Offer Registration Statement or the Shelf Registration Statement or (b)
the date that is 150 days after the Closing Date the Issuer shall file with the
Commission the annual reports, quarterly reports and other documents which the
Issuer would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Issuer were so
required, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Issuer would have
been required so to file such documents if the Issuer were so required. The
Issuer shall also in any event (a) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders, as their names and addresses appear in the
Security Register, without cost to such Holders, and (ii) file with the Trustee,
copies of the annual reports, quarterly reports and other documents which the
Issuer files with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto or would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provisions
thereto if the Issuer were required to be subject to such Sections and (b) if
filing such documents by the Issuer with the Commission is not permitted under
the Securities Exchange Act of 1934, promptly upon written request supply copies
of such documents to any prospective Holder. ((S) 1018)
UNRESTRICTED SUBSIDIARIES
The Issuer may designate any Subsidiary of the Issuer to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. "Unrestricted
Subsidiary" means (1) any Subsidiary designated as such by the Board of
Directors as set forth below where (a) neither the Issuer nor any of its other
Subsidiaries (other than another Unrestricted Subsidiary) (i) provides credit
support for, or Guarantee of, any Debt of such Subsidiary or any Subsidiary of
such Subsidiary (including any undertaking, agreement or instrument evidencing
such Debt) or (ii) is directly or indirectly liable for any Debt of such
Subsidiary or any Subsidiary of such Subsidiary, and (b) no default with respect
to any Debt of such Subsidiary or any Subsidiary of such Subsidiary (including
any right which the holders thereof may have to take enforcement action against
such Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Debt of the Issuer and its Subsidiaries (other than another
Unrestricted Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, any other Subsidiary of the Issuer which is not a Subsidiary of the
Subsidiary to be so designated or otherwise an Unrestricted Subsidiary, provided
that either
90
<PAGE>
(x) the Subsidiary to be so designated has total assets of $1,000 or less or (y)
immediately after giving effect to such designation, the Issuer could Incur at
least $1.00 of additional Debt pursuant to the first paragraph under
"--Limitation on Debt" and provided, further, that the Issuer could make a
Restricted Payment in an amount equal to the greater of the fair market value
and book value of such Subsidiary pursuant to "Limitation on Restricted
Payments" and such amount is thereafter treated as a Restricted Payment for the
purpose of calculating the aggregate amount available for Restricted Payments
thereunder. ((S) 101)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Issuer may not, in a single transaction or a series of related
transactions, (i) consolidate or merge with or into any other Person or permit
any other Person to consolidate or merge with or into the Issuer or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
substantially all of its assets, unless:
(1) in a transaction in which the Issuer does not survive or in which
the Issuer sells, leases or otherwise disposes of all or substantially all
of its assets, the successor entity to the Issuer is organized under the
laws of the United States of America, any State thereof or the District of
Columbia, and shall expressly assume, by a supplemental indenture executed
and delivered to the Trustee in form satisfactory to the Trustee, all of
the Issuer's obligations under the Indenture;
(2) immediately before and after giving effect to such transaction and
treating any Debt which becomes an obligation of the Issuer or a Restricted
Subsidiary as a result of such transaction as having been Incurred by the
Issuer or such Restricted Subsidiary at the time of the transaction, no
Event of Default or event that with the passing of time or the giving of
notice, or both, would constitute an Event of Default shall have occurred
and be continuing;
(3) except in the case of any such consolidation or merger of the
Issuer with or into, or any such transfer, sale, lease or other disposition
of assets to, a Wholly Owned Restricted Subsidiary, immediately after
giving effect to such transaction, the Consolidated Net Worth of the Issuer
(or other successor entity to the Issuer) is equal to or greater than that
of the Issuer immediately prior to the transaction;
(4) except in the case of any such consolidation or merger of the
Issuer with or into, or any such transfer, sale, lease or other disposition
of assets to, a Wholly Owned Restricted Subsidiary, immediately after
giving effect to such transaction and treating any Debt which becomes an
obligation of the Issuer or a Restricted Subsidiary as a result of such
transaction as having been Incurred by the Issuer or such Restricted
Subsidiary at the time of the transaction, the Issuer (including any
successor entity to the Issuer) could Incur at least $1.00 of additional
Debt pursuant to the provisions of the Indenture described in the first
paragraph under "Limitation on Debt" above;
(5) if, as a result of any such transaction, property or assets of the
Issuer would become subject to a Lien prohibited by the provisions of the
Indenture described under "Limitation on Liens above, the Issuer or the
successor entity to the Issuer shall have secured the Notes as required by
said covenant; and
(6) certain other conditions are met. ((S) 801)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. ((S) 101)
"ABRY Subordinated Debt" means Debt of the Issuer in principal amount not
to exceed $15 million in the
91
<PAGE>
aggregate at any time outstanding (a) that is owed to ABRY II, ABRY, any other
investment fund controlled by ABRY, Robert Wolsey, or any Person the majority of
whose Voting Stock is directly or indirectly owned by Robert Wolsey and (b) as
to which the payment of principal of (and premium, if any) and interest and
other payment obligations in respect of such Debt shall be subordinate to the
prior payment in full of the Notes to at least the following extent: (i) no
payments of principal of (or premium, if any) or interest on or otherwise due in
respect of such Debt may be permitted for so long as any default in the payment
of principal (or premium, if any) or interest on the Notes exists; (ii) in the
event that any other default that with the passing of time or the giving of
notice, or both, would constitute an event of default exists with respect to the
Notes, upon notice by 25% or more in principal amount of the Notes to the
Trustee, the Trustee shall have the right to give notice to the Issuer and the
holders of such Debt (or trustees or agents therefor) of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be made for a period of 179 days from
the date of such notice.
"Accreted Value" means, as of any date prior to March 15, 2003, an amount
per $1,000 principal amount at maturity of Notes that is equal to the sum of (a)
the initial offering price ($614.74 per $1,000 principal amount at maturity of
Notes) of such Notes and (b) the portion of the excess of the principal amount
of such Notes over such initial offering price which shall have been amortized
through such date, such amount to be so amortized on a daily basis and
compounded semi-annually on each March 15 and September 15 at the rate of 10%
per annum from the date of original issue of the Notes through the date of
determination computed on the basis of a 360-day year of twelve 30-day months,
and as of any date on or after March 15, 2003, the principal amount of each
Note.
"Acquisition Debt" means with respect to any specified Person, Debt that is
Incurred in connection with an acquisition of assets consisting of (i) Debt
Incurred for the purpose of financing all or part of the cost of an acquisition
by such Person or any of its Restricted Subsidiaries of assets (including
Capital Stock of a Person that will become a Restricted Subsidiary of such
Person or be merged or consolidated with or into such Person or a Restricted
Subsidiary of such Person) in an amount not to exceed 100% of the purchase price
of such acquisition, (ii) Debt of any other Person existing at the time such
other Person merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Debt Incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, or (iii) Debt secured by a Lien encumbering
any assets acquired by such specified Person, provided in each case (i), (ii)
and (iii) that after giving pro forma effect to the Incurrence of such Debt the
ratio of (a) the aggregate consolidated principal amount of Debt of the Issuer
and its Restricted Subsidiaries outstanding as of the most recent available
quarterly or annual balance sheet, after giving pro forma effect to the
Incurrence of such Debt and any other Debt Incurred since such balance sheet
date that remains outstanding and the receipt and application of the proceeds
thereof, to (b) Adjusted Consolidated Cash Flow (after giving effect to such
acquisition) is not greater than such actual ratio prior to the Incurrence of
such Debt.
"Adjusted Consolidated Cash Flow" means the Consolidated Cash Flow for the
most recent fiscal quarter for which financial statements are available,
determined (i) after giving effect on a pro forma basis to (a) any Asset
Disposition or acquisition of assets (including acquisitions of other Persons by
merger, consolidation or purchase of Capital Stock) by the Issuer or any
Restricted Subsidiaries during or after such quarter as if such Asset
Disposition or acquisition had taken place on the first day of such quarter,
(b) any new lease or Site Management Contract entered into by the Issuer or any
Restricted Subsidiary in the ordinary course of business with respect to Tower
Assets during or after such quarter as if such new lease or Site Management
Contract had been signed on the first day of such quarter and the rent required
by the terms of such lease or Site Management Contract for such quarter had been
received by the Issuer or a Restricted Subsidiary during such quarter, (c) the
loss after the first day of such quarter of any lease or Site Management
Contract of the Issuer or a Restricted Subsidiary with respect to any Tower
Assets that was in effect on the first
92
<PAGE>
day of such quarter as if such lease or Site Management Contract had not been in
effect during such quarter and no rent under such lease had been received during
such quarter, and (d) any rent increases received by the Issuer or any
Restricted Subsidiary during or after such quarter related to leases or Site
Management Contracts on Tower Assets as if such increased rental rate had been
in effect on the first day of such quarter and the Issuer had received such
increased amount of rent during such quarter, and (ii) as adjusted to add back
Corporate Development Expenses which had been deducted from consolidated
revenues in determining Consolidated Net Income for such quarter, multiplied by
four.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted Subsidiaries
(including a consolidation or merger or other sale of any such Restricted
Subsidiary with, into or to another Person in a transaction in which such
Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Restricted Subsidiary of such Person to such Person or a Wholly
Owned Restricted Subsidiary of such Person or by such Person to a Wholly Owned
Restricted Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary of such Person, (ii) substantially all of the assets of such Person
or any of its Restricted Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its Restricted
Subsidiaries outside of the ordinary course of business, provided in each case
that the aggregate consideration for such transfer, conveyance, sale, lease or
other disposition is equal to $1 million or more.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty. The principal amount of such obligation shall be the capitalized amount
thereof that would appear on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of six months from the
date of acquisition, (ii) certificates of deposit with maturities of not more
than six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500.0
million and a Thompson Bank Watch Rating of "B" or better, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each case
maturing within six months after the date of acquisition and (v) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(iv) of this definition.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period increased
93
<PAGE>
by the sum of (i) Consolidated Interest Expense for such period, plus (ii)
Consolidated Income Tax Expense for such period, plus (iii) the consolidated
depreciation and amortization expense included in the income statement of the
Issuer and its Restricted Subsidiaries for such period, plus (iv) other non-cash
charges of such Person for such period deducted from consolidated revenues in
determining Consolidated Net Income for such period, minus (v) other non-cash
items of the Issuer and its Restricted Subsidiaries for such period increasing
consolidated revenues in determining Consolidated Net Income for such period.
"Consolidated Income Tax Expense" for any period means the consolidated
provision for income taxes of the Issuer and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Interest Expense" means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Issuer and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities; (iii) fees (net of any amounts received) with
respect to interest rate swap or similar agreements or foreign currency hedge,
exchange or similar agreements; (iv) Preferred Stock dividends of the Issuer and
its Restricted Subsidiaries (other than with respect to Redeemable Stock)
declared and paid or payable, other than dividends paid in Capital Stock that is
not Redeemable Stock; (v) accrued Redeemable Stock dividends of the Issuer and
its Restricted Subsidiaries, whether or not declared or paid; (vi) interest on
Debt guaranteed by the Issuer and its Restricted Subsidiaries; and (vii) the
portion of any rental obligation allocable to interest expense.
"Consolidated Net Income" for any period means the consolidated net income
(or loss) of the Issuer and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Issuer or a Restricted
Subsidiary of the Issuer in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Restricted Subsidiary of the Issuer except to the extent of
the amount of dividends or other distributions actually paid to the Issuer or a
Restricted Subsidiary of the Issuer by such Person during such period, (c) gains
or losses on Asset Dispositions by the Issuer or its Restricted Subsidiaries,
(d) all extraordinary gains and extraordinary losses, (e) the cumulative effect
of changes in accounting principles and (f) the tax effect of any of the items
described in clauses (a) through (e) above.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to the Issuer,
adjustments following the date of the Indenture to the accounting books and
records of the Issuer in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto), or otherwise resulting from the
acquisition of control of the Issuer by another Person shall not be given
effect.
"Corporate Development Expenses" means non-tower-level costs incurred in
connection with acquisitions and development of Tower Assets.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(including securities repurchase agreements but excluding trade accounts payable
or accrued
94
<PAGE>
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) all Receivables Sales of such Person, together with any
obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith, (vii)
all Redeemable Stock issued by such Person, (viii) if such Person is a
Restricted Subsidiary, all Preferred Stock issued by such Person, (ix) every
obligation under Interest Rate or Currency Protection Agreements of such Person
and (x) every obligation of the type referred to in clauses (i) through (x) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. The "amount" or "principal
amount" of Debt at any time of determination as used herein represented by (a)
any contingent Debt, shall be the maximum principal amount hereof, (b) any Debt
issued at a price that is less than the principal amount at maturity thereof,
shall be the amount of the liability in respect thereof determined in accordance
with generally accepted accounting principles, (c) any Receivables Sale, shall
be the amount, if any, in connection with such Receivables Sale for which there
is recourse to the seller or any of its Subsidiaries, (d) any Redeemable Stock,
shall be the maximum fixed redemption or repurchase price in respect thereof,
and (e) any Preferred Stock, shall be the maximum voluntary or involuntary
liquidation preference plus accrued and unpaid dividends in respect thereof, in
each case as of such time of determination.
"Generally accepted accounting principles" means generally accepted
accounting principles in the United States which are in effect on the date of
original issuance of the Notes.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the "primary obligor") in any manner, whether directly
or indirectly, and including, without limitation, any obligation of such Person,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Debt, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment
of such Debt, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing"
and "Guarantor" shall have meanings correlative to the foregoing); provided,
however, that the Guaranty by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of
business.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
including by acquisition of Restricted Subsidiaries or the recording, as
required pursuant to generally accepted accounting principles or otherwise, of
any such Debt or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in generally
accepted accounting principles that results in an obligation of such Person that
exists at such time becoming Debt shall not be deemed an Incurrence of such
Debt.
"Interest Rate or Currency Protection Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars and similar
agreements) relating to, or the value of which is dependent upon, interest rates
or currency exchange rates or indices.
"Internal Revenue Code" means the Internal Revenue Code of 1986.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any
other Person, including any payment on a Guarantee of any obligation of such
other Person, but shall not include trade accounts receivable in the ordinary
95
<PAGE>
course of business on credit terms made generally available to the customers of
such Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Net Cash Proceeds" from any Asset Disposition by any Person means cash or
Cash Equivalents received (including by way of sale or discounting of a note,
instalment receivable or other receivable, but excluding any other consideration
received in the form of assumption by the acquiror of Debt or other obligations
relating to such properties or assets) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such Asset Disposition, (ii) all payments
made by such Person or its Restricted Subsidiaries on any Debt which is secured
by such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments made to minority interest holders in Restricted Subsidiaries of such
Person or joint ventures as a result of such Asset Disposition and (iv)
appropriate amounts to be provided by such Person or any Restricted Subsidiary
thereof, as the case may be, as a reserve in accordance with generally accepted
accounting principles against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by the Board of Directors, in its reasonable good faith judgment
evidenced by a resolution of the Board of Directors filed with the Trustee;
provided, however, that any reduction in such reserve within twelve months
following the consummation of such Asset Disposition will be treated for all
purposes of the Indenture and the Notes as a new Asset Disposition at the time
of such reduction with Net Cash Proceeds equal to the amount of such reduction.
"Offer to Purchase" means a written offer (the "Offer") sent by the Issuer
by first class mail, postage prepaid, to each Holder at his address appearing in
the Note Register on the date of the Offer offering to purchase up to the
principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Offer Expiration Date") of the Offer to Purchase which shall be, subject
to any contrary requirements of applicable law, not less than 20 business days
or more than 60 days after the date of such Offer and a settlement date (the
"Purchase Date") for purchase of Notes within five Business Days after the Offer
Expiration Date. The Issuer shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Issuer's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Issuer or, at the Issuer's request, by the Trustee in the
name and at the expense of the Issuer. The Offer shall contain information
concerning the business of the Issuer and its Restricted Subsidiaries which the
Issuer in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to the
Indenture (which requirements may be satisfied by delivery of such documents
together with the Offer), (ii) a description of material developments in the
Issuer's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Issuer to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Issuer to make the Offer to Purchase and (iv) any other
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase.
96
<PAGE>
The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Notes offered to
be purchased by the Issuer pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such has been determined pursuant to
the Section hereof requiring the Offer to Purchase) (the "Purchase
Amount");
(4) the purchase price to be paid by the Issuer for each $1,000
aggregate principal amount of Notes accepted for payment (as specified
pursuant to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each Holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such Note at the place or places
specified in the Offer prior to the close of business on the Offer
Expiration Date (such Note being, if the Issuer or the Trustee so requires,
duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Issuer and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Issuer (or their Paying Agent) receives, not later
than the close of business on the Offer Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder tendered, the certificate number of
the Note the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Issuer shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Issuer shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 or
integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in
part, the Issuer shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased
portion of the Note so tendered.
97
<PAGE>
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Permitted Holder" means as of the date of determination (i) Andrew Banks,
Royce Yudkoff or Robert Wolsey and any of their respective spouses, estates,
lineal descendants (including adoptive children), heirs, executors, personal
representatives, administrators and trusts for any of their benefit and (ii) any
other Person, the majority of whose Voting Stock is directly or indirectly owned
by any Person described in clause (1) above.
"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions in the ordinary course of business that is
designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby and not for purposes of speculation.
"Permitted Senior Bank Debt" means Debt under the Senior Credit Facility
and any extension, renewal, refinancing or refunding thereof in an aggregate
amount not to exceed at any one time outstanding the sum of $250 million less
the aggregate amount of any such Debt that is repaid pursuant to the provisions
of clause (iii) of the provisions of the Indenture described under the caption
"Asset Dispositions".
"Pinnacle Towers" means Pinnacle Towers Inc., a Delaware corporation.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Issuer pursuant to an effective registration statement under
the Securities Act of 1933, as amended.
"Purchase Money Secured Debt" of any Person means Debt of such Person
secured by a Lien on real or personal property of such Person which Debt (a)
constitutes all or a part of the purchase price or construction cost of such
property or (b) is Incurred prior to, at the time of or within 180 days after
the acquisition or substantial completion of such property for the purpose of
financing all or any part of the purchase price or construction cost thereof;
provided, however, that (w) the Debt so incurred does not exceed 100% of the
purchase price or construction cost of such property, (x) such Lien does not
extend to or cover any property other than such item of property and any
improvements on such item, (y) the purchase price or construction cost for such
property is or should be included in "addition to property, plant and equipment"
in accordance with generally accepted accounting principles and (z) the purchase
or construction of such property is not part of any acquisition of a Person or
business unit or line of business.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
"Receivables Sale" of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (including upon the occurrence of
an event other than a Change of Control or substantially similar event) matures
or is required to be redeemed (pursuant to any sinking fund obligation or
otherwise, but other than as a result of the death or disability of the holder
thereof or the termination of the employment with the Company of the holder
thereof) or is convertible into or exchangeable for Debt or is
98
<PAGE>
redeemable at the option of the holder thereof, in whole or in part, at any time
prior to the final Stated Maturity of the Notes; provided, however, that any
Capital Stock which would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require the Issuer or a Restricted
Subsidiary to repurchase or redeem such Capital Stock upon the occurrence of an
Asset Disposition occurring prior to the final maturity of the Notes shall not
constitute Redeemable Stock if such provisions applicable to such Capital Stock
are no more favorable to the holders of such stock than the provisions
applicable to the Notes contained in the covenant described under "Asset
Dispositions" and such provisions applicable to such Capital Stock specifically
provide that the Issuer and its Restricted Subsidiaries will not repurchase or
redeem any such stock pursuant to such provisions prior to the repurchase of
such Notes as are required to be repurchased pursuant to the covenant described
under "Asset Dispositions."
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
"Restricted Subsidiary" means any Subsidiary of the Issuer, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Site Management Contract" means any agreement pursuant to which the Issuer
or any of its Restricted Subsidiaries has the right to substantially control
Tower Assets and the revenues derived from the rental or use thereof.
"Subordinated Debt" means Debt of the Issuer as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the
Notes to at least the following extent: (i) no payments of principal of (or
premium, if any) or interest on or otherwise due in respect of such Debt may be
permitted for so long as any default in the payment of principal (or premium, if
any) or interest on the Notes exists; (ii) in the event that any other default
that with the passing of time or the giving of notice, or both, would constitute
an event of default exists with respect to the Notes, upon notice by 25% or more
in principal amount of the Notes to the Trustee, the Trustee shall have the
right to give notice to the Issuer and the holders of such Debt (or trustees or
agents therefor) of a payment blockage, and thereafter no payments of principal
of (or premium, if any) or interest on or otherwise due in respect of such Debt
may be made for a period of 179 days from the date of such notice; and (iii)
such Debt may not (x) provide for payments of principal of such Debt at the
stated maturity thereof or by way of a sinking fund applicable thereto or by way
of any mandatory redemption, defeasance, retirement or repurchase thereof by the
Issuer (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Notes or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the Issuer)
of such other Debt at the option of the holder thereof prior to the final Stated
Maturity of the Notes, other than a redemption or other retirement at the option
of the holder of such Debt (including pursuant to an offer to purchase made by
the Issuer) which is conditioned upon a change of control of the Issuer pursuant
to provisions substantially similar to those described under "Change of Control"
(and which shall provide that such Debt will not be repurchased pursuant to such
provisions prior to the Issuer's repurchase of the Notes required to be
repurchased by the Issuer pursuant to the provisions described under "Change of
Control"); provided, however, that any Debt which would constitute Subordinated
Debt but for provisions thereof giving holders thereof the right to require the
Issuer or a Restricted Subsidiary to repurchase or redeem such Subordinated Debt
upon the occurrence of an Asset Disposition occurring prior to the final
maturity of the Notes shall constitute Subordinated Debt if such provisions
applicable to such Subordinated Debt are no more favorable to the holders of
such Debt than the provisions applicable to the Notes contained in the covenant
described under "Asset Dispositions" and such provisions applicable to such Debt
specifically provide that the Issuer and its Restricted Subsidiaries will
not repurchase or redeem any such Debt pursuant to such provisions prior to the
repurchase of such Notes as are
99
<PAGE>
required to be repurchased pursuant to the covenant described under "Asset
Dispositions."
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Restricted Subsidiaries thereof,
or (ii) any other Person (other than a corporation) in which such Person, or one
or more other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
"Tower Asset Exchange" means any transaction in which the Issuer or a
Restricted Subsidiary exchanges assets for Tower Assets and/or cash or Cash
Equivalents where the fair market value (evidenced by a resolution of the Board
of Directors set forth in an Officers' Certificate delivered to the Trustee) of
the Tower Assets and cash or Cash Equivalents received by the Issuer and its
Restricted Subsidiaries in such exchange is at least equal to the fair market
value of the assets disposed in such exchange.
"Tower Assets" means (i) wireless transmission towers and related assets
that are located on the site of a transmission tower and rooftop and other
wireless transmission sites and related assets located at such site and (ii)
Site Management Contracts.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(a) failure to pay principal of (or premium, if any, on) any Note when
due;
(b) failure to pay any interest on any Note when due, continued for 30
days;
(c) default in the payment of principal and interest on Notes required
to be purchased pursuant to an Offer to Purchase as described under "Change
of Control" and "Asset Dispositions" when due and payable;
(d) failure to perform or comply with the provisions described under
"Merger, Consolidation and Certain Sales of Assets";
(e) failure to perform any other covenant or agreement of the Issuer
under the Indenture or the Notes continued for 60 days after written notice
to Holding by the Trustee or Holders of at least 25% in aggregate principal
amount of Outstanding Notes;
(f) default under the terms of any instrument evidencing or securing
Debt for money borrowed by the Issuer or any Restricted Subsidiary having
an outstanding principal amount of $5 million individually or in the
aggregate which default results in the acceleration of the payment of all
or any portion of such indebtedness or constitutes the failure to pay all
or any portion of such indebtedness when due;
100
<PAGE>
(g) the rendering of a final judgment or judgments (not subject to
appeal) against the Issuer or any Subsidiary in an amount in excess of $5
million which remains undischarged or unstayed for a period of 60 days
after the date on which the right to appeal has expired; and
(h) certain events of bankruptcy, insolvency or reorganization
affecting the Issuer or any Subsidiary. ((S) 501)
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default (as defined) shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. ((S) 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Notes will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee. ((S) 512)
If an Event of Default (other than an Event of Default described in Clause
(h) above) shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of Outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal, have been cured or
waived as provided in the Indenture. If an Event of Default specified in Clause
(h) above occurs, the Outstanding Notes will ipso facto become immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. ((S) 502) For information as to waiver of defaults, see
"Modification and Waiver".
Notwithstanding the foregoing, upon an acceleration of the Notes or an
Event of Default specified in Clause (h) above, in each case prior to the Full
Accretion Date, the holders of Notes will be entitled to receive only a default
amount equal to the Accreted Value of the Notes, which until the Full Accretion
Date will be less than the face amount of such Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default (as defined) and unless also the Holders of at least 25% in aggregate
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. ((S) 507) However, such limitations do not apply to a suit instituted by a
Holder of a Note for enforcement of payment of the principal of and premium, if
any, or interest on such Note on or after the respective due dates expressed in
such Note. ((S) 508)
The Issuer will be required to furnish to the Trustee quarterly a statement
as to the performance by the Issuer of certain of its obligations under the
Indenture and as to any default in such performance. ((S) 1018)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer and exchange and the
Issuer's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Holders to
receive payment of principal and interest on the Notes, (iv) rights, obligations
and immunities of the Trustee under the Indenture and (v) rights of the Holders
of the Notes as beneficiaries of the Indenture with respect to any property
deposited with the Trustee payable to all or any of them), if (x) the Issuer
will have paid or caused to be paid the principal of and interest on
101
<PAGE>
the Notes as and when the same will have become due and payable or (y) all
outstanding Notes (except lost, stolen or destroyed Notes which have been
replaced or paid) have been delivered to the Trustee for cancellation. (Article
Four)
DEFEASANCE
The Indenture will provide that, at the option of the Issuer, (a) if
applicable, the Issuer will be discharged from any and all obligations in
respect of the Outstanding Notes or (b) if applicable, the Issuer may omit to
comply with certain restrictive covenants, that such omission shall not be
deemed to be an Event of Default under the Indenture and the Notes, in either
case (a) or (b) upon irrevocable deposit with the Trustee, in trust, of money
and/or U.S. government obligations which will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent
certified public accountants to pay the principal of and premium, if any, and
each installment of interest, if any, on the Outstanding Notes. With respect to
clause (B), the obligations under the Indenture other than with respect to such
covenants and the Events of Default other than the Events of Default relating to
such covenants above shall remain in full force and effect. Such trust may only
be established if, among other things:
(i) with respect to clause (a), the Issuer has received from, or there
has been published by, the Internal Revenue Service a ruling or there has
been a change in law, which in the Opinion of Counsel provides that Holders
of the Notes will not recognize gain or loss for U.S. federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to U.S. federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (b),
the Issuer has delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Notes will not recognize gain or loss for U.S.
federal income tax purposes as a result of such deposit and defeasance and
will be subject to U.S. federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such deposit
and defeasance had not occurred;
(ii) such deposit, defeasance and discharge will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Issuer or any Restricted Subsidiary is a party or
by which the Issuer and any Restricted Subsidiary is bound;
(iii) no Event of Default or event that with the passing of time or
the giving of notice, or both, shall constitute an Event of Default shall
have occurred and be continuing;
(iv) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that such deposit shall not cause the Trustee or the trust so
created to be subject to the Investment Issuer Act of 1940; and
(v) certain other customary conditions precedent are satisfied.
(Article Thirteen)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Issuer and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Notes; provided, however,
that no such modification or amendment may, without the consent of the
Holder of each Outstanding Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any Note,
(b) reduce the principal amount of, (or the premium) or interest on, any
Note, (c) change the place or currency of payment of principal of (or
premium), or interest on, any Note, (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any Note, (e)
reduce the above-stated percentage of Outstanding Notes necessary to modify
or amend the Indenture, (f) reduce the percentage of aggregate principal
amount of Outstanding Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, (g)
102
<PAGE>
modify any provisions of the Indenture relating to the modification and
amendment of the Indenture or the waiver of past defaults or covenants,
except as otherwise specified, or (h) following the mailing of any Offer to
Purchase, modify any Offer to Purchase for the Notes required under the
"Limitation on Asset Dispositions" and the "Change of Control" covenants
contained in the Indenture in a manner materially adverse to the Holders
thereof. ((S) 902)
Notwithstanding the foregoing, without the consent of any Holder, the
Issuer and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency provided that such action
does not adversely affect the interests of the Holders of the Notes in any
material respect, to provide for the assumption of the Issuer's obligations
to Holders of Notes in the case of a merger or consolidation, to secure the
Notes, to add to the covenants of the Issuer for the benefits of the
Holders or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes, on behalf of all Holders of Notes, may waive compliance
by the Issuer with certain restrictive provisions of the Indenture.
((S) 1019) Subject to certain rights of the Trustee, as provided in the
Indenture, the Holders of a majority in aggregate principal amount of the
Outstanding Notes, on behalf of all Holders of Notes, may waive any past
default under the Indenture, except a default in the payment of principal,
premium or interest or a default arising from failure to purchase any Note
tendered pursuant to an Offer to Purchase. ((S) 513)
GOVERNING LAW
The Indenture and the Notes are governed by the laws of the State of
New York.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically
set forth in the Indenture. During the existence of an Event of Default,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of
such person's own affairs. ((S)(S) 601 and 605)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Issuer, to obtain payment of claims in certain cases or
to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Issuer or any Affiliate, provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. ((S) 608)
103
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax considerations of the Exchange Offer to Holders of the
Original Notes. This discussion is a summary for general information only and
does not consider all aspects of U.S. federal income tax that may be relevant to
a Holder of the Original Notes in light of such Holder's particular
circumstances. This discussion also does not address the U.S. federal income
tax consequences to Holders subject to special treatment under the U.S. federal
income tax laws, such as dealers in securities or foreign currency, tax-exempt
entities, financial institutions, foreign persons, insurance companies, persons
that hold the Notes as part of a "straddle," a "hedge" against currency risk or
a "conversion transaction," persons that have a "functional currency" other than
the U.S. dollar and investors in pass-through entities. In addition, this
discussion does not describe any tax consequences arising out of the tax laws of
any state, local or foreign jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, Internal Revenue Service ("IRS") rulings and pronouncement and
judicial decisions now in effect, all of which are subject to change (possibly
on a retroactive basis). The Company has not and will not seek any rulings or
opinions from the IRS or counsel with respect to the matters discussed below.
There can be no assurance that the IRS will not take positions concerning the
tax consequences of the Exchange Offer which are different from those discussed
herein.
HOLDERS OF ORIGINAL NOTES SHOULD CONSULT THEIR OWN ADVISORS CONCERNING THE
APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION, TO THE EXCHANGE OFFER IN LIGHT OF THEIR
PARTICULAR SITUATIONS.
The exchange of the Original Notes for New Notes pursuant to the Exchange
Offer should not constitute a taxable exchange. As a result, (i) a holder
should not recognize taxable gain or loss as a result of exchanging Original
Notes for New Notes pursuant to the Exchange Offer; (ii) the holding period of
the New Notes should include the holding period of the Original Notes exchanged
therefor; and (iii) the adjusted tax basis of the New Notes should be the same
as the adjusted tax basis of the Original Notes exchanged therefor immediately
before the exchange.
104
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that received New Notes for its own account pursuant to
the Exchange Offer ("Restricted Holder") must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a Restricted
Holder in connection with resales of New Notes received in exchange for Original
Notes where such Original Notes were acquired as a result of market-making
activities or other trading activities. For a period of 180 days after the
Expiration Date, the Company will use reasonable efforts to make this Prospectus
available to any Restricted Holder for use in connection with any such resale,
provided that such Restricted Holder indicates in the Letter of Transmittal that
is a broker-dealer. In addition, until ___________, 1998, all Restricted
Holders effecting transactions in the New Notes may be required to deliver a
Prospectus.
The Company will not receive any proceeds from any sale of Original Notes
by Restricted Holders. Original Notes received by Restricted Holders for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, or at prices
related to such prevailing market prices on negotiated prices. Any such resale
may be made directly to purchasers or to or through Restricted Holders who may
receive compensation in the form of commissions or concessions from any such
Restricted Holder and/or the purchasers of any New Notes. Any Restricted Holder
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any person that participates in the distribution of such
New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such Restricted Holders may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Restricted Holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Restricted Holder that requires such
documents in the Letter of Transmittal.
By acceptance of this Exchange Offer, each Restricted Holder that receives
New Notes pursuant to the Exchange Offer agrees that, upon receipt of notice
from the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
(which notice the Company agrees to deliver promptly to such Restricted Holder),
such Restricted Holder will suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission
and has furnished copies of the amended or supplemented Prospectus to such
Restricted Holder. If the Company gives any such notice to suspend the use of
the Prospectus, it shall extend the 180-day period referred to above by the
number of days during the period from and including the date of the giving of
such notice up to and including when Restricted Holders shall have received
copies of the supplemental or amended Prospectus necessary to permit resales of
New Notes.
LEGAL OPINIONS
Certain legal matters with respect to the issuance of New Notes will be
passed upon for the Company by its counsel, Holland & Knight LLP.
105
<PAGE>
EXPERTS
The financial statements included in this Prospectus for Pinnacle Holdings
Inc. as of December 31, 1997 and 1996 and for the years then ended and for the
period from inception through December 31, 1995, Shore Communications as of
December 3, 1997 and for the period from January 1, 1997 through December 3,
1997, Tidewater Communications as of July 31, 1997 and for the period from
January 1, 1997 through July 31, 1997 and Majestic Communications as of June 27,
1997 and for the period from January 1, 1997 through June 27, 1997 included in
this Prospectus, have been so included 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 financial statements of the Tower Operations of Southern
Communications Services, Inc., as of December 31, 1997 and 1996 and for the
years then ended, included in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
106
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 19
The Exchange Offer........................................................ 26
Capitalization............................................................ 36
Use of Proceeds........................................................... 36
Recent Developments....................................................... 37
Unaudited Pro Forma Consolidated Financial Statements..................... 38
Selected Historical and Unaudited Pro Forma
Consolidated Financial Data............................................. 42
Management's Discussion and Analysis
of Financial Condition and Results of Operations........................ 45
Business.................................................................. 51
Management................................................................ 68
Principal Stockholders.................................................... 72
Certain Relationships and Transactions.................................... 73
Description of Credit Facilities.......................................... 75
Description of New Notes.................................................. 76
Certain Federal Income Tax Considerations................................. 104
Plan of Distribution...................................................... 105
Legal Opinions............................................................ 105
Experts................................................................... 106
Index to Financial Statements............................................. F-1
================================================================================
================================================================================
$325,000,000
PINNACLE HOLDINGS INC.
10% Senior Discount
Notes due 2008
--------------------
--------------------
______________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pinnacle Holdings Inc., a Delaware corporation (the "Delaware Corporation").
The Delaware Corporation's Certificate of Incorporation and Bylaws contain
provisions limiting the personal liability of its directors for monetary damages
resulting from breaches of their duty of care to the extent permitted by Section
102(b)(7) of the Delaware General Corporation Law. The Delaware Corporation's
Certificate of Incorporation and Bylaws also contain provisions making
indemnification of the Delaware Corporation's directors and officers mandatory
to the fullest extent permitted by the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary.
The Delaware General Corporation Law permits the indemnification by a Delaware
corporation of its directors, officers, employees and other agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than derivative actions
which are by or in the right of the corporation) if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceedings, had no reasonable cause to believe their conduct was illegal. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action and require
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
3.1.1 Amended and Restated Certificate of Incorporation of the Company*
3.1.2 Bylaws of the Company*
4.1 Indenture dated as of March 20, 1998 among the Company and The Bank of New York, as
Trustee (the "Indenture")*
4.2 Form of Original Note No. 1 for $200,000,000, and Original Note No. 2 for $125,000,000,
CUSIP No. 72346N-AA-9.*
4.3 Form of New Note No. 1 for $200,000,000, and New Note No. 2 for $125,000,000,
CUSIP No. 72346N-AB-7*
4.4 Exchange and Registration Rights Agreement dated as of March 20, 1998 by and among the
Company and each of the Purchasers referred to therein*
5.1 Legal Opinion of Holland & Knight
10.1 Purchase Agreement, dated as of March 17, 1998, by and among the Company and the
Initial Purchasers named therein*
10.2 Second Amended and Restated Credit Agreement dated February 26, 1998 by and among
Pinnacle Towers, Inc., a wholly-owned subsidiary of the Company ("PTI"), NationsBank of
Texas, N.A. and Goldman, Sachs Credit Partner L.P.*
10.3 First Amendment to Second Amended and Restated Credit Agreement dated March 17, 1998
10.4 Form of Purchase and Sale Agreement dated January 9, 1998 by and among PTI and
Southern Communications*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
10.5 Form of Southern Communications Master Site Lease Agreement by and among PTI and
Southern Communications*
10.6 Form of Option to Direct Construction or Acquisition of Additional Tower Facilities by
and among PTI and Southern Communications*
10.7 Form of Exchange Agreement by and among PTI and Southern Communications*
10.8 Form of Lease Agreement - Non-Restricted Premises*
10.9 Form of Lease Agreement - Restricted Premises*
10.10 Form of Master Antenna Site Lease by and among PTI and Teletouch Communications,
Inc.*
10.11 Contract of Sale by and among PTI and Teletouch Communications, Inc. and First
Amendment to Contract of Sale*
10.12 Executive Employment Agreement between the Company and Robert Wolsey dated May 3,
1995*
10.13 Executive Employment Agreement between the Company and Steven Day dated February
17, 1997*
10.14 Executive Employment Agreement between the Company and James Dell'Apa dated May 3,
1995*
10.15 Subscription Agreement dated December 31, 1995 by and among ABRY II and PTI*
10.16 Second Amended and Restated Subscription and Stockholders Agreement dated May 16,
1996 by and among PTI, the Company and certain stockholders.*
10.17 Capital Contribution Agreement dated February 26, 1998*
10.18 Convertible Promissory Note due 1998 dated February 11, 1998 by and among the
Company and ABRY II*
10.19 Services Agreement by and among PTI and PTI II*
10.20 Amended Capital Contribution Agreement dated May 29, 1998
10.21 Third Amended and Restated Credit Agreement dated May 29, 1998
12.1 Computation of Ratio of Earnings to Fixed Charges*
21.1 List of Subsidiaries*
23.1 Consent of Holland & Knight LLP (contained in Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP, independent certified public accountants
23.3 Consent of Arthur Andersen LLP, independent certified public accountants
24.1 Powers of Attorney (included on signature pages of Registration Statement)*
25.1 Statement of Eligibility of Trustee, The Bank of New York, on Form T-1*
27.1 Financial Data Schedule for the period ended December 31, 1997*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Deliver*
99.3 Exchange Agent Agreement*
</TABLE>
* Previously filed on April 1, 1998 with the Company's Registration Statement
on Form S-4.
(b) Financial Statement Schedules
Page
----
Index of Financial Statement Schedules..................................... S-1
<PAGE>
Report of Price Waterhouse LLP on Financial Statement Schedules........... S-2
Schedule __ - (to be provided by accountants)............................. S-3
(c) Not Applicable.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(b)(1) 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.
(2) 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.
(c) The undersigned Registrant hereby undertakes:
(1) 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.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not subject of and included in the Registration Statement when it became
effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
PINNACLE HOLDINGS INC., a Delaware corporation, has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Sarasota, State of
Florida, on June 10, 1998.
PINNACLE HOLDINGS, INC.
By:/s/ Robert Wolsey
----------------------------------
Robert Wolsey
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Robert Wolsey Chief Executive Officer, President, June 10, 1998
- ------------------------ Chief Operating Officer and Director
Robert Wolsey
/s/ Steven Day Vice President, Chief Financial June 10, 1998
- ------------------------ Officer, Secretary and Director
Steven Day
* Executive Vice President and Director June 10, 1998
- ------------------------
James Dell'Apa
* Director June 10, 1998
- ------------------------
Andrew Banks
* Director June 10, 1998
- ------------------------
Peni Garber
* Director June 10, 1998
- ------------------------
Peggy Koenig
* Director June 10, 1998
- ------------------------
Royce Yudkoff
*By:/s/ Steven Day June 10, 1998
--------------------
Steven Day
Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
3.1.1 Amended and Restated Certificate of Incorporation of the Company*
3.1.2 Bylaws of the Company*
4.1 Indenture dated as of March 20, 1998 among the Company and The Bank of New York, as
Trustee (the "Indenture")*
4.2 Form of Original Note No. 1 for $200,000,000, and Original Note No. 2 for $125,000,000,
CUSIP No. 72346N-AA-9.*
4.3 Form of New Note No. 1 for $200,000,000, and New Note No. 2 for $125,000,000,
CUSIP No. 72346N-AB-7*
4.4 Exchange and Registration Rights Agreement dated as of March 20, 1998 by and among the
Company and each of the Purchasers referred to therein*
5.1 Legal Opinion of Holland & Knight
10.1 Purchase Agreement, dated as of March 17, 1998, by and among the Company and the
Initial Purchasers named therein*
10.2 Second Amended and Restated Credit Agreement dated February 26, 1998 by and among
Pinnacle Towers, Inc., a wholly-owned subsidiary of the Company ("PTI"), NationsBank of
Texas, N.A. and Goldman, Sachs Credit Partner L.P.*
10.3 First Amendment to Second Amended and Restated Credit Agreement dated March 17, 1998*
10.4 Form of Purchase and Sale Agreement dated January 9, 1998 by and among PTI and
Southern Communications*
10.5 Form of Southern Communications Master Site Lease Agreement by and among PTI and
Southern Communications*
10.6 Form of Option to Direct Construction or Acquisition of Additional Tower Facilities by
and among PTI and Southern Communications*
10.7 Form of Exchange Agreement by and among PTI and Southern Communications*
10.8 Form of Lease Agreement - Non-Restricted Premises*
10.9 Form of Lease Agreement - Restricted Premises*
10.10 Form of Master Antenna Site Lease by and among PTI and Teletouch Communications,
Inc.*
10.11 Contract of Sale by and among PTI and Teletouch Communications, Inc. and First
Amendment to Contract of Sale*
10.12 Executive Employment Agreement between the Company and Robert Wolsey dated May 3,
1995*
10.13 Executive Employment Agreement between the Company and Steven Day dated February
17, 1997*
10.14 Executive Employment Agreement between the Company and James Dell'Apa dated May 3,
1995*
10.15 Subscription Agreement dated December 31, 1995 by and among ABRY II and PTI*
10.16 Second Amended and Restated Subscription and Stockholders Agreement dated May 16,
1996 by and among PTI, the Company and certain stockholders.*
10.17 Capital Contribution Agreement dated February 26, 1998*
10.18 Convertible Promissory Note due 1998 dated February 11, 1998 by and among the
Company and ABRY II*
10.19 Services Agreement by and among PTI and PTI II*
10.20 Amended Capital Contribution Agreement dated May 29, 1998
10.21 Third Amended and Restated Credit Agreement dated May 29, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
12.1 Computation of Ratio of Earnings to Fixed Charges*
21.1 List of Subsidiaries*
23.1 Consent of Holland & Knight LLP (contained in Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP, independent certified public accountants
23.3 Consent of Arthur Andersen LLP, independent certified public accountants
24.1 Powers of Attorney (included on signature pages of Registration Statement)*
25.1 Statement of Eligibility of Trustee, The Bank of New York, on Form T-1*
27.1 Financial Data Schedule for the period ended December 31, 1997*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Deliver*
99.3 Exchange Agent Agreement*
</TABLE>
* Previously filed on April 1, 1998 with the Company's Registration Statement
on Form S-4.
TPA3-523171.16
<PAGE>
Exhibit 5.1
June 11, 1998
Pinnacle Holdings Inc.
1549 Ringling Boulevard
3rd Floor
Sarasota, FL 34236
Re: Registration Statement on Form S-4
Registration No. 333-49147
Gentlemen:
We have acted as counsel for Pinnacle Holdings Inc. (the "Corporation"), a
Delaware corporation, in connection with the preparation of the above-referenced
registration statement (the "Registration Statement"), filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"), to register the exchange of an aggregate principal of $325,000,000 of
its 10% Senior Discount Notes Due 2008 (the "New Notes") for an equal principal
amount of its outstanding 10% Senior Discount Notes Due 2008 (the "Original
Notes," and with the New Notes collectively, the "Notes"). The Notes have been
issued pursuant to an indenture between the Company and The Bank of New York, as
Trustee, dated as of March 20, 1998 (the "Indenture"). In this connection, you
have requested our opinion as to certain matters with respect to the New Notes.
Capitalized terms defined in the Registration Statement and not otherwise
defined herein are used herein with the meanings as so defined.
We have reviewed the Registration Statement, the Indenture and such other
documents, records and certificates of officers of the Corporation and its
subsidiaries and other instruments relating to the authorization and issuance of
New Notes as we deemed relevant or necessary for the opinions herein expressed.
With respect to various factual matters material to the opinions expressed
<PAGE>
Pinnacle Holdings, Inc.
June 11, 1998
Page 2
below, we have relied upon certain certificates and information furnished by
public officials and representatives of the Company. We have assumed without
inquiry or other investigation (a) the legal capacity of each natural person
executing the agreements described herein, (b) that there have been no
undisclosed modifications of any provision of any document reviewed by us in
connection with the rendering of the opinion and no undisclosed prior waiver of
any right or remedy contained in any of the documents, (c) the genuineness of
each signature, (d) the completeness of each document submitted to us,
(e) the authenticity of each document reviewed by us as an original, (f) the
conformity to the original of each document reviewed by us as a copy and the
authenticity of the original of each document received by us a copy, (g) that
each transaction complies with all tests of good faith, fairness, and
conscionability required by law, and (h) that each certificate or copy of a
public record furnished by public officials is accurate, complete, and
authentic.
Based on the above, it is our opinion that the $325,000,000 principal
amount of New Notes proposed to be issued in exchange for an equal principal
amount of Original Notes have been duly authorized and when issued for exchange
in accordance with the Registration Statement, the Indenture and the Letter of
Transmittal, will be validly issued. The New Notes, upon due acceptance by the
Corporation of the Original Notes being tendered in exchange therefor as
provided in the Registration Statement, the Indenture and the Letter of
Transmittal will constitute valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with the terms of such
documents.
The opinion expressed in the second sentence of the preceding paragraph is
subject to the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights and remedies of creditors generally.
This opinion letter speaks only as of its date. We undertake no obligation
to advise the addressees (or any other third party) of changes in law or fact
that occur after the date hereof, even though the change may affect the legal
analysis, a legal conclusion, or an informational confirmation in the opinion.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to all references to our firm in the Registration
Statement.
<PAGE>
Pinnacle Holdings, Inc.
June 11, 1998
Page 3
Very truly yours,
HOLLAND & KNIGHT LLP
<PAGE>
EXHIBIT 10.20
CAPITAL CONTRIBUTION AGREEMENT
------------------------------
THIS CAPITAL CONTRIBUTION AGREEMENT is dated as of the 29th day of May, 1998
(as amended, restated or otherwise modified from time to time, this
"Agreement"), and entered into among ABRY Broadcast Partners II, L.P., a
Delaware limited partnership ("ABRY"), Pinnacle Towers Inc., a Delaware
corporation (the "Company") and wholly-owned subsidiary of Pinnacle Holdings
Inc., a Delaware corporation (the "Parent"), the Parent, the Lenders signatory
hereto, and NationsBank, N.A., a national banking association, individually and
as Administrative Lender (in such latter capacity, the "Administrative Lender").
BACKGROUND:
----------
The Company, the Lenders and the Administrative Lender entered into a Third
Amended and Restated Credit Agreement, dated as of May 29, 1998 (as amended,
restated, or otherwise modified from time to time, the "Credit Agreement");
The Parent has guaranteed the obligations of the Company under the Credit
Agreement;
It is a condition precedent to making Advances (as that term is defined in the
Credit Agreement) that the parties hereto execute, deliver, and perform this
Agreement;
NOW, THEREFORE, for valuable consideration hereby acknowledged, ABRY, the
Company, the Parent, the Lenders and the Administrative Lender agree as follows:
SECTION 1. Definitions. Unless specifically defined or redefined below,
-----------
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
SECTION 2. Capital Contributions.
---------------------
(a) No later than the fortieth (40th) day following each Quarterly Date
throughout the term of this Agreement, or if later for any quarterly
period, the twelfth (12th) Business Day after receipt by ABRY of the report
referred to in the next two sentences for such quarterly period, ABRY
agrees to make a capital contribution to the Parent in immediately
available funds in an amount equal to 100% of the amount of the General and
Administrative Expenses for the fiscal quarter ending on such Quarterly
Date, as specified in the report described in the following two sentences,
and the Parent agrees in turn immediately to make a capital contribution to
the Company (in immediately available funds) in the amount so contributed
by ABRY; provided that this Agreement shall not require ABRY to make any
capital contributions in an amount which would cause the aggregate amount
of the capital contributions made by ABRY to the Parent or the Company to
exceed $50,000,000, including capital contributions previously made. No
later than the 20th day immediately following each Quarterly Date
throughout the term of this Agreement, the Company shall deliver to the
Parent and ABRY (with a copy to the
<PAGE>
Administrative Lender) a written report of the amount of General and
Administrative Expenses for the fiscal quarter ending on such Quarterly
Date as specified in the consolidated financial statements of the Company
for such fiscal quarter. In the event that the Company fails to deliver to
ABRY and the Parent the report specified in the preceding sentence, then
the Administrative Lender shall have the right to deliver the consolidated
financial statements of the Company for the fiscal quarter ending on such
Quarterly Date to ABRY and the Parent, and ABRY and the Parent shall make
the capital contributions required to be made by them by this Section 2(a)
based upon the amount of General and Administrative Expenses set forth in
such financial statements, and such financial statements shall constitute
the "report" referred to in the first sentence of this Section 2(a) for
such fiscal quarter. The Company shall confirm with the Administrative
Lender to its satisfaction that each such contribution has been made in
full.
(b) Upon the occurrence and continuation of an Event of Default under Section
9.01(a) of the Credit Agreement, the Administrative Lender may demand that
ABRY, upon twelve (12) Business Days' notice, make an equity capital
contribution to the Parent in an amount sufficient to enable the Company
(after the Parent contributes any such equity capital contribution amount
to the Company) to make all payments necessary to cure the breaches
thereunder, and the Parent agrees in turn immediately to make any such
equity capital contribution to the Company (in immediately available funds)
in the amount so contributed by ABRY; provided that this Agreement shall
not require ABRY to make any equity capital contributions in an amount
which would cause the sum of the aggregate amount of the equity capital
contributions made by ABRY to the Parent or the Company plus the aggregate
amount of Cure Sub Loans (as defined below), to exceed $50,000,000,
including equity capital contributions and Cure Sub Loans previously made.
Upon the occurrence and continuation of an Event of Default under Section
9.01(c) of the Credit Agreement with respect to the financial covenants set
forth in Sections 8.01(a), (b), (c), (d), and (e) thereof, the
Administrative Lender may demand that ABRY, upon twelve (12) Business Days'
notice, make an equity capital contribution to the Parent or a Cure Sub
Loan to the Company in an amount equal to the amount sufficient to cause
the Company to be in compliance with all of the financial covenants set
forth in Sections 8.01(a), (b), (c), (d), and (e) of the Credit Agreement
immediately following such equity capital contribution or Cure Sub Loan,
and, in the case of an equity capital contribution, the Parent agrees in
turn immediately to make an equity capital contribution to the Company (in
immediately available funds) in the amount of any such equity capital
contribution so contributed by ABRY; provided that this Agreement shall not
require ABRY to make any equity capital contributions or Cure Sub Loans in
an amount which would cause the aggregate amount of the equity capital
contributions and Cure Sub Loans made by ABRY to the Parent or the Company
to exceed $50,000,000, including equity capital contributions or Cure Sub
Loans previously made. The Company agrees to use all funds received
pursuant to the second sentence of this Section with respect to the
financial covenants set forth in Sections 8.01(a) and (b) of the Credit
Agreement to permanently reduce the Available Commitment. The amount
required to
2
<PAGE>
cure the financial covenants in Sections 8.01(c), (d) and (e) of the Credit
Agreement shall be equal to the amount which, assuming that the Debt for
Borrowed Money under the Credit Agreement had been reduced by such amount,
and the ratios referred to therein were recomputed on a pro forma basis
giving effect to such reduction (as if such reduction had occurred (i) on
the first day of the twelve-month period referred to in clause (b) of
Section 8.01(c) of the Credit Agreement, for purposes of Section 8.01(c) of
the Credit Agreement, (ii) on the last day of the fiscal quarter referred
to in Section 8.01(d) of the Credit Agreement, for purposes of Section
8.01(d) of the Credit Agreement and (iii) on the first day of the twelve-
month period referred to in clause (b) of Section 8.01(e) of the Credit
Agreement, for purposes of Section 8.01(e) of the Credit Agreement, would
cause the Company to be in compliance with such covenants. For the purposes
of this Agreement, "CURE SUB LOAN" means, for the purpose of effecting a
cure under Section 8.01(a)(i) and/or Section 8.01(b)(i) of the Credit
Agreement only, a subordinated loan made by ABRY to the Company that meets
each of the following conditions: (a) such subordinated loan must be made
in immediately available cash funds and such subordinated loan must be
fully and deeply subordinated to all other debt of the Company on terms and
conditions, and subject to documentation acceptable to the Majority Lenders
in their sole discretion, (b) such subordinated loan shall not provide for
any current pay interest or principal, except payments of interest in kind,
(c) such subordinated loan shall not mature but shall convert to common
equity of the Parent in not more than one year from its date of issuance
upon terms and conditions acceptable to the Majority Lenders and (d) all
such subordinated indebtedness in the aggregate at any one time outstanding
may not exceed an amount equal to $10,000,000.
(c) On each Quarterly Date throughout the term of this Agreement, or if later,
when ABRY receives the requisite report or notice for the quarterly period
in question, ABRY agrees to make a capital contribution to the Parent in
immediately available funds in an amount equal to 100% of the amount equal
to the difference between any cash distribution of 95% of taxable income
required to maintain the Parent's REIT Status minus the amount of the
maximum tax liability of ABRY and its partners (determined as if each such
partner were a corporation subject to United States federal income tax and
any state tax which would be applicable to a non-exempt corporation) as a
result of such operations of the Parent, the Company, and its Subsidiaries
on a consolidated basis, taking into account all tax benefits available to
such Persons as a result of such operations; provided that this Agreement
shall not require ABRY to make any capital contributions in an amount which
would cause the aggregate amount of the capital contributions made by ABRY
to the Parent or the Company to exceed $50,000,000, including capital
contributions previously made.
(d) Parent agrees to contribute to the capital of the Company (in immediately
available funds) all amounts contributed to the Parent by ABRY.
(e) In consideration for each capital contribution made by ABRY to the Parent,
3
<PAGE>
the Parent shall issue to ABRY shares of the Parent's Class E Common Stock
in accordance with Stockholders Agreement. Each capital contribution by
ABRY to the Parent or by the Parent to the Company required under any of
the Sections 2(a), (b) and (c) hereunder shall not be subject to any
repayment obligation by the Company to the Parent or by the Parent to ABRY
(other than the obligation of the Parent or the Company, as the case may
be, to make distributions in respect of its capital stock (if and when such
distributions are made) in the manner provided in its certificate of
incorporation). Any Subordinated Debt issued to ABRY shall not be deemed
to be a capital contribution for purposes of this Agreement.
SECTION 3. Representations and Warranties. Each of ABRY, the Parent, and
------------------------------
the Company represents and warrants, as to itself, to the Lenders and the
Administrative Lender that:
(a) Each of ABRY and the Parent is a limited partnership or
corporation, respectively, duly organized, validly existing, and in good
standing under the Laws of the State of Delaware;
(b) Each of ABRY and the Parent is qualified to do business in all
jurisdictions where the nature of its business or properties require such
qualification except where the failure to so qualify would not cause a
Material Adverse Change;
(c) Each of ABRY, the Parent, and the Company has duly authorized
the execution, delivery, and performance of this Agreement;
(d) no consent of the partners of ABRY or stockholders of the Parent
or the Company (except any consent already obtained) is required as a
prerequisite to the validity and enforceability of this Agreement to be
executed by ABRY, the Parent, or the Company;
(e) Each of ABRY, the Parent, and the Company has full legal right,
power, and authority to execute, deliver, and perform under this Agreement;
(f) this Agreement constitutes the legal, valid, and binding
obligations of ABRY, Parent, and the Company enforceable in accordance with
the terms hereof (subject as to enforcement of remedies to any applicable
Debtor Relief Laws);
(g) the execution and delivery of this Agreement, and performance
hereunder, do not conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon any properties
of ABRY, the Parent or the Company under, or require any consent (other
than consents already obtained), approval, or other action by, notice to,
or filing with any Tribunal or Person pursuant to, the governance documents
of ABRY, the Parent, or the Company, any award of any arbitrator, or any
agreement, instrument, or Law to which ABRY, the
4
<PAGE>
Parent, the Company or any of its properties is subject;
(h) ABRY is Solvent;
(i) the value of the consideration received and to be received by
ABRY is reasonably worth at least as much as the liability and obligation
of ABRY hereunder, and such liability and obligation may reasonably be
expected to benefit ABRY directly or indirectly;
(j) ABRY is familiar with, and has independently reviewed books and
records regarding, the financial condition of the Company and the Parent;
and
(k) neither the Lenders nor any of its officers or agents has made
any representation, warranty or statement to ABRY regarding the financial
condition of the Company or the Parent in order to induce ABRY to execute
this Agreement.
SECTION 4. Breach of this Agreement. In the event of a breach by the
------------------------
Company, ABRY, or the Parent of this Agreement, the Administrative Lender shall
have all rights and remedies afforded to it at law or in equity, including the
right to demand specific performance. In addition, this Agreement shall be
deemed to be a Loan Paper, and a breach of any covenant by the Company, ABRY, or
the Parent of any of its respective obligations hereunder shall be an Event of
Default under the Credit Agreement.
SECTION 5. Further Assurances. Each of ABRY, the Company, and the Parent
------------------
shall execute and deliver such further agreements, documents, instruments, and
certificates in form and substance satisfactory to the Administrative Lender, as
the Administrative Lender or any Lender may reasonably deem necessary in
connection with this Agreement.
SECTION 6. Miscellaneous.
-------------
(a) ABRY and the Parent each hereby agrees that its obligations
under the terms of this Agreement shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any one or more of the
following events: (i) the taking or accepting of any other security or
guaranty for any or all of the Obligations; (ii) any release, surrender,
exchange, subordination, or loss of any security at any time existing in
connection with any or all of the Obligations; (iii) the modification of,
amendment to, or waiver of compliance with any terms of the Credit
Agreement or any other Loan Paper without the notification of ABRY or the
Parent (the right to such notification being herein specifically waived by
ABRY and the Parent); provided, ABRY and the Parent do not waive their
right to notice and consent to any amendment or modification of, the Credit
Agreement, which modification or amendment could increase the amount of the
liability, or the likelihood that ABRY or the Parent will be required to
make any capital
5
<PAGE>
contribution, pursuant hereto (it being expressly understood that nothing
herein shall be construed to refer to course of dealing by the
Administrative Lender or the Lenders); (iv) the insolvency, bankruptcy, or
lack of corporate or other power of the Company, whether now existing or
hereafter occurring; (v) pursuant to this Agreement, any renewal or
extension of the payment of any or all of the Obligations, either with or
without notice to or consent of ABRY and the Parent, or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by the
Lenders to the Company, ABRY, the Parent, or any other Person liable for
the Obligations provided, ABRY and the Parent do not waive their right to
--------
notice and consent to any renewal or extension of the Credit Agreement,
which could increase the amount of the liability of ABRY or the Parent or
the likelihood that ABRY or the Parent will be required to make a capital
contribution hereunder (it being expressly understood that nothing herein
shall be construed to refer to course of dealing by the Administrative
Lender or the Lenders); (vi) any neglect, delay, omission, failure, or
refusal of the Lenders to take or prosecute any action for the collection
of any of the Obligations or to foreclose or take or prosecute any action
in connection with any instrument or agreement evidencing or securing all
or any part of the Obligations; (vii) any failure of the Lenders to notify
ABRY or the Parent of any renewal, extension, or assignment of the
Obligations or any part thereof (provided that, any renewal or extension of
--------
the Obligations to the extent the same could increase the amount of the
liability, or the likelihood that ABRY and the Parent will be required to
make any capital contribution pursuant to, this Agreement will require the
consent of ABRY), or the release of any security, or of any other action
taken or refrained from being taken by the Lenders, it being understood
that (except as specifically provided in this Agreement) the Lenders shall
not be required to give ABRY and the Parent any notice of any kind under
any circumstances whatsoever with respect to or in connection with the
Obligations (it being expressly understood that nothing herein shall be
construed to refer to course of dealing by the Administrative Lender or the
Lenders); (viii) the unenforceability of all or any part of the Obligations
against the Company or any other Person by reason of the fact that the
Obligations, and/or the interest paid or payable with respect thereto,
exceeds the amount permitted by Law, the act of creating the Obligations,
or any part thereof, is ultra vires, or the officers creating same acted in
----- -----
excess of their authority, or the Note being nonrecourse as to the Company,
or for any other reason; or (ix) any payment by the Company or any other
Person to the Lenders is held to constitute a preference under any Debtor
Relief Law or if for any other reason any Lender is required to refund such
payment or pay the amount thereof to another Person.
(b) This Agreement shall be an absolute and continuing obligation of
payment of ABRY and the Parent, and the circumstances that at any time or
from time to time the Obligations under the Credit Agreement may be paid in
full shall not affect the obligation of ABRY or the Parent to make any
capital contribution which may be required hereby, subject to the terms of
this Agreement.
6
<PAGE>
(c) If ABRY or the Parent becomes liable for any indebtedness owing by
the Company to the Lenders by endorsement or otherwise, other than this
Agreement, such liability shall not be in any manner impaired or affected
hereby, and the rights of the Lenders hereunder shall be cumulative of any
and all other rights which the Lenders may ever have against ABRY or the
Parent. The exercise by the Lenders of any Right or remedy hereunder or
under any other instrument shall not preclude the concurrent or subsequent
exercise of any other Right or remedy.
(d) It shall not be necessary for the Lenders, in order to enforce the
right to require ABRY or the Parent to make a capital contribution pursuant
to this Agreement, first to institute suit or exhaust their remedies
against the Company, or other Persons liable for the Obligations, or to
enforce their Rights against any security which shall ever have been given
to secure the Obligations, this Agreement being in no way conditional or
contingent.
(e) ABRY and the Parent each hereby waives all rights by which it might
be entitled to require suit on an accrued right of action in respect of any
of the Obligations or require suit against the Company or any other Person,
whether arising pursuant to Section 34.02 of the Texas Business and
Commerce Code, as amended, Section 17.001 of the Texas Civil Practice and
Remedies Code, as amended, and Rule 31 of the Texas Rules of Civil
Procedure, as amended, or otherwise.
(f) The Obligations shall not be reduced, discharged, or released
because or by reason of any existing or future offset, claim or defense of
the Company or any other Person against the Lenders or against payment of
the Obligations, whether such offset, claim, or defense arises in
connection with the Obligations or otherwise.
SECTION 7. Waiver of Subrogation.
---------------------
(a) ABRY and the Parent shall not assert, enforce, or otherwise exercise
(a) any right of subrogation to any of the rights or liens of the Lenders or any
other beneficiary against the Company or any other Person obligated to the
Lenders or any collateral or other security, or (b) any right of recourse,
reimbursement, contribution, indemnification, or similar right against the
Company or any other Person on all or any part of the Obligations or any
guarantor thereof, and ABRY hereby waives any and all of the foregoing rights
and the benefit of, and any right to participate in, any collateral or other
security given to the Lenders or any other beneficiary to secure payment of the
Obligations. The provisions of this Section 7 shall survive for a period of a
year and one day following the termination of this Agreement, and any
satisfaction and discharge of the Company by virtue of any payment, court order,
or Law.
(b) The provisions of this Section 7 shall be valid and effective if and
to the extent that as a result of a final, non-appealable decision by a court of
competent jurisdiction, it is determined that (i) ABRY or the Parent is an
"insider" (as that term is used in 11 U.S.C. /S/547)
7
<PAGE>
of any other Person (which other Person is the subject of a proceeding under a
Debtor Relief Law), and (ii) a transfer of an interest in property of such other
Person to the Lenders is an avoidable transfer under 11 U.S.C. /S/547 (or other
applicable Debtor Relief Law) and recoverable under 11 U.S.C. /S/550 (or other
applicable Debtor Relief Law) and such transfer otherwise would not have been so
avoidable and so recoverable but for the determination under clause (i) above
----------
that ABRY and the Parent is an "insider" of such other Person.
SECTION 8. Termination of this Agreement. This Agreement shall terminate
-----------------------------
when all Obligations of the Company under the Credit Agreement are paid in full
and no commitments remain outstanding thereunder. As of the date hereof, the
Capital Contribution Agreement dated as of February 26, 1998 between ABRY, the
Company, and the Administrative Lender is hereby terminated.
SECTION 9. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument. In making proof of any such agreement, it shall not be necessary to
produce or account for any counterpart other than one signed by the party
against which enforcement is sought.
SECTION 10. ENTIRE AGREEMENT. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT
----------------
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11. GOVERNING LAW
-------------
. (a) THIS AGREEMENT SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF TEXAS
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF ALL OR ANY PART OF THIS AGREEMENT. WITHOUT
EXCLUDING ANY OTHER JURISDICTION, EACH OF ABRY, THE PARENT, AND THE COMPANY
AGREES THAT THE COURTS OF TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION HEREWITH.
(B) EACH OF THE COMPANY, THE PARENT, AND ABRY HEREBY WAIVES PERSONAL
SERVICE OF ANY LEGAL PROCESS UPON IT. IN ADDITION, EACH OF THE COMPANY, THE
PARENT, AND ABRY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE COMPANY, THE PARENT,
OR ABRY AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT BY IT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE LENDER OR ANY LENDER TO SERVE LEGAL
PROCESS IN
8
<PAGE>
ANY OTHER MANNER PERMITTED BY LAW.
SECTION 12. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
--------------------
THE COMPANY, THE PARENT, ABRY AND EACH LENDER HEREBY WAIVES ANY RIGHT THAT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, OR ANY
RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE
SITTING WITHOUT A JURY.
SECTION 13. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to it, at the address or number listed below such Person set
forth on the signature page. All such notices and other communications shall,
when mailed, telecopied, telegraphed, telexed or cabled, be effective when
received.
SECTION 14. Assignment. This Agreement is not assignable, except that either
the Parent or the Company may assign its rights to the Administrative Lender for
the benefit of the Lenders, and the Administrative Lender and each of the
Lenders may assign or otherwise transfer all or any portion of its rights and
obligations hereunder in connection with an assignment under the Credit
Agreement to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to the
Administrative Lender and the Lenders herein or otherwise.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.
COMPANY: PINNACLE TOWERS INC.
1549 Ringling Boulevard
3rd Floor ------------------------------
Sarasota, Florida 34236 By:---------------------------
Telephone: (941) 364-8886 Its:--------------------------
Telecopy: (941) 364-8761
PARENT: PINNACLE HOLDINGS INC.
1549 Ringling Boulevard
3rd Floor -----------------------------
Sarasota, Florida 34236 By:--------------------------
Telephone: (941) 364-8886 Its:-------------------------
Telecopy: (941) 364-8761
ABRY BROADCAST PARTNERS II, L.P.
18 Newbury Street By ABRY Capital, L.P.
Boston, MA 02116 Its General Partner
Telephone: By ABRY Holdings, Inc.,
Telecopy: Its General Partner
-----------------------------
By:
Its:
NATIONSBANK, N.A., as
Administrative Lender, and
individually as a Lender
901 Main Street
64th Floor
Dallas, TX 75202
Attn: Ms. Roselyn Reid -----------------------------
Telephone: (214) 508-0860 By: Roselyn Reid
Telecopy: (214) 508-9390 Its: Vice President
10
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS
L.P.
Address:
85 Broad
17th Floor -------------------------------
New York, New York 10001 By: ---------------------------
Its: --------------------------
Attn.: Rich Katz
Telephone: (212) 902-5492
Telecopy: (212) 357-4451
BANKBOSTON, N.A.
Address:
Media & Communications Department
100 Federal Street, 01-08-08
Boston, Massachusetts 02110 -------------------------------
Attn.: Mr. Lenny Mason By:----------------------------
Its:---------------------------
Telephone: (617) 434-6489
Telecopy: (617) 434-3401
SOCIETE GENERALE, NEW YORK
BRANCH
Address:
1221 Avenue of the Americas
11th Floor
New York, New York 10020 -------------------------------
Attn.: Mr. John Sadik-Khan By:----------------------------
Its:---------------------------
Telephone: (212) 278-6873
Telecopy: (212) 278-6240
11
<PAGE>
BANK OF AMERICA
Address:
335 Madison Avenue, 5th Floor
New York, NY 10286 ------------------------------
Attn.: Carl Salas By:---------------------------
Its:--------------------------
Telephone: (212) 503-3425
Telecopy: (212) 503-7173
UNION BANK OF CALIFORNIA, N.A.
Address: 445 South Figueroa Street
Los Angeles, CA 90071 ------------------------------
Attn.: Kristina Mouzakis By:---------------------------
Its:--------------------------
Telephone: (213) 236-7580
Telecopy: (213) 236-5747
12
<PAGE>
EXHIBIT 10.21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$250,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
PINNACLE TOWERS INC.
AND
NATIONSBANK, N.A.
AS ADMINISTRATIVE LENDER
AND
GOLDMAN SACHS CREDIT PARTNERS L.P.,
AS SYNDICATION AGENT
AND
BANKBOSTON, N.A.
SOCIETE GENERALE, NEW YORK BRANCH
BANK OF AMERICA
UNION BANK OF CALIFORNIA, N.A.
AS LENDERS
DATED AS MAY 29, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
$250,000,000
PINNACLE TOWERS INC.
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS
1.01. Definitions...................................................... 2
1.02. Accounting and Other Terms....................................... 25
ARTICLE II. AMOUNTS AND TERMS OF ADVANCES
2.01. The Advances..................................................... 25
2.02. Making Advances.................................................. 25
2.03. Evidence of Debt for Borrowed Money.............................. 27
2.04. Optional Prepayments............................................. 27
2.05. Mandatory Prepayments............................................ 28
2.06. Repayment........................................................ 29
2.07. Interest......................................................... 29
2.08. Default Interest................................................. 30
2.09. Continuation and Conversion Elections............................ 30
2.10. Fees............................................................. 31
2.11. Reduction of Available Commitment................................ 32
2.12. Funding Losses................................................... 34
2.13. Computations and Manner of Payments.............................. 34
2.14. Yield Protection; Changed Circumstances.......................... 35
2.15. Use of Proceeds.................................................. 37
2.16. Collateral and Collateral Call................................... 37
2.17. Replacement of a Lender.......................................... 38
2.18. Conditions Precedent to the Increase of the Available Commitment. 39
ARTICLE III. LETTERS OF CREDIT
3.01. Issuance of Letters of Credit.................................... 41
3.02. Letters of Credit Fee............................................ 42
3.03. Reimbursement Obligations........................................ 42
3.04. Lenders' Obligations............................................. 44
3.05. Administrative Lender's Obligations.............................. 44
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to Closing and the Initial Advance.......... 45
4.02. Conditions Precedent to All Advances and Letters of Credit....... 47
4.03. Conditions Precedent to Advances for Permitted Acquisitions...... 47
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties................................... 48
5.02. Survival of Representations and Warranties....................... 56
<PAGE>
$250,000,000
- --------------------------------------------------------------------------------
PINNACLE TOWERS INC.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT is dated as of May 29,
1998, among Pinnacle Towers Inc., a Delaware corporation (the "Borrower"), the
Lenders (as defined below), NationsBank, N.A., as a Lender and Administrative
Lender (the "Administrative Lender"), and Goldman Sachs Credit Partners L.P., as
Syndication Agent.
BACKGROUND.
WHEREAS, Borrower entered into that certain Second Amended and Restated
Credit Agreement with Administrative Lender and Lenders, dated as of February
26, 1998 (the "Original Credit Agreement") which provided for one revolver/term
loan in the initial amount of $200,000,000 (which could be increased to
$250,000,000), to add certain lenders as parties thereto and to make certain
other agreed to changes to the existing credit facility among the parties
thereto.
WHEREAS, Borrower and Administrative Lender have agreed to restructure,
extend, renew and restate such indebtedness under the Original Credit Agreement
as set forth herein to provide for one reducing revolver facility in the initial
amount of $150,000,000, which may under certain circumstances (but the Lenders
are under no commitment to) increase to $250,000,000 and to make certain other
agreed to changes to the existing credit facility among the parties thereto.
AGREEMENT.
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
parties hereto agree as follows:
All obligations under the Original Credit Agreement, as modified herein,
shall after the Closing Date, be evidenced by the Notes, this Agreement, and the
Loan Papers, and shall be secured by (except as expressly provided herein or in
any other Loan Paper), among other things, the original collateral as granted
Borrower pursuant to the Loan Papers executed and delivered pursuant to the
Original Credit Agreement and the preceding credit documentation, as amended
from time to time.
<PAGE>
ARTICLE I. DEFINITIONS
1.01. Definitions. As used in this Agreement, the following terms have
the respective meanings indicated below (such meanings to be applicable equally
to both the singular and plural forms of such terms):
"ABRY" means ABRY Broadcast Partners II, L.P., a Delaware limited
partnership.
"Advance" means an advance made by a Lender to the Borrower pursuant to
Section 2.01 hereof, which such Advance may be a Refinancing Advance.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled By or is Under Common Control
with another Person.
"Administrative Lender" means NationsBank, N.A. in its capacity as
Administrative Lender hereunder, or any successor Administrative Lender
appointed pursuant to Section 10.06 hereof.
"Agreement" means this Third Amended and Restated Credit Agreement, as
hereafter amended, modified, increased, extended, restated or supplemented from
time to time.
"Annualized EBITDA" means, (a) with respect to Compliance Certificates
delivered in connection with Section 7.03 hereof, the product of (i) EBITDA for
the Parent, the Borrower and its Subsidiaries on a consolidated basis, for the
most recently completed month immediately preceding the date of determination
times (ii) twelve, and (b) with respect to pro-forma Compliance Certificates
delivered in connection with Permitted Acquisitions delivered pursuant to
Section 6.16 hereof, the product of (i) EBITDA for the Parent, the Borrower and
its Subsidiaries on a consolidated basis, for the most recently completed month
immediately preceding the date of determination with respect to which the
Borrower has financial statements prepared, times (ii) twelve.
"Applicable Law" means (a) in respect of any Person, all provisions of
Laws applicable to such Person, and all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a party
and (b) in respect of contracts made or performed in the State of Texas,
"Applicable Law" shall also mean the laws of the United States of America,
including, without limiting the foregoing, 12 USC Sections 85 and 86, as amended
to the date hereof and as the same may be amended at any time and from time to
time hereafter, and any other statute of the United States of America now or at
any time hereafter prescribing the maximum rates of interest on loans and
extensions of credit, and the laws of the State of Texas, including, without
limitations, Articles 5069-1H, Title 79, Revised Civil Statutes of Texas, 1925,
as amended ("Art. 1H"), if applicable, and if Art. 1H
<PAGE>
is not applicable, Article 5069-1D, Title 79, Revised Civil Statutes of Texas,
1925 ("Art. 1D"), as amended, and any other statute of the State of Texas now or
at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit, provided however, that pursuant to Article 5069-15.10(b),
Title 79, Revised Civil Statutes of Texas, 1925, as amended, the Borrower agrees
that the provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas,
1925, as amended, shall not apply to the Advances hereunder.
"Applicable Margin" means, (a) with respect to LIBOR Advances, 2.750%
per annum, and (b) with respect to Base Advances, 1.750% per annum provided
that, if there exists no Default or Event of Default, then the Applicable Margin
will be the following per annum percentages applicable in the following
situations:
Base Advance LIBOR Advance
Applicability Percentage
- ------------- ----------
Percentage
- ----------
(i) If the Total 1.750% 2.750%
Leverage Ratio is equal to or
greater than 9.50 to 1.00
(ii) If the Total 1.625% 2.625%
Leverage Ratio is equal to or
greater than 9.00 to 1.00
but is less than
9.50 to 1.00
(iii) If the Total 1.500% 2.500%
Leverage Ratio is equal to or
greater than 8.00 to 1.00
but is less than
9.00 to 1.00
(iv) If the Total 1.250% 2.250%
Leverage Ratio is equal to or
greater than 7.50 to 1.00
but is less than
8.00 to 1.00
(v) If the Total 1.000% 2.000%
Leverage Ratio is equal to or
greater than 6.50 to 1.00
but is less than
7.50 to 1.00
3
<PAGE>
(vi) If the Total 0.750% 1.750%
Leverage Ratio is equal to or
greater than 6.00 to 1.00
but is less than
6.50 to 1.00
(vii) If the Total 0.500% 1.500%
Leverage Ratio is equal to or
greater than 5.50 to 1.00
but is less than
6.00 to 1.00
(viii) If the Total 0.250% 1.250%
Leverage Ratio is equal to or
greater than 5.00 to 1.00
but is less than
5.50 to 1.00
(ix) If the Total 0.000% 1.000%
Leverage Ratio is less than
5.00 to 1.00
The Applicable Margin payable by the Borrower shall be (a) reduced or increased
as applicable and as set forth in the table above, on a quarterly basis
according to the performance of the Parent, Borrower and Subsidiaries of
Borrower as tested by the Total Leverage Ratio, (b) increased by 0.125% in each
instance in the table set forth above if the Senior Leverage Ratio is in excess
of 5.00 to 1.00 as tested on a quarterly basis, and (c) further increased as set
forth in Section 6.15(c) hereof. Except as set forth in the last sentence
hereof, any such increase or reduction in the Applicable Margin provided for
herein shall be effective three Business Days after receipt by Administrative
Lender of the applicable financial statements and corresponding Compliance
Certificate. If financial statements and a Compliance Certificate of the
Borrower setting forth the Total Leverage Ratio and the Senior Leverage Ratio
are not received by the Administrative Lender by the date required pursuant to
Article VII hereof, the Applicable Margin shall be determined as if the Total
Leverage Ratio exceeds 9.50 to 1.00 and the Senior Leverage Ratio exceeds 5.00
to 1.00, until such time as such financial statements and Compliance Certificate
are received. For the final quarter of any fiscal year of the Borrower, the
Borrower may provide the unaudited financial statements of the Borrower, subject
only to year-end adjustments, for the purpose of adjusting the Applicable
Margin.
"Application" means any stand-by letter of credit application delivered
to Administrative Lender for or in connection with any stand-by Letter of Credit
pursuant to Article III hereof, in Administrative Lender's standard form for
stand-by letters of credit.
4
<PAGE>
"Art. 1D" has the meaning specified in the definition herein of
"Applicable Law".
"Art. 1H" has the meaning specified in the definition herein of
"Applicable Law".
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by Administrative
Lender, in the form of Exhibit F hereto.
"Auditor" means Price Waterhouse L.L.P., or other independent certified
public accountants selected by the Borrower and acceptable to Administrative
Lender.
"Authorized Officer" means, with respect to the Borrower and its
Subsidiaries, the President, Chief Executive Officer, Chief Financial Officer or
the Controller of the Borrower.
"Available Commitment" means $150,000,000, as such amount may be
increased prior to March 31, 2000 in accordance with the terms of Section 2.18
hereof, and as such amount may be reduced from time to time or terminated
pursuant to Sections 2.06, 2.11 or 9.02 hereof.
"Bank Affiliate" means the holding company of any Lender, or any
wholly-owned direct or indirect subsidiary of such holding company or of such
Lender.
"Base Advance" means an Advance bearing interest at the Base Rate.
"Base Rate" means a per annum interest rate equal to the lesser of (a)
the Highest Lawful Rate, and (b) the sum of the Applicable Margin plus the
higher of (i) a fluctuating rate per annum as shall be in effect from time to
time announced or published by NationsBank, N.A. as its prime rate, and which
may not necessarily be the lowest interest rate charged by NationsBank, N.A. and
(ii) the Federal Funds Rate in effect at such time plus .50%.
"Borrower Pledge Agreement" means the Pledge Agreement of even date
herewith, executed by the Borrower, granting a Lien on 100% of the Capital Stock
of each of the Borrower's Subsidiaries constituting Pledged Stock as security
for the Obligations, substantially in the form of Exhibit J hereto, as such
agreement may be amended, modified, renewed or extended from time to time.
"Borrowing" means a borrowing of the same Type made on the same day.
"Borrowing Notice" has the meaning set forth in Section 2.02(a) hereof.
5
<PAGE>
"Business Day" means a day of the year on which banks are not required
or authorized to close in Dallas, Texas or Sarasota, Florida, or, if with
respect to any notice, payment or calculation related to a LIBOR Advance, in New
York, New York, Dallas, Texas, Sarasota, Florida or London, England.
"Capital Contribution Agreement" means that certain Capital Contribution
Agreement, dated as of May 29, 1998, among ABRY, the Parent, the Borrower and
the Administrative Lender on behalf of Lenders, substantially in the form of
Exhibit N hereto.
"Capital Expenditures" means capital expenditures, as defined in
accordance with GAAP.
"Capital Leases" means capital leases and subleases, as defined in
accordance with GAAP.
"Capital Stock" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a corporation and each class of partnership interests
(including without limitation, general, limited and preference units) in any
Person that is a partnership.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any provision of the Code shall include all successor provisions
thereto.
"Collateral" has the meaning ascribed thereto in Section 2.16 hereof.
"Commitment Fee" means the fee described in Section 2.10(b) hereof.
"Communications Act" means, collectively, the Communications Act of 1934
and the rules and regulations promulgated thereunder, as from time to time in
effect.
"Compliance Certificate" means a certificate of an Authorized Officer in
the form of Exhibit C hereto, (a) certifying that such individual has no
knowledge that a Default or Event of Default has occurred and is continuing, or
if a Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action being taken or proposed to be taken with
respect thereto, (b) setting forth detailed calculations with respect to the
covenants described in Section 8.01 hereof and (c) certifying to the appropriate
Applicable Margin.
"Consequential Loss" with respect to (a) the Borrower's payment of all
or any portion of the then-outstanding principal amount of a LIBOR Advance on a
day other than the last day of the
6
<PAGE>
related Interest Period, including, without limitation, payments made as a
result of the acceleration of the maturity of a Note, (b) subject to
Administrative Lenders' prior consent, a LIBOR Advance made on a date other than
the date on which the Advance is to be made according to Section 2.02(a) or
Section 2.09 hereof to the extent such Advance is made on such other date at the
request of the Borrower, or (c) any of the circumstances specified in Section
2.04 hereof on which a Consequential Loss may be incurred, means any loss, cost
or expense incurred by any Lender as a result of the timing of the payment or
Advance or in liquidating, redepositing, redeploying or reinvesting the
principal amount so paid or affected by the timing of the Advance or the
circumstances described in Section 2.04 hereof, which amount shall be the sum of
(i) the interest that, but for the payment or timing of Advance, such Lender
would have earned in respect of that principal amount, reduced, if such Lender
is able to redeposit, redeploy, or reinvest the principal amount, by the
interest earned by such Lender as a result of redepositing, redeploying or
reinvesting the principal amount plus (ii) any expense or penalty incurred by
such Lender by reason of liquidating, redepositing, redeploying or reinvesting
the principal amount. Each determination by each Lender of any Consequential
Loss is, in the absence of manifest error, presumptive evidence of the validity
of such claim.
"Contingent Liability" means, as to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Debt or obligation of any other Person in any manner,
whether directly or indirectly, including without limitation any obligation of
such Person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt, (b)
to purchase Property or services for the purpose of assuring the owner of such
Debt of its payment, or (c) to maintain the solvency, working capital, equity,
cash flow, fixed charge or other coverage ratio, or any other financial
condition of the primary obligor so as to enable the primary obligor to pay any
Debt or to comply with any agreement relating to any Debt or obligation, but
excluding endorsement of checks, drafts and other instruments in the ordinary
course of business.
"Continue," "Continuation" and "Continued" each refer to the
continuation pursuant to Section 2.09 hereof of a LIBOR Advance from one
Interest Period to the next Interest Period.
"Control" or "Controlled By" or "Under Common Control" mean possession,
direct or indirect, of power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided that, in any event (a) any Person which beneficially owns
(i) 10% or more (in number of votes) of the securities having ordinary voting
power for the election of directors of a corporation shall be conclusively
presumed to control such corporation and (ii) 10% or more of the
7
<PAGE>
interest in capital or profits of a partnership shall be conclusively presumed
to control such partnership, and (b) no Person shall be deemed to be an
Affiliate of a corporation solely by reason of his being an officer or director
of such corporation.
"Controlled Group" means, as to any Person, all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
which are under common control with such Person and which, together with such
Person, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code.
"Conversion or Continuance Notice" has the meaning set forth in Section
2.09(b) hereof.
"Cure Sub Debt" means, for the purpose of effecting a cure under Section
8.01(a)(i) hereof and/or Section 8.01(b)(i) hereof only, subordinated
indebtedness owed by the Borrower to ABRY that meets each of the following
conditions: (a) such subordinated indebtedness must be issued upon receipt of
cash funds for a like amount and must be fully and deeply subordinated to all
other debt of the Borrower on terms and conditions, and subject to documentation
acceptable to the Majority Lenders in their sole discretion, (b) such
subordinated indebtedness shall not provide for any current pay interest or
principal, except payments of interest in kind, (c) such subordinated debt shall
not mature but shall convert to common equity of the Parent in not more than one
year from its date of issuance upon terms and conditions acceptable to the
Majority Lenders and (d) all such subordinated indebtedness in the aggregate at
any one time outstanding may not exceed an amount equal to $10,000,000.
"Debt" means all obligations, contingent or otherwise, which in
accordance with GAAP are required to be classified on the balance sheet as
liabilities, and in any event including (without duplication) (a) Capital
Leases, (b) Contingent Liabilities that are required to be disclosed and
quantified in notes to consolidated financial statements in accordance with
GAAP, and (c) liabilities secured by any Lien on any Property, regardless of
whether such secured liability is with or without recourse.
"Debt for Borrowed Money" means, as to any Person, at any date, without
duplication, (a) all obligations of such Person for borrowed money, letters of
credit (or applications for letters of credit) or other similar instruments, (b)
all obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, and, with respect to the Parent, the Borrower
and its Subsidiaries, including any accrued but unpaid Earn-Out Liability, but
excluding any unaccrued Earn-Out Liability, and (d) liabilities under Synthetic
Leases. For purposes of this Agreement, the principal amount of Debt of a Person
deemed to be outstanding under (a) Synthetic
8
<PAGE>
Leases to which a Person is a party shall be the aggregate net present value
(calculated at a discount rate of ten percent of the future Rental Obligations
which will become due and payable by such Person over the remaining term of all
Synthetic Leases) to which such Person is a party.
"Debtor Relief Laws" means applicable bankruptcy, reorganization,
moratorium, or similar Laws, or principles of equity affecting the enforcement
of creditors' rights generally.
"Default" means any event specified in Section 9.01 hereof, whether or
not any requirement in connection with such event for the giving of notice,
lapse of time, or happening of any further condition has been satisfied.
"Distribution" means, as to any Person, (a) any declaration or payment
of any distribution or dividend (other than a stock dividend) on, or the making
of any pro rata distribution, loan, advance, or investment to or in any holder
of, any partnership interest or shares of capital stock or other equity interest
of such Person (or the establishment of a sinking fund or otherwise setting
aside of funds for any such purpose), or (b) any purchase, redemption, or other
acquisition or retirement for value of any shares of partnership interest or
capital stock or other equity interest of such Person (or the establishment of a
sinking fund or otherwise setting aside of funds for any such purpose).
"Earn-Out Liability" means, with respect to the Borrower and its
Subsidiaries, any unsecured contingent liability of the Borrower or any
Subsidiary of the Borrower incurred in connection with any Permitted
Acquisition, which such contingent liability (a) constitutes a portion of the
purchase price for the property acquired but is not an amount certain, (b) is
only payable based on the performance of the acquired property and in an amount
based only on the performance of the acquired property or (c) is not subject to
any acceleration right.
"EBITDA" means, for the Parent, the Borrower and its Subsidiaries, for
any period of determination, the sum of (a) net income for such period, plus (b)
amortization and depreciation for such period, plus (c) non-cash charges (minus
extraordinary non-cash income) and other extraordinary items for such period to
the extent not included in net income, plus (d) Interest Expense for such
period, including Rental Obligations under Synthetic Leases (whether or not
treated as Interest Expense), plus (e) General and Administrative Expense for
such period which are reimbursable by ABRY pursuant to the terms of the Capital
Contribution Agreement, plus (f) Income Tax Expense for the Parent, the Borrower
and its Subsidiaries for such period, plus (g) an adjustment to net income for
such period to account for the effect of treating all acquisitions completed in
such period as if such acquisitions had been completed on the first day of such
period, plus (h) an adjustment to net income for such period to record (i) an
increase
9
<PAGE>
in revenue related to all new leases executed in the period as if such leases
were effective as of the beginning of such period and (ii) a decrease in revenue
related to all terminated or cancelled leases during the period as if such
leases were terminated or cancelled as of the beginning of such period.
"Eligible Assignee" means any Bank Affiliate and any (a) commercial bank
organized under the laws of the United States, or any state thereof, and having
total assets in excess of $1,000,000,000; (b) savings and loan association or
savings bank organized under the laws of the United States, or any state
thereof, having total assets in excess of $1,000,000,000, and not in
receivership or conservatorship; (c) commercial bank organized under the laws of
any other country which is a member of the Organization for Economic Cooperation
and Development, or a political subdivision of any such country, and having
total assets in excess of $1,000,000,000, provided that such bank is acting
through a branch or agency located in the country in which it is organized or
another country which is described in this clause; and (d) central bank of any
country which is a member of the Organization for Economic Cooperation and
Development.
"Environmental Claim" means any written notice by any Tribunal alleging
liability for damage to the environment, or by any Person alleging liability for
personal injury (including sickness, disease or death), resulting from or based
upon (a) the presence or release (including sudden or non-sudden, accidental or
non-accidental, leaks or spills) of any Hazardous Material at, in or from
property, whether or not owned by the Parent, the Borrower or any of its
Subsidiaries, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss.9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. ss.1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C ss.6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air Act (42 U.S.C.
ss.7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. ss.651 et seq.) ("OSHA"),
as such laws have been or hereafter may be amended or supplemented, and any and
all analogous future federal, or present or future state or local, Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder, as from time to time
in effect.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the controlled group of the Borrower or any Obligor, or is
under common control with Borrower or any Obligor, within the meaning of Section
414(c) of the Code, and the regulations and rulings issued thereunder.
10
<PAGE>
"ERISA Event" means (a) a reportable event, within the meaning of
Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto
has been waived by the PBGC, (b) the issuance by the administrator of any Plan
of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA), (c) the withdrawal by the Parent, the Borrower, any
Subsidiary of the Borrower, or an ERISA Affiliate from a Multiple Employer Plan
during a Plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA, (d) the failure by the Borrower, any Subsidiary of
the Borrower, or any ERISA Affiliate to make a payment to a Plan required under
Section 302 of ERISA, (e) the adoption of an amendment to a Plan requiring the
provision of security to such Plan, pursuant to Section 307 of ERISA, or (f) the
institution by the PBGC of proceedings to terminate a Plan, pursuant to Section
4042 of ERISA, or the occurrence of any event or condition that constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, a Plan.
"Estoppel and Attornment Language" means estoppel and attornment
language substantially in the form of Exhibit O hereto, or such other language
as may be approved in writing by Administrative Lender.
"Event of Default" means any of the events specified in Section 9.01 of
this Agreement, provided there has been satisfied any requirement in connection
therewith for the giving of notice, lapse of time, or happening of any further
condition.
"Excess Cash Flow" means, for any fiscal year of the Borrower, EBITDA
for such year minus the sum of (a)Income Tax Expense for such year, plus (b)
Fixed Charges for such year (excluding interest paid or payable, at the option
of the Borrower, in-kind), plus (c) (without duplication) all voluntary
principal prepayments on the Obligations pursuant to Section 2.04 hereof during
such period, plus (d) all General and Administrative Expense paid during such
period.
"FAA" means the Federal Aviation Administration, or any governmental
agency succeeding to the functions thereof.
"FCC" means the Federal Communications Commission, or any governmental
agency succeeding to the functions thereof.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of Dallas, or, if such rate is not so published for any day
which is a Business Day, the average of the
11
<PAGE>
quotations for such date on such transactions received by Administrative Lender
from three federal funds brokers of recognized standing selected by it.
"Fee Letter" means that certain Fee Letter, dated March 17, 1998,
between the Borrower and the Administrative Lender, as such letter may be
amended, modified, substituted, replaced, or increased from time to time, and
such other fee letters as may be executed among the parties from time to time,
as such letters may be amended, modified, substituted, replaced, or increased
from time to time.
"Fixed Charges" means, for any specified period for the Parent, the
Borrower and its Subsidiaries on a consolidated basis, the sum of (a) required
or scheduled principal and interest payments with respect to Debt for Borrowed
Money for such period, excluding until March 31, 2000 (x) required or scheduled
principal payments with respect to seller notes executed by the Borrower in
connection with Permitted Acquisitions to the extent permitted by Section 8.02
hereof and (y) accrued or paid Earn-Out Liabilities, plus (b) required or
scheduled payments with respect to Capital Leases for such period, plus (c) cash
distributions made by the Borrower and the Parent in accordance with the terms
of Section 8.08(b)(iii) hereof during such period (without duplication), plus
(d) Capital Expenditures (other than those Capital Expenditures for Permitted
Acquisitions) for such period.
"GAAP" means generally accepted accounting principles applied on a
consistent basis. Application on a consistent basis shall mean that the
accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period, except for new
developments or statements promulgated by the Financial Accounting Standards
Board and other changes in accounting methods permitted by generally accepted
accounting principles.
"General and Administrative Expense" means, for any respective period,
Borrower's general and administrative expenses, as determined on a consolidated
basis in accordance with GAAP.
"Ground Lease" means those certain leases for real property or rooftops
entered into or acquired by the Borrower or any Subsidiary of the Borrower, for
the lease of real property (including rooftops) which constitute a Tower or upon
which is located a Tower (or which will constitute a Tower or upon which will be
located a Tower) for the purpose of maintaining Tenant Leases, including,
without limitation, those Ground Leases described on Schedule 5.01(x) hereto.
"Guarantors" means the Parent and each Subsidiary of the Borrower
existing on the Closing Date or formed or acquired from time to time thereafter.
12
<PAGE>
"Guaranty" means a guaranty executed by any Person of the obligations of
another Person, or any agreement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for the payment of,
or otherwise becomes liable upon, the obligation of any other Person, or agrees
to maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor or such other Person against
loss, including, without limitation, any comfort letter, or take-or-pay contract
and shall include without limitation, the contingent liability of such Person in
connection with any application for a letter of credit.
"Hazardous Materials" means all materials subject to any Environmental
Law, including without limitation materials listed in 49 C.F.R. ss. 172.101,
Hazardous Substances, explosive or radioactive materials, hazardous or toxic
wastes or substances, petroleum or petroleum distillates, asbestos, or material
containing asbestos.
"Hazardous Substances" means hazardous waste as defined in the Clean
Water Act, 33 U.S.C. ss. 1251 et seq., the Comprehensive Environmental Response
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. ss. 9601 et seq., the Resource Conservation
Recovery Act, 42 U.S.C. ss. 6901 et seq., and the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq.
"Highest Lawful Rate" means at the particular time in question the
maximum rate of interest which, under Applicable Law, Administrative Agent is
then permitted to charge on the Obligations. If the maximum rate of interest
which, under Applicable Law, such Lender is permitted to charge on the
Obligations shall change after the date hereof, the Highest Lawful Rate shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate without notice
to the Borrower. For purposes of determining the Highest Lawful Rate under
Applicable Law, the applicable rate ceiling shall be (a) the indicated rate
ceiling described in and computed in accordance with the provisions of Art. lH;
or (b) either the annualized ceiling or quarterly ceiling computed pursuant to
.008 of Art. 1D; provided, however, that at any time the indicated rate ceiling,
the annualized ceiling or the quarterly ceiling, as applicable, shall be less
than 18% per annum or more than 24% per annum, the provisions of Sections
.009(a) and .009(b) of said Art. lD shall control for purposes of such
determination, as applicable.
"Income Tax Expense" means the aggregate Taxes accrued by the Parent,
the Borrower and its Subsidiaries for the relevant period of determination, plus
any cash Distributions made by the Borrower for the purposes of satisfying any
Tax liabilities in accordance with Section 8.08 hereof.
13
<PAGE>
"Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of
ERISA.
"Interest Expense" means, for the Parent, the Borrower and its
Subsidiaries on a consolidated basis, all interest expense and commitment fees
incurred with respect to Total Debt whether accrued or paid, all fees or
expenses with respect to letters of credit, bankers' acceptances or similar
facilities, excluding interest actually paid-in-kind.
"Interest Period" means, with respect to any LIBOR Advance, the period
beginning on the date the Advance is made or continued as a LIBOR Advance and
ending one, two, three or six months thereafter (as the Borrower shall select),
provided, however, that:
- -------- -------
(a) the Borrower may not select any Interest Period that ends
after any principal repayment date unless, after giving effect to such
selection, the aggregate principal amount of LIBOR Advances having
Interest Periods that end on or prior to such principal repayment date,
shall be at least equal to the principal amount of Advances due and
payable on and prior to such date;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of
-------- -------
such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding
Business Day; and
(c) whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in
such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or similar interest rate protection agreement between the Borrower and
any Lender.
"Investment" means any acquisition of all or substantially all of the
assets of any Person, or any direct or indirect purchase or other acquisition
of, or a beneficial interest in, capital stock or other securities of any other
Person, or any direct or indirect loan, advance (other than (i) advances to
employees for moving and travel expenses, (ii) drawing accounts, (iii) deposits
and advances made to contractors, vendors and others in the ordinary course of
business, (iv) earnest money deposits, good faith deposits and
14
<PAGE>
similar deposits made in connection with Permitted Acquisitions, and (v) similar
expenditures in the ordinary course of business), or capital contribution to or
investment in any other Person, including without limitation the incurrence or
sufferance of Debt or accounts receivable of any other Person that are not
current assets or do not arise from sales to that other Person in the ordinary
course of business.
"Law" means any constitution, statute, law, ordinance, regulation, rule,
order, writ, injunction, or decree of any Tribunal.
"Lenders" means the lenders listed on the signature pages of this
Agreement, and each Eligible Assignee which hereafter becomes a party to this
Agreement pursuant to Section 11.04 hereof or pursuant to an amendment to this
Agreement, for so long as each is owed any portion of the Obligation or is
obligated under any portion of the Available Commitment.
"Lending Office" means, with respect to each Lender, its branch or
affiliate, (a) initially, the office of each Lender, branch or affiliate
identified as such on Schedule 11.02 hereto, and (b) subsequently, such other
office of each Lender, branch or affiliate as each Lender may designate to the
Borrower and Administrative Lender as the office from which the Advances of
each Lender will be made and maintained and for the account of which all
payments of principal and interest on the Advances and the Commitment Fee will
thereafter be made. Lenders may have more than one Lending Office for the
purpose of making Base Advances and LIBOR Advances.
"Letter of Credit Commitment" means an amount equal to the lesser of (a)
$20,000,000 and (b) the remainder of the Available Commitment minus the sum of
(i) all outstanding Advances plus (ii) the aggregate face amount of all
outstanding Letters of Credit plus (iii) reimbursement obligations under Article
III hereof.
"Letters of Credit" means the irrevocable standby letters of credit
issued by Administrative Lender under and pursuant to Article III hereof, as
each may be amended, modified, substituted, increased, replaced, renewed or
extended from time to time.
"LIBOR Advance" means an Advance bearing interest at the LIBOR Rate.
"LIBOR Lending Office" means, with respect to each Lender, the office
designated as its "LIBOR Lending Office" below its name on Schedule 11.02
hereto, or such other office of Lender or any of its affiliates hereafter
designated by notice to the Borrower and Administrative Lender.
"LIBOR Rate" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, and (b) sum of the
15
<PAGE>
Applicable Margin plus the LIBOR Rate Basis. The LIBOR Rate shall, with respect
to LIBOR Advances subject to reserve or deposit requirements under any Law, be
subject to premiums assessed therefor by each Lender, which are payable directly
to each Lender in an amount sufficient to compensate such Lender for any
increased cost or reduced rate of return attributable to such reserve deposit
requirements. Any calculation by a Lender of such increased cost or reduced rate
of return which is in reasonable detail and submitted to Borrower shall, in the
absence of manifest error, be presumptive evidence of the validity of such
claim. Once determined for any LIBOR Advance, the LIBOR Rate shall remain
unchanged during the applicable Interest Period.
"LIBOR Rate Basis" means, for any LIBOR Advance for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR Rate Basis" shall mean, for any LIBOR
Advance for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"License" means, as to the Parent, the Borrower, or any Subsidiary of
the Borrower, any license, permit, consent, certificate of need, authorization,
certification, accreditation, franchise, approval, or grant of rights by, or any
filing or registration with, any Tribunal or third Person (including without
limitation the FCC and the FAA) necessary for such Person to own, build,
maintain, or operate its business or Property.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
or charge of any kind, including without limitation any agreement to give or not
to give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement or other similar form of public notice under the
Laws of any jurisdiction (except for the filing of a financing statement or
notice in connection with an (a) operating lease or (b) the true consignment of
goods to the Borrower or any Subsidiary of the Borrower as consignee).
"Litigation" means any proceeding, claim, lawsuit, arbitration, and/or
investigation conducted by or before any Tribunal or arbitrator, including
without limitation proceedings,
16
<PAGE>
claims, lawsuits, and/or investigations under or pursuant to any environmental,
occupational, safety and health, antitrust, unfair competition, securities, Tax,
or other Law, or under or pursuant to any contract, agreement, or other
instrument.
"Loan Papers" means this Agreement, the Notes, the Security Agreements,
Borrower Pledge Agreement, the Subsidiary Guaranties, the Parent Guaranty, the
Capital Contribution Agreement, the Parent Pledge Agreement, the Fee Letter,
financing statements, mortgages, deeds of trust, any Interest Rate Protection
Agreement and related documents entered into by the Borrower with any Lender or
Bank Affiliate, all Letters of Credit, all Applications and all other agreements
between the Borrower, the Parent or any Subsidiary of the Borrower and the
Administrative Lender related to any Letter of Credit, assignment of leases,
other fee letters, Assignment and Acceptances, post-closing letters, and all
other documents, instruments, agreements, or certificates executed or delivered
from time to time by any Person in connection with this Agreement or as security
for the Obligations hereunder, granting Collateral or otherwise, as each such
agreement may be amended, modified, substituted, replaced or extended from time
to time.
"Majority Lenders" means any combination of Lenders having at least
66.67% of the aggregate amount of outstanding Advances hereunder, provided,
however, that if no Advances are outstanding, such term means any combination of
Lenders having Specified Percentages equal to at least 66.67%.
"Material Adverse Change" means any circumstance or event that is or
would reasonably be expected to (a) be material and adverse to the financial
condition, business operations, prospects, or Properties of the Parent, the
Borrower and its Subsidiaries on a consolidated basis, (b) materially and
adversely affect the validity or enforceability of (i) any Note, (ii) this
Agreement or (iii) any material Loan Paper or Loan Papers which in the aggregate
are material, or (c) cause a Default or Event of Default.
"Maturity Date" means December 31, 2005, or such earlier date on which
the total amount of outstanding Obligations are due and payable (including,
without limitation, whether by acceleration, scheduled reduction of the
Available Commitment to zero or mandatory or voluntary commitment reduction of
the Available Commitment to zero).
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, a Lender is permitted to charge on the Obligations.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower, any Subsidiary of the Borrower, or
any ERISA Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an obligation
to make
17
<PAGE>
contributions, such plan being maintained pursuant to one or more collective
bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate and at least
one Person other than the Borrower, any Subsidiary of the Borrower, and any
ERISA Affiliate, or (b) was so maintained and in respect of which the Borrower,
any Subsidiary of the Borrower, or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"Net Proceeds" means the gross cash proceeds received by the Parent, the
Borrower or any Subsidiary of the Borrower in connection with or as a result of
(a) any asset sale not in the ordinary course of business, minus (so long as
each of the following are estimated in good faith by the management of the
Borrower and certified to the Lenders in reasonable detail by an Authorized
Officer) (i) distributions to be made, if any, by the Borrower to the Parent and
by the Parent to the Shareholders, each as permitted by Section 8.08 hereof,
plus to the extent the Borrower or such Subsidiary has any actual Tax liability,
actual Taxes payable with respect to such asset sale in an amount equal to the
Tax liability of the Parent, the Borrower or any Subsidiary of the Borrower in
respect of such sale (taking into account the distribution to the Parent and by
the Parent to the Shareholders, and all Tax benefits of each of the parties),
(ii) reasonable and customary transaction costs payable by the Parent, the
Borrower or any Subsidiary of the Borrower related to such sale and (iii) Debt
secured by the assets sold that is immediately repaid as a consequence of such
sale, and (b) any additional equity or permitted Debt for Borrowed Money, except
such Debt for Borrowed Money that is specifically permitted to be incurred under
the terms of Section 8.02 hereof, minus (so long as it is estimated in good
faith by the management of the Borrower or such Subsidiary and certified to the
Lenders in reasonable detail by an Authorized Officer), reasonable and customary
transaction costs (including reasonable and customary broker's fees), payable by
the Parent, the Borrower or any Subsidiary of the Borrower related to such
transaction.
"Non-Conforming Ground Leases" means those Ground Leases with respect to
which any item required by Schedule 2.16 hereof or any provision set forth in
the Estoppel and Attornment Language in substantially similar form to the
Estoppel and Attornment Language is not delivered to the Administrative Lender
in form and substance satisfactory to the Administrative Lender within (a) 90
days after the Closing Date, for all Ground Leases listed on Schedule 5.01(x)
hereto, and (b) within 90 days after the date of any acquisition or creation of
any Ground Lease for all Ground Leases not listed on Schedule 5.01(x); provided
that, notwithstanding the foregoing or any other provision of this Agreement or
the other Loan Papers,
18
<PAGE>
those certain ten subleases acquired in connection with the acquisition by the
Borrower of WEO Tower, Inc., showing Nextel Communications as Sublessor, shall
be excluded from this definition of "NonConforming Ground Leases" to the extent
that each such sublease would be included solely because of paragraph 17
thereof.
"Note" means each Note of the Borrower evidencing Advances hereunder,
substantially in the form of Exhibit A hereto, together with any extension,
renewal or amendment thereof, or substitution therefor.
"Obligations" means all present and future obligations, indebtedness and
liabilities, and all renewals and extensions of all or any part thereof, of the
Borrower and each Obligor to Lenders and Administrative Lender arising from, by
virtue of, or pursuant to this Agreement, any of the other Loan Papers and any
and all renewals and extensions thereof or any part thereof, or future
amendments thereto, all interest accruing on all or any part thereof and
reasonable attorneys' fees incurred by the Administrative Lender for the
preparation of this Agreement and consummation of this credit facility,
execution of waivers, amendments and consents, and in connection with the
enforcement or the collection of all or any part thereof, and reasonable
attorneys' fees incurred by the Lenders in connection with the enforcement or
the collection of all or any part of the Obligations during the continuance of
an Event of Default, in each case whether such obligations, indebtedness and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several. Without limiting the generality of the foregoing, "Obligations"
includes all amounts which would be owed by the Borrower, each other Obligor and
any other Person (other than Administrative Lender or Lenders) to Administrative
Lender or Lenders under any Loan Paper, but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower, any other Obligor
or any other Person (including all such amounts which would become due or would
be secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of the Borrower, any other
Obligor or any other Person under any Debtor Relief Law).
"Obligor" means (a) the Borrower, (b) the Parent, (c) each Subsidiary of
the Borrower, (d) each other Person liable for performance of any of the
Obligations and (e) each other Person the Property of which secures the
performance of any of the Obligations. Notwithstanding the foregoing, ABRY shall
not be considered an Obligor for purposes of Sections 9.01(g), (h), (k) and (l)
hereof.
"Operating Cash Flow" means, for the Borrower and its Subsidiaries on a
consolidated basis for the most recently completed calendar month, the sum of
(a) pre-tax income or deficit, as the case may be (excluding extraordinary items
and income from
19
<PAGE>
the sale of assets) for such month, plus (b) interest expense on Debt for
Borrowed Money of the Borrower and its Subsidiaries on a consolidated basis for
such month, plus (c) depreciation and amortization expense for such month, plus
(d) general and administrative expenses for such month.
"Original Credit Agreement" has the meaning ascribed thereto in the
preamble hereof.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
agency or entity performing substantially the same functions.
"Parent" means Pinnacle Holdings Inc., a Delaware corporation.
"Parent Guaranty" means any Guaranty executed by the Parent guarantying
payment and performance of the Obligations, substantially in the form of Exhibit
L attached hereto, as such agreement may be amended, modified, renewed or
extended from time to time.
"Parent Pledge Agreement" means the Pledge Agreement executed by the
Parent, granting a Lien on 100% of the Capital Stock of the Borrower owned by
the Parent which such Capital Stock will constitute Pledged Stock securing the
Obligations, substantially in the form of Exhibit M hereto, as such agreement
may be amended, modified, renewed or extended from time to time.
"Parent Senior Notes" means those certain 10% Senior Discount Notes due
2008 aggregating $325,000,000.00 amount in face value, unsecured, non cash
interest bearing (payment in kind only) for the first five years and issued by
the Parent pursuant to the Parent Senior Notes Documentation.
"Parent Senior Notes Documentation" means that certain Indenture, dated
March 20, 1998, between the Parent and The Bank of New York, as trustee, and all
other written agreements and documentation relating to the Parent Senior Notes.
"Permitted Acquisition" means (i) the development, construction or
acquisition of towers or rooftop space, or (ii) acquisitions of 100% of the
Capital Stock of any Person owning or leasing towers or rooftop space, or (iii)
acquisitions of leasehold rights on Towers for the purpose of subleasing, in
each case by the Borrower or any Subsidiary of the Borrower, which, after giving
effect to the proposed acquisition and any equity investments and borrowings
related thereto, would not cause a Default or Event of Default under Section
8.01(a) or 8.01(b) hereof or any other term or provision of this Agreement and
the Loan Papers.
"Permitted Liens" means, as applied to any Person:
20
<PAGE>
(a) any Lien in favor of the Lenders to secure the Obligations
hereunder;
(b) (i) Liens on real estate for real estate Taxes not yet delinquent,
(ii) Liens created by lease agreements, statute or common law to secure the
payments of rental amounts and other sums not yet due thereunder, (iii) Liens on
leasehold interests created by the lessor in favor of any mortgagee of the
leased premises, and (iv) Liens for Taxes, assessments, governmental
charges, levies or claims that are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on such Person's books, but only so long as no foreclosure, restraint,
sale or similar proceedings have been commenced with respect thereto;
(c) Liens of carriers, warehousemen, mechanics, laborers and materialmen
and other similar Liens incurred in the ordinary course of business for sums not
yet due or being contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;
(e) Easements, right-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere with the ordinary conduct of
the business of such Person;
(f) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured and
the insurer shall not have denied coverage, or (iii) such judgments or awards
shall have been bonded to the satisfaction of the Majority Lenders;
(g) Any Liens existing on the Closing Date which are described on
Schedule 8.03 hereto, and Liens resulting from the refinancing of the related
Debt for Borrowed Money, provided that the Debt for Borrowed Money secured
thereby shall not be increased and the Liens shall not cover additional assets
of the Borrower, the Parent or any such Subsidiary; and
(h) Any Liens which secure the Debt for Borrowed Money permitted under
Section 8.02(e) hereof.
"Person" means an individual, partnership, joint venture, corporation,
trust, Tribunal, unincorporated organization, and government, or any department,
agency, or political subdivision thereof.
21
<PAGE>
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledged Stock" means all of the Capital Stock of the Subsidiaries of
the Borrower and all of the Capital Stock of the Borrower.
"Primary Non-Conforming Tenant Leases" means those Tenant Leases which
are oral and not subject to any written agreement, except those Tenant Leases
that are Secondary NonConforming Tenant Leases.
"Pro Forma Debt Service" means, on any date of determination, for the
Parent, the Borrower and its Subsidiaries, the sum of (a) cash Interest Expense
minus (without duplication) interest that is payable in-kind at the option of
the Borrower, the Parent or any Subsidiary of the Borrower, plus (b) required or
scheduled principal payments with respect to Debt for Borrowed Money, each for
the four fiscal quarters immediately succeeding any date of determination,
provided that, with respect to any Debt for Borrowed Money subject to a floating
interest rate, the rate of interest on such Debt for Borrowed Money for the four
fiscal quarters immediately succeeding any such date of determination shall be
deemed to be the weighted average interest rate applicable to the Obligations on
the date of calculation of Pro Forma Debt Service.
"Prohibited Transaction" has the meaning specified in Section 4975 of
the Code or Section 406 of Title I of ERISA.
"Property" means all types of real, personal, tangible, intangible, or
mixed property, whether owned or hereafter acquired in fee simple or leased by
the Parent, the Borrower and its Subsidiaries, including for the Borrower and
its Subsidiaries without limitation, the Tenant Leases.
"Pro Rata" means, as to any Lender, in accordance with its percentage of
the aggregate amount of outstanding Advances; provided, however, that if no
Advances are outstanding, such term means in accordance with such Lender's
Specified Percentage.
"Qualified REIT Subsidiaries" means the Borrower and any Subsidiary of
the Borrower, so long as such entity meets the qualifications set forth in
Section 856(i)(2) of the Code.
"Quarterly Date" means the last day of each March, June, September and
December during the term of this Agreement.
"Ratable" means, as to any Lender, in accordance with its Specified
Percentage.
"Refinancing Advance" means any Advance which is used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period and which, after giving effect to such
22
<PAGE>
application, does not result in an increase in the aggregate amount of
outstanding Advances.
"REIT Status" means, with respect to any Person, such Person's status as
a real estate investment trust, as defined in Section 856(a) of the Code, that
satisfies the conditions and limitations set forth in Sections 856(b) and 856(c)
of the Code.
"Release Date" means the date on which the Notes have been paid, all
other Obligations due and owing have been paid and performed in full, and the
Available Commitment has been terminated.
"Rental Obligations" means amounts payable by a lessee under a lease
including, without limitation, amounts payable under any renewal or purchase
option in favor of the lessee which, if not paid, will result in a material
forfeiture of rights, interest or property available to such lessee (i.e. a
forfeiture of rights, interest or property with a fair market value materially
greater than the cost of exercising such renewal or purchase option.)
"Restricted Payments" means (a) any direct or indirect Distribution,
dividend or other payment on account of any equity interest in, or shares of
capital stock or other securities of, the Borrower or the Parent (or the
establishment of any sinking fund or otherwise the setting aside of any funds
with respect thereto); (b) any management, consulting or other similar fees, or
any interest thereon, payable by the Parent, the Borrower or any of its
Subsidiaries to any Affiliate of the Parent, the Borrower, or to any other
Person other than an unrelated third party (or the establishment of any sinking
fund or otherwise the setting aside of any funds with respect thereto); and (c)
any cash payment of interest, principal, fees or penalties, on any Subordinated
Debt, or the establishment of any sinking fund or otherwise the setting aside of
any funds with respect thereto.
"Rights" means rights, remedies, powers, and privileges.
"Secondary Non-Conforming Tenant Leases" means, on any date of
determination, each such Tenant Lease (a) which is oral and not subject to any
written agreement, or (b) with respect to which any Lien of the Administrative
Lender or any foreclosure and/or operation of the Tower on which such Tenant
Lease is located by the Lenders is prohibited, unenforceable or null and void,
whether by contractual provision, operation of law or otherwise, or (c) which
has any provision preventing, hindering or prohibiting the Administrative Lender
from directly receiving the rents, receivables or other Tenant Lease Revenues
from the lessee (or which is prevented, hindered or prohibited by the operation
of Law), provided that no Tenant Lease shall be a Secondary Non-Conforming
Tenant Lease unless (A) the Borrower is at all times diligently and in good
faith pursuing either a written agreement or eliminating the problems described
in (b) or (c) above (a "Curing
23
<PAGE>
Action") with respect to such Tenant Lease, (B) negotiations regarding such
Curing Action have not been terminated and are proceeding toward consummation,
(C) the lessee under each such Tenant Lease is current under its monetary
obligations to the Borrower in accordance with past and current practice
generally, (D) the FCC database regarding such Tenant Lease shows (I) that the
lessee under such Tenant Lease has been licensed to use the applicable Tower and
(II) does not indicate that the lessee has filed for approval to remove or
transfer from such Tower, (E) the Borrower is not aware and has not received
notice that any such lessee is moving from the Tower within the next six months,
and (F) such Curing Action with respect to such Tenant Lease shall have been
consummated within (x) six months after the Closing Date, for each Tenant Lease
listed on Schedule 5.01(w) hereto, and (y) within six months after the date of
any acquisition or creation of any Tenant Lease for each Tenant Lease not listed
Schedule 5.01(w) hereto, provided that, if the Borrower can demonstrate to the
satisfaction of the Administrative Lender that any Curing Action with respect to
any Tenant Lease is still probable after the expiration of the six month period,
any such Tenant Lease will be included in the definition of Secondary Non-
Conforming Tenant Lease for an additional six month period.
"Security Agreements" means (a) the Security Agreement, duly executed by
the Borrower and Parent in substantially the form of Exhibit B hereto,
appropriately completed, and (b) each Security Agreement, duly executed by each
of the Borrower's Subsidiaries, in substantially the form of Exhibit H hereto,
appropriately completed, in each case as amended, modified, substituted,
replaced or extended from time to time.
"Senior Debt" means, on any date of determination, the difference
between Total Debt minus Debt of the Parent included in the definition of Total
Debt.
"Senior Leverage Ratio" means the ratio, at the end of the accounting
period with respect to which such determination is made, of (a) the remainder of
Senior Debt of the Borrower and its Subsidiaries (exclusive of Debt owed to each
other), minus the sum of Subordinated Debt outstanding which is (i) permitted to
be incurred under Sections 8.02(h) hereof and (ii) (without duplication) owed to
ABRY, to (b) Annualized EBITDA, provided that, the calculation of the Senior
Leverage Ratio shall exclude revenues or charges attributable to Properties of
the Borrower and its Subsidiaries sold during the calculation period as if such
sale occurred on the first day of such period and shall include revenues and
charges attributable to Properties of the Borrower and its Subsidiaries
purchased during such period as if such purchase occurred on the first day of
such period.
"Shareholder" or "Shareholders" means, on any date of determination, the
shareholders of the Parent.
24
<PAGE>
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, other than a Multiple Employer Plan of the
Borrower.
"Solvent" means, with respect to any Person, that on such date (a) the
fair value of the Property of such Person is greater than the total amount of
liabilities, including without limitation Contingent Liabilities of such Person,
(b) the present fair salable value of the assets of such Person on a going
concern basis is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's Property would constitute an unreasonably small capital.
"Special Counsel" means the law firm of Donohoe, Jameson & Carroll,
P.C., Dallas, Texas, or such other individual or firm acting as special counsel
to Administrative Lender, as designated by Administrative Lender from time to
time.
"Specified Percentage" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or as adjusted or specified (i)
in accordance with Section 2.18 hereof, (ii) in any Assignment and Acceptance or
(iii) in any amendment to this Agreement.
"Stockholders Agreement" has the meaning ascribed thereto in Section
8.08(b)(vi) hereof.
"Subordinated Debt" means Debt for Borrowed Money of the Borrower, any
Subsidiary of the Borrower or the Parent, that is subordinated to the
Obligations hereunder in accordance with the terms and provisions of the
Subordination Agreement substantially in the form of Exhibit I attached hereto.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) 50% or more of:
(a) the outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency),
(b) the interest in the capital or profits of such partnership or
joint venture, or
(c) the beneficial interest of such trust or estate,
25
<PAGE>
is at the time directly or indirectly owned by such Person, by such
Person and one or more of its Subsidiaries or by one or more of such
Person's Subsidiaries.
"Subsidiary Guaranty" means the Guaranty, executed by each Subsidiary of
the Borrower, guarantying payment and performance of the Obligations,
substantially in the form of Exhibit G attached hereto, as such agreement may be
amended, modified, renewed or extended from time to time.
"SuperMajority Lenders" means any combination of Lenders having at least
73% of the aggregate amount of outstanding Advances hereunder, provided,
however, that if no Advances are outstanding, such term means any combination of
Lenders having Specified Percentages equal to at least 73%.
"Synthetic Lease" means any lease entered into in connection with the
lease or acquisition of fixed assets which is treated under GAAP as an operating
lease but for Tax purposes as a capital lease.
"Taxes" means all taxes, assessments, imposts, fees, or other charges at
any time imposed by any Laws or Tribunal.
"Tenant Lease Revenue" means, with respect to each Tenant Lease for the
most recently completed calendar month, all revenues generated by such Tenant
Lease for such month.
"Tenant Leases" means each of the leases of space on any Tower of the
Borrower or any Subsidiary of the Borrower now existing or hereafter created or
acquired, including, without limitation, those leases listed on Schedule 5.01(w)
hereto.
"Total Debt" means all Debt for Borrowed Money of the Borrower, the
Parent and any Subsidiary of the Borrower which would be shown on a balance
sheet in accordance with GAAP, including, without limitation, (a) Capital Lease
obligations, (b) obligations to pay the deferred purchase price of property and
services (but excluding trade payables that are less than 90 days old and any
thereof that are being contested in good faith), (c) Debt of any other Person
secured by a Lien on the property of the Borrower and the Parent or any
Subsidiary of the Borrower and the Parent, (d) Contingent Liabilities, and (e)
Withdrawal Liability.
"Total Leverage Ratio" means the ratio, at the end of the accounting
period with respect to which such determination is made, of (a) the remainder of
Total Debt of the Parent, the Borrower and its Subsidiaries (exclusive of Debt
owed to each other), minus the sum of Subordinated Debt outstanding which is (i)
permitted to be incurred under Section 8.02(h) hereof and (ii) (without
duplication) owed to ABRY, to (b) Annualized EBITDA, provided that, the
calculation of the Total Leverage Ratio shall exclude revenues or charges
attributable to Properties of the Borrower and its
26
<PAGE>
Subsidiaries sold during the calculation period as if such sale occurred on the
first day of such period and shall include revenues and charges attributable to
Properties of the Borrower and its Subsidiaries purchased during such period as
if such purchase occurred on the first day of such period.
"Tower" means each tower owned or managed by the Borrower or any
Subsidiary of the Borrower, and each rooftop or other site owned or managed by
the Borrower or any Subsidiary of the Borrower in the ordinary course of
business.
"Tower Cash Flow" means, with respect to each Tower for the most
recently completed calendar month, the remainder of (a) the aggregate amount of
all Tenant Lease Revenues generated by all Tenant Leases relating to such Tower
for such month, plus (b) all newly executed leases as if such leases were
effective as of the beginning of such calendar month minus (c) Tower level cash
operating expenses for such Tower for such month.
"Tower Construction Advances" means those Advances used by the Borrower
solely for the construction, refurbishment or development of Towers and
designated as a Tower Construction Advance in the monthly certification required
by Section 7.07(a) hereof, in an aggregate amount outstanding on any date of
determination not to exceed the amount permitted by Section 8.01(f) hereof.
Notwithstanding anything herein to the contrary (a) no Advance may be a Tower
Construction Advance if twelve consecutive months have passed after the date
such Tower Construction Advance was made or designated as a Tower Construction
Advance, and (b) any particular Advance designated as a Tower Construction
Advance may only be designated once as a Tower Construction Advance.
"Tribunal" means any state, commonwealth, federal, foreign, territorial,
or other court or government body, subdivision, agency, department, commission,
board, bureau, or instrumentality of a governmental body.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and LIBOR Rate.
"UCC" means the Uniform Commercial Code as adopted in the State of Texas
on the Closing Date.
"Unavailable Commitment" means (a) prior to March 31, 2000, $100,000,000
(as such amount may be reduced from time to time as a result of the reallocation
of any portion of the Unavailable Commitment to the Available Commitment in
accordance with the terms of Section 2.18 hereof), and (b) on and after March
31, 2000, $0.00.
"Withdrawal Liability" has the meaning given such term under Part I of
Subtitle E of Title IV of ERISA.
27
<PAGE>
1.02. Accounting and Other Terms. All accounting terms used in this
Agreement which are not otherwise defined herein shall be construed in
accordance with GAAP on a consolidated basis for the Parent, the Borrower and
its Subsidiaries, unless otherwise expressly stated herein. References herein to
one gender shall be deemed to include all other genders. Except where the
context otherwise requires, (a) definitions imparting the singular shall include
the plural and vice versa and (b) all references to time are deemed to refer to
Dallas time.
ARTICLE II. AMOUNTS AND TERMS OF ADVANCES
2.01. The Advances. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make Advances to the
Borrower on a Business Day during the period from the Closing Date to the
Maturity Date, in an aggregate principal amount not to exceed at any time
outstanding such Lender's Specified Percentage of the Available Commitment.
Subject to the terms and conditions of this Agreement, the Borrower may borrow,
repay and reborrow the Advances; provided, however, that at no time shall the
sum of (a) all outstanding Advances plus (b) the face amount of all outstanding
Letters of Credit plus (c) reimbursement obligations under Article III hereof,
ever exceed the Available Commitment.
2.02. Making Advances.
(a) Each Borrowing of Advances shall be made upon the written notice of
the Borrower, received by Administrative Lender not later than (i) 10:00 a.m.
three Business Days prior to the date of the proposed Borrowing, in the case of
LIBOR Advances and (ii) 10:00 a.m. on the date of such Borrowing, in the case of
Base Advances. Each such notice of a Borrowing (a "Borrowing Notice") shall be
by telecopy or telephone, promptly confirmed by letter, in substantially the
form of Exhibit D hereto specifying therein:
(i) the date of such proposed Borrowing, which shall be a
Business Day;
(ii) the Type of Advances of which the Borrowing is to be
comprised;
(iii) the amount of such proposed Borrowing which, (A) in the
case of Advances, shall not exceed the unused portion of the Available
Commitment, (B) shall, in the case of a Borrowing of Base Advances, be
in an amount of not less than $100,000 or an integral multiple of
$50,000 in excess thereof (or any lesser amount if such amount is the
remaining undrawn portion under the Available Commitment) and (C) shall,
in the case of a Borrowing of LIBOR Advances, be in an amount of not
less than $500,000 or an integral multiple of $100,000 in excess
thereof; and
28
<PAGE>
(iv) if the Borrowing is to be comprised of LIBOR Advances,
the duration of the initial Interest Period applicable to such Advances.
If the Borrowing Notice fails to specify the duration of the initial
Interest Period for any Borrowing comprised of LIBOR Advances, such Interest
Period shall be three months. Administrative Lender shall promptly notify
Lenders of each such notice. Each Lender shall, before 1:00 p.m. on the date of
each Advance hereunder (other than a Refinancing Advance), make available to
Administrative Lender, at its office at NationsBank Plaza, 901 Main Street,
Dallas, Texas 75202, such Lender's Specified Percentage of the aggregate
Advances to be made on that day in immediately available funds.
(b) Unless any applicable condition specified in Article IV has not been
satisfied, Administrative Lender will make the funds promptly available to the
Borrower (other than with respect to a Refinancing Advance) by wiring such
amounts pursuant to any wiring instructions specified by the Borrower to the
Administrative Lender in writing.
(c) After giving effect to any Borrowing, (i) there shall not be more
than five different Interest Periods in effect and (ii) the aggregate principal
amount of outstanding Advances, Letters of Credit, and reimbursement obligations
under Article III hereof shall not exceed the Available Commitment.
(d) No Interest Period applicable to any Advance shall extend beyond the
Maturity Date.
(e) Unless a Lender shall have notified Administrative Lender prior to
the date of any Advance that it will not make available its Specified Percentage
of any Advance, Administrative Lender may assume that such Lender has made the
appropriate amount available in accordance with Section 2.02(a) hereof, and
Administrative Lender may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If and to the extent any Lender shall not
have made such amount available to Administrative Lender, such Lender and the
Borrower severally agree to repay to Administrative Lender immediately on demand
such corresponding amount together with interest thereon, from the date such
amount is made available to the Borrower until the date such amount is repaid to
Administrative Lender, at (i) in the case of the Borrower, the Base Rate, and
(ii) in the case of such Lender, the Federal Funds Rate.
(f) The failure by any Lender to make available its Specified Percentage
of any Advance hereunder shall not relieve any other Lender of its obligation,
if any, to make available its Specified Percentage of any Advance. In no event,
however, shall any Lender be responsible for the failure of any other Lender to
make available any portion of any Advance.
29
<PAGE>
(g) The Borrower shall indemnify each Lender against any Consequential
Loss incurred by each Lender as a result of (i) any failure to fulfill, on or
before the date specified for the Advance, the conditions to the Advance set
forth herein or (ii) the Borrower's requesting that an Advance not be made on
the date specified in the Borrowing Notice.
2.03. Evidence of Debt for Borrowed Money.
(a) The Advances made by each Lender shall be evidenced by a Note in the
amount of such Lender's Specified Percentage of the Available Commitment in
effect on the Closing Date (as the same may be modified pursuant to Section
11.04 hereof).
(b) Administrative Lender's and each Lender's records shall be
presumptive evidence as to amounts owed Administrative Lender and such Lender
under the Notes and this Agreement.
2.04. Optional Prepayments.
(a) The Borrower may, upon at least two Business Days prior written
notice to Administrative Lender stating the proposed date and aggregate
principal amount of the prepayment, prepay the outstanding principal amount of
any Advances in whole or in part, together with accrued interest to the date of
such prepayment on the principal amount prepaid without premium or penalty other
than any Consequential Loss; provided, however, that in the case of a prepayment
of a Base Advance, the notice of prepayment may be given by telephone by 10:00
a.m. on the date of prepayment. Each partial prepayment shall, in the case of
Base Advances, be in an aggregate principal amount of not less than $100,000 or
a larger integral multiple of $50,000 in excess thereof and, in the case of
LIBOR Advances, be in an aggregate principal amount of not less than $500,000 or
a larger integral multiple of $100,000 in excess thereof. If any notice of
prepayment is given, the principal amount stated therein, together with accrued
interest on the amount prepaid and the amount, if any, due under Section 2.12
and Section 2.14 hereof, shall be due and payable on the date specified in such
notice unless the Borrower revokes its notice, provided that, if the Borrower
revokes its notice of prepayment prior to such date specified, the Borrower
shall reimburse the Administrative Lender for the account of all Lenders for all
Consequential Losses suffered by each Lender as a result of the Borrower's
failure to prepay. A certificate of each Lender claiming compensation under this
Section 2.04(a), setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder shall be presumptive
evidence of the validity of such claim.
(b) No prepayments of Advances made solely pursuant to this Section 2.04
shall cause the Available Commitment to be reduced.
30
<PAGE>
2.05. Mandatory Prepayments.
(a) Excess Cash Flow. Within 130 days after the end of each fiscal year
of Borrower ending on or after March 31, 2000, the Borrower shall pay to
Administrative Lender for the Ratable account of Lenders an amount equal to (i)
50% of Excess Cash Flow for the preceding fiscal year if the Senior Leverage
Ratio calculated at the end of the same period is less than 4.00 to 1.00, or (b)
75% of Excess Cash Flow for the preceding fiscal year if the Senior Leverage
Ratio calculated at the end of the same period is greater than or equal to 4.00
to 1.00. All prepayments made pursuant to this Section 2.05(a) shall be applied
to reduce outstanding Advances (which amounts shall also reduce the Available
Commitment in accordance with the terms of Section 2.11(c)(iv) hereof).
Notwithstanding anything herein to the contrary, no Advance constituting a Tower
Construction Advance will be included in the Senior Debt calculation to
determine the Senior Leverage Ratio in order to determine compliance with this
Section 2.05(a), but only so long as (A) such Advance remains a Tower
Construction Advance, and (B) there is not included in the calculation of EBITDA
for the purposes of this Section 2.05(a) only, revenue attributable to any new
Tower being constructed with the proceeds of any such Tower Construction Advance
for so long as any such Tower Construction Advance remains designated as a Tower
Construction Advance, it being understood by the parties hereto that,
notwithstanding the use of Tower Construction Advances to refurbish or replace
any existing Tower, revenue attributable to such refurbished or replacement
Tower may not be included in the calculation of EBITDA in order to determine the
Senior Leverage Ratio in order to determine compliance with this Section
2.05(a).
(b) Additional Equity and Allowed Debt. To the extent that the Borrower
or any of its Subsidiaries issues any public or private indebtedness (except
that permitted to be incurred under Section 8.02 hereof) or equity securities
(except debt and equity described in Section 8.02(c) hereof or pursuant to the
Capital Contribution Agreement) (this provision shall not in and of itself
permit the Borrower to consummate any of the above described transactions),
then, unless the Net Proceeds therefrom are used, within 180 days thereafter,
for Permitted Acquisitions or for Capital Expenditures relating to Towers, the
Borrower and its Subsidiaries shall immediately after the expiration of such
180-day period use the Net Proceeds of any such transaction to repay Advances
hereunder. All prepayments made pursuant to this Section 2.05(b) shall be
applied to reduce outstanding Advances, and shall, after March 31, 2000, reduce
the Available Commitment in accordance with the terms of Section 2.11(c)(v)
hereof. Upon the occurrence of a "Change of Control" as that term is defined in
the Parent Senior Notes Documentation, the Borrower will repay all Advances and
Obligations hereunder (and the Available Commitment shall correspondingly reduce
to zero in accordance with the terms of Section 2.11(c)(vii) hereof).
31
<PAGE>
(c) Asset Sales. To the extent that the Borrower or any of its
Subsidiaries consummates any sale of any asset or any of its Properties other
than in the ordinary course of business, then unless the Net Proceeds therefrom
are used, within 180 days thereafter, for Permitted Acquisitions or for Capital
Expenditures relating to Towers, the Borrower and its Subsidiaries shall
immediately after the expiration of the 180-day period use the Net Proceeds of
any such transaction to repay Advances hereunder. All prepayments made pursuant
to this Section 2.05(c) shall be applied to reduce outstanding Advances and, if
such payment is made after March 31, 2000, such prepayment shall also reduce the
Available Commitment in accordance with the terms of Section 2.11(c)(vi) hereof.
(d) Mandatory Prepayments, Generally. Any prepayments made pursuant to
this Section 2.05 shall be first applied to Base Advances and then to LIBOR
Advances, without premium or penalty, except the Borrower must pay together with
any such prepayments, any Consequential Losses.
2.06. Repayment.
(a) LIBOR Advances. The principal amount of each LIBOR Advance is due
and payable on the last day of the applicable Interest Period, which principal
payment may be made by means of a Refinancing Advance (subject to the other
provisions of this Agreement).
(b) Available Commitment Reduction. On the date of each reduction of the
Available Commitment pursuant to Section 2.11 hereof, the Borrower shall
immediately repay the Obligations in an amount equal to the difference by which
the sum of (i) the amount of all Advances outstanding on the date of reduction
plus (ii) the outstanding face amount of Letters of Credit outstanding on such
date plus (iii) the amount of reimbursement obligations under Article III hereof
on such date, exceeds the Available Commitment as reduced, which principal
payment may not be made by means of a Refinancing Advance.
(c) Maturity Date. All outstanding Obligations shall be due and payable
in full on the Maturity Date.
(d) Repayments, Generally. Any repayments made pursuant to this Section
2.06 shall be first applied to Base Advances and then to LIBOR Advances in the
order of maturity, without premium or penalty, except the Borrower must pay
together with any such prepayments, any Consequential Losses.
2.07. Interest. Subject to Section 2.08 and Section 11.08 hereof, the
Borrower shall pay interest on the unpaid principal amount of each Advance from
the date of such Advance until such principal shall be paid in full, at the
following rates per annum:
32
<PAGE>
(a) Base Advances. Base Advances shall bear interest at a rate
per annum equal to the Base Rate as in effect from time to time. If the
amount of interest payable in respect of any interest computation period
is reduced to the Highest Lawful Rate and the amount of interest payable
in respect of any subsequent interest computation period would be less
than Maximum Amount, then the amount of interest payable in respect of
such subsequent interest computation period shall be automatically
increased to the Maximum Amount; provided that at no time shall the
aggregate amount by which interest paid has been increased pursuant to
this sentence exceed the aggregate amount by which interest has been
reduced pursuant to this sentence.
(b) LIBOR Advances. LIBOR Advances shall bear interest at the
rate per annum equal to the LIBOR Rate applicable to such Advance.
(c) Payment Dates. Accrued and unpaid interest on Base Advances
shall be paid quarterly in arrears on each Quarterly Date and on the
Maturity Date. Accrued and unpaid interest in respect of each LIBOR
Advance shall be paid on the last day of the appropriate Interest Period
and on the date of any prepayment or repayment of such Advance;
provided, however, that if any Interest Period for a LIBOR Advance
exceeds three months, interest shall also be paid on the date which
falls three months after the beginning of such Interest Period.
2.08. Default Interest. During the continuation of any Event of Default,
the Borrower shall pay, on demand, interest (after as well as before judgment to
the extent permitted by Law) on the principal amount of all Advances outstanding
and on all other Obligations due and unpaid hereunder at a per annum rate equal
to the lesser of the (a) the Highest Lawful Rate and (b) (i) to the extent any
such Advance outstanding at such time is bearing interest at the LIBOR Rate,
then the applicable LIBOR Rate plus 3.00% to the end of its Interest Period, and
(ii) for all other outstanding Advances, the Base Rate plus 2%. LIBOR Advances
shall not be available for selection by the Borrower during the continuance of
an Event of Default.
2.09. Continuation and Conversion Elections.
(a) The Borrower may upon irrevocable written notice to Administrative
Lender and subject to the terms of this Agreement:
(i) elect to convert, on any Business Day, all or any
portion of outstanding Base Advances (in an aggregate amount not less
than $500,000 or an integral multiple of $100,000 in excess thereof)
into LIBOR Advances; or
(ii) elect to convert at the end of any Interest Period
therefor, all or any portion of outstanding LIBOR
33
<PAGE>
Advances comprised in the same Borrowing (in an aggregate amount not
less than $100,000 or an integral multiple of $50,000 in excess thereof)
into Base Advances; or
(iii) elect to continue, at the end of any Interest Period
therefor, any LIBOR Advances;
provided, however, that if the aggregate amount of outstanding LIBOR
Advances comprised in the same Borrowing shall have been reduced as a result of
any payment, prepayment or conversion of part thereof to an amount less than
$500,000, the LIBOR Advances comprised in such Borrowing shall automatically
convert into Base Advances at the end of each respective Interest Period.
(b) The Borrower shall deliver a notice of conversion or continuation (a
"Conversion or Continuation Notice"), in substantially the form of Exhibit E
hereto, to Administrative Lender not later than 10:00 a.m. (i) three Business
Days prior to the proposed date of conversion or continuation, if the Advances
or any portion thereof are to be converted into or continued as LIBOR Advances;
and (ii) on the Business Day of the proposed conversion, if the Advances or any
portion thereof are to be converted into Base Advances.
Each such Conversion or Continuation Notice shall be by telecopy or
telephone, promptly confirmed by letter, specifying therein:
(i) the proposed date of conversion or continuation;
(ii) the aggregate amount of Advances to be converted or
continued;
(iii) the nature of the proposed conversion or continuation;
and
(iv) the duration of the applicable Interest Period.
(c) If, upon the expiration of any Interest Period applicable to LIBOR
Advances, the Borrower shall have failed to select a new Interest Period to be
applicable to such LIBOR Advances or if an Event of Default shall then have
occurred and be continuing, the Borrower shall be deemed to have elected to
convert such LIBOR Advances into Base Advances effective as of the expiration
date of such current Interest Period.
(d) Notwithstanding any other provision contained in this Agreement,
after giving effect to any conversion or continuation of any Advances, there
shall not be outstanding Advances with more than five different Interest
Periods.
34
<PAGE>
2.10. Fees.
(a) Facility Fee. Subject to Section 11.08 hereof, the Borrower shall
pay to Administrative Lender for the account of each of the Lenders an
origination and facility fee as set forth in the Fee Letter between
Administrative Lender and the Borrower.
(b) Commitment Fee. Subject to Section 11.08 hereof, the Borrower shall
pay to Administrative Lender for the Ratable account of Lenders a commitment fee
on the average daily amount of the difference between (i) the Available
Commitment and (ii) the sum of all Advances outstanding and the face amount of
all outstanding Letters of Credit, at a per annum rate equal to (A) if the Total
Leverage Ratio (as determined in the most recently delivered Compliance
Certificate in accordance with the terms of Section 7.03 hereof) is greater than
or equal to 6.50 to 1.00, 0.500%, (B) if the Total Leverage Ratio (as determined
in the most recently delivered Compliance Certificate in accordance with the
terms of Section 7.03 hereof) is less than 6.50 to 1.00 but greater than or
equal to 4.50 to 1.00, 0.375% per annum, and (C) if the Total Leverage Ratio (as
determined in the most recently delivered Compliance Certificate in accordance
with the terms of Section 7.03 hereof) is less than 4.50 to 1.00, 0.250% per
annum, payable in each case in arrears on each Quarterly Date and on the
Maturity Date, commencing with the first Quarterly Date after the Closing Date,
and continuing until the Maturity Date.
2.11. Reduction of Available Commitment.
(a) Mandatory Termination of the Available Commitment. The Available
Commitment shall reduce to zero and terminate on the Maturity Date.
(b) Mandatory Scheduled Reduction of the Available Commitment. After
March 31, 2000, the Available Commitment shall automatically reduce on each
Quarterly Date, in a reduction amount on each such date equal to the percentage
set forth below of the Available Commitment in effect on March 31, 2000 opposite
each such Quarterly Date, until the Available Commitment has been reduced to
zero. The first such automatic reduction in the Available Commitment shall occur
on the first Quarterly Date after March 31, 2000, and continue thereafter as
follows:
REDUCTION PERCENTAGE is equal to the
Percentage of the Available
Date of Automatic Reduction Commitment in effect on
of the Available Commitment March 31, 2000
- --------------------------- --------------
June 30, 2000 3.33%
September 30, 2000 3.33%
December 31, 2000 3.34%
35
<PAGE>
March 31, 2001 3.75%
June 30, 2001 3.75%
September 30, 2001 3.75%
December 31, 2001 3.75%
March 31, 2002 5.00%
June 30, 2002 5.00%
September 30, 2002 5.00%
December 31, 2002 5.00%
March 31, 2003 5.00%
June 30, 2003 5.00%
September 30, 2003 5.00%
December 31, 2003 5.00%
March 31, 2004 5.00%
June 30, 2004 5.00%
September 30, 2004 5.00%
December 31, 2004 5.00%
March 31, 2005 3.75%
June 30, 2005 3.75%
September 30, 2005 3.75%
December 31, 2005 3.75%
(c) Reduction of the Available Commitment. The Available Commitment
shall be permanently reduced from time to time:
(i) as set forth, and in accordance with, the terms of Section 8.01(a)
hereof,
(ii) as set forth, and in accordance with, the terms of Section 8.01(b)
hereof,
(iii) as set forth, and in accordance with, the terms of the Capital
Contribution Agreement,
(iv) on the date of, and by the amount of, each Excess Cash Flow
mandatory prepayment required by Section 2.05(a) hereof,
(v) on the date of, and by the amount of, each mandatory prepayment made
after March 31, 2000 from the issuance of equity or debt, in each case
only as required to be prepaid by Section 2.05(b) hereof,
(vi) on the date of, and by the amount of, each mandatory prepayment
made after March 31, 2000 from the sale of assets, in each case only as
required to be prepaid by Section 2.05(c) hereof, and
(vii) on the date of any occurrence of a "Change of Control" as that
term is defined in the Parent Senior Notes Documentation, the Available
Commitment will automatically be reduced to zero and terminate.
36
<PAGE>
No reduction in the Available Commitment set forth in 2.11(c) above
shall reduce or relieve the automatic scheduled reduction of the Available
Commitment required by Section 2.11(b) above.
(d) Voluntary Available Commitment Reductions. The Borrower may from
time to time, upon notice to Administrative Lender not later than 1:00 p.m.,
five Business Days in advance, terminate in whole or reduce in part the
Available Commitment, as designated by the Borrower; provided, however, that the
Borrower shall pay the accrued interest and the applicable Commitment Fee on the
amount of such reduction and all amounts due, and any partial reduction shall be
in an aggregate amount which is an integral multiple of $1,000,000. No voluntary
reduction in the Available Commitment permitted by this Section 2.11(d) shall
reduce or relieve the automatic scheduled reduction of the Available Commitment
required by Section 2.11(b) above.
(e) Available Commitment Reductions, Generally. No prepayment under
Section 2.04 hereof, required prepayment under Section 2.05 hereof or commitment
reductions under Sections 2.11(c) and (d) above shall reduce or relieve the
scheduled reduction required by Section 2.11(b) above. To the extent outstanding
Advances exceed the applicable Available Commitment after any reduction thereof,
the Borrower shall repay, on the date of such reduction, any such excess amount
and all accrued interest thereon, the applicable Commitment Fee on the amount of
such reduction and all amounts due. Once reduced or terminated, the Available
Commitment may not be increased or reinstated, except in accordance with Section
2.18 hereof.
2.12. Funding Losses. The Borrower may prepay the outstanding principal
balance of any Advance, in full at any time or in part from time to time in
accordance with the terms of Section 2.04 hereof, provided, that as a condition
precedent to the Borrower's right to make, and any Lender's obligation to
accept, any such prepayment, each such prepayment shall be in the amount of 100%
of the principal amount to be prepaid, plus accrued unpaid interest thereon to
the date of prepayment, plus any other sums which have become due to
Administrative Lender and Lenders under the Loan Papers on or before the
prepayment date but have not been paid, plus (subject to Section 11.08 hereof)
any Consequential Loss.
The Borrower agrees that each Lender is not obligated to actually
reinvest the amount prepaid in any specific obligation as a condition to
receiving any Consequential Loss, or otherwise.
2.13. Computations and Manner of Payments.
(a) The Borrower shall make each payment hereunder and under the other
Loan Papers not later than 1:00 p.m. on the day when due in same day funds to
Administrative Lender, for the Ratable account of Lenders unless otherwise
specifically provided herein, at
37
<PAGE>
Administrative Lender's office at NationsBank Plaza, 901 Main Street, Dallas,
Texas 75202, for further credit to the account of Pinnacle Towers Inc. No later
than the end of each day when each payment hereunder is made, the Borrower shall
notify Ms. Linda Brown (214) 508-3044, or such other Person as Administrative
Lender may from time to time specify.
(b) Unless Administrative Lender shall have received notice from the
Borrower prior to the date on which any payment is due hereunder that the
Borrower will not make payment in full, Administrative Lender may assume that
such payment is so made on such date and may, in reliance upon such assumption,
make distributions to Lenders. If and to the extent the Borrower shall not have
made such payment in full, each Lender shall repay to Administrative Lender
forthwith on demand the applicable amount distributed, together with interest
thereon at the Federal Funds Rate, from the date of distribution until the date
of repayment. The Borrower hereby authorizes each Lender, if and to the extent
payment is not made when due hereunder, to charge the amount so due against any
account of the Borrower with such Lender.
(c) Subject to Section 11.08 hereof, interest on LIBOR Advances under
the Loan Papers shall be calculated on the basis of actual days elapsed but
computed as if each year consisted of 360 days. Subject to Section 11.08 hereof,
interest on Base Advances, the Commitment Fee and other amounts due under the
Loan Papers shall be calculated on the basis of actual days elapsed but computed
as if each year consisted of 365 or 366 days, as applicable. Such computations
shall be made including the first day but excluding the last day occurring in
the period for which such interest, payment or Commitment Fee is payable. Each
determination by Administrative Lender or a Lender of an interest rate, fee or
commission hereunder shall be presumptive evidence of the validity of such
claim. All payments under the Loan Papers shall be made in United States
dollars, and without setoff, counterclaim, or other defense.
(d) Whenever any payment to be made hereunder or under any other Loan
Papers shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of interest or fees, if applicable;
provided, however, if such extension would cause payment of interest on or
principal of LIBOR Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
(e) Reference to any particular index or reference rate for determining
any applicable interest rate under this Agreement is for purposes of calculating
the interest due and is not intended as and shall not be construed as requiring
any Lender to actually obtain funds for any Advance at any particular index or
reference rate.
38
<PAGE>
2.14. Yield Protection; Changed Circumstances.
(a) If any Lender determines that either (i) the adoption, after the
date hereof, of any Applicable Law, rule, regulation or guideline regarding
capital adequacy and applicable to commercial banks or financial institutions
generally or any change therein, or any change, after the date hereof, in the
interpretation or administration thereof by any Tribunal, central bank or
comparable agency charged with the interpretation or administration thereof, or
(ii) compliance by any Lender (or Lending Office of any Lender) with any request
or directive made after the date hereof applicable to commercial banks or
financial institutions generally regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency has the effect of reducing the rate of return on such Lender's capital as
a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount reasonably deemed by such Lender to be material, then from time to
time, within fifteen days after demand by such Lender, the Borrower shall pay to
such Lender such additional amount or amounts as will adequately compensate such
Lender for such reduction. Each Lender will notify the Borrower of any event
occurring after the date of this Agreement which will entitle such Lender to
compensation pursuant to this Section 2.14(a) as promptly as practicable after
such Lender obtains actual knowledge of such event; provided, no Lender shall be
liable for its failure or the failure of any other Lender to provide such
notification. A certificate of such Lender claiming compensation under this
Section 2.14(a), setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder and certifying that such
claim is consistent with such Lender's treatment of similar customers having
similar provisions generally in their agreements with such Lender shall be
presumptive evidence of the validity of such claim. Each Lender shall use
reasonable efforts to mitigate the effect upon the Borrower of any such
increased costs payable to such Lender under this Section 2.14(a).
(b) If, after the date hereof, any Tribunal, central bank or other
comparable authority, at any time imposes, modifies or deems applicable any
reserve (including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Lender, or imposes on any Lender any other condition affecting a LIBOR Advance,
the Notes, or its obligation to make a LIBOR Advance, or imposes on any Lender
any other condition affecting a Letter of Credit; and the result of any of the
foregoing is to increase the cost to such Lender of making or maintaining its
Letter of Credit, LIBOR Advances, or to reduce the amount of any sum received or
receivable by such Lender under this Agreement or under the Notes, the Letters
of Credit or reimbursement obligations by an amount deemed by such
39
<PAGE>
Lender, to be material, then, within five days after demand by such Lender, the
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduction. Each Lender will
(i) notify the Borrower of any event occurring after the date of this Agreement
that entitles such Lender to compensation pursuant to this Section 2.14(b), as
promptly as practicable after such Lender obtains actual knowledge of the event;
provided, no Lender shall be liable for its failure or the failure of any other
Lender to provide such notification and (ii) use good faith and reasonable
efforts to designate a different Lending Office for LIBOR Advances, of such
Lender if the designation will avoid the need for, or reduce the amount of, the
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender. A certificate of such Lender claiming
compensation under this Section 2.14(b), setting forth in reasonable detail the
computation of the additional amount or amounts to be paid to it hereunder and
certifying that such claim is consistent with such Lender's treatment of similar
customers having similar provisions generally in their agreements with such
Lender shall be presumptive evidence of the validity of such claim. If such
Lender demands compensation under this Section 2.14(b), the Borrower may at any
time, on at least five Business Days' prior notice to such Lender (i) repay in
full the then outstanding principal amount of LIBOR Advances, of such Lender,
together with accrued interest thereon, or (ii) convert the LIBOR Advances to
Base Advances in accordance with the provisions of this Agreement; provided,
however, that the Borrower shall be liable for the Consequential Loss arising
pursuant to those actions.
40
<PAGE>
(c) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation or administration of
any Law shall make it unlawful, or any central bank or other Tribunal shall
assert that it is unlawful, for a Lender to perform its obligations hereunder to
issue or maintain Letters of Credit, make LIBOR Advances or to continue to fund
or maintain LIBOR Advances hereunder, then, on notice thereof and demand
therefor by such Lender to the Borrower, (i) each LIBOR Advance will
automatically, upon such demand, convert into a Base Advance, (ii) the
obligation of such Lender to make, or to convert Advances into, LIBOR Advances
shall be suspended until such Lender notifies Administrative Lender and the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist, and (iii) the obligation of such Lender to make or
maintain Letters of Credit shall be suspended until such Lender notifies
Administrative Lender and the Borrower that such Lender has determined that the
circumstances causing such suspension no longer exist.
(d) Upon the occurrence and during the continuance of any Default or
Event of Default, (i) each LIBOR Advance will automatically, on the last day of
the then existing Interest Period therefor, convert into a Base Advance and (ii)
the obligation of each Lender to make, or to convert Advances into, LIBOR
Advances shall be suspended.
(e) If any Lender notifies Administrative Lender that the LIBOR Rate for
any Interest Period for any LIBOR Advances will not adequately reflect the cost
to such Lender of making, funding or maintaining LIBOR Advances for such
Interest Period, Administrative Lender shall promptly so notify the Borrower,
whereupon (i) each such LIBOR Advance will automatically, on the last day of the
then existing Interest Period therefor, convert into a Base Advance and (ii) the
obligation of such Lender to make, or to convert Advances into, LIBOR Advances
shall be suspended until such Lender notifies Administrative Lender that such
Lender has determined that the circumstances causing such suspension no longer
exist and Administrative Lender notifies the Borrower of such fact.
41
<PAGE>
(f) Failure on the part of any Lender to demand compensation for any
increased costs, increased capital or reduction in amounts received or
receivable or reduction in return on capital pursuant to this Section 2.14 with
respect to any period shall not constitute a waiver of any Lender's right to
demand compensation with respect to such period or any other period, subject,
however, to the limitations set forth in this Section 2.14.
(g) The obligations of the Borrower under this Section 2.14 shall
survive any termination of this Agreement, provided that, in no event shall the
Borrower be required to make a payment under this Section 2.14 with respect to
any event of which the Lender making such claim had knowledge more than twelve
months prior to demand for such payment.
(h) Determinations by Lenders for purposes of this Section 2.14 shall be
presumptively correct. Any certificate delivered to the Borrower by a Lender
pursuant to this Section 2.14 shall include in reasonable detail the basis for
such Lender's demand for additional compensation and a certification that the
claim for compensation is consistent with such Lender's treatment of similar
customers having similar provisions generally in their agreements with such
Lender.
(i) Notwithstanding any other provision of this Agreement, no Lender not
organized under the Laws of the United States or any State (or which has a Bank
Affiliate not organized under the Laws of the United States or any State) shall
be entitled to compensation pursuant to this Section 2.14 with respect to any
amount which would otherwise be due under this Section 2.14 but which is the
result of an act of a Tribunal of the country in which such Lender or Bank
Affiliate is organized.
2.15. Use of Proceeds. The proceeds of the Advances shall be available
(and the Borrower shall use such proceeds) solely (a) on the Closing Date, to
refinance existing indebtedness of the Borrower, (b) for Permitted Acquisitions,
(c) for Capital Expenditures permitted under the terms of this Agreement, (d)
for working capital and (e) for other lawful corporate purposes.
2.16. Collateral and Collateral Call.
(a) Collateral. Payment of the Obligations will be secured by (i) a
first perfected security interest in 100% of the Capital Stock of the
Subsidiaries of the Borrower and 100% of the Capital Stock of the Borrower, (ii)
subject to Permitted Liens and Section 6.15 hereof, a first perfected security
interest in all of the existing and future accounts (including without
limitation, the Tenant Leases), equipment, inventory and general intangibles
(including all existing and future Tenant Leases, and excluding any Interest
Rate Protection Agreement to which any Lender is a party, motor vehicles, bank
accounts, intellectual property and chattel paper) of the Borrower and its
Subsidiaries, (iii) Guaranties of the Obligations by each Guarantor, (iv) in
accordance with Section 6.15 hereof, deeds of trust and/or mortgages on all real
property owned by the Borrower and each Subsidiary of the Borrower and (v) in
accordance with Section 6.15 hereof, leasehold deeds of trust and/or mortgages
on Borrower's leasehold interest under each Ground Lease (collectively, together
with all other Properties or assets of the Borrower, Subsidiaries and other
Persons securing the Obligations from time to time, the "Collateral"). The
Borrower agrees that it will, and will cause its Subsidiaries and the Parent to,
execute and deliver, or cause to be executed and delivered, such documents as
the Administrative Lender may from time to time reasonably request to create and
perfect a first Lien for the benefit of the Administrative Lender and the
Lenders in the Collateral.
(b) Collateral Call. The Borrower agrees: (i) upon the creation,
formation or acquisition of any direct or indirect Subsidiary of the Borrower,
to immediately pledge 100% of the Capital Stock of any such Subsidiary to secure
the Obligations, pursuant to a pledge agreement substantially in the form of
Exhibit J hereto, and to promptly deliver to the Administrative Lender all
certificates or other documentation evidencing 100% of such Capital Stock and,
if such Capital Stock is stock of a corporation, together with stock powers
executed in blank and (ii) to, and agrees to cause the Subsidiaries of the
Borrower to, grant the Administrative Lender and the Lenders from time to time
at the request of the Lenders a Lien on any of the Property of the Borrower or
any Subsidiary of the Borrower that is not already subject to a perfected Lien,
excluding all real estate. The Borrower shall comply with Section 6.15(d) hereof
with respect to all owned or acquired real estate by the Borrower or any
Subsidiary from time to time. The Borrower shall, and shall cause the
Subsidiaries of the Borrower to, provide for the benefit of Administrative
Lender and Lenders securing the Obligations in any other Property of the
Borrower and its Subsidiaries, all items to fully effect the foregoing,
including, without limitation, providing the Administrative Lender with UCC-1's,
new security
42
<PAGE>
agreements, appraisals, hazard insurance, UCC-11 searches, Tax and Lien
searches, intellectual property documentation and registration and other similar
types of documents, consents, authorizations, Licenses, instruments and
agreements relating to all Property of the Borrower and its Subsidiaries as
reasonably requested by the Administrative Lender from time to time.
2.17. Replacement of a Lender. If any Lender has requested compensation
or reimbursement in accordance with the terms of Section 2.14 hereof or in
accordance with the terms of Section 11.07 hereof and (a) such request is not
the result of any uniform changes in the statutes or regulations for capital
adequacy, (b) there exists no Default or Event of Default hereunder, and (c) the
Borrower and such Lender are unable to reach a written agreement regarding such
request within 30 days following written notice by such Lender to the Borrower
and the Administrative Lender of such request, then after the expiration of 30
days following the delivery of the notice under Section 2.14 or Section 11.07
hereof, the Borrower may replace such Lender in whole with another Eligible
Assignee reasonably acceptable to Administrative Lender pursuant to an
Assignment and Acceptance and in accordance with Section 11.04 hereof. Until
such time as any Lender is replaced by the Borrower, the Borrower shall
reimburse or compensate such Lender in accordance with the terms of Section 2.14
hereof and Section 11.07 hereof.
2.18. Conditions Precedent to the Increase of the Available Commitment.
Prior to March 31, 2000, upon written request by the Borrower to
Administrative Lender and other existing Lenders of its choice twenty Business
Days prior to the proposed effective date of the proposed increase, the
Available Commitment shall, subject to the further terms and conditions set
forth below, increase to a maximum of $250,000,000 in the manner set forth
below:
(a) On any date of proposed increase, the representations and
warranties contained in Article V hereof are true and correct on such
date, as though made on and as of such date, except to the extent
expressly made only as of a prior date; and
(b) On any date of proposed increase, no Default or Event of
Default shall exist on any such date, and no Default or Event of Default
would result from the such increase in the Available Commitment and the
subsequent Advance to the Borrower up to the amount of the Available
Commitment; and
(c) On any date of proposed increase, there shall have occurred no
material adverse change in the Borrower's business, assets or financial
condition since December 31, 1997; and
43
<PAGE>
(d) On any date of proposed increase, the sum of (i) all Advances
outstanding (after giving effect to any proposed Advance to be made on
such date, plus (ii) the aggregate face amount of all outstanding
Letters of Credit (after giving effect to any proposed Letter of Credit
to be made on such date), plus (iii) (without duplication) the sum of
all reimbursement obligations with respect to all outstanding Letters of
Credit, shall not exceed the Available Commitment; and
(e) The proposed increase shall occur prior to March 31, 2000 and
the Available Commitment as increased shall not be in excess of the sum
of the Available Commitment prior to such increase plus the Unavailable
Commitment prior to such increase; and
(f) Upon satisfaction of each of the conditions precedent in this
Section 2.18, the Borrower shall be entitled to increase the Available
Commitment not more than five times, in an aggregate amount for both
such increases not to exceed the Unavailable Commitment . Each Lender
specified by the Borrower shall have received not less than twenty days'
prior written notice from the Borrower requesting such Available
Commitment increase. Each such Lender electing to participate in such
Available Commitment increase shall commit to an amount not less than
$5,000,000, but shall accept any allocation amount designated by the
Borrower and the Administrative Lender that is equal to or less than its
proposed portion of the Available Commitment increase; and
(g) Notwithstanding anything herein or in any other Loan Paper to
the contrary, (i) the Borrower is not obligated to notify each Lender
of, or to allocate to any existing Lender any portion of, the proposed
increase, and the Borrower and the Administrative Lender may agree to
add other creditors in connection with any such proposed increase. Each
existing Lender agrees and acknowledges that new creditors may be
allocated all or any portion of the proposed increase upon the
determination of the Borrower and the Administrative Lender; and
(h) Each of the two proposed increases shall be in an aggregate
minimum amount of $10,000,000 and $5,000,000 multiples thereof; and
(i) The Administrative Lender shall have received a certificate
from the Borrower to the effect that (i) such increase has received all
required regulatory approvals, if necessary, and is in compliance with
all applicable Laws, and (ii) no other approvals or consents from any
Person are required by any such Person except to the extent they have
been received; and
44
<PAGE>
(j) Each new Lender (including any new Lenders party hereto) shall
have received a promissory Note, and the Borrower and each new Lender
agrees to execute any and all such documents deemed necessary by the
Administrative Lender in order to effectuate this Section 2.18 (whether
UCC-1s, new documentation relating to any Collateral, Guaranty or
otherwise); and
(k) On the date of increase, the Administrative Lender shall
deliver to each Lender evidence of new Specified Percentages adjusted to
give effect to the increase in the Available Commitment; and
(l) On or prior to the date of increase, each new lender being
added to the credit facility shall deliver to the Borrower and the
Administrative Lender documentation acceptable to the Administrative
Lender evidencing such new Lender's acceptance of this Agreement and all
the other Loan Papers in form and substance reasonably acceptable to the
Administrative Lender (and making such lender a party to this Agreement
and the other Loan Papers); and
(m) The Administrative Lender shall have received a pro-forma
Compliance Certificate in form and substance acceptable to the Lenders
and demonstrating compliance with the terms of this Agreement and the
Loan Papers for one full year after the date of such proposed increase;
and
(n) The Administrative Lender shall have received financial
projections in form and substance acceptable to the Lenders and
demonstrating compliance with the financial covenants set forth in
Section 8.01 hereof throughout the term of this Agreement; and
(o) The Available Commitment shall (i) never exceed the sum of the
Available Commitment plus the Unavailable Commitment, as each is reduced
in accordance with Section 2.11 hereof, this Section 2.18 and the other
terms of this Agreement, and (ii) never increase except to the extent,
and not to exceed such amount, that the Unavailable Commitment is in
excess of zero; and
(p) The Unavailable Commitment shall be reduced in accordance with
this Section 2.18 dollar for dollar for each increase in the Available
Commitment; and
(q) The Administrative Lender on behalf of each Lender shall have
received all amendments to security agreements, deeds of trust and
mortgages as the Administrative Lender shall deem necessary to maintain
its valid and perfected Lien.
No Lender shall be obligated to increase the dollar amount of its share
of the Available Commitment without its written consent
45
<PAGE>
in its sole discretion. In connection with any increase to the Available
Commitment in accordance with the terms of this Section 2.18, each existing
Lender (regardless of whether such Lender is participating in such increase)
agrees to execute any and all agreements requested by the Administrative Lender
to effectuate the intent of this Section 2.17. Notwithstanding anything
contained herein to the contrary, the limitations placed upon assignments set
forth in Section 11.04 hereof shall not apply to proposed increases pursuant to
this Section.
ARTICLE III. LETTERS OF CREDIT
3.01. Issuance of Letters of Credit. The Borrower shall give the
Administrative Lender not less than five Business Days prior written notice of a
request for the issuance of a Letter of Credit, and the Administrative Lender
shall promptly notify each Lender of such request. Upon receipt of the
Borrower's properly completed and duly executed Applications, and subject to the
terms of such Applications and to the terms of this Agreement, the
Administrative Lender agrees to issue Letters of Credit on behalf of the
Borrower in an aggregate face amount not in excess of the Letter of Credit
Commitment. No Letter of Credit shall have a maturity extending beyond the
earliest of (i) the Maturity Date, or (ii) one year from the date of its
issuance, or (iii) such earlier date as may be required to enable the Borrower
to satisfy its repayment obligations under Section 2.06 hereof (including,
without limitation, such repayment obligations resulting from a decrease in the
Available Commitment required by Section 2.11 hereof). Subject to such maturity
limitations and so long as no Default or Event of Default has occurred and is
continuing or would result from the renewal of a Letter of Credit, the Letters
of Credit may be renewed by the Administrative Lender in its discretion. The
Lenders shall participate ratably in any liability under the Letters of Credit
and in any unpaid reimbursement obligations of the Borrower with respect to any
Letter of Credit in their Specified Percentages. The amount of the Letters of
Credit issued and outstanding and the unpaid reimbursement obligations of the
Borrower for such Letters of Credit shall reduce the amount of Available
Commitment available, so that at no time shall the sum of (i) all outstanding
Advances in the aggregate, plus (ii) the aggregate face amount of all
outstanding Letters of Credit, plus (iii) (without duplication) all outstanding
reimbursement obligations related to Letters of Credit, exceed the Available
Commitment, and at no time shall the sum of all Advances by any Lender made plus
its ratable share of amounts available to be drawn under the Letters of Credit
and the unpaid reimbursement obligations of the Borrower in respect of such
Letters of Credit exceed its Specified Percentage of the Available Commitment.
3.02. Letters of Credit Fee. In consideration for the issuance of each
Letter of Credit, the Borrower shall pay to (a) the Administrative Lender for
its own account, an application and
46
<PAGE>
processing fee in the amount of $350.00 on each Letter of Credit, due and
payable on the date of issuance of each Letter of Credit, and (b) the
Administrative Lender for the account of the Administrative Lender and the
Lenders in accordance with their Specified Percentages, a per annum fee for each
Letter of Credit equal to (i) the product of 1/8 of 1 percent multiplied by the
face amount of each such Letter of Credit, plus (ii) the product of the
Applicable Margin for LIBOR Advances on the date of issuance multiplied by the
face amount of each such Letter of Credit. Each fee for each Letter of Credit
under subsection (b) above shall be due and payable to the Administrative Lender
quarterly as it accrues on each Quarterly Date during the term of the Letter of
Credit and on the expiration or renewal and/or extension of each such Letter of
Credit, beginning with the first such Quarterly Date after the issuance of each
Letter of Credit and ending on the expiration date of each such Letter of Credit
or the renewal and/or extension of each such Letter of Credit.
3.03. Reimbursement Obligations.
(a) The Borrower hereby agrees to reimburse Administrative Lender
immediately upon demand by Administrative Lender, and in immediately available
funds, for any payment or disbursement made by Administrative Lender under any
Letter of Credit. Payment shall be made by the Borrower with interest on the
amount so paid or disbursed by Administrative Lender from and including the date
payment is made under any Letter of Credit to and including the date of payment,
at the lesser of (i) the Highest Lawful Rate, and (ii) the sum of the Base Rate
in effect from time to time plus two percent (2%) per annum; provided, however,
that if the Borrower would be permitted under the terms of Section 2.01, Section
2.02 and Section 4.02 hereof to borrow Advances in amounts at least equal to
their reimbursement obligation for a drawing under any Letter of Credit, a Base
Advance by each Lender, in an amount equal to such Lender's Specified
Percentage, shall automatically be deemed made on the date of any such payment
or disbursement made by Administrative Lender in the amount of such obligation
and subject to the terms of this Agreement.
(b) The Borrower hereby also agrees to pay to Administrative Lender
immediately upon demand by Administrative Lender and in immediately available
funds, as security for their reimbursement obligations in respect of the Letters
of Credit under Section 3.03(a) hereof and any other amounts payable hereunder
and under the Notes, an amount equal to the aggregate amount available to be
drawn under Letters of Credit then outstanding, irrespective of whether the
Letters of Credit have been drawn upon, upon an Event of Default. Any such
payments shall be deposited in a separate account designated "Pinnacle Special
Account" or such other designation as Administrative Lender shall elect. All
such amounts deposited with Administrative Lender shall be and shall remain
funds of the Borrower on deposit with Administrative Lender and may be invested
by Administrative Lender as Administrative Lender shall
47
<PAGE>
determine. Such amounts may not be used by Administrative Lender to pay the
drawings under the Letters of Credit; however, such amounts may be used by
Administrative Lender as reimbursement for Letter of Credit drawings which
Administrative Lender has paid. If any amounts in the Pinnacle Special Account
shall have been deposited upon the occurrence of an Event of Default only and
such Event of Default shall have been subsequently cured or waived and no other
Event of Default exists, the Borrower shall be relieved of its obligations under
this Section 3.03(b) until an Event of Default once again occurs. During the
existence of an Event of Default but after the expiration of any Letter of
Credit that was not drawn upon, the Borrower may direct the Administrative
Lender to use any cash collateral for any such expired Letter of Credit, if any,
to reduce the amount of the Obligations. Any amounts remaining in the Pinnacle
Special Account, after the date of the expiration of all Letters of Credit and
after all Obligations have been paid in full, shall be repaid to the Borrower
promptly after such expiration and such payment in full.
(c) The obligations of the Borrower under this Section 3.03 will
continue until all Letters of Credit have expired and all reimbursement
obligations with respect thereto have been paid in full by the Borrower and
until all other Obligations shall have been paid in full.
(d) The Borrower shall be obligated to reimburse Administrative Lender
upon demand for all amounts paid under the Letters of Credit as set forth in
Section 3.03(a) hereof; provided, however, if the Borrower for any reason fails
to reimburse Administrative Lender in full upon demand, whether by borrowing
Advances to pay such reimbursement obligations or otherwise, the Lenders shall
reimburse Administrative Lender in accordance with each Lender's Specified
Percentage for amounts due and unpaid from the Borrower as set forth in Section
3.04 hereof; provided, however, that no such reimbursement made by the Lenders
shall discharge the Borrower's obligations to reimburse Administrative Lender.
(e) The Borrower shall indemnify and hold Administrative Lender or any
Lender, its officers, directors, representatives and employees harmless from
loss for any claim, demand or liability which may be asserted against
Administrative Lender or such indemnified party in connection with actions taken
under the Letters of Credit or in connection therewith (INCLUDING LOSSES
RESULTING FROM THE NEGLIGENCE OF ADMINISTRATIVE LENDER OR SUCH INDEMNIFIED
PARTY), and shall pay Administrative Lender for reasonable fees of attorneys
(who may be employees of Administrative Lender) and legal costs paid or incurred
by Administrative Lender in connection with any matter related to the Letters of
Credit, except for losses and liabilities incurred as a direct result of the
gross negligence or wilful misconduct of Administrative Lender or such
indemnified party. If the Borrower for any reason fails to indemnify or pay
Administrative Lender or
48
<PAGE>
such indemnified party as set forth herein in full, the Lenders shall indemnify
and pay Administrative Lender upon demand, in accordance with each Lender's
Specified Percentage of such amounts due and unpaid from the Borrower. The
provisions of this Section 3.03(e) shall survive the termination of this
Agreement.
3.04. Lenders' Obligations. Each Lender agrees, unconditionally and
irrevocably to reimburse Administrative Lender (to the extent Administrative
Lender is not otherwise reimbursed by the Borrower in accordance with Section
3.03(a) hereof) on demand for such Lender's Specified Percentage of each draw
paid by Administrative Lender under any Letter of Credit. All amounts payable by
any Lender under this subsection shall include interest thereon at the Federal
Funds Rate, from the date of the applicable draw to the date of reimbursement by
such Lender. No Lender shall be liable for the performance or nonperformance of
the obligations of any other Lender under this Section. The obligations of the
Lenders under this Section shall continue after the Maturity Date and shall
survive termination of any Loan Papers.
3.05. Administrative Lender's Obligations.
(a) Administrative Lender makes no representation or warranty, and
assumes no responsibility with respect to the validity, legality, sufficiency or
enforceability of any Application or any document relative thereto or to the
collectibility thereunder. Administrative Lender assumes no responsibility for
the financial condition of the Borrower and its Subsidiaries or for the
performance of any obligation of the Borrower. Administrative Lender may use its
discretion with respect to exercising or refraining from exercising any rights,
or taking or refraining from taking any action which may be vested in it or
which it may be entitled to take or assert with respect to any Letter of Credit
or any Application.
(b) Except as set forth in subsection (c) below, Administrative Lender
shall be under no liability to any Lender, with respect to anything the
Administrative Lender may do or refrain from doing in the exercise of its
judgment, the sole liability and responsibility of Administrative Lender being
to handle each Lender's share on as favorable a basis as Administrative Lender
handles its own share and to promptly remit to each Lender its share of any sums
received by Administrative Lender under any Application. Administrative Lender
shall have no duties or responsibilities except those expressly set forth herein
and those duties and liabilities shall be subject to the limitations and
qualifications set forth herein.
(c) Neither Administrative Lender nor any of its directors, officers, or
employees shall be liable for any action taken or omitted (whether or not such
action taken or omitted is expressly set forth herein) under or in connection
herewith or any other instrument or document in connection herewith, except for
gross
49
<PAGE>
negligence or willful misconduct, and no Lender waives its right to institute
legal action against Administrative Lender for wrongful payment of any Letter of
Credit due to Administrative Lender's gross negligence or willful misconduct.
Administrative Lender shall incur no liability to any Lender, the Borrower or
any Affiliate of the Borrower or Lender in acting upon any notice, document,
order, consent, certificate, warrant or other instrument reasonably believed by
Administrative Lender to be genuine or authentic and to be signed by the proper
party.
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to Closing and the Initial Advance. The
obligation of each Lender to sign this Agreement and to make the initial Advance
or issue the first Letter of Credit is subject to receipt by the Administrative
Lender of each of the following, in form and substance satisfactory to the
Administrative Lender, with a copy (except for the Notes) for each Lender:
(a) A loan certificate of the Borrower, the Parent and each Subsidiary
of the Borrower certifying as to the accuracy of their representations and
warranties in the Loan Papers, certifying that no Default has occurred, and
including a certificate of incumbency with respect to each Authorized Officer,
and including (i) a copy of the Articles of Incorporation of the Borrower, the
Parent and each Subsidiary of the Borrower, certified to be true, complete and
correct by the secretary of state of its state of incorporation, (ii) a copy of
the By-Laws of the Borrower, the Parent and each Subsidiary of the Borrower, as
in effect on the Closing Date, (iii) a copy of the resolutions of the Borrower,
the Parent and each Subsidiary of the Borrower authorizing them to execute,
deliver and perform this Agreement, the Notes and the other Loan Papers to which
each of them is a party, and (iv) a copy of a certificate of good standing and a
certificate of existence for the Borrower's, the Parent's, and each of the
Borrower's Subsidiaries' state of incorporation and each state in which they are
or should be qualified to do business;
(b) duly executed Notes, payable to the order of each Lender and in an
amount for each Lender equal to its Specified Percentage of the Available
Commitment;
(c) duly executed and completed confirmation agreement confirming
obligations under (i) pledge agreements by the Parent and the Borrower; (ii) the
Guaranty of the Obligations executed by the Parent and the Subsidiaries of the
Borrower; (iii) Security Agreement by the Borrower, the Parent and the
Subsidiaries of the Borrower granting the Lenders a lien and security interest
in all assets owned by the Borrower, the Parent and the Subsidiaries of the
Borrower; and (iv) all other Loan Papers, including without limitation, all
mortgages, deeds of trust, and deeds to secure debt duly filed in all required
locations and each item required to be
50
<PAGE>
delivered on Schedule 2.16 hereto, except those Loan Papers specifically agreed
to in Section 6.15 hereof;
(d) copies of all financing statements filed against the Borrower, the
Parent and each Subsidiary of the Borrower, as debtor;
(e) opinions of counsel to the Borrower, the Parent and each Subsidiary
of the Borrower addressed to the Lenders and in form and substance satisfactory
to the Lenders, dated the Closing Date;
(f) copies of insurance binders or certificates covering the assets of
the Borrower, the Parent and the Subsidiaries of the Borrower, and meeting the
requirements of Section 6.05 hereof;
(g) reimbursement for Administrative Lender of its reasonable fees and
expenses and for Special Counsel's reasonable fees and expenses rendered through
the date hereof;
(h) evidence that all corporate proceedings of the Borrower, the Parent
and the Subsidiaries of the Borrower taken in connection with the transactions
contemplated by this Agreement and the other Loan Papers shall be reasonably
satisfactory in form and substance to the Lenders and Special Counsel; and the
Lenders shall have received copies of all documents or other evidence which the
Administrative Lender, Special Counsel or any Lender may reasonably request in
connection with such transactions;
(i) copies of the following audited financial statements for the
Borrower (and as applicable, the Parent), as of and for the period ended
December 31, 1997; (i) balance sheets of the Borrower, the Parent and the
Subsidiaries of the Borrower as of the end of such period, and (ii) statements
of income and changes in cash for such period; all in reasonable detail and
certified by an Authorized Officer to the best of his knowledge to present
fairly in all material respects the consolidated financial position of the
Borrower and the results of operations for the period then ended and, except as
noted therein, to be in accordance with GAAP (other than footnotes thereto);
(j) evidence on the Closing Date that the Borrower and ABRY have entered
into an amendment to the Capital Contribution Agreement acceptable to the
Administrative Lender, providing that ABRY will make equity contributions to the
Borrower up to $50,000,000 (inclusive of contributions made prior to the Closing
Date) to be used by the Borrower to (i) make Permitted Acquisitions, (ii) at the
option of the Lenders, to repay Obligations to the Lenders in the event of (A)
any payment Default or Event of Default or (B) any Default or Event of Default
under any provision of Section 8.01 hereof, in each case in an amount equal to
the lesser of the amount necessary so that either the Borrower is in compliance
with all provisions of Section 8.01
51
<PAGE>
hereof, and (iii) the extent that there exists a difference between any cash
distribution of 95% of taxable income required to maintain REIT status minus the
maximum tax liability of the Shareholders as a result of the operations of the
Borrower, taking into account all tax benefits available to the Shareholders as
a result of the operations of the Borrower;
(k) evidence that the Parent shall have (i) issued the Parent Senior
Notes on terms and conditions acceptable to the Administrative Lender, (ii)
entered into Parent Senior Notes Documentation that is acceptable to the
Administrative Lender, and (iii) received not less than $190,000,000 in net
proceeds from the issuance of the Parent Senior Notes;
(l) a duly completed Compliance Certificate evidencing no Default or
Event of Default as of the Closing Date; and
(m) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Lender or any Lender may reasonably require in connection with
the transactions contemplated hereby, including without limitation the status,
organization or authority of the Borrower, the Parent and the Subsidiaries of
the Borrower, and the enforceability of and security for the Obligations.
4.02. Conditions Precedent to All Advances and Letters of Credit. The
obligation of each Lender to make each Advance hereunder and the obligation of
the Administrative Lender to issue any Letter of Credit shall be subject to the
further conditions precedent that on the date of such Advance or such issuance
of such Letter of Credit:
(a) All of the representations and warranties of the Borrower under this
Agreement shall be true and correct at such time in all material respects, both
before and after giving effect to the application of the proceeds of the Advance
or the issuance of the Letter of Credit, except those representations and
warranties that specifically speak as of a particular date;
(b) The incumbency of the Authorized Officers shall be as stated in the
certificate of incumbency delivered in the Borrower's loan certificate pursuant
to Section 4.01(a) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Lender. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrower made to such effect if no written notice to the contrary, dated on or
before the date of such Advance or the issuance of such Letter of Credit, is
received by the Administrative Lender from the Borrower prior to the making of
such Advance or such Letter of Credit;
(c) There shall not exist a Default hereunder or an Event of Default
hereunder and none shall exist as a result of making any
52
<PAGE>
such Advance or such Letter of Credit, and the Administrative Lender shall have
received written or telephonic certification thereof by an Authorized Officer
(which certification, if telephonic, shall be followed promptly by written
certification);
(d) There shall have occurred no Material Adverse Change since December
31, 1997;
(e) In the case of each Letter of Credit, Borrower shall have delivered
to the Administrative Lender a duly executed and complete Application acceptable
to Administrative Lender; and
(f) The aggregate outstanding Advances, after giving effect to such
proposed Advance, plus the sum of (i) the face amount of all outstanding Letters
of Credit, and (ii) reimbursement obligations under Article III hereof, shall
not exceed the Available Commitment.
4.03. Conditions Precedent to Advances for Permitted Acquisitions. The
obligation of each Lender to make each Advance (including the initial Advance)
where any proceeds of such Advance will be used for a Permitted Acquisition,
shall be subject to the further conditions precedent that the Borrower has
complied with all terms and provisions of Sections 6.15(c) and 6.16 hereof.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties. The Borrower hereby represents and
warrants to each Lender as follows:
(a) The respective jurisdictions of incorporation and percentage
ownership of the Subsidiaries of the Parent by the Parent and the Borrower on
the Closing Date and listed on Schedule 5.01(a) hereto are true and correct.
Each of the Parent, the Borrower and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization. Each of the Parent, the Borrower and its Subsidiaries has the
corporate power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted. Each of the Parent, the
Borrower and its Subsidiaries is duly qualified, in good standing and authorized
to do business in each jurisdiction in which the character of its Properties or
the nature of its business requires such qualification or authorization, except
where the failure to so qualify would not cause a Material Adverse Change.
(b) The Borrower has corporate power and has taken all necessary
corporate action to authorize it to borrow hereunder. Each of the Parent, the
Borrower and its Subsidiaries has corporate power and has taken all necessary
corporate action to execute, deliver and perform the Loan Papers to which it is
party in accordance with the terms thereof, and to consummate the
53
<PAGE>
transactions contemplated thereby. Each Loan Paper has been duly executed and
delivered by the Parent, the Borrower or such Subsidiary executing it. Each of
the Loan Papers to which the Parent, the Borrower, and its Subsidiaries are
party is a legal, valid and binding respective obligation of the Parent, the
Borrower or such Subsidiary, as applicable, enforceable in accordance with its
terms, subject, to enforcement of remedies, to the following qualifications: (i)
equitable principles generally, and (ii) bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Parent, the Borrower or any Subsidiary of the
Borrower).
(c) The execution, delivery and performance by the Parent, the Borrower
and its Subsidiaries of the other Loan Papers to which they are respectively a
party, and the consummation of the transactions contemplated thereby, do not and
will not (i) require any consent or approval not already obtained, (ii) violate
any Applicable Law, (iii) conflict with, result in a breach of, or constitute a
default under the articles of incorporation or by-laws of the Parent, the
Borrower or any Subsidiary of the Borrower, or under any material License,
indenture, agreement or other instrument, to which the Parent, the Borrower or
any Subsidiary of the Borrower is a party or beneficiary of, or by which they or
their respective Properties may be bound, or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any property now
owned or hereafter acquired by the Parent, the Borrower or any Subsidiary of the
Borrower, except Permitted Liens.
(d) The Parent, the Borrower and its Subsidiaries are primarily engaged
in the operation of leasing and subleasing towers and tower sites, and pursuing
activities related thereto.
(e) All material Licenses have been duly authorized and obtained, and
are in full force and effect. The Parent, the Borrower and its Subsidiaries are
and will continue to be in compliance in all material respects with all
provisions thereof. On the Closing Date, no material License is the subject of
any pending or, to the best of the Borrower's knowledge, threatened challenge or
revocation. After the Closing Date, no material License is the subject of any
pending or, to the best of the Borrower's knowledge, threatened challenge or
revocation, which such event could cause a Material Adverse Change. The Parent,
the Borrower and its Subsidiaries are not required to obtain any material
License that has not already been obtained from, or effect any material filing
or registration that has not already been effected with, the FCC, the FAA or any
other federal, state or local regulatory authority in connection with the
execution and delivery of this Agreement or any other Loan Paper, or the
performance thereof (other than any enforcement of remedies by the
Administrative Lender on behalf of the Lenders), in accordance with their
respective terms, including any borrowings hereunder.
54
<PAGE>
(f) The Parent, the Borrower and its Subsidiaries are in compliance in
all material respects with all Applicable Laws. The Parent, the Borrower and its
Subsidiaries have duly and timely filed all reports, statements and filings that
are required to be filed by any of them under the Communications Act, and are in
all material respects in compliance therewith, including without limitation the
rules and regulations of the FCC and FAA. Except as set forth on Schedule
5.01(f) hereto, as of the Closing Date, the Borrower is not aware of any event
or circumstance constituting noncompliance (or any Person alleging
noncompliance) with any rule or regulation of the FAA. After the Closing Date,
the Borrower is not aware of any event or circumstance constituting
noncompliance (or any Person alleging noncompliance) with any rule or regulation
of the FAA, which such event or circumstance could cause a Material Adverse
Change.
(g) The Parent, the Borrower and its Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, all of their material
assets. None of their assets are subject to any Liens, except Permitted Liens.
As of the Closing Date, no financing statement or other Lien filing authorized
by the Parent, the Borrower or any Subsidiary of the Borrower (except relating
to Permitted Liens) is on file in any state or jurisdiction that names the
Parent, the Borrower or any of its Subsidiaries as debtor or covers (or purports
to cover) any assets of the Parent, the Borrower or any of its Subsidiaries.
After the Closing Date, no financing statement or other Lien filing authorized
by the Parent, the Borrower or any Subsidiary of the Borrower (except relating
to Permitted Liens) is on file in any state or jurisdiction that names the
Parent, the Borrower or any of its Subsidiaries as debtor or covers (or purports
to cover) any assets of the Parent, the Borrower or any of its Subsidiaries,
which such financing statement or other Lien filing could cause a Material
Adverse Change. The Parent, the Borrower and its Subsidiaries have not signed
any such financing statement or filing, nor any security agreement authorizing
any Person to file any such financing statement or filing.
(h) On the Closing Date, except as reflected on Schedule 5.01(h) hereto,
there is no action, suit, proceeding or any other Litigation pending against,
or, to the best of the Borrower's knowledge, threatened against the Parent, the
Borrower or any of its Subsidiaries, or in any other manner relating directly
and materially adversely to the Parent, the Borrower, any of its Subsidiaries,
or any of their material Properties, in any court or before any arbitrator of
any kind or before or by any governmental body. On each date after the Closing
Date on which this representation is deemed to be made, there is no action,
suit, proceeding or any other Litigation pending against, or, to the best of the
Borrower's knowledge, threatened against the Parent, the Borrower or any of its
Subsidiaries, or in any other manner relating to the Parent, the Borrower, any
of its Subsidiaries, or any of their Properties, in any court or before any
arbitrator of
55
<PAGE>
any kind or before or by any governmental body, which could reasonably be
expected to cause a Material Adverse Change.
(i) All federal, state and other Tax returns of the Parent, the Borrower
and its Subsidiaries required by law to be filed have been duly filed and all
federal, state and other Taxes, assessments and other governmental charges or
levies upon the Parent, the Borrower, its Subsidiaries or any of their
Properties, income, profits and assets, which are due and payable, have been
paid, except those that are diligently contested in good faith by the Borrower
and for which a reserve has been established in accordance with GAAP, and no
Lien (other than a Permitted Lien) has attached and no foreclosure, distraint,
sale or similar proceedings have been commenced.
(j) The Borrower has furnished or caused to be furnished to the Lenders
copies of its financial statements at December 31, 1996 and audited financial
statements at December 31, 1997, which are prepared in good faith and complete
in all material respects and present fairly in all material respects and in
accordance with GAAP (except, with respect to the financial statements delivered
prior to the Closing Date, as noted therein), the financial position of the
Parent, the Borrower and its Subsidiaries as at such dates and the results of
operations for the periods then ended. The Parent, the Borrower and its
Subsidiaries have no material liabilities, contingent or otherwise, nor material
losses, except as disclosed in writing to the Lenders prior to the Closing Date
or as disclosed on any subsequent financial statements. On the Closing Date
after giving effect to the Advances made on such date, each of the Parent, the
Borrower and its Subsidiaries is Solvent.
(k) Since the date of the most recent financial statements delivered to
the Lenders, no event or circumstances have occurred or arisen that could
constitute a Material Adverse Change.
(l) None of the Borrower or its Controlled Group maintains or
contributes to any Plan other than those disclosed to the Administrative Lender
in writing. Each such Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and any other applicable Federal or
state law, rule or regulation. With respect to each Plan of the Borrower and
each member of its Controlled Group (other than a Multiemployer Plan), all
reports required under ERISA or any other Applicable Law to be filed with any
governmental authority, the failure of which to file could reasonably result in
liability of the Borrower or any member of its Controlled Group in excess of
$100,000, have been duly filed. All such reports are true and correct in all
material respects as of the date given. No such Plan of the Borrower or any
member of its Controlled Group has any accumulated funding deficiency (as
defined in Section 412(a) of the Code) (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested. None of the Borrower or any member
of its
56
<PAGE>
Controlled Group has failed to make any contribution or pay any amount due or
owing as required by Section 412 of the Code or Section 302 of ERISA or the
terms of any such Plan prior to the due date under Section 412 of the Code and
Section 302 of ERISA. There has been no ERISA Event or any event requiring
disclosure under Section 4041(c)(3)(C), 4068(f), 4063(a) or 4043(b) of ERISA
with respect to any Plan or trust of the Borrower or any member of its
Controlled Group since the effective date of ERISA. The value of the assets of
each Plan (other than a Multiemployer Plan) of the Borrower and each member of
its Controlled Group equaled or exceeded the present value of the benefit
liabilities, as defined in Title IV of ERISA, of each such Plan as of the most
recent valuation date using Plan actuarial assumptions at such date. There are
no pending or, to the best of the Borrower's knowledge, threatened claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and neither the Borrower nor any member
of its Controlled Group has knowledge of any threatened Litigation or claims
against, (i) the assets of any Plan or trust or against any fiduciary of a Plan
with respect to the operation of such Plan, or (ii) the assets of any employee
welfare benefit plan within the meaning of Section 3(1) or ERISA, or against any
fiduciary thereof with respect to the operation of any such plan. None of the
Borrower or any member of its Controlled Group has engaged in any prohibited
transactions, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, in connection with any Plan. None of the Borrower or any member of its
Controlled Group, nor has incurred or reasonably expects to incur (A) any
liability under Title IV of ERISA (other than premiums due under Section 4007 of
ERISA to the PBGC), (B) any withdrawal liability (and no event has occurred
which with the giving of notice under Section 4219 of ERISA would result in such
liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan, or (C) any liability under Section 4062 of ERISA to the PBGC
or to a trustee appointed under Section 4042 of ERISA. None of the Borrower, any
member of its Controlled Group, or any organization to which the Borrower or any
member of its Controlled Group is a successor or parent corporation within the
meaning of ERISA Section 4069(b), has engaged in a transaction within the
meaning of ERISA Section 4069. None of the Borrower or any member of its
Controlled Group maintains or has established any welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides for continuing benefits or
coverage for any participant or any beneficiary of any participant after such
participant's termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations thereunder, and at the expense of the participant or the
beneficiary of the participant, or retiree medical liabilities. Each of the
Borrower and its Controlled Group which maintains a welfare benefit plan within
the meaning of Section 3(1) of ERISA has complied in all material respects with
any applicable notice and continuation requirements of COBRA and the regulations
thereunder.
57
<PAGE>
(m) The Borrower is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying any margin stock within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System, and no part of the proceeds of
the Advances will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock. No
assets of the Parent, the Borrower and its Subsidiaries are margin stock, and
none of the Pledged Stock is margin stock. None of the Parent, the Borrower and
its Subsidiaries, nor any agent acting on their behalf, have taken or will
knowingly take any action which might cause this Agreement or any Loan Papers to
violate any regulation of the Board of Governors of the Federal Reserve System
or to violate the Securities Exchange Act of 1934, in each case as in effect now
or as the same may hereafter be in effect.
(n) As of the Closing Date, the Parent, the Borrower and its
Subsidiaries are in compliance in all material respects with all of the
provisions of their articles of incorporation and by-laws, and no event has
occurred or failed to occur, which has not been remedied or waived, the
occurrence or non-occurrence of which constitutes, or which with the passage of
time or giving of notice or both would constitute, (i) an Event of Default or
(ii) a default by the Parent, the Borrower or any of its Subsidiaries under any
material indenture, agreement or other instrument, or any judgment, decree or
order to which the Parent, the Borrower or any of its Subsidiaries is a party or
by which they or any of their material Properties is bound. After the Closing
Date, the Parent, the Borrower and its Subsidiaries are in compliance in all
material respects with all of the provisions of their articles of incorporation
and by-laws, and no event has occurred or failed to occur, which has not been
remedied or waived, the occurrence or non-occurrence of which constitutes, or
which with the passage of time or giving of notice or both would constitute, (i)
an Event of Default or (ii) a default by the Parent, the Borrower or any of its
Subsidiaries under any material indenture, agreement or other instrument, or any
judgment, decree or order to which the Parent, the Borrower or any of its
Subsidiaries is a party or by which they or any of their material Properties is
bound, that could reasonably be expected to cause a Material Adverse Change.
(o) The Borrower is not required to register under the provisions of the
Investment Company Act of 1940, as amended. Neither the entering into or
performance by the Borrower of this Agreement nor the issuance of the Notes
violates any provision of such act or requires any consent, approval, or
authorization of, or registration with, the Securities and Exchange Commission
or any other governmental or public body of authority pursuant to any provisions
of such act.
(p) On the Closing Date, none of the Borrower nor any Subsidiary of the
Borrower has any actual knowledge or reason to
58
<PAGE>
believe that any substance deemed hazardous by any applicable Environmental Law,
has been installed on any real property now owned by the Parent, the Borrower or
any of its Subsidiaries, except (i) for hazardous substances the presence of
which is not in violation of law and (ii) as disclosed to the Lenders. After the
Closing Date, none of the Parent, the Borrower nor any Subsidiary of the
Borrower has any actual knowledge or reason to believe that any substance deemed
hazardous by any applicable Environmental Law, has been installed in violation
of law on any real property now owned by the Parent, the Borrower or any of its
Subsidiaries except as disclosed to the Lenders and which would not, in the
reasonable judgment of the Borrower, cause a Material Adverse Change. As of the
Closing Date, the Borrower and its Subsidiaries are not in violation of or
subject to any existing, pending or, to the best of the Borrower's knowledge,
threatened investigation or inquiry by any governmental authority or to any
material remedial obligations under any applicable Environmental Laws, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to any real property of the
Parent, the Borrower and its Subsidiaries. After the Closing Date, the Parent,
the Borrower and its Subsidiaries are not in violation of or subject to any
existing, pending or, to the best of the Borrower's knowledge, threatened
investigation or inquiry by any governmental authority or to any material
remedial obligations under any applicable Environmental Laws which could cause a
Material Adverse Change, and this representation and warranty would continue to
be true and correct following disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances, if any,
pertaining to any real property of the Parent, the Borrower and its
Subsidiaries. The Parent, the Borrower and its Subsidiaries are not required to
obtain any permits, Licenses or similar authorizations to construct, occupy,
operate or use any buildings, improvements, fixtures, and equipment forming a
part of any real property of the Parent, the Borrower or any Subsidiary of the
Borrower by reason of any applicable Environmental Laws, except those that have
been obtained. As of the Closing Date, the Borrower and its Subsidiaries have no
actual knowledge or reason to believe, after reasonable investigation, that any
hazardous substances or solid wastes have been disposed of or otherwise released
on or to the real property of the Parent, the Borrower or any of its
Subsidiaries in violation of any applicable Environmental Law. After the Closing
Date, the Parent, the Borrower and its Subsidiaries have no actual knowledge or
reason to believe, that any hazardous substances or solid wastes have been
disposed of or otherwise released on or to the real property of the Parent, the
Borrower or any of its Subsidiaries, within the meaning of the applicable
Environmental Laws, except as disclosed to the Lenders and which such disposal
or release would not cause a Material Adverse Change.
59
<PAGE>
(q) The agreements evidencing obligations with respect to Capital Leases
have been duly authorized, executed and delivered by the Parent, Borrower or its
Subsidiaries, as applicable, and (to the best of the Borrower's knowledge) the
other parties thereto. Except as disclosed to each Lender, there is no
Litigation, or, to the best of the Borrower's knowledge, threatened Litigation
or pending or threatened claim of breach or default, with respect to any such
Capital Lease obligations that could be expected to adversely affect any such
lease or contract. There is no Litigation, or, to the best of the Borrower's
knowledge, threatened Litigation or pending or threatened claim of breach or
default, with respect to any loan agreement or document evidencing any Debt for
Borrowed Money of the Parent, the Borrower, or their Subsidiaries that has not
been disclosed to Lenders. The Borrower has no knowledge of any default by any
tenant or tenants under any Tenant Leases which aggregate five percent or more
of the revenues of the Borrower and its Subsidiaries, except as disclosed to the
Lenders. The Borrower has no notice of or belief that any party to any material
Capital Lease is contemplating a breach, default or termination for any reason
of such contract or lease, except as disclosed to the Lenders. As of the Closing
Date, the Borrower has provided, or caused to be provided, to the Administrative
Lender complete and correct copies of or access to the Capital Leases, all as
amended, together with all exhibits and schedules thereto.
(r) All Pledged Stock has been duly authorized and validly issued, and
is fully paid and nonassessable. The Capital Stock described on Exhibit A to
Borrower Pledge Agreement constitutes all the issued and outstanding Capital
Stock of the Subsidiaries of the Borrower or the Subsidiaries of another
Subsidiary, except such shares that have been issued after the Closing Date,
pledged to the Administrative Lender to secure the Obligations and delivered to
the Administrative Lender together with stock powers executed in blank. All
Capital Stock of the Borrower is pledged to the Administrative Lender on behalf
of Lenders to secure the Obligations. No Person has conversion rights with
respect to, or any subscription rights, calls, commitments or claims of any
character for, or any repurchase or redemption options relating to, the Pledged
Stock, other than those that have waived. The Pledged Stock, when issued or
sold, was either (i) registered or qualified under applicable federal or state
securities laws, or (ii) exempt therefrom.
(s) No broker's, finder's or other fee or commission will be payable by
the Borrower (other than to the Lenders hereunder) with respect to the making of
the Available Commitment or the Advances hereunder. The Borrower agrees to
indemnify and hold harmless the Administrative Lender and each Lender from and
against any claims, demand, liability, proceedings, costs or expenses asserted
with respect to or arising in connection with any such fees or commissions.
60
<PAGE>
(t) No event has occurred which permits (or with the passage of time
would permit) the revocation or termination of any material License, or which
could result in the imposition of any restriction thereon of such a nature that
could reasonably be expected to constitute a Material Adverse Change.
(u) The Parent, the Borrower and its Subsidiaries have obtained all
material patents, trademarks, service-marks, trade names, copyrights, Licenses
and other rights, free from burdensome restrictions, that are necessary for the
operation of their business as presently conducted and as proposed to be
conducted. Nothing has come to the attention of the Borrower or any of its
Subsidiaries to the effect that (i) any process, method, part or other material
presently contemplated to be employed by the Parent, Borrower or any Subsidiary
of the Borrower may infringe any patent, trademark, service-mark, trade name,
copyright, License or other right owned by any other Person, or (ii) there is
pending or overtly threatened any claim or Litigation against or affecting the
Borrower or any Subsidiary of the Borrower contesting its right to sell or use
any such process, method, part or other material, which could reasonably be
expected to cause a Material Adverse Change.
(v) Neither this Agreement nor any other document, certificate or
statement which has been furnished to any Lender by or on behalf of the Parent,
the Borrower or any Subsidiary of the Borrower in connection herewith contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statement contained herein and therein not
misleading at the time it was furnished. On the Closing Date, there is no fact
known to the Borrower and not known to the public generally that could
reasonably be expected to cause a Material Adverse Change, which has not been
set forth in this Agreement or in the documents, certificates and statements
furnished to the Lenders by or on behalf of the Borrower prior to the date
hereof in connection with the transaction contemplated hereby. On each date
after the Closing Date on which this representation is deemed to be made, there
is no fact known to the Borrower and not known to the public generally that
could reasonably be expected to cause a Material Adverse Change, which has not
been disclosed to the Lenders in writing.
(w) There exists no breach or default by any party under any Tenant
Lease, except (i) those disclosed to the Administrative Lender in writing, and
(ii) breaches of any Tenant Lease, or all breaches of Tenant Leases in the
aggregate, that could not cause a Material Adverse Change. All Tenant Leases in
existence on the Closing Date are listed on Schedule 5.01(w) hereto, together
with the lease rate for each such Tenant Lease, the date of termination of each
such Tenant Lease, and whether such Tenant Lease is a Primary Non-Conforming
Tenant Lease or a Secondary Non-Conforming Tenant Lease. No Tenant Lease is a
Primary Non-Conforming Tenant Lease or a Secondary Non-Conforming Tenant Lease,
except, if the Borrower is in compliance with Section 6.15(c) below, the
Borrower
61
<PAGE>
may have Primary NonConforming Tenant Leases and Secondary Non-Conforming Tenant
Leases that are disclosed to the Lenders in connection with Section 7.07 below
and accurately included in all calculations pursuant to Sections 6.15(a) and (c)
below.
(x) All Ground Leases are in full force and effect, and, as of the
Closing Date, there exists no breach or default by any party under any Ground
Lease, except those disclosed to the Administrative Lender in writing. All
Ground Leases in existence on the Closing Date are listed on Schedule 5.01(x)
hereto, together with the lease rate for each such Ground Lease, the date of
termination of each such Ground Lease and the Tower Cash Flow generated from the
Tower on each such Ground Lease, in each case, as of the Closing Date. No Ground
Lease is a NonConforming Ground Lease except, if the Borrower is in compliance
with Section 6.15(c) below, the Borrower may have Non-Conforming Ground Leases
that are disclosed to the Lenders in connection with Section 7.07 below and
accurately included in all calculations pursuant to Sections 6.15(b) and (c)
below.
(y) Each piece of owned real property in existence on the Closing Date
is listed on Schedule 5.01(y) hereto, together with the Tower Cash Flow related
to such piece of real property. After the expiration of 90 days after the
Closing Date, all real property owned by the Borrower or any Subsidiary for more
than 90 days is subject to a mortgage and/or deed of trust and otherwise
complies with all requirements set forth with respect to owned real property in
Section 6.15 hereof.
(z) Parent (i) qualifies as a real estate investment trust, as defined
in Section 856(a) of the Code, and satisfies the conditions and limitations set
forth in Sections 856(b) and 856(c) of the Code, (ii) has not engaged in any
"prohibited transactions" as defined in Section 857(b)(6)(B)(iii) and (C) of the
Code and (iii) for its current "tax year" (as defined in the Code) is and for
all prior tax years subsequent to its election to be a real estate investment
trust has been entitled to a dividends paid deduction under the requirements of
Section 857 of the Code. Borrower and each of the Subsidiaries of Borrower is a
Qualified REIT Subsidiary.
(aa) On each date after the Closing Date on which this representation is
deemed to be made, no event has occurred and no circumstance exists, which by
itself or aggregated together with all other such events or circumstances is
likely to (i) reduce Tower Cash Flow in the aggregate for all Towers by five
percent or more for a period in excess of three months, or (ii) otherwise cause
a Material Adverse Change.
5.02. Survival of Representations and Warranties. All representations
and warranties made under this Agreement and the other Loan Papers shall be
deemed to be made at and as of the Closing Date and at and as of the date of
each Advance, and each
62
<PAGE>
shall be true and correct in all material respects when made. All such
representations and warranties shall survive, and not be waived by, the
execution hereof by any Lender, any investigation or inquiry by any Lender, or
by the making of any Advance under this Agreement.
ARTICLE VI. GENERAL COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Available Commitment or any Letter of Credit is outstanding (whether or not the
conditions to borrowing have been or can be fulfilled):
6.01. Preservation of Existence and Similar Matters. The Borrower shall,
and shall cause each Subsidiary of the Borrower and the Parent to:
(a) preserve and maintain, or timely obtain and thereafter preserve and
maintain, its existence and material rights, franchises, authorizations,
consents, privileges and all other material Licenses from federal, state and
local governmental bodies and any Tribunal (regulatory or otherwise); and
(b) qualify and remain qualified and authorized to do business in each
jurisdiction in which the character of its Properties or the nature of its
business requires such qualification or authorization, except where the failure
to do so would not cause a Material Adverse Change.
6.02. Business; Compliance with Law and Material Agreements. The Parent,
the Borrower and its Subsidiaries shall (a) engage primarily in the acquisition
and operation of towers, and leasing and subleasing towers and tower sites, and
activities related thereto, and (b) comply in all material respects with the
requirements of all Applicable Law and all material agreement to which each is a
party.
6.03. Maintenance of Properties. The Borrower shall, and shall cause the
Parent and each Subsidiary of the Borrower to, maintain or cause to be
maintained all its material Properties necessary to the conduct of its business
(whether owned or held under lease) in reasonably good repair, working order and
condition, taken as a whole, and from time to time make or cause to be made all
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
6.04. Accounting Methods and Financial Records. The Borrower shall, and
shall cause the Parent and each Subsidiary of the Borrower to, maintain a system
of accounting established and administered in accordance with GAAP, keep
adequate records and books of account in which complete entries will be made and
all transactions reflected in accordance with GAAP, and keep accurate
63
<PAGE>
and complete records of its respective assets. The Borrower and each of its
Subsidiaries shall maintain a fiscal year ending on December 31.
6.05. Insurance. The Borrower shall, and shall cause the Parent and each
Subsidiary of the Borrower to, maintain insurance from responsible companies in
such amounts and against such risks as shall be customary and usual in the
industry for companies of similar size and capability, but in no event less than
the amount and types insured as of the Closing Date, provided that, the Borrower
is permitted to self insure the replacement value of Towers having in the
aggregate at any one time insurable values not more than 5% of the aggregate
insurable values for all Towers. Each insurance policy shall provide for at
least 30 days' prior notice to the Administrative Lender of any proposed
termination or cancellation of such policy, whether on account of default or
otherwise and all property insurance shall name the Administrative Lender as
loss payee or additional insured, as appropriate.
6.06. Payment of Taxes and Claims. The Borrower shall, and shall cause
the Parent and each Subsidiary of the Borrower to, pay and discharge all Taxes,
assessments and governmental charges or levies imposed upon it or its income or
Properties prior to the date on which penalties attach thereto, and all lawful
material claims for labor, materials and supplies which, if unpaid, might become
a Lien upon any of their Properties, except those Taxes, assessments and charges
contested by the Borrower diligently in good faith, and for which adequate
reserves have been established in accordance with GAAP. The Borrower shall, and
shall cause the Parent and each Subsidiary of the Borrower to, timely file all
information returns required by federal, state or local Tax authorities.
6.07. Visits and Inspections. The Borrower shall, and shall cause each
Subsidiary of the Borrower and the Parent to, promptly permit representatives of
the Administrative Lender or any Lender from time to time to (a) visit and
inspect the Properties of the Parent, the Borrower and each Subsidiary of the
Borrower as often as the Administrative Lender or any Lender shall deem
advisable, (b) inspect and make extracts from and copies of the Borrower's, the
Parent's and each Subsidiary of the Borrower's books and records, and (c)
discuss with the Parent's, the Borrower's and each Subsidiary's directors,
officers, employees and, after notice to the Borrower, the auditors of Borrower
and the Parent, its business, assets, liabilities, financial positions, results
of operations and business prospects.
6.08. Payment of Debt for Borrowed Money. The Borrower shall, and shall
cause the Parent and each Subsidiary of the Borrower to, pay its Debt for
Borrowed Money when and as the same becomes due.
64
<PAGE>
6.09. Use of Proceeds. The Borrower shall use the proceeds of Advances
solely (a) on the Closing Date, to refinance existing indebtedness of the
Borrower, (b) for Permitted Acquisitions, (c) for Capital Expenditures permitted
under the terms of this Agreement, (d) for working capital and (e) for other
lawful corporate purposes.
6.10. Indemnity.
(a) The Borrower agrees to defend, protect, indemnify and hold harmless
the Administrative Lender, each Lender, each of their respective Affiliates, and
each of their respective (including such Affiliates') officers, directors,
employees, agents, attorneys, shareholders and consultants (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth herein) of each of the foregoing
(collectively, "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees (whether
direct, indirect or consequential and whether based on any federal, state, or
local laws and regulations, under common law or at equitable cause, or on
contract, tort or otherwise, arising from or connected with the past, present or
future operations of the Borrower or its predecessors in interest, in any manner
relating to or arising out of this Agreement, the Loan Papers, or any act, event
or transaction or alleged act, event or transaction relating or attendant
thereto, the making of any participations in the Advances and the management of
the Advances, including in connection with, or as a result, in whole or in part,
of any negligence of Administrative Lender or any Lender (other than those
matters raised exclusively by a participant against the Administrative Lender or
any Lender and not the Borrower), or the use or intended use of the proceeds of
the Advances hereunder, or in connection with any investigation of any potential
matter covered hereby, but excluding any claim or liability that arises as the
result of the gross negligence or willful misconduct of any Indemnitee, as
finally judicially determined by a court of competent jurisdiction
(collectively, the "Indemnified Matters").
(b) In addition, the Borrower shall periodically, upon request,
reimburse each Indemnitee for its reasonable legal and other actual expenses
(including the cost of any investigation and preparation) incurred in connection
with any Indemnified Matter. If for any reason the foregoing indemnification is
unavailable to any Indemnitee or insufficient to hold any Indemnitee harmless
with respect to Indemnified Matters, then the Borrower shall contribute to the
amount paid or payable by such Indemnitee as a result of
65
<PAGE>
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the Borrower and the
Borrower's stockholders on the one hand and such Indemnitee on the other hand
but also the relative fault of the Borrower and such Indemnitee, as well as any
other relevant equitable considerations. The reimbursement, indemnity and
contribution obligations under this Section shall be in addition to any
liability which the Borrower may otherwise have, shall extend upon the same
terms and conditions to each Indemnitee, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Borrower, the Administrative Lender, the Lenders and all other Indemnitees.
This Section shall survive any termination of this Agreement and payment of the
Obligations.
6.11. Environmental Law Compliance. The use which the Parent, the
Borrower or any Subsidiary of the Borrower intends to make of any real Property
owned by it will not result in the disposal or other release of any hazardous
substance or solid waste on or to such real Property in violation of any
Environmental Law. As used herein, the terms "hazardous substance" and "release"
as used in this Section shall have the meanings specified in CERCLA (as defined
in the definition of applicable Environmental Laws), and the terms "solid waste"
and "disposal" shall have the meanings specified in RCRA (as defined in the
definition of applicable Environmental Laws); provided, however, that if CERCLA
or RCRA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment; and provided further, to the extent that any other law applicable to
the Parent, the Borrower, any Subsidiary of the Borrower or any of their
Properties establishes a meaning for "hazardous substance," "release," "solid
waste," or "disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply. The Borrower agrees to indemnify and
hold the Administrative Lender and each Lender harmless from and against, and to
reimburse them with respect to, any and all claims, demands, causes of action,
loss, damage, liabilities, costs and expenses (including attorneys' fees and
courts costs) of any kind or character, known or unknown, fixed or contingent,
asserted against or incurred by any of them at any time and from time to time by
reason of or arising out of (a) the failure of the Parent, the Borrower or any
Subsidiary of the Borrower to perform any obligation hereunder regarding
asbestos or applicable Environmental Laws, (b) any violation on or before the
Release Date of any applicable Environmental Law in effect on or before the
Release Date, and (c) any act, omission, event or circumstance existing or
occurring on or prior to the Release Date (including without limitation the
presence on such real Property or release from such real Property of hazardous
substances or solid wastes disposed of or otherwise released on or prior to the
Release Date), resulting from or in connection with the ownership of the real
Property, regardless of whether the act, omission, event or circumstance
constituted a violation of any applicable Environmental Law at the
66
<PAGE>
time of its existence or occurrence, or whether the act, omission, event or
circumstance is caused by or relates to the negligence of any indemnified
Person; provided that, the Borrower shall not be under any obligation to
indemnify the Administrative Lender or any Lender to the extent that any such
liability arises as the result of the gross negligence or willful misconduct of
such Person, as finally judicially determined by a court of competent
jurisdiction, or for any event which is both not caused by the Parent, the
Borrower or any Subsidiary of the Borrower and occurs after any foreclosure by
the Lenders on any specific Property. The provisions of this paragraph shall
survive the Release Date and shall continue thereafter in full force and effect.
6.12. Interest Rate Protection Agreements. By no later than May 1, 1998,
the Borrower will enter into an Interest Rate Protection Agreement on terms
acceptable to the Administrative Lender providing for interest rate protection
for one year for 50% of the principal of the Obligations outstanding on May 1,
1998, and the Borrower shall thereafter, until the third anniversary of the
Closing Date, maintain an Interest Rate Protection Agreement in effect at all
times on terms acceptable to the Administrative Lender and providing for an
interest rate protection for not less than 50% of the entire principal of the
Obligations.
6.13. Issuance and Pledge of Capital Stock of the Borrower. Prior to or
simultaneous with the issuance by the Borrower of any Capital Stock to any
Person, the Borrower shall, and shall cause the Parent to, cause such Capital
Stock to be pledged to the Administrative Lender on behalf of Lenders to secure
the Obligations in accordance with documentation substantially in the form of
Exhibit M hereto.
6.14. Continued Status as a Real Estate Investment Trust; Prohibited
Transactions. Parent (a) will continue to be qualified as a real estate
investment trust as defined in Section 856 of the Code, (b) will not engage in
any "prohibited transactions" as defined in Section 857(b)(6)(B)(iii) or (C) of
the Code, (c) will continue to satisfy the conditions and limitations set forth
in Sections 856(b) and 856(c) of the Code and (d) will do all acts necessary to
continue to be entitled to a dividend paid deduction under Section 857 of the
Code and (d) each of Borrower and each of its Subsidiaries will continue to be a
Qualified REIT Subsidiary.
6.15. Tenant Leases, Ground Leases and Fee Owned Property.
(a) Tenant Leases. The Borrower and each Subsidiary of the Borrower
shall, after the Closing Date, only enter into new Tenant Leases, acquire new
Tenant Leases or become party to any Tenant Leases which are not Primary
Non-Conforming Tenant Leases or Secondary Non-Conforming Tenant Leases, provided
that, the Borrower is permitted to have (i) Primary Non-Conforming Tenant Leases
so long as the sum of the aggregate Tenant Lease Revenues from all Primary
Non-Conforming Tenant Leases, at no time after the 90th day
67
<PAGE>
after the Closing Date exceeds fifteen percent of the total revenues of the
Borrower and its Subsidiaries for the most recently completed calendar month
during the term of this Agreement, and (ii) Secondary Non-Conforming Tenant
Leases, so long as the sum of the aggregate Tenant Lease Revenues from all
Secondary Non-Conforming Tenant Leases in any calendar month does not exceed
twenty percent of the total revenues of the Borrower and its Subsidiaries for
such completed calendar month.
(b) Ground Leases and Fee Owned Real Property. The Borrower and each
Subsidiary of the Borrower shall, after the Closing Date, use its best efforts
to only enter into new Ground Leases which are substantially in the form set
forth on Exhibit K hereto, or with such other provisions as are approved by the
Administrative Lender in writing. The Borrower shall use its best efforts to
immediately provide the Lenders with each item for each piece of real Property
(whether leased or owned) required on Schedule 2.16 hereto in accordance with
the terms thereon prior to and immediately after the Closing Date and prior to
and immediately after each Permitted Acquisition or other creation or
acquisition of any real Property by the Borrower or any Subsidiary of the
Borrower. The Borrower shall not permit to exist Non-Conforming Ground Leases
which have aggregate Tower Cash Flow from all Towers located on NonConforming
Ground Leases in excess of thirty percent of Operating Cash Flow at any time (on
any date of determination) during the term of this Agreement.
(c) Breach of Section 6.15(a) and (b) above. In the event any provision
of Section 6.15(a) or (b) above is breached, subject to the last sentence of
this Section 6.15(c), the Applicable Margin shall increase by .25% per annum,
effective the date of such breach under Section 6.15(a) or (b) above, and shall
increase every 30 days thereafter (effective each 31st date following the
preceding increase) by .25% per annum (but in no event shall the interest rate
increase under this Section 6.15(c) by more than .25% per annum per 30 day
period) until the earlier of (i) compliance with this Section 6.15, or (ii) such
time as the per annum interest rate is equal to the Highest Lawful Rate (where
the interest rate will remain until the Borrower is in compliance). If, on the
date six months after the date of any breach, such breach is still in effect,
then (A) with respect to a breach under Section 6.15(a) hereof, all Tenant Lease
Revenues from any Primary Non-Conforming Tenant Lease or Secondary Non-
Conforming Tenant Lease, as applicable, in excess of the applicable percent
limitation, will be excluded from revenues for the purpose of
68
<PAGE>
determining EBITDA in connection with any determination of (I) the Total
Leverage Ratio (with respect to Section 8.01(a) hereof, Commitment Fees and the
Applicable Margin), the Senior Leverage Ratio (with respect to 8.01(b) hereof)
and the debt service coverage ratio set forth in Section 8.01(d) hereof, and (B)
with respect to a breach under Section 6.15(b) hereof, all Tower Cash Flow from
any Tower located on a Non-Conforming Ground Lease in excess of the thirty
percent limitation will be excluded from revenues for the purpose of determining
EBITDA in connection with any determination of (I) the Total Leverage Ratio
(with respect to Section 8.01(a) hereof, Commitment Fees and the Applicable
Margin), the Senior Leverage Ratio (with respect to Section 8.01(b) hereof) and
the debt service coverage ratio set forth in Section 8.01(d) hereof, and, in
each case, such exclusion from EBITDA for such purposes will continue until five
Business Days after the date the Borrower delivers to the Administrative Lender
a certificate of an Authorized Officer certifying that there exists no breach
under Section 6.15(a) and/or (b) above, in detail satisfactory to the
Administrative Lender. If there exists no Default or Event of Default upon
giving effect to any exclusion from EBITDA in accordance with the provisions set
forth above, the interest rate shall be calculated without giving effect to any
increase in the Applicable Margin set forth in this Section 6.15(c).
(d) Real Estate Collateral.
(i) Fee Owned Property. The Borrower shall, within 60 days after the
acquisition by the Borrower or any of its Subsidiaries of any owned real
property, provide or cause to be provided to the Administrative Lender
on behalf of itself and the Lenders with a first and prior mortgage or
deed of trust for each such property securing the Obligations in form
and substance substantially similar to the previously filed
mortgages/deeds of trust. The Borrower also agrees to provide (or to
cause to be provided) all such documents and instruments required by the
Administrative Lender to fully effect the foregoing, including, without
limitation, providing the Administrative Lender with UCC- 1's, new
security agreements, mortgages, deeds of trust, appraisals, surveys,
hazard insurance, UCC-11 searches, Tax and Lien searches, intellectual
property documentation and registration and other similar types of
documents, consents, authorizations, Licenses, instruments and
agreements relating to all Property of the Borrower and its Subsidiaries
as reasonably requested by the Administrative Lender from time to time.
(ii) Leasehold Property. The Borrower shall use its best efforts after
the acquisition by the Borrower or any of its Subsidiaries of any
leasehold property, to provide the Administrative Lender on behalf of
itself and the Lenders a first and prior mortgage or deed of trust for
each such property securing the Obligations in form and substance
substantially similar to the previously filed mortgages/deeds of trust.
The Borrower also agrees to use its best efforts to provide (or to cause
to be provided) all such documents and instruments required by the
Administrative Lender to fully effect the foregoing, including, without
limitation, providing the Administrative Lender with UCC-1's, new
security agreements, mortgages, deeds of trust, Estoppel and Attornment
language, appraisals, surveys, hazard insurance, UCC-11 searches, Tax
and Lien searches, intellectual property
69
<PAGE>
documentation and registration and other similar types of documents,
consents, authorizations, Licenses, instruments and agreements relating
to all Property of the Borrower and its Subsidiaries as reasonably
requested by the Administrative Lender from time to time.
(iii) Fee Owned Property and Leasehold Property Existing on the Closing
Date. With respect to fee owned property of the Borrower and its
Subsidiaries in existence on the Closing Date and not subject to a
mortgage or deed of trust on the Closing Date, all such property shall
be treated as if such property were acquired on the Closing Date in
order to determine compliance with Section 6.15(d)(i) above. With
respect to leasehold property of the Borrower and its Subsidiaries in
existence on the Closing Date and not subject to a mortgage or deed of
trust on the Closing Date, all such property shall be treated as if such
property were acquired 120 days after the Closing Date in order to
determine compliance with Section 6.15(d)(ii) above.
6.16. Acquisitions, Generally. In connection with any acquisition made
by the Borrower during the term of this Agreement, the Borrower shall with
respect to individual Permitted Acquisitions in excess of $2,000,000 and all
Permitted Acquisitions which in the aggregate exceed $10,000,000, (a) not less
than ten Business Days prior to the proposed acquisition date, deliver to
Administrative Lender (i) a detailed written description of the proposed
Permitted Acquisition in form reasonably acceptable to the Administrative
Lender, a description and location of all fee owned real property, all leasehold
property, all Towers and all other assets (together with all legal descriptions
of all real property (leasehold and fee owned) available at such time), (ii) the
address of any office acquired and (iii) a copy of the purchase agreement,
schedules thereto and all related documentation (unless such schedules or
documentation is to be delivered by the seller, in which case the Borrower shall
deliver drafts and originals of such schedules and documentation promptly upon
receipt by the Borrower if later than 10 days prior to closing), and (b) prior
to the consummation of the acquisition a statement certified by an Authorized
Officer that (i) the proposed transaction complies with the definition of
Permitted Acquisition set forth in Article I hereof, and (ii) no Default or
Event of Default exists prior to or after giving effect to any requested Advance
or the consummation of such acquisition, or will exist upon consummation of the
proposed acquisition and related borrowings and transactions, together with a
Compliance Certificate computed after giving effect to such acquisition and
borrowings (provided that, in such Compliance Certificate, the Borrower may
certify as to Sections 8.01(a), 8.01(b) and 8.01(d) hereof only, and not
Sections 8.01(c), 8.01(e) and 8.01(f) hereof).
6.17. Year 2000. The Borrower has (a) undertaken a detailed review and
assessment of all areas within its business and
70
<PAGE>
operations that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Borrower may be unable to
recognize and perform property date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (b) developed a detailed plan
and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to
date, implemented that plan in accordance with that timetable. The Borrower
reasonably anticipates that all computer applications that are material to its
business and operations will on a timely basis be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 Compliant").
ARTICLE VII. INFORMATION COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Available Commitment or any Letter of Credit is outstanding (whether or not the
conditions to borrowing have been or can be fulfilled), the Borrower shall
furnish or cause to be furnished to each Lender:
7.01. Quarterly Financial Statements and Information. Within 45 days
after the end of each fiscal quarter, consolidated and consolidating balance
sheets of Parent, the Borrower and its Subsidiaries as at the end of such
quarter and the related consolidated and consolidating statements of income and
consolidated statements of changes in cash for such quarter and for the elapsed
portion of the year ended with the last day of such quarter, all of which shall
be certified by an Authorized Officer, to, in his or her opinion, present fairly
in all material respects, in accordance with GAAP, the financial position and
results of operations of the Parent, the Borrower and its Subsidiaries as at the
end of and for such period, and for the elapsed portion of the year ended with
the last day of such period.
7.02. Annual Financial Statements and Information; Certificate of No
Default.
(a) Within 120 days after the end of each fiscal year, a copy of (i) the
consolidated balance sheet of the Parent, the Borrower and its Subsidiaries, as
of the end of the current and prior fiscal years and (ii) consolidated
statements of earnings, statements of changes in shareholders' equity, and
statements of changes in cash as of and through the end of such fiscal year, all
of which are prepared in accordance with GAAP, and certified by independent
certified public accountants acceptable to the Lenders, whose opinion shall be
in scope and substance in accordance with generally accepted auditing standards
and shall be unqualified.
(b) As soon as available, but in any event within 60 days following the
end of each fiscal year, a copy of the annual
71
<PAGE>
consolidated operating budget of the Borrower, the Parent, and its Subsidiaries
for the succeeding fiscal year.
7.03. Compliance Certificates. Within 20 days after the end of each
month (together with the monthly compliance certificate described in Section
7.07(a) hereof), and at the time financial statements are furnished pursuant to
Section 7.01 and Section 7.02, a Compliance Certificate.
7.04. Copies of Other Reports and Notices.
(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Parent, the Borrower or any Subsidiary of
the Borrower by accountants in connection with any annual, interim or special
audit, including without limitation any report prepared in connection with the
annual audit referred to in Section 7.03 hereof, and any other comment letter
submitted to management in connection with any such audit, (ii) each financial
statement, report, notice or proxy statement sent by the Parent, the Borrower or
any Subsidiary of the Borrower to stockholders generally, (iii) each regular or
periodic report and any registration statement or prospectus (or material
written communication in respect of any thereof) filed by the Parent, the
Borrower or any Subsidiary of the Borrower with any securities exchange, with
the Securities and Exchange Commission or any successor agency, and (iv) all
press releases concerning material financial aspects of the Parent, the Borrower
or any Subsidiary of the Borrower;
(b) Promptly upon becoming aware that (i) the holder(s) of any note(s)
or other evidence of indebtedness or other security of the Parent, the Borrower
or any Subsidiary of the Borrower in excess of $250,000 in the aggregate has
given notice or taken any action with respect to a breach, failure to perform,
claimed default or event of default thereunder, (ii) any party to any material
Capital Lease of the Borrower or any Subsidiary of the Borrower has given notice
or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, (iii) any occurrence or non-occurrence
of any event which constitutes or which with the passage of time or giving of
notice or both could constitute a material breach by the Parent, the Borrower or
any Subsidiary of the Borrower under any material agreement or instrument other
than this Agreement to which the Parent, the Borrower or any Subsidiary of the
Borrower is a party or by which any of their Properties may be bound, or (iv)
any event, circumstance or condition which could reasonably be expected to
constitute a Material Adverse Change, a written notice specifying the details
thereof (or the nature of any claimed default or event of default) and what
action is being taken or is proposed to be taken with respect thereto;
(c) Promptly upon receipt thereof, information with respect to and
copies of any notices received from the FCC, the FAA or any
72
<PAGE>
other federal, state or local regulatory agencies or any tribunal relating to
any order, ruling, law, information or policy that relates to a breach of or
noncompliance with the Communications Act, or might result in the payment of
money by the Parent, the Borrower or any Subsidiary of the Borrower in an amount
of $250,000 or more in the aggregate, or otherwise constitute a Material Adverse
Change, or result in the loss or suspension of any material License;
(d) Promptly upon receipt from any governmental agency, or any
government, political subdivision or other entity, any material notice,
correspondence, hearing, proceeding or order regarding or affecting the Parent,
the Borrower, any Subsidiary of the Borrower, or any of their Properties or
businesses not in the ordinary course of business, a copy of such notice,
correspondence, hearing, proceeding or order;
(e) Promptly upon and in any event within forty-eight hours after the
Borrower first has knowledge of (i) the Parent failing to (A) continue to
qualify as a real estate investment trust as defined in Section 856 of the Code
or (B) maintain its REIT Status, (ii) any act by the Parent causing the election
by the Parent or the Borrower, as applicable, to be taxed as a real estate
investment trust to be terminated, (iii) any act causing the Parent to be
subject to the taxes imposed by Section 857(b)(6) of the Code, (iv) the Parent
failing to be entitled to a dividends paid deduction under Section 857 of the
Code, (v) the Parent failing to satisfy any condition or limitation set forth in
Section 856(b) or 856(c) of the Code, (vi) any challenge by the Internal Revenue
Service to the Parent's REIT Status, (vii) the Borrower or any Subsidiary of
Borrower failing to be a Qualified REIT Subsidiary, or (viii) any challenge by
the Internal Revenue Service to the status of Borrower or any Subsidiary of
Borrower as a Qualified REIT Subsidiary, notice of any such occurrence or
circumstance; and
(f) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results of
operations or business prospects of the Parent, the Borrower and its
Subsidiaries that is within the Borrower's control, as the Administrative Lender
or any Lender may reasonably request.
7.05. Notice of Litigation, Default and Other Matters. Prompt notice of
the following events after the Borrower has knowledge or notice thereof:
(a) The commencement of all proceedings and investigations by or before
the FCC, the FAA or any other governmental body, and all other actions and
proceedings in any court or before any arbitrator involving claims for damages
(including punitive damages) in excess of $250,000 in the aggregate (after
deducting the amount with respect to the Parent, the Borrower or any
73
<PAGE>
Subsidiary of the Borrower is insured), against or in any other way relating
directly to the Parent, the Borrower, any Subsidiary of the Borrower, or any of
their Properties or businesses;
(b) Promptly upon the happening of any condition or event which
constitutes a Default, a written notice specifying the nature and period of
existence thereof and what action is being taken or is proposed to be taken with
respect thereto; and
(c) Any Material Adverse Change with respect to the business, assets,
liabilities, financial position, results of operations or prospective business
of the Parent, the Borrower or any Subsidiary of the Borrower.
7.06. ERISA Reporting Requirements.
(a) Promptly and in any event (i) within 30 days after the Borrower or
any member of its Controlled Group knows or has reason to know that any ERISA
Event described in clause (a) of the definition of ERISA Event or any event
described in Section 4063(a) of ERISA with respect to any Plan of the Borrower
or any member of its Controlled Group has occurred, and (ii) within 10 days
after the Borrower or any member of its Controlled Group knows or has reason to
know that any other ERISA Event with respect to any Plan of the Borrower or any
member of its Controlled Group has occurred or a request for a minimum funding
waiver under Section 412 of the Code with respect to any Plan of the Borrower or
any member of its Controlled Group, a written notice describing such event and
describing what action is being taken or is proposed to be taken with respect
thereto, together with a copy of any notice of event that is given to the PBGC;
(b) Promptly and in any event within two Business Days after receipt
thereof by the Borrower or any member of its Controlled Group from the PBGC,
copies of each notice received by the Borrower or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(c) Promptly and in any event within 30 days after the filing thereof by
the Borrower or any member of its Controlled Group with the United States
Department of Labor, the Internal Revenue Service or the PBGC, copies of each
annual and other report (including Schedule B thereto) with respect to each
Plan;
(d) Promptly and in any event within 30 days after receipt thereof, a
copy of any notice, determination letter, ruling or opinion the Borrower or any
member of its Controlled Group receives from the PBGC, the United States
Department of Labor or the Internal Revenue Service with respect to any Plan;
(e) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Borrower or any
74
<PAGE>
member of its Controlled Group receives from the Plan Sponsor (as defined by
Section 4001(a)(10) of ERISA) of any Plan concerning potential withdrawal
liability pursuant to Section 4219 or 4202 of ERISA, and a statement from the
chief financial officer of the Borrower or such member of its Controlled Group
setting forth details as to the events giving rise to such potential withdrawal
liability and the action which the Borrower or such member of its Controlled
Group is taking or proposes to take with respect thereto;
(f) Notification within 30 days of any material increases in the
benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which the Borrower or any member of its Controlled Group was not previously
contributing;
(g) Notification within three Business Days after the Borrower or any
member of its Controlled Group knows or has reason to know that the Borrower or
any such member of its Controlled Group has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(h) Promptly after receipt of written notice of commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower or any member of its Controlled Group with
respect to any Plan.
7.07. Fee Owned Property, Ground Leases, Tenant Leases and Tower
Construction Advances.
(a) Monthly Compliance Certificate. Within 20 days after the end of each
month during the term of this Agreement (and together with the Compliance
Certificate required by Section 7.03 hereof), the Borrower shall provide the
Administrative Lender and each Lender with compliance certificates certified by
an Authorized Officer regarding (i) compliance by the Borrower with Section 6.15
hereof and (ii) designation of Tower Construction Advances and the related
Towers, the aggregate outstanding amount of Tower Construction Advances and
compliance with Section 8.01(f) hereof, each for the most recently completed
month, substantially in the form of Exhibit C hereto, in sufficient detail, form
and substance reasonably acceptable to the Administrative Lender.
(b) Quarterly Information Regarding Fee Owned Real Property, Ground
Leases and Tenant Leases. The Borrower shall provide the Administrative Lender
and each Lender, with quarterly updates delivered with the Compliance
Certificate as required in Section 7.03 hereof, certifying as to (i) all
existing Ground Leases and fee owned real property of the Borrower and the
75
<PAGE>
Subsidiaries of the Borrower, (ii) the annual charges paid in connection with
fee owned real Property (if any) and Ground Leases of the Borrower and the
Subsidiaries of the Borrower, and the annual revenues generated by each Tower on
each Ground Lease and each fee owned real property, (iii) the termination date
for each such Ground Lease, (iv) whether there exists a material breach or
default by any party to any such Ground Lease (or alleged breach or default),
(v) a list of all Non-Conforming Ground Leases on such date (detailing the
reason for non-compliance), together with a detail of all Tower Cash Flow
generated by any Tower on all NonConforming Ground Leases, and any
non-compliance with respect to any requirement set forth in Section 6.15 hereof
or set forth on Schedule 2.16 hereof for any fee owned real Property of the
Borrower and each Subsidiary of the Borrower, and (vi) a list of all Primary
NonConforming Tenant Leases and Secondary Non-Conforming Tenant Leases
(detailing the reason for non-compliance) and all Tenant Lease Revenues
generated by such Primary Non-Conforming Tenant Leases and Secondary
Non-Conforming Tenant Leases, all in form and substance acceptable to the
Administrative Lender. Each such quarterly update certificate shall be certified
by an Authorized Officer that there exists no breach of Section 6.15 hereof and
that there exists no Default or Event of Default under Section 9.01(t) hereof.
(c) Annual Information Regarding Tenant Leases. The Borrower shall
provide the Administrative Lender and each Lender, with annual updates as to all
existing Tenant Leases delivered with the annual information required by Section
7.02 hereof, such information to show the Tenant Lease Revenues with respect to
each Tenant Lease, the termination date for each such Tenant Lease, whether such
Tenant Lease is a Primary Non-Conforming Tenant Lease or a Secondary
Non-Conforming Tenant Lease (and the reason therefor), and whether there exists
a material breach or default by any party to a (i) material Tenant Lease or (ii)
group of Tenant Leases which is material, all in form and substance acceptable
to the Administrative Lender.
ARTICLE VIII. NEGATIVE COVENANTS
So long as any of the Obligations are outstanding and unpaid or the
Available Commitment or any Letter of Credit is outstanding (whether or not the
conditions to borrowing have been or can be fulfilled):
8.01. Financial Covenants.
(a) TOTAL LEVERAGE RATIO. The Borrower shall not permit the Total
Leverage Ratio to be more than the following ratios at the end of any
fiscal quarter during the time during the following time periods:
76
<PAGE>
Period Ratio
------ -----
From the Closing Date
through September 30, 1998 10.25 to 1.00
From October 1, 1998
through December 31, 1998 9.50 to 1.00
From January 1, 1999
through June 30, 1999 9.00 to 1.00
From July 1, 1999
through March 31, 2000 8.25 to 1.00
From April 1, 2000
through March 31, 2001 7.50 to 1.00
From April 1, 2001
through March 31, 2002 7.00 to 1.00
From April 1, 2002
through March 31, 2003 6.50 to 1.00
From April 1, 2003
and thereafter 6.00 to 1.00
provided however,
(i) that in the event of a failure to meet the ratios required by this
Section 8.01(a), so long as no other Default or Event of Default exists
hereunder, ABRY may, through the Parent, not more than two times during
the term of this Agreement (in addition to those instances in which ABRY
may be required to make such a contribution pursuant to Section 2(b) of
the Capital Contribution Agreement), prior to the delivery by the
Borrower of its Compliance Certificate in accordance with Section 7.03
hereof evidencing such breach, make either (A) an equity capital
contribution or (B) a loan to the Borrower constituting Cure Sub Debt,
or any combination of equity and Cure Sub Debt, in each case to enable
the Borrower to reduce the outstanding principal amount of Advances
hereunder in an amount sufficient to cure the breach under this Section
8.01(a). In the event that the ABRY makes such capital contribution or
loan constituting Cure Sub Debt, the Borrower must reduce the
outstanding Advances hereunder by such amount, and the Borrower may
demonstrate its compliance with the financial covenant in this Section
8.01(a) by calculating such covenant (I) after such contribution or Cure
Sub Debt loan has been made, and (II) after the Obligation has been
reduced by such contribution or such Cure Sub Debt loan. Notwithstanding
anything in this Agreement to the contrary, the second time that ABRY
makes any capital contribution or Cure Sub Debt loan to cure any Event
of Default as a result of
77
<PAGE>
a violation of this Section 8.01(a) as permitted above, any such capital
contribution or Cure Sub Debt loan shall be applied in accordance with
the terms of Section 2.05(b) hereof, but shall permanently reduce the
outstanding Obligations by a reduction in the Available Commitment in
accordance with the terms of Section 2.11(c)(i) hereof; and
(ii) notwithstanding anything herein to the contrary, no Advance
constituting a Tower Construction Advance will be included in the Total
Debt calculation to determine compliance with this Section 8.01(a), but
only so long as (A) such Advance remains a Tower Construction Advance,
and (B) there is not included in the calculation of EBITDA for the
purposes of this Section 8.01(a) only, revenue attributable to any new
Tower being constructed with the proceeds of any such Tower Construction
Advance for so long as any such Tower Construction Advance remains
designated as a Tower Construction Advance, it being understood by the
parties hereto that, notwithstanding the use of Tower Construction
Advances to refurbish or replace any existing Tower, revenue
attributable to such refurbished or replacement Tower may not be
included in the calculation of EBITDA to determine compliance with this
Section 8.01(a).
(b) SENIOR LEVERAGE RATIO. The Borrower shall not permit the
Senior Leverage Ratio to be more than the following ratios at the end of
any fiscal quarter during the time during the following time periods:
Period Ratio
------ -----
From the Closing Date
through March 31, 1999 5.25 to 1.00
From April 1, 1999
through March 31, 2000 5.00 to 1.00
From April 1, 2000
through March 31, 2001 4.50 to 1.00
From April 1, 2001
through March 31, 2002 4.00 to 1.00
From April 1, 2002
through March 31, 2003 ` 3.50 to 1.00
From April 1, 2003
and thereafter 3.00 to 1.00
provided however,
78
<PAGE>
(i) that in the event of a failure to meet the ratios required by this
Section 8.01(b), so long as no other Default or Event of Default exists
hereunder, ABRY may, through the Parent, not more than two times during
the term of this Agreement (in addition to those instances in which ABRY
may be required to make such a contribution pursuant to Section 2(b) of
the Capital Contribution Agreement), prior to the delivery by the
Borrower of its Compliance Certificate in accordance with Section 7.03
hereof evidencing such breach, make either (A) an equity capital
contribution or (B) a loan to the Borrower constituting Cure Sub Debt,
or any combination of equity and Cure Sub Debt, in each case to enable
the Borrower to reduce the outstanding principal amount of Advances
hereunder in an amount sufficient to cure the breach under this Section
8.01(b). In the event that the ABRY makes such capital contribution or
loan constituting Cure Sub Debt, the Borrower must reduce the
outstanding Advances hereunder by such amount, and the Borrower may
demonstrate its compliance with the financial covenant in this Section
8.01(b) by calculating such covenant (I) after such contribution or Cure
Sub Debt loan has been made, and (II) after the Obligation has been
reduced by such contribution or such Cure Sub Debt loan. Notwithstanding
anything in this Agreement to the contrary, the second time that ABRY
makes any capital contribution or Cure Sub Debt loan to cure any Event
of Default as a result of a violation of this Section 8.01(b) as
permitted above, any such capital contribution or Cure Sub Debt loan
shall be applied in accordance with the terms of Section 2.05(b) hereof,
but shall permanently reduce the outstanding Obligations by a reduction
in the Available Commitment in accordance with the terms of Section
2.11(c)(ii) hereof; and
(ii) notwithstanding anything herein to the contrary, no Advance
constituting a Tower Construction Advance will be included in the Senior
Debt calculation to determine compliance with this Section 8.01(b), but
only so long as (A) such Advance remains a Tower Construction Advance,
and (B) there is not included in the calculation of EBITDA for the
purposes of this Section 8.01(b) only, revenue attributable to any new
Tower being constructed with the proceeds of any such Tower Construction
Advance for so long as any such Tower Construction Advance remains
designated as a Tower Construction Advance, it being understood by the
parties hereto that, notwithstanding the use of Tower Construction
Advances to refurbish or replace any existing Tower, revenue
attributable to such refurbished or replacement Tower may not be
included in the calculation of EBITDA to determine compliance with this
Section 8.01(b).
(c) INTEREST COVERAGE RATIO. The Borrower shall not permit, at the end
of any fiscal quarter, the ratio of (a) EBITDA for the preceding twelve
month period to (b) the difference between (i) Interest Expense for the
preceding twelve month
79
<PAGE>
period minus (ii) accrued interest expense to be paid in-kind by the
Borrower, the Parent or any Subsidiary of the Borrower, to be less than
the following ratios during the following time periods:
Period Ratio
------ -----
From the Closing Date
through December 31, 1998 1.75 to 1.00
From January 1, 1999
through December 31, 1999 2.00 to 1.00
From January 1, 2000
and thereafter 2.25 to 1.00
(d) DEBT SERVICE COVERAGE RATIO. The Borrower shall not permit at the end
of any fiscal quarter the ratio of (a) Annualized EBITDA to (b) Pro Forma
Debt Service to be less than 1.25 to 1.00.
(e) FIXED CHARGE COVERAGE RATIO. The Borrower shall not permit at the end
of any fiscal quarter the ratio of (a) EBITDA for the most recently
completed twelve month period to (b) Fixed Charges for the most recently
completed twelve month period, to be less than 1.10 to 1.00.
(f) CAPITAL EXPENDITURES FOR TOWER CONSTRUCTION. On any date of
determination, the Borrower shall not permit the aggregate outstanding
Tower Construction Advances to exceed $30,000,000, provided that,
notwithstanding the foregoing, such $30,000,000 limitation shall be
reduced on such dates and by such percentage of $30,000,000, as is set
forth below:
Percentage of
Date of Payment $30,000,000.00
--------------- --------------
June 30, 2000 3.33%
September 30, 2000 3.33%
December 31, 2000 3.34%
March 31, 2001 3.75%
June 30, 2001 3.75%
September 30, 2001 3.75%
December 31, 2001 3.75%
March 31, 2002 5.00%
June 30, 2002 5.00%
September 30, 2002 5.00%
December 31, 2002 5.00%
March 31, 2003 5.00%
June 30, 2003 5.00%
September 30, 2003 5.00%
December 31, 2003 5.00%
March 31, 2004 5.00%
80
<PAGE>
June 30, 2004 5.00%
September 30, 2004 5.00%
December 31, 2004 5.00%
March 31, 2005 3.75%
June 30, 2005 3.75%
September 30, 2005 3.75%
December 31, 2005 3.75%
Proceeds of all Tower Construction Advances used for preconstruction and
preacquisition expenses of the Borrower, including without limitation,
survey fees, environmental audit fees, and other expenses typically
expended by a buyer in connection with the acquisition of
telecommunications towers, shall not exceed $1,500,000 in the aggregate.
Proceeds of all other Tower Construction Advances shall be used for
acquisition costs, hard costs of construction, and any other expenses of
the Borrower associated with constructing a tower.
8.02. Debt for Borrowed Money. The Borrower shall not, and shall not
permit the Parent or any Subsidiary of the Borrower to, create, assume, incur or
otherwise become or remain obligated in respect of, or permit to be outstanding,
or suffer to exist any Debt for Borrowed Money, except:
(a) with respect to the Borrower and its Subsidiaries, Debt for Borrowed
Money under the Loan Papers;
(b) with respect to the Borrower, Debt for Borrowed Money described on
Schedule 8.02 hereto attached hereto in the principal amounts and as such Debt
for Borrowed Money exists as of the Closing Date;
(c) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Parent, Subordinated Debt owed
to ABRY up to a maximum aggregate amount of $15,000,000, which may be refinanced
(provided no Default or Event of Default exists or would result from the
incurrence thereof) with proceeds of one or more issuances (and refinances
thereof) of subordinated debt or equity which is on terms and conditions and
pursuant to documentation satisfactory to the SuperMajority Lenders);
(d) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Borrower and the Parent,
unsecured Debt for Borrowed Money up to the maximum aggregate amount at any one
time outstanding of $250,000 for both the Borrower and the Parent, which Debt
may not be subject to an interest rate in excess of 13% per annum;
(e) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Borrower and the Parent,
secured Debt for Borrowed Money not to
81
<PAGE>
exceed $350,000 in the aggregate for the Borrower and the Parent throughout the
term of this Agreement;
(f) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Borrower, accrued but unpaid
Earn-Out Liabilities;
(g) provided that no Default or Event of Default exists or would result
from the incurrence thereof, with respect to the Parent, the Borrower and the
Subsidiaries of the Borrower, Debt owed to each other; provided that all Debt
owed by the Borrower or any of its Subsidiaries to the Parent shall be
Subordinated Debt;
(h) provided that no Default or Event of Default exists or would result
from the incurrence thereof, in addition to the Subordinated Debt the Parent is
entitled to incur in accordance with the terms of Section 8.02(c) above, the
Parent may incur Subordinated Debt to the Shareholders, such Subordinated Debt
not to exceed in principal face amount in the aggregate for any taxable year,
the amount necessary to enable the Borrower to obtain the maximum possible
deduction for dividends paid, as defined in Section 561 of the Code and further
described in Section 857 of the Code for such year, taking into account the sum
of all distributions previously made to Shareholders permitted by Section
8.08(b)(iii) hereof for such fiscal year, provided that, any determination under
Section 857 of the Code shall take into consideration for such purpose the
necessity of increasing the aggregate amounts distributed to reflect the fact
that distributions in redemption of any preferred return on any class of stock
will be treated as being made partly from earnings and profits and partly from
capital;
(i) provided that no Default or Event of Default exists or would result
from the incurrence thereof, Debt for Borrowed Money incurred by the Borrower to
sellers in connection with Permitted Acquisitions, the amount of such Debt which
shall not exceed, together with the amount of seller Debt described on Schedule
8.02 hereto, the aggregate amount of Letters of Credit which are issued
hereunder in connection with such Permitted Acquisitions; and
(j) provided that, no Default or Event of Default exists or would result
from the incurrence thereof, Debt for Borrowed Money of the Parent incurred
pursuant to the Parent Senior Notes.
8.03. Liens. The Borrower shall not, and shall not permit the Parent or
any Subsidiary of the Borrower to, create, assume, incur, permit or suffer to
exist, directly or indirectly, any Lien on any of its assets or Properties,
whether now owned or hereafter acquired, except Permitted Liens. The Borrower
shall not, and shall not permit Parent or any Subsidiary of the Borrower to,
agree with any other Person that it shall not create, assume, incur, permit or
suffer to exist or to be created, assumed, incurred or
82
<PAGE>
permitted to exist, directly or indirectly, any Lien on any of its assets or
Properties.
8.04. Investments. The Borrower shall not, and shall not permit the Parent
or any Subsidiary of the Borrower to, make any Investment, except that the
Borrower may purchase or otherwise acquire and own:
(a) Marketable, direct obligations of, or guaranteed by, the United States
of America and maturing within 365 days of the date of purchase;
(b) Commercial paper issued by U.S. corporations that have a rating of
A-1/P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, a Division of McGraw-Hill, Inc.;
(c) Certificates of deposit of domestic banks maturing within 365 days of
the date of purchase, which banks' debt obligations have one of the two highest
ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, a Division of McGraw-Hill, Inc.;
(d) Securities issued by U.S. corporations that have one of the two
highest ratings obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group, a Division of McGraw-Hill, Inc.;
(e) Investments in newly-formed or existing, wholly-owned Subsidiaries of
the Borrower (i) that are subject to the provisions hereof, (ii) that are or
immediately become party to the Subsidiary Guaranty and any security documents
required by the Administrative Lender, (iii) whose stock is pledged to the
Lenders to secure the Obligations pursuant to a pledge agreement substantially
identical in form and substance to the Borrower Pledge Agreement and (iv) that
are Qualified REIT Subsidiaries;
(f) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;
(g) Investments in existence on the Closing Date which are described on
Schedule 8.04 hereto;
(h) Investments constituting Permitted Acquisitions permitted by Section
8.06(b) hereof;
(i) So long as there exists no Default or Event of Default at the time
such Investment is made, Investments not in excess of $200,000 at any one time
outstanding made by the Borrower in the form of advances to executive employees
for the purchase by any such employees of residential property, but only to the
extent that ABRY has made a capital contribution to the Parent, and the Parent
has made a capital contribution to the Borrower, each in the form of equity, and
provided further that no such capital contribution
83
<PAGE>
may be used by the Borrower in connection with required capital contributions
for Permitted Acquisitions, General and Administrative Expenses and curing
Defaults and Event of Defaults under this Agreement and the Loan Papers; and
(j) Certificates of deposit and Eurodollar time deposits with maturities
of one year or less from the date of acquisition, overnight bank deposits and
repurchase obligations having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States government
or any agency thereof, in each case, of either an Eligible Assignee or Brown
Brothers Harriman & Co., provided that such Investments do not exceed
$20,000,000 in the aggregate at any time outstanding.
8.05. Amendment and Waiver. The Borrower shall not, and shall not permit
the Parent or any Subsidiary of the Borrower to, enter into any amendment of any
term or provision, or accept any consent or waiver with respect to any such
provision, of (a) its articles of incorporation or by-laws in any manner
material and adverse to the Lenders, (b) any material provision of any material
Capital Lease in any manner material and adverse to the Lenders, (c) the Capital
Contribution Agreement, (d) any provision in any Ground Lease provision that is
set forth on Exhibit K hereto or (e) any material provision of the Stockholders
Agreement in any manner material and adverse to the Lenders or which would
result in a breach of any provision of the Loan Papers. The Borrower shall not,
nor shall it permit the Parent or any Subsidiary of the Borrower to, amend or
change (or take any action or fail to take any action the result of which is an
effective amendment or change) or accept any waiver or consent with respect to,
the Subordinated Debt or the Parent Senior Notes that would result in (a) an
increase in any principal, interest, fees, or other amounts payable under the
Subordinated Debt or the Parent Senior Notes (including without limitation a
waiver or action that results in the waiver of any payment default under the
Subordinated Debt or the Parent Senior Notes), (b) a change in any date fixed
for any payment of principal, interest, fees, or other amounts payable under the
Subordinated Debt or the Parent Senior Notes (including, without limitation, as
a result of any redemption) to a date earlier than January 31, 2005, (c) a
change in any financial covenant in the Subordinated Debt or the Parent Senior
Notes Documentation to a more restrictive provision for the Borrower, the Parent
or any Subsidiary of the Borrower, (d) an increase in any remedy or right (or
any change that broadens the rights or remedies) of the holders of the
Subordinated Debt or the Parent Senior Notes, (e) a change in any covenant, term
or provision in the Subordinated Debt or the Parent Senior Notes which would
result in such term or provision being more restrictive than the terms of this
Agreement and the Loan Papers, or (f) a change in any term or provision of the
Subordinated Debt or the Parent Senior Notes, or other document or instrument in
connection therewith that could have, in any material respect, an adverse effect
on the interests of the Lenders.
84
<PAGE>
8.06. Liquidation, Disposition or Acquisition of Assets, Merger, New
Subsidiaries. The Borrower shall not, and shall not permit the Parent or any
Subsidiary of the Borrower to, at any time:
(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up; or sell, lease, abandon, transfer or
otherwise dispose of all or any part of its assets, Properties or business
(other than in the ordinary course of business and other than assets that are
damaged or obsolete), provided that, (i) any Subsidiary of the Borrower can be
dissolved so long as the Borrower or a wholly-owned Subsidiary of the Borrower
acquires all such Subsidiary's assets; and (ii) so long as there exists no
Default or Event of Default both before and after giving effect to such sale and
the Borrower complies fully with Section 2.05(c) hereof, Borrower may consummate
the sale of Towers (but not all or any substantial portion of Towers);
(b) acquire any assets, Property or business of any other Person except
(i) the Borrower and the Subsidiaries of the Borrower may acquire assets and
Property acquired in the ordinary course of business and (ii) provided no
Default or Event of Default exists or would result therefrom, the Borrower may
consummate transactions constituting Permitted Acquisitions;
(c) enter into any merger or consolidation, except that, so long as there
exists no Default or Event of Default and none is caused thereby, (i) any
Subsidiary of the Borrower can merge or consolidate into any other Subsidiary of
the Borrower, or so long as such transaction is in connection with a Permitted
Acquisition, into another Person, so long as a Subsidiary of the Borrower is a
survivor, or into the Borrower so long as the Borrower is the surviving
corporation, and (ii) another Person may be merged into the Borrower or any
Subsidiary of the Borrower in connection with a Permitted Acquisition, so long
as the Borrower or such Subsidiary is the surviving corporation; or
(d) create or acquire any Subsidiary, except as permitted by Section
8.04(e) hereof.
In connection with any asset sale permitted by this Section 8.06 or otherwise
consented to by the Lenders in accordance with the terms of this Agreement, the
Administrative Lender is hereby authorized by each Lender to (i) execute any and
all releases deemed appropriate by it to release such assets of the Borrower and
the Subsidiaries of the Borrower constituting Collateral from all Liens and
security interests securing all or any portion of the Obligations, (ii) return
to the Borrower any such Collateral in the possession of the Administrative
Lender, and (iii) take such other action as the Administrative Lender deems
necessary or appropriate in connection with such transaction and in furtherance
of the effectuation thereof.
85
<PAGE>
8.07. Guaranties; Contingent Liabilities. The Borrower shall not, and
shall not permit the Parent or any Subsidiary of the Borrower to, at any time
make or issue any Guaranty, or assume, be obligated with respect to, or permit
to be outstanding any Contingent Liabilities, except pursuant to the Loan
Papers.
8.08. Restricted Payments. The Borrower shall not, and shall not permit
the Parent or any Subsidiary of the Borrower to, directly or indirectly declare,
make or pay any Restricted Payment; provided, however
(a) any Subsidiary of the Borrower may declare and pay a Distribution to
the Borrower, and
(b) so long as there exists no Default or Event of Default immediately
before and after giving effect to any such transaction or payment,
(i) the Borrower may pay ABRY (A) a management fee in an amount not
to exceed in the aggregate for any fiscal year of the Borrower, $75,000,
plus (B) up to $25,000 in the aggregate for any fiscal year of the
Borrower to reimburse ABRY for out of pocket expenses incurred for such
year,
(ii) (A) the Borrower and the Parent may each make payments in kind
on its Subordinated Debt (but only in kind payments and no cash payments),
(iii) the Borrower may annually make not more than two cash
distributions to the Parent, who must use such cash distributions to make
distributions to the Shareholders, each such distribution in an aggregate
amount per taxable year equal to (A) the amount of gross income actually
includible by the Shareholders on their Tax returns with respect to such
taxable year solely as a result of the operations of the Parent, the
Borrower and its Subsidiaries, multiplied by (B) the sum of the highest
marginal Federal and highest marginal State income tax rates applicable to
one or more of the Shareholders,
(iv) Borrower may make one or more distributions with respect to
any taxable year constituting Subordinated Debt to the Parent, who, to the
extent such distribution is made by the Borrower may make one or more
distributions with respect to any taxable year constituting Subordinated
Debt to the Shareholders, each such distribution constituting Subordinated
Debt not to exceed in the aggregate an amount necessary to enable the
Parent to obtain the maximum possible deduction for dividends paid, as
defined in Section 561 of the Code and further described in Section 857 of
the Code for such year, taking into account the sum of all distributions
previously paid to Shareholders in accordance with the terms of Section
8.08(b)(iii) above, provided that, in connection with any such
distribution, the Parent shall take into consideration for such
86
<PAGE>
purpose the necessity of increasing the aggregate amounts distributed to
reflect the fact that distributions in redemption of any preferred return
on any class of stock will be treated as being made partly from earnings
and profits and partly from capital,
(v) the Borrower may make a distribution to the Parent to enable
the Parent to repurchase capital stock of the Parent owned by any deceased
Shareholder (and the Parent is hereby permitted to do so) (A) to the
extent that the Borrower was the beneficiary of a key-man life insurance
policy on such Shareholder and (B) in an amount not to exceed net proceeds
received by the Borrower from such key-man life insurance,
(vi) at such time as the Total Leverage Ratio is less than 5.00 to
1.00, the Borrower may make a distribution to the Parent to enable the
Parent to repurchase capital stock of the Parent owned by any Shareholder
that was an officer of the Borrower that has resigned or has been
terminated (and the Parent is hereby permitted to do so) (A) in accordance
with the terms of that certain Second Amended and Restated Subscription
and Stockholders Agreement, among the Parent and the Shareholders, dated
as of May 16, 1996 (the "Stockholders Agreement") and (B) in an amount not
to exceed any equity contribution made by ABRY to the Parent and by the
Parent to the Borrower for such purpose,
(vii) the Borrower may make an annual distribution to Parent in an
amount not to exceed $25,000 to reimburse the Parent for its miscellaneous
expenses,
(viii) within 130 days after the end of each fiscal year of
Borrower ending on or after March 31, 2000, to the extent there exists
Excess Cash Flow not required to reduce the Available Commitment pursuant
to Section 2.11(c)(iv) hereof, the Borrower may make an annual
distribution to the Parent in the amount of such Excess Cash Flow, and
(ix) until September 1, 2003, the Parent may make payments in kind
only on the Parent Senior Notes (but only in kind payments and no cash
payments), in accordance with the terms of the Parent Senior Notes
Documentation.
8.09. Affiliate Transactions. The Borrower shall not, and shall not permit
the Parent or any Subsidiary of the Borrower to, at any time engage in any
transaction with an Affiliate, nor make an assignment or other transfer of any
of its assets or Properties to any Affiliate, on terms materially less
advantageous to the Parent, the Borrower or any Subsidiary of the Borrower than
would be the case if such transaction had been effected with a non-Affiliate,
except pursuant to the Capital Contribution Agreement, the agreements listed on
Schedule 8.09 hereto and except for Restricted Payments permitted to be paid
under Section 8.08
87
<PAGE>
hereof, and as expressly permitted in Sections 8.02 and 8.04 hereof.
8.10. Compliance with ERISA. The Borrower shall not, and shall not permit
the Parent or any Subsidiary of the Borrower to, directly or indirectly, or
permit any member of its Controlled Group to directly or indirectly, (a)
terminate any Plan so as to result in any material (in the opinion of the
Majority Lenders) liability to the Borrower or any member of its Controlled
Group, (b) permit to exist any ERISA Event, or any other event or condition
which presents the risk of liability of the Borrower or any member of its
Controlled Group, (c) make a complete or partial withdrawal (within the meaning
of Section 4201 of ERISA) from any Multiemployer Plan so as to result in any
liability to the Borrower or any member of its Controlled Group, (d) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder except in the ordinary course of business consistent with past
practice which could result in any liability to the Borrower or any member of
its Controlled Group, or (e) permit the present value of all benefit
liabilities, as defined in Title IV of ERISA, under each Plan of the Borrower or
any member of its Controlled Group (using the actuarial assumptions utilized by
the PBGC upon termination of a plan) to exceed the fair market value of Plan
assets allocable to such benefits all determined as of the most recent valuation
date for each such Plan.
8.11. Capital Stock. The Borrower shall not, and shall not permit the
Parent or any Subsidiary of the Borrower to (a) make or permit any transfer,
assignment, distribution, mortgage, pledge or gift of any shares of Pledged
Stock, and (b) issue any Capital Stock, except as specifically permitted
pursuant to Section 8.02(c) hereof, provided that, if there exists no Default or
Event of Default before and immediately after giving effect to such issuance
(provided that, in accordance with the provisions of Sections 8.01(a) and
8.01(b) hereof, a Default or Event of Default may exist prior to such issuance),
the Parent may issue Capital Stock of the Parent to any Person.
8.12. Sale and Leaseback. The Borrower shall not, and shall not permit the
Parent or any Subsidiary of the Borrower to, enter into any arrangement whereby
it sells or transfers any of its assets, and thereafter rents or leases such
assets, except that the Borrower may sell real estate that it owns and
thereafter lease it subject to a Ground Lease, provided that the Borrower
complies with the provisions of Sections 6.15 and 7.07 hereof as if the Borrower
had acquired such leased property.
8.13. Sale or Discount of Receivables. The Borrower shall not, and shall
not permit the Parent or any Subsidiary of the Borrower to, directly or
indirectly sell, with or without recourse, for discount or otherwise, any notes
or accounts receivable.
88
<PAGE>
8.14. Limitation on Restrictive Agreements. The Borrower shall not, and
shall not permit the Parent or any Subsidiary of the Borrower to, enter into any
indenture, agreement, instrument, financing document or other arrangement which,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon: (a) the
incurrence of indebtedness, (b) the granting of Liens, (c) the making or
granting of Guarantees, (d) the payment of dividends or Distributions, (e) the
purchase, redemption or retirement of any Capital Stock, (f) the making of loans
or advances, (g) transfers or sales of property or assets (including Capital
Stock) by the Parent, the Borrower or any of its Subsidiaries, (h) the making of
Investments, (i) any change of control or management, or (j) any amendment of,
or waiver or consent to, any provision of this Agreement or any other Loan
Paper.
ARTICLE IX. EVENTS OF DEFAULT
9.01. Events of Default. Any one or more of the following shall be an
"Event of Default" hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, by operation of Law, or otherwise:
(a) The Borrower shall fail to pay any (i) principal payable under any
Loan Paper on the date due; or (ii) any interest, fees or other amounts payable
within three days of the date due;
(b) Any representation or warranty made or deemed made by any Obligor (or
any of its officers or representatives) under or in connection with any Loan
Paper shall prove to have been incorrect or misleading in any material respect
when made or deemed made;
(c) The Borrower shall fail to perform or observe any term or covenant
contained in Article VIII hereof;
(d) Any Obligor shall fail to perform or observe any other term or
covenant contained in any Loan Paper, other than those described in Sections
9.01(a), (b) and (c) above or in Sections 6.15(a) and (b) hereof, and such
failure shall not be remedied within thirty days following the earlier of the
Borrower's knowledge of such failure or notice fro any Lender of the occurrence
of such failure;
(e) Any of the following shall occur: (i) Any Loan Paper or material
provision thereof shall, for any reason, not be valid and binding on the Obligor
signatory thereto, or not be in full force and effect, or shall be declared to
be null and void; or (ii) the validity or enforceability of any Loan Paper shall
be contested by any Obligor; or (iii) any Obligor shall deny in writing that it
has any or further liability or obligation under its respective Loan Papers; or
(iv) any default or breach under any provision of any
89
<PAGE>
Loan Papers shall continue after the applicable grace period, if any, specified
in such Loan Paper;
(f) Any of the following shall occur: (i) any Obligor shall make an
assignment for the benefit of creditors or be unable to pay its debts generally
as they become due; (ii) any Obligor shall petition or apply to any Tribunal for
the appointment of a trustee, receiver, or liquidator of it, or of any
substantial part of its assets, or shall commence any proceedings relating to
any Obligor under any Debtor Relief Laws; (iii) any such petition or application
shall be filed, or any such proceedings shall be commenced, against any Obligor,
or an order, judgment or decree shall be entered appointing any such trustee,
receiver, or liquidator, or approving the petition in any such proceedings, and
such petition or application shall be consented to or uncontested by such
Obligor, or if contested by such Obligor, shall not be dismissed within 60 days
following the filing of such petition or application; (iv) any final order,
judgment, or decree shall be entered in any proceedings against any Obligor
decreeing its dissolution; or (v) any final order, judgment, or decree shall be
entered in any proceedings against any Obligor decreeing its split-up which
requires the divestiture of a substantial part of its assets;
(g) Any of the following shall occur: (i) The Borrower or any other
Obligor shall fail to pay any Subordinated Debt, Debt evidenced by the Parent
Senior Notes or any other Debt, or obligations in respect of Capital Leases
(other than Debt under the Loan Papers) in an aggregate amount of $1,000,000 or
more when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to such
Debt; or (ii) the Borrower or any other Obligor shall fail to perform or observe
any term or covenant contained in any agreement or instrument relating to any
such Debt, when required to be performed or observed, and such failure shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, and can result in acceleration of the maturity of such Debt; or
(iii) any such Debt shall be declared to be due and payable, or required to be
prepaid, mandatorily redeemed or repurchased (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
(h) Any Obligor shall have any final judgment(s) outstanding against it
for the payment of $1,000,000 or more, and such judgment(s) shall remain
unstayed, in effect, and unpaid for the period of time after which the judgment
holder may and may cause the creation of Liens against or seizure of any of its
Property;
(i) Any of the following shall have occurred: (i) Any ERISA Event shall
have occurred with respect to a Plan of the Borrower, and the sum of the
Insufficiency of such Plan and liabilities relating thereto is equal to or
greater than $1,000,000 or (ii) the
90
<PAGE>
Borrower or any ERISA Affiliate of the Borrower shall have committed a failure
described in Section 302(f)(l) of ERISA, and the amount determined under Section
302(f)(3) of ERISA is equal to or greater than $1,000,000;
(j) The Borrower or any ERISA Affiliate of the Borrower shall have been
notified by the sponsor of a Multiemployer Plan that (A) it has incurred
Withdrawal Liability to such Plan in an amount that, exceeds $1,000,000 or
requires payments exceeding $1,000,000 per annum, or (B) such Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if as a result thereof the aggregate annual contributions to all Multiemployer
Plans in reorganization or being terminated is increased over the amounts
contributed to such Plans for the preceding Plan year by an amount exceeding
$1,000,000;
(k) Any Obligor shall be required under any Environmental Law (i) to
implement any remedial, neutralization, or stabilization process or program, the
cost of which would constitute a Material Adverse Change, or (ii) to pay any
penalty, fine, or damages in an aggregate amount which would constitute a
Material Adverse Change;
(l) Any of the following shall have occurred: (i) Any Property (whether
leased or owned), or the operations conducted thereon by any Obligor or any
current or prior owner or operator thereof (in the case of real Property), shall
violate or have violated any applicable Environmental Law, if such violation
would constitute a Material Adverse Change; or (ii) such Obligor shall not
obtain or maintain any License required to be obtained or filed under any
Environmental Law in connection with the use of such Property and assets,
including without limitation past or present treatment, storage, disposal, or
release of Hazardous Materials into the environment, if the failure to obtain or
maintain the same would constitute a Material Adverse Change;
(m) Any of the following shall have occurred: (i) Any Loan Paper shall for
any reason (other than pursuant to the terms thereof) cease to create a valid
and perfected first priority Lien in the Collateral purported to be covered
thereby (except as permitted by the terms of this Agreement or consented to by
the Lenders); or (ii) less than 100% of the Capital Stock of the Borrower shall
be pledged to secure the Obligations;
(n) Any of the following shall have occurred: (i) A final non-appealable
order is issued by any Tribunal, including, but not limited to, the FCC, the FAA
or the United States Justice Department, requiring Borrower to divest a
substantial portion of its assets pursuant to any antitrust, restraint of trade,
unfair competition, industry regulation, or similar Laws, or (ii) any Tribunal
shall condemn, seize, or otherwise appropriate, or take custody or control of
all or any substantial portion of the assets of Borrower;
91
<PAGE>
(o) Any of the following shall have occurred if the effect thereof is to
cause a Material Adverse Change: (i) Any License whether presently existing or
hereafter granted to or obtained by Borrower or any Subsidiary of the Borrower
shall expire without renewal on or before payment in full of the Notes and all
Obligations hereunder, or be suspended or revoked, or (ii) Borrower or any
Subsidiary of the Borrower shall become subject to any injunction or other order
affecting or which may affect Borrower's or a Subsidiary of the Borrower's
present or proposed operations under any such License;
(p) Any of the following shall have occurred: (i) There shall exist any
breach of the Capital Contribution Agreement after the expiration of any
applicable grace period, or (ii) ABRY or the Parent shall fail at any time to
perform any obligation it has under the Capital Contribution Agreement, after
the expiration of any applicable grace period, or (iii) ABRY, the Parent or the
Borrower denies the validity or enforceability of the Capital Contribution
Agreement or any material provision thereof;
(q) Any of the following shall have occurred: (i) the Shareholders in
existence on the Closing Date shall, at any time, own and control less than 51%
of the outstanding voting stock of the Parent; or (ii) the Parent shall own less
than 100% of the Capital Stock of the Borrower, or the Borrower shall own less
than 100% of its Subsidiaries;
(r) For any taxable year, the Borrower shall have made any Restricted
Payment to the Parent, or the Parent shall have made any Restricted Payment to
any Shareholder in accordance with the terms of Section 8.08(b)(iii) hereof for
the tax liability of any Shareholder for such taxable year, and the Borrower or
the Parent shall also have paid or be subject to any Federal income tax on any
amount in excess of five percent of the Borrower's real estate investment trust
taxable income for such taxable year;
(s) Any civil action, suit or proceeding shall be commenced against
Borrower, the Parent, or any Subsidiary of the Borrower under any federal or
state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970)("RICO") and such suit shall be
adversely determined by a court of applicable jurisdiction and forfeiture shall
commence against assets in the aggregate having fair market value of $1,000,000
or more, or any criminal action or proceeding shall be commenced against the
Borrower, the Parent, or any Subsidiary of the Borrower under any federal or
state racketeering statute (including, without limitation, RICO);
(t) With respect to Parent, Borrower or any Subsidiary of the Borrower,
(i) any such entity fails to pay dividends in the amount of taxable income
necessary to maintain Parent's REIT Status, or (ii) Parent shall fail to
maintain its REIT Status or (iii)
92
<PAGE>
Borrower or any Subsidiary of Borrower shall fail to maintain its status as a
Qualified REIT Subsidiary;
(u) A "Change of Control" as that term is defined in the Parent Senior
Notes Documentation shall occur; and
(v) The Borrower shall not have received an equity contribution within
five days after the payment by the Borrower of cash dividends in accordance with
the terms of Sections 8.08(b)(iii) and (iv) hereof ("Tax Dividends"), in an
amount not less than the difference between (i) the aggregate amount of such Tax
Dividends and (ii) the Shareholder's maximum tax liability as a result of the
operations of the Borrower (after giving effect to all tax benefits).
9.02. Remedies upon Default. If an Event of Default described in Section
9.01(f) shall occur with respect to any Obligor, the aggregate unpaid principal
balance of and accrued interest on all Advances shall, to the extent permitted
by applicable Law, thereupon become due and payable concurrently therewith,
without any action by Administrative Lender or any Lender, and without
diligence, presentment, demand, protest, notice of protest or intent to
accelerate, or notice of any other kind, all of which are hereby expressly
waived. Subject to the foregoing sentence, if any Event of Default shall occur
and be continuing, Administrative Lender may at its election, do any one or more
of the following:
(a) Declare the entire unpaid balance of all Advances immediately due and
payable, whereupon it shall be due and payable without diligence, presentment,
demand, protest, notice of protest or intent to accelerate, or notice of any
other kind (except notices specifically provided for under Section 9.01 hereof),
all of which are hereby expressly waived (except to the extent waiver of the
foregoing is not permitted by applicable Law);
(b) Terminate the Available Commitment;
(c) Reduce any claim of Administrative Lender and Lenders to judgment;
(d) Demand (and the Borrower shall pay to Administrative Lender)
immediately upon demand and in immediately available funds, the amount equal to
the aggregate amount of the Letters of Credit then outstanding, irrespective of
whether such Letters of Credit have been drawn upon, all as set forth and in
accordance with the terms of provisions of Article III hereof. The
Administrative Lender shall promptly advise the Borrower of any such declaration
or demand but failure to do so shall not impair the effect of such declaration
or demand; and
(e) Exercise any Rights afforded under any Loan Papers, by Law, including
but not limited to the UCC, at equity, or otherwise.
93
<PAGE>
9.03. Cumulative Rights. All Rights available to Administrative Lender and
Lenders under the Loan Papers shall be cumulative of and in addition to all
other Rights granted thereto at Law or in equity, whether or not amounts owing
thereunder shall be due and payable, and whether or not Administrative Lender or
any Lender shall have instituted any suit for collection or other action in
connection with the Loan Papers.
9.04. Waivers. The acceptance by Administrative Lender or any Lender at
any time and from time to time of partial payment of any amount owing under any
Loan Papers shall not be deemed to be a waiver of any Default or Event of
Default then existing. No waiver by Administrative Lender or any Lender of any
Default or Event of Default shall be deemed to be a waiver of any Default or
Event of Default other than such Default or Event of Default. No delay or
omission by Administrative Lender or any Lender in exercising any Right under
the Loan Papers shall impair such Right or be construed as a waiver thereof or
an acquiescence therein, nor shall any single or partial exercise of any such
Right preclude other or further exercise thereof, or the exercise of any other
Right under the Loan Papers or otherwise.
9.05. Performance by Administrative Lender or any Lender. Should any
covenant of any Obligor fail to be performed in accordance with the terms of the
Loan Papers, Administrative Lender may, at its option, perform or attempt to
perform such covenant on behalf of such Obligor. Notwithstanding the foregoing,
it is expressly understood that neither Administrative Lender nor any Lender
assumes, and shall not ever have, except by express written consent of
Administrative Lender or such Lender, any liability or responsibility for the
performance of any duties or covenants of any Obligor.
9.06. Expenditures. The Borrower shall reimburse Administrative Lender and
each Lender for any reasonable sums spent by it in connection with the exercise
of any Right under Section 9.05 hereof. Such sums shall bear interest at the
lesser of (a) the Base Rate (whether or not in effect), plus 2.00% per annum and
(b) the Highest Lawful Rate, from five days after the date any Lender makes
demand to the Borrower for reimbursement of such amount until the date of
repayment by the Borrower.
9.07. Control. None of the covenants or other provisions contained in this
Agreement shall, or shall be deemed to, give Administrative Lender or any Lender
any Rights to exercise control over the affairs and/or management of any
Obligor, the power of Administrative Lender and each Lender being limited to the
Rights to exercise the remedies provided in this Article; provided, however,
-------- -------
that if Administrative Lender or any Lender becomes the owner of any
partnership, stock or other equity interest in any Person, whether through
foreclosure or otherwise, it shall be entitled to exercise such legal Rights as
it may have by being an owner of such stock or other equity interest in such
Person.
94
<PAGE>
ARTICLE X. THE ADMINISTRATIVE LENDER
10.01. Authorization and Action. Each Lender hereby appoints and
authorizes Administrative Lender to take such action as Administrative Lender on
its behalf and to exercise such powers under this Agreement and the other Loan
Papers as are delegated to the Administrative Lender by the terms of the Loan
Papers, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement and the other Loan
Papers (including without limitation enforcement or collection of the Notes),
Administrative Lender shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
Majority Lenders (or all Lenders, if required under Section 11.01 hereof), and
such instructions shall be binding upon all Lenders; provided, however, that
Administrative Lender shall not be required to take any action which exposes
Administrative Lender to personal liability or which is contrary to any Loan
Papers or applicable Law. Administrative Lender agrees to give to each Lender
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement, and to distribute to each applicable Lender in like funds all amounts
delivered to Administrative Lender by the Borrower for the Ratable or individual
account of any Lender. Functions of the Administrative Lender are administerial
in nature and in no event shall the Administrative Lender have a fiduciary or
trustee relationship in respect of any Lender by reason of this Agreement or any
Loan Paper.
10.02. Administrative Lender's Reliance, Etc. Neither Administrative
Lender, nor any of its directors, officers, agents, employees, or
representatives shall be liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement or any other Loan Paper,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, Administrative Lender (a) may
treat the payee of any Note as the holder thereof until Administrative Lender
receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to Administrative Lender; (b) may consult with
legal counsel (including counsel for the Borrower or any of its Subsidiaries),
independent public accountants, and other experts selected by it, and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; (c) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties, or representations made in or in
connection with this Agreement or any other Loan Papers; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants, or conditions of this Agreement or any other Loan Papers
on the part of any Obligor or its Subsidiaries or to inspect the Property
(including the books
95
<PAGE>
and records) of any Obligor or its Subsidiaries; (e) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency, or value of this Agreement, any other Loan Papers, or
any other instrument or document furnished pursuant hereto; and (f) shall incur
no liability under or in respect of this Agreement or any other Loan Papers by
acting upon any notice, consent, certificate, or other instrument or writing
believed by it to be genuine and signed or sent by the proper party or parties.
10.03. NationsBank, N.A. and Affiliates. With respect to its Available
Commitment, its Advances, and any Loan Papers, NationsBank, N.A. has the same
Rights under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Lender. NationsBank, N.A. and its Affiliates
may accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, any Obligor, any Affiliate
thereof, and any Person who may do business therewith, all as if NationsBank,
N.A. were not Administrative Lender and without any duty to account therefor to
any Lender.
10.04. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Administrative Lender or any other
Lender, and based on the financial statements referred to in Section 5.01(j),
Article VII hereof and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Administrative Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Papers.
10.05. Indemnification by Lenders. Lenders shall indemnify Administrative
Lender, Pro Rata, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Administrative Lender in any way relating to or arising out of
any Loan Papers or any action taken or omitted by Administrative Lender
thereunder, including any negligence of Administrative Lender; provided,
however, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements resulting from Administrative Lender's gross
negligence or willful misconduct. Without limitation of the foregoing, Lenders
shall reimburse Administrative Lender, Pro Rata, promptly upon demand for any
out-of-pocket expenses (including reasonable attorneys' fees) incurred by
Administrative Lender in connection with the preparation, execution, delivery,
administration, modification, amendment, or enforcement (whether
96
<PAGE>
through negotiation, legal proceedings or otherwise) of, or legal and other
advice in respect of rights or responsibilities under, the Loan Papers. The
indemnity provided in this Section 10.05 shall survive the termination of this
Agreement.
10.06. Successor Administrative Lender. Administrative Lender may resign
at any time by giving written notice thereof to Lenders and the Borrower, and
may be removed at any time with or without cause by the action of all Lenders
(other than Administrative Lender, if it is a Lender). Upon any such
resignation, Majority Lenders shall have the right to appoint a successor
Administrative Lender. If no successor Administrative Lender shall have been so
appointed and shall have accepted such appointment within thirty days after the
retiring Administrative Lender's giving of notice of resignation, then the
retiring Administrative Lender may, on behalf of Lenders, appoint a successor
Administrative Lender, which shall be a commercial bank organized under the Laws
of the United States of America or of any State thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Administrative Lender hereunder by a successor Administrative
Lender, such successor Administrative Lender shall thereupon succeed to and
become vested with all the Rights and duties of the retiring Administrative
Lender, and the retiring Administrative Lender shall be discharged from its
duties and obligations under the Loan Papers, provided that if the retiring or
removed Administrative Lender is unable to appoint a successor Administrative
Lender, Administrative Lender shall, after the expiration of a sixty day period
from the date of notice, be relieved of all obligations as Administrative Lender
hereunder. Notwithstanding any Administrative Lender's resignation or removal
hereunder, the provisions of this Article shall continue to inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Lender under this Agreement.
ARTICLE XI. MISCELLANEOUS
11.01. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Papers, nor consent to any departure by the
Borrower or any Obligor therefrom, shall be effective unless the same shall be
in writing and signed by the Borrower and the Administrative Lender with the
consent of the Majority Lenders, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver, or consent shall (and the
result of action or failure to take action shall not) unless in writing and
signed by all of Lenders and Administrative Lender, (a) increase the Available
Commitment (except as specifically permitted by Section 2.18 hereof), (b) reduce
any principal, interest, fees, or other amounts
97
<PAGE>
payable hereunder, or waive or result in the waiver of any Event of Default
under Section 9.01(a) hereof, (c) postpone any date fixed for any payment of
principal, interest, fees, or other amounts payable hereunder, (d) release any
Collateral or guaranties securing any Obligor's obligations hereunder, other
than releases contemplated hereby and by the Loan Papers, (e) change the meaning
of "Specified Percentage" or the number of Lenders required to take any action
hereunder, (f) change the definitions of "Available Commitment", "Unavailable
Commitment", "Maturity Date", "Majority Lenders", or "Letter of Credit
Commitment", (g) amend Section 2 of the Capital Contribution Agreement or (h)
amend Section 2.18 hereof, Sections 2.11(a), (b) and (c) hereof, the last
sentence of Section 8.01(a)(i) hereof, the last sentence of Section 8.01(b)(i)
hereof, or this Section 11.01. No amendment, waiver, or consent shall affect the
Rights or duties of Administrative Lender under any Loan Papers, unless it is in
writing and signed by Administrative Lender in addition to the requisite number
of Lenders.
11.02. Notices.
(a) Manner of Delivery. All notices communications and other materials to
be given or delivered under the Loan Papers shall, except in those cases where
giving notice by telephone is expressly permitted, be given or delivered in
writing. All written notices, communications and materials shall be sent by
registered or certified mail, postage prepaid, return receipt requested, by
telecopier, or delivered by hand. In the event of a discrepancy between any
telephonic notice and any written confirmation thereof, such written
confirmation shall be deemed the effective notice except to the extent
Administrative Lender, any Lender or the Borrower has acted in reliance on such
telephonic notice.
(b) Addresses. All notices, communications and materials to be given or
delivered pursuant to this Agreement shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:
(i) If to the Borrower:
Pinnacle Towers Inc.
1549 Ringling Boulevard
3rd Floor
Sarasota, Florida 34236
Telephone No.: (941) 364-8886
Telecopier No.: (941) 364-8761
Attention: Mr. Steve Day
98
<PAGE>
(ii) If to Administrative Lender:
NationsBank, N.A.
NationsBank Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Telephone No.: (214) 508-0988
Telecopier No.: (214) 508-9390
Attention: Ms. Roselyn M. Reid
Vice President
With a copy to:
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Telephone No.: (214) 698-3814
Telecopier No.: (214) 744-0231
Attention: Melissa Ruman Stewart
(iii) If to any Lender, to its address shown on Schedule 11.02 hereto or
on any Assignment and Acceptance.
or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".
(d) Effectiveness. Each notice, communication and any material to be given
or delivered to any party pursuant to this Agreement shall be effective or
deemed delivered or furnished (i) if sent by mail, on the fifth day after such
notice, communication or material is deposited in the mail, addressed as above
provided, (ii) if sent by telecopier, when such notice, communication or
material is transmitted to the appropriate number determined as above provided
in this Section 11.02 and the appropriate receipt is received or otherwise
acknowledged, (iii) if sent by hand delivery or overnight courier, when left at
the address of the addressee addressed as above provided, and (iv) if given by
telephone, when communicated to the individual or any member of the department
specified as the individual or department to whose attention notices,
communications and materials are to be given or delivered except that notices of
a change of address, telecopier or telephone number or individual or department
to whose attention notices, communications and materials are to be given or
delivered shall not be effective until received; provided, however, that notices
to Administrative Lender pursuant to Article II shall be effective when
received. The Borrower agrees that Administrative Lender shall have no duty or
obligation to verify or otherwise confirm telephonic notices given pursuant to
Article II, and agrees to indemnify and hold harmless Administrative Lender and
Lenders for
99
<PAGE>
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, and expenses resulting, directly or indirectly,
from acting upon any such notice.
11.03. Parties in Interest. All covenants and agreements contained in this
Agreement and all other Loan Papers shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto. Each Lender may from
time to time assign or transfer its interests hereunder pursuant to Section
11.04 hereof. The Borrower may not assign or transfer its Rights or obligations
hereunder without the prior written consent of Administrative Lender.
11.04. Assignments and Participations.
(a) Each Lender (an "Assignor") may assign its Rights and obligations as a
Lender under the Loan Papers to one or more Eligible Assignees pursuant to an
Assignment and Acceptance, so long as (i) each assignment shall be of a
constant, and not a varying percentage of all Rights and obligations thereunder,
(ii) each Assignor shall obtain in each case the prior written consent of
Administrative Lender and the Borrower, in each case such consent not to be
unreasonably withheld or delayed, provided that, in the event there exists a
Default or Event of Default, any such consent of the Borrower shall not be
required, (iii) each Assignor shall in each case pay a $3,500 processing fee to
Administrative Lender and (iv) no such assignment is for an amount less than
$5,000,000 (and, if such assignment is a partial assignment, no Lender shall
hold less than $5,000,000 immediately after giving effect to any assignment).
Assignments and other transfers (except participations) with respect to each
Lender's participation in a given Letter of Credit may only be made with the
prior written consent of the Administrative Lender. Within five Business Days
after Administrative Lender receives notice of any such assignment, the Borrower
shall execute and deliver to Administrative Lender, in exchange for the Notes
issued to Assignor, new Notes to the order of such Assignor and its assignee in
amounts equal to their respective Specified Percentages of the Available
Commitment. Such new Notes shall be dated the effective date of the assignment.
It is specifically acknowledged and agreed that on and after the effective date
of each assignment, the assignee shall be a party hereto and shall have the
Rights and obligations of a Lender under the Loan Papers.
(b) Each Lender may sell participations to one or more Persons in all or
any of its Rights and obligations under the Loan Papers; provided, however, that
(i) such Lender's obligations under the Loan Papers shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
its Notes for all purposes of the Loan Papers, (iv) the participant shall be
granted the Right to vote on or consent to only those matters described in
Sections 11.01(a), (b), (c) and (d) hereof,
100
<PAGE>
(v) Obligor, Administrative Lender, and other Lenders shall continue to deal
solely and directly with such Lender in connection with its Rights and
obligations under the Loan Papers and (vi) no such participation is for an
amount less than $5,000,000.
(c) Any Lender may, in connection with any assignment or participation, or
proposed assignment or participation, disclose to the assignee or participant,
or proposed assignee or participant, any information relating to any Obligor
furnished to such Lender by or on behalf of any Obligor.
(d) Notwithstanding any other provision set forth in this Agreement, (i)
any Lender may at any time create a security interest in all or any portion of
its Rights under this Agreement (including, without limitation, the Advances
owing to it and the Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System, (ii) no participant of any Lender may further assign or participate any
of its interest in the Loan Papers to any Person (except as may be required by
Law or a Tribunal having authority over such participant), and (iii) no Lender
(other than NationsBank, N.A.) may assign any of its interest in the Loan Papers
to any Person (except as may be required by Law or a Tribunal having authority
over NationsBank, N.A.) except as specifically provided in Section 11.04 hereof.
11.05. Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any Right of set-off,
or otherwise) on account of its Advances in excess of its Pro Rata share of
payments made by the Borrower, such Lender shall forthwith purchase
participations in Advances made by the other Lenders as shall be necessary to
share the excess payment Pro Rata with each of them; provided, however, that if
any of such excess payment is thereafter recovered from the purchasing Lender,
its purchase from each Lender shall be rescinded and each Lender shall repay the
purchase price to the extent of such recovery together with a Pro Rata share of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 11.05
may, to the fullest extent permitted by Law, exercise all its Rights of payment
(including the Right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
11.06. Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time and from time
to time, to the fullest extent permitted by Law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any and all of the obligations of
the Borrower now or hereafter existing
101
<PAGE>
under this Agreement and the other Loan Papers, whether or not Administrative
Lender or any Lender shall have made any demand under this Agreement or the
other Loan Papers, and even if such obligations are unmatured. Each Lender shall
promptly notify the Borrower after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of such set-
off and application. The Rights of each Lender under this Section 11.06 are in
addition to other Rights (including, without limitation, other Rights of set-
off) which such Lender may have.
11.07. Costs, Expenses, and Taxes.
(a) The Borrower agrees to pay on demand (i) all costs and expenses of
Administrative Lender in connection with the preparation and negotiation of all
Loan Papers, including without limitation the reasonable fees and out-of-pocket
expenses of Special Counsel, (ii) all costs and expenses (including reasonable
attorneys' fees and expenses) of Administrative Lender in connection with any
interpretation, grant and perfection of any Lien, modification, amendment,
waiver, release of any Loan Papers, restructuring or work-out and (iii) all
costs and expenses (including reasonable attorneys' fees and expenses) of
Administrative Lender and each Lender in connection with any collection of any
portion of the Obligations or the enforcement of any Loan Papers during the
continuance of an Event of Default.
(b) In addition, the Borrower shall pay any and all stamp, debt, and other
Taxes payable or determined to be payable in connection with any payment
hereunder (other than Taxes on the overall net income of Administrative Lender
or any Lender or franchise Taxes or Taxes on capital or capital receipts of
Administrative Lender or any Lender), or the execution, delivery, or recordation
of any Loan Papers, and agrees to save Administrative Lender and each Lender
harmless from and against any and all liabilities with respect to, or resulting
from any delay in paying or omission to pay any Taxes in accordance with this
Section 11.07, including any penalty, interest, and expenses relating thereto.
All payments by the Borrower or any Subsidiary of the Borrower under any Loan
Papers shall be made free and clear of and without deduction for any present or
future Taxes (other than Taxes on the overall net income of Administrative
Lender or any Lender of any nature now or hereafter existing, levied, or
withheld, or franchise Taxes or Taxes on capital or capital receipts of
Administrative Lender or any Lender), including all interest, penalties, or
similar liabilities relating thereto. If the Borrower shall be required by Law
to deduct or to withhold any Taxes from or in respect of any amount payable
hereunder (i) the amount so payable shall be increased to the extent necessary
so that, after making all required deductions and withholdings (including Taxes
on amounts payable to Administrative Lender or any Lender pursuant to this
sentence), Administrative Lender or any Lender receives an amount equal to the
sum it would have received had no such deductions or withholdings been made,
(ii) the Borrower
102
<PAGE>
shall make such deductions or withholdings, and (iii) the Borrower shall pay the
full amount deducted or withheld to the relevant taxing authority in accordance
with applicable Law. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 11.07 shall survive the execution of this Agreement, termination
of the Available Commitment, repayment of the Obligations, satisfaction of each
agreement securing or assuring the Obligations and termination of this Agreement
and each other Loan Paper.
11.08. Rate Provision. It is not the intention of any party to any Loan
Papers to make an agreement violative of the Laws of any applicable jurisdiction
relating to usury. In no event shall any Obligor or any other Person be
obligated to pay any amount in excess of the Maximum Amount. If Administrative
Lender or any Lender ever receives, collects or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated hereunder as such; and if principal is paid
in full, any remaining excess shall be paid to the Borrower or the other Person
entitled thereto. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Maximum Amount, each Obligor,
Administrative Lender and each Lender shall, to the maximum extent permitted
under Applicable Laws, (a) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (b) exclude voluntary prepayments and
the effect thereof, and (c) amortize, prorate, allocate and spread in equal
parts, the total amount of interest throughout the entire contemplated term of
the Obligations so that the interest rate is uniform throughout the entire term
of the Obligations; provided that if the Obligations are paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Amount,
Administrative Lender or Lenders, as appropriate, shall refund to the Borrower
the amount of such excess or credit the amount of such excess against the total
principal amount owing, and, in such event, neither Administrative Lender nor
any Lender shall be subject to any penalties provided by any Laws for
contracting for, charging or receiving interest in excess of the Maximum Amount.
This Section 11.08 shall control every other provision of all agreements among
the parties to the Loan Papers pertaining to the transactions contemplated by or
contained in the Loan Papers.
11.09. Severability. If any provision of any Loan Papers is held to be
illegal, invalid, or unenforceable under present or future Laws during the term
thereof, such provision shall be fully severable, the appropriate Loan Paper
shall be construed and enforced as if such illegal,
103
<PAGE>
invalid, or unenforceable provision had never comprised a part thereof, and the
remaining provisions thereof shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of such
Loan Paper a legal, valid, and enforceable provision as similar in terms to the
illegal, invalid, or unenforceable provision as may be possible.
11.10. Exceptions to Covenants. No Obligor shall be deemed to be permitted
to take any action or to fail to take any action that is permitted as an
exception to any covenant in any Loan Papers, or that is within the permissible
limits of any covenant, if such action or omission would result in a violation
of any other covenant in any Loan Papers.
11.11. Counterparts. This Agreement and the other Loan Papers may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.
11.12. GOVERNING LAW; WAIVER OF JURY TRIAL.
(A) THIS AGREEMENT AND ALL OTHER LOAN PAPERS SHALL BE DEEMED TO BE
CONTRACTS MADE IN DALLAS, TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO
CONFLICTS OF LAWS) AND THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, THE BORROWER AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS
LOCATED IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION
HEREWITH. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE BORROWER HEREBY WAIVES ANY
RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN
TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS
AGREEMENT, THE OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
(B) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL PROCESS UPON
IT. THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS
ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL.
NOTHING IN THIS SECTION 11.12 SHALL AFFECT THE RIGHT OF ADMINISTRATIVE LENDER OR
ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
11.13. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
===============================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
===============================================================================
104
<PAGE>
IN WITNESS WHEREOF, this Third Amended and Restated Credit Agreement is
executed as of the date first set forth above.
THE BORROWER:
PINNACLE TOWERS INC.
By:----------------------------------------
Its:---------------------------------------
ADMINISTRATIVE LENDER:
NATIONSBANK, N.A., as Administrative Lender
-------------------------------------------
By: Roselyn M. Reid
Its: Vice President
GOLDMAN SACHS CREDIT PARTNERS, L.P., as
Syndication Agent
-------------------------------------------
By:----------------------------------------
Its:---------------------------------------
LENDERS:
Specified Percentage: 31.6666% NATIONSBANK, N.A., individually as a Lender
Address:
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn.: Roselyn M. Reid -------------------------------------------
Telephone: (214) 508-0988 By: Roselyn M. Reid
Telecopy: (214) 508-9390 Its: Vice President
105
<PAGE>
Specified Percentage: 21.6666% GOLDMAN SACHS CREDIT PARTNERS L.P.
Address:
85 Broadstreet
17th Floor
New York, New York 10001 -------------------------------------------
Attn.: Rich Katz By:----------------------------------------
Telephone: (212) 902-5492 Its:---------------------------------------
Telecopy: (212) 357-4451
Specified Percentage: 10.0000% BANKBOSTON, N.A.
Address:
Media & Communications Department
100 Federal Street, 01-08-08
Boston, Massachusetts 02110 -------------------------------------------
Attn.: Mr. Lenny Mason By:----------------------------------------
Its:---------------------------------------
Telephone: (617) 434-6489
Telecopy: (617) 434-3401
Specified Percentage: 16.6666% SOCIETE GENERALE, NEW YORK BRANCH
Address:
1221 Avenue of the Americas
11th Floor
New York, New York 10020 -------------------------------------------
Attn.: Mr. John Sadik-Khan By:----------------------------------------
Its:---------------------------------------
Telephone: (212) 278-6873
Telecopy: (212) 278-6240
Specified Percentage: 10.0000% BANK OF AMERICA
Address:
335 Madison Avenue, 5th Floor
New York, NY 10286 -------------------------------------------
Attn.: Carl Salas By:----------------------------------------
Its:---------------------------------------
Telephone: (212) 503-3425
Telecopy: (212) 503-7173
106
<PAGE>
Specified Percentage: 10.0000% UNION BANK OF CALIFORNIA, N.A.
Address: 445 South Figueroa Street
Los Angeles, CA 90071 -------------------------------------------
Attn.: Kristina Mouzakis By:----------------------------------------
Its:---------------------------------------
Telephone: (213) 236-7580
Telecopy: (213) 236-5747
107
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on From S-4 of Pinnacle Holdings Inc. of the following:
(1) our report dated March 4, 1998 relating to the consolidated financial
statements of Pinnacle Holdings Inc., (2) our report dated February 9, 1998
relating to the combined financial statements of Shore Communications. (3) our
report dated February 9, 1998 relating to the combined financial statements of
Tidewater Communications and (4) our report dated February 9, 1998 relating to
the combined financial statements of Majestic Communications, which appear in
such Prospectus. We also consent to the reference to us under the headings
"Summary Historical and Unaudited Pro Forma Consolidated Financial Date",
"Selected Historical and Unaudited Pro Forma Consolidated Financial Data", and
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- ----------------------------
PRICE WATERHOUSE LLP
Tampa, Florida
June 11, 1998
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use in this
Registration Statement of our report dated February 20,1998, on the Tower
Operations of Southern Communications Services, Inc. and to all references to
our Firm included in or made a part of this Registration Statement.
/s/ Arthur Andersen LLP
- --------------------------
Atlanta, Georgia
June 10, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,318,875
<SECURITIES> 0
<RECEIVABLES> 2,055,768
<ALLOWANCES> (100,000)
<INVENTORY> 0
<CURRENT-ASSETS> 7,901,855
<PP&E> 256,313,437
<DEPRECIATION> 11,734,944
<TOTAL-ASSETS> 264,380,120
<CURRENT-LIABILITIES> 9,101,038
<BONDS> 200,400,971
1,761,039
0
<COMMON> 366
<OTHER-SE> 19,985,809
<TOTAL-LIABILITY-AND-EQUITY> 264,380,120
<SALES> 5,372,833
<TOTAL-REVENUES> 5,372,833
<CGS> 0
<TOTAL-COSTS> 1,043,406
<OTHER-EXPENSES> 4,537,855
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 3,842,605
<INCOME-PRETAX> (3,921,725)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,921,725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,921,725)
<EPS-PRIMARY> (11.58)
<EPS-DILUTED> 0
</TABLE>
