<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 3, 1998
PINNACLE HOLDINGS INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24773 65-0652634
-------- ------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1549 Ringling Boulevard, 3rd Floor Sarasota, Florida 34236
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 364-8886
-------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
This Report on Form 8-K contains forward-looking statements within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements are based on the Registrant's current expectations. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions described above. Future events and
actual results are subject to a number of risks and uncertainties and could
differ materially from those currently anticipated or desired as a result of a
number of factors, including, the effect of the substantial indebtedness and
redeemable preferred stock of the Registrant, and the Registrant's ability to
service such indebtedness; the Registrant's dependence upon successfully
identifying, consummating and integrating acquisitions; a significant portion of
the Registrant's revenues coming from a limited number of customers; fulfilling
the Registrant's anticipated capital needs for future acquisition and
construction activity; business conditions and growth in the wireless
communications industry; the impact of competition from the Registrant's
competitors; and other risks and uncertainties, some of which have been or will
be identified from time to time in the Registrant's reports filed with the
Securities and Exchange Commission. Additional discussion of these factors
effecting the Registrant's business and prospects is contained in the
Registrant's filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on any forward-looking statements
contained herein, which speak only as of the date hereof. The Registrant
undertakes no obligation to publicly update or revise such forward-looking
statements.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 7, 1998, Pinnacle Towers Inc., a Delaware corporation and wholly
owned subsidiary of the Registrant, entered into an asset purchase agreement (as
amended, the "Agreement") with MobileMedia Corporation ("MobileMedia") and
several of its affiliates to acquire 166 towers for an aggregate purchase price
of approximately $170 million. The acquisition was completed on September 3,
1998. Pursuant to the Agreement, MobileMedia also assigned its existing tenant
leases on the towers to Pinnacle Towers Inc. In connection with the
acquisition, the Registrant entered into a lease (the "Lease") with MobileMedia
Communications, Inc., an affiliate of MobileMedia, providing such affiliate of
MobileMedia the non-exclusive right to lease a certain amount of its equipment
on most of the acquired towers for aggregate rent of approximately $10.7
million per year. The Lease has an initial term of 15 years and one five-year
renewal term exercisable at the option of the lessee. Prior to this acquisition,
space on the towers was primarily for the exclusive use of MobileMedia and its
affiliates. The Registrant intends to integrate these towers into its rental
tower business by leasing space on these towers to other third party wireless
communications providers. The towers are located in the Southeastern United
States, Southern California and New England.
The transaction was funded with proceeds from the sale of two separate
newly authorized series of preferred stock of the Registrant described below, a
loan from ABRY Broadcast Partners II, L.P., a controlling stockholder of the
Registrant, and borrowings under the Registrant's senior credit facility with
NationsBank, N.A. and certain other lenders.
New York Life Insurance Company purchased newly authorized Series A Senior
Preferred Stock of the Company (the "Senior Preferred Stock") with a liquidation
preference of $30 million and warrants to purchase approximately .75% of the
Registrant's outstanding common stock for a purchase price of $30 million.
Dividends on the Senior Preferred Stock accrue at a rate of 14% through March
31, 1999, 14.75% from April 1, 1999 through June 30, 1999, 15.5% from July 1,
1999 through September 30, 1999 and 16% thereafter. At the Registrant's option,
such dividends can be paid by the issuance of additional shares of such stock.
The Senior Preferred Stock is redeemable at the Registrant's option at no
premium at any time upon 30 days advance notice. The Senior Preferred Stock is
mandatorily redeemable on September 30, 2008. The warrants are exercisable at a
nominal price for a period of eight and one-half years commencing 18 months
following the issuance of the Senior Preferred Stock. If the Senior Preferred
Stock is redeemed prior to such date, the warrants may not be exercised and will
be cancelled. The warrants expire on September 3, 2008.
ABRY/Pinnacle, Inc., an affiliate of ABRY Broadcast Partners II, L.P,
purchased newly authorized Series B Junior Preferred Stock of the Company (the
"Junior Preferred Stock") with a liquidation preference of $32.5 million.
2
<PAGE>
Dividends accrue at a rate of 14% and at the Registrant's option may be paid by
the issuance of additional shares of such stock. The Junior Preferred Stock is
redeemable at the Registrant's option at no premium at any time. The Junior
Preferred Stock is not mandatorily redeemable.
The Senior Preferred Stock and the Junior Preferred Stock have not been and
will not be registered under the Securities Act of 1933 and may not be offered
or sold in the United States absent registration or an applicable exemption from
the registration requirements.
The foregoing is subject to the actual provisions of the Lease, and the
Certificates of Designation relating to the Senior Preferred Stock and the
Junior Preferred Stock, which are incorporated herein by reference and attached
as exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
MobileMedia Communications, Inc. and Subsidiaries Tower Operations
(b) PRO FORMA FINANCIAL INFORMATION.
Pinnacle Holdings Inc. Unaudited Pro Forma Consolidated Balance Sheet
as of June 30, 1998.
Pinnacle Holdings Inc. Unaudited Pro Forma Consolidated Statement of
Operations:
For the six months ended June 30, 1998
For the year ended December 31, 1997
(c) EXHIBITS.
Exhibit Number Description
-------------- -----------
2.1 Purchase Agreement dated July 7, 1998 between Pinnacle
Towers Inc. and MobileMedia Corporation and certain of
its affiliates.*
2.2 Amendment to Purchase Agreement dated September 2, 1998
between Pinnacle Towers Inc. and MobileMedia
Corporation and certain of its affiliates.
4.1 Certificate of Designation Series A Senior Preferred
Stock.
4.2 Certificate of Designation Series B Junior Preferred
Stock.
10.1 Master Lease for Transmitter Systems Space between the
Company and MobileMedia Communications, Inc.*
*Filed on July 17, 1998 with Registrant's Registration Statement on
Form S-11 (SEC file no. 333-59297).
3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MobileMedia Communications, Inc. and
Subsidiaries
We have audited the accompanying balance sheets of the tower operations (the
"Tower Operations") of MobileMedia Communications, Inc. and Subsidiaries (the
"Parent") as of December 31, 1997 and 1996 and the related statements of
income, changes in net tower operation assets, and cash flows for the years
then ended. These financial statements are the responsibility of the Parent's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Tower Operations of
MobileMedia Communications, Inc. and Subsidiaries as of December 31, 1997 and
1996 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in Note 4, on July 7, 1998, MobileMedia Corporation and the
Parent entered into an agreement to sell certain assets of the Tower
Operations to Pinnacle Towers Inc. Tower Operations is not a separate legal
entity, subsidiary, division or segment of the Parent and, accordingly, it has
no independent financing sources. On January 30, 1997, MobileMedia, the Parent
and all seventeen of the Parent's subsidiaries (collectively with the Parent
and MobileMedia, the "Debtors"), filed for protection under Chapter 11 of
Title 11 of the United States Code. The Debtors are operating as debtors-in-
possession and are subject to the jurisdiction of the United State Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). Accordingly, the
aforementioned sale transaction is subject to Bankruptcy Court approval.
Management believes it will receive the consent of its debt holders and the
Bankruptcy Court for the sale of the Tower Operations free and clear of all
liens. As a result of the uncertainties of the Debtor's bankruptcy and the
collateralization of the Tower Operations' assets, and the potential effect on
the Tower Operations' assets, there is substantial doubt that the Tower
Operations would continue as a going concern if the necessary consents are not
received or if for some other reason the sale transaction is not consummated.
The accompanying financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classifications
of assets or the amounts and classification of liabilities that may result
from the outcome of this uncertainty.
/s/ Ernst & Young LLP
MetroPark, New Jersey
July 13, 1998
F-1
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -----------------------
1998 1997 1996
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable (net of allowance
for doubtful accounts of $80,000,
$57,000 and $18,000 at June 30, 1998,
December 31, 1997 and 1996, respective-
ly).................................... $ 283,294 $ 196,307 $ 179,960
Prepaid site lease rentals.............. 46,248 49,710 46,934
----------- ----------- ----------
Total current assets................. 329,542 246,017 226,894
Property and equipment:
Land.................................... 2,401,987 2,401,987 2,401,987
Tower assets and other equipment........ 4,910,330 4,891,859 4,670,431
Less accumulated depreciation........... (1,544,396) (1,279,937) (758,456)
----------- ----------- ----------
Net property and equipment............... 5,767,921 6,013,909 6,313,962
----------- ----------- ----------
Total assets......................... $ 6,097,463 $ 6,259,926 $6,540,856
=========== =========== ==========
LIABILITIES AND NET TOWER OPERATION
ASSETS
Liabilities:
Accounts payable........................ $ 214,316 $ 520,318 $ 282,045
Unearned revenue........................ 172,829 165,241 29,411
----------- ----------- ----------
387,145 685,559 311,456
Commitments and contingencies
Net tower operation assets............... 5,710,318 5,574,367 6,229,400
----------- ----------- ----------
Total liabilities and net tower oper-
ation assets........................ $ 6,097,463 $ 6,259,926 $6,540,856
=========== =========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, -----------------------
1998 1997 1997 1996
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................ $1,262,201 $1,246,855 $ 2,500,185 $ 2,608,321
Expenses:
Operations..................... 513,105 525,572 1,113,663 1,001,018
General and administrative..... 283,413 292,413 609,179 540,015
Depreciation................... 264,459 257,576 521,481 489,271
---------- ---------- ----------- -----------
Total expenses.............. 1,060,977 1,075,561 2,244,323 2,030,304
---------- ---------- ----------- -----------
Net income...................... $ 201,224 $ 171,294 $ 255,862 $ 578,017
========== ========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
STATEMENTS OF CHANGES IN NET TOWER OPERATION ASSETS
<TABLE>
<S> <C>
Net tower operation assets as of December 31, 1995.................. $3,958,877
Net income......................................................... 578,017
Net activity with Parent........................................... 1,692,506
----------
Net tower operation assets as of December 31, 1996.................. 6,229,400
Net income......................................................... 255,862
Net activity with Parent........................................... (910,895)
----------
Net tower operation assets as of December 31, 1997.................. 5,574,367
Net income (unaudited)............................................. 201,224
Net activity with Parent (unaudited)............................... (65,273)
----------
Net tower operation assets as of June 30, 1998 (unaudited).......... $5,710,318
==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
YEAR ENDED DECEMBER 31,
JUNE 30, JUNE 30, -------------------------
1998 1997 1997 1996
----------- ---------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................. $ 201,224 $ 171,294 $ 255,862 $ 578,017
Adjustments to reconcile
net income to net cash
provided by operating ac-
tivities:
Depreciation............. 264,459 257,576 521,481 489,271
Change in operating as-
sets and liabilities:
Accounts receivable.... (86,987) (6,186) (16,347) (50,889)
Prepaid expenses....... 3,462 (2,777) (2,776) --
Accounts payable....... (306,002) 131,694 238,273 248,015
Unearned revenue....... 7,588 89,654 135,830 (27,082)
--------- --------- ----------- ------------
Net cash provided by oper-
ating activities.......... 83,744 641,255 1,132,323 1,237,332
INVESTING ACTIVITIES
Tower acquisitions and cap-
ital expenditures......... (18,471) (216,973) (221,428) (2,929,838)
--------- --------- ----------- ------------
Net cash used in investing
activities................ (18,471) (216,973) (221,428) (2,929,838)
FINANCING ACTIVITIES
Net activity with Parent... (65,273) (424,282) (910,895) 1,692,506
--------- --------- ----------- ------------
Net cash (used in) provided
by financing activities... (65,273) (424,282) (910,895) 1,692,506
--------- --------- ----------- ------------
Net increase in cash....... -- -- -- --
Cash at beginning of peri-
od........................ -- -- -- --
--------- --------- ----------- ------------
Cash at end of period...... $ -- $ -- $ -- $ --
========= ========= =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements present the financial position and the
results of operations of the tower operations (the "Tower Operations") of
MobileMedia Communications, Inc. and Subsidiaries (the "Parent"), which
includes the Parent's business of leasing space on the 163 tower sites that
are being acquired by Pinnacle Towers Inc. ("Pinnacle") (see Note 4) to
customers in the broadcast and wireless communication industries. The Parent
also utilizes the tower sites for its own transmitter systems.
Tower Operations is not a separate legal entity, subsidiary, division or
segment of the Parent and, accordingly, it has no independent financing
sources. All funding has been summarized in the accompanying financial
statements as "Net activity with Parent".
The financial statements of the Tower Operations business have been derived
from the financial statements of the Parent and have been prepared to present
the financial position, results of operations, and cash flows on a stand-alone
basis. All revenues and expenses specifically identifiable to Tower ownership
are included. Additionally, the accompanying financial statements include
certain costs and expenses that have been allocated to the Tower business from
the Parent. These costs have been allocated on a pro rata basis primarily
based upon revenues or total costs of certain infrastructure operations,
depending upon the nature of the cost.
On January 30, 1997, MobileMedia Corporation ("MobileMedia"), the Parent and
all seventeen of the Parent's subsidiaries (collectively with the Parent and
MobileMedia, the "Debtors"), filed for protection under Chapter 11 of Title 11
of the United States Code. The Debtors are operating as debtors-in-possession
and are subject to the jurisdiction of the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court").
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
CONCENTRATIONS OF CREDIT RISK
The owned tower site lease receivables potentially subject the business to
credit risk, as the Tower Operations generally does not require collateral or
other security to support customer receivables. The carrying amount of the
Tower Operations receivables approximates fair value.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives, which vary from 5 to
29 years.
IMPAIRMENT OF LONG-LIVED ASSETS
Management periodically reviews the values assigned to long-lived assets to
determine whether any impairments are other than temporary. Management
believes that no impairment exists with respect to the long-lived assets in
the accompanying balance sheets.
F-6
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Tower Operations earns revenues by leasing space on its towers to
customers in the broadcast and communication industries or to customers that
have internal communication systems. Lease revenues are recognized on a
periodic basis over the non-cancelable lease term. The effect of escalation
clauses within such leases is not material. No revenue is recognized in the
accompanying financial statements related to the Parent's usage of space on
the Tower Operations towers.
ALLOCATION OF EXPENSES
Certain administrative expenses were allocated from the Parent based on the
ratio of revenue generated from the Tower Operations to the Parent's revenues
from services, rents and maintenance. Additionally, certain operational
expenses were allocated from the Parent based on the estimated percentage of
such costs which are deemed to be applicable to the Tower Operations.
Management believes that these are the most appropriate methodologies for
allocating such expenses.
INCOME TAXES
The Tower Operations is not in itself a taxable entity and no provision or
benefit for United States federal or state income taxes has been recorded.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial information as of June 30, 1998 and the six months
ended June 30, 1998 and 1997 contained herein is unaudited but, in the opinion
of management, includes all adjustments of a normal recurring nature which are
necessary for a fair presentation of the financial position, results of
operations, and cash flows for the periods presented. Results of operations
for the periods presented herein are not necessarily indicative of results of
operations for the entire year.
2. COMMITMENTS AND CONTINGENCIES
The Tower Operations' property and equipment are part of the collateral for
MobileMedia's secured debt. MobileMedia is seeking the consent of the secured
debt holders and the Bankruptcy Court for the sale of certain assets of the
Tower Operations to Pinnacle free and clear of the liens (see Note 4).
Management believes it will receive such consents from the secured debt
holders and the Bankruptcy Court.
The land on which certain towers are constructed is leased pursuant to
operating leases. Rental expenses under operating leases were approximately
$277,000, $298,000, $597,000 and $563,000 for the six months ended June 30,
1998 (unaudited) and 1997 (unaudited) and the years ended December 31, 1997
and 1996, respectively. The effect of escalation clauses within such leases is
not material. At December 31, 1997, the aggregate minimum rental commitments
under leases were as follows:
<TABLE>
<S> <C>
1998........................................................... $ 570,916
1999........................................................... 454,913
2000........................................................... 330,408
2001........................................................... 203,091
2002........................................................... 177,582
Thereafter..................................................... 639,760
----------
$2,376,670
==========
</TABLE>
F-7
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A CARVE-OUT ENTITY OF MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. COMMITMENTS AND CONTINGENCIES (CONTINUED)
One ground lease, which extends until October 2003, stipulates that the
tower on the land becomes the property of the city in which it is located upon
expiration of the lease.
One tower asset represents an exclusive lease agreement for use of the tower
by the Tower Operations. Additionally, the Company believes that it has title
to all Tower Operations land; however, for one such parcel, the Tower
Operations may only have an easement to use the property.
3. IMPACT OF YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Parent's
computer programs that have time-sensitive software may recognize a date using
"00" as the Year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
While the Parent is aware that certain of its software requires
modification, it is in the process of determining the full extent that it will
be required to modify or replace significant portions of its software so that
its computer systems function properly with respect to dates in the Year 2000
and thereafter. If such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material impact on the
operations of the Parent and the Tower Operations.
4. SUBSEQUENT EVENT--SALE AND LEASEBACK OF TOWER ASSETS
On July 7, 1998, MobileMedia and the Parent entered into an agreement to
sell 163 towers and 49 parcels of land related to the Tower Operations to
Pinnacle Towers Inc. for $170,000,000. The transaction also includes the
assignment of leases and related lease payments for 89 land leases related to
towers included in the sale. It is anticipated that such transaction will
close on August 25, 1998, subject to the approval of the Bankruptcy Court.
In connection with the transaction, MobileMedia and the Parent will enter
into a lease agreement with Pinnacle in which the Parent will lease space on
towers for 683 transmitters for a period of fifteen years at a cost of $1,300
per month per transmitter.
F-8
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pinnacle
Holdings MobileMedia Pro forma Combined
June 30, 1998 June 30, 1998 Adjustments Pro Forma
--------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,715 $ 2,715
Accounts receivable 2,140 283 (283) (1) 2,140
Prepaid expenses and other current assets 1,115 46 (46) (1) 1,115
--------------- --------------- ------------- -----------
Total current assets 5,970 329 (329) 5,970
Restricted cash 61 61
Tower assets, net 279,785 3,366 169,650 (1) 452,801
Fixed assets, net 1,839 1,839
Land 12,153 2,402 (2,402) (1) 12,153
Deferred debt costs, net 11,337 11,337
Other assets 854 854
--------------- --------------- ------------- -----------
$ 311,999 $ 6,097 $ 166,919 $ 485,015
=============== =============== ============= ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,794 $ 214 (214) (1) 2,794
Accrued expenses 3,430 3,430
Deferred revenue 1,335 173 (173) (1) 1,335
Current portion of long-term debt 2,944 2,944
--------------- --------------- ------------- -----------
Total current liabilities 10,503 387 (387) 10,503
Long-term debt 287,227 110,556 (1) 397,243
Other liabilities 539 539
--------------- --------------- ------------- -----------
298,269 387 109,629 408,285
--------------- --------------- ------------- -----------
Redeemable Stock:
Preferred stock 28,480 (2) 29,000
Class B common stock 1,761 1,761
Class D common stock - - -
--------------- --------------- ------------- -----------
1,761 - 29,000 30,761
--------------- --------------- ------------- -----------
Divisional Equity 5,710 (5,710) -
Stockholder's Equity
Preferred stock 33,000 (3) 33,000
Common stock - -
Warrants 1,000 (2) 1,000
APIC 36,231 36,231
Accumulated deficit (24,262) (24,262)
--------------- --------------- ------------- -----------
Total stockholders' equity 11,969 - 34,000 45,969
--------------- --------------- ------------- -----------
$ 311,999 $ 6,097 $ 166,919 $ 485,015
=============== =============== ============= ===========
</TABLE>
(1) Reflects the elimination of assets not acquired and liabilities not assumed
as per the underlying Purchase Agreement, the preliminary allocation of
purchase price, the incurrence of pro forma debt and the Senior Preferred
Stock Issuance Costs.
(2) Reflects the issuance of mandatorily redeemable Senior Preferred Stock and
deductable warrants in connection with the MobileMedia acquisition, less
issuance costs of $450,000.
(3) Reflects the issuance of Junior Preferred Stock in connection with the
MobileMedia acquisition.
F-9
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma Combined
Pinnacle MobileMedia Adjustments Pro Forma
---------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Tower rental revenue $ 12,881 $ 2,500 $ 10,329 (1) $ 25,710
Tower operating expenses excluding
depreciation and amortization 2,633 1,114 218 (1) 3,965
---------- ------------- ------------- -----------
Gross profit, excluding depreciation
and amortization 10,248 1,386 10,111 21,745
Other expenses:
General and administrative 1,385 609 1,994
Corporate development 3,772 3,772
Depreciation and amortization 6,627 521 11,013 (2) 18,161
---------- ------------- ------------- -----------
11,784 1,130 11,013 23,927
Income (loss) from operations (1,536) 256 (902) (2,182)
Interest expense 6,925 9,397 (3) 16,322
Amortization of original issue discount - - - -
---------- ------------- ------------- -----------
Net loss (8,461) 256 (10,299) (18,504)
Dividends and accretion on PIK
reedemable preferred stock 4,185 4,185
Net loss attributable to
---------- ------------- ------------- -----------
common stock $ (8,461) $ 256 $ (6,114) $ (14,319)
========== ============= ============= ===========
</TABLE>
(1) Reflects pro forma incremental tower revenues and operating expenses
pursuant to the Lease.
(2) Reflects pro forma increases in tower asset depreciation resulting from the
Company's preliminary application of purchase accounting.
(3) Reflects the pro forma increase in interest associated with the financing
of Mobile Media Acquisition.
F-10
<PAGE>
Unaudited Pro Forma Consolidated
Statement of Operations
Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Pro Forma Combined
Pinnacle MobileMedia Adjustments Pro Forma
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Tower rental revenue $ 12,544 $ 1,262 $ 5,153 (1) $ 18,959
Tower operating expenses excluding
depreciation and amortization 2,531 513 153 (1) 3,197
---------- ----------- ----------- ---------
Gross profit, excluding depreciation
and amortization 10,013 749 5,000 15,762
Other expenses:
General and administrative 1,495 283 1,778
Corporate development 3,475 3,475
Depreciation and amortization 7,971 265 5,502 (2) 13,738
---------- ---------- ----------- ---------
12,941 548 5,502 18,991
Income (loss) from operations (2,928) 201 (502) (3,229)
Interest expense 4,550 4,699 (3) 9,249
Amortization of original issue discount 5,661 - 5,661
---------- ---------- ----------- ---------
Net loss (13,139) 201 (5,201) (18,139)
Dividends and accretion on PIK
redeemable preferred stock 2,093 2,093
---------- ---------- ----------- ---------
Net loss attributable to common stock $ (13,139) $ 201 $ (3,108) $ (16,046)
========== ========== =========== =========
</TABLE>
(1) Reflects pro forma incremental tower revenues and operating expenses
pursuant to the Lease.
(2) Reflects pro forma increases in tower asset depreciation resulting from the
Company's preliminary application of purchase accounting.
(3) Reflects the pro forma increase in interest associated with the financing of
MobileMedia Acquisition.
F-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PINNACLE HOLDINGS INC.
(Registrant)
By: /s/ Steven R. Day
---------------------------------------------------------
Steven R. Day, Chief Financial Officer, Vice President
and Secretary
Date: September 18, 1998
<PAGE>
Exhibit 2.2
AMENDMENT TO PURCHASE AGREEMENT
This AMENDMENT TO PURCHASE AGREEMENT (this "Amendment") is entered
into as of September 2, 1998 by and among PINNACLE TOWERS INC., a Delaware
corporation ("Purchaser"), MOBILEMEDIA CORPORATION, a Delaware corporation, as
debtor and debtor-in-possession ("MobileMedia"), MOBILEMEDIA COMMUNICATIONS,
INC., a Delaware corporation, as debtor and debtor-in-possession ("MobileMedia
Communications"), MOBILE COMMUNICATIONS CORPORATION OF AMERICA, a Mississippi
corporation, as debtor and debtor-in-possession ("MCA"), MOBILECOMM OF THE WEST,
a California corporation, as debtor and debtor-in-possession ("MCWEST"),
MOBILECOMM OF THE SOUTHWEST, INC., a Texas corporation, as debtor and debtor-in-
possession ("MCSW"), MOBILECOMM OF TENNESSEE, INC., a Tennessee corporation, as
debtor and debtor-in-possession ("MCTN"), MOBILECOMM NATIONWIDE OPERATIONS,
INC., a Delaware corporation, as debtor and debtor-in-possession ("MCNO"),
MOBILEMEDIA COMMUNICATIONS, INC. (CALIFORNIA), a California corporation, as
debtor and debtor-in-possession ("MCCAL"), MOBILEMEDIA DP PROPERTIES, INC., a
Delaware corporation, as debtor and debtor-in-possession ("MDP"), MOBILEMEDIA
PCS, INC., a Delaware corporation, as debtor and debtor-in-possession ("MPCS"),
DIAL PAGE SOUTHEAST, INC., a Delaware corporation, as debtor and debtor-in-
possession ("DPS"), RADIO CALL COMPANY OF VA., INC, a Virginia corporation, as
debtor and debtor-in-possession ("RCC"), MOBILEMEDIA PAGING, INC., a Delaware
corporation, as debtor and debtor-in-possession ("MPI"), MOBILECOMM OF THE
SOUTHEAST INC., a Delaware corporation, as debtor and debtor-in-possession
("MCSE"), MOBILECOMM OF THE NORTHEAST, INC., a Delaware corporation, as debtor
and debtor-in-possession ("MCNE"), MOBILECOMM OF THE SOUTHEAST PRIVATE CARRIER
OPERATIONS, INC., a Georgia corporation, as debtor and debtor-in-possession
("MCSPCO"), MOBILECOMM OF FLORIDA, INC., a Florida corporation, as debtor and
debtor-in-possession ("MCFL"), MOBILECOMM OF THE MIDSOUTH, INC., a Missouri
corporation, as debtor and debtor-in-possession ("MCMS"), and FWS RADIO, INC., a
Texas corporation, as debtor and debtor-in-possession ("FWS"), and each of
MobileMedia, MobileMedia Communications, MCA, MCWEST, MCSW, MCTN, MCNO, MCCAL,
MDP, MPCS, DPS, RCC, MPI, MCSE, MCNE, MCSPCO, MCFL, MCMS and FWS, together with
their respective
<PAGE>
successors and permitted assigns, are individually referred to herein as a
"Seller" and collectively referred to herein as the "Sellers".
RECITALS
A. Purchaser and Sellers have entered into that certain Purchase
Agreement dated as of July 7, 1998 (the "Original Purchase Agreement"). The
Original Purchase Agreement as amended by this Amendment is referred to herein
as the "Purchase Agreement". Capitalized terms used in this Amendment without
separate definition shall have the respective meanings specified in the Original
Purchase Agreement.
B. Purchaser and Sellers desire to amend, supplement, modify or
clarify certain provisions of the Purchase Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing premises and of the
covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE I
AMENDMENTS, SUPPLEMENTS AND CLARIFICATIONS
I.1. Post-Closing Period Revenue Leases Prepaid Rent.
-----------------------------------------------
(a) Section 3.01(h) of the Purchase Agreement is amended and restated
in its entirety to read as follows:
"(h) At the Closing or as soon as reasonably
practicable thereafter, MobileMedia Communications on
behalf of Sellers shall pay to Purchaser an amount
equal to the amount, if any, of any Post-Closing Period
Revenue Leases Prepaid Rent. MobileMedia Communications
shall identify
2
<PAGE>
the Revenue Leases for which any such Post-Closing Period
Prepaid Rent has been so paid".
(b) The final sentence of Section 7.07(a) of the Purchase Agreement
is amended: (i) by inserting the phrase "or as soon as reasonably practicable
thereafter" between the phrases "at Closing" and "by payment of an amount", and
(ii) by inserting the phrase ", and MobileMedia Communications shall identify
the Revenue Leases for which any such Post-Closing Period Prepaid Rent has been
so paid" at the end of such sentence.
I.2. Post-Closing Period Ground Leases Prepaid Rent.
----------------------------------------------
(a) Section 3.01(i) of the Purchase Agreement is amended by inserting
the following as the final sentence thereof: "MobileMedia Communications shall
identify the Ground Leases for which any such Post-Closing Period Prepaid Rent
has been so paid".
(b) The final sentence of Section 7.07(b) of the Purchase Agreement
is amended by inserting the following phrase at the end thereof: ",and
MobileMedia Communications shall identify the Ground Leases for which any such
Post-Closing Period Prepaid Rent has been so paid".
I.3. Other Prorations. (a) Section 3.01(j) of the Purchase
----------------
Agreement is amended and restated in its entirety to read as follows:
"(j) At the Closing or as soon as reasonably
practicable thereafter, Purchaser shall pay to
MobileMedia Communications on behalf of Sellers or
MobileMedia Communications on behalf of Sellers shall
pay to Purchaser, as the case may be, the amount or
amounts, if any, as required to be paid as prorations
for certain costs, expenses and charges pursuant to
Section 7.07(c)".
(b) MobileMedia Communications (on behalf of Purchaser) shall pay for
the current tax years(s) (existing as of the Closing Date) in the applicable
jurisdictions (the "Current
3
<PAGE>
Year Periods"), all personal property taxes and real estate taxes with respect
to the Assets for the Current Year Periods (for which MobileMedia Communications
receives the applicable tax invoices), including for the portions thereof
running on and after the Closing Date. Purchaser shall promptly reimburse
MobileMedia Communications in full for an amount equal to each such payment of
personal property taxes or real estate taxes that MobileMedia Communications
pays regarding any period (or portion thereof) on or after the Closing Date,
provided that the Estimated Tax Proration (defined below) shall be applied
towards such reimbursement obligation of Purchaser prior to Purchaser making any
additional payments to MobileMedia Communications pursuant to this sentence. At
the Closing, Purchaser shall pay to MobileMedia Communications an amount equal
to $81,761.10 (in immediately available federal funds to such account as
MobileMedia Communications shall designate) which $81,761.10 payment (the
"Estimated Tax Proration") shall be applied by MobileMedia Communications
towards Purchaser?s reimbursement obligations pursuant to the preceding
provisions of this Section 1.3(b). In the event that for the Current Year
Periods the aggregate amount of the personal property taxes and real estate
taxes paid (applied) by MobileMedia Communications under this Section 1.3(b) is
less than the Estimated Tax Proration (the "Excess Proration"), promptly after
the time of such determination, MobileMedia Communications shall pay to
Purchaser an amount equal to the Excess Proration (without interest).
I.4. Utilities. On or prior to the Closing Date, Purchaser shall
---------
contact all of the utility companies that are providing utilities services to
the Sites, requesting that each such utility company change the name and billing
address on the utility company's user and payor accounts (with respect to such
Sites) from the applicable Sellers to Purchaser. The applicable Sellers (or
MobileMedia Communications on behalf of Sellers) shall pay all utilities charges
with respect to Sites for which it receives invoices from the utilities
companies within ninety (90) days after the Closing Date, and upon evidence of
payment (and which evidence may include a copy of the applicable invoices marked
"paid" or similar notation) Purchaser shall promptly reimburse MobileMedia
Communications (on behalf of Sellers) for all utilities charges regarding any
period (or portion thereof)
4
<PAGE>
on or after the Closing Date (and in accordance with Section 7.07(c) of the
Purchase Agreement).
I.5. Audit Reimbursement. By the Closing Date, Purchaser shall pay
-------------------
to Ernst & Young LLP (on behalf of Sellers), full payment and reimbursement for
all the fees and costs charged (or chargeable) by Ernst & Young LLP to Sellers
in connection with an audit by Ernst & Young LLP regarding the business and
operations with respect to the Towers for 1997 and the first six months of 1998,
in an aggregate final amount of $122,000, which audit Sellers' arranged at
Purchaser's request. At the Closing Purchaser shall deliver to MobileMedia
Communications evidence of such payment (and which evidence may include a copy
of the applicable invoices marked "paid" or similar notation).
I.6. Certain Generators and Fuel Tanks. Schedule A hereto identifies
---------------------------------
certain generators and fuel tanks located at Sites which shall be deemed Assets
for purposes of the Purchase Agreement, and which generators and fuel tanks
shall be sold, conveyed and assigned to Purchaser at the Closing pursuant to
Article II of the Purchase Agreement.
I.7. Indemnification for Certain Transfer Taxes And Charges
------------------------------------------------------
(a) In the event that (i) Purchaser does not deliver to Sellers any
or all of the resale certificates contemplated by Section 3.01(o) of the
Purchase Agreement or (ii) after the Closing, Purchaser delivers to Sellers any
of the resale certificates contemplated by Section 3.01(o) of the Purchase
Agreement, Purchaser shall indemnify, protect and hold harmless each Seller
---
Group Member from and against any and all Transfer Taxes And Charges (as defined
in Section 3.01(k) of the Purchase Agreement), plus all interest and penalties
thereon, that are imposed on any Seller Group Member solely as a result of
Purchaser?s failure to deliver a resale certificate (i) prior to or at Closing
or (ii) prior to such later time as is permitted by applicable law. Any such
indemnification claim by Sellers shall not expire until the expiration of the
applicable period of limitations (including extensions thereof) for imposing
such Transfer Taxes And Charges on any Seller Group Member following the filing
by Sellers of the applicable sales or use tax returns;
5
<PAGE>
provided, however, that in the event Sellers do not file the applicable sales or
use tax returns for the period relating to the transfer of the Towers, the
indemnification claim by any Seller Group Member shall not expire until four (4)
years from the date Purchaser notifies Sellers of a determination received
pursuant to paragraph (c) of this Section 1.7.
(b) In the event it is determined by an applicable state taxing
authority or judicial body after the Closing that the transfer and sale of the
Towers to Purchaser was a transfer of tangible personal property that was not
made for resale (whether or not a resale certificate contemplated by Section
3.01(o) of the Purchase Agreement was delivered by Purchaser before, at, or
after Closing, and provided that such determination is not solely the result of
Purchaser?s failure to timely deliver such a resale certificate), then Purchaser
shall indemnify, protect and hold harmless each Seller Group Member for one-half
of the Transfer Taxes And Charges, one-half of the interest thereon, and 100% of
any penalties thereon, that are imposed on any Seller Group Member as a result
of that determination. Sellers shall indemnify, protect and hold harmless each
Purchaser Group Member for one-half of any such Transfer Taxes And Charges, plus
one-half of the interest thereon, but not for any penalties imposed thereon,
that are imposed on any Purchaser Group Member as a result of that
determination. Any such indemnification claim by any Purchaser Group Member or
by any Seller Group Member shall not expire until the expiration of the
applicable period of limitations (including extensions thereof) for imposing
such Transfer Taxes And Charges on any Purchaser Group Member or any Seller
Group Member (as the case may be) following the filing by Sellers or Purchaser
of the applicable sales or use tax return (as the case may be); provided;
however, that in the event Purchaser or Sellers (as the case may be) do not file
the applicable sales or use tax returns for the period relating to the transfer
of the Towers, the indemnification claim by any Seller Group Member or Purchaser
Group Member (as the case may be) shall not expire until four (4) years from the
date Purchaser notifies Sellers of a determination received pursuant to
paragraph (c) of this Section 1.7.
(c) Purchaser agrees that, within 30 days of the Closing, Purchaser
will submit to the applicable taxing authority
6
<PAGE>
in each state in which one or more of the transferred Towers is located a
request for a written determination as to whether the transfer of the Towers is
considered for state sales and use tax purposes to be a transfer of real estate
or a transfer of tangible personal property, and, if the transfer is considered
a transfer of tangible personal property, whether the transfer is exempt as (i)
an isolated or occasional sale or (ii) as a sale for resale on the basis that
Purchaser acquired the Towers for lease. Purchaser, prior to submitting each
request to the applicable state taxing authority, agrees to provide a copy of
each such request to MobileMedia Communications (on behalf of Sellers) and to
obtain MobileMedia Communications' agreement (on behalf of Sellers) that
Purchaser has correctly and completely stated all material facts. Purchasers and
MobileMedia Communications (on behalf of Sellers) agree to review the results of
the ruling requests every six months until the final state ruling is received in
order to determine whether the tax treatment afforded the Tower sale by
Purchaser and Sellers conformed to the ruling received by each state. Any
resulting liability shall be addressed in accordance with paragraph (a) or (b)
of this Section 1.7.
I.8. Indemnification Matters. Any indemnification claims by any
-----------------------
Seller Group Member or any Purchaser Group Member (as the case may be) under
Sections 3.01(k) or 7.07 of the Purchase Agreement or Sections 1.1, 1.2, 1.3,
1.4, 1.5 or 1.7 of this Amendment shall not be subject to the $1,000,000
threshold amount under Section 7.11(h) of the Purchase Agreement. Except as
modified by Section 1.7 of this Amendment or by this Section 1.8, any
indemnification claims by a Seller Group Member or Purchaser Group Member (as
the case may be) under this Amendment shall be subject to all the applicable
terms and conditions of Section 7.11 of the Purchase Agreement.
I.9. Keys and Combinations. By the Closing or promptly thereafter,
---------------------
MobileMedia Communications shall use its best efforts to deliver or cause to be
delivered to Purchaser, or as Purchaser reasonably directs, copies of existing
keys (or combinations as applicable) for each of the Sites.
I.10. Radio Call Company of VA., Inc. Reference in the Purchase
-------------------------------
Agreement to "Radio Call Co. of Virginia, Inc." or
7
<PAGE>
"Radio Cell Co. of Virginia, Inc." shall be deemed to refer to "Radio Call
Company of Va., Inc."
I.11. Revised Purchase Agreement Schedules. Pursuant to Section 4.08
------------------------------------
of the Purchase Agreement, Sellers are currently herewith delivering to
Purchaser an amended and restated Disclosure Schedule, a copy of which is
attached hereto, and which amended and restated Disclosure Schedule shall be the
Disclosure Schedule to the Purchase Agreement (and accordingly replaces the
Disclosure Schedule that was initially attached to the Original Purchase
Agreement). Pursuant to Sections 1.01 and 4.08 of the Purchase Agreement,
Sellers are currently herewith delivering to Purchaser an amended and restated
Schedule I and Schedule III, copies of which are attached hereto, and which
amended and restated Schedules shall be Schedule I and Schedule III to the
Purchase Agreement (and accordingly replace Schedule I and Schedule III that
were initially attached to the Original Purchase Agreement).
1.12. Additional Towers. Recital B of the Purchase Agreement is
-----------------
amended to change "163" to "166".
ARTICLE II
EFFECT OF AMENDMENTS
II.1. Scope. Except as expressly amended by Article I of this
-----
Amendment, all of the terms, conditions and provisions of the Purchase Agreement
shall remain in full force and effect without any modification or supplement
thereto.
II.2. Purchase Agreement References. The parties intend that
-----------------------------
references to this "Agreement" in the Original Purchase Agreement and references
to "Purchase Agreement" in the Exhibits and Schedules thereto and in other
documents shall be deemed as referring to the Original Purchase Agreement as
amended by this Amendment.
8
<PAGE>
ARTICLE III
MISCELLANEOUS
III.1. Binding Effect. This Amendment shall be binding upon and
--------------
shall inure to the benefit of the parties and their respective successors and
assigns.
III.2. Counterparts. This Amendment may be executed in one or more
------------
counterpart all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each of the other parties.
III.3. Interpretation. Reference herein to the singular includes the
--------------
plural and reference to the plural includes the singular, according to the
context. The headings to the Articles and Sections of this Agreement are for
convenience of reference and shall not affect the meaning or interpretation of
this Amendment.
III.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York.
9
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the day and year first above written.
PINNACLE TOWERS INC. MOBILEMEDIA CORPORATION
MOBILEMEDIA COMMUNICATIONS, INC.
MOBILE COMMUNICATIONS CORPORATION
By:________________________ OF AMERICA
Name: Steven Day MOBILECOMM OF THE WEST, INC.
Title: Vice President MOBILECOMM OF THE SOUTHWEST, INC.
MOBILECOMM OF TENNESSEE, INC.
MOBILECOMM NATIONWIDE
OPERATIONS, INC.
MOBILEMEDIA COMMUNICATIONS, INC.
(CALIFORNIA)
MOBILEMEDIA DP PROPERTIES, INC.
MOBILEMEDIA PCS, INC.
DIAL PAGE SOUTHEAST, INC.
RADIO CALL COMPANY OF VA., INC.
MOBILEMEDIA PAGING, INC.
MOBILECOMM OF THE SOUTHEAST, INC.
MOBILECOMM OF THE NORTHEAST, INC.
MOBILECOMM OF THE SOUTHEAST PRIVATE
CARRIER OPERATIONS, INC.
MOBILECOMM OF FLORIDA, INC.
MOBILECOMM OF THE MIDSOUTH, INC.
FWS RADIO, INC.
By:____________________________________
Name: Joseph A. Bondi
Title: Chairman-Restructuring
10
<PAGE>
SCHEDULE A
GENERATORS AND FUEL TANKS WHICH CONSTITUTE ASSETS
-------------------------------------------------
<PAGE>
EXHIBIT 4.1
PINNACLE HOLDINGS INC.
Certificate of Designation
Pursuant to Section 151
Of the General Corporation Law
Of the State of Delaware
_______
Certificate of Designation
Series A Senior Preferred Stock
I, Steven Day, being a Vice President of Pinnacle Holdings Inc., a
corporation organized and existing under the General Corporation Law of Delaware
(the "Corporation"), do hereby certify:
FIRST: That, pursuant to authority expressly vested in the Board of
Directors of the Corporation by the provisions of its Certificate of
Incorporation, the Board of Directors has duly adopted the following resolution:
RESOLVED that this Board of Directors, pursuant to authority expressly
vested in it by the provisions of the Certificate of Incorporation of the
Corporation, hereby authorizes the issue of a series of Preferred Stock of the
Corporation and hereby fixes the designation, relative powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, as follows:
1. Designation and Number of Shares. 145,000 shares of the Preferred
--------------------------------
Stock of the Corporation shall constitute a series of Preferred Stock designated
as Series A Senior Preferred Stock (hereinafter referred to as "Senior Preferred
Stock").
2. Shares of Series Identical. All shares of this Series shall be
--------------------------
identical with each other in all respects.
3. Dividends. (a) Dividends on each share of the Senior Preferred Stock
---------
shall accrue from the date of its original issue (the "Issue Date") at an annual
rate equal to the percentage of the Liquidation Value per share set forth below
for each corresponding time period (the "Dividend Rate").
14.00% Through March 31, 1999
14.75% From April 1, 1999 through June 30, 1999
15.50% From July 1, 1999 through September 30, 1999
16.00% After September 30, 1999
The "Liquidation Value" per share shall be $1,000. Dividends will be
payable quarterly on the last day of the months of March, June, September and
December of each year in additional shares of Senior Preferred Stock valued at
the Liquidation Value or at the option of the Corporation, with 30 days prior
written notice as to the method of payment, in cash, or any combination thereof.
<PAGE>
(b) Such dividends will accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. To the extent that dividends on
the Senior Preferred Stock are to be paid in additional shares of Senior
Preferred Stock, the dividends on such additional shares of Senior Preferred
Stock will accrue from the date that such additional shares of Senior Preferred
Stock were to have been delivered in payment, whether or not such additional
shares were delivered and if not delivered, the dividends will be considered to
be accrued and unpaid. Any dividends payable quarterly that have not been paid
in cash shall be deemed to have been payable in additional shares of Preferred
Stock.
(c) So long as any shares of the Senior Preferred Stock are outstanding,
no dividend or distribution shall be declared or paid or set aside for payment
upon the common stock or upon any other stock of the Corporation ranking junior
to the Senior Preferred Stock ("Junior Securities"), nor shall any common stock
nor any other stock of the Corporation ranking junior to the Senior Preferred
Stock be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Corporation other than:
(i) dividends or distributions paid in common stock and cash
dividends of up to an aggregate of $100,000 per year paid in lieu
of fractional shares in connection with dividends or
distributions paid in common stock;
(ii) dividends permitted to be made under clause (3) of the third
paragraph of Section 1011 of the Indenture dated as of March 20,
1998 between the Corporation and The Bank of New York, as
Trustee, relating to the 10% Senior Discount Notes due 2008 of
the Corporation in the form that such Indenture exists as of
September 3, 1998 (the "Indenture");
(iii) redemption of up to $32,500,000 aggregate Liquidation Value (as
defined in the Certificate of Designation for the Series B Junior
Preferred Stock) of the Company's Series B Junior Preferred Stock
for a price equal to its Liquidation Value plus accrued and
unpaid dividends thereon, provided that such redemption price
shall be paid with the proceeds from the sale by the Company of
other Junior Securities; and
(iv) repurchases of capital stock of the Company owned by either any
deceased shareholder of the Company or former employee of the
Company, provided that, to the extent the cost of any such
repurchases exceeds the net proceeds of "key man" life insurance
2
<PAGE>
policies for which the Company or any of its subsidiaries is the
beneficiary, the aggregate amount of such repurchases in excess
of such net proceeds in any twelve-month period may not exceed $1
million.
4. Redemption. (a) All (but not less than all) of the outstanding
----------
shares of Senior Preferred Stock may be redeemed at any time and shall be
required to be redeemed by the Corporation by September 30, 2008, at a
redemption price per share equal to the Liquidation Value per share, plus in
each case an amount payable in cash equal to accrued and unpaid dividends
thereon (the total sum so payable on such a redemption being hereinafter
referred to as the "Redemption Price").
(b) Upon the occurrence of a Change in Control, each holder of shares of
Senior Preferred Stock shall have the right to cause the Corporation to redeem
all or part of the shares of Senior Preferred Stock held by such holder. The
Corporation shall, within 30 days following the date of the consummation of a
transaction resulting in a Change of Control, mail an offer to redeem shares of
Senior Preferred Stock at the Redemption Price to each holder of shares of
Preferred Stock. A holder may accept such offer by written notice to the
Corporation received by the Corporation within 30 days of the offer. Any such
redemption shall occur within 10 days after the end of such 30-day period. The
term "Change of Control" shall have the meaning ascribed to it in the Indenture.
(c) Notice of Redemption. A notice of any proposed redemption shall
--------------------
state: (i) the time and date as of which the redemption shall occur; (ii) the
total number of shares to be redeemed; (iii) the Redemption Price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price; and (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date (unless the Corporation
shall default in payment of the Redemption Price, in which case such dividends
will continue to accrue).
(d) Procedure for Redemption. Notice of any proposed redemption of the
------------------------
shares of Senior Preferred Stock shall be given by mailing a copy of such
notice, postage prepaid, to the holders of record of such shares at their
respective addresses then appearing on the books of the Corporation, not more
than ninety nor less than thirty days prior to the date fixed for said
redemption. On the date fixed for redemption of any shares, the Corporation
shall, and at any time not more than ninety days prior to such date may, deposit
the aggregate of the Redemption Price of the shares to be redeemed with a bank,
trust Corporation, accounting firm or law firm (the "Depositary"), designated in
the notice of such redemption, in trust for payment to the holders of the shares
to be redeemed, and deliver irrevocable written instructions authorizing the
Depositary to apply such deposit solely to the redemption of such shares. Such
written instructions may provide that any of such deposit remaining unclaimed,
at the expiration of two years after the date fixed for such redemption, by
3
<PAGE>
the holder of any of such shares be returned to the Corporation, after which
return such holder shall have no claim against the Depositary but shall have a
claim as an unsecured creditor against the Corporation for the redemption price
thereof (together with accrued and unpaid dividends as provided herein), without
interest. If notice of redemption shall have been given as herein provided,
dividends on the shares so called for redemption shall cease to accrue, such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the Redemption Price) shall cease from and after the time
and date fixed in the notice of redemption as the time and date of redemption
(unless the Corporation shall default in the payment of the Redemption Price, in
which case such rights shall not terminate at such time and date). Upon
surrender (in accordance with the notice of redemption) of the certificate or
certificates for any shares to be so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice of redemption shall
so state), such shares shall be redeemed by the Corporation at the Redemption
Price.
(e) If the Corporation is unable to meet its obligations under Section
4(a) and 4(b) hereof, each holder of Senior Preferred Stock shall have the
option to receive in lieu of payment of the Redemption Price a promissory note
(the "Note") executed by the Corporation, in form and substance satisfactory to
the holder of Senior Preferred Stock, payable to such holder in the original
principal amount at the fixed rate of 16.00% per annum with a maturity date of
and a single payment of principal due on the date six (6) months from the date
of the mandatory redemption required pursuant to Sections 4(a) and 4(b) hereto,
which interest rate shall increase by 1.0% per annum for each ninety (90) day
period beyond such maturity date that the Note remains unpaid.
5. No Senior Classes of Stock. So long as any shares of Senior Preferred
--------------------------
Stock are outstanding, the Corporation may not issue any class or series of
capital stock having dividend or liquidation rights prior to or pari passu in
priority with the Senior Preferred Stock.
6. Liquidation Rights. (a) Upon the dissolution, liquidation or winding
------------------
up of the Corporation, whether voluntary or involuntary, the holders of the
shares of the Senior Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, before any
payment or distribution shall be made on the common stock or on any other class
of stock ranking junior to the Senior Preferred Stock in respect of
distributions upon liquidation or winding up, payment in cash equal to the
Liquidation Value per share, plus a payment in cash equal to all dividends on
such shares accrued and unpaid thereon to the date payment is made available.
(b) After the payment to the holders of the shares of the Senior Preferred
Stock of the full preferential amounts provided for in this paragraph (6), the
holders of the Senior Preferred Stock as such shall have no right or claim to
any of the remaining
4
<PAGE>
assets of the Corporation.
(c) In the event the assets of the Corporation available for distribution
to the holders of shares of the Senior Preferred Stock upon any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to subparagraph (6)(a) above, no such distributions shall be
made upon account of any shares of any other class of stock of the Corporation.
7. Voting Rights. The holders of shares of Senior Preferred Stock shall
-------------
not be entitled to vote except as otherwise required by law and except that, so
long as any shares of Senior Preferred Stock are outstanding, the affirmative
vote of holders of 66 2/3% of the outstanding shares of Senior Preferred Stock
shall be required for the Corporation to incur Debt (except Debt that could be
then incurred without the limitation imposed by Section 1008 of the Indenture),
unless the ratio of (a) the aggregate consolidated principal amount of Debt of
the Corporation and its Restricted Subsidiaries outstanding as of the most
recent available quarterly or annual balance sheet plus the liquidation value of
any preferred stock of the Corporation outstanding as of the most recent
available quarterly or annual balance sheet (other than the liquidation value of
any then outstanding preferred stock ranking junior to the Senior Preferred
Stock in respect of distributions upon liquidation or winding up to the extent
that such liquidation value does not exceed $60 million), 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 or preferred stock
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 8.5 to 1. The term "Debt," "Restricted Subsidiaries," "Incurred,"
"Incurrence," and "Adjusted Consolidated Cash Flow" shall have the meanings
ascribed to them in the Indenture.
8. Stock to be Reserved. The Corporation will at all times reserve and
--------------------
keep available out of its authorized Senior Preferred Stock, solely for the
purpose of paying dividends, such number of shares of Senior Preferred Stock as
shall be required to satisfy the dividend requirements on the Senior Preferred
Stock through September 30, 2008.
9. Retirement of Shares. Shares of Senior Preferred Stock that are
--------------------
redeemed by the Corporation shall be permanently retired and shall not under any
circumstances be reissued.
10. Transfer Agent, Conversion Agent and Registrar. The Corporation will,
----------------------------------------------
so long as any shares of Senior Preferred Stock are outstanding, maintain an
office or
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<PAGE>
agency where such shares may be presented for registration of transfer and
exchange.
SECOND: That such determination of the designation, relative powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof relating to said Senior Preferred Stock was duly made by the Board of
Directors pursuant to the provisions of the Certificate of Incorporation of the
Corporation and in accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation has been signed by a
Vice President of the Corporation and said Corporation has caused its corporate
seal to be hereunto affixed, all as of the 3rd day of September, 1998.
PINNACLE HOLDINGS, INC.
By:_________________________
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<PAGE>
EXHIBIT 4.2
CERTIFICATE OF DESIGNATION OF
THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF
THE SERIES B PREFERRED STOCK OF
PINNACLE HOLDINGS INC.
Pursuant to the provisions of
Section 151 of
the General Corporation Law of
the State of Delaware
Pinnacle Holdings Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies that the Board of
-----------
Directors of the Corporation, by vote at a meeting duly called and held or by
written consent in accordance with the General Corporation Law of the State of
Delaware, adopted the following resolution:
A RESOLUTION OF THE BOARD OF DIRECTORS OF
PINNACLE HOLDINGS INC.
CREATING AND AUTHORIZING
A SERIES OF PREFERRED STOCK DESIGNATED AS
SERIES B PREFERRED STOCK
AND FIXING AND DETERMINING THE
RELATIVE RIGHTS AND PREFERENCES THEREOF
RESOLVED, pursuant to the authority expressly granted by the
provisions of the Restated Certificate of Incorporation of Pinnacle Holdings
Inc., a Delaware corporation (the "Corporation"), the Board of Directors of the
-----------
Corporation hereby creates and authorizes the issuance of a series of preferred
stock, par value $0.001 per share, of the Corporation, to consist of 100 shares,
and hereby fixes the designation, dividend rights, voting powers, rights on
liquidation or dissolution and other preferences and relative participating,
optional or other special rights, and the qualification, limitations or
restrictions of the shares of such series (in addition to any thereof set forth
in the Restated Certificate of Incorporation of the Corporation that are
applicable to all series of the Corporation's preferred stock) as follows:
SECTION 1. DESIGNATION AND NUMBER OF SHARES. The Corporation is
--------------------------------
hereby authorized to issue from time to time a total of 100 shares to be
designated Series B Preferred Stock, with $0.001 par value per share,
having the preferences, qualification, rights and privileges herein set
forth (the "Series B Preferred"). Other capitalized terms used and not
------------------
otherwise defined herein have the meanings set forth in Section 9.
<PAGE>
SECTION 2. RANK.
----
2A. PRIORITY. The Series B Preferred will rank with respect to
--------
dividend rights and rights on liquidation, winding up and dissolution: (a)
senior to the Common Stock and all other Junior Securities; (b) pari passu
with all Pari Passu Securities; and (c) junior to all Senior Securities.
2B. DISTRIBUTIONS. Any distribution made pursuant to dividend
-------------
rights or rights on liquidation, winding up, or dissolution will be made to
the holders of the Corporation's securities in accordance with the relative
priorities set forth above, and any such distribution will fully satisfy
the Corporation's obligations to the holders of a senior security prior to
any distribution to the holders of any junior security.
SECTION 3. DIVIDENDS.
---------
3A. GENERAL OBLIGATION. When and as declared by the
------------------
Corporation's Board of Directors and to the extent permitted under the
General Corporation Law of the State of Delaware (as in effect from time to
time, the "DGCL"), and subject to the terms of any Senior Securities, the
----
Corporation will pay preferential dividends to the holders of the Series B
Preferred as provided in this Section 3. Dividends on each share of the
Series B Preferred (a "Share") will accrue on a daily basis at the rate of
-----
14% per annum of the sum of the Liquidation Value thereof from time to time
plus all accumulated and unpaid dividends thereon from and including the
date of issuance of such Share to and including the first to occur of: (a)
the date on which the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon) is paid to the holder thereof in connection with
the liquidation of the Corporation; or (b) the date on which such Share is
acquired by the Corporation. Such dividends will accrue whether or not
they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues any Share
will be deemed to be its "date of issuance" regardless of the number of
times transfer of such Share is made on the stock records maintained by or
for the Corporation and regardless of the number of certificates which may
be issued to evidence such Share.
3B. DIVIDEND REFERENCE DATES. To the extent not paid on March
------------------------
31, June 30, September 30 or December 31 of any year, beginning with the
first such date after the date of issuance of the Share in question (each a
"Dividend Reference Date"), all dividends which have accrued on each Share
-----------------------
outstanding during the three-month period (or other period, in the case of
the first Dividend Reference Date after the date of issuance of such Share)
ending upon each such Dividend Reference Date will be accumulated and will
remain accumulated and accrued dividends with respect to such Share until
paid to the holder thereof.
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<PAGE>
3C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. If at any time
-----------------------------------------
the Corporation pays less than the total amount of dividends then accrued
with respect to the Series B Preferred, such payment will be distributed
pro rata among the holders thereof based upon the rank and number of Shares
held by each such holder.
SECTION 4. LIQUIDATION. Subject to the terms of any Senior
-----------
Securities, upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series B
Preferred will be entitled to be paid, after any required distribution or
payment is made upon any Senior Securities, before any distribution or
payment is made upon any Junior Securities, and on a pari passu basis (pro
rata according to the relative amounts to be paid) with any required
distribution or payment to be made upon any Pari Passu Securities, an
amount in cash equal to the aggregate Liquidation Value of all Shares held
by such holder (plus all accrued and unpaid dividends thereon), and the
holders of Series A Preferred will not be entitled to any further payment.
If upon any such liquidation, dissolution or winding up of the Corporation
the Corporation's assets to be distributed among the holders of the Series
B Preferred and any Pari Passu Securities are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to
be paid under this Section 4, then the entire assets available to be
distributed to the Corporation's stockholders will be distributed pro rata
among the holders of Series B Preferred and any Pari Passu Securities based
upon the aggregate Liquidation Value (plus all accrued and unpaid
dividends) of the Series B Preferred, and the comparable amount payable to
the holders of any Pari Passu Securities, held by each such holder.
Neither the consolidation or merger of the Corporation into or with any
other entity or entities (whether or not the Corporation is the surviving
entity), nor the sale or transfer by the Corporation of all or any part of
its assets, nor the reduction of the capital stock of the Corporation nor
any other form of recapitalization or reorganization affecting the
Corporation will be deemed to be a liquidation, dissolution or winding up
of the Corporation within the meaning of this Section 4.
SECTION 5. APPROVAL BY SERIES B PREFERRED OF DIVIDENDS AND
-----------------------------------------------
REDEMPTIONS. So long as any Series B Preferred remains outstanding,
-----------
without the prior written consent of the holders of a majority of the
outstanding shares of Series B Preferred, the Corporation will not, nor
will it permit any Subsidiary to, redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities, nor will the Corporation
directly or indirectly pay or declare any dividend or make any distribution
upon any Junior Securities.
SECTION 6. VOTING RIGHTS. Except as otherwise may be required
-------------
herein or by the DGCL, the holders of the Series B Preferred will not be
entitled to notice of any meeting of the stockholders of the Corporation
and will not be entitled to vote, together with any other stockholders or
as a separate class, on any matter to be voted on the by the Corporation's
stockholders.
3
<PAGE>
SECTION 7. REGISTRATION OF TRANSFER. The Corporation will keep at
------------------------
its principal office a register for the registration of Series B Preferred.
Upon the surrender of any certificate representing Series B Preferred at
such place, the Corporation will, at the request of the record holder of
such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the
aggregate the number of Shares represented by the surrendered certificate.
Each such new certificate will be registered in such name and will
represent such number of Shares as is requested by the holder of the
surrendered certificate and will be substantially identical in form to the
surrendered certificate, and dividends will accrue on the Series B
Preferred represented by such new certificate from the date to which
dividends have been fully paid on such Series B Preferred represented by
the surrendered certificate.
SECTION 8. REPLACEMENT. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (provided that an affidavit of the
registered holder will be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any certificate evidencing Share(s),
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation will (at its expense)
execute and deliver in lieu of such certificate a new certificate of like
kind representing the number of Shares of such Series represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends will accrue
on the Series B Preferred represented by such new certificate from the date
to which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
SECTION 9. DEFINITIONS. As used herein, the following terms have
the following respective meanings:
"DGCL" has the meaning set forth in Section 3A.
----
"DIVIDEND REFERENCE DATE" has the meaning set forth in Section
-----------------------
3B.
"JUNIOR SECURITIES" means any capital stock or other equity
-----------------
securities of the Corporation, except for the Series B Preferred,
Senior Securities and Pari Passu Securities.
"LIQUIDATION VALUE" means, in relation to any Share, $1,000,000.
-----------------
"PARI PASSU SECURITIES" means shares of any series of preferred
---------------------
stock of the Corporation created and authorized in accordance with the
Restated Certificate of Incorporation of the Corporation, if the terms
of such series expressly provide
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<PAGE>
that shares of such series will be "Pari Passu Securities" with
respect to the Series B Preferred.
"SENIOR SECURITIES" means (a) shares of the Corporation's Series
-----------------
A Senior Preferred Stock, par value $0.001 per share, and (b) shares
of any other series of preferred stock of the Corporation created and
authorized in accordance with the Restated Certificate of
Incorporation of the Corporation, if the terms of such other series
expressly provide that shares of such series will be "Senior
Securities" with respect to the Series B Preferred.
"SERIES B PREFERRED" has the meaning set forth in Section 1.
------------------
"SUBSIDIARY" means any corporation of which the shares of
----------
outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the board of directors are, at the time as
of which any determination is being made, owned by the Corporation
either directly or indirectly through Subsidiaries.
SECTION 10. AMENDMENT AND WAIVER. No amendment, modification or
--------------------
waiver will be binding or effective with respect to any provision of any of
Sections 1 through 10 hereof without the prior written consent of the
holders of a majority of the Series B Preferred outstanding at the time
such action is taken; provided that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation or entity unless the Corporation has obtained the prior written
consent of the holders of a majority of the Series B Preferred then
outstanding.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, this Certificate has been executed as of the date
specified below by the officer of the Corporation indicated below:
Dated: September 3, 1998
PINNACLE HOLDINGS INC.
By: ______________________________
Name:
Title:
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<PAGE>
THE DISCLOSURE SCHEDULES TO THIS AGREEMENT HAVE BEEN OMITTED PURSUANT TO
ITEM 601(B)(2) OF REGULATION S-K. PINNACLE HOLDINGS INC. AGREES TO FURNISH THESE
SCHEDULES TO THE COMMISSION UPON REQUEST.
