<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1999
Registration Statement No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PINNACLE HOLDINGS INC.
(Exact name of registrant as specified in its governing instruments)
---------------
1549 Ringling Boulevard, 3rd Floor
Sarasota, Florida 34236
(941) 364-8886
(Address, including zip code, and telephone number, including area code, of
registrant's 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)
---------------
Copies of communications to:
CHESTER E. BACHELLER, ESQ. WILLIAM M. HARTNETT, ESQ.
Holland & Knight LLP Cahill Gordon & Reindel
400 North Ashley Drive, Suite 2300 80 Pine Street
Tampa, Florida 33602 New York, New York 10005
(813) 227-8500 (212) 701-3000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered Per Share Price(1) Fee(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share........... 12,305,000 $18.75 $230,718,750 $64,140
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933, as amended, and includes
shares that may be purchased by the Underwriters pursuant to an over-
allotment option.
(2) Calculated based upon the average of high and low prices reported on the
NASDAQ National Market on June 28, 1999, in accordance with Rule 457(c)
under the Securities Act of 1933, as amended.
---------------
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
July 2, 1999
10,700,000 Shares
Pinnacle Holdings Inc.
Common Stock
This is a public offering of common stock of Pinnacle Holdings Inc. We are
offering 10,700,000 shares of common stock of which 2,350,000 are being offered
by the selling stockholders listed under the heading "Selling Stockholders" on
page 59 and 8,350,000 are being offered by us. The international underwriters
are offering 2,140,000 shares outside the United States and Canada and the U.S.
underwriters are offering 8,560,000 shares in the United States and Canada.
Our common stock trades on the Nasdaq National Market under the symbol
"BIGT". On July 1, 1999, the last reported sale price of our common stock was
$23.75 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 9.
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price............................................. $ $
Underwriting discounts and commissions............................ $ $
Proceeds, before expenses, to Pinnacle Holdings Inc. ............. $ $
Proceeds, before expenses, to selling stockholders................ $ $
</TABLE>
Neither the securities and exchange commission nor any state securities
commission has approved or disapproved of these securities or determined or
passed upon the adequacy or accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
We have granted the underwriters the right to purchase up to 1,605,000
additional shares at the public offering price to cover any over-allotments.
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Raymond James & Associates, Inc.
Salomon Smith Barney
Banc of America Securities LLC
The date of this Prospectus is , 1999.
<PAGE>
[PICTURES OF VARIOUS TOWERS]
<PAGE>
[MAP OF U.S. INDICATING COMPANY'S CURRENT
TOWER SITES AND PENDING TOWER SITES.]
<PAGE>
PROSPECTUS SUMMARY
As used in this Prospectus, unless the context otherwise requires, "we,"
"us," "our," "Company" or "Pinnacle" refers to Pinnacle Holdings Inc., the
issuer of the Common Stock, and its subsidiaries. The following summary
contains basic information about us and this offering. It likely does not
contain all the information that is important to you. For a more complete
understanding of this offering, we encourage you to read this entire Prospectus
and the documents we have referred you to.
THE COMPANY
Overview
We are the leading provider of wireless communications site space in the
Southeastern United States. We rent space on communications sites to providers
of wireless communication services such as PCS, cellular, paging, SMR, wireless
data transmission and radio and television broadcasting. We believe renting
communications sites space allows us to achieve the highest cash flow margins
with the lowest level of risk on the capital we invest in the communications
site business. As a result of our extensive base of existing communications
site, we believe that we are well positioned to continue to benefit from the
growth opportunities in the rapidly consolidating tower industry and from the
strong demand for tower rental space fueled by growing demand for wireless
services.
Since our formation in May 1995, we have focused on creating a portfolio of
communications site clusters by concentrating our presence in high growth
markets such as Atlanta, Birmingham, New Orleans, Orlando and Tampa. As of
June 30, 1999, we have completed 279 acquisitions, acquiring 999 communications
sites and have constructed an additional 108 towers. Currently we have
agreements or letters of intent to acquire 1,971 additional communications
sites, including an agreement with Motorola, Inc. ("Motorola") to acquire 499
owned sites, 526 "managed" sites and 833 "leased" sites for $255 million (the
"Motorola Antenna Site Acquisition"). Managed sites are tower or rooftop
communications sites owned by others where we have the exclusive right to
market antenna space on these sites. Leased sites are tower or rooftop
communications sites owned by others that we have a non-exclusive right to
market. The pending Motorola Antenna Site Acquisition will enhance our strong
position in the Southeast, expand our existing presence in the Northeast and
West and introduce us to new markets in the Midwest. Following the closing of
the Motorola Antenna Site Acquisition and the additional communications sites
which are currently subject to agreement or a letter of intent we will have
1,685 owned communications sites, 560 managed communications sites and 833
leased communications sites. This offering is not conditioned upon closing the
Motorola Antenna Site Acquisition. We cannot assure you that we will consummate
the Motorola Antenna Site Acquisition. We had annualized tower rental revenue
and EBITDA on a pro forma basis of $143.8 million and $66.5 million,
respectively for the three months ended March 31, 1999. For the purpose of this
Prospectus, EBITDA on a pro forma basis is defined as earnings (loss) from
operations before depreciation and amortization after giving effect to the pro
forma acquisitions referenced in this Prospectus. See "Our Unaudited Pro Forma
Financial Data."
We currently have over 800 customers renting space on one or more of our
communications sites. Our tenants consist of all forms of wireless
communications providers, operators of private wireless networks and government
agencies including Southern Communications, Nextel, Sprint PCS, PageNet,
Motorola, BellSouth Mobility, MobileMedia Communications, Teletouch, Skytel,
Pagemart, Federal Bureau of Investigation and Bureau of Alcohol, Tobacco &
Firearms. Our customers are generally responsible for the installation of their
own equipment and the incremental utility costs associated with that equipment.
In addition, adding customers on a communications site does not increase
monitoring, maintenance or insurance costs. Therefore, when new customers are
added to a communications site, we are able to increase revenue at low
incremental cost, thereby increasing cash flow margins.
<PAGE>
We believe that "same tower" revenue growth is a meaningful indicator of our
success in growing our business. Same tower revenue growth is measured by
comparing the annualized revenues of our communications sites at the end of a
period to the annualized revenues for the same sites at the end of a prior
period without considering revenues from the communications sites we acquired
during the period. Taking into consideration leases for new tenants as of
December 31, 1998, we experienced same tower revenue growth of approximately
20% for the year ended December 31, 1998 on the base of communications sites we
owned as of December 31, 1997.
Our Business and Growth Strategy
Our objective is to create value both by capitalizing on our position as the
leading provider of wireless communications site rental space in the
Southeastern United States and applying our focused marketing and cluster
enhancing strategy to new markets we may enter, including markets where
Motorola sites are located.
. Marketing and Development Strategy--We aggressively market rental space
on our communications sites to leverage our fixed costs over a broader
base of customers. The key elements of our marketing and development
strategy include:
--owning and assembling clusters of communications sites in high growth
regions, which we believe allows us to offer our customers the ability to
rapidly and efficiently fulfill their network expansion plans across a
particular market or region;
--targeting a diversified customer base that uses differing types of
wireless technologies with different height requirements to maximize the
utilization of our communications sites;
--using our customer relationships and our established reputation as a
highly professional and reliable communications site space provider;
--premarketing communications site rental space to new wireless
communications service providers based on the market intelligence we gain
by tracking FCC filing; and
--using information obtained from our customers concerning their future
expansion plans to guide our acquisition and new construction programs.
. Acquisition Strategy--We believe that growth through acquisition is an
attractive strategy because it allows us to choose the location of our
communications sites, acquire sites with existing tenants and capacity to
add additional tenants and avoid unprofitable "build-to-suit" mandates.
The key elements of our acquisition strategy include:
--targeting population centers and key transportation corridors in
wireless communications markets where there is evidence of high potential
growth;
--selecting communications sites which will allow us to create or enhance
a cluster of communications sites in a given area;
--employing a disciplined process to acquire communications sites that
have existing cash flow and potential for significant future cash flow
growth from additional tenants; and
--committing significant personnel to identifying, negotiating, and
closing communications site acquisitions.
. New Tower Construction Strategy--We also selectively construct new towers
in and around major markets where we already have a presence to enhance
our existing communications site clusters. We do not pursue large build-
to-suit mandates or engage in speculative construction projects. During
1997, 1998 and the first three months of 1999, we constructed 22, 47 and
16
2
<PAGE>
towers, respectively. We estimate that we will identify 80 to 100 new
tower build opportunities in the next year. The key elements of our tower
build program include:
--learning our customers' network build out plans through our sales and
marketing relationships and identifying suitable tower construction sites
based on that information; and
--rapidly beginning construction after identifying an attractive
opportunity.
Our Strengths
We believe the following to be the strengths of our business:
. Focus on Communications Site Rental Business. We focus on the rental of
wireless communications site space as opposed to other aspects of the
tower industry such as site acquisition services or tower construction
services. Furthermore, we do not engage in large scale build-to-suit
programs, preferring instead to focus on our core acquisition strategy
and complimentary selective construction strategy designed to enhance
coverage in targeted markets;
. Communications Site Portfolio. We believe that the size of our portfolio
coupled with our focus on creating and enhancing clusters of
communications sites create significant competitive advantages by
enabling us to provide our customers with multiple communications sites
in a given area;
. Successful Acquisition Strategy. Our acquisition process identifies
communications sites that typically have existing cash flow and enhance
our existing portfolio. We have demonstrated the ability to identify,
successfully negotiate the purchase of, and integrate what we believe to
be value enhancing acquisitions; and
. Ability to Increase Rental Revenue. Our aggressive marketing efforts to
all major wireless communication providers have resulted in the signing
of a significant number of new tenants over the last four years.
Additional tenants increase the operating leverage of our communications
site portfolio and generally increase our overall cash flow margins. We
have generated a cumulative increase in total monthly revenues for the 29
towers acquired in 1995 of approximately 133% through December 31, 1998.
In addition, the 119 towers acquired in 1996 and the 134 towers acquired
in 1997 have generated cumulative increases in total monthly revenues of
approximately 68% and 14%, respectively, through December 31, 1998.
Recent Developments
Motorola Antenna Site Acquisition
On June 29, 1999, we executed a definitive agreement to acquire 1,858
communications sites, including 499 owned sites, 526 managed sites, and 833
leased sites from Motorola for $255 million plus fees and expenses. We will
finance the Motorola Antenna Site Acquisition by (1) drawing down approximately
$225 million under our credit facility, of which $25 million was advanced by a
letter of credit issued to Motorola on June 29, 1999, and (2) (x) drawing on
our credit facility to the extent additional borrowing is then available (y)
applying a portion of the net proceeds from this offering, or (z) a combination
of both (x) and (y) above. See "Description of Indebtedness" and "Description
of Capital Stock." The Motorola communications sites are largely clustered in
urban areas throughout the United States and Canada with over 50% of the owned
sites overlapping with our existing communications site portfolio. We believe
that the Motorola Antenna Site Acquisition greatly enhances our ability to
offer our customers attractive tower clusters in high growth markets and
transportation corridors. In addition, the managed sites we expect to acquire
in the Motorola Antenna Site Acquisition will enable us to provide our
customers premier urban rooftop sites such as the World Trade Center in New
York, Sears Tower in Chicago and the Allied Bank Building in Houston. We
believe these sites will
3
<PAGE>
allow us to further diversify our customer base by providing us with an
inventory of high altitude sites in urban areas. For the three months ended
March 31, 1999, the Motorola communications sites generated $20.9 million and
$7.1 million in revenue and EBITDA on a pro forma basis, respectively.
This offering is not conditioned upon the consummation of the Motorola
Antenna Site Acquisition and we cannot assure you that we will consummate the
Motorola Antenna Site Acquisition. See "Risk Factors--There may be risks
associated with the Motorola Antenna Site Acquisition."
We have executed letters of intent or purchase agreements with respect to
acquisitions for an aggregate purchase price of approximately $40 million in
the aggregate. Among the communication sites we expected to acquire are (1)
twenty-eight radio towers, associated building and equipment from SCANA
Communications, Inc. (the "SCANA Acquisition") for a purchase price of
approximately $15 million and (2) seventy-three communications towers and
associated equipment, ground leases and leases of communications site space to
tenants from Meretel Communications, Limited Partnership (the "Meretel
Acquisition") for a purchase price of approximately $19 million. We expect to
pay for the SCANA Acquisition and approximately $6 million of the purchase
price of the Meretel Acquisition with either borrowings under our Credit
Facility, proceeds from this issuance of $20 million aggregate liquidation
preference of senior preferred pay-in-kind stock of Pinnacle, series B, to an
affiliate of Deutsche Bank Securities Inc. pursuant to a commitment letter
dated July 2, 1999 between us and such affiliate of Deutsche Bank Securities
Inc., which we would expect to redeem with proceeds from this offering,
(3) proceeds from the issuance of another senior preferred pay-in-kind stock of
Pinnacle that we may seek to issue to one or more of the underwriters or these
affiliates or some other institutional investor or (4) a combination of the
foregoing. We expect to pay for the $14 million balance of the Meretel
Acquisition and approximately $5 million of smaller pending acquisitions by (1)
assuming that this offering is consummated prior to the closing of the
foregoing acquisitions, applying proceeds therefrom or (2) if this offering is
not consummated prior to the completion of such acquisitions, by issuing pay-
in-kind preferred stock or by borrowings under our Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Capital Stock."
4
<PAGE>
THE OFFERING(1)
The offering of 8,560,000 shares of our common stock in the United States
and Canada (the "U.S. Offering") and the offering of 2,140,000 shares of our
common stock outside the United States and Canada (the "International
Offering") are collectively referred to in this prospectus as the "offering."
<TABLE>
<S> <C>
Common Stock offered:
By Pinnacle............ 8,350,000 shares
By the Selling
Stockholders.......... 2,350,000 shares
-------------
Total................. 10,700,000 shares
-------------
-------------
Common Stock to be
outstanding after the
Offering (2)........... 40,375,951 shares
Use of Proceeds......... We intend to use the net proceeds of this offering to
initially repay a limited amount of debt under our
credit facility, invest a substantial portion of the
proceeds in short-term liquid securities and then, upon
the expected consummation of the Motorola Antenna Site
Acquisition, repay a substantial amount of debt under
our credit facility, pay for a portion of the purchase
price of the Motorola Antenna Site Acquisition, fund
future acquisitions and redeem any pay-in-kind
preferred stock which we may issue to fund such
acquisitions prior to the closing of this offering. In
the event that the Motorola Antenna Site Acquisition is
not consummated, we shall apply the net proceeds of
this offering as described above, except that the
proceeds that would otherwise be used to pay for the
Motorola Antenna Site Acquisition will be used to
further reduce our debt and to fund acquisitions. The
net proceeds of the selling stockholders will not be
available to Pinnacle. See the "Use of Proceeds"
section of this Prospectus for further details.
Risk Factors............ See "Risk Factors" beginning on page 9 for a discussion
of factors you should carefully consider before
deciding to invest in the Common Stock.
NASDAQ National Market
Symbol................. "BIGT"
</TABLE>
- --------
(1) Does not include 1,605,000 shares of Common Stock subject to a 30-day over-
allotment option granted to the underwriters half by us and half by the
Selling Stockholders.
(2) Excludes approximately 3,000,000 shares of Common Stock reserved for
issuance pursuant to our stock incentive plan.
Our headquarters are located at 1549 Ringling Boulevard, Third Floor,
Sarasota, Florida 34236, and our telephone number is (941) 364-8886. Our
website is www.pinnacletowers.com. The information provided on our website is
not incorporated into this Prospectus.
5
<PAGE>
OUR SUMMARY HISTORICAL AND UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents our summary historical and unaudited pro forma
consolidated financial data. The summary historical consolidated financial data
for the period of inception (May 3, 1995) through December 31, 1995 and for
each of the three years ended December 31, 1996, 1997 and 1998 were derived
from our consolidated historical financial statements contained elsewhere in
this document including their related Notes, which have been audited by
PricewaterhouseCoopers LLP, independent certified public accountants. The
unaudited consolidated statement of operations data for the three months ended
March 31, 1998 and 1999 are derived from our unaudited consolidated financial
statements, which are contained elsewhere herein. The unaudited pro forma
consolidated financial data as of and for the three months ended March 31, 1998
and 1999 were derived from our Unaudited Pro Forma Consolidated Financial
Statements contained elsewhere in this document. The summary financial
information should be read in conjunction with, and is qualified in its
entirety by, the information contained in our audited consolidated financial
statements and their related Notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Our Unaudited Pro Forma
Financial Data" and "Our Selected Historical Consolidated Financial Data"
included elsewhere in this Prospectus.
The following summary unaudited pro forma statement of operations data have
been prepared to reflect the results of our operations as if each of the
following had been completed as of January 1, 1998:
. all individually insignificant acquisitions completed during 1998;
. acquisitions of other rental communications sites completed since January
1, 1999;
. the Southern Towers Acquisition described elsewhere in this Prospectus.
See "Business--Our Acquisition Strategy;"
. the MobileMedia Acquisition described elsewhere in this Prospectus. See
""Business--Our Acquisition Strategy;''
. the Motorola Antenna Site Acquisition;
. other individually insignificant acquisitions of rental communications
sites businesses for which we have entered into agreements or letters of
intent to acquire as of June 30, 1999, and that we believe are probable;
. related financing of the acquisitions referred to above;
. the initial public stock offering in February 1999; and
. the offering of the Common Stock and the application of the net proceeds
thereunder as described under "Use of Proceeds."
To the extent not consummated prior to April 1, 1999, the pro forma balance
sheet data as of March 31, 1999 have been prepared as if each such transaction
referred to above was completed by March 31, 1999. The pro forma adjustments
are based upon available information and certain assumptions that we believe
are reasonable. The pro forma consolidated financial data do not purport to
present what our results of operations or financial position would actually
have been, or to project our results of operations or financial position at any
future period.
6
<PAGE>
<TABLE>
<CAPTION>
Period from Pro Forma
Inception Three as Adjusted
(May 3, Months for three
1995) Pro Forma Ended Months
through Years Ended December 31, as Adjusted March 31, Ended
December 31, -------------------------- December 31, ----------------- March 31,
1995 1996 1997 1998 1998 1998 1999 1999
------------ ------- ------- -------- ------------ ------- -------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Site rental revenue..... $ 733 $ 4,842 $12,881 $ 32,019 $142,198 $ 5,373 $ 12,008 $ 35,956
Direct site operating
expenses, excluding
depreciation and
amortization........... 181 1,135 2,633 6,166 59,749 851 2,233 14,587
------ ------- ------- -------- -------- ------- -------- ---------
Gross profit, excluding
depreciation and
amortization........... 552 3,707 10,248 25,853 82,449 4,522 9,775 21,369
Other expenses:
General and
administrative (a)..... 306 916 1,367 4,175 12,967 420 843 2,821
Corporate development
(a).................... 369 1,421 3,723 6,382 6,382 1,289 1,711 1,711
State franchise, excise
and minimum taxes...... -- 26 67 686 686 70 201 201
Depreciation............ 282 2,041 6,335 22,513 75,087 2,951 8,994 19,187
------ ------- ------- -------- -------- ------- -------- ---------
Loss from operations.... (405) (697) (1,244) (7,903) (12,673) (208) (1,974) (2,551)
Interest expense........ 181 1,155 6,925 12,300 31,216 3,103 3,900 6,589
Amortization of original
issue discount and debt
issuance costs......... 59 164 292 16,427 20,565 610 5,429 5,429
------ ------- ------- -------- -------- ------- -------- ---------
Loss before
extraordinary item..... (645) (2,016) (8,461) (36,630) (64,454) (3,921) (11,303) (14,569)
====== ======= ======= ======== ======== ======= ======== =========
Extraordinary loss from
Extinguishment of
debt................... -- -- -- 5,641 5,641 -- -- --
------ ------- ------- -------- -------- ------- -------- ---------
Net loss................ (645) 2,016 (8,461) (42,271) (70,095) (3,921) (11,303) (14,569)
====== ======= ======= ======== ======== ======= ======== =========
Dividends and accretion
on preferred stock..... -- -- -- 3,094 -- -- 2,930 --
------ ------- ------- -------- -------- ------- -------- ---------
Loss attributable to
common stock........... $ (645) $(2,016) $(8,461) $(45,365) $(70,095) $(3,921) $(14,233) $ (14,569)
====== ======= ======= ======== ======== ======= ======== =========
Basic loss per common
share:
Loss before
extraordinary item.... (6.31) (8.10) (27.28) (94.95) (1.60) (.43) (.79) (.36)
Extraordinary item..... -- -- -- (13.48) (.14) -- -- --
------ ------- ------- -------- -------- ------- -------- ---------
Net loss............... $(6.31) $ (8.10) $(27.28) $(108.43) $ (1.74) $ (.43) $ (0.79) $ (.36)
====== ======= ======= ======== ======== ======= ======== =========
Weighted average number
of shares of common
stock.................. 102 249 310 418 40,376 9,116 18,068 40,376
Other Operating Data:
Tower Level Cash Flow
(b).................... $ 552 $ 3,707 $10,248 $ 25,853 $ 82,449 $ 4,522 $ 9,775 $ 21,369
Tower Level Cash Flow
Margin (c)............. 75.3% 76.6% 79.6% 80.7% 58.0% 84.2% 81.4% 59.4%
Adjusted EBITDA (b)..... $ 246 $ 2,791 $ 8,881 $ 21,678 $ 69,482 $ 4,102 $ 8,932 $ 18,548
Adjusted EBITDA Margin
(c).................... 33.6% 57.6% 68.9% 67.7% 48.9% 76.3% 74.4% 51.6%
EBITDA Before Franchise,
Excise and Minimum
Taxes (b).............. $ (123) $ 1,370 $ 5,158 $ 15,296 $ 63,100 $ 2,813 $ 7,221 $ 16,837
EBITDA Before Franchise,
Excise and Minimum
Taxes Margin (c)....... -- 28.3% 40.0% 47.8% 44.4% 52.4% 60.1% 46.8%
EBITDA (b).............. $ (123) $ 1,344 $ 5,091 $ 14,610 $ 62,414 $ 2,743 $ 7,020 $ 16,636
EBITDA Margin (c)....... -- 27.8% 39.5% 45.6% 43.9% 51.1% 58.5% 46.3%
Number of Sites: (d)
Beginning of period.... 0 33 156 312 -- 312 876 --
Sites acquired during
the period............ 29 119 134 517 -- 238 109 --
Sites constructed
during the Period..... 4 4 22 47 -- 9 16 --
End of period.......... 33 156 312 876 -- 247 1,001 3,078
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
December 31, As Adjusted
------------------------------------ March 31, March 31,
1995 1996 1997 1998 1999 1999
------- ------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 31 $ 47 $ 1,694 $ 13,801 $ 1,276 $ 1,276
Working capital
deficit................ (1,077) (1,477) (12,790) (9,270) (14,740) (15,151)
Tower assets, net....... 11,532 48,327 127,946 473,942 553,889 893,561
Total assets............ 13,972 55,566 143,178 516,148 584,527 976,976
Total debt.............. 5,523 30,422 120,582 433,218 353,878 550,306
Mandatorily redeemable
stock:
Senior Preferred
Stock................. -- -- -- 29,882 -- --
Class B Common Stock... 1,200 1,200 1,761 1,761 -- --
Class D Common Stock... -- -- -- -- -- --
Junior Preferred Stock.. -- -- -- 59,929 -- --
Common Stock............ -- -- -- -- 32 40
Additional paid-in
capital................ 7,051 24,881 25,876 33,137 276,566 464,293
Stock subscription
receivable............. (180) -- -- -- -- --
Common stock warrants... -- -- -- 1,000 -- --
Accumulated deficit..... (645) (2,661) (11,123) (53,394) (64,697) (64,697)
------- ------- -------- -------- -------- --------
Stockholders' equity.... $ 6,226 $22,220 $ 14,753 $ 40,672 $211,901 $399,636
</TABLE>
- --------
(a) "General and administrative" expenses represent those costs directly
related to the day-to-day management and operation of our communications
sites towers. "Corporate development" expenses represent costs incurred in
connection with acquisitions and the development of new business
initiatives, and consists primarily of allocated compensation, benefits and
overhead costs that are not directly related to the administration or
management of existing sites.
(b) "Tower Level Cash Flow" is defined as site rental revenue minus site
operating expenses, excluding depreciation and amortization. "Adjusted
EBITDA" represents earnings (loss) from operations before depreciation,
amortization, corporate development expenses and state franchise, excise
and minimum taxes. "EBITDA Before Franchise, Excise and Minimum Taxes"
represents earnings (loss) from operations before depreciation,
amortization and state franchise, excise and minimum taxes. "EBITDA"
represents earnings (loss) from operations before depreciation and
amortization. We have included Tower Level Cash Flow, Adjusted EBITDA,
EBITDA Before Franchise, Excise and Minimum Taxes and EBITDA in Other
Operating Data because we believe such information may be useful to you in
evaluating our ability to service our debt. Tower Level Cash Flow, Adjusted
EBITDA, EBITDA Before Franchise, Excise and Minimum Taxes 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
our ability to meet our cash needs or as an indication of our operating
performance. Moreover, Tower Level Cash Flow, Adjusted EBITDA, EBITDA
Before Franchise, Excise and Minimum Taxes and EBITDA are not standardized
measures and may be calculated in a number of ways. Accordingly, the Tower
Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise, Excise and
Minimum Taxes and EBITDA information provided may not be comparable to
other similarly titled measures provided by other companies.
(c) Represents Tower Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise,
Excise and Minimum Taxes and EBITDA each as a percentage of site rental
revenue.
(d) Includes sites that we manage, including 13 communications sites we
acquired in 1997, 17 communications sites we acquired in 1998, and, 1,359
communications sites we will acquire upon the consummation of the Motorola
Antenna Site Acquisition.
8
<PAGE>
RISK FACTORS
Before you invest in our Common Stock, you should be aware that the
occurrence of any of the events described in this Risk Factor section and
elsewhere in this Prospectus could have a material adverse effect on our
business, financial condition and results of operations. You should carefully
consider these risk factors, together with all of the other information
included in this Prospectus, before you decide to purchase our Common Stock.
This Prospectus contains certain forward-looking statements that involve risks
and uncertainties.
We have a history of operating losses. We have generated losses from
operations and negative cash flow, and we may continue to do so.
We have incurred losses from continuing operations in each of the fiscal
years since our inception. As a result, for the years ended December 31, 1997
and 1998 and the three months ended March 31, 1999, our earnings were
insufficient to cover combined fixed charges by approximately $0.8 million,
$10.8 million and $1.7 million, respectively. We expect to continue to
experience net losses in the future, principally due to interest charges on
outstanding indebtness and substantial charges relating to depreciation of our
existing and future assets. These net losses may be greater than the net
losses we have experienced in the past.
Our substantial indebtedness could adversely affect our financial condition.
We have now, and after this offering will continue to have, a high level of
indebtedness. As of March 31, 1999, on a pro forma basis after giving effect
to this offering, the application of the proceeds therefrom and the
consummation and financing of the pending acquisitions, we would have had
$550.3 million of indebtedness outstanding.
Our high level of indebtedness could have important consequences to you.
For example, it could:
. make it more difficult for us to satisfy our obligations with respect to
our indebtedness;
. increase our vulnerability to general adverse economic and industry
conditions;
. limit our ability to obtain additional financing;
. require the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness reducing the availability of such cash flow to fund our
growth strategy, working capital, capital expenditures or other general
corporate purposes;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry; and
. place us at a competitive disadvantage relative to competitors with less
debt.
We may incur substantially more debt. This could further exacerbate the risks
described above.
We may incur substantial additional debt in the future. The terms of our
outstanding debt do not fully prohibit us from doing so. If new debt is added
to our current levels, the related risks that we and they now face could
intensify. See "Capitalization," "Our Selected Historical Consolidated
Financial Data " and "Description of Indebtedness."
We will require a significant amount of cash to service our indebtedness and
meet our other liquidity needs. Our ability to generate cash depends on many
factors beyond our control.
Our ability to meet our debt service and other obligations will depend on
our future performance, which is subject to general economic, financial,
competitive, legislative, regulatory and other factors that
9
<PAGE>
are beyond our control. We anticipate the need for substantial capital
expenditures in connection with our future expansion plans.
If we are unable to generate sufficient cash flow from operations to service
our indebtedness and fund our other liquidity needs, we 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 our 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, and
the implementation of any of these alternative strategies could have a negative
impact on the value of the Common Stock. We may also need to refinance all or a
portion of our debt on or before maturity. We cannot assure you that we will be
able to refinance any of our debt on commercially reasonable terms or at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
There may be risks associated with the Motorola Antenna Site Acquisition.
On June 29, 1999, we entered into an agreement, subject to certain
conditions, with Motorola to purchase 1,858 communication sites, including 499
owned sites, 526 managed sites and 833 leased sites for a purchase price of
$255 million (the "Purchase Agreement"). The Motorola Antenna Site Acquisition
would have increased our revenues and EBITDA on a pro forma basis by $85.1
million and $26.8 million, respectively, for the year ended December 31, 1998.
The Motorola Antenna Site Acquisition and the terms of the Purchase Agreement
may be subject to anti-trust clearance. We cannot assure you that the Motorola
Antenna Site Acquisition will receive anti-trust law clearance, if required, or
that the Motorola Antenna Site Acquisition will ultimately be consummated.
Additionally, most of the leases to be assumed in connection with the Motorola
Antenna Site Acquisition are cancelable on short-term notice. We cannot assure
you that tenants on the sites obtained in the Motorola Antenna Site Acquisition
will not cancel their leases.
Due to timing, logistical and other constraints, we may not have the ability
to access, analyze and verify all information regarding title and other issues
related to the Motorola sites prior to closing the Motorola Antenna Site
Acquisition. If within the 18 month period (three years for certain title
matters) following the closing of the Motorola Antenna Site Acquisition, we
determine that Motorola breaches any of the representations or warranties set
forth in the Purchase Agreement, we have the right to obtain indemnity from
Motorola for certain losses suffered as a result of any such breach of an
amount not to exceed approximately $63 million. However, except as otherwise
set forth above, we will not otherwise be compensated for defects in title or
other site-related and other issues. Accordingly, our ability to recover
damages we may suffer as a result of any such defects may be limited.
We are a holding company. Our only source of cash is from distributions from
our subsidiaries.
We are a holding company with no operations of our own and conduct all of
our business through our subsidiaries. Our only significant asset is the
outstanding capital stock of our subsidiaries. We will be wholly dependent on
the cash flow of our subsidiaries and dividends and distributions from our
subsidiaries to us in order to service our 10% senior discount notes due 2008
and any future obligations of our holding company. The ability of our
subsidiaries to pay such dividends and distributions will be subject to, among
other things, the terms of any debt instruments of our subsidiaries then in
effect and applicable law. Our rights, and the rights of our creditors, to
participate in the distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization will be subject to the prior claims
of such subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case our claims would
still be subject to the claims of any secured creditor of
10
<PAGE>
such subsidiary. As of March 31, 1999, after giving effect to the acquisitions
referred to herein on a pro forma as adjusted basis, the aggregate amount of
debt and other obligations of our subsidiaries (including trade payables
current, long-term and other liabilities) plus other debt would have been
approximately $577.3 million.
We will not be able to effect our business plan if we do not have the required
cash.
Our business plan is materially dependent upon the acquisition of additional
suitable communications sites at prices we consider reasonable in light of the
revenue we believe we will be able to generate from such sites when acquired.
We will need significant additional capital to finance future acquisitions as
well as our tower construction plan and other capital expenditures. During
1996, 1997 and 1998, we made capital investments aggregating approximately
$42.2 million, $88.4 million and $372.1 million, respectively, in
communications site acquisitions, site upgrades and new tower construction. We
estimate capital investments in 1999 and 2000 will be approximately $500.1
million and $120 million, respectively. We cannot assure you that our actual
cash requirements will not materially exceed our estimated capital requirements
and available capital. We historically have financed our capital expenditures
through a combination of borrowings under bank credit facilities, a senior
discount notes offering, bridge financings, equity issuances, seller financing
and cash flow from operations. Significant additional acquisition or tower
construction opportunities will create a need for additional capital financing.
If our revenue and cash flow are not as expected, or if our borrowing base is
reduced as a result of operating performance, we may have limited ability to
access necessary capital. We cannot assure you that adequate funding will be
available as needed or, if available, on terms acceptable to us or permitted
under the terms of our existing indebtedness. The terms of additional debt
financing could have important consequences to you. See "--The terms of our
indebtedness impose significant restrictions on us." Insufficient available
funds may require us to scale back or eliminate some or all of our planned
expansion. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The terms of our indebtedness impose significant restrictions on us.
Certain provisions of the indentures governing our 10% senior discount notes
due 2008 contain covenants that restrict our ability to:
. incur additional indebtedness;
. incur liens;
. make investments;
. pay dividends or make certain other restricted payments;
. consummate certain asset sales;
. consolidate with any other person; and
. sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets.
In addition, our credit facility requires us to comply with certain
financial ratios and tests, under which we are required to achieve certain
financial and operating results. Our ability to meet these financial ratios and
tests may be affected by events beyond our control, and there can be no
assurance that they will be met. In the event of a default under our credit
facility, the lenders may declare the indebtedness immediately due and payable,
which would result in a default under the indenture governing our 10% senior
discount notes. We cannot assure you that we will have sufficient assets to pay
indebtedness outstanding under our credit facility and our 10% senior discount
notes. Any refinancing of our credit facility is likely to contain similar
restrictive covenants. See "Description of Indebtedness."
11
<PAGE>
We depend on acquisitions and the integration of those acquisitions into our
business.
Our business plan is materially dependent upon the acquisition of suitable
communications sites at prices we consider reasonable in light of the revenue
we believe we will be able to generate from these sites when acquired. Since
our inception, however, the price of acquisitions within the industry have
generally increased over time. Additionally, we compete with certain wireless
communications providers, site developers and other independent communications
site owners and operators for acquisitions of communications sites, some of
which have greater financial and other resources than we have. Increased demand
for acquisitions may result in fewer acquisition opportunities for us as well
as higher acquisition prices. Our inability to grow by acquisition or to
accurately estimate the amount of revenue that will be generated from such
acquisitions may effect us adversely. Although we believe that opportunities
may exist for us to grow through acquisitions, we cannot assure you that we
will be able to identify and consummate acquisitions on terms we find
acceptable. Certain provisions of our credit facility and our 10% senior
discount notes may limit our ability to effect acquisitions. See "--Our
substantial indebtedness could adversely affect our financial condition."
Further, we cannot assure you that we will be able to profitably manage and
market the space on additional communications sites acquired or successfully
integrate acquired sites with our operations and sales and marketing efforts
without substantial costs or delays. Acquisitions involve a number of potential
risks, including the potential loss of customers, increased leverage and debt
service requirements, combining disparate company cultures and facilities and
operating sites in geographically diverse markets. Accordingly, we cannot
assure you that one or more of our past or future acquisitions may not have a
material adverse effect on our financial condition and results of operations.
If we fail to protect our rights against persons claiming superior rights in
our communications sites, our business may be adversely affected.
Our real property interests relating to our communications sites consist of
fee interests, leasehold interests, private easements and licenses, easements
and rights-of-way. We generally obtain title insurance on fee properties we
acquire and rely on title warranties from sellers. Our ability to protect our
rights against persons claiming superior rights in communications sites depends
on our ability to:
. recover under title policies, the policy limits of which may be less than
the purchase price of the particular site;
. in the absence of insurance coverage, realize on title warranties given
by the sellers, which warranties often terminate after the expiration of
a specific period, typically one to three years; and
. realize on title covenants from landlords contained in leases.
The loss of any significant customer could adversely affect our business.
We have certain customers that account for a significant portion of our
revenue. MobileMedia Communications and its affiliates and Southern
Communications and certain of its affiliates would have accounted for
approximately 24% and 11%, respectively, of our revenue, on a run rate basis,
at December 31, 1998. After the Motorola Antenna Site Acquisition, Nextel will
represent approximately 13% of our revenues. Southern Communications holds
leases with initial terms of 10 years each. MobileMedia Communications holds a
lease with an initial term of 15 years. The loss of one or more of these major
customers, or a reduction in their utilization of our communications site
rental space due to their insolvency or other inability or unwillingness to
pay, could have a material adverse effect on our business, results of
operations and financial condition.
There can be no assurance that MobileMedia Communications will be able to
manage its operations successfully and meet its obligations under its lease. In
the event of a default by MobileMedia Communications as to the payment of rent,
we have the right to terminate its lease with respect to
12
<PAGE>
either a particular site space or all site spaces. Any default by MobileMedia
Communications with respect to some or all of the site spaces covered by its
lease, could have a material adverse effect on our business, operating results
and financial position.
There are significant risks associated with construction of new towers.
As of March 31, 1999, we had 11 towers under construction and 50 additional
tower projects in various stages of development. The success of our growth
strategy is dependent in part on our ability to construct new towers. Such
construction can be delayed by factors beyond our control, 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. Additionally, we cannot assure you that build
opportunities will become available that meet our economic criteria. Our
expansion plans call for a significant increase in construction activity. We
cannot assure you that we will be able to overcome the barriers to new
construction or that the number of towers planned for construction will be
completed. Our failure to complete the necessary construction could have a
material adverse effect on our business, financial condition and results of
operations.
We compete with companies that have greater financial resources.
We face competition for customers from various sources, including:
. wireless communications providers and utility companies that own and
operate their own communications site networks and lease communications
site space to other carriers;
. site development companies that acquire space on existing communications
sites for wireless communications providers and manage new tower
construction;
. other independent communications site companies; and
. traditional local independent communications site operators.
Wireless communications providers that own and operate their own
communications site networks generally are substantially larger and have
greater financial resources than we have. We believe that site 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 communications site rental companies.
We believe that competition for communications site acquisitions will increase
and that additional competitors will enter the tower rental market, certain of
which may have greater financial and other resources than we have. See
"Business--Our Competition."
Our business depends on demand for wireless communications.
Substantially all of our revenue is derived from leases of communications
site space, most of which are with wireless communications providers.
Accordingly, our future growth depends, to a considerable extent, upon the
continued growth and increased availability of cellular and other wireless
communications services. We cannot assure you 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, personal
communications services ("PCS"), fixed microwave, Specialized Mobile Radio
("SMR"), enhanced specialized mobile radio ("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 seven for PCS) within a
13
<PAGE>
geographic market competing for subscribers. The demand for rental space on our
communications sites is dependent on a number of factors beyond our control,
including the following:
. demand for wireless services;
. financial condition and access to capital of wireless communications
providers;
. strategy of wireless communications providers with respect to owning or
leasing communications sites;
. government licensing of broadcast rights;
. changes in telecommunications regulations; and
. general economic conditions.
The demand for space on our communications sites 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 our rental communications sites.
In addition, a downturn in a particular wireless segment as a result of
technological competition or other factors beyond our control could adversely
affect the demand for rental communications sites. Advances in technology could
also reduce the need for site-based transmission and reception. In addition,
wireless services providers often enter into "roaming" and "resale"
arrangements that permit providers to serve customers in areas where they do
not have facilities. Specifically, in most cases, these arrangements are
intended to permit a provider's customers to obtain service in areas outside
the provider's license area or, in the case of resale arrangements, to permit a
provider that does not have any licenses to enter the wireless marketplace.
Current Federal Communications Commission ("FCC") rules, which are subject
to sunset requirements that vary from service to service and market to market,
also give licensed wireless service providers the right to enter into roaming
and resale arrangements with other providers licensed to serve overlapping
service areas. Such roaming and resale arrangements could be viewed by some
wireless service providers as superior alternatives to constructing their own
facilities or leasing space on communications sites that we own. If such
arrangements were to become common, there could be a material adverse effect on
our prospects, financial condition and results of operations. See "Business--
Industry Background." The occurrence of any of these factors could have a
material adverse effect on our financial condition and results of operations.
Our business requires compliance and approval with regulatory authorities.
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 communications sites 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. 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 our 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 our ability to respond to customer demand. In
addition, such regulations increase costs associated with new
14
<PAGE>
tower construction. We cannot assure you 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 us. Such factors could have a material adverse effect on
our future growth. Our customers may also become subject to new regulations or
regulatory policies that adversely affect the demand for tower sites.
Our growth strategy will be affected by our 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. We cannot assure you that we can obtain the permits,
licenses and zoning relief necessary to continue the expansion of our
communications site rental business. The failure to obtain such permits,
licenses and zoning relief would have a material adverse effect on our
business, financial condition and results of operations.
Our success depends upon our retaining key executives.
Our success depends to a significant degree upon the continued contributions
of key management, engineering, sales and marketing, customer support and
finance personnel, some of whom may be difficult to replace. Although we
maintain employment agreements with certain of our employees, we cannot assure
you that the services of such personnel will continue to be available to us. We
do not maintain key man life insurance policies on our executives that would
adequately compensate us for any loss of services of such executives. The loss
of the services of these executives could have a material adverse effect on our
business.
Competing technologies and other alternatives could reduce the demand for our
services.
Most types of wireless services currently require ground-based network
facilities, including communications sites, for transmission and reception. The
extent to which wireless service providers lease such communications sites
depends on a number of factors beyond our control, including the level of
demand for such wireless services, the financial condition and access to
capital of such providers, the strategy of providers with respect to owning or
leasing communications sites, government licensing of communications services,
changes in telecommunications regulations and general economic conditions. In
addition, wireless service providers frequently enter into agreements with
competitors allowing each other to utilize one another's wireless
communications facilities to accommodate customers who are out of range of
their home provider's services. Such agreements may be viewed by wireless
service providers as a superior alternative to leasing space for their own
antenna on communications sites we own. The proliferation of such agreements
could have a material adverse effect on our business, financial condition or
results of operations.
The emergence of new technologies that do not require terrestrial antenna
sites and can be substituted for those that do also could have a negative
impact on our operations. For example, the FCC has granted license applications
for four low-earth orbiting satellite systems that are intended to provide
mobile voice and data services. In addition, the FCC has issued licenses for
several low-earth orbiting satellite systems that are intended to provide
solely data services. Although such systems are highly capital-intensive and
technologically untested, mobile satellite systems could compete with land-
based wireless communications systems, thereby reducing the demand for the
infrastructure services we provide. The occurrence of any of these factors
could have a material adverse effect on our business, financial condition or
results of operations.
We are subject to environmental laws that impose liability without regard to
fault and environmental regulations that could adversely affect our operations.
Our 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,
15
<PAGE>
materials or wastes. Under certain of these laws, we could be held strictly,
jointly and severally liable for the remediation of hazardous substance
contamination as its facilities or at third-party waste disposal sites and also
could be held liable for any personal or property damage related to such
contamination. Although we believe that we are in substantial compliance with
and have no material liability under all applicable environmental laws, there
can be no assurance that the costs of compliance with existing or future
environmental laws and liability related thereto will not have a material
adverse effect on our business, financial condition or results of operations.
The FCC requires tower owners subject to the agency's antenna structure
registration program to comply at the time of registration with federal
environmental rules which may restrict the siting of towers. Under these rules,
tower owners are required initially to identify whether proposed sites are in
environmentally sensitive locations. If so, the tower owners must prepare and
file environmental assessments, which must be reviewed by the FCC staff prior
to registration and construction of the particular towers.
If we sustain damage to our communications sites in excess of our insurance
coverage, our business could be adversely affected.
Our communications sites are subject to risks from vandalism and risks
associated with natural disasters such as tornadoes, hurricanes, fires and
earthquakes. We maintain certain insurance to cover the cost of replacing
damaged communications sites and general liability insurance to protect us in
the event of an accident involving a communications site, but we do not
maintain business interruption insurance. Accordingly, damage to a group of our
communications sites could result in a significant loss of revenue and could
have a material adverse effect on our results of operations and financial
condition. In addition, a communications site accident for which we are
uninsured or underinsured could have a material adverse effect on our financial
condition or results of operations.
Certain of our stockholders have the power to control our business. Such
stockholders' interests may not be aligned with yours.
ABRY Broadcast Partners II, L.P. ("ABRY II"), our primary stockholder, holds
approximately 25.6% of our outstanding voting stock, and will own approximately
15.1% of our outstanding voting stock after this offering, and holds four of
seven seats on our board of directors. Therefore, ABRY II has the power to
exercise control over our business, policies and affairs. Moreover, subject to
contractual restrictions and general fiduciary duties, we are not prohibited
from engaging in transactions with management and principal stockholders, or
with entities in which such persons are interested. Our certificate of
incorporation does not provide for cumulative voting. See "Selling
Stockholders."
We may not be able to repurchase our 10% senior discount notes or repay debt
under our credit facility in the event of a change of control.
Upon the incurrence of certain change of control events, holders of our 10%
senior discount notes may require us to offer to repurchase all of their notes.
We may not have sufficient funds at the time of the change of control to make
the required repurchases or restrictions in our credit facility may not allow
such repurchases. Additionally, a "change of control" (as defined in the
indenture governing our 10% senior discount notes) is an event of default under
our credit facility, which would permit the lenders to accelerate the debt,
which also would cause an event of default under the indenture governing the
Notes.
The source of funds for any repurchase required as a result of any change of
control will be our 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. We cannot assure you, however, that
sufficient funds will be available at the time of any change of control to make
any required repurchases
16
<PAGE>
of our 10% senior discount notes tendered and to repay debt under our credit
facility. Furthermore, the use of available cash to fund the potential
consequences of a change of control may impair our ability to obtain additional
financing in the future. Any future credit agreements or other agreements
relating to indebtedness to which we may become a party may contain similar
restrictions and provisions. See "Description of Indebtedness."
Risks concerning potential negative health effects of radio frequency
emissions.
Along with wireless communications providers that utilize our communications
sites, we are subject to government requirements and other guidelines relating
to radio frequency emissions. The potential connection between radio frequency
emissions and certain negative health effects, including some forms of cancer,
has been the subject of substantial study by the scientific community in recent
years. To date, the results of these studies have been inconclusive. Although
we have not been subject to any claims relating to radio frequency emissions,
we cannot assure you that we will not be subject to such claims in the future,
which could have a material adverse effect on our results of operations and
financial condition. See "Business--Regulatory Matters."
If we fail to qualify as a REIT, we will be subject to a variety of taxes and
penalties.
We have elected to be taxed as a Real Estate Investment Trust ("REIT") under
Sections 856-860 of the Internal Revenue Code of 1986 (the "Code"). We believe
that we have been organized and operate to date in such a manner as to qualify
for taxation as a REIT. However, prospective investors should be aware that the
federal tax rules and regulations relating to REITs are highly technical and
complex, and that our qualification as a REIT during each taxable year
(including prior years) will depend on our ability to meet these requirements,
through actual annual operating results, income distribution levels, stock
ownership requirements and tests relating to our assets and sources of income.
Therefore, no assurance can be given that we have operated or will operate in a
manner so as to qualify or remain qualified as a REIT. Furthermore, depending
on our assessment of the strategic importance of acquisitions which may become
available to us in our existing line of business or in complementary non-real
estate based communication services activities, we may acquire, operate and
derive income from assets, businesses or entities that will cause us to no
longer qualify as a REIT. In this regard we recently committed to acquire
certain assets from Motorola and have not yet determined whether such assets,
and the income derived from such assets, will permit us to continue to meet the
qualification requirements for a REIT. We could be subject to a variety of
taxes and penalties if we engage in certain prohibited transactions, fail to
satisfy REIT distribution requirements or recognize 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 us of a loss or failure to maintain
our REIT status.
Virtually all of our shares will be eligible for sale after this offering,
which could result in a decline in our stock price
If our stockholders sell substantial amounts of our Common Stock in the
public market following this offering, the market price of our Common Stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Based on shares outstanding as of June 30, 1999, upon completion
of this offering, we will have 40,375,951 shares of Common Stock outstanding.
Of these shares, 32,726,000 shares will be freely tradable and 7,649,951 shares
will become eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
--------- ----
<C> <S>
At various times after the date of this Prospectus pursuant to Rule
91,612 144
7,558,339 At various times after 90 days from the date of this Prospectus
</TABLE>
17
<PAGE>
These shares are subject to contractual restrictions with us and in, most
cases, with the underwriters, that prevent them from being sold until 90 days
after the effective date of the registration statement for this offering
without the consent of Deutsche Bank Securities Inc.
As of June 30, 1999, options to purchase 2,749,692 shares of Common Stock
were outstanding and shares acquired upon exercise of these options will be
eligible for sale in the public market from time to time subject to vesting and
the 90-day lockup restrictions that apply to the outstanding stock. The
possible sale of a significant number of these shares may cause the price of
the Common Stock to decline.
We expect to experience volatility in our stock price that could affect your
investment
The stock market has from time to time experienced significant price and
volume fluctuations that have affected the market prices for the common stocks
of companies. In the past, certain broad market fluctuations have been
unrelated or disproportionate to the operating performance of these companies.
Any significant fluctuations in the future might result in a material decline
in the market price of our common stock. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class action litigation has often been brought against such company. We may
become involved in this type of litigation in the future. Litigation is often
expensive and diverts management's attention and resources, which could have a
material adverse effect upon our business and operating results.
We have adopted anti-takeover provisions that could affect the sale of Pinnacle
Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. See "Description of Capital Stock--
Certain Provisions of Our Certificate of Incorporation and Bylaws and--Certain
Provisions of Delaware Law" for more detailed information.
We cannot assure you that the impact of the Year 2000 date change on computer
systems will not have significant adverse effects on us.
Currently, many computer systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th
century dates. As a result, many companies' software and computer systems may
need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. We and third parties with whom we do business rely on numerous
computer programs in our day to day operations. We are evaluating Year 2000
issues as they relate to our and our subsidiaries' internal computer systems
and third party computer systems with whom we and our subsidiaries interact. We
expect to incur internal staff costs as well as consulting and other expenses
related to the Year 2000 compliance program we have undertaken in order to
address these issues. In addition, the appropriate course of action may include
replacement or an upgrade of certain systems or equipment at a substantial cost
to us. There can be no assurance that our Year 2000 compliance program, or
similar programs by third parties with whom we do business, will be completed
before the end of 1999 or that such programs will be successful. We may incur
significant costs in resolving our Year 2000 issues. If not resolved, these
issues could have a significant adverse impact on our business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
18
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" throughout this Prospectus. Whenever
you read a statement that is not simply a statement of historical fact (such as
when we describe what we "believe," "expect" or "anticipate" will occur, and
other similar statements), you must remember that our expectations may not be
correct, even though we believe they are reasonable. We do not guarantee that
the transactions and events described in this Prospectus will happen as
described (or that they will happen at all). You should read this Prospectus
completely and with the understanding that actual future results may be
materially different from what we expect. We will not update these forward-
looking statements, even though our situation may change in the future. Whether
actual results will conform with our expectations and predictions is subject to
a number of risks and uncertainties including:
. the significant considerations discussed in this Prospectus;
. risks associated with the effect of economic conditions;
. our outstanding indebtedness and our ability to pay interest and
principal on our debt;
. future capital needs;
. restrictions imposed by the terms of our indebtedness;
. risks associated with Motorola Antenna Site Acquisition;
. our ability to successfully identify, complete and integrate
acquisitions;
. our ability to protect our rights in our property and to insure against
losses from damage to our communications sites;
. risks associated with retaining our significant customers;
. our ability to construct new towers;
. the impact of competition and technological change on us;
. our dependence on the wireless communications industry;
. the impact of legislation and regulation;
. the loss of key employees; and
. our ability to maintain our REIT status.
You should read carefully the section of this Prospectus under the heading
"Risk Factors" beginning on page 9. We assume no responsibility for updating
forward looking information contained in this Prospectus.
USE OF PROCEEDS
The net proceeds to Pinnacle from the sale of the 8,350,000 shares being
offered by us and to the Selling Stockholders from the sale of the 2,350,000
shares being offered by them assuming a public offering price of $23.75 per
share, after deducting underwriting discounts, commissions and estimated
offering expenses, are estimated to be approximately $188.9 million and $53.4
million, respectively, or $207.1 million and $71.6 million, respectively, if
the underwriters' over-allotment option is exercised in full.
We intend to use the net proceeds of this offering to initially repay a
limited amount of debt under our credit facility, invest a substantial portion
of the proceeds in short-term liquid securities and then, upon the expected
consummation of the Motorola Antenna Site Acquisition, repay a substantial
amount of debt under our credit facility, pay for a portion of the purchase
price of the Motorola Antenna Site Acquisition, fund future acquisitions and
redeem any pay-in-kind preferred stock which we may issue to fund such
acquisitions prior to the closing of this offering. In the event that the
Motorola Antenna Site Acquisition is not consummated, we shall apply the net
proceeds of this offering as described above, except that the proceeds that
would otherwise be used to pay for the Motorola Antenna Site Acquisition will
be used to further reduce our debt and to fund acquisitions. The net proceeds
of the selling stockholders will not be available to Pinnacle.
19
<PAGE>
DILUTION
The pro forma net tangible book value of our common stock at March 31, 1999
was $211.9 million or $6.62 per share. "Net tangible book value per share"
represents the amount of total tangible assets less total liabilities divided
by the number of shares of Common Stock outstanding, excluding all outstanding
stock options and the Underwriters' over-allotment options. Without taking into
account any other changes in the pro forma net tangible book value after March
31, 1999, other than to give effect to the receipt by us of the net proceeds
from the sale of 8,350,000 shares of Common Stock in this offering (assuming an
offering price of $23.75 per share), the pro forma net tangible book value of
our common stock as of March 31, 1999 would have been $9.90 per share of Common
Stock. This represents an immediate increase in net tangible book value of
$3.28 per share to existing stockholders and an immediate dilution of $13.85
per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share....................... $23.75
Pro forma net tangible book value per share at March 31,
1999....................................................... $6.62
Increase per share attributable to this offering............ 3.28
-----
Pro forma net tangible book value per share after the
Offering..................................................... $ 9.90
------
Dilution per share to new investors........................... $13.85
======
</TABLE>
DIVIDEND POLICY
In order to qualify as a REIT for federal income tax purposes, among other
things we must make distributions each taxable year (not including any return
of capital for federal income tax purposes) equal to at least 95% of our real
estate investment trust taxable income, although our board of directors, in its
discretion, may increase that percentage as it deems appropriate. See "Certain
Federal Income Tax Considerations--Requirements for REIT Qualification--
Distribution Requirements." The declaration of distributions is within the
discretion of our board of directors and depends upon our cash available for
distribution, current and projected cash requirements, tax considerations and
other factors.
We intend to make distributions to holders of the Common Stock only in the
minimum amount necessary to satisfy the REIT distribution requirements
necessary to maintain REIT status and intends to retain available cash in
excess of such amount for future operation and expansion of our business. In
this regard, we do not expect for the foreseeable future that it will have real
estate investment trust taxable income which will be required to be distributed
in order to maintain our REIT status. See "Certain Federal Income Tax
Considerations--Requirements for REIT Qualification--Distribution
Requirements." Any determination to declare or pay dividends in the future will
be at the discretion of our Board of Directors and will depend upon our results
of operations, financial condition and any contractual restrictions,
considerations imposed by applicable law and other factors deemed relevant by
the Board of Directors.
20
<PAGE>
PRICE RANGE OF COMMON STOCK
Our Common Stock began trading on the Nasdaq National Market under the
symbol "BIGT" on February 19, 1999. The following table sets for the range of
high and low sale prices per share for our Common Stock as reported on the
Nasdaq National Market for the periods indicated:
<TABLE>
<CAPTION>
High Low
------- ------
<S> <C> <C>
1999
First quarter................................................. $15.125 $14.00
Second quarter................................................ $ 24.50 $15.00
</TABLE>
On July 1, 1999, the last sale price of the Common Stock as reported on them
Nasdaq National Market was $23.75 per share and there were 133 holders of
record of our Common Stock.
CAPITALIZATION
The Actual column in the following table set forth Pinnacle's actual
capitalization as of March 31, 1999. The Pro Forma Column gives effect to (1)
all acquisitions of communications site rental businesses completed after March
31, 1999 through June 30, 1999; (2) all other individually insignificant
acquisitions of communications site rental businesses for which the Company has
entered into agreements or letters of intent to acquire as of June 30, 1999,
and that the Company believes are probable; (3) the Motorola Antenna Site
Acquisition and; (4) the financing of the acquisitions referenced in (1)
through (3) above under the credit facility and the issuance of Series A
Preferred Stock and Series B Preferred Stock, as applicable. The pro forma as
adjusted column gives effect to items (1) through (4) above as well as this
offering and the application of the proceeds therefrom. The following table
does not include 2,749,692 shares subject to outstanding options or reserved
for issuance under our stock option plan. See "Management--Stock Plans."
<TABLE>
<CAPTION>
As of March 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Short-term debt:
Current portion of notes payable............. $ 1,002 $ 1,002 $ 1,002
-------- -------- --------
Total current maturities..................... 1,002 1,002 1,002
Long-term debt, net of current maturities:
Credit facility(1)........................... 108,450 443,762 304,878
10% senior discount notes.................... 221,201 221,201 221,201
Notes payable(2)............................. 23,225 23,225 23,225
-------- -------- --------
Total long-term debt....................... 352,876 688,188 549,304
-------- -------- --------
Redeemable stock:
Senior preferred stock....................... -- 48,850 --
Stockholders' equity:
Common Stock, $0.001 par value, 100,000,000
shares authorized; 32,025,951 shares issued
and outstanding............................... 32 32 40
Additional paid-in capital..................... 276,566 276,566 464,293
Accumulated deficit............................ (64,697) (64,697) (64,697)
-------- -------- --------
Total stockholders' equity................. 211,901 211,901 399,636
-------- -------- --------
Total capitalization....................... $565,779 $949,941 $949,942
======== ======== ========
</TABLE>
- --------
(1) Availability under our credit facility after giving effect to the use of
proceeds from the offering will be $95.9 after giving effect to $49.2
million of outstanding letters of credit, which reduce availability
thereunder.
(2) Notes payable consists of notes issued to tower sellers in our acquisition
of towers. Interest rates range from 8.5% to 13.0% and the notes mature at
varying dates through December 2020.
21
<PAGE>
OUR UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Pro Forma Consolidated Balance Sheet at March 31, 1999 gives
pro forma effect to:
. the acquisition of individually insignificant site rental businesses
completed subsequent to March 31, 1999 through June 30, 1999;
. the Motorola Antenna Sites Acquisition;
. other individually insignificant acquisitions of site rental businesses
for which we have entered into agreements or letters of intent to acquire
as of June 30, 1999, and that we believe are probable;
. the related financing of the acquisitions referred to above; and
. the offering of our common stock hereby and the application of the net
proceeds therefrom as described under "Use of Proceeds;"
as if each had occurred as of March 31, 1999.
The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998 and three months ended March 31, 1999 gives pro forma
effect to:
. all individually insignificant acquisitions completed during 1998;
. acquisitions of other site rental businesses completed since January 1,
1999;
. the Southern Towers Acquisition;
. the MobileMedia Acquisition;
. the Motorola Antenna Site Acquisition;
. other individually insignificant acquisitions of site rental businesses
for which we have entered into agreements or letters of intent to acquire
as of June 30, 1999, and that we believe are probable;
. related financing of the acquisitions referred to above;
. the Initial Public Offering; and
. the offering of our common stock hereby and the application of the net
proceeds therefrom as described under "Use of Proceeds;"
as if each had occurred as of January 1, 1998.
We account for our acquisitions under the purchase method of accounting. The
total cost of site rental businesses acquired including related fees and
expenses is allocated to the underlying tangible and intangible assets acquired
and liabilities assumed based on their respective fair values. The purchase
price allocations for the respective acquisitions included in the unaudited pro
forma data are preliminary. However, we do not expect that the final allocation
of the purchase price will be materially different from its preliminary
allocation.
The unaudited pro forma financial data are provided for informational
purposes only and are not necessarily indicative of our results of operations
or financial position had the transactions assumed therein occurred, nor are
they necessarily indicative of the results of operations that may be expected
to occur in the future. There can be no assurance whether or when any of the
probable acquisitions reflected in the unaudited pro forma data will be
completed. Furthermore, the unaudited pro forma financial data are based upon
assumptions that we believe are reasonable and should be read in conjunction
with the financial statements and the accompanying notes thereto included
elsewhere in this document.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Adjustments
for
Acquisitions Adjustments
Pinnacle Completed For Adjustments Pro
Holdings Subsequent to Motorola For Adjustments Forma
March 31, March 31, Antenna Site Probable Pro For the As
1999 1999(a) Acquisition(b) Acquisitions(a) Forma Offering(c) Adjusted
--------- ------------- -------------- --------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 1,276 $ -- $ -- $ -- $ 1,276 $ -- $ 1,276
Accounts receivable.... 2,176 -- 3,702 -- 5,878 -- 5,878
Prepaid expenses and
other Current assets.. 1,374 -- 4,175 -- 5,549 -- 5,549
-------- ------- -------- ------- -------- -------- --------
Total current assets... 4,826 -- 7,877 -- 12,703 -- 12,703
Tower assets, net...... 553,889 77,343 222,410 39,919 893,561 -- 893,561
Fixed assets, net...... 2,591 -- -- -- 2,591 -- 2,591
Land................... 15,766 -- -- -- 15,766 -- 15,766
Deferred debt costs,
net................... 6,502 -- 6,900 -- 13,402 -- 13,402
Other assets........... 953 -- 38,000 -- 38,953 -- 38,953
-------- ------- -------- ------- -------- -------- --------
$584,527 $77,343 $275,187 $39,919 $976,976 -- $976,976
======== ======= ======== ======= ======== ======== ========
Liabilities
Current liabilities:
Accounts payable....... 4,210 -- 1,518 -- 5,728 -- 5,728
Accrued expenses....... 11,444 -- 2,187 -- 13,631 -- 13,631
Deferred revenue....... 2,911 -- 4,582 -- 7,493 -- 7,493
Current portion of long-
term debt.............. 1,002 -- -- -- 1,002 -- 1,002
-------- ------- -------- ------- -------- -------- --------
Total current
liabilities........... 19,567 -- 8,287 -- 27,854 -- 27,854
Long-term debt.......... 352,876 77,343 218,050 39,919 688,188 (138,885) 549,303
Other liabilities....... 183 -- -- -- 183 -- 183
-------- ------- -------- ------- -------- -------- --------
372,626 77,343 226,337 39,919 716,225 (138,885) 577,340
Redeemable Stock:
Senior Preferred Stock.. -- -- 48,850 -- 48,850 (48,850) --
Stockholders' Equity:
Common Stock............ 32 -- -- -- 32 8 40
Additional paid-in
capital................ 276,566 -- -- -- 276,566 188,877
(1,150) 464,293
Accumulated deficit..... (64,697) -- -- -- (64,697) -- (64,697)
-------- ------- -------- ------- -------- -------- --------
Total stockholders'
equity................ 211,901 -- -- -- 211,901 187,735 399,636
-------- ------- -------- ------- -------- -------- --------
$584,527 $77,343 $275,187 $39,919 $976,976 $ -- $976,977
======== ======= ======== ======= ======== ======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(in thousands)
(a) Reflects our preliminary allocation of purchase price in accordance with
the purchase method of accounting for individually insignificant
acquisitions of site rental assets, and the related debt financing of such
acquisitions under our credit facility, as follows:
<TABLE>
<CAPTION>
Number Aggregate
Number of of Purchase
Acquisitions Sites Price(1)
------------ ------ ---------
<S> <C> <C> <C>
Acquisitions of individually insignificant
site rental businesses that we completed in
the period April 1, 1999 through
June 30, 1999............................... 36 57 $77,343
Other individually insignificant acquisitions
of site rental businesses for which we have
entered into agreements or letters of intent
to acquire as of June 30, 1999, and which we
believe are probable........................ 8 113 $39,919
</TABLE>
--------
(1) Includes estimated fees and expenses related to the acquisitions of
$2,625, and $1,886, respectively.
(b) Represents the pro forma impact of the Motorola Antenna Site Acquisition
for a total cost of $260,000 (including $5,000 in fees and expenses), and
the Company's preliminary allocation of purchase price in accordance with
the purchase method of accounting, and the related debt financing under our
credit facility and issuance of the Series A Preferred Stock and Series B
Preferred Stock, as follows:
<TABLE>
<CAPTION>
Motorola Pro Forma
as of for Motorola
April 3, 1999 Adjustments(1) Acquisition
------------- -------------- ------------
<S> <C> <C> <C>
Accounts receivable.............. 3,702 -- 3,702
Prepaid rent..................... 4,175 -- 4,175
Property and equipment, net...... 37,464 184,946 222,410
Deferred debt costs.............. -- 6,900 6,900
Other assets..................... 570 37,430 38,000
------- -------- --------
Total assets..................... $45,911 $229,276 $275,187
======= ======== ========
Accounts payable................. 1,518 -- 1,518
Accrued expenses................. 2,187 -- 2,187
Deferred revenue................. 4,582 -- 4,582
Debt............................. -- 218,050 218,050
Senior preferred stock........... -- 48,850 48,850
Net assets....................... 37,624 (37,624) --
------- -------- --------
Total liabilities and net
assets........................ $45,911 $229,276 $275,187
======= ======== ========
</TABLE>
--------
(1) Reflects the Company's preliminary allocation of purchase price, the
incurrence of pro forma debt under the credit facility and the issuance
of the Series A Preferred Stock and Series B Preferred Stock.
(c) Reflects the receipt and use of estimated net proceeds of the Offering to
the Company of $188,885 net of the estimated underwriting discounts and
commissions and Offering expenses totaling $9,428.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Adjustments Adjustments
Pinnacle Adjustments For Adjustments for Adjustments
Holdings for Southern for Motorola Adjustments for
December 31, Completed Towers MobileMedia Antenna Sites for Probable Initial Public
1998 Acquisition(a) Acquisition(b) Acquisition(c) Acquisition(d) Acquisitions(e) Offering(f)
------------ -------------- -------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Site rental
revenue.......... $ 32,019 $ 12,271 $ 836 $ 8,863 $ 85,108 $ 3,101 $ --
Site operating
expenses,
excluding
depreciation and
amortization..... 6,166 2,073 185 836 49,916 573
-------- -------- ------- -------- -------- ------- --------
Gross profit,
excluding
depreciation and
amortization..... 25,853 10,198 651 8,027 35,192 2,528 --
Other expenses:
General and
administrative.. 4,175 -- 15 381 8,396 -- --
Corporate
development..... 6,382 -- -- -- -- -- --
State franchise,
excise and
minimum taxes... 686 -- -- -- -- -- --
Depreciation.... 22,513 11,295 955 7,636 30,027 2,661 --
-------- -------- ------- -------- -------- ------- --------
(7,903) (1,097) (319) 10 (3,231) (133) --
Interest
expense.......... 12,300 14,839 (1,969) 5,599 19,520 3,393 (10,661)(h)
Amortization of
original issue
discount and debt
issuance costs... 16,427 -- 4,138 -- -- -- --
-------- -------- ------- -------- -------- ------- --------
Income/(loss)
before
extraordinary
item............. (36,630) (15,936) (2,488) (5,589) (22,751) (3,526) 10,661
Extraordinary
loss from
extinguishment of
debt............. 5,641 -- -- -- -- -- --
-------- -------- ------- -------- -------- ------- --------
Net loss......... $(42,271) $(15,936) $(2,488) $ (5,589) $(22,751) $(3,526) $ 10,661
======== ======== ======= ======== ======== ======= ========
Payable in kind
preferred
dividends and
accretion........ 3,094 -- -- 6,438 7,978 -- (9,532)
-------- -------- ------- -------- -------- ------- --------
Net loss
attributable to
common
shareholders..... $(45,365) $(15,936) $(2,488) $(12,027) $(30,729) $(3,526) $ 20,193
======== ======== ======= ======== ======== ======= ========
Basic loss per
common share:
Loss before
extraordinary
Item............ $ (95.03)
Extraordinary
item............ (13.50)
--------
Net loss......... $(108.53)
========
Weighted average
number of common
shares........... 418
<CAPTION>
Adjustments Pro Forma
for the as
Pro forma Offering(g) Adjusted
---------- ----------- ----------
<S> <C> <C> <C>
Site rental
revenue.......... $142,198 $ -- $ 142,198
Site operating
expenses,
excluding
depreciation and
amortization..... 59,749 59,749
---------- ----------- ----------
Gross profit,
excluding
depreciation and
amortization..... 82,449 -- 82,449
Other expenses:
General and
administrative.. 12,967 -- 12,967
Corporate
development..... 6,382 -- 6,382
State franchise,
excise and
minimum taxes... 686 -- 686
Depreciation.... 75,087 -- 75,087
---------- ----------- ----------
(12,673) -- (12,673)
Interest
expense.......... 43,021 (11,805) 31,216
Amortization of
original issue
discount and debt
issuance costs... 20,565 -- 20,565
---------- ----------- ----------
Income/(loss)
before
extraordinary
item............. (76,259) 11,805 (64,454)
Extraordinary
loss from
extinguishment of
debt............. 5,641 -- 5,641
---------- ----------- ----------
Net loss......... $(81,900) $11,805 $ (70,095)
========== =========== ==========
Payable in kind
preferred
dividends and
accretion........ 7,978 (7,978) --
---------- ----------- ----------
Net loss
attributable to
common
shareholders..... $(89,878) $19,783 $(70,095)
========== =========== ==========
Basic loss per
common share:
Loss before
extraordinary
Item............ $ (2.63) $ (1.60)
Extraordinary
item............ (.18) (.14)
---------- ----------
Net loss......... $ (2.81) $ (1.74)
========== ==========
Weighted average
number of common
shares........... 32,026 40,376
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
25
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
Three Months Ended March 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Adjustments
Pinnacle Adjustments for Adjustments
Holdings for Motorola Adjustments for Adjustments Pro Forma
March 31, Completed Antenna Site for Probable Initial Public for the as
1999 Acquisition(j) Acquisition(k) Acquisitions(e) Offering(f) Pro forma Offering(g) Adjusted
--------- -------------- -------------- --------------- -------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Site rental
revenue.......... $ 12,008 $ 2,252 $20,921 $ 775 $ -- $ 35,956 $ -- $ 35,956
Site operating
expenses,
excluding
depreciation and
amortization..... 2,233 383 11,828 143 14,587 14,587
-------- ------- ------- ----- ------- -------- ------- --------
Gross profit
excluding
depreciation and
amortization..... 9,775 1,869 9,093 632 -- 21,369 -- 21,369
Other expenses:
General and
administrative.. 843 -- 1,978 -- -- 2,821 -- 2,821
Corporate
development..... 1,711 -- -- -- -- 1,711 -- 1,711
State franchise,
excise and
minimum taxes... 201 -- -- -- -- 201 -- 201
Depreciation.... 8,994 2,021 7,507 665 -- 19,187 -- 19,187
-------- ------- ------- ----- ------- -------- ------- --------
11,749 2,021 9,485 665 -- 23,920 -- 23,920
Income/(loss)
from operations.. (1,974) (152) (392) (33) -- (2,551) -- (2,551)
Interest
expense.......... 3,900 2,577 4,880 848 (2,665) 9,540 (2,951) 6,589
Amortization of
original issue
discount and debt
issuance costs... 5,429 -- -- -- -- 5,429 -- 5,429
-------- ------- ------- ----- ------- -------- ------- --------
Net loss......... $(11,303) $(2,729) $(5,272) $(881) $ 2,665 $(17,520) $ 2,951 $(14,569)
======== ======= ======= ===== ======= ======== ======= ========
Dividends and
accretion on
preferred stock.. 2,930 -- 2,056 -- (2,930) 2,056 (2,056) --
-------- ------- ------- ----- ------- -------- ------- --------
Net loss
attributable to
common stock..... $(14,233) $(2,729) $(7,328) $(881) $ 5,595 $(19,576) $ 5,007 $(14,569)
======== ======= ======= ===== ======= ======== ======= ========
Basic and diluted
loss per common
share............ $ (0.79) $ (.61) $ (.36)
Weighted average
number of shares
of common stock
outstanding...... 18,068 32,026 40,376
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(a) Reflects the historical, pre-acquisition results of operations (in
aggregate) for the acquisitions of rental site businesses other than the
Southern Towers Acquisition and the MobileMedia Acquisition completed by
the Company during 1998 and those completed in the period January 1, 1999
through their respective date of acquisition (but no later than June 30,
1999), and the related debt financing of such acquisitions under our credit
facility, as follows:
<TABLE>
<CAPTION>
Acquisitions Acquisitions
Completed Completed Adjustments
as of Subsequent to for
December 31, December 31, Completed
1998 1998 Acquisitions
------------ ------------- ------------
<S> <C> <C> <C>
Site rental revenues............... $ 1,699 $ 10,572 $ 12,271
Site operating expenses, excluding
depreciation and amortization..... 340 1,733 2,073
------- -------- --------
Gross profit excluding depreciation
and amortization.................. 1,359 8,839 10,198
General and administrative......... -- -- --
Depreciation....................... 1,948 9,347 11,295
------- -------- --------
Loss from operations............... (589) (508) (1,097)
Interest expense................... 2,922 11,917 14,839
------- -------- --------
Net income (loss).................. $(3,511) $(12,425) $(15,936)
======= ======== ========
</TABLE>
(b) Reflects the historical operating results of Southern Communications
Services, Inc. site operations and the pro forma effect of site rental
revenue, site operating expenses and site asset depreciation, and the
related financing of the Southern Towers Acquisition under our credit
facility, assuming the transaction was completed on January 1, 1998, as
follows:
<TABLE>
<CAPTION>
Southern Towers
For the Period from Adjustments
January 1, 1998 for Southern
through Towers
March 3, 1998 Adjustments Acquisition
------------------- ----------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenues........ $ 178 $ 658(1) $ 836
Site operating expenses,
excluding depreciation and
amortization............... 153 32(1) 185
----- ------- -------
Gross profit excluding
depreciation and
amortization............... 25 626 651
General and administrative.. 15 -- 15
Depreciation................ 340 615(2) 955
----- ------- -------
Loss from operations........ (330) 11 (319)
Interest income............. -- (1,969)(3) (1,969)
Amortization of original
issue discount and debt
issuance costs............. -- 4,138(3) 4,138
----- ------- -------
Net loss.................... $(330) $(2,158) $(2,488)
===== ======= =======
</TABLE>
--------
(1) Represents incremental increases in pro forma site rental revenues and
operating expenses pursuant to the executed lease agreement with
Southern Communications Services, Inc., and related affiliates.
(2) Reflects the increase in pro forma depreciation on site assets acquired
resulting from the Company's preliminary application of purchase
accounting.
(3) Reflects the pro forma increase in interest expense associated with the
financing of the Southern Towers Acquisition and the subsequent
issuance of our 10% senior discount notes.
27
<PAGE>
(c) Reflects the historical operating results of MobileMedia Communications,
Inc. and Subsidiaries; tower operations and the pro forma effect of site
rental revenue, site operating expenses and site asset depreciation, and
the related financing of the MobileMedia Acquisition, assuming the
transaction was completed on January 1, 1998, as follows:
<TABLE>
<CAPTION>
MobileMedia
for the
Period from
January 1, 1998 Adjustments for
through MobileMedia
September 2, 1998 Adjustments Acquisitions
----------------- ----------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenues...... $ 1,698 $ 7,165 (1) $ 8,863
Site operating expenses,
excluding depreciation
and amortization......... 690 146 (1) 836
------- -------- --------
Gross profit excluding
depreciation and
amortization............. 1,008 7,019 8,027
General and
administrative........... 381 -- 381
Depreciation.............. 356 7,280 (2) 7,636
------- -------- --------
Loss from operations...... 271 (261) 10
Interest expense.......... -- 5,599 (3) 5,599
------- -------- --------
Net income (loss)......... 271 (5,860) (5,589)
Dividends and accretion on
Existing Preferred
Stock.................... -- 6,438 (4) 6,438
------- -------- --------
Net income (loss)
attributate to Common
Stock.................... $ 271 $(12,298) $(12,027)
======= ======== ========
--------
(1) Represents incremental increases in pro forma tower revenues and
operating pursuant to the executed lease agreement with MobileMedia
Communications, Inc., and its affiliates.
(2) Reflects the increase in pro forma depreciation on tower assets
acquired resulting from the Company's preliminary application of
purchase accounting.
(3) Reflects the increase in pro forma interest expense associated with the
debt financing of the MobileMedia Acquisition under our credit
facility.
(4) Reflects dividends accrued and accretion to liquidation value on the
Existing Preferred Stock.
(d) Reflects the historical operating results of Motorola antenna site business
and the pro forma effect of operations, and the related financing of the
Motorola Antenna Site Acquisition under our credit facility and the
issuance of the Series A Preferred Stock and Series B Preferred Stock,
assuming the transaction was completed on January 1, 1998, as follows:
<CAPTION>
Motorola for the Adjustments for
Period Ended Motorola
December 31, Antenna Site
1998 Adjustments Acquisition(1)
----------------- ----------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenue....... $85,608 $ (500)(1) $ 85,108
Site operating expenses,
excluding depreciation
and amortization......... 50,416 (500)(1) 49,916
------- -------- --------
Gross margin excluding
depreciation and
amortization............. 35,192 -- 35,192
Other expenses:
General and
administrative.......... 11,516 (3,120)(2) 8,396
Allocated costs from
parent.................. 4,168 (4,168)(3) --
Depreciation and
amortization............ 8,476 21,551 (4) 30,027
------- -------- --------
Income (loss) from
operations............... 11,032 (14,263) (3,231)
Interest expense.......... -- 19,520 (5) 19,520
------- -------- --------
Net income (loss) before
income taxes............. 11,032 (33,783) (22,751)
------- -------- --------
Dividends and accretion on
existing preferred
stock.................... -- 7,978 (6) 7,978
------- -------- --------
Net income (loss)
attributable to common
stock.................... $11,032 $(41,761) $(30,729)
======= ======== ========
</TABLE>
--------
(1) Represents the pro forma adjustment to site rental revenue and site
operating expense for those sites leased from Pinnacle by the Motorola
antenna site business, as such amounts will be eliminated as a direct
result of the Motorola Antenna Site Acquisition.
28
<PAGE>
(2) Represents the recurring cost savings to the Company as a direct result
of the Motorola Antenna Site Acquisition related to allocated costs for
administrative services which will no longer be provided under the
Motorola Antenna Site Acquisition agreement. The related services were
provided by Motorola personnel who were not specifically dedicated to
the Motorola antenna site business and not among the group of
transferred employees under the Motorola Antenna Site Acquisition
Agreement.
(3) Represents the elimination of historical corporate costs charged to the
Motorola antenna site business under Motorola corporate cost allocation
policies. These costs, comprised primarily of corporate-level treasury,
legal, patent, tax, insurance administration, payroll administration,
accounting, audit and human resources services were allocated to the
Motorola antenna site business on a budget formula and will not
continue under the Motorola Antenna Site Acquisition agreement.
(4) Represents the increase in depreciation and amortization expense as a
result of the Company's application of purchase accounting and its
preliminary fair value determination of acquired assets.
(5) Represents the additional pro forma interest expense associated with
the financing of the Motorola Antenna Site Acquisition under our credit
facility.
(6) Represents dividends accrued and accretion to liquidation value on the
Series A Preferred Stock and Series B Preferred Stock.
(e) Reflects the adjustment to results of operations for 8 separate
acquisitions pending as of June 30, 1999 of 113 sites, for which the
Company has entered into agreements or letters of intent, and which the
Company believes are probable, each of which is individually immaterial,
assuming such transactions were completed as of January 1, 1998.
(f) Reflects the pro forma effects of the Initial Public Offering, assuming it
was completed as of January 1, 1998.
(g) Reflects the pro forma effect of the offering of our common stock.
(h) Reflects the decrease in pro forma interest expense resulting from the use
of a portion of the net proceeds from both our 10% senior discount notes
offering and the Initial Public Offering to repay pro forma outstanding
debt under our credit facility, assuming such transactions were completed
as of January 1, 1998.
(i) Reflects the historical, pre-acquisition results of operations (in
aggregate) for the acquisitions of rental tower businesses other than the
Motorola Antenna Site Acquisition that we completed in the period January
1, 1999 through their respective date of acquisition (but no later than
June 30, 1999), and the related debt financing under our credit facility,
as follows:
<TABLE>
<CAPTION>
Acquisitions Acquisitions
Completed Completed Adjustments
as of Subsequent to for
March 31, March 31, Completed
1999 1999 Acquisitions(1)
------------ ------------- ---------------
<S> <C> <C> <C>
Site rental revenues............ $ 846 $ 1,406 $ 2,252
Site operating expenses,
excluding depreciation and
amortization................... 179 204 383
----- ------- -------
Gross profit excluding
depreciation and amortization.. 667 1,202 1,869
General and administrative...... -- -- --
Depreciation.................... 732 1,289 2,021
----- ------- -------
Loss from operations............ (65) (87) (152)
Interest expense................ 933 1,644 2,577
----- ------- -------
Net loss........................ $(998) $(1,731) $(2,729)
===== ======= =======
</TABLE>
--------
(1) Represents the aggregate adjustment to results of operations for 63
separate complete acquisitions of 164 total sites completed during the
period from January 1, 1999 through June 30, 1999, other than the
Motorola Antenna Site Acquisition, each of which acquisitions were
individually immaterial, assuming such transactions were completed as
of January 1, 1999.
29
<PAGE>
(j) Reflects the historical operating results of the Motorola antenna site
business and the pro forma effect of operations and the related financing
of the Motorola Antenna Site Acquisition under our credit facility and the
issuance of Series A Preferred Stock and Series B Preferred Stock, assuming
the transaction was completed on January 1, 1998, as follows:
<TABLE>
<CAPTION>
Adjustments for
Motorola for the Motorola
Period Ended Antenna
April 3, Site
1999 Adjustments Acquisition
---------------- ----------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenue........ $21,088 $ (167)(1) $20,921
Site operating expenses,
excluding depreciation and
amortization.............. 11,995 (167)(1) 11,828
------- -------- -------
Gross margin, excluding
depreciation and
amortization.............. 9,093 -- 9,093
Other expenses:
Selling, general and ad-
ministrative............. 2,587 (609)(2) 1,978
Allocated costs from par-
ent...................... 718 (718)(3) --
Depreciation and amortiza-
tion..................... 2,185 5,322 (4) 7,507
------- -------- -------
Income (loss) from
operations................ 3,603 (3,995) (392)
Interest expense........... -- 4,880 (5) 4,880
------- -------- -------
Net income (loss) before
income taxes.............. 3,603 (8,875) (5,272)
Dividends and accretion on
existing preferred stock.. -- 2,056 (6) 2,056
------- -------- -------
Net income (loss)
attributable to common
stock..................... $ 3,603 $(10,931) $(7,328)
======= ======== =======
</TABLE>
--------
(1) Represents the pro forma adjustment to site rental revenue and site
operating expense for those sites leased from Pinnacle by the Motorola
antenna site business, as such amounts will be eliminated as a direct
result of the Motorola Antenna Site Acquisition.
(2) Represents the recurring cost savings to the Company as a direct result
of the Motorola Antenna Site Acquisition relating to allocated costs
for administrative services which will no longer be provided under the
Motorola Antenna Site Acquisition Agreement. The related services were
provided by Motorola personnel who were not specifically dedicated to
the Motorola antenna site business and not among the group of
transferred employees under the Motorola Antenna Site Acquisition
Agreement.
(3) Represents the elimination of historical corporate costs charged to the
Motorola antenna site business under Motorola corporate cost allocation
policies. These costs, comprised primarily of corporate-level treasury,
legal, patent, tax, insurance administration, payroll administration,
accounting, audit and human resources services were allocated to the
Motorola antenna site business on a budget formula and will not
continue under the Motorola Antenna Site Acquisition agreement.
(4) Represents the increase in depreciation and amortization expense as a
result of the Company's application of purchase accounting and its
preliminary fair value determination of acquired assets.
(5) Represents the additional pro forma interest expense associated with
the financing of the Motorola Antenna Site Acquisition under our credit
facility.
(6) Represents dividends accrued and accretion to liquidation value on the
Series A Preferred Stock and Series B Preferred Stock.
30
<PAGE>
OUR SELECTED HISTORICAL
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 three
years ended December 31, 1996, 1997 and 1998 were derived from our consolidated
historical financial statements, including the related Notes thereto, which
have been audited by PricewaterhouseCoopers LLP, independent certified public
accountants. The unaudited consolidated statement of operations data for the
three months ended March 31, 1998 and 1999 are derived from our unaudited
consolidated financial statements, which are contained elsewhere herein. The
selected historical consolidated financial information should be read in
conjunction with and are qualified in their entirety by, the information
contained in our consolidated audited financial statements and the related
Notes thereto. "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Our Unaudited Pro Forma Financial Data" included
elsewhere in this document.
<TABLE>
<CAPTION>
Period from
Inception Three Months
(May 3, 1995) Ended
through Years Ended December 31, March 31,
December 31, -------------------------- -----------------
1995 1996 1997 1998 1998 1999
------------- ------- ------- -------- ------- --------
(in thousands, except per share
amounts) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Tower rental revenue.... $ 733 $ 4,842 $12,881 $ 32,019 $ 5,373 $ 12,008
Tower operating
expenses, excluding
depreciation and
amortization........... 181 1,135 2,633 6,166 851 2,233
------ ------- ------- -------- ------- --------
Gross profit, excluding
depreciation and
amortization........... 552 3,707 10,248 25,853 4,522 9,775
Other expenses:
General and
administrative (a).... 306 916 1,367 4,175 420 843
Corporate development
(a)................... 369 1,421 3,723 6,382 1,289 1,711
State franchise, excise
and minimum taxes..... -- 26 67 686 70 201
Depreciation........... 282 2,041 6,335 22,513 2,951 8,994
------ ------- ------- -------- ------- --------
Loss from operations.... (405) (697) (1,244) (7,903) (208) (1,974)
Interest expense........ 181 1,155 6,925 12,300 3,103 3,900
Amortization of original
issue discount and debt
issuance costs......... 59 164 292 16,427 610 5,429
------ ------- ------- -------- ------- --------
Loss before
extraordinary item..... (645) (2,016) (8,461) (36,630) (3,921) --
====== ======= ======= ======== ======= ========
Extraordinary loss from
extinguishment of
debt................... -- -- -- 5,641 -- --
Net loss................ (645) (2,016) (8,461) (42,271) (3,921) (11,303)
====== ======= ======= ======== ======= ========
Dividends and accretion
on preferred stock..... -- -- -- 3,094 -- 2,930
Loss attributable to
common stock........... $ (645) $(2,016) $(8,461) $(45,365) $(3,921) $(14,233)
====== ======= ======= ======== ======= ========
Basic loss per common
share:
Loss before
extraordinary item.... $(6.31) $ (8.10) $(27.28) $ (94.95) $ (.43) $ (.79)
Extraordinary item..... -- -- -- (13.48) -- --
------ ------- ------- -------- ------- --------
Net loss............... $(6.31) $ (8.10) $(27.28) $(108.43) $ (0.43) $ (0.79)
====== ======= ======= ======== ======= ========
Weighted average number
of shares of common
stock.................. 102 249 310 418 9,116 18,068
Other Operating Data:
Tower Level Cash Flow
(b).................... $ 552 $ 3,707 $10,248 $ 25,853 $ 4,522 $ 9,775
Tower Level Cash Flow
Margin (c)............. 75.3% 76.6% 79.6% 80.7% 84.2% 81.4%
Adjusted EBITDA (b)..... $ 246 $ 2,791 $ 8,881 $ 21,678 $ 4,102 $ 8,932
Adjusted EBITDA Margin
(c).................... 33.6% 57.6% 68.9% 67.7% 76.3% 74.4%
EBITDA Before Franchise,
Excise and Minimum
Taxes (b).............. $ (123) $ 1,370 $ 5,158 $ 15,296 $ 2,813 $ 7,221
EBITDA Before Franchise,
Excise and Minimum
Taxes Margin (c)....... -- 28.3% 40.0% 47.8% 52.4% 60.1%
EBITDA (b).............. $ (123) $ 1,344 $ 5,091 $ 14,610 $ 2,743 $ 7,020
EBITDA Margin (c)....... -- 27.8% 39.5% 45.6% 51.1% 58.5%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Period from
Inception Three
(May 3, 1995) Years Ended Months
through December 31, Ended
December 31, -------------- March 31,
1995 1996 1997 1998 1999
------------- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Number of Sites(d):
Beginning of period..................... 0 33 156 312 876
Sites acquired during the period........ 29 119 134 517 109
Sites constructed during the period..... 4 4 22 47 16
End of period........................... 33 156 312 876 1,001
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------ March 31,
1995 1996 1997 1998 1999
------- ------- -------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents....... $ 31 $ 47 $ 1,694 $ 13,801 $ 1,276
Working capital
deficit........... (1,077) (1,477) (12,790) (9,270) (14,740)
Tower assets, net.. 11,532 48,327 127,946 473,942 553,889
Total assets....... 13,972 55,566 143,178 516,148 584,527
Total debt......... 5,523 30,422 120,582 433,218 353,878
Redeemable stock:
Series A senior
preferred stock.. -- -- -- 29,882 --
Class B common
stock............ 1,200 1,200 1,761 1,761 --
Class D common
stock............ -- -- -- --
Series B junior
preferred stock... -- -- -- 59,929 --
Common stock....... -- -- -- -- 32
Additional paid-in
capital........... 7,051 24,881 25,876 33,137 276,566
Stock subscription
receivable........ (180) -- -- -- --
Common Stock
warrants.......... -- -- -- 1,000 --
Accumulated
deficit........... (645) (2,661) (11,123) (53,394) (64,697)
------- ------- -------- -------- --------
Stockholders'
equity............ $ 6,226 $22,220 $ 14,753 $ 40,672 $211,901
</TABLE>
- --------
(a) "General and administrative" expenses represent those costs directly
related to the day-to-day management and operation of our towers.
"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.
(b) "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,
corporate development expenses and state franchise, excise and minimum
taxes. "EBITDA Before Franchise, Excise and Minimum Taxes" represents
earnings (loss) from operations before depreciation, amortization and state
franchise, excise and minimum taxes. "EBITDA" represents loss from
operations before depreciation and amortization. We have included Tower
Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise, Excise and
Minimum Taxes and EBITDA in Other Operating Data because we believe such
information may be useful to you in evaluating our ability to service our
debt. Tower Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise,
Excise and Minimum Taxes 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 our ability to
meet our cash needs or as an indication of our operating performance.
Moreover, Tower Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise,
Excise and Minimum Taxes and EBITDA are standardized measures and may be
calculated in a number of ways. Accordingly, the Tower Level Cash Flow,
Adjusted EBITDA, EBITDA Before Franchise, Excise and Minimum Taxes and
EBITDA information provided may not be comparable to other similarly titled
measures provided by other companies.
(c) Represents Tower Level Cash Flow, Adjusted EBITDA, EBITDA Before Franchise,
Excise and Minimum Taxes and EBITDA each as a percentage of tower rental
revenue.
(d) Includes towers that we manage, which at March 31, 1999 were 34 towers.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of
operations for each of the three years ended December 31, 1996, 1997, 1998 and
the three months ended March 31, 1999. The discussion should be read in
conjunction with our Financial Statements and the Notes thereto included
elsewhere in this Prospectus. The statements regarding the wireless
communications industry, our expectations regarding our 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
We acquire and construct rental towers and lease space on these towers to a
broad base of wireless communications providers, operators of private networks,
government agencies and other customers. Our 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. We seek to obtain a significant ownership
position of tower assets in our targeted markets in order to offer "one-stop
shopping" to wireless communications providers who are deploying or expanding
wireless communications networks.
Our growth has come primarily from the acquisition and construction of
towers and from adding new tenants to these towers. Our business strategy
focuses on aggressively pursuing tower acquisitions and selectively
constructing towers in areas that complement our existing base of rental towers
and the expansion into additional high growth wireless communications markets.
Since commencing operations in May 1995, we have completed acquisitions and
builds as follows:
<TABLE>
<CAPTION>
Acquisitions
Periods Ended Completed Pro Forma
December 31, Subsequent to for
------------------- March 31, March 31, Probable
1995 1996 1997 1998 1999 1999 Acquisitions Total
---- ---- ---- ---- --------- ------------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of towers
acquired............... 29 119 134 517 109 57 612 1,577
Number of towers built.. 4 4 22 47 16 15 0 108
--- --- --- --- --- --- --- -----
Number of towers
acquired or built
during the period...... 33 123 156 564 125 72 612 1,685
=== === === === === === === =====
Number of towers
managed................
Number of acquisition
transactions
completed.............. 13 49 72 82 27 36 8 287
</TABLE>
As of March 31, 1999, we also had 11 towers under construction and 50
additional tower projects in various stages of development. As of March 31,
1999, we had agreements or letters of intent to acquire 35 additional
communications sites. In addition, we have identified numerous additional
acquisition candidates. We expect that internal growth related to completed
acquisitions and the business potential of pending acquisitions will have a
material impact on our future revenues and EBITDA.
We believe that significant opportunities for growth exist by maximizing the
use of our existing and future communications sites. Because the costs of
operating a communications site are primarily fixed on owned sites, increasing
tower utilization significantly improves tower level operating margins on these
sites. We believe that "same tower" revenue growth on owned communications
sites (measured by comparing the annualized run rate revenue of our owned
communications sites at the end of a period to the annualized run rate revenue
for the same owned communications sites at the end of a prior period), is a
meaningful indicator of the quality of these sites and our ability to generate
incremental
33
<PAGE>
revenue on such sites. Taking into consideration new leases written as of
December 31, 1998, we experienced "same tower" revenue growth of approximately
20% for the year ended December 31, 1998 on the base of communications sites we
owned as of December 31, 1997.
We have generated net losses since inception and at March 31, 1999, had an
accumulated deficit totaling approximately $64.7 million. Due to the nature of
our business (the leasing of cash-generating assets) and our plans to continue
to grow the business, it is expected that charges relating to depreciation of
existing and future assets and interest expense associated with related debt
balances will be substantial. Accordingly, we expect to continue to generate
losses for the foreseeable future.
Our annualized run rate revenue is calculated as of a given date by
annualizing the monthly rental rates then in effect for customer lease
contracts as of such date. We believe that growth in our annualized run rate
revenue is a meaningful indicator of our performance. As of March 31, 1999, our
annualized run rate revenue was $51.6 million.
On June 29, 1999, we entered into an agreement to consummate the Motorola
Antenna Site Acquisition. In connection with that transaction, we anticipate
acquiring approximately 1,858 communications sites, consisting of 499 owned
sites, 526 managed sites and 833 leased sites, for $255 million plus fees and
expenses. For the three months ended March 31, 1999 on pro forma basis, the
Motorola sites generated $24.9 million in revenue, $9.1 million in tower level
cash flow and $7.1 million in EBITDA. Accordingly, the closing of that
acquisition will significantly increase our revenue, tower level cash flow and
EBITDA. Previously, these have not been a significant number of managed or
leased sites in our portfolio. Generally, managed and leased sites have higher
operating costs than owned towers, primarily as a result of higher rental costs
related to revenue sharing with site owners. In addition, on leased sites, we
generally have a right to lease only a limited portion of a site, which limits
total revenue potential. Higher relative operating costs and limited revenue
growth results in substantially lower tower cash flow and EBITDA margin
performance on managed and leased sites. Accordingly, the acquisition of
managed and leased sites in the Motorola Antenna Site Acquisition or any other
potential future acquisitions substantially will decrease our tower level
operating margins.
Results of Operations
The following table sets forth, for the periods indicated, each statement of
operations item as a percentage of 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 our consolidated financial
statements and Notes thereto included elsewhere in this document.
<TABLE>
<CAPTION>
Year Ended Period Period
December 31, Ended Ended
---------------------- March 31, March 31,
1996 1997 1998 1998 1999
----- ----- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Site rental revenue............. 100.0% 100.0% 100.0% 100.0% 100.0%
Site operating expenses,
excluding depreciation and
amortization................... 23.4 20.4 19.3 15.8 18.6
Gross profit.................... 76.6 79.6 80.7 84.2 81.4
Expenses:
General and administrative...... 18.9 10.6 13.0 7.8 7.0
Corporate development........... 29.3 28.9 19.9 24.0 14.3
State franchise, excise and
minimum taxes.................. 0.5 0.5 2.1 1.3 1.7
Depreciation.................... 42.2 49.2 70.3 54.9 74.9
Loss from operations.............. (14.3) (9.6) (24.6) (3.8) (16.04)
Interest expense.................. 23.9 53.8 38.4 57.8 32.5
Amortization of original issue
discount......................... 3.4 2.3 51.3 11.4 45.2
Net loss before extraordinary
items............................ (41.6%) (65.7%) (114.3%) (73.0%) (94.1%)
</TABLE>
34
<PAGE>
Three Months Ended March 31, 1999 compared to Three Months Ended March 31,
1998
Site rental revenue increased 123.5% to $12.0 million for the three month
period ended March 31, 1999 from $5.4 million for the three month period ended
March 31, 1998. This increase is attributable to additional revenue resulting
from (i) the acquisition and construction of 125 communications sites during
the three month period ended March 31, 1999, the results of which are reflected
from the time of acquisition or construction in the three month period ended
March 31, 1999, (ii) the inclusion of results from 308 communications sites
acquired or constructed during the period from April 1, 1998 through December
31, 1998 for the entire three month period ended March 31, 1999 and (iii) the
inclusion of results from 201 communications sites acquired in March 1998 for
the full three month period ended March 31 1999. In addition, the increase is
due to growth in per communications site revenue as a result of expanded
marketing efforts to increase the number of customers per communication site,
as well as regular, contractual price escalations for existing customers.
Site 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 expenses,
utilities, property taxes and other direct costs of communications site
operation, increased 162.2% to $2.2 million for the three month period ended
March 31, 1999 from $0.9 million for the three month period ended March 31,
1998. This increase is consistent with the purchase and construction of
communications sites and the related increases in revenue as discussed above.
Communications site operating expenses as a percentage of revenue increased to
18.6% for the three month period ended March 31, 1999 from 15.9% for the three
month period ended March 31, 1998. The change primarily results from the
continuing change in the mix of communications site assets due to ongoing
acquisition and build activity occurring since March 31, 1998. The portfolio of
communications site assets that we owned during the three months ended March
31, 1999 have slightly higher expenses as a percentage of communications site
revenue than the substantially smaller portfolio of tower assets owned during
the three month ended March 31, 1998. The specific areas of expenses effected
include ground rents, property taxes and certain maintenance costs related to
our site improvement program, which is designed to enhance marketability of
sites to our customers.
General and administrative expenses, which are associated with supporting
our day-to-day management of our existing properties and primarily consist of
employee compensation and related benefits costs, advertising, professional and
consulting fees, office rent and related expenses and travel costs, as a
percentage of revenue, decreased to 7.0% of revenue for the three month period
ended March 31, 1999 from 7.8% for the three month period ended March 31, 1998
reflecting the growth in revenues resulting from our continued success in
implementing our growth strategy over the past year. This decrease results from
decreases in personnel and infrastructure costs as our tower revenues increased
as a result of our acquisitions and construction of communications sites,
offset partially by the effect of increases in expenses from additional
staffing due to us becoming a public registrant and related increases in
professional fees, increased levels of advertising and marketing expenditures
and increases in rent and related costs associated with our growth.
Corporate development expenses, which represent costs incurred in connection
with acquisitions and construction of new communications sites, increased 32.8%
to $1.7 million for the three month period ended March 31, 1999 from $1.3
million for the three month period ended March 31, 1998. The increase in
corporate development expenses reflects the higher costs associated with
expansion of our acquisition and construction strategies and related
communications site development efforts. Corporate development expenses
decreased as a percentage of revenue from 24.0% for the three month period
ended March 31, 1998 to 14.2% for the three month period ended March 31, 1999
because of the incremental increase in revenue from the comparative period in
1998 and our ability to use our personnel and infrastructures more effectively
as we grow.
State franchise, excise and minimum taxes, which represent taxes assessed in
connection with our operations in various state jurisdictions, increased to
$0.20 million for the three month period ended
35
<PAGE>
March 31, 1999 from $0.01 million for the three month period ended March 31,
1998. Such taxes are calculated using various methods such as a portion of our
property within a given state, our capital structure or based upon a minimum
tax in lieu of income taxes. The increase in 1999 is primarily attributable to
our significant expansion of our geographic region primarily through
acquisitions.
Depreciation expense increased 204.8% to $9.0 million for the three month
period ended March 31, 1999 from $3.0 million for the three month period ended
March 31, 1998 as a result of the increase in tower assets through our
acquisition activities as described above.
Interest expense, net of amortization of original issue discount and debt
issuance costs, increased 25.6% to $3.9 million for the three month period
ended March 31, 1999 from $3.1 million for the three month period ended March
31, 1998. The increase in interest expenses was attributable to increased
average borrowings associated with the Company's acquisitions during the three
month period ended March 31, 1999 as compared to the three month period ended
March 31, 1998, offset by us being subject to lower average interest rates on
our average borrowings for the three month period ended March 31, 1999 as
compared to the three month period ended March 31, 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Site rental revenue increased 148.6% to $32.0 million in 1998 from $12.9
million in 1997. This increase is attributable to the acquisition and
construction of 564 communications sites during the twelve month period ended
December 31, 1998. In addition, the increase is due to growth in per
communications site revenue as a result of expanded marketing efforts to
increase the number of customers per communications site, as well as regular,
contractual price escalations for existing customers.
Site operating expenses, excluding depreciation and amortization, increased
134.2% to $6.2 million in 1998 from $2.6 million in 1997. This increase is
consistent with the purchase and construction of communications sites as
discussed above.
General and administrative expenses, increased to 13.0% of revenue in 1998
from 10.6% in 1997. This increase resulted from increases in staffing when we
became a public registrant and related increases in professional fees and
travel costs, increased levels of advertising and marketing expenditures in
connection with attracting new tenants to our communications sites and
increases in rent and related costs.
Corporate development expenses, increased 71.4% to $6.4 million in 1998 from
$3.7 million in 1997. The increase in corporate development expenses reflects
the higher costs associated with the expansion of our acquisition and
construction strategies. Corporate development expenses decreased as a
percentage of site rental revenue to 19.9% in 1998 from 28.9% in 1997 because
of the incremental increase in communications site rental revenue from the
comparative period in 1997 and our ability to use our personnel and
infrastructure more effectively as we grow.
State franchise, excise and minimum taxes, which represent taxes assessed in
connection with our operations in various state jurisdictions, increased to
$0.7 million in 1998 from $0.1 million in 1997. Such taxes are calculated using
various methods such as a portion of our property within a given state, our
capital structure or based upon a minimum tax in lieu of income taxes. The
increase in 1998 is primarily attributable to the significant expansion of our
geographic region primarily through acquisitions.
Interest expense, net of amortization of original issue discount, increased
77.6% to $12.3 million in 1998 from $6.9 million in 1997. The increase in
interest expense was attributable to increased borrowing associated with our
acquisitions and construction activity during the period.
36
<PAGE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Site rental revenue increased 166.0% to $12.9 million in 1997 from $4.8
million in 1996. This increase is primarily attributable to the acquisition and
construction of 156 communication towers during 1997 and, to a lesser extent,
expanded marketing efforts to increase the number of customers per tower as
well as regular, contractual price escalations for existing customers.
Site operating expenses, excluding depreciation and amortization, increased
131.9% to $2.6 million in 1997 from $1.1 million in 1996 due primarily to the
addition of 156 communication towers during the year. However, site operating
expenses, excluding depreciation and amortization, decreased as a percentage of
site rental revenue to 20.4% in 1997 from 23.4% in 1996, reflecting operating
efficiencies gained on existing communications sites as well as on new
communication towers acquired or constructed.
General and administrative expenses increased 49.2% to $1.4 million in 1997
from $0.9 million in 1996. General and administrative costs decreased as a
percentage of site rental revenue to 10.6% in 1997 from 18.9% in 1996 because
of lower overhead costs as a percentage of site rental revenue.
Corporate development expenses increased 162.0% to $3.7 million in 1997 from
$1.4 million in 1996. The increase in corporate development expenses reflects
our expansion of our acquisition and construction strategies. Corporate
development expenses remained relatively constant as a percentage of site
rental revenue at 28.9% in 1997 compared to 29.3% 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 levels associated with our acquisitions during the period.
Liquidity and Capital Resources
Our liquidity needs arise from our acquisition-related activities, debt
service obligations, working capital needs and capital expenditures. We have
historically funded our liquidity needs with proceeds from equity
contributions, bank borrowings, the issuance of our 10% senior discount notes,
cash flow from operations and our initial public offering of the Common Stock
("IPO"). We had a working capital deficit of $14.7 million, $9.3 million
(inclusive of a $15.0 million bridge loan owed to ABRY II, which was repaid on
February 24, 1999), $12.8 million and $1.5 million as of March 31, 1999,
December 31, 1998, 1997 and 1996, respectively. Excluding the current portion
of long-term debt, current liabilities exceed current assets by $13.7 million
as of March 31, 1999. Excluding the current portion of long-term debt, current
liabilities exceeded current assets by $6.4 million, $1.7 million and $0.8
million as of December 31, 1998, 1997 and 1996, respectively. Our ratio of
total debt to stockholders' equity was 1.7 to 1.0 at March 31, 1999. Our ratio
of total debt to stockholders' equity was 10.7 to 1.0 at December 31, 1998, 8.2
to 1.0 at December 31, 1997 and 1.4 to 1.0 as of December 31, 1996. On a pro
forma basis as of March 31, 1999, we would have had consolidated cash and cash
equivalents of $1.3 million, $550.3 million of consolidated long-term debt
outstanding, consolidated stockholders' equity of $399.6 million and a ratio of
total debt to stockholders' equity of 1.38 to 1.0.
Our credit facility provides us with two revolving lines of credit for two
term loans for aggregate borrowings of up to $450 million, of which $225
million (including letters of credit) is currently outstanding. Approximately
$220 million is intended to be drawn to partially finance the Motorola Antenna
Site Acquisition. Under the two revolving lines of credit, we may make
borrowings and repayments until June 30, 2006. Under one term loan, advances
must be repaid in full by June 30, 2006. Under the other term loan, advances
must be repaid in full by June 30, 2007. Once repaid, advances under term loans
may not be re-drawn. Advances under one revolving line of credit and one term
loan may be used for acquisitions, working capital, and other general corporate
purposes. Advances under the other revolving credit and the other term loan are
limited to acquisitions. Advances under our credit facility have been used
primarily to fund acquisitions and construction of sites.
37
<PAGE>
Beginning September 30, 2001, the availability under each revolving line of
credit and one term loan starts reducing by specified amounts on a quarterly
basis until June 30, 2006, when the availability under such credits will be
reduced to zero. Beginning September 30, 2001, the availability under the other
term loan starts reducing by specified amounts on a quarterly basis until June
30, 2007, when the term loan must be repaid in full. Advances under the
revolving credits and the term loan maturing June 30, 2006 bear interest at a
rate per annum, at the borrower's request, equal to the agent bank's prime rate
plus a margin of up to 1.5% or the 90-day London Interbank Offered Rate plus a
margin of up to 2.75%. Advances under the term loan maturing June 30, 2007 bear
interest at a rate per annum, at the borrower's request, equal to the agent
bank's prime rate plus a margin of up to 1.75% or the 90-day London Interbank
Offered Rate plus a margin of up to 3.0%. As of March 31, 1999, after giving
effect to the acquisitions referred to in this Prospectus on a pro forma
adjusted basis, there would have been $95.9 million available under our credit
facility, after giving effect to approximately $49.2 million of outstanding
letters of credit, which reduce availability under our credit facility.
We also use seller financing to fund certain of our communications site
acquisitions. As of March 31, 1999, we had outstanding, in the aggregate
amount, $24.2 million of seller notes bearing interest at rates ranging from
8.5% to 13.0% per annum.
In March 1998, we completed the offering of our 10% senior discount notes.
We received net proceeds of approximately $192.8 million from that offering.
The proceeds were used to repay outstanding borrowings under our credit
facility, to repay in full and retire a $12.5 million bridge loan from ABRY II
and accrued interest thereon and a $20 million subordinated term loan and
accrued interest thereon and to pay a distribution preference to certain
holders of our Common Stock. Our 10% senior discount notes were issued an
indenture and will mature on March 15, 2008. Cash interest is not payable on
our notes prior to March 15, 2003. Thereafter, our notes will require annual
cash interest payments of $32.5 million.
On February 19, 1999, we completed our IPO whereby we sold 20,000,000 shares
of common stock and on March 19, 1999, the over-allotment options were
exercised and an additional 2,026,000 shares were sold. The initial price per
share was $14, resulting in net proceeds of approximately $290 million before
deducting costs of our IPO.
We recently received a commitment from an institutional investor to purchase
$30 million aggregate liquidation preference of senior preferred pay-in-kind
stock, Series A (the "Series A Preferred Stock"). Proceeds from the issuance of
the Series A Preferred Stock would be available to partially fund the Motorola
Antenna Site Acquisition. If issued, it is anticipated their Series A Preferred
Stock will be entitled to receive dividends, payable quarterly, at an initial
rate equal to 14% per annum for the first two quarters after its issuance,
14.75% per annum for the following quarter, 15.5% per annum for the following
quarter and 16% per annum thereafter. At our option, we will be able to pay
dividends in cash or by the issuance of additional shares of Series A Preferred
Stock having an aggregate liquidation preference equal to the amount of such
dividends. Five years after issuance, we will be able to pay dividends by
paying a 14% per annum cash dividend and a 2% per annum dividend by the
issuance of additional shares of Series A Preferred Stock having an aggregate
liquidation preference equal to the amount of such 2% per annum dividend. The
Series A Preferred Stock will be redeemable at our option, in whole (but not in
part), at any time at a redemption price equal to the aggregate liquidation
preference thereof, plus all accumulated but unpaid dividends to the date of
redemption. In addition, we will be required, subject to certain conditions, to
redeem all of the Series A Preferred Stock outstanding ten years from the date
its issuance at a redemption price equal to 100% of the liquidation preference
thereof, plus accumulated and unpaid dividends to the date of redemption. If
issued, we would expect to redeem the Series A Preferred Stock to be redeemed
with proceeds from this offering.
38
<PAGE>
In connection with the SCANA Acquisition and the approximately $6 million
portion of the Meretel Acquisition, we have signed a commitment letter dated
July 2, 1999 between us and an affiliate of Deutsche Bank Securities, Inc.,
which permits us to pay for the acquisitions by the issuance of $20 million
aggregate liquidation preference of senior preferred pay-in-kind stock of the
Company, Series B ("Series B Preferred Stock"). The Series B Preferred Stock
will be entitled to receive dividends, payable quarterly in additional shares
of Series B Preferred Stock at an initial rate equal to 17% per annum. The
Series B Preferred Stock will rank junior in right of payment of dividends and
upon liquidation to the Series A Preferred Stock and will rank senior to all
other class of preferred common stock of the Company. The PIK Preferred Stock
will be redeemable, at the option of the Company, in whole or in part, at any
time at a redemption price equal to 100% of the aggregate liquidation
preference thereof, plus all accumulated but unpaid dividends thereon, if any,
to the date of redemption. The commitment relating to the provision of the
Series B Preferred Stock expires on July 31, 1999 if no designated acquisitions
have been funded with bridge or interim financing. We expect that, if funded,
we will redeem the Series B Preferred Stock with proceeds from this offering.
Capital investments, including acquisitions, for the three months ended
March 31, 1999 were $85.7 million, compared to $111.0 million in the comparable
1998 period. We anticipate that we will spend approximately $182.1 million on
capital investments during the period from April 1, 1999 through December 31,
1999, including various individually immaterial acquisitions in our current
targeted acquisitions pipeline, construction and upgrading of additional
towers. Depending on availability of additional capital, we expect that we may
make substantial capital investments for acquisitions, construction and
upgrading of additional towers in 1999 and 2000.
We estimate capital expenditures in each of 1999 and 2000 to be
approximately $150.0 million.
We believe that the proceeds from this offering of our Common Stock,
availability under our credit facility, cash flow from operations and existing
cash balances will be sufficient to meet working capital requirements for
existing properties and to fund our current probable acquisitions. To the
extent that we pursue additional acquisitions, construction activity and other
capital expenditures requiring funding in excess of that then available under
our credit facility, we will be required to obtain additional financing. To the
extent that we are unable to finance future capital expenditures, we may not be
able to achieve our current business strategy.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business and, in some cases, relate to our acquisitions of
related businesses. We are subject to interest rate risk on our credit facility
and any future financing requirements. Our fixed rate debt consists primarily
of outstanding balances on our 10% senior discount notes and notes payable to
former tower owners and our variable rate debt relates to borrowings under our
credit facility. See "--Liquidity and Capital Resources".
The following table presents the future principal payment obligations and
weighted-average interest rates associated with our existing long-term debt
instruments assuming our actual level of long-term indebtedness of $329,651,613
under our 10% senior discount notes and our credit facility as of March 31,
1999:
<TABLE>
<CAPTION>
Expected Maturity Date
-----------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter
---- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term Debt
Fixed Rate (10.00%).... -- -- -- -- -- $325,000,000
Variable Rate (Weighted
Average Interest Rate
of 8.58%)............. -- $10,845,000 $16,267,500 $21,690,000 $59,647,500 --
</TABLE>
39
<PAGE>
Our primary market risk exposure relates to the following:
. the interest rate risk on long-term and short-term borrowings;
. our ability to refinance our notes at maturity at market rates;
. the impact of interest rate movements on our ability to meet interest
expense requirements and exceed financial covenants; and
. the impact of interest rate movements on our ability to obtain adequate
financing to fund future acquisitions.
We manage interest rate risk on our outstanding long-term and short-term
debt through our use of fixed and variable rate debt. While we cannot predict
or manage our ability to refinance existing debt or the impact interest rate
movements will have on our existing debt, we continue to evaluate our financial
position on an ongoing basis.
Inflation
Because of the relatively low levels of inflation experienced in 1996, 1997,
1998 and as of March 31, 1999, inflation did not have a significant effect on
our results in such years.
Year 2000
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify years. As a result, such systems will
recognize the year 2000 as "00" or 1900. This could cause many computer
applications to fail completely or to create erroneous results unless
corrective measures are taken.
We utilize management information systems and software technology that may
be affected by Year 2000 issues throughout our businesses. During fiscal 1996,
we began to implement plans to assess our systems to determine their ability to
meet our internal and external requirements. During fiscal 1998, we completed
our initial comprehensive testing of our systems in response to and
modifications to our information systems in response to that testing. We have
developed questionnaires and contacted key suppliers regarding their Year 2000
compliance to determine any impact on our operation. In general, our suppliers
and customers appear to have developed or are in the process of developing
plans to address Year 2000 issues. We will continue to monitor and evaluate the
progress of our suppliers and customers on this matter.
Year 2000 issues are is not expected to have a material impact on our
current information systems as a result of the steps already completed to try
and make our systems Year 2000 compliant. Based on the nature of our business,
we anticipate that we are not likely to experience material business
interruption due to the impact of Year 2000 compliance on our customers and
vendors, although if our customers and vendors experience Year 2000 problems,
our results of operations could be materially adversely affected. We estimate
that we will spend approximately $100,000 in 1999 to continue to monitor and
test our systems for Year 2000 compliance including our software applications
that we continuously develop and enhance. As a result, we do not anticipate
that incremental expenditures to address Year 2000 compliance will be material
to our liquidity, financial position or results of operations prior to the Year
2000. See "Risk Factors--We cannot assure you that the impact of the Year 2000
date change on computer systems will not have significant adverse effects on
us."
40
<PAGE>
BUSINESS
Company Overview
We are the leading provider of wireless communications site space in the
Southeastern United States. We rent space on communications sites to providers
of wireless communication services such as PCS, cellular, paging, SMR, wireless
data transmission and radio and television broadcasting. We believe renting
communications site space allows us to achieve the highest cash flow margins
with the lowest level of risk on the capital we invest in the communications
site business. As a result of our extensive base of existing communications
site, we believe that we are well positioned to continue to benefit from the
growth opportunities in the rapidly consolidating tower industry and from the
strong demand for tower rental space fueled by growing demand for wireless
services.
Since our formation in May 1995, we have focused on creating a portfolio of
communications site clusters by concentrating our presence in high growth
markets such as Atlanta, Birmingham, New Orleans, Orlando and Tampa. As of
June 30, 1999, we have completed 279 acquisitions, acquiring 999 communications
sites and have constructed an additional 108 towers. Currently we have
agreements or letters of intent to acquire 1,971 additional communications
sites, including an agreement with Motorola, to acquire 499 owned sites, 526
"managed" sites and 833 "leased" sites for $255 million. The pending Motorola
Antenna Site Acquisition will enhance our strong position in the Southeast,
expand our existing presence in the Northeast and West and introduce us to new
markets in the Midwest. Following the closing of the Motorola Antenna Site
Acquisition and the additional communications sites which are currently subject
to agreement or a letter of intent we will have 1,685 owned communications
sites, 558 managed communications sites and 833 leased communications sites.
Managed sites are tower or rooftop communications sites owned by others where
we have the exclusive right to market antenna space on these sites. Leased
sites are tower or rooftop communications sites owned by others that we have a
non-exclusive right to market. We had annualized tower rental revenue and
EBITDA on a pro forma basis of $143.8 million and $66.5 million, respectively
for the three months ended March 31, 1999.
We currently have over 800 customers renting space on one or more of our
communications sites. Our tenants consist of all forms of wireless
communications providers, operators of private wireless networks and government
agencies including Southern Communications, Nextel, Sprint PCS, PageNet,
Motorola, BellSouth Mobility, MobileMedia Communications, Teletouch, Skytel,
Pagemart, Federal Bureau of Investigation and Bureau of Alcohol, Tobacco &
Firearms. Our customers are generally responsible for the installation of their
own equipment and the incremental utility costs associated with that equipment.
In addition, adding customers on a communications site does not increase
monitoring, maintenance or insurance costs. Therefore, when new customers are
added to a communications site, we are able to increase revenue at low
incremental cost, thereby increasing cash flow margins. The Motorola Antenna
Site Acquisition will also enhance our customer base. Motorola currently leases
tower space to over customers, many of whom are our existing customers.
Industry Background
Communications sites are primary infrastructure components for wireless
communications services such as PCS, cellular, paging, 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 to
meet the requirements of a particular carrier to cover a geographic area and
include transmission equipment such as antenna, 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 on which the
equipment may be placed. Wireless communications providers design their
networks and select their communications sites in order to optimize their
41
<PAGE>
transmission frequencies, taking into account the projected geographic area the
site will cover, the topography of the area and the requirements of the
technology being deployed.
The Wireless Communications Industry
The wireless communications industry is growing rapidly as:
. consumers become increasingly aware of the uses and benefits of wireless
communications services;
. the costs of wireless communications services decline; and
. new wireless communications technologies are developed.
Changes in federal regulatory laws have led to a significant increase in the
number of competitors in the wireless communications industry. This
competition, combined with an increasing reliance on wireless communications
services by consumers and businesses, has increased demand for higher quality
networks with wide reaching and reliable service. As new service carriers build
out their networks and existing carriers upgrade and expand their networks to
maintain their competitiveness, the demand for communications sites is expected
to increase dramatically.
The wireless communications industry is comprised of the following segments:
. Cellular--Currently each market in the United States has two cellular
service operators. Cellular networks consist of numerous geographic
"cells" located every few miles that rebroadcast the cellular frequency.
Each cell includes a communications site consisting of transmission
equipment typically located on a wireless communications tower. According
to industry publications, as of December 31, 1998 there were 58.9 million
wireless telephone subscribers in the United States, representing a 14%
growth rate over the prior 12 months, and an overall penetration of the
market of approximately 21.8%, with demand expected to increase as prices
decline;
. PCS--PCS is an emerging wireless communications technology competing with
cellular that offers a digital signal that is clearer and offers greater
privacy than analog cellular systems. PCS companies are expected to be
substantial users of tower space primarily because:
--up to six PCS licenses have been issued by the FCC in each market
(versus two licenses for cellular); and
--PCS technology requires more communications sites to cover the same
geographic area as cellular technology.
According to industry publications, there were approximately 7.5 million
PCS subscribers in the United States as of December 31, 1998. The
Personal Communications Industry Association ("PCIA") estimates that as
of December 31, 1998 there were approximately 84,000 antenna sites
(cellular and PCS) in the United States. PCIA estimates that this number
will increase by approximately 66,000 additional antenna sites by 2005.
While some of these sites may use existing communications sites, it is
expected that a large number of new sites will be required for the
deployment of PCS networks. PrimeCo, Aerial and Sprint PCS are currently
building out PCS systems in the Southeast, and are placing their
equipment on many of our rental communications sites, rather than
constructing their own towers;
. Paging--Paging has also enjoyed dramatic growth over the last ten years.
According to industry publications, there were 54.2 million pagers at the
end of 1998, representing a compound annual growth rate of 23% since
1993. This growth was spurred by declining prices, wider geographic reach
and increasing demand by consumers. While network construction by the
paging industry appears to be reaching a level of maturity, even at the
current subscriber levels it is expected that additional transmission
frequencies and, in-turn, additional transmitter equipment will be
required
42
<PAGE>
both to service existing paging customers and deploy new paging
technologies. 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 primarily
for commercial purposes. Two-way private business radio is used primarily
for businesses engaged in dispatching personnel or equipment to work
sites with users including 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 communications sites 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 with cellular and PCS. As more commercial users are attracted to
enhanced SMR services, the demand for communications site space to
support this broader use should also increase. Nextel and Southern
Communications are currently the leading ESMR providers in the United
States;
. Government Agencies--Federal, state and local government agencies are
major users of wireless communications services and typically operate on
their own dedicated frequencies. These government agencies often find it
easier to lease rather than own communications site 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 services.
Examples of government customers of communications site 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 communications site location is chosen,
broadcasters rarely change sites because of complex regulatory
requirements, high switching costs and business disruption. Although the
U.S. broadcasting industry is generally mature in its demand for
transmission communications site capacity, a significant increase in
demand for communications site space may occur when digital spectrum is
used to deliver high definition television or digital multi-casting,
i.e., multiple "normal" definition television channels. Additionally,
wireless cable television is being developed and positioned as a
potential alternative to traditional cable television. Wireless cable
operates by receiving programming from a satellite which is then
retransmitted from an antenna on a communications site to an antenna on a
subscriber's residence. Several wireless cable companies are now in the
process of constructing their systems in our regions; and
. Emerging Technologies and Availability of FCC Spectrum--Several new
entrants in the wireless communications industry are emerging as new
technology becomes available and as additional radio spectrum is
authorized for use by the FCC. For example, wireless local loop 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. Wireless local loop 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. Wireless data transmission is also
widely viewed as being in its infancy as several companies endeavor to
build national wireless data transmission networks including, Nationwide
Wireless Network (an affiliate of MTEL), RAM Mobile Data (10% owned by
BellSouth), and Racotek's SMR based data networks. Automatic Vehicle
Monitoring/Location and Monitoring Services such as "Lo Jack" also
require a minimum of three towers to provide their services in a
particular coverage area. In addition to their current uses, we believe
that monitoring/tracking service providers will
43
<PAGE>
use the band to provide fleet tracking, rail and container transportation
monitoring, security and access control, etc.
These recent developments in the wireless communications industry indicate
continuing opportunities for growth in the communications site 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
communications sites.
The Communications Site Rental Industry
A typical tower site consists of a fenced area containing a tower and an
equipment shelter that houses a variety of transmitting, receiving and
switching equipment. There are three types of towers
. Guyed towers (which can reach heights of up to 2,000 feet) gain their
support from a series of cables attached at different levels on the tower
to anchor foundations in the ground;
. Lattice towers (which can reach heights of up to 1,000 feet) are self-
supporting structures usually tapered from the bottom up, with either
three or four legs; and
. Monopoles (which range in height from 50-200 feet) are self-supporting
tubular structures, which typically accommodate fewer tenants. Monopoles
are often used as single purpose towers or in locations where there are
space constraints or a need to address aesthetic concerns.
In addition to towers, wireless communications equipment can also be placed
on building rooftops. Rooftop sites are common in urban downtown areas where
tall buildings are available and multiple communications sites are required
because of the high volume of wireless traffic. As of March 31, 1999, our
tower portfolio was comprised of 696 guyed, 234 self supporting lattices, 64
monopoles and 17 rooftop sites. In addition, with the Motorola Antenna Site
Acquisition, we are acquiring or managing 1,117 guyed, 342 self supporting
lattices, 30 monopoles and 369 rooftop sites.
The value of a rental communications sites is principally determined by the
desirability of its location to customers and the amount of equipment that can
be located at a particular site. Multiple customers can share one tower
through "vertical separation" with each type of customer (i.e. cellular, PCS,
Paging) located at a different height on the tower, while multiple customers
can share a single rooftop communications site through "horizontal separation"
of each type of customer. Additionally, although many existing towers and
rooftops were not originally built with the capacity to support multiple
customers, these communications sites can often be upgraded or reinforced to
support additional equipment.
Historically, wireless communications providers and broadcasters built,
owned and operated their own towers, which were typically constructed and
designed for their exclusive use. There have been a number of changes in the
communications industry, however, that have resulted in communications sites
becoming available for multiple uses and for acquisition by independent
communications site operators.
. As new technologies emerged, much of the transmission and broadcast
equipment located on many communications sites became obsolete. For
example, fiber optic cables have largely replaced transmission traffic
traditionally carried by wireless microwave networks;
. Paging and SMR providers traditionally owned their own networks and
transmission towers. As these industries have consolidated over the past
ten years, the service providers consolidated their equipment, resulting
in unutilized or underutilized towers; and
. Wireless communications providers today are generally more focused on
developing their subscriber base and less focused on building and owning
proprietary tower networks.
44
<PAGE>
During the mid-to-late 1980s, a number of independent communications site
owners began to emerge, marking the beginning of the site rental industry.
These independent tower owners focused on owning and managing towers and
rooftops with multiple customers. We believe the majority of these operators
were individuals with a small number of local rental towers offering very
limited coverage areas. Since 1995, however, several larger independent
communications site owners have emerged as demand for wireless communications
services has continued to grow and as additional high frequency licenses were
awarded for new wireless communications services. Both trends led to a need for
networks with an extensive tower infrastructure. As the demand for
communications sites has been increasing, there has been a growing trend by
municipalities to slow the proliferation of towers. These trends have
contributed to an increasing need for strategically located towers that can
accommodate multiple wireless communications providers.
Our Approach to the Tower Rental Industry
As a result of the recent developments in the wireless communications
industry and the highly fragmented nature of the tower rental industry, our
founders recognized a significant opportunity to consolidate strategically
located wireless communications towers and enhance rental revenue on those
towers. In particular, our founders developed a strategy of acquiring clusters
of towers that would provide strong positions in selected, high growth wireless
communications markets in the Southeastern United States.
Our Business and Growth Strategy
Our objective is to create substantial value by both maintaining our
position as the leading provider of wireless communications rental tower space
in the Southeastern United States and expanding into additional wireless
communication markets. In order to achieve this objective, we have designed and
implemented a three-tiered growth strategy that includes:
. increasing our revenue per tower by aggressively marketing available
rental space;
. continuing to acquire towers in key markets; and
. implementing a selective tower construction program designed to
complement our acquisition strategy.
Our Marketing and Development Strategy
We aggressively market rental space on our towers to capitalize on our
method of business operation. Our customers are generally responsible for the
installation of their own equipment and the utility costs associated with
operating their equipment. In addition, adding customers to an existing tower
does not increase our monitoring, maintenance or insurance costs. Accordingly,
when customers are added to an existing tower, there is little expense and the
additional revenue increases our cash flow margins. The key elements of our
marketing and development strategy include the following:
. We Offer Strategically Located Clusters of Communications Sites. By
owning and assembling clusters of towers in high growth regions, we
believe that we are able to offer our customers the ability to rapidly
and efficiently fulfill their network expansion plans across a particular
market or region, which we believe provides us with a significant
competitive advantage. We also believe that the management and leasing
contracts we will acquire in the Motorola Antenna Site Acquisition will
enhance our competitive position by allowing us to make more towers, in
more locations available to our customers;
. We Target a Diversified Customer Base. The number of antenna a tower can
accommodate varies depending on the type of tower (guyed, self-supporting
lattice or self-supporting monopole), the height of the tower and the
nature of the services provided by such antenna. The
45
<PAGE>
substantial majority of our towers are self-supporting lattice and guyed
towers that can support a large number of antenna and therefore enable us
to market our tower space to a diverse group of wireless communications
providers. In addition, rooftop sites allow us to further diversify our
customer base by providing us with an inventory of high altitude sites
suitable for newer LMDS and HDTV technologies;
. We Take Advantage of Our Strong Customer Relationships. We believe that
we have established a reputation among our customers as a highly
professional and reliable tower space provider. This reputation has been
achieved through ongoing investment in the development of relationships
at multiple levels of our customers' organizations. We believe that
important factors in generating interest in our towers are the customer's
awareness of the quality of a particular site, the ease of doing business
with one lessor, the location of our other towers and our ability to
construct new towers; and
. We Track FCC Filings. All FCC licensees must file applications for site
locations. As part of a disciplined approach to acquisitions and new
tower construction activities, we track these filings, which provide us
with market intelligence as to existing wireless communications
providers' build-out plans and new market entrants.
Our Acquisition Strategy
Rental communications sites in many parts of the United States are still
largely owned by many different companies and individuals, even though the
consolidation of communications site ownership has begun to accelerate as
larger independent owners acquire small local owners. We believe that our
acquisition strategy has allowed us to achieve the highest density of towers
across nine states located in the Southeastern United States, as well as
create dense clusters of communications sites. Our objective is to create
value both by capitalizing on our position as the leading provider of wireless
communications site rental space in the Southeastern United States and
applying our focused marketing and cluster enhancing strategy to new markets
we may enter, including markets where Motorola sites are located.
We believe that growth through acquisition is an attractive strategy
because it allows us to:
. choose the location of our communications sites in key urban and other
desired locations;
. acquire communications sites with existing tenants and the capacity to
add multiple, additional tenants;
. not seek "build-to-suit" mandates from customers, which may result in
towers being built in unprofitable locations; and
. lower our risk as cash flow from existing tenants is predetermined and
immediate.
Our acquisition strategy continues to focus on:
. rapidly acquiring communications sites in key markets as a means to
quickly gain critical mass which discourages other site consolidators
from entering our markets;
. completing follow-on acquisitions to enhance our coverage in selected
wireless communications markets; and
. entering new markets as a platform for future growth.
In executing our acquisition strategy, we generally target strategically
located individual communications sites or small groups of communications
sites. Our focus on individual communications sites or small groups of
communications sites, however, does not preclude potential acquisitions of a
large number of sites in a single transaction, as is the case with the
Southern Towers Acquisition, MobileMedia Acquisition, and the pending Motorola
Antenna Site Acquisition.
46
<PAGE>
We conduct extensive due diligence prior to consummating an acquisition,
leveraging what we believe to be our competitive advantage in terms of our
experience in, and knowledge of, the communications site rental industry. We
utilize 10 full-time communications site buyers, who spend substantially all of
their time in the field identifying, evaluating and generating acquisition
opportunities using a standardized process that we have developed to ensure
that acquisitions are evaluated, documented and rapidly processed. In order to
execute and ensure the integrity and quality of this process, we use outside
independent professionals to verify certain accounting, legal and engineering
data. We believe that this approach has proven effective in permitting us to
more accurately predict the performance of acquired assets and reduce the risks
associated with our 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 we
will be able to successfully implement our acquisition strategy. See "Risk
Factors--We depend on acquisitions and the integration of those acquisitions
into our business."
The key elements of our acquisition strategy are set forth below:
. We Target High Growth Wireless Communications Markets. We target
population centers and key transportation corridors in wireless
communications markets where there is evidence of high potential growth.
We have established strong market positions in densely populated areas
such as Atlanta, Birmingham, New Orleans, Orlando, Tampa, Knoxville,
Mobile and Nashville. In addition, we have strong market positions in
Southern California and New England.
. We Focus on the Compatibility with Our Existing Communications Site
Network. We consider many factors when evaluating a potential
acquisition. In particular, we consider whether an acquisition will
enhance or create a cluster of communications sites in a given area,
thereby providing us with a stronger market position and competitive
advantage. We also consider whether the communications sites in a
particular acquisition meet previously identified customer demand for
enhanced coverage. In some instances, we may acquire, as part of a group
of communications sites being purchased, an individual communications
site that falls outside of normal acquisition parameters. Such
acquisitions occur only when we have determined that the overall
transaction is attractive.
. We Employ a Disciplined Valuation Process. We seek to acquire
communications sites that have existing cash flow and identified
potential for significant future cash flow growth from additional
tenants. Prior to acquiring a communications site we consider each of the
following factors:
--current population coverage of each communications site to be
acquired;
--nature and quality of the existing and potential customer base;
--coverage of current and future transportation corridors; and
--location and desirability of competing communications sites.
We also make an assessment of potential cash flow growth and estimate
whether additional capital expenditures will be required to add capacity to
accommodate future growth.
While we have completed an average of 5.6 acquisitions a month over the last
four years, consistent with our acquisition criteria and strategy, we have
completed or entered into an agreement to complete the following major
acquisitions since March 1998:
Southern Towers Acquisition. In March 1998, we acquired 201 towers from
Southern Communications for approximately $83.5 million plus fees and expenses
(the "Southern Towers Acquisition"). Southern Communications is a subsidiary of
Southern Company, one of the largest utility holding companies in the United
States and an ESMR provider. Substantially all of the towers, which are located
in Georgia, Alabama, Mississippi and Florida, were constructed within the past
five years.
47
<PAGE>
In connection with the Southern Towers Acquisition, we entered into leases
with Southern Communications and its affiliates to provide communications site
space for their ESMR network. The leases provide for an initial ten-year term
with five optional renewal periods of five-years each exercisable at the
customer's option on the same terms as the original leases. In addition, we
have entered into an option agreement with Southern Communications, Inc. where
Southern Communications could require us to use commercially reasonable efforts
to supply, acquire or construct an additional 80 towers for rental to Southern
Communications or its affiliates. We have initiated construction on
approximately half of the tower opportunities presented by Southern
Communications to date.
Prior to the Southern Towers Acquisition, these towers were principally for
the use of Southern Communications and its affiliates and had only a limited
number of third party tenants. The towers were generally constructed with
capacity that significantly exceeded Southern Communications' specific capacity
requirements. Accordingly, we believe that there is substantial potential for
additional revenue from these towers.
MobileMedia Acquisition. In September 1998, we acquired 166 towers from
MobileMedia and its affiliates for approximately $170.0 million (the
"MobileMedia Acquisition"). Following its pending merger with Arch
Communications, Inc., MobileMedia will be the second largest paging company in
the United States.
In connection with this acquisition, we entered into a lease arrangement to
provide rental tower space to MobileMedia Communications, an affiliate of
MobileMedia. This lease provides for an initial 15 year noncancellable term
with one five-year renewal period, exercisable at the customer's option. Under
this lease, MobileMedia Communications secured communications site space for
its currently existing 683 transmitters on the acquired towers at a monthly
rental rate of $1,300 per transmitter or $888,000 per month. In connection with
the lease, we have also given MobileMedia Communications the right to a defined
pricing discount for additional communications site space on our tower
portfolio that MobileMedia Communications may lease in the future as it
continues to expand its paging network. We believe that the discount
arrangement is an incentive for MobileMedia Communications to use us as a
preferred provider of rental communications site space for new communications
site locations they may require in the future.
Motorola Antenna Site Acquisition On June 29, 1999, we executed a definitive
agreement to acquire 1,858 communications sites, including 499 owned sites, 526
managed sites, and 833 leased sites from Motorola for $255 million plus fees
and expenses. The Motorola communications sites are largely clustered in urban
areas throughout the United States and Canada with over 50% of the owned sites
overlapping with our existing communications site portfolio. We believe that
the Motorola Antenna Site Acquisition greatly enhances our ability to offer our
customers attractive tower clusters in high growth markets and transportation
corridors. In addition, the managed sites we expect to acquire in the Motorola
Antenna Site Acquisition will enable us to provide our customers premier urban
rooftop sites such as the World Trade Center in New York, Sears Tower in
Chicago and the Allied Bank Building in Houston. We believe these sites will
allow us to further diversify our customer base by providing us with an
inventory of high altitude sites in urban areas. For the three months ended
March 31, 1999, the Motorola communications sites generated $20.9 million and
$7.1 million in revenue and EBITDA on a pro forma basis, respectively.
This offering is not conditioned upon the consummation of the Motorola
Antenna Site Acquisition and we cannot assure you that we will consummate the
Motorola Antenna Site Acquisition. See "Risk Factors--There may be risks
associated with the Motorola Antenna Site Acquisition."
48
<PAGE>
Our New Tower Construction Strategy
An additional element of our growth strategy is to selectively construct new
towers in and around major markets where we already have a presence to enhance
our tower coverage in existing markets. Additionally, we also intend to build
new towers to expand the capacity of, or otherwise improve, existing sites. In
both cases, we adhere to our own requirements of return on invested capital. We
do not engage in speculative construction projects or large scale "build-to-
suit" projects. During 1997, 1998 and the first three months of 1999, we
constructed 22, 47 and 16 towers, respectively. As a result of opportunities
generated through our marketing efforts, we estimate that we will identify 80
to 100 new tower build opportunities in the next year. As of December 31, 1998,
we had 11 new towers under construction and over 50 additional tower projects
in various stages of development. See "Risk Factors--There are significant
risks associated with construction of new towers."
The elements of our tower build program include the following:
. We Have a Disciplined Build Selection Criteria. Through our sales and
marketing efforts, we seek to identify suitable tower construction sites
based on information obtained from wireless communications providers
about their network construction plans. By knowing our customers' plans,
we can market space on an existing tower or determine whether it makes
sense to acquire or construct a new tower to meet our customers' needs.
Once a potential opportunity is identified, we act quickly to select only
those opportunities that are financially attractive. Tower construction
is only initiated after at least one anchor customer is identified and
after we have determined, based on market research, that the capital
outlay for the construction project would generate returns that exceed
our minimum required return on invested capital.
. We Rapidly Implement Construction. After identifying an attractive
construction opportunity, we move quickly to:
--secure access to the site by either purchasing or entering into a
long-term lease for a parcel of land;
--select the appropriate type of tower based on capacity needs;
--initiate sales and marketing efforts to rent additional space on the
tower; and
--complete the necessary steps to obtain zoning approvals and building
permits.
We acquire tower structures from a variety of vendors and oversee the
construction of the tower with hired sub-contractors.
Our Strengths
We believe the following to be the strengths of our business:
. We Primarily Focus on the Tower Rental Business. We primarily focus on
the rental of wireless communications site space as opposed to other
aspects of the tower industry such as site acquisition services, tower
construction services and ancillary services. Furthermore, we do not
engage in large scale "build-to-suit" programs, preferring instead to
focus on our core acquisition strategy and complimentary selective
construction strategy designed to enhance coverage in targeted markets.
We believe that by focusing on this sector of the tower industry, we can
earn the highest risk adjusted return on invested capital.
. We are a Disciplined and Efficient Acquirer of Communications Site
Assets. At March 31, 1999 we had a network of approximately 1,035
communications sites (excluding 57 sites we acquired subsequent to March
31, 1999, and 1,971 towers to be acquired pursuant to probable
acquisitions including the Motorola Antenna Site Acquisition). Our proven
acquisition process identifies communications sites that typically have
existing cash flow and are complementary to our
49
<PAGE>
existing portfolio. We have demonstrated the ability to identify and
successfully negotiate the purchase of what we believe to be value
enhancing acquisitions.
. We Have the Ability to Successfully Increase Tower Rental Revenue. Our
aggressive marketing efforts to all major wireless communication
providers have resulted in the signing of a significant number of new
tenants over the last three years. Additional tenants increase the
operating leverage of our communications site portfolio and generally
increase our overall cash flow margins. In order to measure the revenue
growth performance of acquired communications sites, we track the
cumulative increase in monthly revenue from communications sites acquired
during different periods. We have generated a cumulative increase in
total monthly revenues for the 29 communications sites acquired in 1995
of approximately 133% through December 31, 1998. In addition, the 119
communications sites acquired in 1996 and the 134 communications sites
acquired in 1997 have generated cumulative increases in total monthly
revenues of approximately 68% and 14%, respectively through December 31,
1998.
In addition to the above strengths, we believe that our business will be
characterized by the following:
. Consolidation Opportunities in a Highly Fragmented Industry. The
communications site rental industry remains highly fragmented, with a few
independent operators owning a large number of towers. The pace of
consolidation has begun to accelerate, however, as the larger independent
operators continue to acquire small local or regional operators and
purchase communications sites and related assets from wireless
communications carriers. We believe that significant opportunities for
growth exist in this current industry environment and that we are well-
positioned to continue to be a significant consolidator of towers. Since
commencing operations in May 1995, through June 30, 1999, we have
successfully completed 279 acquisitions through which we have acquired
999 communications sites;
. Attractive Growth Prospects. Our rental towers provide basic
infrastructure components for all major wireless communications services,
including cellular, PCS, paging, two-way radio, broadcast television,
microwave, wireless data transmission and SMR customers. As a result, we
believe that we can achieve a level of growth in our tower rental revenue
that will in general reflect the growth of our customer base over the
next several years;
. Stable and Predictable Cash Flow. We believe that we benefit from the
fact that our contracts are generally long-term and are characterized by
predictable and stable monthly, prepaid recurring revenue. Additionally,
because a significant proportion of tower rental revenue is received from
customers that are large companies and because towers provide a basic
utility-like service (which can be terminated by a communications site
owner if rent is not paid), we generally experience low levels of bad
debt expense;
. Barriers to Entry. Communications sites are subject to a variety of
federal and local regulations that make the construction of towers
difficult and increase the time and expense associated with their
construction, especially in highly populated or high transmission areas.
As a result, we believe that in areas where we have established a
critical mass of rental tower inventory, construction of alternative
communications sites 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 communications sites to be built and
supporting the trend toward co-location on rental communications sites;
and
. Low Customer Churn. The tower rental industry 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 time and costs
associated with network
50
<PAGE>
reconfiguration and obtaining FCC and municipal or local approval may also
discourage customer relocation. We believe that the high levels of
commitment made by our customers benefit us in the form of recurring and
highly predictable revenue stream. We experienced customer churn of
approximately 1.0% per annum for the twelve month period ended March 31,
1999.
Our Operations
Through our centralized management structure, we are designed to be an
efficient consolidator and operator of rental communications sites. This is
reflected in the methods and processes that we employ in managing our day-to-
day operations, including the rapid integration of acquisition, tower
construction and sales and marketing data into our proprietary management
information systems. This approach ensures that communications site management
is coordinated across our functional areas and that the information is
accurate, timely and easily available. We have invested heavily in our
information systems and believe that our investments in these areas will
accommodate significant additional growth. As we seek to expand our tower
portfolio, we will continue to evaluate the need to supplement our current
workforce.
The key components of our operations include:
. effective integration of tower assets into our existing portfolio;
. ongoing monitoring of our portfolio of communications site assets; and
. customer sales and support.
Integration. The pace and level of activity that characterize our
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, over the past four years we
committed substantial resources to the development of our proprietary
management information systems to accommodate our overall acquisition,
construction and marketing strategies. As a result, we have developed the
capability to rapidly integrate new acquisitions and tower construction
activity and initiate sales and marketing efforts immediately upon closing or
completion.
Ongoing Monitoring. Our operations personnel perform routine, ongoing site
monitoring to ensure the maintenance of accurate data with regard to our tower
inventory. Inventory management includes radio frequency audits and regulatory
compliance. We seek to maintain accurate information with regard to customers'
equipment that is installed on our communications sites. We believe that this
area is overlooked by many rental communications site owners, resulting in
erroneous information about the availability of tower space and payments owned
by some existing customers. To minimize errors, we conduct radio frequency
audits and match 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, we use 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 we operate are essential to us as well as to
our 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 our management information systems and is provided to
current and potential customers as part of equipment installation support
efforts.
Customer Sales and Support. Our 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
51
<PAGE>
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 our communications sites and, we believe,
has enhanced our reputation as a full-service and responsive provider of rental
communications site space.
Our Customers and Customer Leases
As of March 31, 1999, we had over 4,500 separate communications site space
leases. We have a diversified base of over 800 customers. MobileMedia
Communications and certain of its affiliates and Southern Communications and
certain of its affiliates would have accounted for approximately 24% and 11% of
our revenues, respectively, at December 31, 1998. Pro forma for the Motorola
Antenna Site Acquisition, Nextel will account for approximately 18% of our
revenues. See "Risk Factors"--The loss of any significant customer would
adversely affect our business."
We have a diverse mix of customers representing the various technologies and
segments of the wireless communications industry. As a result, we believe that
we are not dependent on any one segment of the wireless communications industry
for future revenue growth. The following is a summary of our annualized run
rate revenue by customer type and approximate percentage of revenue derived
therefrom as of March 31, 1999:
Customer Type
<TABLE>
<CAPTION>
Percentage
of Revenue
----------
<S> <C>
Paging.......................................................... 41.8%
SMR............................................................. 13.8
PCS............................................................. 13.2
Land Mobile..................................................... 12.0
Cellular........................................................ 8.5
Broadcasting.................................................... 3.6
Other........................................................... .3
Data............................................................ 6.7
----
Total......................................................... 100%
====
</TABLE>
In connection with the Southern Towers Acquisition, we entered into leases
with Southern Communications providing that Southern Communications or one of
its affiliates would be a customer on each of the 201 towers acquired. Under
these leases, Southern Communications and its affiliates 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 of which is exercisable
at the customer's option on the same terms as the original leases. 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. We also entered
into a 10 year option agreement with Southern Communications whereby Southern
Communications may require us to use commercially reasonable efforts to supply,
acquire or construct an additional 80 sites within Alabama, Florida, Georgia or
Mississippi at locations designated by Southern Communications, for rental of
sites thereon 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.
In connection with the MobileMedia Acquisition, we entered into a lease with
affiliates of MobileMedia leasing the "site spaces" at the towers that were
previously utilized by MobileMedia and its affiliates for the installation and
operation of transmitter systems. The lease has a 15 year term with one five-
year renewal term exercisable at the option of the lessee. Rent under the lease
during the initial 15
52
<PAGE>
year term is $1,300 per month per site space. During the renewal term, rent
will be determined based on then existing market rental rates.
Upon consummation of the Motorola Antenna Site Acquisition, we will assume
assume a very substantial number of tenant leases for the owned communications
sites we are acquiring from Motorola. Generally these leases are cancelable by
either party on short-term notice.
Our Properties
We both own and lease the real property upon which our communications sites
are located. As of March 31, 1999, we owned 653 towers on parcels of real
estate that are leased and 358 towers on parcels of real estate that are owned.
The following is a summary of our sites by state, as of March 31, 1999:
<TABLE>
<CAPTION>
Number of Number of Total Number of
Communications Communications Communications
State Sites Leased Sites Owned Sites*
- ----- -------------- -------------- ---------------
<S> <C> <C> <C>
Georgia........................... 125 90 211
Florida........................... 123 80 203
Alabama........................... 84 29 113
Louisiana......................... 67 16 83
Tennessee......................... 47 24 71
Mississippi....................... 27 34 61
North Carolina.................... 38 18 56
California........................ 30 12 42
South Carolina.................... 24 12 36
Texas............................. 20 16 36
Virginia.......................... 17 2 19
Maryland.......................... 13 0 13
Washington........................ 10 0 10
New Hampshire..................... 3 6 9
Kentucky.......................... 6 1 7
New York.......................... 3 4 7
Ohio.............................. 4 3 7
Arkansas.......................... 3 2 5
Rhode Island...................... 1 4 5
Maine............................. 1 2 3
New Jersey........................ 2 1 3
Connecticut....................... 2 0 2
Massachusetts..................... 2 0 2
New Mexico........................ 2 0 2
Delaware.......................... 1 0 1
Indiana........................... 0 1 1
Michigan.......................... 1 0 1
Pennsylvania...................... 0 1 1
Wisconsin......................... 1 0 1
--- --- -----
657 358 1,011
=== === =====
</TABLE>
- --------
* Includes 34 communications sites that we managed as of March 31, 1999.
Most of our sites are located on small parcels in urban areas. In rural
areas, a site typically consists of a three to five acre tract that supports
the tower, equipment shelter and guy wires that stabilize the tower. Less than
2,500 square feet are needed for a self-supporting tower that is typically used
in metropolitan areas. Our existing leases generally have 10 to 25 year terms,
with options for us to renew
53
<PAGE>
the leases for an average of approximately 10 years. Leases we expect to
acquire in the Motorola Antenna Site Acquisition are generally cancellable on
short-term notice. Pursuant to our credit facility, the senior lenders have
liens on, among other things, tenant leases, equipment, inventory and interests
in certain of our real property on which communications sites are located or
which constitute of a site.
A significant portion of the ground leases assumed in connection with the
MobileMedia Acquisition are subject to renewal within the next five years. In
the event that we are not satisfied with the renewal terms with respect to such
leases, we have the right to put back these properties to MobileMedia and
MobileMedia will still be obligated to pay its rent on these properties. We may
incur significant additional operating expenses in connection with the renewal
of such leases. There can be no assurance regarding the extent of such
increases or whether such increases could have an adverse effect on our results
of operations.
We lease our corporate headquarters in Sarasota, Florida. The aggregate
square footage of office space under this lease is approximately 14,000. The
lease term ends on September 30, 2000, and we paid rent of approximately
$207,000 in 1998. We believe that our facilities are adequate for our short-
term needs. We are currently considering alternative local facilities and do
not expect difficulty replacing such facilities or locating additional
facilities, if needed.
Our Competition
The markets in which we operate are highly competitive. We compete with
wireless communications providers who own and operate their own communications
site networks, site development companies that acquire space on existing
towers, rooftops and other sites, other independent communications site
companies and traditional local independent communications site operators.
Wireless communications providers who own and operate their own communications
site networks generally are larger and have greater financial resources than we
have. We believe that communications site 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. We believe that competition for tower acquisitions will
increase and that additional competitors will enter the communications site
rental market, some of which may have greater financial and other resources
than we have. See "Risk Factors--We compete with companies that have greater
financial resources."
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 maintain applicable requirements may lead to civil
liabilities. Wireless communications devices operating on towers and other
communications sites are separately regulated by the FCC and independently
licensed based upon the particular frequently used.
54
<PAGE>
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.
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 Regulations. In addition to the FCC's environmental
regulations, we are subject to various other federal, state and local health,
safety and environmental laws and regulations. The current cost of complying
with those laws is not material to our financial condition or results of
operations.
Our Employees
As of March 31, 1999, we had approximately 95 full-time employees, of which
74 work in our Sarasota, Florida headquarters office. None of our employees are
unionized, and we consider our relationship with our employees to be good.
REIT Status
We have elected 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, we are required for each
taxable year to satisfy certain requirements pertaining to organization,
sources of income, distributions and asset ownership, among others. Among the
numerous requirements that must be satisfied with respect to each taxable year
in order to qualify and remain qualified as such, a REIT generally must:
. distribute to stockholders 95% of its taxable income computed without
regard to net capital gains and deductions for distributions to
stockholders;
. maintain at least 75% of the value of its total assets in real estate
assets (generally real property and interests therein), cash, cash items
and government securities and 95% of certain foreclosure income;
. derive at least 75% of its gross income from investments in real
property or mortgages on real property; and
. derive at least 95% of its gross income from real property investments
described above and from dividends, interest and gain from the sale or
disposition of stock and securities and certain other types of gross
income.
55
<PAGE>
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 that are
structural components of such buildings or structures. The Internal Revenue
Service (the "Service") has ruled in a revenue ruling that transmitting and
receiving communications towers built upon pilings or foundations similar to
ours as well as ancillary buildings, heating and air conditioning systems and
fencing constitutes inherently permanent structures and are therefore real
estate assets. Depending on our assessment of the strategic importance of
acquisitions which may become available to us in our existing line of business
or in complementary non-real estate based communication services activities, we
may acquire, operate and derive income from assets businesses or entities that
will cause us to no longer qualify as a REIT. In this regard we recently
committed to acquire certain assets from Motorola and have not yet determined
whether such assets, and the income derived from such assets, will permit us to
continue to meet the qualification requirements for a REIT. See "Certain
Federal Income Tax Considerations" for a detailed discussion of the REIT
qualification requirements.
Legal Proceedings
We are from time to time involved in ordinary litigation incidental to the
conduct of our business. We believe that none of our pending litigation will
have a material adverse effect on our business, financial condition or results
of operations.
56
<PAGE>
MANAGEMENT AND DIRECTORS
Set forth below is certain information concerning our directors, executive
officers and key employees as of June 30, 1999. All of the directors have
served as our directors since our inception, except for Steven Day who has
served since February 1997. [Update ages, positions, etc.]
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert Wolsey........... 48 Director, President and Chief Executive Officer
James Dell'Apa.......... 41 Director, Executive Vice President and Chief Operating Officer
Steven Day.............. 46 Director, Vice President, Secretary and Chief Financial Officer
Ben Gaboury............. 47 President of Pinnacle Towers Inc.
David Zahn.............. 34 Vice President of Operations of Pinnacle Towers Inc.
Martin Alvarez.......... 44 Chief Information Officer
Andrew Banks............ 44 Director
Peni Garber............. 35 Director
Peggy Koenig............ 42 Director
Royce Yudkoff........... 43 Director
</TABLE>
Robert Wolsey is primarily responsible for the overall direction of our
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 raised over $74 million in its initial public
Offering. At the time of Mr. Wolsey's departure from PCI in April 1994, PCI 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.
Steven Day is primarily responsible for our 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 that have filed initial public Offerings.
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 our sales and marketing operations.
Mr. Gaboury was employed for 17 years with Motorola Inc. in various sales and
sales management positions. Before joining
57
<PAGE>
us 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 our
existing communications site inventory, new site construction, capacity
augmentation and new customer equipment integration. He joined Pinnacle in
September 1996. From 1987 to 1996, Mr. Zahn worked for 360(degrees)
Communications (formerly Sprint Cellular and Centel Cellular) where he held a
variety of positions including 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 our Information Technology and
Services. Prior to joining us 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
(or the equivalent) of DirecTel. 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 and secretary of ABRY Partners, Inc. She joined
ABRY Partners, Inc. 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 (or the equivalent) of Nexstar Broadcasting Group LLC,
Network Music Holdings LLC, Quorum Broadcast Holdings Inc. and Audio
Communications Network, LLC. Ms. Garber graduated summa cum laude from Bryant
College.
Peggy Koenig is a partner in ABRY Partners, Inc. She joined ABRY Partners,
Inc. 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 (or the equivalent) of Connoisseur Communications Partners, L.P.,
Avalon Cable Holdings LLC and Network Music Holdings LLC. 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 Partners, Inc.
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 (or the equivalent) of Quorum Broadcast
Holdings Inc., Nexstar Broadcasting Group, LLC, Audio Communications Network,
LLC and Metrocall. He graduated as a Baker Scholar from the Harvard Business
School and is an honors graduate of Dartmouth College.
58
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Selling Stockholders, as of July 1, 1999 and as adjusted as of
that date to reflect the sale of common stock in this offering. Except as
otherwise noted, the address of each person listed in the table is c/o Pinnacle
Holdings Inc., 1549 Ringling Boulevard, 3rd Floor, Sarasota, Florida 34236.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power
with respect to shares. To our knowledge, except under applicable community
property laws or as otherwise indicated, the selling stockholders named in the
table have sole voting and sole investment control with respect to all shares
beneficially owned. The applicable percentage of ownership for each stockholder
is based on 32.0 million shares of common stock outstanding as of June 30,
1999, and 40.4 shares outstanding after the offering. Shares of common stock
issuable upon exercise of options and other rights beneficially owned are
deemed outstanding for the purpose of computing the percentage ownership of the
person holding those options and other rights, but are not deemed outstanding
for computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
Before Offering After Offering
-------------------- Number of --------------------
Number of Shares Number of
Name of Beneficial Owner Shares Percentage Offered Shares Percentage
- ------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
ABRY II(a)................. 8,196,983 25.6% 2,115,000 6,081,983 15.1%
Robert Wolsey(b)........... 613,082 2.0 84,187 528,895 1.3
James M. Dell'Apa(c)....... 408,639 1.3 56,113 352,526 *
Steven Day(d).............. 368,182 1.1 50,558 317,624 *
David Zahn................. 35,717 * 4,905 30,812 *
Ben Gaboury................ 35,717 * 4,905 30,812 *
Martin Alvarez............. 35,717 * 4,905 30,812 *
Shirley Putman............. 35,717 * 4,905 30,812 *
James Bokish............... 35,717 * 4,905 30,812 *
Slade Lindsay.............. 142,868 * 19,618 123,250 *
Royce Yudkoff(e)........... 8,198,083 25.6% 2,115,000 6,083,083 15.1%
--------- ---- --------- ---------
</TABLE>
- --------
*Indicates less than 1 percent
(a) ABRY Holdings, Inc., the general partner of ABRY Capital, which is the
general partner of ABRY II, is wholly owned by Mr. Yudkoff.
(b) Includes 5,774 shares of Common Stock held by Pantera, Inc. and 288,682
shares of Common Stock held by Pantera Partnership Ltd.
(c) Excludes 36,618 shares of Common Stock held by relatives of Mr. Dell'Apa of
which he disclaims beneficial ownership.
(d) Includes 67,863 shares of Common Stock held by Mr. Day's spouse, 7,143
shares of Common Stock held by South Creek, Inc. and 214,304 shares of
Common Stock held by South Creek Partnership Ltd.
(e) 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. Also includes 550
shares of Common Stock held by Mr. Yudkoff's spouse.
59
<PAGE>
DESCRIPTION OF INDEBTEDNESS
Credit Facility
We have entered into the Fourth Amended and Restated Credit Agreement dated
June 25, 1999 with NationsBank, N.A. and certain other lenders that provides
two $75 million revolving lines of credit for borrowings in the aggregate of up
to $150 million ("Revolver A" and "Revolver B"), a $125 million term loan
("Term Loan A"), and a $175 million term loan ("Term Loan B"). Under the
revolving lines of credit we may make borrowings and repayments until June 30,
2006. Under Term Loan A, advances must be repaid in full by June 30, 2006.
Under Term Loan B, advances must be repaid in full by June 30, 2007. Once
repaid, advances under Term Loan A and Term Loan B may not be re-drawn.
Advances under Revolver A and Term Loan B may be used for acquisitions, working
capital, and other general corporate purposes. Advances under Revolver B and
Term Loan A are limited to acquisitions. Advances under our credit facility
have been used primarily to fund acquisitions and construction of towers.
Beginning September 30, 2001, the availability under each of Revolver A,
Revolver B, and Term Loan A starts reducing by specified amounts on a quarterly
basis until June 30, 2006 when the availability under such credits will be
reduced to zero. Beginning September 30, 2001, the availability under Term
Loan B starts reducing by specified amounts on a quarterly basis until June 30,
2007, when Term Loan B must be repaid in full. Advances under Revolver A,
Revolver B, and Term Loan A bear interest at a rate per annum, at the
borrower's request, equal to the agent bank's prime rate plus a margin of up to
1.5% or the 90-day London Interbank Offered Rate plus a margin of up to 2.75%.
Advances under Term Loan B bear interest at a rate per annum, at the borrower's
request, equal to the agent bank's prime rate plus a margin of up to 1.75% or
the 90-day London Interbank Offered Rate plus a margin of up to 3.0%. Aggregate
outstanding borrowings under our credit facility were $200 million at March 31,
1999.
As of March 31, 1999, after giving effect to the acquisitions referenced in
this Prospectus on a pro forma basis, there would have been $95.9 million
available under our credit facility, after giving effect to approximately $49.2
million of outstanding letters of credit, which reduce availability under our
credit facility.
Our credit facility is secured by a lien on substantially all of our assets
and our subsidiaries and a pledge of substantially all of the capital stock of
the subsidiaries and we have guaranteed the obligations of the borrower,
Pinnacle Towers Inc., under our credit facility. The credit agreement contains
customary covenants such as limitations on our ability to incur indebtedness,
to incur liens or encumbrances on assets, to make certain investments, to make
distributions to stockholders, or to prepay subordinated debt. A "change of
control" (as defined in our credit facility) constitutes an event of default
under our credit facility and includes the acquisition by a person or group of
related persons (other than Mr. Wolsey and his affiliates) of control of in
excess of 30% of the ordinary voting power of our Common Stock. A further event
of default includes any one of the President, Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer of the borrower failing to perform
the primary roles and functions of such positions on our behalf (whether
pursuant to death, extended disability, termination, resignation or otherwise)
and we do not replace such executive officer with a new employee reasonably
acceptable to fifty-one percent of the lending banks within 60 days of such
failure. In addition, we may not permit the Leverage Ratio (as defined in our
credit facility) to exceed certain amounts.
10% Senior Discount Notes
Our 10% senior discount notes were initially issued in aggregate principal
amount at maturity of $325 million, are senior unsecured obligations and will
mature on March 15, 2008. Cash interest is not payable on our notes, prior to
March 15, 2003. Thereafter, interest on our notes will be payable at a rate
60
<PAGE>
of 10.0% per annum, semi-annually in arrears on March 15 and September 15 of
each year, commencing September 15, 2003.
Our 10% senior discount notes are redeemable at our option, in whole or in
part, at any time on or after March 15, 2003 at a redemption price equal to
105.0% of the principal amount thereof during the twelve-month period beginning
March 15, 2003, 103.333% of the principal amount thereof during the twelve-
month period beginning March 15, 2004, 101.667% of the principal amount thereof
during the twelve-month period beginning March 15, 2005 and 100.0% of the
principal amount thereof on or after March 15, 2006, together with accrued and
unpaid interest to the redemption date. In addition, we have the option to
redeem up to 35% of the original principal amount of our notes at any time on
or before March 15, 2001, at a redemption price equal to 110.0% of the Accreted
Value (as defined in the indenture governing the notes) thereof with the net
proceeds of one or more Public Equity Offerings (as defined in the indenture
governing the notes); provided, however, that at least 65% of the original
principal amount remains outstanding and that such redemption occurs within 60
days following the closing any such Public Equity Offering.
In the event of a Change of Control (as defined in the indenture governing
our 10% senior discount notes) we will be required to make an offer to purchase
all outstanding notes at a price equal to 101% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages (as defined in the
indenture governing the notes) to the date of purchase. If such offer to
purchase is to be consummated prior to March 15, 2003, the purchase price will
be equal to 101% of the Accreted Value (as defined in the indenture governing
the notes) thereof on the date of purchase plus accrued and unpaid Liquidated
Damages thereon to the date of purchase. A "Change of Control" under the
indenture governing the notes includes the acquisition by a person or group of
related persons (other than ABRY II and Mr. Wolsey and their affiliates) of
control of a majority of the ordinary voting power of our common stock.
The indenture governing our 10% senior discount notes contains covenants for
the benefit of the holders of the notes that, among other things, and subject
to certain exceptions, restrict our ability and our Restricted Subsidiaries (as
defined in the indenture governing the notes) to:
. incur additional indebtedness;
. guarantee payment of debt;
. pay dividends and make distributions;
. restrict dividend or other payments of Restricted Subsidiaries;
. create liens;
. issue stock of subsidiaries;
. enter into transactions with affiliates;
. merge or consolidate Pinnacle; and
. transfer and sell assets.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 100 million shares of common stock, $.001 par
value per share, and 5 million shares of undesignated preferred stock, $.001
par value per share.
Common Stock
Each holder of common stock will be entitled to one vote for each share
held. Stockholders will not have the right to cumulate their votes in elections
of directors. Accordingly, holders of a majority of the issued and outstanding
common stock will have the right to elect all of our directors and otherwise
control Pinnacle, subject to any voting rights of the then outstanding
preferred stock, if any.
Holders of Common Stock will be entitled to dividends on a pro rata basis
upon declaration of dividends by the board of directors. Dividends will be
payable only out of unreserved and unrestricted surplus that is legally
available for the payment of dividends. Any determination to declare or pay
dividends in the future will be at the discretion of our board of directors and
will depend on our results of operations, financial condition, contractual or
legal restrictions and other factors deemed relevant by the board of directors.
In order to maintain Pinnacle's REIT status, however, we are required to
distribute to stockholders 95% of its taxable income. Our credit facility and
Indenture currently prohibit us from paying any dividends other than those
required to be paid to maintain our REIT Status. See "Dividend Policy."
Upon our liquidation, holders of the common stock will be entitled to a pro
rata distribution of the assets of Pinnacle, after payment of all amounts owed
to our creditors, and subject to any preferential amount payable to holders of
preferred stock, if any.
Preferred Stock
Our certificate of incorporation permits our board of directors to issue
shares of preferred stock in one or more series, and to fix the relative
rights, preferences, and limitations of each series. Among such rights,
preferences and limitations are divided rights and rates, provisions for
redemption, rights upon liquidation, conversion privileges and voting powers.
Any issuance of preferred stock with a dividend preference over the common
stock could adversely affect the dividend rights of holders of common stock.
Our board of directors currently has no plans to issue any shares of Preferred
Stock, other than possibly the Series A Preferred Stock, the Series B Preferred
Stock and possibly other preferred stock to finance certain acquisitions. We
would expect to redeem any such preferred stock that may be issued with
proceeds from this offering.
Certain Provisions of Our Certificate of Incorporation and Bylaws
Restrictions on Transfer. Because we wish to retain our status as a REIT, no
holder of common stock may transfer any such share or interest, if as a result,
either (a) beneficial ownership of all shares of common stock would be held by
less than 100 persons, if beneficial ownership of all shares of common stock
was held by 100 or more persons prior to such transfer or (b) a violation of
the percentage ownership limit would occur.
Under the percentage ownership limit test, no share of any series of our
capital stock may be sold or otherwise transferred to any individual if such
transfer would result in the ownership of such individual in combination with
four or fewer individuals of more than 50% of the aggregate value of all shares
of all classes of our capital stock.
Such restrictions may delay or make more difficult acquisitions or changes
of control of the Company.
62
<PAGE>
Preferred Stock and Additional Common Stock. Under the certificate of
incorporation, our board of directors has the authority to provide by board
resolution for the issuance of shares of one or more series of preferred stock.
Our board of directors is authorized to fix by resolution the terms and
conditions of each such series.
We believe that the availability of additional preferred stock, issuable in
series, and additional shares of common stock could facilitate certain
financings and acquisitions and provide a means for meeting other corporate
needs that might arise. The authorized shares of preferred stock, as well as
authorized but unissued shares of common stock, will be available for issuance
without further action by our stockholders, unless stockholder action is
required by applicable law or by the rules of any stock exchange on which any
series of our stock may then be listed.
These provisions give our board of directors the power to approve the
issuance of a series of preferred stock, or additional shares of common stock,
that could, depending on its terms, either impede or facilitate the completion
of a merger, tender offer or other takeover attempt.
Limitation of Liability and Indemnification. As permitted by the Delaware
General Corporation Law, Pinnacle's certificate of incorporation provides that
our directors shall not be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director. In addition, our
Bylaws provide that we shall, to the fullest extent authorized under Delaware
law, indemnify all directors and officers and all persons serving at the
request of Pinnacle's as director, trustee, officer, employee, or agent of
another corporation or of a partnership, trust or other enterprise. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Pinnacle pursuant to
the foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and, therefore, is unenforceable.
Certain Provisions of Delaware Law
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation, such as Pinnacle, from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date that the person became an interested stockholder unless, subject to
exceptions, the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. Generally,
a "business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the stockholder. Generally an
"interested stockholder" is a person who, together with affiliates and
associates owns, or within three years prior, did own, 15% or more of the
corporation's voting stock. These provisions may have the affect of delaying,
defining, or preventing a change in central of Pinnacle without further action
by the stockholders.
The provisions of Section 203 may encourage companies interested in
acquiring Pinnacle to negotiate in advance with out board of directors to avoid
obtaining our stockholders approval if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder. Such provisions also may
have the effect of preventing changes in management. It is possible that such
provisions could make it more difficult to accomplish transactions that
stockholders may otherwise deem to be in their best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is First Union
National Bank.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, Pinnacle will have outstanding 40,375,951
shares of common stock, including, the 12,305,000 shares sold in this offering,
(assuming the full exercise of the 1,605,000 shares available under the
underwriters' over-allotment option). 34,331,000 will be freely tradable
without restriction under the Securities Act, unless purchased by "affiliates"
of Pinnacle, which generally includes officers, directors or 10% stockholders
as that term is defined in Rule 144 under the Securities Act.
The remaining 7,649,951 shares outstanding are "restricted securities"
within the meaning of Rule 144 under the Securities Act. These shares may be
sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under
the Securities Act, which are summarized below. Sales of the restricted shares
in the public market, or the availability of these shares for sale, could
adversely affect the market price of the common stock.
Certain stockholders of Pinnacle have entered into lock-up agreements
generally providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of Pinnacle common stock or any
securities exercisable for or convertible into Pinnacle common stock owned by
them for a period of 90 days after the effective date of the registration
statement filed in connection with this offering without the prior written
consent of Deutsche Bank Securities Inc., BT Alex. Brown. As a result of these
contractual restrictions, notwithstanding possible earlier eligibility for sale
under the provisions of Rules 144, 144(k) and 701, shares subject to lock-up
agreements will not be salable until these agreements expire or are waived by
the designated underwriters' representative. Taking into account the lock-up
agreements, and assuming BT Alex. Brown does not release stockholders from
these agreements, the following shares will be eligible for sale in the public
market at the following times:
. Beginning 90 days after the effective date of the offering, approximately
7,558,539 shares will be eligible for sale pursuant to Rules 144, 144(k)
and 701.
. An additional 91,612 shares will become eligible for sale pursuant to
Rule 144 beginning on , 1999. Shares eligible to be sold by affiliates
pursuant to Rule 144 are subject to volume restrictions as described
below.
In general, under Rule 144 as currently in effect, and beginning after the
expiration of the lock-up agreements, which is 90 days after the effective date
of the registration statement, a person, or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year would be entitled to sell within any three-month period a number of shares
that does not exceed the greater of: (1) one percent of the number of shares of
common stock then outstanding, which will equal approximately 403,760 shares
immediately after this offering; or (2) the average weekly trading volume of
the common stock during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to manner of sale provisions and notice requirements
and to the availability of current public information about Pinnacle. Under
Rule 144(k), a person who is not deemed to have been an affiliate of Pinnacle
at any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to
sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
64
<PAGE>
The Company has agreed to indemnify the Underwriters against some specified
types of liabilities, including liabilities under the Securities Act.
Certain of the Company's officers, directors and stockholders have agreed
not to offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of, any common stock for a period of 90 days after
the effective date of the registration statement of which this Prospectus is a
part without the prior written consent of Deutsche Bank Securities Inc. This
consent may be given at any time without public notice. The Company has entered
into a similar agreement.
65
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material federal income tax
considerations that may be relevant to you. The summary does not address all
aspects of taxation that may be relevant to particular stockholders in light of
their personal investment or tax circumstances, or to certain types of
stockholders (including insurance companies, tax-exempt organizations (except
as described herein), financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States
(except as described herein), persons who hold Common Stock through
partnerships or other pass-through entities, and persons who acquired their
common stock pursuant to the exercise of an employee stock option or otherwise
as compensation) subject to special treatment under the federal income tax
laws. This summary discusses only common stock which is held as a capital asset
within Section 1221 of the Code. The summary is based on current provisions of
the Code, existing, temporary, and currently proposed Treasury Regulations
promulgated under the Code, the legislative history of the Code, existing
administrative rulings and practices of the IRS, and judicial decisions. No
assurance can be given that future legislative, judicial, or administrative
actions or decisions, which may be retroactive in effect, will not affect the
accuracy of statements in the summary as applicable to transactions entered
into or contemplated prior to the effective date of such changes.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. YOU ARE ADVISED TO
CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF
THE ACQUISITION, OWNERSHIP AND SALE OF THE COMMON STOCK AND OF OUR ELECTION TO
BE TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP, SALE, AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Taxation of Pinnacle
We currently have in effect an election to be taxed as a REIT under Sections
856 through 860 of the Code. We believe that since our inception we have been
organized and operated in such a manner as to qualify for taxation as a REIT
under the Code. Our continued qualification as a REIT will depend upon our
qualification as a REIT in prior years. No assurance can be given that we will
qualify or remain qualified as a REIT. Depending on our assessment of the
strategic importance of acquisitions which may become available to us in our
existing line of business or in complementary non-real estate based
communication services activities, we may acquire, operate and derive income
from assets businesses or entities that will cause us to no longer qualify as a
REIT. In this regard we recently committed to acquire certain assets from
Motorola and have not yet determined whether such assets, and the income
derived from such assets, will permit us to continue to meet the qualification
requirements for a REIT. In the opinion of Holland & Knight LLP, we have been
organized and operated in conformity with the requirements for qualification as
a REIT under the Code through December 31, 1998. It must be emphasized that
such opinion of counsel as to REIT qualification is based on certain customary
assumptions and factual representations regarding, among other things, the
ownership of stock of Pinnacle, the nature of Pinnacle's assets, the conduct of
its business, the sources of its revenues, the amounts distributed by it to
stockholders and other matters germane to the requirements for qualification as
a REIT. In addition, Holland & Knight LLP will not review our compliance with
these requirements on an ongoing basis, and there can be no assurance that we,
the sources of our income, the composition of our assets, the level of our
dividends or the diversity of our share ownership for any given year will
satisfy the requirements for qualification and taxation as a REIT. As stated
above, we may undertake acquisitions which may have the effect of terminating
our REIT qualification. Prospective investors also should be aware that an
opinion of counsel is not binding on the Internal Revenue Service (the
"Service") or any court, but merely represents counsel's best judgment with
respect to the probable outcome on the merits based on counsel's review and
analysis of existing law, regulations and interpretations, which include no
controlling precedent. In certain instances, due to the lack of relevant
66
<PAGE>
precedent, counsel's opinion is based on administrative policies and practices
of the Service as indicated in existing private letter rulings (which rulings
are not binding on the Service) or authority considered by counsel to be
analogous. There can be no assurance that a position contrary to the opinion of
counsel will not be taken by the Service, or that any court considering the
issues would not hold contrary to such opinion.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex, and only limited judicial or administrative
interpretations are available. The following discussion sets forth the material
aspects of the Code sections that govern the federal income tax treatment of a
REIT and its stockholders. The discussion is qualified in its entirety by the
applicable Code provisions, Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject
to change prospectively or retroactively.
If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income tax on our net income that is distributed currently to
its stockholders. That treatment substantially eliminates the "double taxation"
(i.e., taxation at both the corporate and stockholder levels) that generally
results from investment in a corporation. However, we will be subject to
federal income tax in the following circumstances. First, we will be taxed at
regular corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, we may be
subject to the "alternative minimum tax" on undistributed items of tax
preference, if any. Third, if we have (i) net income from the sale or other
disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if we have net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property (other
than foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if we
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and nonetheless have maintained our qualification as a
REIT because certain other requirements have been met, we will be subject to
tax in an amount equal to (a) the gross income attributable to the greater of
the amount by which it fails the 75% or 95% gross income test, multiplied by
(b) a fraction intended to reflect its profitability. Sixth, if we should fail
to distribute during each calendar year at least the sum of (i) 85% of our REIT
ordinary income for such year, (ii) 95% of our REIT capital gain net income for
such year, and (iii) any undistributed taxable income from prior periods, we
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. If we elect to retain and pay income tax
on our net long-term capital gain in a taxable year, any retained amounts would
be treated as having been distributed for purposes of the 4% excise tax. See
"--Requirements for REIT Qualification--Distribution Requirements." Seventh, if
we acquire any asset from a C corporation (i.e., a corporation generally
subject to full corporate-level tax) in a transaction in which the basis of the
asset in our hands is determined by reference to the basis of the asset (or any
other asset) in the hands of the C corporation and we recognize gain on the
disposition of such asset during the 10-year period beginning on the date on
which such asset was acquired by us, then to the extent of such asset's "built-
in-gain" (i.e., the excess of the fair market value of such asset at the time
of acquisition by us over the adjusted basis in such asset at such time), such
gain will be subject to tax at the highest regular corporate rate applicable
(as to be provided in Treasury Regulations that have not yet been promulgated).
The results described above with respect to the recognition of "built-in-gain"
assume that we have made an election pursuant to IRS Notice 88-19 as to such
acquisitions and will do so as to any future such acquisition.
Requirements for REIT Qualification
The Code defines a REIT as a corporation, trust, or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by
67
<PAGE>
transferable certificates of beneficial interest; (iii) that would be taxable
as a domestic corporation, but for sections 856 through 860 of the Code; (iv)
that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (v) the beneficial ownership of which is held
by 100 or more persons; (vi) not more than 50% in value of the outstanding
shares of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of
each taxable year (the "5/50 Rule"); (vii) that makes an election to be a REIT
(or has made such election for a previous taxable year) and satisfies all
relevant filing and other administrative requirements established by the
Service that must be met in order to elect and maintain REIT status; (viii)
that uses a calendar year for federal income tax purposes and complies with the
recordkeeping requirements of the Code and Treasury Regulations promulgated
thereunder; and (ix) that meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (i) to
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. For
purposes of determining stock ownership under the 5/50 Rule, a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of
a trust permanently set aside or used exclusively for charitable purposes
generally is considered an individual. A trust that is a qualified trust under
Code section 401(a), however, generally is not considered an individual and
beneficiaries of such trust are treated as holding shares of a REIT in
proportion to their actuarial interests in such trust for purposes of the 5/50
Rule.
Our certificate of incorporation contains restrictions regarding transfer of
its shares that are intended to assist us in continuing to satisfy the share
ownership requirements described in clauses (v) and (vi) above. Such transfer
restrictions are described in "Description of Capital Stock--Certain Provisions
of Our Certificate of Incorporation and Bylaws."
In connection with the Offering, our executive officers and directors, who
will own in the aggregate approximately 18.7% of our stock outstanding after
the completion of the Offering have entered into agreements (the "Lock-Up
Agreements") not to, without prior written consent of the Underwriters, sell,
offer, contract to sell, pledge, grant any option to purchase, or otherwise
transfer or dispose of any such shares for a period of 90 days after the date
of this Prospectus. See "Underwriting." These same persons were subject to the
same restriction in connection with an earlier offering (the "Prior Lock-Up
Agreement"). In addition, since the time we were organized, an agreement among
us and our major stockholders has imposed certain restrictions on the transfers
of shares our stock under certain circumstances (the "Stockholders Agreement").
Furthermore, in connection with the issuance of certain classes of its stock,
we have imposed certain restrictions on the transferability of such shares (the
"Restrictive Legends"). As described above, one of the REIT qualification
requirements is that the shares of a REIT be transferable. The opinion of
Holland & Knight LLP is based in part on the conclusion that none of the Lock-
Up Agreements, the Prior Lock-Up Agreements, the Stockholders Agreement or the
Restrictive Legends will render the shares of stock restricted thereby to be
deemed other than transferable for purposes of such REIT qualification
requirement. Investors should be aware that there is no relevant authority
involving transfer restrictions similar to those contained in any of the Lock-
Up Agreements, the Stockholders Agreement or the Restrictive Legends or that
discuss whether such restrictions may violate such transferability requirement.
Therefore, the opinion of Holland & Knight LLP with respect to the
transferability requirement is based upon the plain language of the REIT
provisions of the Code and authorities addressing transferability in situations
that are considered to be analogous, certain of which authorities have been
rendered obsolete for unrelated reasons by more recent administrative
pronouncements. Opinions of counsel are not binding upon the Service or the
courts, and there can be no assurance that the Service will not assert
successfully a contrary position. If any of the Lock-Up Agreements, Prior Lock-
Up Agreements Stockholders Agreement or the Restrictive Legends is deemed to be
a transfer restriction contrary to the transferability requirement for REIT
qualification, we may not currently qualify as a REIT or may, in connection
with the completion of the Offering, may lose
68
<PAGE>
our REIT status and possibly incur other adverse tax consequences. See "Risk
Factors--If we fail to qualify as a REIT, we will be subject to a variety of
taxes and penalties."
We currently have wholly-owned corporate subsidiaries (the "Corporate
Subsidiaries"). We may have additional corporate subsidiaries in the future.
Code section 856(i) provides that a corporation that is a "qualified REIT
subsidiary" will not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" will be treated as assets, liabilities, and items of income,
deduction, and credit of the REIT. For taxable years beginning after December
31, 1997, a "qualified REIT subsidiary" is a corporation all of the capital
stock of which is owned by the REIT. However, for taxable years beginning
before January 1, 1998, a "qualified REIT subsidiary" was a corporation, all of
the capital stock of which was owned by the REIT at all times during the period
such corporation was in existence. Legislative history provided, however, that
an existing corporation acquired by a REIT would be deemed to satisfy this
requirement if a Section 338 election was made by the corporation. Thus, in
applying the requirements described herein, any of our "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities, and items of
income, deduction, and credit of such subsidiaries will be treated as our
assets, liabilities, and items of income, deduction, and credit. We believe our
current Corporate Subsidiaries are "qualified REIT subsidiaries" and will
continue to be "qualified REIT subsidiaries", such that no Corporate Subsidiary
will be subject to federal corporate income taxation (although it may be
subject to state and local taxation).
In addition, in order to become qualified and remain qualified as a REIT, as
of the close of each taxable year, a REIT must not have any accumulated
"earnings and profits" attributable to a non-REIT year, including for this
purpose any such accumulated "earnings and profits" carried over or deemed
carried over to it from a C corporation. We believe that neither we have, nor
any acquisition by us of a C corporation has resulted in our having, any such
accumulated "earnings and profits." However, an adjustment of our earnings and
profits for a prior year, resulting from an audit adjustment of the Service or
otherwise, could cause us to fail to satisfy such requirement effective for the
year of such adjustment and subsequent years.
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share. In addition, the assets
and gross income of the partnership will retain the same character in the hands
of the REIT for purposes of section 856 of the Code, including satisfying the
gross income and asset tests described below.
Income Tests
In order for us to qualify and to maintain our qualification as a REIT, two
requirements relating to gross income must be satisfied annually. First, at
least 75% of its gross income (excluding gross income from prohibited
transactions) for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and, in
certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of its gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from such
real property or temporary investments, and from dividends, other types of
interest, and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. The specific application of these tests to us
is discussed below.
The rent received by us from our tenants ("Rent") will qualify as "rents
from real property" in satisfying the gross income requirements for a REIT
described above only if several conditions are met. First, the amount of Rent
must not be based, in whole or in part, on the income or profits of any person.
However, an amount received or accrued generally will not be excluded from the
term "rents from real property" solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
69
<PAGE>
Second, the Code provides that rents received from a tenant of us will not
qualify as "rents from real property" in satisfying the gross income tests if
we or a direct or indirect owner of 10% or more of us directly or
constructively owns 10% or more of the ownership interests in such tenant (a
"Related Party Tenant"). Third, if rent attributable to personal property,
leased in connection with a lease of real property, is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property." Finally,
for the Rent to qualify as "rents from real property," we generally must not
operate or manage our properties or furnish or render services to the tenants
of such properties, other than through an "independent contractor" who is
adequately compensated and from whom we derive no revenue. The "independent
contractor" requirement, however, does not apply to the extent the services
provided by us are "usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise considered "rendered
to the occupant." In addition, beginning with our 1998 taxable year, we may
render a de minimis amount of "noncustomary" services to the tenants of a
property other than through an independent contractor as long as the amount we
receive with respect to such services does not exceed 1% of its total receipts
from the property. For that purpose, the amount attributable to such services
will be at least equal to 150% of our direct cost of providing the services.
We do not charge Rent for any portion of any property that is based, in
whole or in part, on the sales, receipts, income or profits of any person. In
addition, Pinnacle has not received and does not anticipate receiving any Rent
from a Related Party Tenant. Also, the Rent attributable to personal property
leased in connection with any lease (a "Lease") of real property by Pinnacle
does not exceed 15% of the total Rent received under the Lease. Finally,
subject to the 1% de minimis exception, Pinnacle provides no noncustomary
services to its tenants, other than through an independent contractor.
If any portion of the Rent does not qualify as "rents from real property"
because the Rent attributable to personal property leased in connection with
any Lease of real property exceeds 15% of the total Rent received under the
Lease for a taxable year, the portion of the Rent that is attributable to
personal property will not be qualifying income for purposes of either the 75%
or 95% gross income test. Thus, if the Rent attributable to personal property,
plus any other income received by us during a taxable year that is not
qualifying income for purposes of the 95% gross income test, exceeds 5% of its
gross income during such year, it likely we would lose our REIT status. If,
however, any portion of the Rent received under a Lease does not qualify as
"rents from real property" because either (i) the Rent is considered based on
the income or profits of any person or (ii) the tenant is a Related Party
Tenant, none of the Rent received by us under such Lease would qualify as
"rents from real property." In that case, if the Rent received by us under such
Lease, plus any other income received by it during the taxable year that is not
qualifying income for purposes of the 95% gross income test, exceeds 5% of its
gross income for such year, we likely would lose our REIT status. Finally,
subject to the 1% de minimis exception, if any portion of the Rent does not
qualify as "rents from real property" because we furnish noncustomary services
with respect to a property other than through a qualifying independent
contractor, none of the Rent received by us with respect to such property would
qualify as "rents from real property." In that case, if the Rent received by us
with respect to such property, plus any other income received by it during the
taxable year that is not qualifying income for purposes of the 95% gross income
test, exceeds 5% of its gross income for such year, we would lose our REIT
status.
In addition to the Rent, certain of our tenants may be required to pay
additional charges, such as late fees. To the extent that such charges
represent either (i) reimbursements of amounts a tenant is obligated to pay to
third parties or (ii) penalties for nonpayment or late payment of such amounts,
such charges should qualify as "rents from real property." To the extent that
additional charges represent interest that is accrued on the late payment of
the Rent or such additional charges, such should be treated as interest that
qualifies for the 95% gross income test, but not the 75% gross income test.
From time to time, we have entered into hedging transactions with respect to
one or more of our assets or liabilities, and we may continue to enter into
such hedging transactions. Such transactions
70
<PAGE>
include or may include interest rate swap contracts, interest rate cap or floor
contracts, futures or forward contracts, and options. To the extent that we
have entered or do enter into an interest rate swap or cap contract, option,
futures contract, forward rate agreement, or similar financial instrument to
reduce the interest rate risk with respect to any indebtedness incurred or to
be incurred to acquire or carry real estate assets, any periodic income or gain
from the disposition of such contract will be qualifying income for purposes of
the 95% gross income test, but not the 75% gross income test. To the extent
that we hedge with other types of financial instruments or in other situations,
it is not entirely clear how the income from those transactions will be treated
for purposes of the income tests that apply to REITs under the Code. We have
structured, and for so long as we otherwise remain qualified as a REIT we
intend to structure in the future, any hedging transactions in a manner that
will not jeopardize our status as a REIT.
If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we nevertheless may qualify as a REIT for such year if we are
entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if our failure to meet such tests is due
to reasonable cause and not due to willful neglect, we attach a schedule of the
sources of our income to our return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances we would be entitled to the
benefit of those relief provisions. As discussed above in "Certain Federal
Income Tax Considerations--Taxation of Pinnacle," even if those relief
provisions apply, we will be subject to a tax in an amount equal to (a) the
gross income attributable to the greater of the amount by which the 75% and 95%
gross income tests are failed, multiplied by (b) a fraction intended to reflect
profitability.
Asset Tests
At the close of each quarter of each taxable year, we also must satisfy two
tests relating to the nature of our assets. First, at least 75% of the value of
our total assets must be represented by cash or cash items (including certain
receivables), government securities, "real estate assets," or, in cases where
it raises new capital through stock or long-term (at least five-year) debt
offerings, temporary investments in stock or debt instruments during the one-
year period following its receipt of such capital. The term "real estate
assets" includes interests in real property, interests in mortgages on real
property to the extent the principal balance of a mortgage does not exceed the
value of the associated real property, and shares of other REITs. For purposes
of the 75% asset test, the term "interest in real property" includes an
interest in land and improvements thereon, such as buildings or other
inherently permanent structures (including items that are structural components
of such buildings or structures), a leasehold of real property, and an option
to acquire real property (or a leasehold of real property). The Service has
ruled in a revenue ruling that transmitting and receiving communications towers
built upon pilings or foundations similar to those which we presently own as
well as ancillary buildings, heating and air conditioning systems and fencing
constitute inherently permanent structures and are therefore real estate
assets. Based on this ruling and limited authorities bearing on the issue, our
communication sites will be regarded as real estate assets for this purpose,
and the opinion of Holland & Knight LLP is based in part on it's conclusion
that such authorities are so applicable. Second, of the investments not
included in the 75% asset class, the value of any one issuer's securities owned
by us may not exceed 5% of the value of your total assets and we may not own
more than 10% of any one issuer's outstanding voting securities (except for an
interest in any qualified REIT subsidiary).
If we should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause us to lose our REIT status if (i) we
satisfied the asset tests at the close of the preceding calendar quarter and
(ii) the discrepancy between the value of our assets and the asset test
requirements was not wholly or partly caused by an acquisition of non-
qualifying assets and arose from changes in the market values of our assets. If
the condition described in clause (ii) of the preceding sentence were not
satisfied,
71
<PAGE>
we still could avoid disqualification by eliminating any discrepancy within 30
days after the close of the calendar quarter in which it arose.
Distribution Requirements
In order to qualify as a REIT, we are required to distribute with respect to
each taxable year dividends (other than capital gain dividends or retained
capital gains) to our stockholders in an aggregate amount at least equal to (i)
the sum of (A) 95% of our "REIT taxable income" (computed without regard to the
dividends paid deduction and its net capital gain) and (B) 95% of the net
income (after tax), if any, from foreclosure property, minus (ii) the sum of
certain items of noncash income. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
we timely file our federal income tax return for such year and if paid on or
before the first regular dividend payment date after such declaration. To the
extent that we do not distribute all of our net capital gain or distributes at
least 95%, but less than 100%, of our "REIT taxable income," as adjusted, we
will be subject to tax thereon at capital gains and regular ordinary corporate
tax rates, as the case may be. Furthermore, if we should fail to distribute
during each calendar year at least the sum of (i) 85% of our REIT ordinary
income for such year, (ii) 95% of our REIT capital gain income for such year,
and (iii) any undistributed taxable income from prior periods, we would be
subject to a 4% nondeductible excise tax on the excess of such required
distribution over the amounts actually distributed. To the extent that we elect
to retain and pay income tax on its long-term capital gain in a taxable year,
as described in "--Taxation of Taxable U.S. Stockholders," such retained amount
will be treated as having been distributed for purposes of the 4% excise tax.
To the extent that we are required to include items in "REIT taxable income" in
advance of the receipt of cash payments associated with such income or are
required to expend cash for the repayment of debt or in any other manner for
which no current deduction is available in computing our "REIT taxable income,"
we may find it necessary to arrange for short-term (or possibly long-term)
borrowings, raise funds through the issuance of additional shares of Common or
Preferred Stock, or pay dividends in the form of taxable share dividends in
order to meet the 95% distribution requirement necessary to maintain our REIT
qualification.
Under certain circumstances, we may be able to rectify a failure to meet the
distribution requirements for a year by paying "deficiency dividends" to our
stockholders in a later year, which may be included in its deduction for
dividends paid for the earlier year. Although we may be able to avoid being
taxed on amounts distributed as deficiency dividends, we will be required to
pay to the Service interest based upon the amount of any deduction taken for
deficiency dividends.
Recordkeeping Requirements
Pursuant to applicable Treasury Regulations, in order to qualify as a REIT,
we must maintain certain records. In addition, to avoid a monetary penalty
(with respect to our 1998 and later tax years) or disqualification as a REIT
(with respect to our 1997 and earlier tax years), we must have requested and
continue to request on an annual basis certain information from its
stockholders designed to disclose the actual ownership of its outstanding
shares.
Failure to Qualify
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Distributions to stockholders in any year in which we fail to qualify
will not be deductible nor will they be required to be made. In such event, to
the extent of current and accumulated earnings and profits, all distributions
to stockholders will be taxable as ordinary income and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific
statutory provisions, we also will be disqualified from taxation as a REIT for
the four taxable years following the year during which it ceased
72
<PAGE>
to qualify as a REIT. It is not possible to predict whether in all
circumstances we would be entitled to such statutory relief. Unless we are
qualified as a REIT at the time of any sale of our assets, we will not be able
to distribute such proceeds as a dividend distribution to stockholders as a
means of avoiding the incurrence of a corporate level income tax at regular
corporate rates on any gain on sale of such assets. Although a corporate level
tax consequence could be avoided if substantially all our assets were disposed
of in a transaction qualifying for non-recognition under the reorganization
provisions of the Code, due to the carryover basis provisions of the Code
applicable to such transactions and the acquiror's inability to "step-up" the
basis of those assets to then current value for federal income tax purposes,
the consideration offered in such a transaction to us or our stockholders would
likely be less in a purchase of assets described in the preceding sentence.
Taxation of Taxable U.S. Stockholders
As used herein, the term "U.S. Stockholder" means a holder of Common Stock
that for U.S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a corporation, (iii) an estate whose income from sources
without the United States is includible in gross income for U.S. federal income
tax purposes regardless of its connection with the conduct of a trade or
business within the United States, or (iv) any trust with respect to which (A)
a U.S. court is able to exercise primary supervision over the administration of
such trust and (B) one or more U.S. fiduciaries have the authority to control
all substantial decisions of the trust.
Taxation of Stockholders on Distributions
As long as we qualify as a REIT, distributions made to taxable U.S.
Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends or retained capital gains) will be taken
into account by such U.S. Stockholders as ordinary income and will not be
eligible for the dividends received deduction generally available to
corporations. Distributions that are designated as capital gain dividends will
be taxed as long-term capital gains (to the extent they do not exceed our
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held his shares. However, corporate stockholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income. Beginning with our 1998 taxable year, we may elect to retain and pay
income tax on its net long-term capital gains. In that case, our stockholders
would include in income as long-term capital gain their proportionate share of
its undistributed long- term capital gains. In addition, the stockholders would
be deemed to have paid their proportionate share of the tax paid by us, which
would be credited or refunded to the stockholders. Each stockholder's basis in
his shares would be increased by the amount of the undistributed long-term
capital gains included in the stockholder's income, less the stockholder's
share of the tax paid by us.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
stockholder's shares, such distributions will be included in income as long-
term capital gain (or short-term capital gain if such shares have been held for
one year or less), assuming that such shares are capital assets in the hands of
the stockholder. In addition, any distribution declared by us in October,
November, or December of any year and payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by us and
received by the stockholder on December 31 of such year, provided that the
distribution is actually paid by us during January of the following calendar
year. We may be required to withhold a portion of capital gain distributions to
stockholders who fail to certify their nonforeign status to us.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses. Instead, such losses would be carried over
by us for potential offset against our future
73
<PAGE>
income (subject to certain limitations). Taxable distributions made by us and
gain from the disposition of Common Stock will not be treated as passive
activity income and, therefore, stockholders generally will not be able to
apply any "passive activity losses" (such as losses from certain types of
limited partnerships in which a stockholder is a limited partner) against such
income. In addition, taxable distributions from us generally will be treated as
investment income for purposes of the investment interest limitations. Capital
gains from the disposition of Common Stock or distributions treated as such (or
any portion of either), however, will be treated as investment income only if
the stockholder so elects, in which case such capital gains will be taxed at
ordinary income rates. We will notify stockholders after the close of our
taxable year as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital, and capital gain.
Taxation of Stockholders on the Disposition of Common Stock
In general, any gain or loss realized upon a taxable disposition of shares
of Common Stock by a stockholder who is not a dealer in securities will be
treated as long-term capital gain or loss if the shares have been held for more
than one year and otherwise as short-term capital gain or loss. However, any
loss upon a sale or exchange by a shareholder who has held such shares for six
months or less (after applying certain holding period rules), will be treated
as a long-term capital loss to the extent that a distribution made by us is
required to be treated by such stockholder as long-term capital gain. All or a
portion of any loss realized upon a taxable disposition of shares of Common
Stock may be disallowed if other shares of the same Common Shares are purchased
within 30 days before or after the disposition.
Capital Gains and Losses
A capital asset generally must be held for more than one year in order for
gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income tax rate is 39.6%.
For taxable years ending after 1997, the maximum tax rate on net capital gains
applicable to noncorporate taxpayers is 20% for sales and exchanges of assets
held for more than one year. The maximum tax rate on long-term capital gain
applicable to noncorporate taxpayers from the sale or exchange of "section 1250
property" (i.e., depreciable real property) is 25% to the extent that such gain
would have been treated as ordinary income if the property were "section 1245
property."
With respect to distributions designated by us as capital gain dividends and
any retained capital gains that we are deemed to distribute in taxable years
beginning on and after January 1, 1998, we may designate (subject to certain
limits) whether such a dividend or distribution is taxable to its noncorporate
stockholders at a 20% or 25% rate. Thus, the tax rate differential between
capital gain and ordinary income for individuals may be significant. In
addition, the characterization of income as capital or ordinary may affect the
deductibility of capital losses. Capital losses not offset by capital gains may
be deducted against an individual's ordinary income only up to a maximum annual
amount of $3,000, and capital losses not currently deductible due to such
limitation may be carried forward indefinitely. All net capital gain of a
corporate taxpayer is subject to tax at ordinary corporate rates. A corporate
taxpayer can deduct capital losses only to the extent of capital gains, with
unused losses being carried back three years and forward five years.
Information Reporting Requirements and Backup Withholding
We will report to its U.S. Stockholders and to the Service the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with the applicable requirements of
the backup withholding rules. A stockholder who does not provide us with his
correct taxpayer
74
<PAGE>
identification number also may be subject to penalties imposed by the Service.
Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability.
Taxation of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation. However, they are subject to taxation
on their unrelated business taxable income ("UBTI"). While many investments in
real estate generate UBTI, the Service has issued a published ruling that
dividend distributions from a REIT to an exempt employee pension trust do not
constitute UBTI, provided that the shares of the REIT are not otherwise used in
an unrelated trade or business of the exempt employee pension trust. Based on
that ruling, amounts distributed by us to Exempt Organizations generally will
not constitute UBTI, provided that (i) the Exempt Organization has not financed
its acquisition of shares of Common Stock with acquisition indebtedness within
the meaning of the Code and (ii) the shares of Common Stock are not otherwise
used by the Exempt Organization in an unrelated trade or business. Furthermore,
social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under paragraphs (7), (9), (17), and (20), respectively,
of Code section 501(c) are subject to different UBTI rules, which generally
will require them to characterize distributions from us as UBTI. In addition,
in certain circumstances, a pension trust that owns more than 10% of our stock
(by value) may be required to treat a percentage of the dividends received with
respect to our shares as UBTI (the "UBTI Percentage"). The UBTI Percentage
equals the gross income derived by us from an unrelated trade or business
(determined as if we were a pension trust) divided by our total gross income
for the year in which the dividends are paid. The UBTI rule applies to a
pension trust holding more than 10% of our outstanding stock (by value) only if
(i) the UBTI Percentage is at least 5%, (ii) we qualify as a REIT by reason of
the modification of the 5/50 Rule that allows the beneficiaries of the pension
trust to be treated as holding shares of us in proportion to their actuarial
interests in the pension trust, and (iii) either (A) one pension trust owns
more than 25% of the value of our shares or (B) a group of pension trusts
individually holding more than 10% of the value of our shares collectively owns
more than 50% of the value of our shares.
Taxation of Non-U.S. Stockholders
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, and other foreign holders of Common Stock
(collectively, "Non-U.S. Stockholders") are complex and no attempt will be made
herein to provide more than a summary of such rules. NON-U.S. STOCKHOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL,
STATE, AND LOCAL INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN COMMON STOCK,
INCLUDING ANY REPORTING REQUIREMENTS.
Taxation of Stockholders on Distributions
Distributions to Non-U.S. Stockholders that are not attributable to gain
from sales or exchanges of U.S. real property interests and are not designated
by us as capital gains dividends or retained capital gains (i.e., undistributed
capital gains to the extent so designated by us) will be treated as dividends
of ordinary income to the extent that they are made out of our current or
accumulated earnings and profits. Such distributions ordinarily will be subject
to a withholding tax equal to 30% of the gross amount of the distribution
unless an applicable tax treaty reduces or eliminates that tax. However, if
income from the investment in Common Stock is treated as effectively connected
with the Non-U.S. Stockholder's conduct of a U.S. trade or business, the Non-
U.S. Stockholder generally will be subject to federal income tax at graduated
rates, in the same manner as U.S. Stockholders are taxed with respect to such
distributions (and also may be subject to the 30% branch profits tax in the
case of a Non-U.S. Stockholder that is a non-U.S. corporation). We expect to
withhold U.S. income tax at the rate of 30% on
75
<PAGE>
the gross amount of any such distributions made to a Non-U.S. Stockholder
unless (i) a lower treaty rate applies and any required form evidencing
eligibility for that reduced rate is filed with us or (ii) the Non-U.S.
Stockholder files an IRS Form 4224 or its successor form with us claiming that
the distribution is effectively connected income. The Service has issued
regulations that modify the manner in which we must comply with the withholding
requirements. Those regulations are effective for distributions made after
December 31, 2000.
Distributions in excess of our current and accumulated earnings and profits
will not be taxable to a Stockholder to the extent that such distributions do
not exceed the adjusted basis of the Stockholder's Common Stock but rather will
reduce the adjusted basis of such shares. To the extent that distributions in
excess of current and accumulated earnings and profits exceed the adjusted
basis of a Non-U.S. Stockholder's Common Stock, such distributions will give
rise to tax liability if the Non-U.S. Stockholder would otherwise be subject to
tax on any gain from the sale or disposition of his Common Stock, as described
below. Because it generally cannot be determined at the time a distribution is
made whether or not such distribution will be in excess of our current and
accumulated earnings and profits, the entire amount of any distribution
normally will be subject to withholding at the same rate applicable to dividend
distributions. However, amounts so withheld are refundable to the extent it is
determined subsequently that such distribution was, in fact, in excess of our
current and accumulated earnings and profits.
For any year in which we qualify as a REIT, to the extent that a
distribution is attributable to gain from sales or exchanges of U.S. real
property interests, the distribution will be taxed to a Non-U.S. Stockholder
under the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of U.S.
real property interests are taxed to a Non-U.S. Stockholder as if such gain
were effectively connected with a U.S. business without regard to whether we
designate such distribution as capital gain dividends. Non-U.S. Stockholders
thus would be taxed at the normal capital gain rates applicable to U.S.
Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals).
Distributions subject to FIRPTA also may be subject to the 30% branch profits
tax in the hands of a non-U.S. corporate shareholder not entitled to treaty
relief or exemption. We are required to withhold 35% of any distribution that
is designated or could be designated by it as a capital gains dividend. The
amount withheld is creditable against the Non-U.S. Stockholder's FIRPTA tax
liability.
Taxation of Stockholders on the Disposition of Common Stock
Gain recognized by a Non-U.S. Stockholder upon a sale of his Common Stock
generally will not be taxed under FIRPTA if we are a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by non-U.S. persons. We believe that we are currently a
"domestically controlled REIT" and, therefore, the sale of Common Stock will
not be subject to taxation under FIRPTA, but such may not be the case in future
years (see "--Taxation of Pinnacle") and therefore no assurance can be given
that we will continue to be a "domestically controlled REIT." Furthermore, gain
not subject to taxation under FIRPTA will be taxable to a Non-U.S. Stockholder
if (i) investment in Common Stock is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business, in which case the Non-U.S. Stockholder
will be subject to the same treatment as U.S. Stockholders with respect to such
gain, or (ii) the Non-U.S. Stockholder is a nonresident alien individual who
was present in the U.S. for 183 days or more during the taxable year and
certain other conditions apply, in which case the nonresident alien individual
will be subject to a 30% tax on the individual's capital gains. If we were not
a "domestically controlled REIT," gain recognized upon the sale of Common Stock
by a Non-U.S. Stockholder generally will not be subject to tax under FIRPTA
provided that (a) the Common Stock is regularly traded, as defined in
applicable Treasury Regulations, on an established securities market and (b)
the Non-U.S. Stockholder held 5% or less of our Common Stock at all times
within a specified testing period. If the gain on the sale of
76
<PAGE>
Common Stock were to be subject to taxation under FIRPTA, the Non-U.S.
Stockholder would be subject to the same treatment as U.S. Stockholders with
respect to such gain (subject to applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals, and the
possible application of the 30% branch profits tax in the case of non-U.S.
corporations). In addition, the purchaser would be required to withhold 10% of
the purchase price and remit such amount to the Service.
Information Reporting Requirements and Backup Withholding
We will report to our Non-U.S. Stockholders and to the Service the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a Non-U.S. Stockholder may be
subject to backup withholding at the rate of 31% with respect to distributions
paid unless such holder certifies as to its Non-U.S. status under penalties of
perjury or otherwise establishes an exemption (provided that neither we nor our
paying agent has actual knowledge that the holder is a U.S. person or that the
conditions of any other exemption are not, in fact, satisfied). The Service has
issued final regulations regarding the backup withholding rules that apply to
Non-U.S. Stockholders. Those regulations alter the current system of backup
withholding compliance and are effective for distributions made after December
31, 2000. Such regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify reliance standards.
Estate Tax
Common stock held (or treated as held) by an individual who is not a citizen
or resident (as specially defined for U.S. Federal estate tax purposes) of the
United States at the time of his or her death will be includable in the
individual's estate for U.S. Federal estate tax purposes unless an applicable
estate tax treaty provides otherwise. Such individual's estate may be subject
to U.S. Federal estate tax on the property includable in the estate for U.S.
Federal estate tax purposes.
Possible Legislative or Other Actions Affecting Tax Consequences
Prospective holders of Common Stock should recognize that the present
federal income tax treatment of us and an investment in us may be modified by
legislative, judicial or administrative action at any time, and that any such
action may affect us and investments and commitments previously made. The rules
dealing with federal income taxation are constantly under review by persons
involved in the legislative process and by the Service and Treasury Department,
resulting in revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in federal tax
laws and the interpretations thereof could adversely affect the tax
consequences to us or of an investment in us.
Other Tax Consequences
We, our Corporate Subsidiaries, or our stockholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which it or they own property, transact business, or reside. The state and
local tax treatment of us and our stockholders may not conform to the federal
income tax consequences discussed above. CONSEQUENTLY, YOU SHOULD CONSULT YOUR
OWN TAX ADVISORS REGARDING THE EFFECT OF STATE AND LOCAL TAX LAWS ON AN
INVESTMENT IN PINNACLE.
77
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated the
date hereof (the "U.S. Underwriting Agreement"), the underwriters named below
(the "U.S. Underwriters"), through their representatives Deutsche Bank
Securities Inc., Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Bank of America Securities LLC. and Raymond James &
Associates, Inc. (the "Representatives") have severally agreed to purchase from
the Company and the selling stockholders the following respective numbers of
shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Deutsche Bank Securities Inc. ........................................
Merrill Lynch Pierce, Fenner & Smith Incorporated.....................
Salomon Smith Barney Inc. ............................................
Raymond James & Associates, Inc.......................................
Banc of America Securities LLC. ......................................
-------
Total...............................................................
=======
</TABLE>
The Company has also entered into an international purchase agreement (The
"International Purchase Agreement") with certain international underwriters for
whom Deutsche Bank AG London, Salomon Brothers International Limited, Bank of
America International Limited, Merrill Lynch International and Raymond James &
Associates, Inc. (collectively the "International Underwriters") are acting as
representatives and together with the U.S. Underwriters the "Underwriters".
Subject to the terms and conditions set forth in the International Purchase
Agreement, and concurrently with the sale of 8,560,000 shares of Common Stock
to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Company
and the selling stockholders have agreed to sell to the International
Underwriters, and each of the International Underwriters severally and not
jointly has agreed to purchase from the Company and the selling stockholders,
an aggregate of 2,140,000 shares of Common Stock. The public offering price per
share of Common Stock and the underwriting discount per share of Common Stock
are identical under the U.S. Purchase Agreement and the International Purchase
agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the International Underwriters, respectively,
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the shares of Common Stock being sold pursuant to each such agreement if
any of the shares of common stock being sold pursuant to such agreement are
purchased. In the event of a default by an underwriter, the U.S. Purchase
Agreement and the International Purchase Agreement provide that, in certain
circumstances, the commitments of non-defaulting underwriters may be increased
or the purchase agreements may be terminated. The closings with respect to the
sale of shares of Common Stock to be purchased by the U.S. Underwriters and the
International Underwriters are conditioned upon one another.
The underwriting agreements provide that the obligations of the several
Underwriters to purchase the shares of Common Stock offered hereby are subject
to conditions. The Underwriters are obligated to purchase all of the shares of
Common Stock offered hereby, other than those covered by the over-allotment
option described below, if any of these shares are purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The Underwriters may allow, and these dealers
may re-allow, a concession not in excess of $ per share to other dealers. The
expenses of the Offering, all of which are being paid by the Company, are
estimated to be .
78
<PAGE>
The Company and the selling stockholders have granted to the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus,
to purchase up to 1,605,000 additional shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The Underwriters may exercise this option only
to cover over-allotments made in connection with the sale of the Common Stock
offered hereby. To the extent that the Underwriters exercise the option, each
of the Underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of Common Stock as the
number of shares of Common Stock to be purchased by it in the above table bears
to 10,700,000. The Company will be obligated, pursuant to the option, to sell
these shares to the Underwriters to the extent the option is exercised. If any
additional shares of Common Stock are purchased, the Underwriters will offer
additional shares on the same terms as those on which the 10,700,000 shares are
being offered.
The Company has agreed to indemnify the Underwriters against some specified
types of liabilities, including liabilities under the Securities Act.
Certain of the Company's officers, directors and stockholders have agreed
not to offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of, any common stock for a period of 90 days after
the effective date of the registration statement of which this Prospectus is a
part without the prior written consent of Deutsche Bank Securities Inc. This
consent may be given at any time without public notice. The Company has entered
into a similar agreement.
An affiliate of Banc of America Securities LLC and Bank of America
International Limited may receive more than 10% of the net proceeds from the
sale of the Common Stock to repay debt under our credit facility. Under the
Conduct Rules of the National Association of Securities Dealers, Inc. (the
"NASD"), special considerations apply to a public offering of securities where
a "member" or a "person associated with a member" (as such terms are defined in
the Conduct Rules of the NASD) and their affiliates collectively beneficially
own more than 10% of the outstanding voting securities of a company which is a
corporation. Therefore, this offering is being made pursuant to Rule 2710(c)(8)
of the Conduct Rules of the NASD, in conjunction with which, Raymond James &
Associates, Inc. has assumed the responsibilities of acting as a "qualified
independent underwriter" in pricing this offering, preparing this Prospectus
and conducting due diligence.
Deutsche Bank Securities Inc., a Representative of the Underwriters, acted
as representative of the underwriters in connection with the IPO. An affiliate
of Deutsche Bank Securities Inc. and Deutsche Bank AG London signed a
commitment letter to purchase $20 million of shares of Series B Preferred
Stock. An affiliate of Banc of America Securities LLC and Bank of America
International Limited is a lender and agent under our credit facility. In
addition, Banc of America Securities LLC, an affiliate of Bank of America
International Limited was an initial purchaser of the 10% senior discount notes
due 2008 of the Company.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Common Stock. Specifically, the Underwriters may over-allot
shares of the Common Stock in connection with this offering, thus creating a
short position in the Common Stock for their own account. Additionally, to
cover these over-allotments or to stabilize the market price of the Common
Stock, the Underwriters may bid for, and purchase, shares of the Common Stock
in the open market. Finally, the Representatives, on behalf of the
Underwriters, also may reclaim selling concessions allowed to an Underwriter or
dealer if the underwriting syndicate repurchases shares distributed by that
Underwriter or dealer. Any of these activities may maintain the market price of
the Common Stock at a level above that which might otherwise prevail in the
open market. The Underwriters are not required to engage in these activities
and, if commenced, may end any of these activities at any time.
79
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Pinnacle by Holland & Knight LLP, Tampa, Florida. Some legal matters
related to this offering will be passed upon for the underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New
York, New York.
EXPERTS
The financial statements for Pinnacle Holdings Inc. as of December 31, 1998
and 1997 and for each of the years in the three year period ended December 31,
1998 included in this Prospectus, have been so included in reliance on the
reports of PricewaterhouseCoopers 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.
The financial statements of MobileMedia Communications, Inc. and
Subsidiaries Tower Operations at December 31, 1997 and 1996, and for the years
then ended, appearing in this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of the North American Antenna Site Business of
Motorola, Inc. as of December 31, 1997 and 1998 and for each of the years in
the three-year period ended December 31, 1998, have been included herein in
reliance upon the report of KPMG LLP, independent auditors, and upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Pinnacle has filed with the SEC a registration statement on Form S-3
pursuant to the Securities Act with respect to the common stock offered by this
prospectus. This prospectus does not contain all the information set forth in
the registration statement, the exhibits and the schedule. For further
information about Pinnacle and the securities offered by this prospectus,
reference is made to the registration statement and to the consolidated
financial statements, exhibits and schedule filed as a part thereof.
Pinnacle is subject to the information requirements of the Exchange Act,
and, in accordance therewith, files reports and other information with the SEC.
The registration statement, the exhibits and schedule forming a part thereof
and the reports and other information filed by Pinnacle with the SEC in
accordance with the Exchange Act may be inspected without charge at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the SEC: 7
World Trade Center, Suite 1300, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-
2511. Copies of such materials or any part thereof may also be obtained from
the Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. You may obtain information regarding the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet Web site at http://www.sec.gov that contains reports,
proxy statements and other information.
80
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities and
Exchange Act of 1934 until we sell all of the securities.
. Annual Report on Form 10-K for the year ended December 31, 1998.
. Quarterly Report on Form 10-Q for the quarter ended December 31, 1998.
On request we will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus, a copy of any or all
of the documents incorporated in this prospectus by reference. We will not
provide exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents. Written or
telephone requests for such copies should be addressed to our principal
executive offices, attention: Steven Day, Chief Financial Officer, 1549
Ringling Boulevard, 3rd Floor, Sarasota, Florida 34236, telephone number (941)
364-8886.
81
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PINNACLE HOLDINGS INC.
Report of Independent Certified Public Accountants........................ F-3
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. F-4
Consolidated Statements of Operations for each of the three years ended
December 31, 1996, 1997 and 1998......................................... F-5
Consolidated Statements of Changes in Stockholders' Equity for each of the
three years ended December 31, 1996, 1997 and 1998....................... F-6
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1996, 1997 and 1998......................................... F-7
Notes to Consolidated Financial Statements................................ F-8
PINNACLE HOLDINGS INC. (Unaudited Interim Consolidated Financial
Statements--March 31, 1999 and 1998)
Condensed Consolidated Balance Sheets as of March 31, 1999 and December
31, 1998................................................................. F-22
Condensed Consolidated Statements of Operations for the three months ended
March 31, 1998 and 1999.................................................. F-23
Condensed Consolidated Statement of Changes in Common Stockholders' Equity
for the three months ended March 31, 1999................................ F-24
Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1999.................................................. F-25
Notes to Condensed Consolidated Financial Statements...................... F-26
NORTH AMERICAN ANTENNA SITES BUSINESS OF MOTOROLA, INC
Report of Independent Auditors............................................ F-29
Statements of Net Assets as of December 31, 1997 and 1998 and April 3,
1999 (unaudited)......................................................... F-30
Statements of Operations and Changes in Net Assets for the years ended
December 31, 1996, 1997 and 1998 (unaudited) and the three months ended
March 28, 1998 and April 3, 1999 (unaudited)............................. F-31
Statements of Cash Flows for the years ended December 31, 1996, 1997 and
1998 (unaudited) and the three months ended March 28, 1998 and April 3,
1999 (unaudited)......................................................... F-32
Notes to Financial Statements............................................. F-33
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES TOWER OPERATIONS
Report of Independent Auditors............................................ F-39
Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997 and
1996..................................................................... F-40
Statements of Income for the six months ended June 30, 1998 and 1997
(unaudited) and for each of the two years ended December 31, 1997 and
1996..................................................................... F-41
Statements of Changes in Net Tower Operation Assets as of December 31,
1996 and 1997 and June 30, 1998 (unaudited).............................. F-42
Statements of Cash Flows for the six months ended June 30, 1998 and 1997
(unaudited) and for each of the two years ended December 31, 1997 and
1996..................................................................... F-43
Notes to Financial Statements............................................. F-44
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
SOUTHERN COMMUNICATIONS SERVICES, INC. TOWER OPERATIONS
Report of Independent Auditors........................................... F-47
Balance Sheets as of December 31, 1997 and 1996.......................... F-48
Statements of Operations for the years ended December 31, 1997 and 1996.. F-49
Statements of Changes in Accumulated Deficit for the years ended December
31, 1997 and 1996....................................................... F-50
Statements of Cash Flows for the years ended December 31, 1997 and 1996.. F-51
Notes to Financial Statements............................................ F-52
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of Pinnacle Holdings Inc. and its subsidiaries (the "Company") at December 31,
1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Tampa, Florida
January 11, 1999
F-3
<PAGE>
PINNACLE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 1,693,923 $ 13,801,190
Accounts receivable, less allowance for doubtful
accounts
of $70,000 and $125,000, respectively.......... 1,577,575 1,679,390
Prepaid expenses and other current assets....... 1,037,447 1,432,428
------------ ------------
Total current assets........................... 4,308,945 16,913,008
Restricted cash................................... 59,822 --
Tower assets, net of accumulated depreciation of
$8,278,524 and $28,964,462, respectively......... 127,946,070 473,942,309
Fixed assets, net................................. 1,495,121 2,476,666
Land.............................................. 6,850,951 14,613,365
Deferred debt issue costs, net of accumulated
amortization of $514,898 and $6,765,601,
respectively..................................... 1,871,242 6,686,683
Other assets...................................... 645,752 1,516,070
------------ ------------
$143,177,903 $516,148,101
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................ $ 2,242,397 $ 3,280,809
Accrued expenses................................ 3,095,049 5,761,016
Deferred revenue................................ 639,460 1,448,432
Current portion of long-term debt............... 11,122,077 15,692,912
------------ ------------
Total current liabilities...................... 17,098,983 26,183,169
Long-term debt.................................... 109,459,790 417,524,802
Other liabilities................................. 105,012 125,152
------------ ------------
126,663,785 443,833,123
------------ ------------
Commitments and contingencies (Note 7)
Redeemable stock (Note 8):
Series A senior preferred stock, mandatorily
redeemable, dividends payable-in-kind; $.001
par value; 145,000 shares authorized; 0 and
31,383 shares issued and outstanding at
December 31, 1997 and 1998, respectively;
includes accrued dividends and accretion of
$1,434,341 at December 31, 1998 ............... -- 29,882,298
Class B common stock, 12,000 shares issued and
outstanding at December 31, 1997 and 1998,
respectively................................... 1,761,000 1,761,000
Class D common stock, $.001 par value; 39,000,
and 40,000 shares issued and outstanding at
December 31, 1997 and 1998, respectively....... 39 40
------------ ------------
1,761,039 31,643,338
------------ ------------
Stockholders' equity (Note 8):
Series B junior preferred stock, redeemable, 14%
dividends, $.001 par value; 100 shares
authorized; 0 and 60 shares issued and
outstanding at December 31, 1997 and 1998,
includes accrued dividends of $1,659,821 ...... -- 59,928,980
Common stock:
Class A common stock--202,500 shares issued and
outstanding at December 31, 1997 and 1998,
respectively.............................. 203 203
Class E common stock--67,089, and 174,766
shares issued and outstanding at December
31, 1997 and 1998, respectively........... 67 175
Warrants ...................................... -- 1,000,000
Additional paid-in capital..................... 25,875,752 33,136,302
Accumulated deficit............................ (11,122,943) (53,394,020)
------------ ------------
14,753,079 40,671,640
------------ ------------
$143,177,903 $516,148,101
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-4
<PAGE>
PINNACLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Site rental revenue................. $ 4,841,752 $12,880,631 $ 32,018,651
Site operating expenses, excluding
depreciation and amortization...... 1,135,023 2,632,274 6,165,897
----------- ----------- ------------
Gross margin, excluding
depreciation and amortization.... 3,706,729 10,248,357 25,852,754
----------- ----------- ------------
Other expenses:
General and administrative........ 916,237 1,367,400 4,175,477
Corporate development............. 1,420,879 3,723,180 6,381,516
State franchise, excise and
minimum taxes.................... 25,801 66,942 686,040
Depreciation...................... 2,041,085 6,334,769 22,512,819
----------- ----------- ------------
4,404,002 11,492,291 33,755,852
----------- ----------- ------------
Loss from operations................ (697,273) (1,243,934) (7,903,098)
Interest expense.................... 1,154,990 6,925,094 12,300,182
Amortization of original issue
discount and debt issuance costs... 164,091 292,143 16,426,224
----------- ----------- ------------
Loss before extraordinary item...... (2,016,354) (8,461,171) (36,629,504)
Extraordinary loss from
extinguishment of debt............. -- -- 5,641,573
----------- ----------- ------------
Net loss............................ $(2,016,354) $(8,461,171) $(42,271,077)
=========== =========== ============
Payable-in-kind preferred dividends
and accretion...................... -- -- 3,094,162
Net loss attributable to common
shareholders....................... $(2,016,354) $(8,461,171) $(45,365,239)
=========== =========== ============
Basic loss per common share:
Loss before extraordinary item..... $ (8.10) $ (27.28) $ (94.95)
Extraordinary item................. -- -- (13.48)
----------- ----------- ------------
Net loss............................ $ (8.10) $ (27.28) $ (108.43)
=========== =========== ============
Weighted average number of common
shares outstanding................. 248,950 310,122 418,363
=========== =========== ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-5
<PAGE>
PINNACLE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series B Junior Class A common Class E common
preferred stock stock stock Additional Stock
------------------ -------------- -------------- paid-in subscriptions Accumulated
Shares Amount Shares Amount Shares Amount Warrants capital receivable deficit
------ ----------- ------- ------ ------- ------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995............. -- $ -- 75,500 $ 76 -- $-- -- $ 7,051,405 $(180,015) $ (645,418)
Issuance of
common stock, net
of issuance
costs:
Class A......... 127,000 127 12,699,873
Class D.........
Class E......... 51,300 51 5,129,941
Payment received
for stock
subscriptions.... 180,015
Net loss......... (2,016,354)
----- ----------- ------- ---- ------- ---- ---------- ----------- --------- ------------
Balance at
December 31,
1996............. -- -- 202,500 203 51,300 51 -- 24,881,219 -- (2,661,772)
Issuance of
common stock, net
of issuance
costs:
Class E......... 15,789 16 1,555,533
Net loss......... (8,461,171)
Adjustment to
Class B common
stock............ (561,000)
----- ----------- ------- ---- ------- ---- ---------- ----------- --------- ------------
Balance at
December 31,
1997............. -- -- 202,500 203 67,089 67 -- 25,875,752 -- (11,122,943)
Issuance of
common stock,
net of issuance
costs:
Class E......... 107,677 108 10,767,600
Distribution to
Class B common
stockholders ... (412,888)
Issuance of
preferred stock,
net of issuance
costs:
Series A senior
preferred
stock........... 1,000,000
Series B junior
preferred
stock........... 58.74 58,269,159 (1,434,341)
Dividends and
accretion on
preferred
stock........... 1.66 1,659,821 (1,659,821)
Net loss........ (42,271,077)
----- ----------- ------- ---- ------- ---- ---------- ----------- --------- ------------
Balance at
December 31,
1998............. 60.40 $59,928,980 202,500 $203 174,766 $175 $1,000,000 $33,136,302 $ -- $(53,394,020)
===== =========== ======= ==== ======= ==== ========== =========== ========= ============
<CAPTION>
Stockholders'
equity
-------------
<S> <C>
Balance at
December 31,
1995............. $ 6,226,048
Issuance of
common stock, net
of issuance
costs:
Class A......... 12,700,000
Class D.........
Class E......... 5,129,992
Payment received
for stock
subscriptions.... 180,015
Net loss......... (2,016,354)
-------------
Balance at
December 31,
1996............. 22,219,701
Issuance of
common stock, net
of issuance
costs:
Class E......... 1,555,549
Net loss......... (8,461,171)
Adjustment to
Class B common
stock............ (561,000)
-------------
Balance at
December 31,
1997............. 14,753,079
Issuance of
common stock,
net of issuance
costs:
Class E......... 10,767,708
Distribution to
Class B common
stockholders ... (412,888)
Issuance of
preferred stock,
net of issuance
costs:
Series A senior
preferred
stock........... 1,000,000
Series B junior
preferred
stock........... 56,834,818
Dividends and
accretion on
preferred
stock........... --
Net loss........ (42,271,077)
-------------
Balance at
December 31,
1998............. $40,671,640
=============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-6
<PAGE>
PINNACLE HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss........................... $ (2,016,354) $ (8,461,171) $ (42,271,077)
------------ ------------ -------------
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation....................... 2,041,085 6,334,769 22,512,819
Amortization of original issue
discount and debt issuance
costs............................. 164,091 292,143 16.426,224
Extraordinary loss from
extinguishment of debt............ -- -- 5,641,573
Provision for doubtful accounts.... 45,000 25,000 55,000
(Increase) decrease in:
Accounts receivable, gross....... (454,065) (1,118,692) (156,815)
Prepaid expenses and other
current assets.................. (277,604) (746,299) (394,981)
Notes receivable................. 387,455 -- --
Other assets..................... (237,408) (358,587) (902,630)
Increase (decrease) in:
Accounts payable................. 633,711 1,435,305 1,038,412
Accrued expenses................. 429,779 2,371,605 2,665,967
Deferred revenue................. 77,417 507,037 808,972
Other current liabilities........ (490,000) -- --
Other liabilities................ 49,491 44,253 20,140
------------ ------------ -------------
Total adjustments................ 2,368,952 8,786,534 47,714,681
------------ ------------ -------------
Net cash provided by operating
activities......................... 352,598 325,363 5,443,604
------------ ------------ -------------
Cash flows from investing
activities:
Payments made in connection with
acquisitions:
Tower assets..................... (31,845,153) (70,852,422) (320,834,472)
Land............................. (3,337,847) (2,738,951) (7,762,414)
Capital expenditures:
Tower assets..................... (7,036,048) (14,815,863) (43,535,621)
Fixed assets..................... (563,646) (1,023,513) (1,553,493)
(Increase) decrease in restricted
cash.............................. 138,157 (25,750) 59,822
------------ ------------ -------------
Net cash used in investing
activities......................... (42,644,537) (89,456,499) (373,626,178)
------------ ------------ -------------
Cash flows from financing
activities:
Borrowings under long-term debt,
net .............................. 24,866,994 89,918,073 487,247,329
Repayment of long-term debt........ (568,516) (695,982) (205,029,425)
Proceeds from issuance of
redeemable stock, net............. 8 -- --
Proceeds from issuance of PIK
preferred stock and warrants,
net............................... -- -- 87,717,116
Proceeds from issuance of common
stock, net........................ 18,010,007 1,555,549 10,767,709
Payment of accretion in Class B
common stock...................... -- -- (412,888)
------------ ------------ -------------
Net cash provided by financing
activities......................... 42,308,493 90,777,640 380,289,841
------------ ------------ -------------
Net increase (decrease) in cash and
cash equivalents................... 16,554 1,646,504 12,107,267
Cash and cash equivalents, beginning
of period.......................... 30,865 47,419 1,693,923
------------ ------------ -------------
Cash and cash equivalents, end of
period............................. $ 47,419 $ 1,693,923 $ 13,801,190
============ ============ =============
Supplemental disclosure of cash
flows:
Cash paid for interest............. $ 1,037,452 $ 5,786,816 $ 12,271,070
============ ============ =============
Non-cash transactions:
Seller debt issued in connection
with acquisitions................. $ 7,493,255 $ 19,251,850 $ 2,414,965
Payable-in-kind preferred
dividends and accretion........... $ -- $ -- $ 3,094,162
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
F-7
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Basis of Presentation
The accompanying consolidated financial statements reflect the financial
position and results of operations and cash flows of Pinnacle Holdings Inc. and
its wholly owned subsidiaries: Pinnacle Towers Inc., Coverage Plus Antenna
Systems, Inc. and Tower Systems, Inc., collectively referred to as the
"Company." The Company acquires, develops and operates telecommunication site
and leases space on its sites to customers in the wireless communications
industries located in the United States. All significant intercompany balances
and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and use
assumptions that affect the reported amounts of assets and liabilities and the
disclosure for contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results may vary from estimates used.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid temporary cash investments with a maturity of three months or less to be
cash equivalents.
Concentration of Credit Risk
Substantially all of the accounts receivable are with federal, state and
local government agencies and national and local wireless communications
providers. The Company performs ongoing credit evaluations of its customers but
does not require collateral to support customer receivables. The Company
maintains an allowance for doubtful accounts on its customer receivables based
upon factors surrounding the credit risk of specific customers, historical
trends and other information. Sales to two customers accounted for 14.4% and
13.3% of revenues in 1998.
Restricted Cash
Restricted cash reflects cash held in escrow restricted for the acquisition
of tower sites.
Tower Assets
Tower assets consists of towers, licenses, permits and tower attachments
which are recorded at cost and depreciated using the straight-line method over
the estimated useful life of the assets, which is 15 years for towers, 30 years
for buildings and from 5 to 10 years for equipment and other improvements to
tower sites. Also included in tower assets are towers under construction of
$3,452,045 and $9,231,475 as of December 31, 1997 and 1998, respectively.
Improvements, renewals and extraordinary repairs which increase the value or
extend the life of the asset are capitalized. Repairs and maintenance costs are
expensed as incurred.
Fixed Assets
Fixed assets are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the fixed assets. Equipment held
under capital leases is amortized on a straight-line basis
F-8
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
over the term of the lease or the remaining life of the leased property,
whichever is shorter. Betterments, renewals and extraordinary repairs which
increase the value or extend the life of the asset are capitalized. Repairs and
maintenance costs are expensed as incurred.
Other Assets
Other assets includes $747,000 of costs incurred in connection with a
pending initial public offering by the Company at December 31, 1998, which will
be deducted from the net proceeds of the offering in determining the amount of
additional paid in capital to be recorded upon completion of the public
offering or recorded as expense should the Company not be able to complete the
initial public offering, and tenant lease receivables recorded in connection
with the revenue recognition on non-cancellable tenant leases in accordance
with Financial Accounting Standards Board Opinion No. 13, "Accounting for
Leases."
Impairment of Long-lived Assets
The Company evaluates the recoverability of its long-lived assets whenever
adverse events or changes in business climate indicate that the expected
undiscounted future cash flows from the related asset may be less than
previously anticipated. If the net book value of the related asset exceeds the
undiscounted future cash flows of the asset, the carrying amount would be
reduced to the present value of its expected future cash flows and an
impairment loss would be recognized. As of December 31, 1997 and 1998
management does not believe that an impairment reserve is required.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments at December 31,
1997 and 1998, which includes cash and accounts receivable, approximates fair
value due to the short maturity of those instruments. The Company considers the
variable rate financial instruments including interest rate swaps to be
representative of current market interest rates and, accordingly, the recorded
amounts approximate fair market value. The Company's Senior 10% discount notes
are publicly traded and were trading based on an 11.1% yield at December 31,
1998, indicating a fair value of the Notes of approximately $188.5 million.
Site Rental Revenue Recognition
Site rental revenue is recognized on a straight-line basis over the life of
the related lease agreements. Revenue is recorded in the month in which it is
due. Any rental amounts received in advance of the month due are recorded as
deferred revenue.
Corporate Development Expenses
Corporate development expenses represent costs incurred in connection with
acquisitions, construction activities and expansion of the customer base. These
expenses consist primarily of allocated compensation and overhead costs that
are not directly related to the administration or management of existing
towers, and are expensed as incurred.
Income Taxes
The Company qualifies and intends to continue to qualify to be taxed as a
Real Estate Investment Trust ("REIT") under the Internal Revenue Code of 1986,
as amended, for each taxable year of
F-9
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
operations. As a REIT, the Company is allowed a tax deduction for the amount of
dividends paid to its stockholders, thereby effectively subjecting the
distributed net income of the Company to taxation at the stockholder level
only, provided it distributes at least 95% of its REIT taxable income and meets
certain other requirements for qualifying as a REIT. The Company incurred a
loss for both book and tax purposes in the years ended December 31, 1997 and
1998 and, therefore, was not required to pay a cash dividend in order to retain
its REIT status.
Loss Per Share
Basic net loss per common share is based on the weighted average number of
shares of common stock outstanding during each period. The computation of
diluted loss per share, assuming conversion of the Class D common shares and
the exercise of warrants issued in connection with the Series A Senior
Preferred Stock and the Subordinated-Term Loan Agreement, has an antidilutive
effect on loss per share.
Reclassifications
Certain amounts from prior years have been reclassified for consistency with
current presentation. These reclassifications were not material to the
consolidated financial statements.
3. Acquisitions
The Company actively acquires communications sites and assumes the sellers'
related customer activity on an ongoing basis. In January 1996, the Company
acquired telecommunications tower sites and related assets from an individual
for cash of $4,443,000. During May of 1996, the Company acquired the rooftop of
the Plaza Tower building including all of the related site assets and fixtures
for a purchase price of $3,000,000 which was paid in cash. In July 1996, the
Company purchased the site leases and subleases of Florida Mobile Telephone,
Inc. for a purchase price of $2,270,000, which was also paid in cash. In
September 1996, the Company purchased 10 sites and related assets for
$3,010,000, which consisted of $792,325 in cash and $2,217,675 of notes payable
to the seller. Additionally, the Company completed 44 other acquisitions of
sites and related assets, all of which were individually insignificant to the
Company, from various sellers during the year ended December 31, 1996. The
aggregate purchase price of $20,854,055 consisted of $15,578,475 in cash and
$5,275,580 of notes payable to the former tower owners (see Note 6).
The Company completed 72 acquisitions during the year ended December 31,
1997, all of which were individually insignificant to the Company. The
aggregate purchase price for acquisitions for the year ended December 31, 1997
was $73,591,373, which consisted of $54,339,523 in cash and $19,251,850 of
notes payable to the former tower owners.
On March 4, 1998, the Company completed the acquisition of 201 sites from
Southern Communications Services, Inc. ("Southern Communications"), a
subsidiary of Southern Company. The Company paid $83,500,000 for these towers,
located in Georgia, Alabama, Mississippi, and Florida. In connection with the
acquisition of these towers, the Company and Southern Communications or one of
its affiliates have entered into leases whereby Southern Communications or one
of its affiliates is a customer on each of the 201 sites acquired. Under the
lease agreement, Southern Communications and its affiliates will pay initial
annual aggregate rent of approximately $5,500,000 in 1998. The leases have
initial terms of ten years with five optional renewal periods of five years
exercisable at the customer's option. The Company anticipates that Southern
Communications will continue to represent a significant, but declining
percentage of the Company's revenues as the Company grows. The Company
F-10
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
has also entered into an option agreement with Southern Communications under
which the Company may supply, acquire or develop an additional 80 sites. Any of
these additional sites would be rented under the same terms as the original
leases of the 201 towers described above.
On September 3, 1998, the Company acquired from MobileMedia Corporation
("MobileMedia") and several of its affiliates 166 sites for an aggregate
purchase price of approximately $170 million. MobileMedia assigned its existing
tenant leases on the sites to the Company. The Company entered into a lease
(the "Lease") with MobileMedia Communications, Inc., an affiliate of
MobileMedia, providing such affiliate of MobileMedia the non-exclusive right to
install a certain amount of its equipment on the acquired towers for an
aggregate rent of $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 towers are located in the
Southeastern United States, Southern California and New England. The
MobileMedia transaction was funded with proceeds from the sale of two separate
newly authorized series of preferred stock of the Company as described below, a
loan from ABRY Broadcast Partners II, L.P., a controlling stockholder of the
Company, and borrowings under the Company's senior credit facility with
NationsBank, N.A. and certain other lenders.
In addition to the Southern Communications and MobileMedia transactions
described above, the Company completed 80 acquisitions of 526 sites and related
assets, all of which were individually insignificant to the Company, from
various sellers during the year ended December 31, 1998 for an aggregate
purchase price of $331,204,262, consisting of $328,789,297 in cash and
$2,414,965 of notes payable to the former tower owners.
The Company accounts for its acquisitions using the purchase method of
accounting. The results of operations of the acquired assets are included with
those of the Company from the dates of the respective acquisitions. The pro-
forma results of operations listed below reflect purchase accounting and pro-
forma adjustments as if the transactions occurred as of January 1, 1997. This
unaudited pro-forma information is not necessarily indicative of the results
that would have occurred if the assumed transaction had occurred on the dates
indicated and are not necessarily indicative of the expected financial position
or results of operations in the future.
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Site rental revenue............................ $ 38,427,583 $ 43,416,231
Gross profit, excluding depreciation and
amortization.................................. 31,970,369 35,889,471
Net loss....................................... (40,363,789) (48,938,067)
Basic net loss per common share................ $ (160.89) $ (153.89)
</TABLE>
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31,
Estimated useful ----------------------
lives in years 1997 1998
---------------- ---------- ----------
<S> <C> <C> <C>
Vehicles.......................... 5 $ 489,778 $ 657,062
Furniture, fixtures and other
office equipment................. 5 504,759 315,345
Data processing equipment......... 5 880,333 2,439,895
---------- ----------
1,874,870 3,412,302
Accumulated depreciation.......... (379,749) (935,636)
---------- ----------
Fixed assets, net................. $1,495,121 $2,476,666
========== ==========
</TABLE>
F-11
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Construction and acquisition costs.................... $1,071,719 $2,429,893
Interest.............................................. 1,337,662 1,334,552
Professional fees..................................... 150,000 543,705
Taxes other than income............................... 148,115 736,698
Payroll and other..................................... 387,553 716,168
---------- ----------
$3,095,049 $5,761,016
========== ==========
</TABLE>
6. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Senior Credit Facility, interest at variable rates
(8.25% at December 31, 1997 and 8.55% to 8.63% at
December 31, 1998, respectively), secured,
quarterly principal installments beginning June
30, 2000, maturing December 31, 2005............. $ 72,000,000 $182,450,000
Senior 10% discount notes, net of unamortized
original issue discount of $0 and $109,041,993,
respectively, unsecured cash interest payable
semi-annually in arrears beginning September 16,
2003, balloon principal payment of $325,000,000
due at maturity on March 15, 2008................ -- 215,958,009
Notes payable to former tower owners, interest
from 8.5% to 13% per annum, monthly installments
of principal and interest of varying amounts
through December 31, 2021, secured by various
letters of credit or guaranty by related party
(Note 9)......................................... 28,581,867 19,809,705
ABRY bridge loan, interest at 9% per annum,
principal and interest due in April 1999 and
September 1999 (Note 9).......................... -- 15,000,000
Subordinated term note, interest at variable rates
(11.88% at December 31, 1997), unsecured,
principal and interest maturing September 22,
2000............................................. 20,000,000 --
------------ ------------
120,581,867 433,217,714
Less: current potion of long-term debt............ (11,122,077) (15,692,912)
------------ ------------
Long-term debt.................................... $109,459,790 $417,524,802
============ ============
</TABLE>
The remaining principal payments at December 31, 1998 were due as follows:
1999-$15,692,912; 2000-$22,914,363; 2001-$28,464,878; 2002-$38,499,435; 2003-
$37,014,388; 2004-$74,673,731 and thereafter $325,000,000.
F-12
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Senior Credit Facility
During 1995, the Company entered into a credit agreement of senior debt
financing through a reducing revolving line of credit and revolver/term loan
(as amended, the "Senior Credit Facility"). Advances under the credit agreement
are limited to a borrowing base, which is based on the Company's cash flows, as
defined in the agreement. The facility comprises a revolving line of credit
under which the Company may make borrowings and repayments until March 31,
2000, at which time the facility will convert into a term loan payable through
December 31, 2005. Advances under the Senior Credit Facility accrued interest
at the Company's option at either LIBOR plus a margin of up to 2.375%, as
defined in the related agreement, or at the greater of the Federal Funds
Effective Rate plus 0.50% or the prime rate, plus a margin of up to 1.375%.
Advances under the Senior Credit Facility bear interest payable in quarterly
installments. In addition, the Company is required to pay commitment fees based
on the unused portion of the commitments and customary facility fees on the
total amount of the commitments.
In December 1998 the Company significantly amended its Senior Credit
Facility to provide $200 million of financing. Advances under the Senior Credit
Facility accrue interest at the Company's option of either LIBOR plus a margin
of up to 3.00%, as defined in the related agreement, or at the greater of the
Federal Funds Effective Rate plus 0.50% or the prime rate, plus a margin of up
to 2.00%. Additionally, certain financial covenants were modified. As a result
of this significant modification, a write-off of the deferred debt costs of
$5.6 million relating to original debt issue costs is reflected in the
accompanying financials statements as an extraordinary item.
The Senior Credit Facility is secured by a lien on substantially all of the
Company's assets and a pledge of substantially all of the Company's capital
stock. 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 shareholders, or
prepay subordinated debt. Under the credit agreement, the Company may not
permit the ratio of senior debt to annualized EBITDA to exceed certain amounts,
as defined in the agreement.
For the years ended December 31, 1996, 1997, and 1998 the Company incurred
commitment fees of approximately $52,000, $192,000, and $210,000, respectively.
Senior Discount Notes
On March 17, 1998, the Company issued $325,000,000 of 10% Senior Discount
Notes with a scheduled maturity in 2008 through a private placement offering to
institutional investors. The Company has the right to redeem the notes on or
after March 15, 2003 at a price 105.0%, 103.3%, 102.6% and 100.0% during the
twelve month periods ending March 15, 2003, 2004, 2005, and 2006 and
thereafter, respectively. In addition, the Company at any time prior to March
15, 2001 may redeem up to 35% of the Senior Discount Notes upon a public equity
offering at a redemption price equal to 110% of the accreted value of the notes
plus unpaid liquidated damages, if any, as of the redemption date. The notes
will accrete interest, representing the amortization of the original issue
discount, at a rate of 10% compounded semi-annually to an amount of
$325,000,000 by March 15, 2003. Thereafter, the notes will pay interest at the
rate of 10% semi annually, payable in arrears on March 15 and September 16.
Amortization of original issue discount for the year ended December 31, 1998
was $16,167,507.
F-13
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ABRY Bridge Loan
In February 1998, the Company entered into an agreement with its principal
stockholder (the "ABRY Bridge Loan"), whereby the Company borrowed $12,500,000
in cash. Amounts outstanding under the Bridge Loan earn interest at the rate of
9% per annum. Interest and principal under the Bridge Loan are payable within
one year from the date of the related borrowing. The Company satisfied the loan
balance in March 1998 in conjunction with the issuance of Senior Discount
Notes, including interest due of $114,041.
During April 1998, the Company borrowed $2.5 million under the ABRY Bridge
Loan to partially fund acquisitions. In September 1998, the Company borrowed
$12,500,000 under the ABRY Bridge Loan to partially finance the MobileMedia
Acquisition. An aggregate amount of $15,000,000 is outstanding under the ABRY
Bridge Loan at December 31, 1998. At December 31, 1998, accrued interest of
$526,438 is included in accrued expenses.
Subordinated Term Loan
On September 22, 1997, the Company entered into a term loan agreement for
$20,000,000, which was subordinated to the Company's Senior Credit Facility.
Borrowings under this agreement accrue interest, at interest rates equal to a
margin amount (as defined in the agreement), plus LIBOR. Additionally, the
Company issued warrants for the Company's Class F Common Stock in connection
with this loan. This loan was repaid in full in March 1998 with proceeds
obtained from the issuance of the Senior Discount Notes. The warrants were
cancelled upon repayment of this loan.
Interest Rate Swap
The Company enters into interest rate swap agreements to manage the interest
rate risk associated with certain of its variable rate debt. The swap
agreements effectively converts the credit agreement floating rate debt from
LIBOR plus a margin, as defined in the agreement, to a fixed rate debt plus the
applicable margin under the credit agreement on an amount equal to the notional
value of the interest rate swap. The Company is exposed to credit losses in the
event of non-performance by counterparties on these agreements, which the
Company does not believe is significant. The following table summarizes the
interest rate swap agreements:
<TABLE>
<CAPTION>
Notional Amount
--------------------------------------------
Fixed
pay rate December 31, 1997 December 31, 1998
-------- ----------------- -----------------
Expiration date
<S> <C> <C> <C>
May 1, 1998..................... 6.22% $20,000,000 $ --
December 24, 1998............... 5.90% 30,000,000 --
June 24, 1999................... 5.14% -- 30,000,000
September 30, 2000.............. 5.75% 20,000,000 20,000,000
May 1, 2001..................... 5.85% -- 50,000,000
</TABLE>
Approximately $28,000, $51,000 and $216,696 of interest expense was incurred
in 1996, 1997 and 1998, respectively, related to the interest rate swap
agreements.
F-14
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Commitments and Contingencies
Operating Leases
The Company is obligated under noncancellable leases for office space,
machinery and equipment and site leases which expire at various times through
2015. The majority of these leases have renewal options which range up to 10
years. Certain of the leases have purchase options at the end of the original
lease term. The future minimum lease commitments under these leases at December
31, 1998 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999........................................................... $ 3,190,114
2000........................................................... 2,752,952
2001........................................................... 2,266,092
2002........................................................... 2,063,840
2003........................................................... 1,713,007
2004 and thereafter............................................ 15,072,586
-----------
Total minimum lease payments................................. $27,058,591
===========
</TABLE>
Total rent expense under noncancellable operating leases was approximately
$468,083, $1,468,323, and $3,623,798 for the years ended December 31, 1996,
1997 and 1998, respectively.
Employment Agreements
The Company has severance agreements with certain officers of the Company
which grant these employees the right to receive their base salary and
continuation of certain benefits for periods ranging from six to eighteen
months in the event of a termination (as defined by the agreement) of such
employees.
Litigation
The Company is not a party to any material legal proceedings other than
routine litigation incidental to its business. In the opinion of management,
the amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
Tenant Leases
The following is a schedule by year of total rentals to be received for site
space under noncancellable lease agreements as of December 31, 1998:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999........................................................... $ 39,155,536
2000........................................................... 35,541,604
2001........................................................... 32,474,747
2002........................................................... 28,766,328
2003........................................................... 21,756,859
2004 and thereafter............................................ 129,193,435
------------
$286,888,509
============
</TABLE>
F-15
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Principally all of the leases provide for renewal at varying escalations.
Leases provided for fixed-rate escalations have been reflected above.
8. Stockholders' Equity
Capital Contribution Commitment
In 1995, the Company and its principal shareholder entered into a capital
contribution agreement whereby the principal shareholder committed to invest up
to $20,000,000 as equity in the Company (the "Capital Contribution Agreement")
and at that time, management contributed $1,200,000. In February 1996, the
Capital Contribution Agreement was amended and the principal shareholder's
equity commitment to the Company was increased to $50,000,000.
As of December 31, 1998, and after giving affect to guaranty of certain
notes payable to former tower owners of $3.9 million, approximately $8.9
million remained outstanding under the Capital Contribution Agreement.
Mandatorily Redeemable Preferred Stock, Preferred Stock and Warrants
On September 30, 1998, in connection with the MobileMedia Acquisition the
Company sold 30,000 shares of newly authorized Series A Senior Preferred Stock
(the "Senior Preferred Stock"). These shares carry a liquidation preference of
$30 million in the aggregate, and were sold with an attached warrant to
purchase 10,000 shares of Class F Common Stock at $.01 per share. 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 Company's option, such
dividends can be paid by the issuance of additional shares of such stock. The
Senior Preferred Stock is redeemable at the Company's option, at liquidation
preference, at any time upon 30 days advance notice. The Senior Preferred Stock
is mandatorily redeemable on September 30, 2008. The warrants (valued using the
Black-Scholes option pricing model) are recorded at fair value of $1,000,000
and 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 18 months after its initial
issuance, 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.
Dividends accrue at a rate of 14% and, at the Company's option, may be paid by
the issuance of additional shares of such stock. The Junior Preferred Stock is
not mandatorily redeemable. In December 1998, the Company sold additional
shares of the Series B Junior Preferred Stock to ABRY/Pinnacle, Inc. with a
liquidation preference of $26.2 million. The Junior Preferred Stock is
redeemable at the Company's option, at liquidation preference, at any time.
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.
Redeemable Common Stock
Class D common stock is convertible into shares of Class C common stock. The
number of shares of Class C common stock issuable upon conversion will be 25%
of the aggregate number of Class A and
F-16
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Class B common stock outstanding at the close of business on the Conversion
date, as defined in the agreement. Such conversion will be effected by the
surrender of the Class D common stock in exchange for the Class C common stock
on a date to be approved by the Board of Directors, or upon consummation of an
initial public offering. Any Class D common stock converted into Class C common
stock will maintain the vesting characteristics such Class D common stock had
prior to the time of conversion.
Shares of Class D Common Stock are held by various officers and employees of
the Company. Vesting of the ownership of these shares is subject to varying
schedules. Certain employees vest into the ownership of the shares at the rate
of 20% per year. Other employees vest according to the following schedule:
<TABLE>
<CAPTION>
Vesting fraction
Anniversary of of shares
the closing date remaining unvested
---------------- ------------------
<S> <C>
First................................................... 1/10
Second.................................................. 1/9
Third................................................... 1/8
Fourth.................................................. 2/7
Fifth................................................... 1/2
Sixth................................................... 1/1
</TABLE>
If certain employees cease to be employed prior to the third anniversary of
the date their respective shares were granted, any vested shares will become
unvested. In the event of an initial public offering or sale of the Company,
all unvested shares for any employee still employed will become vested shares.
In the event of termination of employment, all shares of Class D common stock
are subject to repurchase provisions, as defined below.
If any employee ceases to be employed, then such employee's Class B and
Class D common stock will be subject to repurchase by the Class A stockholders
and the Company. The employee will have the right to require the Company to
purchase any or all Class B and D common stock which are held, if such
employee's termination was with or without cause and any Class D stock if
termination is as a result of death or disability. If the employee is
terminated with or without cause, the repurchase price for Class B common stock
and vested Class D common stock will be fair market value, while the repurchase
price for unvested Class D common stock will be $.001 per share. During 1997,
the Company repurchased 500 shares of Class B common stock from a former
employee. The purchase price approximated $147 per share, resulting in the
determination of a new fair market value of the stock. Accordingly, the Class B
common stock and additional paid in capital accounts have been adjusted to
reflect this increase in fair market value.
The Company's obligation to repurchase the Class D stock in the event of
death or disability of an employee stockholder is limited to the amount of
shares the Company could purchase with the proceeds of the life insurance
policy covering the respective Class D employee stockholder. Additionally, all
repurchases of shares are subject to the applicable restrictions contained in
the Company's debt agreements.
Common Stock
The Company has six classes of authorized common stock: Class A, B, C, D, E
and F. Under the Company's Amended and Restated Certificate of Incorporation,
the relative rights and preferences of each class of common stock are as
follows:
F-17
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Voting Rights
All classes of common stock will vote together as a single combined class on
all matters submitted to a vote of the shareholders, with each holder of Class
A, B, C, E or F common shares being entitled to one vote per share of such
stock held and each holder of Class D common shares being entitled to a number
of votes equal to the number of shares of Class C stock which would be issued
upon conversion of the Class D stock, as described below.
Distributions
The holders of the Class A and B common shares have an initial distribution
preference equal to 15% per annum (the "Yield") based on the initial purchase
price of $100 per share from the date of issuance through June 30, 1997. The
distribution amount related to the Yield was fixed at June 30, 1997 at
approximately $4.8 million. In addition to the Yield, the holders of Class A,
Class B and Class E common stock are entitled to a distribution preference of
$100 per share (the "Preference Amount"), which approximated $38.9 million at
December 31, 1998.
In 1998 the Company paid $412,888 in distributions to the holders of Class B
Common Stock in settlement of a distribution preference on such stock in
connection with the issuance of the senior 10% discount notes (Note 6).
Holders of Class A common stock are entitled to receive their respective
Preference Amounts before any distributions are to be made to any other class
of stock. Similarly, holders of Class E Common stock are entitled to receive
their respective Preference Amount before any distributions are to be made to
the holders of Class B, C, D or F common stock. Once distributions have been
made to Class A and E, holders of Class B common stock will receive their
Preference Amounts. Remaining distributions will be made to all classes of
common stock on the basis of the number of Units (as defined by the Company's
Certificate of Incorporation) assigned to the respective shares.
F-18
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additional stock information is as follows:
<TABLE>
<CAPTION>
December 31
-------------------
1997 1998
-------- ----------
<S> <C> <C>
Preferred Stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized......................................... 100,000 1,000,000
Designated as Series A Senior preferred stock............ -- 145,000
Designated as Series B Junior preferred stock............ -- 100
Shares issued and outstanding:
Series A Senior.......................................... -- 31,383
Series B Junior.......................................... -- 60
Class A common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 202,500 202,500
Shares issued and outstanding............................ 202,500 202,500
Class B common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 12,000 12,000
Shares issued and outstanding............................ 12,000 12,000
Class C common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 200,000 200,000
Shares issued and outstanding............................ -- --
Class D common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 100,000 100,000
Shares issued and outstanding............................ 39,000 40,000
Class E common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 300,000 302,500
Shares issued and outstanding............................ 67,089 174,766
Class F common stock:
Par value per share....................................... $ 0.001 $ 0.001
Shares authorized........................................ 10,000 1,000,000
Shares issued and outstanding............................ -- --
</TABLE>
Stock Incentive Plan
The Pinnacle Holdings, Inc. Stock Incentive Plan (the "Plan") became
effective July 1, 1998. The Plan provides for awards consisting of stock option
and restricted stock grants ("Awards") to employees, non-employee directors,
and other persons who perform services for the Company. The Plan is
administered by a committee consisting of at least two non-employee directors
of the Company (the "Committee")
The maximum number of shares of Common Stock that may be made subject to
Awards granted under the Stock Incentive Plan is approximately 3,000,000. In
the event of any change in capitalization of the Company, however, the
Committee shall adjust the maximum number and class of shares with respect to
which Awards may be granted, the number and class of shares which are subject
to
F-19
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
outstanding Awards may be granted, the number and class of shares which are
subject to outstanding Awards and the purchase price therefor. In addition, if
any Award expires or terminates without having been exercised, the shares of
Common Stock subject the Award again become available for grant under the Stock
Incentive Plan. No shares have been granted at December 31, 1998.
The Committee is authorized to grant to eligible persons incentive stock
options ("ISO") or nonqualified stock options ("NSO"). During any calendar
year, the Committee shall not grant to any eligible person Options to purchase
more than 1,000,000 shares of Common Stock. The term of an ISO cannot exceed 10
years, and the exercise price of any ISO must be equal to or greater than the
fair market value of the shares of Common Stock on the date of the grant. Any
ISO granted to a holder of 10% or more of the combined voting power of the
capital stock of the Company must have an exercise price equal to or greater
than 110% of the fair market value of the Common Stock on the date of grant and
may not have a term exceeding five years from the grant date. The exercise
price and the term of an NSO shall be determined by the Committee on the date
that the NSO is granted.
Options shall become exercisable in whole or in part on the date or dates
specified by the Committee. The Committee, in its sole discretion, may
accelerate the date or dates on which an Option becomes exercisable. Each
Option shall expire on such date or dates as the Committee shall determine at
the time the Option is granted. Upon termination of an Optionee's employment
with the Company (including by reason of the Optionee's death), each
unexercised Option (whether or not then exercisable) shall terminate and be
forfeited, except that any such Options which are then exercisable shall remain
exercisable for such period after termination of the Optionee's employment as
the Committee may have determined at the time the Option was granted. If an
Optionee's employment with the Company is terminated for cause (as defined in
the Stock Incentive Plan), all of such person's Options shall immediately
terminate.
The Committee may also grant to an eligible person an award of Common Stock
subject to future service and such other restrictions and conditions as the
Committee may determine ("Restricted Stock"). The Committee will determine the
terms of such Restricted Stock, including the price, if any, to be paid by the
recipient for the restricted stock, the restrictions placed on the shares and
the time or times when the restrictions will lapse, at the time of the granting
thereof.
9. Related Party Transactions
Certain board members and/or stockholders provide management services to the
Company. The Company pays up to $75,000, plus certain reimbursable costs
incurred on behalf of the Company, each year for such management services. The
Company paid approximately $55,162, $78,166, and $834,192 for such services and
related reimbursable expenses for the years ended December 31, 1996, 1997, and
1998, respectively. At December 31, 1997 and 1998, $29,950 and $ 232,500,
respectively, was due to these related parties for management services and
related reimbursable costs. A balance due from current or former officers of
$200,000 and $16,097 is included in other assets at December 31, 1997 and 1998,
respectively. During 1997, the majority stockholder of the Company guaranteed a
note payable to a tower seller of $3.9 million associated with a tower
acquisition. Also see Note 6 for related party debt and Note 8 for certain
related party equity transactions.
10. Employee Benefit Plan
Effective January 1, 1997, the Company began participating in a 401(k) plan
of the majority stockholder. The plan covers substantially all employees.
Benefits vest based on number of years of
F-20
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
service. To participate in the plan, employees must be at least 21 years old
and have completed six months of service. The Company has not made any
contributions to the plan.
11. Subsequent Events
Acquisitions
Subsequent to December 31, 1998 the Company is party to several letters of
intent with various third parties to purchase 135 sites, reflecting an
aggregate commitment to pay approximately $60.2 million.
F-21
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................ $ 13,801,190 $ 1,276,209
Accounts receivable, net......................... 1,679,390 2,176,233
Prepaid expenses and other current assets........ 1,432,428 1,374,081
------------ ------------
Total current assets......................... 16,913,008 4,826,523
Tower assets, net.................................. 473,942,309 553,888,537
Fixed assets, net.................................. 2,476,666 2,591,363
Land............................................... 14,613,365 15,765,504
Deferred debt issue costs, net..................... 6,686,683 6,501,787
Other assets....................................... 1,516,070 953,542
------------ ------------
$516,148,101 $584,527,256
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................. $ 3,280,809 $ 4,209,825
Accrued expenses................................. 5,761,016 11,443,695
Deferred revenue................................. 1,448,432 2,911,099
Current portion of long-term debt................ 15,692,912 1,002,136
------------ ------------
Total current liabilities.................... 26,183,169 19,566,755
Long-term debt..................................... 417,524,802 352,876,045
Other liabilities.................................. 125,152 183,627
------------ ------------
443,833,123 372,626,427
------------ ------------
Redeemable stock:
Series A senior preferred stock, Class B common
stock, and Class D common stock................. 31,643,338 --
------------ ------------
Stockholders' equity:
Series B junior preferred stock.................. 59,928,980 --
Common stock:
Class A common stock, 202,500 and 0 shares
issued and outstanding at December 31, 1998
and March 31, 1999, respectively.............. 203 --
Class E common stock, 174,766 and 0 shares
issued and outstanding at December 31, 1998
and March 31, 1999, respectively.............. 175 --
Common Stock , $.001 par value, 100,000,000
shares authorized; 0 and 32,026,000 shares
issued and outstanding at December 31, 1998
and March 31, 1999, respectively.............. -- 32,026
Warrants......................................... 1,000,000 --
Additional paid-in capital....................... 33,136,302 276,565,895
Accumulated deficit.............................. (53,394,020) (64,697,092)
------------ ------------
40,671,640 211,900,829
------------ ------------
$516,148,101 $584,527,256
============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
F-22
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1999
----------- ------------
(unaudited) (unaudited)
<S> <C> <C>
Site rental revenue................................. $ 5,372,833 $ 12,008,208
Site operating expenses, excluding depreciation and
amortization....................................... 851,371 2,232,651
----------- ------------
Gross margin, excluding depreciation and
amortization................................... 4,521,462 9,775,557
Other expenses:
General and administrative........................ 419,809 843,464
Corporate development............................. 1,288,807 1,711,283
State franchise, excise and minimum taxes......... 70,424 200,975
Depreciation...................................... 2,950,850 8,994,211
----------- ------------
Loss from operations................................ (208,428) (1,974,376)
Interest expense.................................... 3,102,826 3,900,192
Amortization of original issue discount and debt
issuance costs..................................... 610,471 5,428,504
----------- ------------
Net loss............................................ $(3,921,725) $(11,303,072)
Payable-in-kind preferred dividends and accretion... -- 2,930,338
----------- ------------
Net loss attributable to common shareholders........ $(3,921,725) $(14,233,410)
=========== ============
Basic and diluted loss per common share(a).......... $ (0.43) $ (0.79)
=========== ============
Weighted average number of common shares
outstanding........................................ 9,115,653 18,067,533
=========== ============
</TABLE>
- --------
(a) Basic loss per common share in 1999 and 1998 have been computed based on
the weighted average number of common shares outstanding during the
periods, after giving retroactive effect for the conversion of the
Company's common stock outstanding prior to the Company's initial public
offering in accordance with the recapitalization effected contemporaneously
with the completion of the initial public offering (Note 3).
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
F-23
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series B
Junior Class A Class E
Preferred Stock Common Stock Common Stock Common Stock Additional
------------------- ------------------ ---------------- ---------------- Paid-in
Shares Amount Shares Amount Shares Amount Shares Amount Warrants Capital
------ ----------- ---------- ------- -------- ------ -------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1998............ 60.40 $59,928,980 -- $ -- 202,500 $203 174,766 $175 $1,000,000 $ 33,136,302
Unaudited:
Dividends and
accretion on
Preferred
Stock........... 1.27 1,767,106 (2,930,338)
Issuance of
common stock,
net of issuance
costs, and
conversion (Note
2).............. 32,026,000 32,026 (202,500) (203) (174,766) (175) 290,064,403
Liquidation of
Series A Senior
Preferred
Stock........... (1,000,000)
Liquidation of
Series B Junior
Preferred
Stock........... (61.67) (61,696,086)
Distribution of
contributed
capital and
yield on various
classes of
common stock.... (43,704,472)
Net Loss........
Balance at March
31, 1999........
------ ----------- ---------- ------- -------- ---- -------- ---- ---------- ------------
-- $ -- 32,026,000 $32,026 -- $-- -- $-- $ -- $276,565,895
====== =========== ========== ======= ======== ==== ======== ==== ========== ============
<CAPTION>
Accumulated Stockholders'
Deficit Equity
------------- --------------
<S> <C> <C>
Balance at
December 31,
1998............ $(53,394,020) $ 40,671,640
Unaudited:
Dividends and
accretion on
Preferred
Stock........... (1,163,232)
Issuance of
common stock,
net of issuance
costs, and
conversion (Note
2).............. 290,096,051
Liquidation of
Series A Senior
Preferred
Stock........... (1,000,000)
Liquidation of
Series B Junior
Preferred
Stock........... (61,696,086)
Distribution of
contributed
capital and
yield on various
classes of
common stock.... (43,704,472)
Net Loss........
Balance at March
31, 1999........ (11,303,072) (11,303,072)
------------- --------------
$(64,697,092) $211,900,829
============= ==============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
F-24
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1998 1999
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (3,921,725) $ (11,303,072)
------------- -------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation.................................... 2,950,850 8,994,211
Amortization of original issue discount and
debt issuance costs............................ 610,471 5,428,504
Provision for doubtful accounts................. 30,000 --
(Increase) decrease in:
Accounts receivable, gross..................... (408,193) (487,059)
Prepaid expenses and other current assets...... (1,589,765) 58,347
Other assets................................... 60,736 562,528
Increase (decrease) in:
Accounts payable............................... 2,307,159 929,016
Accrued expenses............................... (203,553) 5,682,679
Deferred revenue............................... 698,038 1,462,667
Other liabilities.............................. (21,721) 58,475
------------- -------------
Total adjustments............................. 4,434,022 22,689,368
------------- -------------
Net cash provided by operating activities.... 512,297 11,386,296
------------- -------------
Cash flows from investing activities:
Payments made in connection with acquisitions:
Tower assets.................................... (96,440,006) (71,020,067)
Land............................................ (4,268,873) (1,152,139)
Capital expenditures:
Tower assets.................................... (10,122,475) (13,134,730)
Fixed assets.................................... (216,188) (350,473)
------------- -------------
Net cash used in investing activities......... (111,047,542) (85,657,409)
------------- -------------
Cash flows from financing activities:
Borrowings under long-term debt, net............ 307,028,824 50,000,000
Repayment of long-term debt..................... (204,023,448) (139,142,790)
Proceeds from issuance of common stock, net..... 9,567,709 288,335,011
Liquidation of PIK preferred stock and
warrants....................................... -- (93,741,617)
Distribution of contributed capital and payment
of accretion on various classes of common
stock.......................................... (412,888) (43,704,472)
------------- -------------
Net cash provided by financing activities.... 112,160,197 61,746,132
------------- -------------
Net increase (decrease) in cash and cash
equivalents..................................... 1,624,952 (12,524,981)
Cash and cash equivalents, beginning of period... 1,693,923 13,801,190
------------- -------------
Cash and cash equivalents, end of period......... $ 3,318,875 $ 1,276,209
============= =============
Supplemental disclosure of cash flows:
Cash paid for interest.......................... $ 4,416,557 $ 4,702,341
============= =============
Non-Cash Transactions:
Seller debt issued in connection with
acquisitions................................... $ -- $ 4,559,650
</TABLE>
The accompanying notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
F-25
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
The accompanying consolidated financial statements reflect the financial
position and results of operations and cash flows of Pinnacle Holdings Inc. and
its wholly owned subsidiaries: Pinnacle Towers Inc., Coverage Plus Antenna
Systems, Inc. and Tower Systems, Inc., collectively referred to as the
"Company". All significant intercompany balances and transactions have been
eliminated. Preparation of the consolidated financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements. Actual results may vary from estimates used.
Results of operations for any interim period are not necessarily indicative
of results of any other periods or for the year. The consolidated statements as
of March 31, 1999 and for the three month periods ended March 31, 1999 and 1998
are unaudited, but in the opinion of management include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of results for such periods. These consolidated financial statements should be
read in conjunction with the Company's financial statements and notes thereto
for the year ended December 31, 1998.
The Company's Consolidated Statements of Operations for the three month
period ended March 31, 1999, reflect all components of Comprehensive Income as
defined by SFAS No. 130, "Reporting Comprehensive Income." Accordingly, no
separate Consolidated Statement of Comprehensive Income is presented as would
otherwise be required.
2. Acquisitions
The Company actively acquires communications sites and related real estate
assets.
On March 4, 1998, the Company completed the acquisition of 201 sites from
Southern Communications Services, Inc. ("Southern Communications"), a
subsidiary of Southern Company. The Company paid $83,500,000 for these towers,
located in Georgia, Alabama, Mississippi, and Florida.
On September 3, 1998, the Company acquired from MobileMedia Corporation
("MobileMedia") and several of its affiliates 166 sites for an aggregate
purchase price of approximately $170 million (the "MobileMedia Acquisition").
MobileMedia assigned its existing tenant leases on the towers to the Company.
The Company entered into a lease (the "Lease") with MobileMedia Communications,
Inc., an affiliate of MobileMedia, providing such affiliate of MobileMedia the
non-exclusive right to install a certain amount of its equipment on the
acquired towers for aggregate rent of $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 sites was
primarily for the exclusive use of MobileMedia and its affiliates. The Company
has integrated these sites into its site rental business and is leasing space
on these sites to other third party wireless communications providers. The
sites are located in the Southeastern United States, Southern California and
New England.
In addition to the Southern Communications and MobileMedia transactions
described above, the Company completed 80 acquisitions of 526 sites and related
assets, all of which were individually insignificant to the Company, from
various sellers during the year ended December 31, 1998 for an aggregate
purchase price of $331,204,262, consisting of $328,789,297 in cash and
$2,414,965 of notes payable to the former tower owners.
During the three months ended March 31, 1999, the Company completed 27
acquisitions of 109 sites and related assets, all of which were individually
insignificant to the Company, from various
F-26
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
sellers for an aggregate purchase price of $58,513,409 consisting of
$53,953,759 in cash and $4,559,650 of notes payable to the former tower owners.
The Company accounts for its acquisitions using the purchase method of
accounting. The results of operations of the acquired assets are included with
those of the Company from the dates of the respective acquisitions. The pro
forma results of operations listed below reflect purchase accounting and pro
forma adjustments as if the transactions occurred as of January 1, 1998. The
unaudited pro forma consolidated financial statements are not necessarily
indicative of the results that would have occurred if the assumed transactions
had occurred on the dates indicated and are not necessarily indicative of the
expected financial position or results of operations in the future.
<TABLE>
<CAPTION>
Pro Forma
--------------------------
March 31, March 31,
1998 1999
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Site rental revenue............................. $ 9,061,275 $ 12,854,268
Gross margin, excluding depreciation............ 7,305,093 10,442,837
Net loss........................................ (14,458,152) (12,355,972)
Net loss attributable to common shareholders.... (14,458,152) (15,286,310)
Net loss per common share....................... (1.59) (0.85)
</TABLE>
3. Initial Public Offering and Stockholders' Equity
On February 19, 1999, the Company completed its initial public offering of
common stock ("the Offering") whereby the Company sold 20,000,000 shares of a
new class of common stock (the "Common Stock"). In addition, on March 19, 1999,
the Underwriters over-allotment options were exercised to the extent that an
additional 2,026,000 shares were sold. The initial price per share was $14,
resulting in net proceeds from the Offering of approximately $288 million.
In connection with the Offering, pursuant to a recapitalization agreement
between the Company, its largest stockholder, ABRY Broadcast Partners II, L.P.
("ABRY II"), and certain members of the Company's management that are
stockholders of the Company, the Company converted all outstanding shares of
each class of the Company's five classes of common stock into shares of the
Common Stock sold in the Offering and paid to the holders of certain of such
classes of common stock preferential amounts and yields. The certificate of
incorporation of the Company was amended immediately prior to the consummation
of the Offering to eliminate the multiple classes of the Company's common stock
and create the now single class of Common Stock, and all of the outstanding
shares of all the classes of common stock of the Company other than Class D
Common Stock were converted into approximately 8,571,309 shares of Common Stock
and all shares of Class D common Stock were converted into approximately
1,428,691 shares of Common Stock.
The holders of the Company's outstanding (prior to the above described
conversion) shares of Class A Common Stock, Class B Common Stock and Class E
Common Stock were collectively paid approximately $38.9 million by the Company
from proceeds of the Offering, which amount equaled the amount of preferences
such shares were entitled to over the other classes of the Company's common
stock pursuant to the Company's certificate of incorporation before giving
effect to the amendment relative to the conversion of those shares as described
above. In addition, the holders of the Company's outstanding (prior to the
above described conversion) shares of Class A Common Stock were collectively
paid approximately $4.8 million by the Company from proceeds of the Offering,
which amount equaled the amount of yield such shares had accrued from the date
of their issuances through June 30, 1997
F-27
<PAGE>
PINNACLE HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
pursuant to the Company's certificate of incorporation before giving effect to
the amendment relative to the conversion of those shares as described above.
Other uses of proceeds from the Offering were: (1) approximately $32.0
redeemed the outstanding shares of the Company's Series A Senior Preferred
Stock (the "Senior Preferred Stock"); (2) approximately $61.7 million redeemed
the outstanding shares of the Company's Series B Junior Preferred Stock (the
"Junior Preferred Stock"); (3) approximately $15.7 million repaid in full and
retired loan from ABRY II; (4) approximately $123.8 million repaid outstanding
borrowings under the Company's Senior Credit Facility (as defined herein); and,
(5) $11.4 was used to fund the closing of pending acquisitions proximate to the
date the funds were available from the Offering.
4. Commitments
As of and subsequent to March 31, 1999, the Company entered into several
letters of intent with various third parties to purchase 35 sites, reflecting
an aggregate commitment to pay approximately $54,345,000, all of which are
subject to consummation of a transaction pending completion of due diligence
efforts and any further negotiation which may result therefrom.
F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Motorola, Inc.:
We have audited the accompanying statements of net assets of the North
American Antenna Sites Business of Motorola, Inc. (Business), as of December
31, 1997 and 1998 and the related statements of operations and changes in net
assets and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility of the
Business' 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.
The accompanying financial statements were prepared on the basis of
presentation described in Note 2. The accompanying financial statements include
allocations for common services provided by Motorola, Inc. and are not
necessarily indicative of the financial position, results of operations, and
cash flows had the Business operated as a stand-alone entity.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets of the Business as of December 31,
1997 and 1998, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1998, on the basis
described in Note 2, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, IL
June 16, 1999
F-29
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF NET ASSETS
December 31, 1997 and 1998 and April 3, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
--------------- April 3,
1997 1998 1999
------- ------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $227, $49, and $234 at
December 31, 1997 and 1998, and April 3, 1999.. $ 3,908 $ 2,892 $ 3,702
Prepaid rent.................................... 4,037 3,606 4,175
------- ------- -------
Total current assets.......................... 7,945 6,498 7,877
Property and equipment, net....................... 41,593 39,533 37,464
Goodwill, net of accumulated amortization of $134,
$138, and $141 at December 31, 1997 and 1998, and
April 3, 1999.................................... 183 574 570
------- ------- -------
Total assets.................................. $49,721 $46,605 $45,911
======= ======= =======
Liabilities and Net Assets
Current liabilities:
Accounts payable................................ $ 1,838 $ 1,717 $ 1,518
Accrued expenses................................ 2,457 1,988 2,187
Deferred revenue................................ 1,786 1,793 4,582
------- ------- -------
Total current liabilities..................... 6,081 5,498 8,287
Net assets........................................ 43,640 41,107 37,624
------- ------- -------
Total liabilities and net assets.............. $49,721 $46,605 $45,911
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Years ended December 31, 1996, 1997, and 1998 and the months
ended March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Years ended December Quarters ended
31, -----------------
------------------------- March 28, April
1996 1997 1998 1998 3, 1999
------- ------- ------- --------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue:
Parent......................... $10,163 $ 8,917 $ 7,563 $ 2,652 $ 1,723
Other parties.................. 78,473 80,182 78,045 19,094 19,365
------- ------- ------- ------- -------
Total net revenue............ 88,636 89,099 85,608 21,746 21,088
Operating expenses:
Direct tower costs............. 50,466 51,553 50,416 12,613 11,995
Selling, general, and
administrative................ 8,194 10,966 11,516 2,750 2,587
Depreciation and amortization.. 9,292 9,271 8,476 2,186 2,185
Allocated costs from the
parent........................ 9,871 6,265 4,168 1,730 718
------- ------- ------- ------- -------
Income before income taxes... 10,813 11,044 11,032 2,467 3,603
Income taxes..................... 4,318 4,398 4,382 978 1,427
------- ------- ------- ------- -------
Net income................... 6,495 6,646 6,650 1,489 2,176
Net assets, beginning of period.. 47,329 43,878 43,640 43,640 41,107
Transfers to Parent.............. (9,946) (6,884) (9,183) (3,630) (5,659)
------- ------- ------- ------- -------
Net assets, end of period........ $43,878 $43,640 $41,107 $41,499 $37,624
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-31
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1997, and 1998 and the quarters
ended March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31, Quarters ended
---------------------------- ------------------
March 28, April 3,
1996 1997 1998 1998 1999
-------- -------- -------- --------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................... $ 6,495 $ 6,646 $ 6,650 $ 1,489 $ 2,176
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization............... 9,292 9,271 8,476 2,186 2,185
Allowance for doubtful
accounts................... (124) 148 (178) (98) 185
Change in assets and
liabilities:
Accounts receivable........ 2,879 (1,358) 1,194 (145) (995)
Prepaid rent............... (766) 479 431 (130) (569)
Accounts payable........... (391) 229 (121) (339) (199)
Accrued expenses and
deferred revenue.......... (843) 391 (463) 2,360 2,989
-------- -------- -------- ------- -------
Net cash provided by
operating activities..... 16,542 15,806 15,989 5,323 5,772
-------- -------- -------- ------- -------
Cash used in investing
activities--capital
expenditures................. (6,596) (8,922) (6,806) (1,693) (113)
-------- -------- -------- ------- -------
Cash used in financing
activities--net cash
transferred to Parent........ (9,946) (6,884) (9,183) (3,630) (5,659)
-------- -------- -------- ------- -------
Cash at beginning and end
of period................ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
(1) Description of Business
The primary function of the North American Antenna Sites Business of
Motorola, Inc. (Business) is the renting, managing, and operating of antenna
and transmitter space on communication towers and provides related services to
and for companies using or providing cellular telephone, personal
communications services, paging, microwave, and specialized mobile radio
services. The Business currently owns, manages, and/or leases approximately
2,000 communication tower sites located in both the United States and Canada.
The Business is wholly-owned by its parent, Motorola, Inc. (Parent).
(2) Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles utilizing the accounting practices and
procedures of its Parent and have been derived from the accounting records of
the Parent. The financial statements include allocations for common services
provided by the Parent and are not necessarily indicative of the financial
position, results of operations, or cash flows had the Business operated as a
stand-alone entity.
The statements of net assets, statements of operations and changes in net
assets, and statements of cash flows as of and for the quarters ended March 28,
1998 and April 3, 1999 are unaudited but include, in the opinion of management
of the Business, all adjustments, consisting only of normal recurring items,
necessary for a fair presentation of such financial statements.
The Business' cash resources are managed under a centralized system wherein
receipts are deposited to the Parent's corporate accounts and disbursements are
centrally funded. Accordingly, cash, income taxes, and other common services or
activities provided by the Parent and related-party transactions are reflected
as a change in the net assets account.
Where it is possible to specifically identify operating costs with the
activities of the Business, these amounts have been charged or credited
directly to the Business without allocation or apportionment.
Expenses for certain common services provided by the Parent, such as cash
management and other treasury services, legal, patent, tax, insurance
administration, payroll administration, corporate accounting, audit, and human
resources have been included in the financial statements. Expenses for common
services provided by the Parent have been allocated to the Business based on a
budget formula that was agreed upon at the beginning of each year. Individual
expense categories are generally allocated on the basis of revenue or other
measures of business unit activity levels.
In management's opinion, the methods employed in allocating the expenses
described above are reasonable. However, the amounts may not represent the
amounts that would have been incurred had these transactions occurred with
third parties at "arm's length".
(3) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-33
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(b) Property and Equipment
Property and equipment is stated at cost. Depreciation of antenna towers and
related equipment is calculated using accelerated and straight-line methods
over the estimated useful lives of the assets, which are five to seven years.
Depreciation of buildings is calculated using accelerated methods over the
estimated useful lives of the assets, which are twenty years. Depreciation of
office equipment is calculated using accelerated and straight-line methods over
the estimated useful lives of the assets, which are three to seven years.
Depreciation of automobiles is calculated using straight-line methods over the
estimated useful lives of the assets, which are two to four years.
Repairs and maintenance are expensed as incurred and betterments are
capitalized.
(c) Goodwill
The excess of cost over fair value of antenna sites acquired is amortized on
a straight-line basis over its estimated useful life of ten years.
(d) Deferred Revenue
Deferred revenue consists of advance site rent payments from customers. The
amount is amortized to revenue when the Business provides the customer with the
site rental service.
(e) Revenue Recognition
Revenues are recognized as tower services are provided. Amounts received
prior to services being performed are deferred until such time as the revenue
is earned.
(f) Income Taxes
The Business represents a business unit of Motorola, Inc. and as such does
not file separate income tax returns. The results of operations are included in
the consolidated tax return of the Parent. The income tax provision included in
the accompanying statements of operations and changes in net assets has been
computed as if the Business were a separate company.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Income taxes are settled
through net transfers to Parent.
(g) Concentration of Customer and Credit Risks
The Business' customers are comprised of wireless communication providers
who rent antenna and transmitter space on the Business' antenna towers.
Financial instruments which potentially subject the Business to concentrations
of credit risk consist principally of accounts receivable. As of December 31,
F-34
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
1997 and 1998, one customer accounted for 11% and 24% of the total accounts
receivable balance, respectively. For the years ended December 31, 1996, 1997,
and 1998, the Parent accounted for 11%, 10%, and 9% of net revenue,
respectively and one other customer accounted for 24%, 21%, and 18% of net
revenue, respectively.
Accounts receivable are generally unsecured; management believes its
allowance for doubtful accounts is adequate to cover any exposure to loss.
(h) Fair Values of Financial Instruments
The Business believes that the carrying amounts of its financial
instruments, consisting of accounts receivable, accounts payable, and accrued
expenses, approximate the fair value of such items due to the short term nature
of these instruments.
(i) Reclassifications
Certain amounts in prior years' financial statements and related notes have
been reclassified to conform to the 1998 presentation. In addition, certain
amounts previously classified as an element of net assets have been
reclassified to property and equipment and prepaid rent to properly reflect the
assets that are specifically identifiable to the Business.
(4) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Antenna towers and related equipment................... $ 107,481 $ 107,313
Buildings.............................................. 32,365 33,620
Land................................................... 5,750 5,822
Office equipment....................................... 2,501 2,420
Automobiles............................................ 1,419 1,407
--------- ---------
149,516 150,582
Less accumulated depreciation.......................... (107,923) (111,049)
--------- ---------
$ 41,593 $ 39,533
========= =========
</TABLE>
F-35
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
(5) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Accrued real estate taxes..................................... $ 200 $ 200
Accrued bonus................................................. 799 --
Accrued vacation.............................................. 172 193
Accrued commissions........................................... 84 132
Accrued rent.................................................. 945 1,221
Accrued other................................................. 257 242
------ ------
$2,457 $1,988
====== ======
</TABLE>
(6) Related-party Transactions
Details with respect to the net transfers from (to) Parent, follow:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash receipts by the Parent on behalf of the
Business.................................... $(90,297) $(87,735) $(86,624)
Cash disbursements by the Parent on behalf of
the Business................................ 76,033 76,453 73,059
Current and deferred income tax liabilities.. 4,318 4,398 4,382
-------- -------- --------
$ (9,946) $ (6,884) $ (9,183)
======== ======== ========
</TABLE>
Employees of the Business are eligible for various benefits under programs
maintained by the Parent. Related liabilities or assets are not included in the
Business' financial statements but rather are reported as an element of net
assets.
The Business engages in transactions with its Parent in the normal course of
its business. These transactions include the renting of antenna tower space and
the allocation of certain expenses.
In management's opinion, the foregoing transactions were consummated based
on amounts agreed upon between the respective parties and are reasonable.
However, these amounts may not represent the amounts that would have been
incurred has these transactions occurred with third parties at "arms-length."
F-36
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
(7) Income Taxes
Income tax expense (benefit) for the years ended December 31, 1996, 1997,
and 1998 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1996:
U.S. Federal..................................... $4,415 $(1,239) $3,176
State and local.................................. 949 (267) 682
Foreign.......................................... 460 -- 460
------ ------- ------
$5,824 $(1,506) $4,318
====== ======= ======
Year ended December 31, 1997:
U.S. Federal..................................... $4,759 $(1,409) $3,350
State and local.................................. 1,023 (303) 720
Foreign.......................................... 328 -- 328
------ ------- ------
$6,110 $(1,712) $4,398
====== ======= ======
Year ended December 31, 1998:
U.S. Federal..................................... $3,069 $ 370 $3,439
State and local.................................. 660 80 740
Foreign.......................................... 203 -- 203
------ ------- ------
$3,932 $ 450 $4,382
====== ======= ======
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate............ $ 3,785 $ 3,866 $ 3,861
Increase in tax expense resulting from:
State and local income taxes, net of Federal
benefit...................................... 444 468 481
Taxes on non-U.S. earnings.................... 89 64 40
-------- -------- --------
$ 4,318 $ 4,398 $ 4,382
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets--liabilities not currently deductible
for tax purposes........................................ $ 944 $ 729
Deferred tax liabilities--property and equipment,
principally due to differences in depreciation.......... (1,850) (2,085)
------- -------
Net deferred tax liability............................. $ (906) $(1,356)
======= =======
</TABLE>
F-37
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the quarters ended
March 28, 1998 (unaudited) and April 3, 1999 (unaudited)
(dollars in thousands)
The foregoing net deferred tax liability has been settled through Transfers
to Parent and is included as a component of net assets at December 31, 1997 and
1998.
(8) Commitments and Contingencies
Leases
Certain antenna sites are leased by the Business under operating leases with
noncancelable lease terms expiring at various dates through 2029. Future
minimum payments under these lease agreements are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ -------
<S> <C>
1999........................................................... $ 6,055
2000........................................................... 5,372
2001........................................................... 4,546
2002........................................................... 3,621
2003........................................................... 3,431
Thereafter..................................................... 15,299
-------
$38,324
=======
</TABLE>
Rent expense for the years ended December 31, 1996, 1997, and 1998 amounted
to $37,319, $38,895, and $38,484, respectively, and is reported in the
statements of operations as an element of direct tower costs.
F-38
<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-39
<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,
respectively).......................... $ 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-40
<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-41
<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-42
<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
activities:
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-43
<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-44
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)
NOTES TO FINANCIAL STATEMENTS--(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-45
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)
NOTES TO FINANCIAL STATEMENTS--(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-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Southern Communications Services, Inc.:
We have audited the accompanying balance sheets of the tower operations (the
"Tower Operations" or "Company") of SOUTHERN COMMUNICATIONS SERVICES, INC. (a
Delaware corporation) as of December 31, 1997 and 1996 and the related
statements of operations, changes in accumulated deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Tower Operations of
Southern Communications Services, Inc. as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 20, 1998
F-47
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Accounts receivable................................. $ 39,459 $ 169,994
Prepaids and other.................................. 117,599 102,942
----------- -----------
Total current assets.............................. 157,058 272,936
----------- -----------
Property and Equipment, at cost:
Tower investment.................................... 40,191,788 38,139,393
Less accumulated depreciation....................... (3,875,184) (1,928,510)
----------- -----------
Net property and equipment........................ 36,316,604 36,210,883
----------- -----------
Total assets...................................... $36,473,662 $36,483,819
=========== ===========
Liabilities and Accumulated Deficit
Current Liabilities:
Accounts Payable.................................... $ 78,342 $ 115,865
Due to Parent......................................... 40,930,277 39,007,286
Commitments and Contingencies
Accumulated Deficit................................... (4,534,957) (2,639,332)
----------- -----------
Total liabilities and accumulated deficit......... $36,473,662 $36,483,819
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues............................................. $ 1,017,305 $ 349,428
Expenses:
Operations......................................... 876,614 748,001
Administrative and General......................... 89,642 54,072
Depreciation....................................... 1,946,674 1,810,282
----------- -----------
Total expenses..................................... 2,912,930 2,612,355
----------- -----------
Net Loss............................................. $(1,895,625) $(2,262,927)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-49
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
STATEMENTS OF CHANGES IN ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<S> <C>
Accumulated Deficit as of December 31, 1995....................... $ (376,405)
Net Loss.......................................................... (2,262,927)
-----------
Accumulated Deficit as of December 31, 1996....................... (2,639,332)
Net Loss.......................................................... (1,895,625)
-----------
Accumulated Deficit as of December 31, 1997....................... $(4,534,957)
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-50
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss........................................... $(1,895,625) $(2,262,927)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation...................................... 1,946,674 1,810,282
Changes in current assets and liabilities:
Decrease (increase) in accounts receivable....... 130,535 (169,994)
Decrease (increase) in prepaids and other........ (14,657) (102,942)
(Decrease) increase in accounts payable.......... (37,523) 115,865
----------- -----------
Total adjustments.............................. 2,025,029 1,653,211
----------- -----------
Net cash provided by (used in) operating activities.. 129,404 (609,716)
----------- -----------
Cash Flow From Investing Activities:
Capital expenditures............................... (2,052,395) (8,657,518)
----------- -----------
Net cash used by investing activities................ (2,052,395) (8,657,518)
Cash Flow From Financing Activities:
Change in Due to Parent............................ 1,922,991 9,267,234
----------- -----------
Net cash provided from financing activities.......... 1,922,991 9,267,234
Increase In Cash..................................... $ 0 $ 0
----------- -----------
Cash at Beginning of Year............................ $ 0 $ 0
=========== ===========
Cash at End of Year.................................. $ 0 $ 0
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-51
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
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 "Company") of Southern
Communications Services, Inc. (the "Parent"), which include the Parent's
business of leasing space on the 201 tower sites that are being acquired by
Pinnacle Towers Inc. ("Pinnacle") (See Note 4) to customers in the broadcast
and wireless communication industries. Tower leasing has been incidental to the
Parent's communications services business, and it has had no concentrated
marketing and sales effort to generate revenues from tower leases.
Tower Operations is not a separate subsidiary, division or segment of the
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 on either revenues or total costs of infrastructure operations,
depending upon the nature of the cost. Management believes this allocation
methodology is reasonable.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Credit Risk
The owned tower site lease receivables potentially subject the business to
credit risk, as collateral is generally not required. The business risk of loss
is limited due to the significant number of leases with affiliated companies
and the superior credit ratings of non-affiliated lessees. The carrying amount
of the Company's receivables approximates fair value.
Property and Equipment
Towers are recorded at cost and include certain capitalized overhead costs
(primarily engineering). Depreciation is computed using the straight-line
method over the estimated useful lives of its towers, which are 20 years.
Long-Lived Assets
The business periodically reviews the values assigned to long-lived assets
to determine whether any impairments are other than temporary. Management
believes that the long-lived assets in the accompanying balance sheets are
appropriately valued.
Income Taxes
The Company is not in itself a taxable entity, and no provision or benefit
for United States federal or state income taxes has been recorded.
F-52
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
The Company 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 straight-line basis
over the noncancelable lease term.
2. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases land for certain tower sites under long-term operating
leases. The majority of these leases contain renewal provisions which generally
require renewals to be exercised at market rates. Rental expense for the years
ended December 31, 1997 and 1996 totaled $228,688 and $195,075, respectively,
and are included in Operations Expense in the accompanying statements of
operations.
Future minimum rental payments required under the operating leases that have
initial or remaining noncancelable lease terms in excess of one year as of
December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 240,320
1999.............................................................. 240,320
2000.............................................................. 218,840
2001.............................................................. 203,544
2002 and thereafter............................................... 854,096
----------
Total............................................................. $1,757,120
==========
</TABLE>
3. RELATED-PARTY TRANSACTIONS
Certain specialized services are performed for the Company by Southern
Company Services, Inc., an affiliate. Services provided include support in
major functional areas, such as engineering, site acquisition, site leasing,
benefits, cash management, legal, risk management, accounting, payroll, and
taxes. These services are provided at cost and totaled $38,994 and $37,054 in
1997 and 1996, respectively.
The Company purchases electrical power and leases land for towers from
affiliated companies. The costs of these services were $117,061 and $112,623 in
1997 and 1996, respectively.
The Company leases space on towers to certain of its affiliates. Revenues
for these sales and services were $371,936 and $169,995 in 1997 and 1996,
respectively.
At December 31, 1997 and December 31, 1996, the Company owed approximately
$26,574 and $71,267, respectively, to its affiliates for amounts due under the
agreements discussed above.
F-53
<PAGE>
SOUTHERN COMMUNICATIONS SERVICES, INC.
TOWER OPERATIONS
(A carve-out entity of Southern Communications Services, Inc.)
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. SALE AND LEASEBACK OF TOWER ASSETS
On January 9, 1998, the Parent entered into a definitive agreement to sell
201 towers and 90 parcels of land to Pinnacle for a purchase price of
$83,500,000 and received $6,000,000 from Pinnacle as a nonrefundable deposit
for the transaction. The transaction also includes the assignment of leases and
related lease payments for 111 land leases related to towers included in the
sale. The transaction is expected to close on March 4, 1998. The sale price
will be adjusted proportionately to the average price per tower site if the
Parent or Pinnacle elect not to include certain sites in the transaction for
certain casualty, title, or lease defects.
In connection with the transaction, the Parent and Pinnacle have entered
into a lease agreement in which the Parent will lease space on each tower
included in the transaction for a period of 10 years at a cost of $1,500 per
month per site. Five five-year option periods are included in the lease
agreement.
The Parent and Pinnacle have also entered into an option agreement, in which
at the sole option of the Parent, Pinnacle may be used to construct up to 80
additional towers for the purpose of permitting the Parent to place thereon
communications antenna and related equipment.
F-54
<PAGE>
[LOGO]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You may rely only on the information contained in this Prospectus. We have not
authorized anyone to provide information different from that contained in this
Prospectus. Neither the delivery of this Prospectus nor sale of common stock
means that information contained in this Prospectus is correct after the date
of this Prospectus. This Prospectus is not an offer to sell or solicitation of
an offer to buy these shares of common stock in any circumstances under which
the offer or solicitation is unlawful.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary..................................................................
The Offering.............................................................
Summary Pro Forma Consolidated Financial Information.....................
Risk Factors.............................................................
Disclosure Regarding Forward-Looking Statements..........................
Use of Proceeds..........................................................
Dilution and Dividend Policy.............................................
Price Range of Common Stock..............................................
Capitalization...........................................................
Unaudited Pro Forma Financial Data.......................................
Selected Historical Consolidated Financial Data..........................
Management's Discussion and Analysis of Financial Condition and Results
of Operation............................................................
Business.................................................................
Management...............................................................
Principal Stockholders...................................................
Description of Indebtedness..............................................
Description of Capital Stock.............................................
Shares Eligible for Future Sale..........................................
Certain Federal Income Tax Considerations................................
Underwriting.............................................................
Legal Matters............................................................
Experts..................................................................
Where You Can Find More Information......................................
Incorporation of Certain Documents by Reference..........................
Index to Financial Statements............................................
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10,700,000 Shares
[LOGO]
Pinnacle Holdings Inc.
Common Stock
----------------
PROSPECTUS
----------------
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Salomon Smith Barney
Raymond James & Associates, Inc.
Banc of America Securities LLC
June 22, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. All
such fees and expenses shall be borne by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 64,140
NASD filing fee.................................................. $ 17,500
Nasdaq listing fee............................................... $ +
Printing and engraving expenses.................................. $
Accounting fees and expenses..................................... $
Legal fees and expenses.......................................... $
Blue Sky fees and expenses....................................... $
Transfer Agent's fees and expenses............................... $
Miscellaneous.................................................... $
----------
Total.......................................................... $1,000,000
==========
</TABLE>
- --------
* Estimated
+ To be filed by amendment.
Item 15. Indemnification of Directors and Officers
Pinnacle'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. Pinnacle's Certificate of
Incorporation and Bylaws also contain provisions making indemnification of its
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. The Company
intends to obtain directors' and officers' liability insurance, consistent with
the provisions of the Delaware General Corporation Law, to protect directors
and officers from liabilities under various laws, including the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.0 U.S. Underwriting Agreement
[1.1 International Underwriting Agreement]
</TABLE>
II-1
<PAGE>
<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*
4.2 Exchange and Registration Rights Agreement dated as of March 20,
1998 by and among the Company and each of the Purchasers referred
to therein*
4.3 Specimen Stock Certificate**
4.4 Registration Agreement**
4.5 Recapitalization Agreement**
5.1 Opinion of Holland & Knight LLP+
8.1 Opinion of Holland & Knight LLP**
10.1 Second Amended and Restated Credit Agreement dated February 26,
1998.
10.2 First Amendment to Second Amended and Restated Credit Agreement
dated March 17, 1998*
10.3 Third Amended and Restated Credit Agreement dated May 29, 1998*
10.4 First Amendment to Third Amended and Restated Credit Agreement**
10.5 Second Amendment to Third Amended and Restated Credit Agreement**
10.6 Third Amendment to Third Amended and Restated Credit Agreement**
10.7 Fourth Amendment and Restated Credit Agreement, dated June 25,
1999
10.8 Form of Purchase and Sale Agreement dated January 9, 1998 by and
among PTI and Southern Communications*
10.9 Form of Southern Communications Master Site Lease Agreement by and
among PTI and Southern Communications*
10.10 Form of Option to Direct Construction or Acquisition of Additional
Tower Facilities by and among PTI and Southern Communications*
10.11 Form of Exchange Agreement by and among PTI and Southern
Communications**
10.12 Form of Lease Agreement--Non-Restricted Premises*
10.13 Form of Lease Agreement--Restricted Premises*
10.14 Form of Master Antenna Site Lease by and among PTI and Teletouch
Communications, Inc.*
10.15 Contract of Sale by and among PTI and Teletouch Communications,
Inc. and First Amendment to Contract of Sale*
10.16 Executive Employment Agreement between the Company and Robert
Wolsey dated May 3, 1995*
10.17 Executive Employment Agreement between the Company and Steven Day
dated February 17, 1997*
10.18 Executive Employment Agreement between the Company and James
Dell'Apa dated May 3, 1995*
10.19 Subscription Agreement dated December 31, 1995 by and among ABRY
II and PTI*
10.20 Second Amended and Restated Subscription and Stockholders
Agreement dated May 16, 1996 by and among PTI, the Company and
certain stockholders*
10.21 Capital Contribution Agreement dated February 26, 1998*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.22 Convertible Promissory Note due 1998 dated February 11, 1998 by
and among the Company and ABRY II*
10.23 Services and Agreement by and among PTI and PTI II*
10.24 Amended Capital Contribution Agreement dated May 29, 1998*
10.25 Purchase Agreement dated as of July 7, 1998 among MobileMedia, its
affiliates and the Company**
10.26 Amendment to Purchase Agreement dated September 2, 1998 between
PTI and MobileMedia and certain of its affiliates**
10.27 Form of Master Lease Transmitter Systems Space between the Company
and MobileMedia Communications, Inc.**
10.28 Form of Management and Consulting Services Agreement dated as of
April 1995 between Pinnacle Towers Inc. and ABRY**
10.29 Stock Incentive Plan**
10.30 First Amendment to Capital Contribution Agreement**
10.31 Agreement for Purchase and Sale of Assets between PTI and
Motorola, Inc., dated June 25, 1999.
21.1 List of Subsidiaries*
23.1 Consent of Holland & Knight LLP (contained in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, independent certified
public accountants
23.3 Consent of Arthur Andersen LLP, independent public accountants
23.4 Consent of Ernst & Young LLP, independent public accountants
23.5 Consent of KPMG LLP, independent public accountants
24.1 Powers of Attorney (included on signature pages of Registration
Statement)
</TABLE>
- --------
+ To be filed by amendment.
* Incorporated by reference to the Company's Registration Statement on Form S-
4 (SEC file no. 333-49147), as amended, filed with the Securities and
Exchange Commission on April 1, 1998.
** Incorporated by reference to the Company's Registration Statement on Form S-
11 (SEC file no. 333-59297), as amended, filed with the Securities and
Exchange Commission on July 17, 1998.
*** Incorporated by reference to the Company's Report on Form 8-K filed with
the Securities and Exchange Commission on July 17, 1998.
II-3
<PAGE>
Item 17. Undertakings
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 described in Item 34, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
PINNACLE HOLDINGS INC., a Delaware corporation, has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Sarasota, State of Florida, on , 1999.
Pinnacle Holdings Inc.
By: _________________________________
Steven Day
Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of Pinnacle Holdings Inc.
(the "Company"), a Delaware corporation, for himself and not for one another,
does hereby constitute and appoint Robert Wolsey and Steven Day, and each and
any of them and their substitutes, a true and lawful attorney in their name,
place and stead, in any and all capacities, to sign their name to any and all
amendments to this registration statement, including post-effective amendments,
and any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) of the Securities Act, and to cause the same to be filed with the
Securities and Exchange Commission, granting unto said attorneys and each of
them full power of substitution and full power and authority to do and perform
any act and thing necessary and proper to be done in the premises, as fully to
all intents and purposes as the undersigned could do if personally present, and
each of the undersigned for himself hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
______________________________________ Chief Executive Officer, , 1999
Robert Wolsey President, Chief Operating
Officer and Director
______________________________________ Vice President, Chief , 1999
Steven Day Financial Officer,
Secretary and Director
______________________________________ Executive Vice President , 1999
James Dell'Apa and Director
______________________________________ Director , 1999
Andrew Banks
______________________________________ Director , 1999
Peni Garber
______________________________________ Director , 1999
Peggy Koenig
______________________________________ Director , 1999
Royce Yudkoff
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.0 U.S. Underwriting Agreement
1.1 International Underwriting Agreement
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*
4.2 Exchange and Registration Rights Agreement dated as of March 20,
1998 by and among the Company and each of the Purchasers referred
to therein*
4.3 Specimen Stock Certificate**
4.4 Registration Agreement**
4.5 Recapitalization Agreement**
5.1 Opinion of Holland & Knight LLP+
8.1 Opinion of Holland & Knight LLP**
10.1 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.*
10.2 First Amendment to Second Amended and Restated Credit Agreement
dated March 17, 1998*
10.3 Third Amended and Restated Credit Agreement dated May 29, 1998*
10.4 First Amendment to Third Amended and Restated Credit Agreement**
10.5 Second Amendment to Third Amended and Restated Credit Agreement**
10.6 Third Amendment to Third Amended and Restated Credit Agreement**
10.7 Fourth Amendment and Prestated Credit Agreement, dated June 25,
1999
10.8 Form of Purchase and Sale Agreement dated January 9, 1998 by and
among PTI and Southern Communications*
10.9 Form of Southern Communications Master Site Lease Agreement by and
among PTI and Southern Communications*
10.10 Form of Option to Direct Construction or Acquisition of Additional
Tower Facilities by and among PTI and Southern Communications*
10.11 Form of Exchange Agreement by and among PTI and Southern
Communications**
10.12 Form of Lease Agreement--Non-Restricted Premises*
10.13 Form of Lease Agreement--Restricted Premises*
10.14 Form of Master Antenna Site Lease by and among PTI and Teletouch
Communications, Inc.*
10.15 Contract of Sale by and among PTI and Teletouch Communications,
Inc. and First Amendment to Contract of Sale*
10.16 Executive Employment Agreement between the Company and Robert
Wolsey dated May 3, 1995*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.17 Executive Employment Agreement between the Company and Steven Day
dated February 17, 1997*
10.18 Executive Employment Agreement between the Company and James
Dell'Apa dated May 3, 1995*
10.19 Subscription Agreement dated December 31, 1995 by and among ABRY
II and PTI*
10.20 Second Amended and Restated Subscription and Stockholders
Agreement dated May 16, 1996 by and among PTI, the Company and
certain stockholders*
10.21 Capital Contribution Agreement dated February 26, 1998*
10.22 Convertible Promissory Note due 1998 dated February 11, 1998 by
and among the Company and ABRY II*
10.23 Services and Agreement by and among PTI and PTI II*
10.24 Amended Capital Contribution Agreement dated May 29, 1998*
10.25 Purchase Agreement dated as of July 7, 1998 among MobileMedia, its
affiliates and the Company**
10.26 Amendment to Purchase Agreement dated September 2, 1998 between
PTI and MobileMedia and certain of its affiliates**
10.27 Form of Master Lease Transmitter Systems Space between the Company
and MobileMedia Communications, Inc.**
10.28 Form of Management and Consulting Services Agreement dated as of
April 1995 between Pinnacle Towers Inc. and ABRY**
10.29 Stock Incentive Plan**
10.30 First Amendment to Capital Contribution Agreement**
10.31 Agreement for Purchase and Sale of Assets between PTI and
Motorola, Inc., dated June 25, 1999
21.1 List of Subsidiaries*
23.1 Consent of Holland & Knight LLP (contained in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, independent certified
public accountants
23.3 Consent of Arthur Andersen LLP, independent public accountants
23.4 Consent of Ernst & Young LLP, independent public accountants
23.5 Consent of KPMG LLP, independent public accountants
24.1 Powers of Attorney (included on signature pages of Registration
Statement)
</TABLE>
- --------
+ To be filed by amendment.
* Incorporated by reference to the Company's Registration Statement on Form
S-4 (SEC file no. 333-49147), as amended, filed with the Securities and
Exchange Commission on April 1, 1998.
** Incorporated by reference to the Company's Registration Statement on Form
S-11 (SEC file no. 333-59297), as amended, filed with the Securities and
Exchange Commission on July 17, 1998.
*** Incorporated by reference to the Company's Report on Form 8-K filed with
the Securities and Exchange Commission on July 17, 1998.
2
<PAGE>
PINNACLE HOLDINGS INC.
COMMON STOCK
______________________
U.S. UNDERWRITING AGREEMENT
______________________
July , 1999
Deutsche Bank Securities Inc.,
Salomon Smith Barney Inc.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Bank of America Securities LLC
Raymond James & Associates, Inc.
As representatives of the
several Underwriters named in
Schedule I hereto,
c/o Deutsche Bank Securities Inc.
1 South Street,
Baltimore, MD 21202
Ladies and Gentlemen:
Pinnacle Holdings Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule II hereto (the "Underwriters") an aggregate of
shares (the "Firm Shares") and, at the election of the Underwriters, up to
additional shares (the "Optional Shares") of Common Stock, par value $.001 per
share ("Stock"), of the Company, and the selling stockholders named in
Schedule I hereto (the "Selling Stockholders"), severally, propose, subject
to the terms and conditions stated herein, to sell to the Underwriters an
aggregate of Firm Shares in the respective amounts set forth in
Schedule I (the Firm Shares and the Optional Shares that the Underwriters
elect to purchase pursuant to Section 3 hereof being collectively called the
"Shares").
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the
<PAGE>
"International Underwriting Agreement") providing for the sale by the Company of
up to a total of shares of Stock (the "International Shares"), including
the overallotment option thereunder, through arrangements with certain
underwriters outside the United States and Canada (the "International
Underwriters"), for whom Deutsche Bank AG London, Salomon Brothers International
Limited, Merrill Lynch International, Raymond James & Associates, Inc., Bank of
America International Limited are acting as lead managers. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Agreement are hereby expressly made conditional
on one another. The Underwriters hereunder and the International Underwriters
are simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") provides, among
other things, for the transfer of shares of Stock between the two syndicates.
Two forms of prospectus are to be used in connection with the offering and sale
of shares of Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the International Shares. The latter form of
prospectus will be identical to the former except for certain substitute pages
as included in the registration statement and amendments thereto as mentioned
below. Except as the context may otherwise require, references hereinafter to
the Shares shall include all the shares of Stock that may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
It also is understood that the Company has entered into an agreement (the
"Acquisition Agreement") to acquire (the "Acquisition") certain assets from
Motorola, Inc. Although the Acquisition is not a condition to the offering of
the Shares contemplated by this Agreement, the Acquisition may be paid for, in
part, with proceeds from the issuance and sale by the Company of the Shares.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333- ) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you,
-2-
<PAGE>
and, excluding exhibits thereto, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Preliminary Prospectus"; the various
parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; the Company meets all of the
requirements for filing on Form S-3; and all references in this Agreement
to amendments or supplements to the Registration Statement, the Preliminary
Prospectus or the Prospectus shall be deemed to mean and include the filing
of any document under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), that is or is deemed to be incorporated by reference therein.
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material
-3-
<PAGE>
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Deutsche Bank Securities Inc. ("Deutsche Bank")
expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Deutsche Bank expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and indefeasible title
to, or a valid leasehold interest in,
-4-
<PAGE>
all of their material assets, except as is described in the Prospectus or
where the failure thereof would not reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
business or property of the Company and its subsidiaries on a consolidated
basis (a "Material Adverse Effect");
(f) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware; each of the Company 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 as described
in the Prospectus. Each of the Company 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 reasonably be expected to have a Material
Adverse Effect;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and nonassessable and (except for directors' qualifying
shares and as described in the Prospectus) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims;
(h) The unissued shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued and fully paid and
nonassessable and will conform to the description of the Stock contained in
the Prospectus;
(i) The issue and sale of the Shares by the Company hereunder and
under the International Underwriting Agreement and the compliance by the
Company with all of the provisions of this Agreement and the International
Under-
-5-
<PAGE>
writing Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, except for any such conflicts, breaches or
violations that, individually or in the aggregate, would not have a
Material Adverse Effect, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(j) The Company and its subsidiaries are in compliance in all
material respects with all of the provisions of their respective
certificate 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, a default by the Company or any
of its subsidiaries under any indenture, agreement or other instrument, or
any judgment, decree or order to which the Company or any of its
subsidiaries is a party or by which they or any of their properties is
bound which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain Federal
Income Tax Con-
-6-
<PAGE>
siderations", and under the caption "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(l) Other than as set forth in the Prospectus, there is no action,
suit, proceeding or any other litigation pending or, to the best of the
Company's knowledge, threatened against the Company or any of its
subsidiaries, or in any other manner relating directly and materially
adverse to the Company, 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 which would reasonably be expected to have a
Material Adverse Effect;
(m) All licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals,
grants of rights by, or filings or registrations with, any federal, state,
local or foreign court or governmental or public body, authority, or other
instrumentality or third person (including without limitation the Federal
Communications Commission (the "FCC") and the Federal Aviation Authority
(the "FAA") (any of the foregoing a "License") necessary for the Company
and its subsidiaries to own, build, maintain or operate their businesses or
properties have been duly authorized and obtained, are in full force and
effect except where the failure to be so obtained or in effect would not,
individually or in the aggregate, have a Material Adverse Effect; and the
Company and its subsidiaries are and will continue to be in compliance in
all material respects with all provisions thereof; no event has occurred
which permits (or with the passage of time would permit) the revocation or
termination of any License, or which could result in the imposition of any
restriction thereon, which is of such a nature or the effect of which would
reasonably be expected to have a Material Adverse Effect; no material
License is the subject of any pending or, to the best of the Company's
knowledge, threatened challenge or revocation which, if such License were
revoked, would reasonably be expected to have a Material Adverse Effect;
the Company 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 Agree-
-7-
<PAGE>
ment, the Shares, or the performance thereof, in accordance with their
respective terms;
(n) The Company and its subsidiaries are in compliance in all
material respects with all applicable laws; the Company 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
of 1934, as amended, and the rules and regulations promulgated thereunder,
and are in all material respects in compliance therewith, including without
limitation the rules and regulations of the FCC and FAA; the Company 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 would reasonably be expected to have a
Material Adverse Effect;
(o) The Company is not required to register under the provisions of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"). Neither the entering into or performance by the Company of this
Agreement nor the offering and sale of the Shares violates any provision of
such act or requires any consent, approval, or authorization of, or
registration with, the Commission or any other governmental or public body
of authority pursuant to any provisions of such act;
(p) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Company is organized in conformity with the requirements for
qualification as a real estate investment trust under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"), and its
proposed method of operation as described in the Prospectus will enable it
to continue to maintain the requirements for taxation as a real estate
investment trust under the Code;
(r) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which
the business or operations of the Company or any of its subsidiaries will
-8-
<PAGE>
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss
or interference with the Company's business or operations. The "Year 2000
Problem" as used herein means any significant risk that computer hardware
or software used in the receipt, transmission, processing, manipulation,
storage, retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in the
case of dates or time periods occurring after December 31, 1999, function
at least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000; and
(s) The representations and warranties of the Company and, to the
best of its knowledge of the Company after due inquiry, each of the
representations and warranties of Motorola, Inc. contained in the
Acquisition Agreement are true and correct in all material respects on the
date hereof; the Company has no reasonable basis to believe that the
transactions contemplated by the Acquisition Agreement will not be
consummated in accordance with its terms.
2. Representations and Warranties of the Selling Stockholders. Each
----------------------------------------------------------
Selling Stockholder listed on Schedule I severally represents and warrants to
each Underwriter and the Company that:
(a) Such Selling Stockholder has full right, power and authority to
enter into this Agreement and to sell, assign, transfer and deliver the
Firm Shares to be sold by such Selling Stockholder hereunder. This
Agreement and the Power of Attorney attached hereto as Exhibit A have been
duly executed and delivered by such Selling Stockholder.
(b) Such Selling Stockholder will convey good and valid title to the
Stock to be delivered by such Selling Stockholder hereunder, free and clear
of all liens, encumbrances, equities and claims whatsoever. Certificates in
negotiable form for the aggregate number of Shares to be sold by such
Selling Stockholder have been placed in custody, under a custody agreement
with the Company as custodian in the form attached hereto as Exhibit B.
-9-
<PAGE>
(c) The information with respect to such Selling Stockholder included
in the Registration Statement and the Prospectus under the caption
"Principal and Selling Stockholders" and "Underwriting" does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such
Selling Stockholder of the transaction contemplated herein, except such as
may have been obtained under the Act or otherwise and such as may be
required under state securities or the "Blue Sky" laws.
(e) The performance of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms and provisions of or constitute a
default under or result in the creation or imposition of any lien, charge,
or encumbrance upon the assets or properties of such Selling Stockholder,
pursuant to any indenture, mortgage, deed or trust, loan agreement or other
agreement or instrument to which such Selling Stockholder is a party or
under and statute or under any order, rule or regulation applicable to such
Selling Stockholder or of any court or other governmental body.
(f) To the extent that any statement or omission in the Registration
Statement, the Prospectus or any post-effective amendment or supplement
thereto is made in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for use
therein, the Registration Statement, the Prospectus and all post-effective
amendments and supplements thereto will (when they become effective or are
filed with the Commission, as the case may be) conform in all material
respects to the requirements of the Act and the rules and regulations
promulgated thereunder and not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
3. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell, and the Selling Stockholders agrees, severally and not
jointly, to sell, to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and
-10-
<PAGE>
each of the Selling Stockholders, at a purchase price per share of $ , the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II hereto and (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Shares as provided below, the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
4. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Deutsche Bank may request upon at least forty-eight hours' prior notice
to the Company and the Selling Stockholders, shall be delivered by or on behalf
of the Company and the Selling Stockholders to Deutsche Bank, for the account of
such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
-11-
<PAGE>
account specified by the Company or such Selling Stockholder, as the case may
be, to Deutsche Bank at least forty-eight hours in advance. The Company will
cause the certificates representing the Shares to be made available for checking
and packaging at least twenty-four hours prior to the Time of Delivery (as
defined below) with respect thereto at the office of Deutsche Bank, 1 South
Street, Baltimore, Maryland 21202 (the "Designated Office"). The time and date
of such delivery and payment shall be, with respect to the Firm Shares, 9:30
a.m., New York City time, on , 1999 or such other time and date as
Deutsche Bank and the Company may agree upon in writing, and, with respect to
the Optional Shares, 9:30 a.m., New York time, on the date specified by Deutsche
Bank in the written notice given by Deutsche Bank of the Underwriters' election
to purchase such Optional Shares, or such other time and date as Deutsche Bank
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 9 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 9(k) hereof, will be delivered at the
offices of Cahill Gordon & Reindel, 80 Pine Street., New York, NY 10005
(the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at
the Closing Location at 2:00 p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable,
-12-
<PAGE>
such earlier time as may be required by Rule 430A(a)(3) under the Act; to
make no further amendment or any supplement to the Registration Statement
or Prospectus prior to the last Time of Delivery which shall be disapproved
by you promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M. New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary
-13-
<PAGE>
in order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such
period to amend or supplement the Prospectus in order to comply with the
Act, to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many copies
as you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Shares at
any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its stockholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus (the
"Lock-up Period"), not to offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar securities
(other than pursuant to employee stock option plans existing on, or upon
the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders equity and cash flows of the Company and
its
-14-
<PAGE>
consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), to make available to its
stockholders consolidated summary financial information of the Company and
its subsidiaries for such quarter in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("Nasdaq National Market"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
7. Covenants of Selling Stockholders. Each Selling Stockholder agrees
---------------------------------
with the several Underwriters as follows:
-15-
<PAGE>
(a) Such Selling Stockholder will cooperate to the extent necessary
to cause the Registration Statement or any post-effective amendment thereto
to become effective at the earliest possible time.
(b) Such Selling Stockholder will use such Selling Stockholder's
reasonable best efforts to do or perform all things required to be done or
performed by it prior to the Closing Date to satisfy all conditions
precedent to the delivery of the Shares.
(c) Except for the sale of Shares, such Selling Stockholder will not
offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any interests therein, or any
securities convertible into, or exchangeable for, shares of Stock or rights
to acquire the same, prior to the expiration of the Lock-up Period without
the prior written consent of the Underwriters.
(d) Such Selling Stockholder will not take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares in violation of the 1934 Act or
any applicable rules of the Nasdaq National Market.
(e) Each Selling Stockholder agrees to notify the Underwriters
promptly of any information that comes to such Selling Stockholder's
attention that would cause such Selling Stockholder to have reason to
believe that his or its representations, warranties and statements in this
Agreement are not accurate in all material respects.
(f) Except as herein contemplated with respect to the Shares to be
included in the Registration Statement, each Selling Stockholder agrees to
waive any registration rights to which such Selling Stockholder may be
entitled in connection with the public offering herein contemplated.
8. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Regis-
-16-
<PAGE>
tration Statement, any Preliminary Prospectus and the Prospectus and amendments
and supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, the International Underwriting Agreement,
the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 6(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the Nasdaq
National Market; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder that are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 10 and 13 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make. Each Selling
Stockholder shall pay the costs and expenses incident to the performance by it
of its obligations hereunder and in connection with the offer, sale and delivery
of the Shares to be sold by it, including any stock transfer taxes payable upon
the sale of the Shares to the Underwriters, the fees and expenses of any counsel
retained by it and the underwriting discounts and communications payable to the
Underwriters.
9. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
-17-
<PAGE>
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Cahill Gordon & Reindel, counsel for the Underwriters, shall
have furnished to you such written opinion or opinions dated such Time of
Delivery, with respect to the Shares, this Agreement, the Registration
Statement and the Prospectus as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
(c) Holland & Knight LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company is a corporation incorporated and validly
existing as a corporation in good standing under the Laws of the
State of Delaware. The Company has the requisite corporate power and
authority to own the properties and conduct its business as now
conducted as described in the Prospectus;
(ii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business as now conducted as described in
the Prospectus so as to require such qualifications, except where the
failure to so qualify would not individually or in the aggregate have
a Material Adverse Effect;
-18-
<PAGE>
(iii) Pinnacle Towers Inc. is a corporation incorporated and
validly existing as a corporation in good standing under the laws of
Delaware;
(iv) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and nonassessable; and the Shares conform to the
description of the Stock contained in the Prospectus.
(v) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder and under the International
Underwriting Agreement have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein
and in the International Underwriting Agreement, will be duly and
validly issued and fully paid and non-assessable and will conform to
the description of the Stock contained in the Prospectus;
(vi) To the knowledge of such counsel, the issue and sale of the
Shares by the Company hereunder and under the International
Underwriting Agreement and the compliance by the Company with all of
the provisions of this Agreement and the International Underwriting
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, except for any
such conflicts, breaches or violations that, individually or in the
aggregate, would not have a Material Adverse Effect, nor will such
action result in any violation of the provisions of the Certificate
of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or
any of their properties;
-19-
<PAGE>
(vii) To such counsel's knowledge and other than as set forth
in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is
subject which, if determined adversely to the Company or any of its
subsidiaries, would have a Material Adverse Effect; and to such
counsel's knowledge, no such proceedings are threatened by
governmental authorities or others;
(viii) To such counsel's knowledge, no consent, approval,
authorization, license, qualification, exemption or order of or with
any court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the
Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the International Underwriters;
(ix) To such counsel's knowledge, all material Licenses
necessary for the Company and its subsidiaries to own, build,
maintain or operate their businesses or properties as now conducted
as described in the Prospectus have been duly authorized and obtained
and are in full force and effect;
(x) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption
"Certain Federal Income Tax Considerations", and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete
and fair;
(xii) The Company is not an "investment company," as such term
is defined in the Investment Company Act;
-20-
<PAGE>
(xiii) Each document filed pursuant to the Securities Exchange
Act of 1934, as amended (the "1934 Act") (other than the financial
statements and supporting schedules included therein, as to which no
opinion need be rendered), and incorporated or deemed to be
incorporated by reference in the Prospectus complied when so filed as
to form in all material respects with the 1934 Act and the
regulations promulgated thereunder; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder,
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred
to in the opinion in subsection (xi) of this Section 9(c); they have
no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration Statement
or the Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to
-21-
<PAGE>
state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents
of a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement
or the Prospectus which are not filed or described as required.
In rendering such opinion, such counsel may state that they express
no opinion as to the laws of any jurisdiction outside the United States.
(d) The Selling Stockholders shall have furnished to you the opinion
of [ ], counsel for the Selling Stockholders, or of such
other counsel to the Selling Stockholders as shall be satisfactory to
Cahill Gordon & Reindel, counsel for the Underwriters, dated such Time of
Delivery, to the effect that:
(i) This Agreement has been duly executed and delivered by the
Selling Stockholders.
(ii) Each Selling Stockholder has the power and authority to
sell, transfer and deliver in the manner provided in this Agreement
the Shares being sold by such Selling Stockholders hereunder.
(iii) The delivery by the Selling Stockholders to the several
Underwriters of certificates for the Shares being sold hereunder by
the Selling Stockholders against payment therefor as provided herein,
assuming the Underwriters purchased the Shares in good faith without
knowledge of any adverse claim, will pass good and valid title to
such Shares to the several Underwriters, free and clear of all liens,
encumbrances, equities and claims whatsoever.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP and [ ] shall have furnished to you a comfort
letter or letters, dated the respective dates of delivery thereof, in form
-22-
<PAGE>
and substance satisfactory to you and each of KPMG LLP, Ernst & Young LLP
and Arthur Andersen LLP shall have furnished to you a comfort letter, dated
the date of the Prospectus, in form and substance satisfactory to you;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any Loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any Labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the Underwriters so
material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and ii) no such organization shall have publicly announced that it
has under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(h) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market; (ii) a suspension or material limitation in trading in the
Company's securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; or (iv) the outbreak or escalation of
hostilities involving
-23-
<PAGE>
the United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this clause
(iv) in the judgment of the Underwriters makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been
duty listed for quotation on National Market;
(j) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the directors and executive
officers and ARBY II substantially to the effect set forth in Subsection
6(e) hereof in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(l) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
you may reasonably request;
(m) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct in all
material respects on and as of the date hereof and on and as of such Time
of Delivery as if made on and as of such date, and you shall have received
certificates, dated as of such Time of Delivery and signed by or on behalf
of the Selling Stockholders to the effect set forth in this Section 9(m);
and
(n) The Selling Stockholders shall not have failed at or prior to
such Time of Delivery to have performed or complied with any of their
agreements herein contained and required to be performed or complied with
by them hereunder at or prior to such Time of Delivery.
-24-
<PAGE>
10. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Deutsche Bank expressly for use therein.
(b) The Company also will indemnify and hold harmless Raymond James &
Associates, Inc. ("Raymond James") and each person, if any, who controls
Raymond James within the meaning of either Section 15 of the Act, or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments incurred as a result of Raymond
James's participation as a "qualified independent underwriter" within the
meaning of Rule 2720 of the National Association of Securities Dealers'
Conduct Rules in connection with the offering of the Common Stock, except
for any losses, claims, damages liabilities, and judgments resulting from
Raymond James's, or such controlling person's, willful misconduct, bad
faith or gross negligence.
(c) Each Selling Stockholder will, severally but not jointly,
indemnify and hold harmless the Company, each Underwriter and each person,
if any, who controls the Company or any Underwriter within the meaning of
Section 15 of the Act of Section 20 of the 1934 Act against any losses,
claims, damages or liabilities to which the Company, underwriter or
controlling person may become subject under the Act, the 1934 Act, or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
-25-
<PAGE>
an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements
therein not misleading, in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company by any Selling Stockholder through the Company (but only in
its capacity as custodian of the Selling Stockholders) specifically for use
therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Company or Underwriter or controlling person in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, that each Selling Stockholder shall not be
liable under this Section 10 for any amounts in excess of the product of
the purchase price per share set forth in Section 3 hereof and the number
of shares being sold by such Selling Stockholder hereunder.
(d) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through Deutsche Bank expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(e) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the com-
-26-
<PAGE>
mencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
Liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party.
(f) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by each party to this
Agreement from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice
required under subsection (d) above, then each indemnifying party shall
-27-
<PAGE>
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of each party to this Agreement in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of
the Shares purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Shares
purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (e)
were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this subsection (e)
shall be deemed to include any Legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection
(e), no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (e) to contribute are several
in proportion to their respective underwriting obligations and not joint.
-28-
<PAGE>
(g) The obligations of the Company under this Section 10 shall be in
addition to any liability that the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section 10 shall be in addition to any
liability that the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company and to each person, if any, who controls the Company within the
meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares that it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of thirty-
six hours within which to procure another party or other parties satisfactory to
you to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Shares, or the Company notifies you that it has so
arranged for the purchase of such Shares, you or the Company shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section 11 with like effect as if such person
had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares that remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-
defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery arid, in
addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of Shares which such Underwriter agreed to
purchase hereunder) of the
-29-
<PAGE>
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares that remains unpurchased exceeds one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, or if
the Company shall not exercise the right described in subsection (b) above
to require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase
and of the Company to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 10 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 8 and 10 hereof.
-30-
<PAGE>
14. Information Supplied by the Underwriters and Selling Stockholders.
-----------------------------------------------------------------
(a) The statements set forth in the last paragraph on the front cover
page of the Prospectus relating to the Shares and paragraph [ ] under the
heading "Underwriting" in the Prospectus relating to the Securities (to the
extent such statements relate to the Underwriters) constitute the only
information furnished by the Underwriters to the Company and the Selling
Stockholders for the purposes of Section 2(b), 10(a) and 10(c) hereof. Each
Underwriter confirms that such statements, to the extent such statements
related to each such Underwriter, are correct in all material respects.
(b) The number of shares of Common Stock beneficially owned by the
Selling Stockholders prior to and after the offering of the Securities and
footnotes in Table 1 under the heading "Principal and Selling Stockholder"
in the Prospectus constitute the only information furnished by the Selling
Stockholders to the Company and the Underwriters for the purposes of
Section 10(b) hereof. Each Selling Stockholder confirms that such
information, to the extent such statements relate to such Selling
Stockholder, is correct in all material respects.
15. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Deutsche Bank, 1
South Street, Baltimore, Maryland 21202, Attention: Registration Department; and
if to the Company shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 10(c) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.
-31-
<PAGE>
16. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 10 and 12 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
17. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
18. This Agreement shall be governed by and construed in accordance
with the Laws of the State of New York.
19. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Master
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
PINNACLE HOLDINGS INC.
By:
-------------------------------------
Name:
Title:
Accepted as of the date hereof:
-32-
<PAGE>
Deutsche Bank Securities Inc.,
Salomon Smith Barney Inc.,
Goldman, Sachs & Co.,
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Raymond James & Associates, Inc.
As representatives of the several
U.S. Underwriters
By: DEUTSCHE BANK SECURITIES INC.
By:
-------------------------------------
Name:
Title:
-33-
<PAGE>
SCHEDULE I
----------
[Selling Stockholders]
-34-
<PAGE>
SCHEDULE II
-----------
<TABLE>
<CAPTION>
Number of
Optional Shares
Total Number to be Purchased
of Firm Shares if Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- -----------------
<S> <C> <C>
Deutsche Bank Securities Inc. ..................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
Salomon Smith Barney Inc. ......................................
Raymond James & Associates, Inc. ...............................
Banc of America Securities LLC..................................
----------------- -----------------
Total.......................................................
================= =================
</TABLE>
-35-
<PAGE>
PINNACLE HOLDINGS INC.
COMMON STOCK
______________________
UNDERWRITING AGREEMENT
(International Version)
______________________
July , 1999
Deutsche Bank AG London,
Salomon Brothers International
Limited,
Merrill Lynch International,
Bank of America International Limited
Raymond James & Associates, Inc.
As representatives of the
several Underwriters named in
Schedule I hereto,
c/o Deutsche Bank Securities Inc.
1 South Street,
Baltimore, MD 21202
Ladies and Gentlemen:
Pinnacle Holdings Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
shares (the "Firm Shares") and, at the election of the Underwriters, up to
additional shares (the "Optional Shares") of Common Stock, par value $.001 per
share ("Stock"), of the Company, (the Firm Shares and the Optional Shares that
the Underwriters elect to purchase pursuant to Section 2 hereof being
collectively called the "Shares").
It is understood and agreed to by all parties that the Company is concurrently
entering into an agreement (the "U.S. Underwriting Agreement") providing for the
sale by the Company of up to a total of 9.844 million shares of Stock (the "U.S.
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters in the United
<PAGE>
States and Canada (the "U.S. Underwriters"), for whom Deutsche Bank Securities
Inc., Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Banc of America Securities LLC and Raymond James and Associates,
Inc. are acting as lead managers. Anything herein or therein to the contrary
notwithstanding, the respective closings under this Agreement and the U.S.
Agreement are hereby expressly made conditional on one another. The Underwriters
hereunder and the U.S. Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting Syndicates (the "Agreement
between Syndicates") which provides, among other things, for the transfer of
shares of Stock between the two syndicates. Two forms of prospectus are to be
used in connection with the offering and sale of shares of Stock contemplated by
the foregoing, one relating to the Shares hereunder and the other relating to
the U.S. Shares. The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the registration statement
and amendments thereto as mentioned below. Except as the context may otherwise
require, references hereinafter to the Shares shall include all the shares of
Stock that may be sold pursuant to either this Agreement or the International
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall include
both the U.S. and the international versions thereof.
It also is understood that the Company has entered into an agreement (the
"Acquisition Agreement") to acquire (the "Acquisition") certain assets from
Motorola, Inc. Although the Acquisition is not a condition to the offering of
the Shares contemplated by this Agreement, the Acquisition may be paid for, in
part, with proceeds from the issuance and sale by the Company of the Shares.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333- ) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule
-2-
<PAGE>
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; the Company meets all of the
requirements for filing on Form S-3; and all references in this Agreement
to amendments or supplements to the Registration Statement, the Preliminary
Prospectus or the Prospectus shall be deemed to mean and include the filing
of any document under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), that is or is deemed to be incorporated by reference therein.
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon
-3-
<PAGE>
and in conformity with information furnished in writing to the Company by
an Underwriter through Deutsche Bank AG London ("Deutsche Bank") expressly
for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Deutsche Bank expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and indefeasible title
to, or a valid leasehold interest in, all of their material assets, except
as is described in the Prospectus or where the failure thereof would not
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business
-4-
<PAGE>
or property of the Company and its subsidiaries on a consolidated basis (a
"Material Adverse Effect");
(f) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware; each of the Company 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 as described
in the Prospectus. Each of the Company 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 reasonably be expected to have a Material
Adverse Effect;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and nonassessable and (except for directors' qualifying
shares and as described in the Prospectus) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims;
(h) The unissued shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued and fully paid and
nonassessable and will conform to the description of the Stock contained in
the Prospectus;
(i) The issue and sale of the Shares by the Company hereunder and
under the International Underwriting Agreement and the compliance by the
Company with all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any inden-
-5-
<PAGE>
ture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries is
subject, except for any such conflicts, breaches or violations that,
individually or in the aggregate, would not have a Material Adverse Effect,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters;
(j) The Company and its subsidiaries are in compliance in all
material respects with all of the provisions of their respective
certificate 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, a default by the Company or any
of its subsidiaries under any indenture, agreement or other instrument, or
any judgment, decree or order to which the Company or any of its
subsidiaries is a party or by which they or any of their properties is
bound which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain Federal
Income Tax Considerations", and under the caption "Underwriting", insofar
as they purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
-6-
<PAGE>
(l) Other than as set forth in the Prospectus, there is no action,
suit, proceeding or any other litigation pending or, to the best of the
Company's knowledge, threatened against the Company or any of its
subsidiaries, or in any other manner relating directly and materially
adverse to the Company, 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 which would reasonably be expected to have a
Material Adverse Effect;
(m) All licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals,
grants of rights by, or filings or registrations with, any federal, state,
local or foreign court or governmental or public body, authority, or other
instrumentality or third person (including without limitation the Federal
Communications Commission (the "FCC") and the Federal Aviation Authority
(the "FAA") (any of the foregoing a "License") necessary for the Company
and its subsidiaries to own, build, maintain or operate their businesses or
properties have been duly authorized and obtained, are in full force and
effect except where the failure to be so obtained or in effect would not,
individually or in the aggregate, have a Material Adverse Effect; and the
Company and its subsidiaries are and will continue to be in compliance in
all material respects with all provisions thereof; no event has occurred
which permits (or with the passage of time would permit) the revocation or
termination of any License, or which could result in the imposition of any
restriction thereon, which is of such a nature or the effect of which would
reasonably be expected to have a Material Adverse Effect; no material
License is the subject of any pending or, to the best of the Company's
knowledge, threatened challenge or revocation which, if such License were
revoked, would reasonably be expected to have a Material Adverse Effect;
the Company 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, the Shares,
or the performance thereof, in accordance with their respective terms;
(n) The Company and its subsidiaries are in compliance in all
material respects with all applicable laws;
-7-
<PAGE>
the Company 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 of 1934, as amended, and the rules and regulations
promulgated thereunder, and are in all material respects in compliance
therewith, including without limitation the rules and regulations of the
FCC and FAA; the Company 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 would
reasonably be expected to have a Material Adverse Effect;
(o) The Company is not required to register under the provisions of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"). Neither the entering into or performance by the Company of this
Agreement nor the offering and sale of the Shares violates any provision of
such act or requires any consent, approval, or authorization of, or
registration with, the Commission or any other governmental or public body
of authority pursuant to any provisions of such act;
(p) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Company is organized in conformity with the requirements for
qualification as a real estate investment trust under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"), and its
proposed method of operation as described in the Prospectus will enable it
to continue to maintain the requirements for taxation as a real estate
investment trust under the Code;
(r) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which
the business or operations of the Company or any of its subsidiaries will
be affected by the Year 2000 Problem. As a result of such review, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a Material Adverse Effect or result in any material loss
or interference with the Company's business or operations. The "Year
-8-
<PAGE>
2000 Problem" as used herein means any significant risk that computer
hardware or software used in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of
data or in the operation of mechanical or electrical systems of any kind
will not, in the case of dates or time periods occurring after December 31,
1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000; and
(s) The representations and warranties of the Company and, to the
best of its knowledge of the Company after due inquiry, each of the
representations and warranties of Motorola, Inc. contained in the
Acquisition Agreement are true and correct in all material respects on the
date hereof; the Company has no reasonable basis to believe that the
transactions contemplated by the Acquisition Agreement will not be
consummated in accordance with its terms.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company at
a purchase price per share of $ , the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase
at their election up to Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you
-9-
<PAGE>
to the Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the First Time of Delivery (as defined in
Section 4 hereof) or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Deutsche Bank may request upon at least forty-eight hours' prior notice
to the Company shall be delivered by or on behalf of the Company to Deutsche
Bank, for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to Deutsche Bank at
least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of Deutsche Bank [ ] (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on , 1999 or such
other time and date as Deutsche Bank and the Company may agree upon in writing,
and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Deutsche Bank in the written notice given by Deutsche Bank of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Deutsche Bank and the Company may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(k) hereof, will be delivered at the
offices of Ca-
-10-
<PAGE>
hill Gordon & Reindel, 80 Pine Street., New York, NY 10005 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all
at such Time of Delivery. A meeting will be held at the Closing Location at
2:00 p.m., New York City time, on the New York Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents
to be delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be disapproved by
you promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of
the issuance of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for
-11-
<PAGE>
offering and sale under the securities laws of such jurisdictions as you
may request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in
any jurisdiction;
(c) Prior to 10:00 A.M. New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New York
City in such quantities as you may reasonably request, and, if the delivery
of a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its stockholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a)
-12-
<PAGE>
of the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus (the
"Lock-up Period"), not to offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar securities
(other than pursuant to employee stock option plans existing on, or upon
the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration Statement), to make available
to its stockholders consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
-13-
<PAGE>
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("Nasdaq National Market"); and
(j) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the Nasdaq
National Market; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses in-
-14-
<PAGE>
cident to the performance of its obligations hereunder that are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make. Each Selling
Stockholder shall pay the costs and expenses incident to the performance by it
of its obligations hereunder and in connection with the offer, sale and delivery
of the Shares to be sold by it, including any stock transfer taxes payable upon
the sale of the Shares to the Underwriters, the fees and expenses of any counsel
retained by it and the underwriting discounts and communications payable to the
Underwriters.
7. The obligations of the Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Cahill Gordon & Reindel, counsel for the Underwriters, shall
have furnished to you such written opinion or opinions dated such Time of
Delivery, with respect to the Shares, this Agreement, the Registration
Statement and the Prospectus as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
-15-
<PAGE>
(c) Holland & Knight LLP, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company is a corporation incorporated and validly
existing as a corporation in good standing under the Laws of the State of
Delaware. The Company has the requisite corporate power and authority to
own the properties and conduct its business as now conducted as described
in the Prospectus;
(ii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business as now conducted as described in the Prospectus so
as to require such qualifications, except where the failure to so qualify
would not individually or in the aggregate have a Material Adverse Effect;
(iii) Pinnacle Towers Inc. is a corporation incorporated and
validly existing as a corporation in good standing under the laws of
Delaware;
(iv) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
nonassessable; and the Shares conform to the description of the Stock
contained in the Prospectus.
(v) The unissued Shares to be issued and sold by the Company to
the Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and in the
International Underwriting Agreement, will be duly and validly issued and
fully paid and non-assessable and will conform to the description of the
Stock contained in the Prospectus;
(vi) To the knowledge of such counsel, the issue and sale of the
Shares by the Company hereunder
-16-
<PAGE>
and under the International Underwriting Agreement and the compliance by
the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except for any such
conflicts, breaches or violations that, individually or in the aggregate,
would not have a Material Adverse Effect, nor will such action result in
any violation of the provisions of the Certificate of Incorporation or By-
laws of the Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties;
(vii) To such counsel's knowledge and other than as set forth in
the Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is subject which, if
determined adversely to the Company or any of its subsidiaries, would have
a Material Adverse Effect; and to such counsel's knowledge, no such
proceedings are threatened by governmental authorities or others;
(viii) To such counsel's knowledge, no consent, approval,
authorization, license, qualification, exemption or order of or with any
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares, and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
-17-
<PAGE>
(ix) To such counsel's knowledge, all material Licenses
necessary for the Company and its subsidiaries to own, build, maintain or
operate their businesses or properties as now conducted as described in the
Prospectus have been duly authorized and obtained and are in full force and
effect;
(x) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption "Certain
Federal Income Tax Considerations", and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xii) The Company is not an "investment company," as such term is
defined in the Investment Company Act;
(xiii) Each document filed pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act") (other than the financial statements
and supporting schedules included therein, as to which no opinion need be
rendered), and incorporated or deemed to be incorporated by reference in
the Prospectus complied when so filed as to form in all material respects
with the 1934 Act and the regulations promulgated thereunder; and
(xiv) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the Act and
the rules and regulations thereunder, although they do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (xi) of this Section 7(c); they
have no reason to believe that, as of its effective date, the Regis-
-18-
<PAGE>
tration Statement or any further amendment thereto made by the Company
prior to such Time of Delivery (other than the financial statements and
related statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
or that, as of such Time of Delivery, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States.
(d) The Selling Stockholders shall have furnished to you the opinion of
[ ], counsel for the Selling Stockholders, or of such other
counsel to the Selling Stockholders as shall be satisfactory to Cahill Gordon &
Reindel, counsel for the Underwriters, dated such Time of Delivery, to the
effect that:
(i) This Agreement has been duly executed and delivered by the
Selling Stockholders.
-19-
<PAGE>
(ii) Each Selling Stockholder has the power and authority to sell,
transfer and deliver in the manner provided in this Agreement the Shares
being sold by such Selling Stockholders hereunder.
(iii) The delivery by the Selling Stockholders to the several
Underwriters of certificates for the Shares being sold hereunder by the
Selling Stockholders against payment therefor as provided herein, assuming
the Underwriters purchased the Shares in good faith without knowledge of
any adverse claim, will pass good and valid title to such Shares to the
several Underwriters, free and clear of all liens, encumbrances, equities
and claims whatsoever.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, PricewaterhouseCoopers
LLP and [ ] shall have furnished to you a comfort letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you and each of KPMG LLP, Ernst & Young LLP and Arthur Andersen
LLP shall have furnished to you a comfort letter, dated the date of the
Prospectus, in form and substance satisfactory to you;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any Loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any Labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Underwriters so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering
-20-
<PAGE>
or the delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and ii) no such organization shall have publicly announced that it
has under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(h) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market; (ii) a suspension or material limitation in trading in the
Company's securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iv) in the judgment of the Underwriters makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been
duty listed for quotation on National Market;
(j) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the directors and executive
officers and ARBY II substantially to the effect set forth in Subsection
6(e) hereof in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(l) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of
-21-
<PAGE>
officers of the Company satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such Time
of Delivery, as to the performance by the Company of all of its obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (e) of this Section and as to such
other matters as you may reasonably request;
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Deutsche Bank expressly for use therein.
(b) The Company also will indemnify and hold harmless Raymond James
& associates, Inc. ("Raymond James") and each person, if any,-who controls
Raymond James within the meaning of either Section 15 of the Act, or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments incurred as a result of Raymond
James's participation as a "qualified independent underwriter" within the
meaning of Rule 2720 of the National Association of Securities Dealers'
Conduct Rules in connection with the offering of the Common Stock, except
for any losses, claims, damages liabilities, and judgments resulting from
Raymond James's, or such controlling person's, willful misconduct, bad
faith or gross negligence.
-22-
<PAGE>
(c) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through Deutsche Bank expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or com-
-23-
<PAGE>
promise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all Liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by each party to this
Agreement from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice
required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of each party to this Agreement in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of
the Shares purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Shares
purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would
not be just
-24-
<PAGE>
and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed
to include any Legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(f) The obligations of the Company under this Section 8 shall be in
addition to any liability that the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section 8 shall be in addition to any
liability that the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company and to each person, if any, who controls the Company within the
meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares that it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of thirty-
six hours within which to procure another party or other parties satisfactory to
you to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Shares,
-25-
<PAGE>
or the Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone such Time of
Delivery for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees to
file promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
11 with like effect as if such person had originally been a party to this
Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares that remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of
Delivery, then the Company shall have the right to require each non-
defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery arid, in
addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of Shares which such Underwriter agreed to
purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares that remains unpurchased exceeds one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, or if
the Company shall not exercise the right described in subsection (b) above
to require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase
and of the Company to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
-26-
<PAGE>
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 6 and 10 hereof; but, if for any other reason,
any Shares are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Deutsche Bank AG
London, [ ], Attention: Registration Department; and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this
-27-
<PAGE>
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Master
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
PINNACLE HOLDINGS INC.
By:
--------------------------
Name:
Title:
-28-
<PAGE>
Accepted as of the date hereof:
Deutsche Bank AG London,
Salomon Brothers International
Limited,
Merrill Lynch International,
Raymond James & Associates, Inc.
As representatives of the several
U.S. Underwriters
By: DEUTSCHE BANK AG LONDON
By:
-----------------------------------
Name:
Title:
-29-
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of
Optional Shares
Total Number to be Purchased
of Firm Shares if Maximum Option
Underwriter to be Purchased Exercised
----------- -------------- -----------------
<S> <C> <C>
Deutsche Bank AG London.............................
Merrill Lynch International.........................
Salomon Brothers International
Limited...........................................
Raymond James & Associates, Inc.....................
Banc of America Securities LLC......................
-------------- -----------------
Total..........................................
============== =================
</TABLE>
-30-
<PAGE>
EXHIBIT 10.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$450,000,000
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Among
PINNACLE TOWERS INC.
And
NATIONSBANK, N.A.
as Administrative Agent
and
LENDERS
as defined herein
Dated as of June 25, 1999
With
BANC OF AMERICA SECURITIES LLC
as Sole Lead Arranger and Sole Book Manager
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PINNACLE TOWERS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS
1.01. Definitions...................................................................................... 1
1.02. Accounting and Other Terms....................................................................... 26
ARTICLE II. THE LOAN FACILITIES
2.01. The Loans........................................................................................ 27
2.02. Making Advances.................................................................................. 28
2.03. Evidence of Debt for Borrowed Money.............................................................. 29
2.04. Optional Prepayments............................................................................. 30
2.05. Mandatory Prepayments............................................................................ 31
2.06. Repayment........................................................................................ 32
2.07. Interest......................................................................................... 33
2.08. Default Interest................................................................................. 34
2.09. Continuation and Conversion Elections............................................................ 34
2.10. Fees and the Fee Letter.......................................................................... 35
2.11. Reduction of Commitments......................................................................... 36
2.12. Funding Losses................................................................................... 38
2.13. Computations and Manner of Payments.............................................................. 38
2.14. Yield Protection; Changed Circumstances.......................................................... 40
2.15. Use of Proceeds.................................................................................. 43
2.16. Collateral and Collateral Call................................................................... 43
2.17. Replacement of a Lender.......................................................................... 44
2.18. Conditions Precedent to the Increase of the Revolver B Commitment................................ 44
ARTICLE III. LETTERS OF CREDIT
3.01. Issuance of Letters of Credit.................................................................... 46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.02. Letters of Credit Fee............................................................................ 47
3.03. Reimbursement Obligations........................................................................ 47
3.04. Lenders' Obligations............................................................................. 49
3.05. Administrative Agent's Obligations............................................................... 49
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to Closing, Effectiveness of this Agreement and the Refunding Advance....... 50
4.02. Conditions Precedent to All Advances and Letters of Credit....................................... 52
4.03. Conditions Precedent to Advances for Permitted Acquisitions, Except the Motorola Acquisition..... 53
4.04. Conditions Precedent to Motorola Acquisition and the Making of any Advance with Respect Thereto.. 53
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties................................................................... 54
5.02. Survival of Representations and Warranties....................................................... 63
ARTICLE VI. GENERAL COVENANTS
6.01. Preservation of Existence and Similar Matters.................................................... 63
6.02. Business; Compliance with Law and Material Agreements............................................ 63
6.03. Maintenance of Properties........................................................................ 63
6.04. Accounting Methods and Financial Records......................................................... 64
6.05. Insurance........................................................................................ 64
6.06. Payment of Taxes and Claims...................................................................... 64
6.07. Visits and Inspections........................................................................... 64
6.08. Payment of Debt for Borrowed Money............................................................... 64
6.09. Use of Proceeds.................................................................................. 64
6.10. Indemnity........................................................................................ 65
6.11. Environmental Law Compliance..................................................................... 65
6.12. Interest Rate Protection Agreements.............................................................. 66
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
6.13. Issuance and Pledge of Capital Stock of the Borrower............................................. 66
6.14. Continued Status as a Real Estate Investment Trust; Prohibited Transactions...................... 67
6.15. Tenant Leases, Ground Leases and Fee Owned Property.............................................. 67
6.16. Acquisitions, Generally.......................................................................... 69
6.17. Year 2000........................................................................................ 69
6.18. Motorola Acquisition............................................................................. 70
6.19. Notice by the Borrower........................................................................... 70
6.20. Syndication of the Loans......................................................................... 70
6.21. Additional Equity and/or Subordinated Debt....................................................... 70
ARTICLE VII. INFORMATION COVENANTS
7.01. Quarterly Financial Statements and Information................................................... 71
7.02. Annual Financial Statements and Information; Certificate of No Default........................... 71
7.03. Compliance Certificates.......................................................................... 71
7.04. Copies of Other Reports and Notices.............................................................. 71
7.05. Notice of Litigation, Default and Other Matters.................................................. 73
7.06. ERISA Reporting Requirements..................................................................... 73
7.07. Fee Owned Property, Ground Leases and Tenant Leases.............................................. 74
ARTICLE VIII. NEGATIVE COVENANTS
8.01. Financial Covenants.............................................................................. 75
8.02. Debt for Borrowed Money.......................................................................... 77
8.03. Liens............................................................................................ 79
8.04. Investments...................................................................................... 79
8.05. Amendment and Waiver............................................................................. 80
8.06. Liquidation, Disposition or Acquisition of Assets, Merger, New Subsidiaries...................... 81
8.07. Guaranties; Contingent Liabilities............................................................... 81
8.08. Restricted Payments.............................................................................. 82
8.09. Affiliate Transactions........................................................................... 83
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
8.10. Compliance with ERISA............................................................................ 83
8.11. Capital Stock.................................................................................... 84
8.12. Sale and Leaseback............................................................................... 84
8.13. Sale or Discount of Receivables.................................................................. 84
8.14. Limitation on Restrictive Agreements............................................................. 84
ARTICLE IX. EVENTS OF DEFAULT
9.01. Events of Default................................................................................ 84
9.02. Remedies upon Default............................................................................ 88
9.03. Cumulative Rights................................................................................ 89
9.04. Waivers 89
9.05. Performance by Administrative Agent or any Lender................................................ 89
9.06. Expenditures..................................................................................... 89
9.07. Control 89
ARTICLE X. THE ADMINISTRATIVE AGENT
10.01. Authorization and Action......................................................................... 90
10.02. Administrative Agent's Reliance, Etc............................................................. 90
10.03. NationsBank, N.A. and Affiliates................................................................. 90
10.04. Lender Credit Decision........................................................................... 91
10.05. Indemnification by Lenders....................................................................... 91
10.06. Successor Administrative Agent................................................................... 91
ARTICLE XI. MISCELLANEOUS
11.01. Amendments and Waivers........................................................................... 92
11.02. Notices.......................................................................................... 92
11.03. Parties in Interest.............................................................................. 94
11.04. Assignments and Participations................................................................... 94
11.05. Sharing of Payments.............................................................................. 95
11.06. Right of Set-off................................................................................. 96
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11.07. Costs, Expenses, and Taxes....................................................................... 96
11.08. Rate Provision................................................................................... 97
11.09. Severability..................................................................................... 97
11.10. Exceptions to Covenants.......................................................................... 98
11.11. Counterparts..................................................................................... 98
11.12. GOVERNING LAW; WAIVER OF JURY TRIAL.............................................................. 98
11.13. ENTIRE AGREEMENT................................................................................. 98
11.14. Amendment, Restatement, Extension, Renewal and Increase.......................................... 98
</TABLE>
<PAGE>
Table of Schedules and Exhibits
-------------------------------
<TABLE>
<CAPTION>
Schedules
---------
<S> <C>
Schedule 2.16 - Items required with respect to Each Fee Owned Real Property of the Borrower and its Subsidiaries
Schedule 5.01(a) - Jurisdictions of Qualification, Ownership and Capital Structure - Borrower
Schedule 5.01(f) - FAA Non-Compliance as of the Closing Date
Schedule 5.01(h) - Existing Litigation
Schedule 5.01(w) - Tenant Leases in existence on the Closing Date
Schedule 5.01(x) - Ground Leases in existence on the Closing Date
Schedule 5.01(y) - Owned Real Property in existence on the Closing Date
Schedule 8.02 - Existing Debt and Liabilities
Schedule 8.03 - Existing Liens
Schedule 8.04 - Existing Investments
Schedule 8.09 - Existing Affiliate Transactions
Schedule 11.02 - Lender Addresses
Exhibits
--------
Exhibit A-1 - Form of Revolver A Note
Exhibit A-2 - Form of Revolver B Note
Exhibit A-3 - Form of Term Loan A Note
Exhibit A-4 - Form of Term Loan B Note
Exhibit B - Form of Security Agreement (Borrower)
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Borrowing Notice
Exhibit E - Form of Conversion/Continuation Notice
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Guaranty of Subsidiaries
Exhibit H - Form of Security Agreement (Subsidiary)
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Borrower Pledge Agreement
Exhibit K - Form of Certain Ground Lease Provisions
Exhibit L - Form of Guaranty of Parent
Exhibit M - Form of Parent Pledge Agreement
Exhibit N - Form of Estoppel and Attornment Language
</TABLE>
<PAGE>
________________________________________________________________________________
$450,000,000
PINNACLE TOWERS INC.
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT is dated as of June 25,
1999, among Pinnacle Towers Inc., a Delaware corporation (the "Borrower"), the
Lenders (as defined below), NationsBank, N.A., as a Lender and Administrative
Agent (the "Administrative Agent"). Banc of America Securities LLC acted as
Sole Lead Arranger and Sole Book Manager.
BACKGROUND.
WHEREAS, Borrower entered into that certain Third Amended and Restated
Credit Agreement with Administrative Agent and Lenders, dated as of May 29, 1998
(the "Original Credit Agreement") which provided for loan facilities in the
initial amount of $250,000,000;
WHEREAS, Borrower and Administrative Agent have agreed to restructure,
extend, renew and restate such indebtedness under the Original Credit Agreement
as set forth herein to provide for three separate facilities 1) a seven year
reducing revolver facility in the initial amount of $75,000,000, 2) a seven year
reducing revolver acquisition facility in the initial amount of $75,000,000,
which may under certain circumstances (but the Lenders are under no commitment
to) increase to $125,000,000, 3) a seven year delayed draw acquisition term loan
in the amount of $125,00,000 (which must be drawn no later than six months after
closing), and 4) an eight year term loan in the amount of $175,00,000 (which
must be fully drawn on the date of closing), 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:
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):
"Acquisition Debt" shall have the meaning ascribed thereto in the
Indenture.
1
<PAGE>
"Acquisition Agreement" means that certain Agreement For Purchase and Sale
of Assets by and between Motorola and the Borrower, in the form of the draft of
such agreement delivered to the Administrative Agent on June 24, 1999, and in
any executed copy of such Agreement For Purchase and Sale of Assets, so long as
any such executed copy is in such form delivered, with only minor and immaterial
changes, or such form with material changes that are consented to by the
Majority Lenders.
"Advance" means an advance made by a Lender to the Borrower pursuant to
Section 2.01 hereof which may be a Revolver A Advance, a Revolver B Advance, a
Term Loan A Advance or a Term Loan B Advance (and may either be Base Advance or
a LIBOR Advance, and which such Advance may also 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 Agent" means NationsBank, N.A. in its capacity as
Administrative Agent hereunder, or any successor Administrative Agent appointed
pursuant to Section 10.06 hereof.
"Agreement" means this Fourth 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 fiscal quarter immediately preceding the date of
determination times (ii) four 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 fiscal quarter immediately preceding the date of determination with
respect to which the Borrower has financial statements prepared, times (ii)
four.
"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 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.
2
<PAGE>
"Applicable Margin" means, (a) with respect to Advances outstanding under
the Term Loan A and the Revolving Loans, 2.75% per annum for LIBOR Advances and
1.50% per annum for Base Advances and (b) with respect to Advances under the
Term Loan B, 3.000% per annum for LIBOR Advances and 1.750% for Base Advances,
provided that, after the date which the Administrative Agent and the Lenders
receive a Compliance Certificate required to be delivered in accordance with the
terms of Section 7.01 hereof for the fiscal quarter ended June 30, 2000, then,
if there exists no Default or Event of Default, the Applicable Margin will be
the following per annum percentages applicable in the following situations:
Term Loan A and
Revolving Loans Term Loan B
Applicability Percentage Percentage
------------- ---------------- ------------
(i) If the Leverage 2.750% 3.000%
Ratio is equal to or
greater than 6.00 to 1.00
(ii) If the Leverage 2.500% 3.000%
Ratio is equal to or
greater than 5.50 to 1.00
but is less than
6.00 to 1.00
(iii) If the Leverage 2.250% 3.000%
Ratio is equal to or
greater than 5.00 to 1.00
but is less than
5.50 to 1.00
(iv) If the Leverage 2.000% 3.000%
Ratio is equal to or
greater than 4.50 to 1.00
but is less than
5.00 to 1.00
(v) If the Leverage 1.750% 2.750%
Ratio is equal to or
greater than 4.00 to 1.00
but is less than
4.50 to 1.00
3
<PAGE>
(vi) If the Leverage 1.500% 2.750%
Ratio is equal to or
greater than 4.00 to 1.00
but is less than
3.50 to 1.00
(vii) If the Leverage 1.250% 2.750%
Ratio is less than
3.00 to 1.00
In each case in the above grid, the Applicable Margin for Base Advances shall be
a per annum rate equal to 1.25% less than the Applicable Margin for the
applicable LIBOR Advance. The Applicable Margin payable by the Borrower shall be
(a) after the Administrative Agent has received all financial information
required by Section 7.01 hereof for the fiscal quarter ended June 30, 2000,
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 Leverage Ratio and (b) 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 Agent of the applicable financial statements and corresponding
Compliance Certificate. If financial statements and a Compliance Certificate of
the Borrower setting forth the Leverage Ratio are not received by the
Administrative Agent by the date required pursuant to Article VII hereof, the
Applicable Margin shall be determined as if the Leverage Ratio exceeds 6.00 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.
"Applicable Specified Percentage" means with respect to any Lender, in the
case of the Revolver A Loan, such Lender's Revolver A Specified Percentage, in
the case of the Revolver B Loan, such Lender's Revolver B Specified Percentage,
in the case of the Term Loan A, such Lender's Term Loan A Specified Percentage
and in the case of the Term Loan B, such Lender's Term Loan B Specified
Percentage.
"Application" means any stand-by letter of credit application delivered to
Administrative Agent for or in connection with any stand-by Letter of Credit
pursuant to Article III hereof, in Administrative Agent's standard form for
stand-by letters of credit.
"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 Agent, in
the form of Exhibit F hereto.
---------
4
<PAGE>
"Auditor" means Price Waterhouse L.L.P., or other independent certified
public accountants selected by the Borrower and acceptable to Administrative
Agent.
"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.
"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.
"BAS" means Banc of America Securities LLC.
"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, 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.
"Bridge Debt" has the meaning ascribed thereto in Section 8.02(c)(ii)
hereof.
"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 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.
5
<PAGE>
"Change of Control" means the occurrence of one of 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
Parent and its Subsidiaries, taken as a whole, to any Person or group of related
Persons, as defined in Section 13(d) of the Securities Exchange Act of 1934 (a
"Group"), other than Permitted Holders, (ii) any Person or Group (other than
Permitted Holders) shall become the owner, directly or indirectly, beneficially
or of record, of shares representing 30% or more of the aggregate voting power
represented by the issued and outstanding voting stock of the Parent or any
successor to all or substantially all of its assets; or (iii) the first day on
which a majority of the members of the board of directors of the Parent are not
Continuing Directors.
"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.
"Commitment Letter" means that certain Commitment Letter, dated June 23,
1999, executed among the Borrower, the Administrative Agent and BAS.
"Commitments" means the Revolver A Commitment and the Revolver B
Commitment.
"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, (c) certifying to the appropriate
Applicable Margins and (d) setting forth a description of all acquisitions
consummated in the previous fiscal quarter with respect to which the Borrower
was not required to inform the Administrative Agent, describing the name of the
acquisition, the purchase price, whether such acquisition was an asset or
Capital Stock acquisition and the cash flow related to the towers acquired.
"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 related Interest Period, including, without
limitation, payments made as a result of the acceleration of the maturity of a
Note, (b) subject to Administrative Agents' 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
6
<PAGE>
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.
"Consolidated Leverage Ratio" means the ratio, at the end of the accounting
period with respect to which such determination is made, of (a) Total Debt
(exclusive of Debt for Borrowed Money among the Parent, the Borrower and the
wholly owned Subsidiaries of the Borrower), to (b) Annualized EBITDA, provided
that, the calculation of Consolidated 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.
"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.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of the Parent who (i) was a member of such board of
directors on the date hereof 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.
"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
7
<PAGE>
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
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.
"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 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
8
<PAGE>
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 and (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, excluding
non-cash income, plus (b) amortization and depreciation for such period, plus
(c) non-cash charges (minus 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) Income Tax Expense for the Parent,
the Borrower and its Subsidiaries for such period, plus (f) an adjustment to net
income (without duplication) 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 (g) an adjustment to net
income for such period to record (i) an increase in revenue related to all new
leases executed or acquired 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 canceled leases during the period as if such leases were
terminated or canceled as of the beginning of such period, provided that,
determinations of adjustments to EBITDA with respect to the assets acquired by
the Borrower in connection with the Motorola Acquisition shall be calculated in
a manner reasonably acceptable to the Administrative Agent and Majority Lenders.
"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; (d) central bank of any
country which is a member of the Organization for Economic Cooperation and
Development; and (e) any other Person approved by the Administrative Agent,
which approval will not be unreasonably withheld.
"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
9
<PAGE>
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. (S)9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. (S)1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C (S)6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. (S)1251 et seq.), the Clean Air Act (42 U.S.C.
(S)7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S)2601 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. (S)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 67 Borrower or any Obligor, within the meaning of Section
414(c) of the Code, and the regulations and rulings issued thereunder.
"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 N hereto, or such other language as may be
---------
approved in writing by Administrative Agent.
"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) Fixed Charges for such year (excluding interest
paid or payable, at the
10
<PAGE>
option of the Borrower, in-kind), plus (b) (without duplication) all voluntary
principal prepayments on the Obligations pursuant to Section 2.04 hereof 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 quotations for such date on such
transactions received by Administrative Agent from three federal funds brokers
of recognized standing selected by it.
"Fee Letter" means that certain Fee Letter and Agreement, dated June 23,
1999, between the Borrower and the Administrative Agent, 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.
"Final Maturity Date" means June 30, 2007, or such earlier date on which
all outstanding Advances under the Term Loan B and all other outstanding
Obligations are due and payable (including, without limitation, whether by
acceleration, installment payment, mandatory or voluntary commitment reduction
or mandatory or voluntary prepayment).
"First Maturity Date" means June 30, 2006, or such earlier date on which
all outstanding Advances under the Revolving Loans and the Term Loan A,
respectively, are due and payable (including, without limitation, whether by
acceleration, installment payment, scheduled reduction of either of the
Commitments to zero or mandatory or voluntary commitment reduction of either of
the Commitments to zero or mandatory or voluntary prepayment).
"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, plus (b) 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, plus (c) accrued or
paid Earn-Out Liabilities, plus (d) required or scheduled payments with respect
to Capital Leases for such period, plus (e) 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 (f) Capital Expenditures
for such period, plus, (e) (without duplication), cash Income Tax Expense of the
Parent, the Borrower and its Subsidiaries with respect to such period.
11
<PAGE>
"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.
"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.
"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. (S) 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. (S) 1251 et seq., the Comprehensive Environmental Response
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Resource Conservation
Recovery Act, 42 U.S.C. (S) 6901 et seq., and the Toxic Substances Control Act,
15 U.S.C. (S) 2601 et seq.
12
<PAGE>
"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.
"Indenture" means that certain Indenture, dated March 20, 1998, between the
Parent and The Bank of New York, as trustee, in connection with the Parent
Senior Notes.
"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
13
<PAGE>
(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 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 or Section 2.18 hereof, for so long as each is owed any portion of the
Obligation or is obligated under any portion of the Commitments.
"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 Agent 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)
(i) until the earlier of October 31, 1999 and the consummation of the Motorola
Acquisition, $60,000,000, and (ii) on and after the earlier of October 31, 1999
and the consummation of the Motorola Acquisition, $40,000,000 and (b) the
remainder of the Revolver B Commitment minus the sum of all outstanding Revolver
B Advances.
"Letters of Credit" means the irrevocable standby letters of credit issued
by Administrative Agent under and pursuant to Article III hereof, and under or
pursuant to Article
14
<PAGE>
III of the Original Credit Agreement, as each may be amended, modified,
substituted, increased, replaced, renewed or extended from time to time.
"Leverage Ratio" means the ratio, at the end of the accounting period with
respect to which such determination is made, of (a) Senior Debt of the Borrower
and its Subsidiaries (exclusive of Debt owed to each other), to (b) Annualized
EBITDA (excluding EBITDA attributable to the Parent), provided that, the
calculation of the 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.
"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 Agent.
"LIBOR Rate" means a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate, and (b) sum of the 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
15
<PAGE>
(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, 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" means, as applicable in the context used, the Revolver A Loan, the
Revolver B Loan, the Term Loan A or the Term Loan B, and "Loans" means all or
any combination of the Revolver A Loan, the Revolver B Loan, the Term Loan A and
the Term Loan B, as applicable in the context used.
"Loan Papers" means this Agreement, the Notes, the Security Agreements,
Borrower Pledge Agreement, the Subsidiary Guaranties, the Parent Guaranty, the
Parent Pledge Agreement, the Fee Letters, the portions of the Commitment Letter
which specifically state that they shall survive the consummation of this credit
facility, 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 Agent related to any Letter of Credit, letter agreements,
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 51.00%
of the aggregate amount of the sum of (a) outstanding Commitments plus (b)
outstanding Term Loan A Advances, plus (c) outstanding Term Loan B Advances,
provided, however, that (i) if either of the Commitments have been terminated,
then (a) above will be the amount of the outstanding Advances under the Revolver
A Loan and/or the Revolver B Loan, as appropriate.
"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
16
<PAGE>
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.
"Maximum Amount" means the maximum amount of interest which, under
Applicable Law, a Lender is permitted to charge on the Obligations.
"Motorola" means Motorola, Inc., a Delaware corporation.
"Motorola Acquisition" means that certain acquisition by the Borrower of
certain tower assets of Motorola in accordance with the Acquisition Agreement.
"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 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.
17
<PAGE>
"Note" means each Note of the Borrower evidencing Advances hereunder,
substantially in the forms of Exhibits A-1, A-2, A-3 and A-4 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 Agent 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 Agent 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 Agent or Lenders) to Administrative
Agent 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.
"Oral Tenant Leases" means those Tenant Leases which are oral and not
subject to any written agreement.
"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
18
<PAGE>
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 and all
other written agreements and documentation relating to the Parent Senior Notes
in existence on the Closing Date or as permitted to be amended by Section 8.05
hereof.
"Permitted Acquisition" means any acquisition of assets related to the
communications tower or rooftop business, including, without limitation, (i) the
development, construction or acquisition of towers or rooftop space and related
real estate, ground leases, and tower, rooftop, access and/or guy wire
easements, 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 Holders" means as of the date of determination (i) Robert
Wolsey and his spouse, and any of his respective 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 which voting stock is directly or indirectly owned by any Person
described in clause (i) above.
"Permitted Liens" means, as applied to any Person:
(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;
19
<PAGE>
(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.
"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.
"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
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.
20
<PAGE>
"Pro Rata" means, as to any Lender, in accordance with its percentage of
the aggregate amount of outstanding Advances under the applicable Loan or all
the Loans; provided, however, that if no such Advances are outstanding, such
-------- -------
term means in accordance with such Lender's Applicable Specified Percentage or
Total Specified Percentage, as applicable.
"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 Applicable
Specified Percentage or Total Specified Percentage, in each case applicable in
the context used.
"Refinancing Advance" means any Advance which is (a) used to pay the
principal amount (or any portion thereof) of an Advance at the end of its
Interest Period, or (b) a conversion of all or any portion of an outstanding
Base Advance to a LIBOR Advance, which, in each case after giving effect to such
application, does not result in an increase in the aggregate amount of
outstanding Advances.
"REIT Conversion" means the occurrence of any one of the following events:
(a) the election by the Parent to no longer maintain its REIT Status, (b) the
election by the Borrower or any Subsidiary of the Borrower to no longer maintain
its Qualified REIT Subsidiary status, (c) the occurrence of any event which
results in the Parent no longer having REIT Status, or (d) the occurrence of any
event which results in the Borrower or any Subsidiary of the Borrower no longer
qualifying as a Qualified REIT Subsidiary.
"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
Commitments have 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
21
<PAGE>
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 Debt for
Borrowed Money or Subordinated Debt, or the establishment of any sinking fund or
otherwise the setting aside of any funds with respect thereto.
"Revolver Advances" means Advances made under the Revolver A Loan and the
Revolver B Loan.
"Revolver A Advances" means any advance made under the Revolver A Loan.
"Revolver B Advances" means any advance made under the Revolver B Loan.
"Revolver A Commitment" means $75,000,000, as such amount may be reduced
from time to time or terminated pursuant to Sections 2.06, 2.11 or 9.02 hereof.
"Revolver B Commitment" means $75,000,000 minus the sum of (a) the undrawn
face amount of all Letters of Credit plus (b) the sum of all reimbursement
obligations under Article III hereof, in each case as such amount may be
increased prior to June 30, 2001 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.
"Revolver A Loan" means the loan made by a Lender pursuant to Section
2.01(a) of this Agreement.
"Revolver B Loan" means the loan made by a Lender pursuant to Section
2.01(b) of this Agreement.
"Revolver A Note" means each Note of the Borrower evidencing Advances under
the Revolver A Loan hereunder, substantially in the form of Exhibit A-1 hereto,
-----------
together in each case, with any extension, renewal or amendment thereof, or
substitution therefor.
"Revolver B Note" means each Note of the Borrower evidencing Advances under
the Revolver B Loan hereunder, substantially in the form of Exhibit A-2 hereto,
-----------
together in each case, with any extension, renewal or amendment thereof, or
substitution therefor.
"Revolver A Specified Percentage" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof designated as its
Revolver A Specified Percentage, or as adjusted or specified (i) in any
Assignment and Acceptance or (ii) in any amendment to this Agreement.
"Revolver B Specified Percentage" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof designated as its
Revolver B Specified Percentage, or as adjusted or specified (i) in any
Assignment and Acceptance or (ii) in any amendment to this Agreement.
22
<PAGE>
"Revolving Loans" means the Revolver A Loan and the Revolver B Loan.
"Rights" means rights, remedies, powers, and privileges.
"Second Parent Issuance" has the meaning ascribed thereto in Section
8.02(c)(i) hereof.
"Second Parent Issuance Documentation" means any indenture and all other
written agreements and documentation relating to the Second Parent Issuance to
be entered into in accordance with the terms of Section 8.02(c) hereof, as such
documentation is permitted to be amended by Section 8.05 hereof.
"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.
"Shareholder" or "Shareholders" means, on any date of determination, the
shareholders of the Parent.
"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 Agent, as designated by Administrative Agent from time to time.
"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.
---------
23
<PAGE>
"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,
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.
"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.
"Term Loan A Advance" means the initial advance and any of the Refinancing
Advances made under the Term Loan A.
"Term Loan B Advance" means the initial advance and any of the Refinancing
Advances made under the Term Loan B.
"Term Loan A" means the term loan made by the Lenders pursuant to Section
2.01(c) of this Agreement.
"Term Loan B" means the term loan made by the Lenders pursuant to Section
2.01(d) of this Agreement.
24
<PAGE>
"Term Loan A Initial Advance" has the meaning set forth in Section 2.01(c)
hereof.
"Term Loan B Initial Advance" has the meaning set forth in Section 2.01(d)
hereof.
"Term Loan A Note" means each Note of the Borrower evidencing Term Loan A
Advances hereunder, substantially in the form of Exhibit A-3 hereto with respect
-----------
to Term Loan A Advances made under the Term Loan A, together with any extension,
renewal or amendment thereof, or substitution therefor.
"Term Loan B Note" means each Note of the Borrower evidencing Term Loan B
Advances hereunder, substantially in the form of Exhibit A-4 hereto with respect
-----------
to Term Loan B Advances made under the Term Loan B, together with any extension,
renewal or amendment thereof, or substitution therefor.
"Term Loan A Specified Percentage" means, as to any Lender, (a) prior to
the initial Term Loan A Advance, the percentage indicated beside its name on the
signature pages hereof designated as its Term Loan A Specified Percentage, or as
adjusted or specified (i) in any Assignment and Acceptance or (ii) in any
amendment to this Agreement, and (b) after the initial Term Loan A Advance, the
percentage of the outstanding portion of the Term Loan A held by such Lender on
any date of determination (after giving effect to assignments in accordance with
the terms of Section 11.04 hereof).
"Term Loan B Specified Percentage" means, as to any Lender, (a) prior to
the initial Term Loan B Advance, the percentage indicated beside its name on the
signature pages hereof designated as its Term Loan B Specified Percentage, or as
adjusted or specified (i) in any Assignment and Acceptance or (ii) in any
amendment to this Agreement, and (b) after the initial Term Loan B Advance, the
percentage of the outstanding portion of the Term Loan B held by such Lender on
any date of determination (after giving effect to assignments in accordance with
the terms of Section 11.04 hereof).
"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.
"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
25
<PAGE>
executed or acquired 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.
"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 June 30, 2001, $50,000,000 (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 Revolver B Commitment in
accordance with the terms of Section 2.18 hereof), and (b) on and after June 30,
2001, $0.00.
"Withdrawal Liability" has the meaning given such term under Part I of
Subtitle E of Title IV of ERISA.
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. THE LOAN FACILITIES
2.01. The Loans.
(a) The Revolver A Loan. 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 First Maturity Date, in an aggregate principal amount not to exceed at
any time outstanding such Lender's Revolver A Specified Percentage of the
Revolver A Commitment. Subject to the terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow the Revolver A
Advances; provided, however, that at no time shall the sum of all
-------- -------
outstanding Revolver A Advances exceed the Revolver A Commitment.
26
<PAGE>
(b) The Revolver B Loan. 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 First Maturity Date, in an aggregate principal amount not to exceed at
any time outstanding such Lender's Revolver B Specified Percentage of the
Revolver B Commitment. Subject to the terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow the Revolver B
Advances; provided, however, that at no time shall the sum of all
-------- -------
outstanding Revolver B Advances exceed the Revolver B Commitment.
(c) Term Loan A. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make a Term Loan A
available to the Borrower on the Closing Date in an aggregate principal
amount equal to such Lender's Term Loan A Specified Percentage of
$125,000,000. The Term Loan A must be borrowed in one initial Advance only
(the "Term Loan A Initial Advance"), which such Term Loan A Initial Advance
must be made on the Closing Date or at any time after the Closing Date but
prior to December 31, 1999. If the Borrower has not borrowed the Term Loan
A Initial Advance prior to December 31,1999, the obligations of the Lenders
to make the Term Loan A available under this Section 2.01(c) shall
terminate. Once borrowed and repaid, no Term Loan A Advance may be
reborrowed.
(d) Term Loan B. Each Lender severally agrees, on the terms and
subject to the conditions hereinafter set forth, to make a Term Loan B
available to the Borrower on the Closing Date in an aggregate principal
amount equal to such Lender's Term Loan B Specified Percentage of
$175,000,000. The Term Loan B must be borrowed in one initial Advance only
(the "Term Loan B Initial Advance"), which such Term Loan B Initial Advance
must be made on the Closing Date. If the Borrower does not borrow the Term
Loan B Initial Advance on the Closing Date, the obligations of the Lenders
to make the Term Loan B available under this Section 2.01(d) shall
terminate. Once borrowed and repaid, no Term Loan B Advance may be
reborrowed.
2.02. Making Advances.
(a Each Borrowing of Advances shall be made upon the written
notice of the Borrower, received by Administrative Agent 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, and whether such Borrowing is a Revolver A Advance, Revolver B
Advance, a Term Loan A Advance or a Term Loan B Advance (provided that,
other than with respect to
27
<PAGE>
the Term Loan A Initial Advance and the Term Loan B Initial Advance, all
such borrowings under the Term Loan A and the Term Loan B shall be
Refinancing Advances);
(iii) the amount of such proposed Borrowing which, (A) in the
case of Advances under the Revolver A Loan, shall not exceed the unused
portion of the Revolver A Commitment, in the case of Advances under the
Revolver B Loan, shall not exceed the unused portion of the Revolver B
Commitment, in the case of the Term Loan A Initial Advance, shall not
exceed the Term Loan A amount of $125,000,000, and in the case of the Term
Loan B Initial Advance, shall not exceed the Term Loan B amount of
$175,000,000, (B) shall, in the case of a Borrowing of Base Advances, be in
an amount of not less than $500,000 or an integral multiple of $100,000 in
excess thereof (or any lesser amount if such amount is the remaining
undrawn portion under either of the Commitments) and (C) shall, in the case
of a Borrowing of LIBOR Advances, be in an amount of not less than
$1,000,000 or an integral multiple of $1,000,000 in excess thereof; and
(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 Agent 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 Agent, at its office at Bank of America Plaza, 901 Main Street,
Dallas, Texas 75202, such Lender's Applicable 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 Agent 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 Agent 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 Revolver A Advances shall not exceed the Revolver A
Commitment and the aggregate principal amount of outstanding Revolver B Advances
shall not exceed the Revolver B Commitment.
(d No Interest Period applicable to any Revolver Advance and Term Loan A
Advance shall extend beyond the First Maturity Date, and no Interest Period
applicable to any Term Loan B Advance shall extend beyond the Final Maturity
Date.
(e Unless a Lender shall have notified Administrative Agent prior to the
date of any Advance that it will not make available its Applicable Specified
Percentage of any such Advance (that is not a Refinancing Advance), the
Administrative Agent may assume that such Lender has made the appropriate amount
available in accordance with Section 2.02(a) hereof, and Administrative Agent
may, in reliance upon such assumption, make available to the Borrower a
28
<PAGE>
corresponding amount. If and to the extent any Lender shall not have made such
amount available to Administrative Agent, such Lender and the Borrower severally
agree to repay to Administrative Agent 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
Agent, 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 Applicable Specified
Percentage of any Advance hereunder shall not relieve any other Lender of its
obligation, if any, to make available its Applicable 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.
(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) (i) The Revolver A Advances made by each Lender shall be evidenced by
a Note in the amount of such Lender's Revolver A Specified Percentage of
$75,000,000 (as the same may be modified pursuant to Section 11.04 hereof)
in the form of Exhibit A-1 hereto.
-----------
(ii) The Revolver B Advances made by each Lender shall be evidenced
by a Note in the amount of such Lender's Revolver B Specified Percentage of
$75,000,000 or such increased amount that may constitute the Revolver B
Commitment (as the same may be modified pursuant to Section 11.04 hereof)
in the form of Exhibit A-2 hereto.
-----------
(iii) The Term Loan A Advances made by each Lender shall be evidenced
by a Note in the amount of such Lender's Term Loan A Specified Percentage
of $125,000,000 (as the same may be modified pursuant to Section 11.04
hereof) in the form of Exhibit A-3 hereto.
-----------
(iv) The Term Loan B Advances made by each Lender shall be evidenced
by a Note in the amount of such Lender's Term Loan B Specified Percentage
of $175,000,000 (as the same may be modified pursuant to Section 11.04
hereof) in the form of Exhibit A-4 hereto.
-----------
(b) Administrative Agent's and each Lender's records shall be presumptive
evidence as to amounts owed Administrative Agent and such Lender under the Notes
and this Agreement.
2.04. Optional Prepayments.
29
<PAGE>
(a) The Borrower may, upon at least two Business Days prior written notice
to Administrative Agent 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 $500,000 or a
larger integral multiple of $100,000 in excess thereof and, in the case of LIBOR
Advances, be in an aggregate principal amount of not less than $1,000,000 or a
larger integral multiple of $1,000,000 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 Agent 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 Revolver A Advances and Revolver B Advances made
solely pursuant to this Section 2.04 shall cause the Revolver A Commitment and
the Revolver B Commitment, respectively, to be reduced. Prepayments of Term Loan
A Advances and Term Loan B Advances may not be reborrowed. All prepayments made
hereunder shall be allocated in accordance with the terms and conditions of
Section 2.13(f) hereof.
2.05. Mandatory Prepayments.
(a) Excess Cash Flow. Commencing April 30, 2000 and continuing on each
April 30 thereafter, the Borrower shall pay to Administrative Agent for the
Ratable account of Lenders to repay the Obligations, an amount equal to (i) 50%
of Excess Cash Flow for the preceding fiscal year if the 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 Leverage Ratio
calculated at the end of the same period is greater than or equal to 4.00 to
1.00.
(b) Additional Equity and Allowed Debt. To the extent that the Parent, the
Borrower or any of its Subsidiaries issues any public or private indebtedness,
or equity securities (except equity permitted to be issued by the Parent in
Section 8.11 hereof and Debt permitted to be incurred by the Parent under
Section 8.02(c) hereof, but only to the extent in each case that such Debt and
equity when added together do not exceed $250,000,000 in the aggregate over the
term of this 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
30
<PAGE>
Advances, and shall reduce the Commitments in accordance with the terms of
Section 2.11(c)(ii) hereof (if applied to either Commitment by the terms of
Section 2.13(f) hereof). Upon the occurrence of a "Change of Control" as that
term is defined in the Indenture, the Borrower will repay all Advances and
Obligations hereunder (and the Commitments shall correspondingly reduce to zero
in accordance with the terms of Section 2.11(c)(iv) hereof).
(c) Asset Sales. To the extent that the Parent, 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,
such prepayment shall also reduce the Commitments in accordance with the terms
of Section 2.11(c)(iii) hereof (if applied to either Commitment by the terms of
Section 2.13(f) 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. Application of all payments and
prepayments shall be applied in accordance with the terms of Section 2.13(f)
hereof.
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) Reduction of Commitments On the date of each reduction of either
of the Commitments 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 the amount of all Revolver A Advances and Revolver B Advances
outstanding on the date of reduction exceeds the Revolver A Commitment and the
Revolver B Commitment, respectively as reduced, which principal payment may not
be made by means of a Refinancing Advance.
(c) Maturity Dates. All outstanding Advances under the Revolving Loans
and the Term Loan A shall be due and payable in full on the First Maturity Date.
All outstanding Advances under the Term Loan B shall be due and payable in full
on the Final Maturity Date. All other outstanding Obligations shall be due and
payable in full on the Final Maturity Date.
(d) Installment Repayments of Term Loan A and Term Loan B. After June
30, 2001, each of the Term Loan A and Term Loan B shall be repaid by the
Borrower on each Quarterly Date, in an amount on each such date equal to the
percentage set forth below of the outstanding Term Loan A Advances and the
outstanding Term Loan B Advances, respectively, in effect on June 30, 2001, in
each case opposite each such Quarterly Date, until each of the Term Loan A
31
<PAGE>
and the Term Loan B has been repaid in full. The first such installment
repayment shall occur on September 30, 2001, and continue thereafter as follows:
<TABLE>
<CAPTION>
Repayment Pertage is equal to
the
Outstanding Amount of the Term
Loan Date of Installment Repayment A Advances and the outstanding of the
<S> <C> <C> <C>
Term Loan A Term Loan B
----------- -----------
September 30, 2001 5.00% 0.50%
December 31, 2001 5.00% 0.50%
March 31, 2002 3.75% 0.25%
June 30, 2002 3.75% 0.25%
September 30, 2002 3.75% 0.25%
December 31, 2002 3.75% 0.25%
March 31, 2003 4.50% 0.25%
June 30, 2003 4.50% 0.25%
September 30, 2003 4.50% 0.25%
December 31, 2003 4.50% 0.25%
March 31, 2004 5.50% 0.25%
June 30, 2004 5.50% 0.25%
September 30, 2004 5.50% 0.25%
December 31, 2004 5.50% 0.25%
March 31, 2005 6.25% 0.25%
June 30, 2005 6.25% 0.25%
September 30, 2005 6.25% 0.25%
December 31, 2005 6.25% 0.25%
March 31, 2006 5.00% 0.25%
June 30, 2006 5.00% 0.25%
September 30, 2006 0.00% 0.25%
December 31, 2006 0.00% 0.25%
March 31, 2007 0.00% 47.00%
June 30, 2007 0.00% 47.00%
</TABLE>
(e) 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. All repayments
shall be allocated among the Loans in accordance with the terms of Section
2.13(f) hereof.
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 First
Maturity Date with respect to Advances under the Revolving Loans and the
Term Loan A and the Final Maturity Date with respect to Advances made under
the Term Loan B. 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
Agent 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 Advances comprised in the
same Borrowing (in an aggregate amount not less than $1,000,000 or an
integral multiple of $1,000,000 in excess thereof) into Base Advances; or
33
<PAGE>
(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
$1,000,000, 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 Agent 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 and whether
such continuation or conversion is a Revolver A Advance, a Revolver B
Advance, a Term Loan A Advance or a Term Loan B Advance (or any combination
thereof);
(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.
2.10. Fees and the Fee Letter .
(a) Facility Fee. Subject to Section 11.08 hereof, the Borrower shall pay
to Administrative Agent for the account of each of the Lenders such origination
and facility fees as are agreed to by the Borrower, the Administrative Agent and
the Lenders, including those set forth in the Fee Letter.
34
<PAGE>
(b) Commitment Fee. Subject to Section 11.08 hereof, the Borrower shall
pay to Administrative Agent for the Ratable account of Lenders having Revolver A
Specified Percentages in excess of zero and Revolver B Specified Percentages in
excess of zero, a commitment fee on the average daily amount of the sum of (i)
the difference between the Revolver A Commitment and the sum of all Revolver A
Advances outstanding, plus (ii) the difference between the Revolver B Commitment
and the sum of all Revolver B Advances outstanding plus (iii) until December 31,
1999, the difference between $125,000,000 and the sum of all Term Loan A
Advances outstanding, in each case at a per annum rate based on usage equal to
the percentage set forth below, applicable in the following circumstances,
payable in each case in arrears on each Quarterly Date and on the First Maturity
Date, commencing with the first Quarterly Date after the Closing Date, and
continuing until the First Maturity Date:
Percentage of Usage
of the Revolving Loans
and the Term Loan A Commitment Fee Percentage
------------------- -------------------------
If outstanding Revolver
Advances and Term Loan A
Advances are less than 25%
of the sum of the Commitments
plus $125,000,000 1.25%
If outstanding Revolver
Advances and Term Loan A
Advances are greater than 25%
of the sum of the Commitments
plus $125,000,000 but equal to
or less than 50% 0.75%
If outstanding Revolver
Advances and Term Loan A
Advances are greater than 50%
of the sum of the Commitments
plus $125,000,000 0.50%
(c) Other Fees and the Fee Letter. The Borrower shall pay such other fees
as are set forth in Article III hereof, in the Fee Letter and in any other Loan
Paper, in each case in accordance with the terms of such agreements. The
Borrower agrees to perform, over the term of this Agreement, all terms,
conditions and agreements of the Fee Letter in accordance with the terms
thereof.
2.11. Reduction of Commitments .
(a) Mandatory Termination of the Commitments. The Revolver A Commitment
and the Revolver B Commitment shall reduce to zero and terminate on the First
Maturity Date.
35
<PAGE>
(b) Mandatory Scheduled Reduction of the Commitments. After June 30, 2001,
each of the Revolver A Commitment and the Revolver B Commitment shall each
automatically reduce on each Quarterly Date, in a reduction amount on each such
date equal to the percentage set forth below of the Revolver A Commitment and
the Revolver B Commitment, respectively, in effect on June 30, 2001, in each
case opposite each such Quarterly Date, until each of the Revolver A Commitment
and the Revolver B Commitment has been reduced to zero. The first such
automatic reduction in the Commitments shall occur on September 30, 2001, and
continue thereafter as follows:
Reduction Percentage is equal to the
Percentage of the Revolver A Date of Automatic Reduction
Commitment and the Revolver B of the Revolver A Commitment Commitment,
respectively, in effect on
and the Revolver B Commitment June 30, 2001
----------------------------- -------------
September 30, 2001 5.00%
December 31, 2001 5.00%
March 31, 2002 3.75%
June 30, 2002 3.75%
September 30, 2002 3.75%
December 31, 2002 3.75%
March 31, 2003 4.50%
June 30, 2003 4.50%
September 30, 2003 4.50%
December 31, 2003 4.50%
March 31, 2004 5.50%
June 30, 2004 5.50%
September 30, 2004 5.50%
December 31, 2004 5.50%
March 31, 2005 6.25%
June 30, 2005 6.25%
September 30, 2005 6.25%
December 31, 2005 6.25%
March 31, 2006 5.00%
June 30, 2006 5.00% and the Revolver A
Commitment and the Revolver B
Commitment shall each be
reduced to zero
(c) Reduction of the Commitments. The Commitments shall be permanently
reduced, pro rata between the Revolver A Commitment and the Revolver B
Commitment from time to time:
(i) on the date of, and by the amount of, each Excess Cash Flow mandatory
prepayment required by Section 2.05(a) hereof,
36
<PAGE>
(ii) on the date of, and by the amount of, each mandatory prepayment made
from the issuance of equity or debt, in each case only as required to be
prepaid by Section 2.05(b) hereof,
(iii) on the date of, and by the amount of, each mandatory prepayment made
from the sale of assets, in each case only as required to be prepaid by
Section 2.05(c) hereof, and
(iv) on the date of any occurrence of a "Change of Control" as that term
is defined in the Indenture, the Commitments will each automatically be
reduced to zero and terminate.
No reduction in the Commitments set forth in 2.11(c) above shall reduce or
relieve the automatic scheduled reduction of the Commitments required by Section
2.11(b) above.
(d) Voluntary Reduction of the Commitments. The Borrower may from time to
time, upon notice to Administrative Agent not later than 1:00 p.m., five
Business Days in advance, terminate in whole or reduce in part either of the
Commitments, 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 $5,000,000. No voluntary
reduction in the Commitments permitted by this Section 2.11(d) shall reduce or
relieve the automatic scheduled reduction of the Commitments required by Section
2.11(b) above.
(e) 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 the outstanding
Revolver A Advances exceed the Revolver A Commitment after any reduction
thereof, or the outstanding Revolver B Advances exceed the Revolver B 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, neither of the Commitments may be increased or
reinstated, except with respect to the Revolver B Commitment, and only in
accordance with Section 2.18 hereof. Application of all reductions in the
Commitments shall be in accordance with the terms of Section 2.13(f) 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 Agent 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.
37
<PAGE>
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 Agent, for the Ratable account of Lenders unless otherwise
specifically provided herein, at Administrative Agent's office at Bank of
America 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 Judy Schneidmiller, at
(214) 209-2135, or such other Person as Administrative Agent may from time to
time specify.
(b) Unless Administrative Agent 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 Agent 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 Agent
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 Agent 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.
(f) Notwithstanding anything to the contrary herein or in any Loan Paper,
to the extent the Borrower makes any voluntary prepayment, or voluntary
reduction of the
38
<PAGE>
Commitments under Sections 2.04 or 2.11 hereof, or any mandatory prepayment, or
mandatory reduction of the Commitments under Sections 2.05 and 2.11 hereof, then
such reduction of Commitments or such prepayment shall be applied as follows:
(i) so long as there exists no Default or Event of Default, all
voluntary Commitment reductions and all voluntary repayments and
prepayments shall be applied as directed by the Borrower, and in the
absence of direction by the Borrower, shall be deemed to prepay and reduce,
respectively (1) pro rata between the Revolver A Commitment and the
Revolver B Commitment and the Revolving Loans, until each of the
Commitments have been reduced to zero and the outstandings under the
Revolving Loans have been repaid in full, then (2) the Term Loan A and the
Term Loan B, pro rata, until all outstanding Term Loan A Advances and Term
Loan B Advances have been repaid in full and (3) to all remaining
outstanding and unpaid Obligations; provided that, so long as there exists
no Default or Event of Default, each Lender having a Term Loan B Specified
Percentage in excess of zero may elect to decline all voluntary and
mandatory prepayments made or allocated to Term Loan B in accordance with
the terms of this Agreement, in which case such declined prepayments shall
be allocated to the Revolving Loans and the Term Loan A pro rata;
(ii) if there exists a Default or Event of Default, all mandatory and
voluntary Commitment reductions and mandatory and voluntary repayments and
prepayments shall be applied pro rata among the Revolving Loans, the Term
Loan A and the Term Loan B, and then to all remaining outstanding
Obligations; and
(iii) all Term Loan A and Term Loan B repayments and prepayments
shall be applied to installments due thereunder in the inverse order of
maturity, and all repayments and prepayments, and reductions to the
Commitments shall not affect the mandatory commitment reduction schedule
set forth in Section 2.11(b) hereof.
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
39
<PAGE>
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 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.
(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
40
<PAGE>
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 Agent 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 Agent 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 Agent 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 Agent 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 Agent that such
Lender has determined that the circumstances causing such suspension no longer
exist and Administrative Agent notifies the Borrower of such fact.
(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
41
<PAGE>
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 Revolver A Advances and the
Term Loan B 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. The proceeds of the Revolver B Advances and
the Term Loan A Advances shall be solely used in connection with the acquisition
of assets in accordance with the terms of Section 1008(v) of the Indenture, such
that all Revolver B Advances and all Term Loan A Advances constitute in each
case, Acquisition Debt in accordance with the terms of the Indenture, the other
Parent Senior Notes Documentation and permitted fully secured indebtedness under
all Second Parent Issuance Documentation.
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)
certain pre-existing leasehold deeds of trust and/or mortgages on Borrower's
leasehold interest under certain Ground Leases (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 Agent may from time to time reasonably request to create and
perfect a first Lien for the benefit of the Administrative Agent and the Lenders
in the Collateral, provided that, notwithstanding the foregoing, the Borrower is
not obligated to grant or perfect any leasehold deed of trust or leasehold
mortgage.
(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 Agent 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 Agent 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(a), (b)
and (d) hereof with respect to all owned or acquired real estate by the Borrower
or any
42
<PAGE>
Subsidiary from time to time. The Borrower shall, and shall cause the
Subsidiaries of the Borrower to, provide for the benefit of Administrative Agent
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 Agent with UCC-1's, new security
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 Agent from time to time.
Notwithstanding the foregoing, in no event shall the Borrower be obligated to
grant, or perfect, any leasehold mortgage or leasehold deed of trust.
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 Agent 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 Agent 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 Revolver B Commitment .
Prior to June 30, 2001, upon written request by the Borrower to the
Administrative Agent and any other existing Lenders of its choice not less than
five Business Days prior to the proposed effective date of the proposed
increase, the Revolver B Commitment shall, subject to the further terms and
conditions set forth below, increase to a maximum of $125,000,000 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 Revolver B Commitment and the
subsequent Revolver B Advance to the Borrower up to the amount of the
Revolver B 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, 1998; and
43
<PAGE>
(d) On any date of proposed increase, the sum of all Revolver B
Advances outstanding (after giving effect to any proposed Revolver B
Advance to be made on such date) shall not exceed the Revolver B
Commitment; and
(e) The proposed increase shall occur prior to June 30, 2001 and the
Revolver B Commitment as increased shall not be in excess of the sum of the
Revolver B 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 Revolver B
Commitment not more than five times, in an aggregate amount for such
increases not to exceed the Unavailable Commitment . Each Lender specified
by the Borrower shall have received not less than 5 Business Days' prior
written notice from the Borrower requesting such Revolver B Commitment
increase. Each such Lender electing to participate in such Revolver B
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 Agent that is equal to or less than its proposed portion of
the Revolver B 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 Agent 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 Agent; and
(h) Each of the proposed increases shall be in an aggregate minimum
amount of $10,000,000 and $5,000,000 multiples thereof; and
(i) The Administrative Agent 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
(j) Each new Lender (including any new Lenders party hereto) shall
have received a promissory Note evidencing its new Revolver B Specified
Percentage of the Revolver B Commitment, and the Borrower and each new
Lender agrees to execute any and all such documents deemed necessary by the
Administrative Agent in order to effectuate this Section 2.18 (whether UCC-
1s, new documentation relating to any Collateral, Guaranty or otherwise);
and
44
<PAGE>
(k) On the date of increase, the Administrative Agent shall deliver to
each Lender evidence of new Revolver B Specified Percentages adjusted to
give effect to the increase in the Revolver B 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
Agent documentation acceptable to the Administrative Agent evidencing such
new Lender's acceptance of this Agreement and all the other Loan Papers in
form and substance reasonably acceptable to the Administrative Agent (and
making such lender a party to this Agreement and the other Loan Papers);
and
(m) The Administrative Agent 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 Agent 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 Revolver B Commitment shall (i) never exceed the sum of the
Revolver B 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 Revolver B
Commitment; and
(q) The Administrative Agent on behalf of each Lender shall have
received all amendments to security agreements, deeds of trust and
mortgages as the Administrative Agent 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 Revolver B Commitment without its written consent in its sole discretion.
In connection with any increase to the Revolver B 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 Agent to effectuate the intent of
this Section 2.18. 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
45
<PAGE>
3.01. Issuance of Letters of Credit. Letters of Credit issued under the
Original Credit Agreement shall be deemed, for the purposes of this Agreement,
to be issued hereunder, and each such Letter of Credit shall be treated
accordingly. The Borrower shall give the Administrative Agent not less than five
Business Days prior written notice of a request for the issuance of a Letter of
Credit, and the Administrative Agent 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 Agent 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 First 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 Revolver B 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 Agent 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 Revolver B 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 Revolver B 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 $75,000,000 (as may be increased by Section 2.18 hereof, and as
may be reduced by Section 2.11 hereof), and at no time shall the sum of all
Revolver B 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
Revolver B Specified Percentage of the Revolver B 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 Agent for its
own account, an application and 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 Agent for the account of the Administrative
Agent and the Lenders in accordance with their Revolver B 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 Agent 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.
46
<PAGE>
3.03. Reimbursement Obligations.
(a) The Borrower hereby agrees to reimburse Administrative Agent
immediately upon demand by Administrative Agent, and in immediately available
funds, for any payment or disbursement made by Administrative Agent under any
Letter of Credit. Payment shall be made by the Borrower with interest on the
amount so paid or disbursed by Administrative Agent 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 Revolver B Specified
Percentage, shall automatically be deemed made on the date of any such payment
or disbursement made by Administrative Agent in the amount of such obligation
and subject to the terms of this Agreement.
(b) The Borrower hereby also agrees to pay to Administrative Agent
immediately upon demand by Administrative Agent 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 Agent shall elect. All such
amounts deposited with Administrative Agent shall be and shall remain funds of
the Borrower on deposit with Administrative Agent and may be invested by
Administrative Agent as Administrative Agent shall determine. Such amounts may
not be used by Administrative Agent to pay the drawings under the Letters of
Credit; however, such amounts may be used by Administrative Agent as
reimbursement for Letter of Credit drawings which Administrative Agent 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 Agent 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 Agent
upon demand for all amounts paid under the Letters of Credit as set forth in
Section 3.03(a) hereof; provided,
47
<PAGE>
however, if the Borrower for any reason fails to reimburse Administrative Agent
in full upon demand, whether by borrowing Advances to pay such reimbursement
obligations or otherwise, the Lenders shall reimburse Administrative Agent in
accordance with each Lender's Revolver B 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 Agent.
(e) The Borrower shall indemnify and hold Administrative Agent or any
Lender, its officers, directors, representatives and employees harmless from
loss for any claim, demand or liability which may be asserted against
Administrative Agent 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 Agent or such indemnified
party), and shall pay Administrative Agent for reasonable fees of attorneys (who
may be employees of Administrative Agent) and legal costs paid or incurred by
Administrative Agent 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 Agent or such
indemnified party. If the Borrower for any reason fails to indemnify or pay
Administrative Agent or such indemnified party as set forth herein in full, the
Lenders shall indemnify and pay Administrative Agent upon demand, in accordance
with each Lender's Revolver B 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 Agent (to the extent Administrative
Agent is not otherwise reimbursed by the Borrower in accordance with Section
3.03(a) hereof) on demand for such Lender's Revolver B Specified Percentage of
each draw paid by Administrative Agent 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 First
Maturity Date and shall survive termination of any Loan Papers.
3.05. Administrative Agent's Obligations.
(a) Administrative Agent 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 Agent assumes no responsibility for
the financial condition of the Borrower and its Subsidiaries or for the
performance of any obligation of the Borrower. Administrative Agent 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 Agent
shall be under no liability to any Lender, with respect to anything the
Administrative Agent may do or refrain from doing in the exercise of its
judgment, the sole liability and responsibility of Administrative
48
<PAGE>
Agent being to handle each Lender's share on as favorable a basis as
Administrative Agent handles its own share and to promptly remit to each Lender
its share of any sums received by Administrative Agent under any Application.
Administrative Agent 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 Agent 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 negligence or willful misconduct, and no Lender waives its right to
institute legal action against Administrative Agent for wrongful payment of any
Letter of Credit due to Administrative Agent's gross negligence or willful
misconduct. Administrative Agent 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 Agent to be genuine or authentic and to be signed by
the proper party.
ARTICLE IV. CONDITIONS PRECEDENT
4.01. Conditions Precedent to Closing, Effectiveness of this Agreement and
the Refunding Advance. The effectiveness of this Agreement and to make the
initial refunding Advance to refinance the existing indebtedness, or issue the
first Letter of Credit is subject to receipt by the Administrative Agent of each
of the following, in form and substance satisfactory to the Administrative
Agent, 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
conducting material business;
(b) duly executed Notes, payable to the order of each Lender in an
amount for each Lender (i) equal to its Revolver A Specified Percentage of the
Revolver A Commitment, (ii) equal to its Revolver B Specified Percentage of the
Revolver B Commitment, (iii) equal to its Term Loan A Specified Percentage of
$125,000,000 and (iv) equal to its Term Loan B Specified Percentage of
$175,000,000;
49
<PAGE>
(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 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, including, without limitation, an
opinion of counsel to the Borrower that this Agreement does not violate or
conflict with any term or condition of the Indenture of any of the other Parent
Senior Notes Documentation;
(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) payment of all fees due to the Administrative Agent in accordance
with the terms of the Fee Letter to be paid on the Closing Date and
reimbursement for Administrative Agent 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 Agent, 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, 1998; (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) a duly completed Compliance Certificate evidencing no Default or
Event of Default as of the Closing Date; and
50
<PAGE>
(k) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Agent 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 Agent 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 Agent. 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 Agent 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 such Advance or such
Letter of Credit, and the Administrative Agent 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, 1998;
(e) In the case of each Letter of Credit, Borrower shall have delivered
to the Administrative Agent a duly executed and complete Application acceptable
to Administrative Agent;
(f) In the case of any Advance under the Revolving Loan, the aggregate
outstanding Revolver A Advances, after giving effect to any such proposed
Revolver A Advance, shall not exceed the Revolver A Commitment, and the
aggregate outstanding Revolver B Advances, after giving effect to any such
proposed Revolver B Advance, shall not exceed the Revolver B Commitment,
(g) In the case of any Advance under the Revolving B Loan and/or the
Term Loan A Initial Advance, and/or the issuance of any Letter of Credit, the
Borrower, by making its
51
<PAGE>
borrowing request under such Revolving B Loan and/or the Term Loan A, or
requesting the issuance of any Letter of Credit, represents and warrants to the
Administrative Agent and each Lender that the proceeds of such Advance shall be
used in accordance with the terms of Section 2.15 hereof, and
(h) Notwithstanding anything to the contrary herein or in any other Loan
Paper, until the earlier of (i) the consummation of the Motorola Acquisition in
accordance with the terms of Section 4.04 hereof or (ii) the date upon which the
Total Specified Percentage of the Administrative Agent is equal to or less than
11.11% due to assignments to Lenders in accordance with the terms of Section
11.04 hereof, and only after the Administrative Agent has received written
notice from the Borrower in accordance with the terms of Section 6.19 hereof,
the sum of (A) the aggregate amount of all outstanding Advances under the Loans,
plus (B) the aggregate face amount of all outstanding and undrawn Letters of
Credit, plus (C) the aggregate amount of all outstanding reimbursement
obligations with respect to draws on Letters of Credit may not, at any time,
exceed $250,000,000.
4.03. Conditions Precedent to Advances for Permitted Acquisitions, Except
the Motorola Acquisition. 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 except the Motorola Acquisition, shall be subject to
the further conditions precedent that the Borrower has complied with all terms
and provisions of Sections 6.15 and 6.16 hereof.
4.04. Conditions Precedent to Motorola Acquisition and the Making of any
Advance with Respect Thereto. The obligation of each Lender to make any Advance
in connection with Motorola Acquisition and the consummation by the Borrower of
the Motorola Acquisition shall each be subject to the further conditions
precedent that:
(a) the Borrower has complied with all terms and provisions of Sections
4.02, 4.03, 6.15, 6.16, 6.18 and 6.19 hereof and all other terms and conditions
of this Agreement and the Loan Papers,
(b) the Borrower shall have delivered to the Administrative Agent (i)
audited financial statements for the fiscal year ended December 31, 1998, (ii)
any later audited financial statements of the assets, (iii) financial statements
for the fiscal quarters ending March 31, 1999 and June 30, 1999 (to the extent
the June 30, 1999 financial statements are available and in the possession of
the Borrower), in each case in connection with the towers and other assets being
acquired by the Borrower from Motorola and financial statements, and (iv) such
other financial information regarding Motorola, the Motorola Acquisition and the
towers and other assets being acquired by the Borrower from Motorola as the
Administrative Agent or any other Lender shall reasonably request,
(c) the Borrower shall have entered into the Acquisition Agreement and
shall have delivered an executed copy of the Acquisition Agreement to the
Administrative Agent together with all exhibits and schedules thereto,
52
<PAGE>
(d) consummation of the Motorola Acquisition concurrently with the
application of Advances under this Section 4.04, on terms and conditions as set
forth in the Acquisition Agreement, and pursuant to such other documentation
contemplated by the Acquisition Agreement that is reasonably acceptable to the
Administrative Agent and the Lenders in their reasonable discretion,
(e) the absence of a material adverse change in the financial condition,
business operations, properties or prospects of the towers and other assets
being acquired by Borrower from Motorola,
(f) the Administrative Agent shall have not discovered that any
information or other matter disclosed to the Administrative Agent and BAS by the
Borrower, the Parent or Motorola, prior to the date hereof and regarding
Motorola and the Motorola Acquisition, and/or the assets being acquired by the
Borrower in connection with the Motorola Acquisition, is incorrect, or
inconsistent with current information, in each case, in both a material and
adverse manner, when taken as a whole as it relates to the assets being
purchased,
(g) evidence that the Borrower has received not less than $30,000,000 in
gross proceeds (or such greater amount that is raised by the Parent) as an
equity contribution from the Parent which issued unsecured public Debt for
Borrowed Money of the Parent or Bridge Debt of the Parent or equity of the
Parent and downstreamed the proceeds to the Borrower, any such Debt for Borrowed
Money and Bridge Debt to be incurred by the Parent in accordance with the terms
of Section 8.02(c) hereof and upon other terms and conditions acceptable to the
Administrative Agent and the Majority Lenders,
(h) executed copies of all material agreements, certificates,
instruments and other documents, together with schedules thereto, in each case
executed or delivered by any Person in connection with the Motorola Acquisition,
each in form and substance satisfactory to the Lenders and Special Counsel,
including, without limitation, opinions of counsel (if any) with respect to the
Parent, the Borrower and Motorola (which such opinions of counsel to the
Borrower and the Parent and their subsidiaries (if any) shall state that the
Lenders are entitled to rely thereon), and
(i) in form and substance satisfactory to the Lenders and Special
Counsel, such other documents, instruments and certificates as the
Administrative Agent or any Lender may reasonably require from the Borrower, the
Parent and their Subsidiaries in connection with the Motorola Acquisition,
including without limitation, and all such documents, instruments, certificates
and other items reasonably requested by the Lenders in connection with the
enforceability of, and security in, the assets and towers being acquired from
Motorola as collateral for the Obligations.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties. The Borrower hereby represents and
warrants to each Lender as follows:
53
<PAGE>
(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 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.
54
<PAGE>
(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 Agent on behalf of the
Lenders), in accordance with their respective terms, including any borrowings
hereunder.
(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
55
<PAGE>
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 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 audited financial statements at December 31, 1998, 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 Agent 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 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
56
<PAGE>
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.
(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
57
<PAGE>
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 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,
58
<PAGE>
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.
(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 Agent 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 Agent to secure the Obligations and delivered to
the Administrative Agent together with stock powers executed in blank. All
Capital Stock of the Borrower is pledged to the Administrative Agent on behalf
of Lenders to secure the Obligations. No Person has conversion rights with
respect to, or any subscription rights, calls, commitments
59
<PAGE>
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
Commitments or the Advances hereunder. The Borrower agrees to indemnify and
hold harmless the Administrative Agent 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.
(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 Agent 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 Oral Lease. No Tenant Lease is
a Oral Lease,
60
<PAGE>
except, if the Borrower is in compliance with Section 6.15(c) below, the
Borrower may have Oral 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 Agent 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.
(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) Either (i) Parent (A) 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, (B) has not
engaged in any "prohibited transactions" as defined in Section 857(b)(6)(B)(iii)
and (C) of the Code and (C) 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, or (ii) the Borrower has delivered
written notice to the Administrative Agent in accordance with the terms of
Section 7.04(e) hereof, that a REIT Conversion has occurred.
(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.
(bb) The Motorola Acquisition is 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 any Applicable Law in connection with the Motorola
Acquisition and have received all necessary or required approvals and consents
with respect to the Motorola Acquisition, which such consents and approvals are
final, and are in all material respects in compliance therewith. 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 by
Motorola or its Subsidiaries or the Parent, the Borrower and its Subsidiaries.
The Parent, the Borrower and its Subsidiaries have or will have good and
indefeasible title to, or a valid leasehold interest in, all assets being
purchased from Motorola in connection with the Motorola Acquisition, free and
clear of all Liens and security interests, except Permitted Liens and Liens
permitted under Section 8.03
61
<PAGE>
hereof . 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 Motorola or any of its
Subsidiaries regarding or relating to the Motorola Acquisition or the assets of
Motorola being purchased by the Borrower, or in any other manner relating
directly and materially adversely to the Parent, the Borrower, any of its
Subsidiaries, or Motorola or any of its Subsidiaries in connection with the
assets being sold by Motorola, in any court or before any arbitrator of any kind
or before or by any governmental body. The Borrower has furnished or caused to
be furnished to the Lenders copies of audited financial statements of Motorola
at December 31, 1998, which are prepared in good faith and complete in all
material respects and present fairly in all material respects and in accordance
with GAAP, the financial position of the Motorola as at such dates and the
results of operations for the periods then ended. Motorola has no material
liabilities, contingent or otherwise, nor material losses, except as disclosed
on such financial statements.
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 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 any portion
of either of the Commitments 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 agreements to which
each is a party.
62
<PAGE>
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 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 Agent of any proposed
termination or cancellation of such policy, whether on account of default or
otherwise and all property insurance shall name the Administrative Agent 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 Agent 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 Agent 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.
63
<PAGE>
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.
6.09. Use of Proceeds. The Borrower shall use the proceeds of Advances
solely as set forth in Section 2.15 hereof.
6.10. Indemnity.
(a) The Borrower agrees to defend, protect, indemnify and hold harmless
the Administrative Agent, 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 Agent or any Lender (other than those
matters raised exclusively by a participant against the Administrative Agent 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 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
64
<PAGE>
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Borrower, the Administrative Agent, 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 Agent 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
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 Agent 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 September
30, 1999, the Borrower will enter into an Interest Rate Protection Agreement on
terms acceptable to the Administrative Agent providing for interest rate
protection for one year for 50% of the principal of the Obligations outstanding
on September 30, 1999, and the Borrower shall thereafter, until the third
anniversary of the Closing Date, maintain an Interest Rate Protection Agreement
in
65
<PAGE>
effect at all times on terms acceptable to the Administrative Agent 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 Agent 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 will either (a) (i) continue to be qualified as a real
estate investment trust as defined in Section 856 of the Code, (ii) not engage
in any "prohibited transactions" as defined in Section 857(b)(6)(B)(iii) or (C)
of the Code, (iii) continue to satisfy the conditions and limitations set forth
in Sections 856(b) and 856(c) of the Code and (iv) will do all acts necessary to
continue to be entitled to a dividend paid deduction under Section 857 of the
Code, or (b) elect to not maintain its REIT Status and notify the Administrative
Agent and each Lender of its decision in writing in accordance with the
provisions of Section 7.04(e) hereof. The Borrower and each of its Subsidiaries
will either (a) continue to be a Qualified REIT Subsidiary so long as the Parent
remains a REIT, or (b) elect not to qualify as a Qualified REIT Subsidiary and
notify the Administrative Agent and each Lender of its decision in writing in
accordance with the provisions of Section 7.04(e) hereof.
6.15. Tenant Leases, Ground Leases and Fee Owned Property.
(a) Tenant Leases and Fee Owned Properties. 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 Oral Leases provided that, the Borrower is permitted to have Oral
Leases so long as the sum of the aggregate Tenant Lease Revenues from all Oral
Leases, at no time after the 90th day after the Closing Date exceeds 10% of the
total revenues of the Borrower and its Subsidiaries for the most recently
completed calendar month during the term of this Agreement. The Borrower
covenants that it will use commercially reasonable efforts to insure that each
Tenant Lease (a) is not oral and is subject to written agreement, (b) does not
prohibit or render unenforceable or void any Lien of the Administrative Agent or
any foreclosure and/or operation of the Tower on which such Tenant Lease is
located by the Lenders, whether by contractual provision, operation of law or
otherwise, and (c) does not have any provision preventing, hindering or
prohibiting the Administrative Agent from directly receiving the rents,
receivables or other Tenant Lease Revenues from the lessee (or the effect of
which prevents, hinders or prohibits such action by the operation of Law). The
Borrower shall use commercially reasonable efforts to immediately provide the
Lenders with each item for each piece of real fee owned real Property 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.
(b) Ground Leases. 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
66
<PAGE>
substantially in the form set forth on Exhibit K hereto, or with such other
---------
provisions as are approved by the Administrative Agent in writing. The Borrower
shall use commercially reasonable efforts to immediately provide the Lenders
with respect to each Ground Lease, Estoppel and Attornment Language immediately
after each Permitted Acquisition including the Motorola Acquisition or other
creation or acquisition of any real Property by the Borrower or any Subsidiary
of the Borrower.
(c) Breach of Section 6.15(a) above. In the event any provision of Section
-------------------------------
6.15(a) 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) 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 all Tenant Lease Revenues
from any Oral Lease in excess of the fifteen percent limitation, will be
excluded from revenues for the purpose of determining EBITDA in connection with
any determination of (I) the Leverage Ratio (with respect to the determination
of Section 8.01(a) hereof and the Applicable Margin), the Consolidated Leverage
Ratio in Section 8.01(b) hereof, the consolidated interest coverage ratio set
forth in Section 8.01(c) hereof, the pro forma debt service coverage ratio set
forth in Section 8.01(d) hereof and the fixed charge coverage ratio set forth in
Section 8.01(e) hereof, and such exclusion from EBITDA for such purposes will
continue until five Business Days after the date the Borrower delivers to the
Administrative Agent a certificate of an Authorized Officer certifying that
there exists no breach under Section 6.15(a) above, in detail satisfactory to
the Administrative Agent. 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 Agent 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 Agent to fully
effect the foregoing, including, without limitation, providing the
Administrative Agent 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 Agent from time
to time.
67
<PAGE>
(ii) Leasehold Property. The Borrower shall use commercially reasonable
------------------
efforts to deliver to the Administrative Agent, within 60 days after each
Permitted Acquisition, a list of each leasehold site acquired by the
Borrower, the purpose each such leased site serves and Estoppel and
Attornment Language for each such site.
(iii) Fee Owned 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.
6.16. Acquisitions, Generally. In connection with any acquisition made by
the Borrower during the term of this Agreement, the Borrower shall, in addition
to the requirements set forth in Sections 4.04, 6.15 and 6.18 (to the extent
applicable) hereof, with respect to individual Permitted Acquisitions in excess
of $20,000,000 and any series of related Permitted Acquisitions which in the
aggregate exceed $20,000,000, (a) deliver notice to Administrative Agent at such
time prior to the proposed acquisition date as is reasonable under the
circumstances, together with (or, the following may be delivered later than the
notice (but still prior to the proposed acquisition), so long as such delivery
is reasonable under the circumstances, and copies of agreements are delivered
promptly upon execution of each such agreement: (i) a detailed description of
the proposed Permitted Acquisition in form reasonably acceptable to the
Administrative Agent, a description and location of all fee owned real property,
all Towers and all other assets (together with all legal descriptions of all
real property (fee owned) available at such time), (ii) the address of any
office acquired, (iii) the most recent financial statements with respect to the
acquired assets and/or Person, and to the extent available, the most recent
audited financial statements, and (iv) a copy of the purchase agreement,
schedules thereto and all related documentation (unless such schedules or
documentation are 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 ten 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 pro forma Compliance Certificate computed after
giving effect to such acquisition and borrowings (A) for acquisitions having
purchases prices in excess of $20,000,000 but less than $50,000,000, evidencing
compliance with the terms of this Agreement for the lesser of two years after
the consummation of the proposed acquisition or the remainder of the term of
this Agreement, together with all projections of the Parent, the Borrower and
any acquired assets and/or Person used to compute the Compliance Certificate and
(B) for acquisitions having purchases prices in excess of $50,000,000,
evidencing compliance with the terms of this Agreement for the remainder of the
term of this Agreement, together with all projections of the Parent, the
Borrower and any acquired assets and/or Person used to compute the Compliance
Certificate.
68
<PAGE>
6.17. Year 2000. The Borrower has (a) undertaken a detailed review and
assessment of all areas within its business and 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").
6.18. Motorola Acquisition. The Borrower shall consummate the Motorola
Acquisition not later than October 31, 1999 and such Motorola Acquisition shall
(a) have a total purchase price not in excess of $255,000,000 plus normal
prorated adjustments, and (b) be consummated in accordance with the terms and
provisions of the Acquisition Agreement and upon other terms and conditions
proposed by Motorola and the Borrower as are reasonably acceptable to the
Administrative Agent and the Majority Lenders in their reasonable discretion.
Prior to or concurrent with, as applicable, the consummation of the Motorola
Acquisition, the Borrower shall comply with all provisions of Section 4.04
hereof, Section 6.16 hereof and Section 2.16(b) hereof, and the Administrative
Agent shall have a Lien to secure the Obligations on all such assets acquired in
connection with the Motorola Acquisition contemplated by Section 2.16 hereof to
be granted to the Administrative Agent. Notwithstanding anything in this
Agreement or in any other Loan Paper to the contrary, in the event that the
Motorola Acquisition is not consummated in accordance with the terms of the
Acquisition Agreement by October 31, 1999, then, the Borrower and the Parent
agree that, not later than November 30, 1999, Section 2.06(d) and Section
2.11(b) of this Agreement and the Loan Papers shall have been renegotiated by
the Parent, the Borrower, the Administrative Agent and BAS, to the reasonable
satisfaction of the Administrative Agent and BAS.
6.19. Notice by the Borrower. The Borrower shall immediately notify the
Administrative Agent in writing of the consummation of the Motorola Acquisition
in accordance with the terms of Section 6.18 hereof.
6.20. Syndication of the Loans. The Borrower agrees to enter into any
amendment of this Agreement and any Loan Paper in connection with any
syndication of the Loans as requested by the Administrative Agent to (a) add
Lenders with titles as agreed to by the Administrative Agent and (b) make any
other reasonably requested changes to this Agreement and the Loan Papers by any
proposed or new Lender or the Administrative Agent. The Borrower further agrees
to comply over the term of this Agreement with all provisions of the Commitment
Letter which specifically state that they shall survive the closing and
consummation of the Loans..
6.21. Additional Equity and/or Subordinated Debt. The Borrower agrees
that, by December 31, 1999 (a) the Borrower shall have received proceeds
contributed by the Parent to the Borrower as equity in an aggregate amount after
the date hereof (including the $30,000,000 the Borrower is required to receive
prior to the Motorola Acquisition in accordance with the
69
<PAGE>
terms of Section 4.04(g) hereof) not less than $100,000,000, and (b) the Parent
shall have received not less than $100,000,000 in net proceeds from the issuance
of unsecured public Debt of the Parent, Bridge Debt of the Parent or equity of
the Parent prior to December 31, 1999, in each case issued in accordance with
the provisions of Section 8.02(c) hereof and Section 8.11 hereof, as applicable.
ARTICLE VII. INFORMATION COVENANTS
So long as any of the Obligations are outstanding and unpaid or any portion
of either of the Commitments 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 consolidated operating budget of
the Borrower, the Parent, and its Subsidiaries for the succeeding fiscal year.
7.03. Compliance Certificates. At the time financial statements are
furnished pursuant to Section 7.01 hereof and Section 7.02 hereof, 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
70
<PAGE>
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 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 or electing to, as
appropriate, (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
71
<PAGE>
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, (viii) any challenge by the Internal Revenue Service to the status
of Borrower or any Subsidiary of Borrower as a Qualified REIT Subsidiary, or
(ix) any other REIT Conversion, immediate telephonic and subsequent written
notice within forty-eight hours 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 Agent
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 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
72
<PAGE>
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 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.
73
<PAGE>
7.07. Fee Owned Property, Ground Leases and Tenant Leases.
(a) Quarterly Information Regarding Fee Owned Real Property, Ground
---------------------------------------------------------------
Leases and Tenant Leases. The Borrower shall provide the Administrative Agent
- ------------------------
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
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),
and (v) a list of all Oral Leases (detailing the reason for non-compliance) and
all Tenant Lease Revenues generated by such Oral Leases, all in form and
substance acceptable to the Administrative Agent. 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(s) hereof.
(b) Annual Information Regarding Tenant Leases. The Borrower shall
------------------------------------------
provide the Administrative Agent 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 Oral 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 Agent.
ARTICLE VIII. NEGATIVE COVENANTS
So long as any of the Obligations are outstanding and unpaid or any portion
of either of the Commitments 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) Leverage Ratio. The Borrower shall not permit the 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 September 30, 1999 6.75 to 1.00**
From October 1, 1999
through June 29, 2000 6.50 to 1.00**
74
<PAGE>
From June 30, 2000
through September 29, 2000 6.00 to 1.00**
From September 30, 2000
through December 30, 2000 5.25 to 1.00**
From December 31, 2000
through March 30, 2001 4.75 to 1.00**
From March 31, 2001
through June 29, 2001 4.50 to 1.00**
From June 30, 2001
through December 30, 2001 4.25 to 1.00**
From December 31, 2001
through December 30, 2002 3.50 to 1.00**
From December 31, 2002
and thereafter 3.00 to 1.00**
**If the Motorola Acquisition has not been consummated by October 31, 1999 in
accordance with the terms of the Acquisition Agreement and this Agreement, in
each case set forth above, the maximum ratio shall be decreased by 0.25.
(b) Consolidated Leverage Ratio. Commencing December 31, 2001, the
Borrower shall not permit the Consolidated 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 December 31, 2001
through December 30, 2002 7.50 to 1.00**
From December 1, 2002
through December 30, 2003 6.50 to 1.00**
From December 31, 2003
and thereafter 5.50 to 1.00**
**If the Motorola Acquisition has not been consummated by October 31, 1999 in
accordance with the terms of the Acquisition Agreement and this Agreement, in
each case set forth above, the maximum ratio shall be decreased by 0.25.
(c) Consolidated Interest Coverage Ratio. The Borrower shall not permit,
at the end of any fiscal quarter, the ratio of (i) EBITDA for the preceding
twelve month period to (ii)
75
<PAGE>
cash Interest Expense for the preceding twelve month period, to be less
than the following ratios during the following time periods:
Period Ratio
------ -----
From the Closing Date
through June 29, 2000 1.75 to 1.00
From June 30, 2000
through December 30, 2000 2.00 to 1.00
From December 31, 2000
through March 30, 2001 2.25 to 1.00
From March 31, 2001
and thereafter 2.50 to 1.00
(d) Consolidated Pro Forma 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 1.50 to 1.00.
(e) Consolidated Fixed Charge Coverage Ratio. On March 31, 2001 and for
each fiscal quarter thereafter, 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 paid in cash during the most recently
completed twelve month period, to be less than 1.25 to 1.00.
(f) Capital Expenditures. The Borrower shall not permit Capital
Expenditures made by the Parent, the Borrower and its Subsidiaries in the fiscal
year 2000 to exceed $61,000,000.
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 or any preferred stock, 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 and that the net proceeds of any such Debt issuance
be downstreamed by the Parent to the Borrower as equity, the Parent may, so long
as the aggregate amount of Second
76
<PAGE>
Parent Issuance and the Bridge Debt incurred pursuant to subsections (i) and
(ii) below in the aggregate over the term of this Agreement do not exceed
$250,000,000 AND at no time shall the aggregate amount of outstanding Debt under
subsections (i) and (ii) below exceed $200,000,000 (except in connection with
any accretion), elect to:
(i) issue unsecured public Debt for Borrowed Money up to the maximum
aggregate amount at any one time outstanding of $200,000,000, except with
respect to any accretion (the "Second Parent Issuance"), and which such
Debt, notwithstanding the foregoing, (i) must be on terms and conditions
substantially similar to the Parent Senior Notes and the Parent Senior
Notes Documentation, (ii) may not be subject to an interest rate in excess
of 13.5% per annum, (iii) must have a scheduled maturity date not earlier
than the Final Maturity Date, and must not be subject to any mandatory
repurchase, redemption, defeasance or any similar provision prior to the
Final Maturity Date, except to the extent there exists a Change of Control,
and in such event such Debt must provide for the repayment in full of the
Obligations prior to such redemption, repurchase, repayment or other
provision, (iv) may not contain covenants or other provisions more
restrictive than this Agreement and the other Loan Papers (including the
definitions), and may not prohibit any action or omission with respect to
this Agreement and the Loan Papers, and (v) shall provide for no principal
payments until the Obligations have been paid in full, and in-kind interest
payments only for a period of not less than the first five years after its
issuance; and
(ii) incur unsecured Debt for Borrowed Money up to the maximum
aggregate amount at any one time outstanding of $50,000,000, except with
respect to any accretion (the "Bridge Debt"), and which such Debt,
notwithstanding the foregoing (i) must be payment in kind only, and not
subject to any cash interest payments, principal payments, fees or
otherwise, (ii) must have a scheduled maturity date not earlier than the
Final Maturity Date, (iii) must not be subject to any mandatory repurchase,
redemption, defeasance or any similar provision prior to the Final Maturity
Date and (iv) may not contain covenants or other provisions more
restrictive than this Agreement and the other Loan Papers (including the
definitions), and may not prohibit any action or omission with respect to
this Agreement and the Loan Papers;
(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 not to exceed $5,000,000 in the aggregate for
the Borrower and the Parent throughout the term of this Agreement;
(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 exceed $5,000,000 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;
77
<PAGE>
(g) 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, if
there has not occurred a REIT Conversion, 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; and
(h) 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, provided that (i) the amount
of such Debt shall not exceed, together with the amount of seller Debt described
on Schedule 8.02 hereto, $40,000,000, and (ii) in connection with the incurrence
-------------
of such Debt, a Letter of Credit shall be issued in the amount of such seller
Debt.
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 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.;
78
<PAGE>
(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 Agent, (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) if the
Parent has not notified the Administrative Agent and each Lender of a REIT
Conversion, such Subsidiaries must be 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; and
(i) 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 or (c) any
provision in any Ground Lease provision that is set forth on Exhibit K hereto.
---------
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, the
Indenture or any other Parent Senior Notes Documentation, or any Second Parent
Issuance Documentation or any Bridge Debt, that would result in (a) an increase
in any principal, interest, fees, or other amounts payable under the
Subordinated Debt, the Parent Senior Notes Documentation, the Second Parent
Issuance Documentation or the Bridge Debt (including without limitation a waiver
or action that results in the waiver of any payment default under the
Subordinated Debt, the Bridge Debt, the Parent Senior Notes Documentation or the
Second Parent Issuance Documentation), (b) a change in any date fixed for any
payment of principal, interest, fees, or other amounts payable under the
Subordinated Debt, the Bridge Debt, the Parent Senior Notes Documentation or the
Second Parent Issuance Documentation (including, without
79
<PAGE>
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, the
Parent Senior Notes Documentation, the Bridge Debt or the Second Parent Issuance
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, the Bridge Debt, the Parent Senior Notes Documentation or the Second
Parent Issuance Documentation, (e) a change in any covenant, term or provision
in the Subordinated Debt, the Bridge Debt, the Parent Senior Notes Documentation
or the Second Parent Issuance Documentation which would result in such term or
provision being more restrictive than the terms of this Agreement and the Loan
Papers, (f) a change in any term or provision of the Parent Senior Notes
Documentation that would alter the definition of Acquisition Debt or Section
1008 of the Indenture in a manner that would make it more restrictive or effect
the usage of the Revolver B Loan or the Term Loan A, or (g) a change in any term
or provision of the Subordinated Debt, the Parent Senior Notes Documentation or
the Second Parent Issuance Documentation, or other document or instrument in
connection therewith that could have, in any material respect, an adverse effect
on the interests of the Lenders.
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.
80
<PAGE>
In connection with any asset sale permitted by this Section 8.06, Section 11.01
hereof or otherwise consented to by the Lenders in accordance with the terms of
this Agreement, the Administrative Agent 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 Agent, and (iii) take such other action as the
Administrative Agent deems necessary or appropriate in connection with such
transaction and in furtherance of the effectuation thereof.
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) commencing April 30, 2000, the Borrower may make an annual
Restricted Payment in an aggregate amount not to exceed in any fiscal year,
the difference between Excess Cash Flow for the preceding calendar year and
the amount required by Section 2.05(a) hereof to repay the Obligations,
provided that, no such Restricted Payment may be made in any fiscal year of
the Borrower until the Borrower has fully complied with Section 2.05(a)
hereof with respect to such year,
(ii) 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) so long as there has not been a REIT Conversion, 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) so long as there has not been a REIT Conversion, the 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
81
<PAGE>
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 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 an annual distribution to Parent in an
amount not to exceed $25,000 to reimburse the Parent for its miscellaneous
expenses,
(vi) until September 1, 2003, the Parent may make (A) 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, and (B) payments in kind only on the Second Parent Issuance
(but only in kind payments and no cash payments), in accordance with the
terms of the Second Parent Issuance Documentation,
(vii) the Parent may repay in its entirety the Bridge Debt, but
only so long as the Parent uses the proceeds of (i) Debt issued in
accordance with the terms of Section 8.02(c)(i) hereof to repay such Bridge
Debt or (ii) equity issued in accordance with the terms of Section 8.11
hereof to repay such Bridge Debt, and
(viii) the Borrower may repay seller debt permitted to be incurred
in accordance with the terms of Section 8.02(h) hereof, so long as such
repayments are in accordance with the terms thereof.
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 the agreements listed on Schedule 8.09 hereto and except for Restricted
-------------
Payments permitted to be paid under Section 8.08 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
82
<PAGE>
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, provided that, (i) if there exists no
Default or Event of Default before and immediately after giving effect to such
issuance and (ii) the net proceeds of each such issuance of common Capital Stock
are contributed to the Borrower as equity (except to the extent all or any
portion of any such issuance is used to repay Debt permitted to be repaid in
accordance with the terms of Section 8.08 hereof), the Parent may issue common
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.
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) any amendment
of, or waiver or consent to, any provision of this Agreement or any other Loan
Paper and (b) the granting of any Liens to secure the Obligations, and, except
with respect to the Parent Senior Notes, the Second Parent Issuance and the
Bridge Debt: (i) the incurrence of indebtedness, (ii) the granting of Liens,
(iii) the making or granting of Guarantees, (iv) the payment of dividends or
Distributions, (v) the purchase, redemption or retirement of any Capital Stock,
(vi) the making of loans or advances, (vii) transfers or sales of property or
assets (including Capital Stock) by the Parent, the Borrower or any of its
Subsidiaries, (viii) the making of Investments and (ix) any change of control or
management.
83
<PAGE>
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 or in Section 7.04(e) 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 Section 6.15(a) hereof, and such failure shall
not be remedied within thirty days following the earlier of the Borrower's
knowledge of such failure or notice from 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 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;
84
<PAGE>
(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, Debt evidenced by any Second Parent Issuance Documentation, Bridge
Debt 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 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
85
<PAGE>
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;
(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) The occurrence of one of more of the following events: (i) the
occurrence of a Change of Control, 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; or (iii) any one of the President, Chief Executive Officer,
Chief Financial Officer or Chief Operating Officer of the Borrower shall, for
any reason, fail to perform the primary roles and functions of such position on
behalf of the Borrower (whether pursuant to death, extended disability,
termination, resignation or otherwise) AND the Borrower shall not have replaced
such senior executive with a new employee reasonably acceptable to the Majority
Lenders within 60 days after such failure;
(q) 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;
(r) 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
86
<PAGE>
Parent, or any Subsidiary of the Borrower under any federal or state
racketeering statute (including, without limitation, RICO);
(s) With respect to Parent, Borrower or any Subsidiary of the Borrower,
if the Parent and the Borrower have not notified the Administrative Agent in
accordance with the terms of Section 7.04(e) hereof of a REIT Conversion, (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) Borrower or any Subsidiary of Borrower shall fail to maintain
its status as a Qualified REIT Subsidiary;
(t) A "Change of Control" as that term is defined in the Parent Senior
Notes Documentation or any Second Parent Issuance Documentation shall occur;
(u) 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), or
(v) The Motorola Acquisition has not been consummated in accordance with
the terms of the Acquisition Agreement by October 31, 1999, AND the Borrower and
the Parent shall not have reached an agreement with the Administrative Agent and
BAS by November 30, 1999 regarding a restructuring of the amortization of the
Loans in Sections 2.06(d) and 2.11(b) hereof to the reasonable satisfaction of
the Administrative Agent and BAS.
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 Agent 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 Agent 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 either the Revolver A Commitment or the Revolver B
Commitment or both of the Commitments;
(c) Reduce any claim of Administrative Agent and Lenders to judgment;
87
<PAGE>
(d) Demand (and the Borrower shall pay to Administrative Agent)
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 Agent 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.
9.03. Cumulative Rights. All Rights available to Administrative Agent
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 Agent 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 Agent 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 Agent 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 Agent 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 Agent or any Lender. Should any
covenant of any Obligor fail to be performed in accordance with the terms of the
Loan Papers, Administrative Agent 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 Agent nor any Lender
assumes, and shall not ever have, except by express written consent of
Administrative Agent 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 Agent
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 Agent or any
Lender any Rights to exercise control over the affairs and/or management of any
Obligor, the power of Administrative Agent and each Lender being limited to the
Rights to exercise the remedies provided in this Article; provided, however,
-------- -------
that if Administrative Agent or any Lender becomes the owner of any
88
<PAGE>
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.
ARTICLE X. THE ADMINISTRATIVE AGENT
10.01. Authorization and Action. Each Lender hereby appoints and
authorizes Administrative Agent to take such action as Administrative Agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Papers as are delegated to the Administrative Agent 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 Agent 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 Agent shall not be required to take any action which exposes
Administrative Agent to personal liability or which is contrary to any Loan
Papers or applicable Law. Administrative Agent 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 Agent by the Borrower for the Ratable or individual
account of any Lender. Functions of the Administrative Agent are administerial
in nature and in no event shall the Administrative Agent have a fiduciary or
trustee relationship in respect of any Lender by reason of this Agreement or any
Loan Paper.
10.02. Administrative Agent's Reliance, Etc. Neither Administrative
Agent, 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 Agent (a) may treat the payee of any
Note as the holder thereof until Administrative Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to Administrative Agent; (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 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,
89
<PAGE>
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 portion of
the Commitments, 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 Agent. 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 Agent 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 Agent 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 Agent 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 Agent, 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 Agent in any way relating to
or arising out of any Loan Papers or any action taken or omitted by
Administrative Agent thereunder, including any negligence of Administrative
Agent; 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 Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, Lenders
shall reimburse Administrative Agent, Pro Rata, promptly upon demand for any
out-of-pocket expenses (including reasonable attorneys' fees) incurred by
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment, or enforcement (whether 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 Agent. Administrative Agent 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 Agent, if it is a Lender). Upon any such
resignation, Majority Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed and shall have accepted such appointment within thirty days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, 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
90
<PAGE>
and surplus of at least $50,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the Rights and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
the Loan Papers, provided that if the retiring or removed Administrative Agent
is unable to appoint a successor Administrative Agent, Administrative Agent
shall, after the expiration of a sixty day period from the date of notice, be
relieved of all obligations as Administrative Agent hereunder. Notwithstanding
any Administrative Agent'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 Agent 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 Agent 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 Agent, (a) increase either of the
Commitments (except as specifically permitted by Section 2.18 hereof), (b)
reduce any principal, interest, fees, or other amounts 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 (i) releases
contemplated by the provisions of this Agreement or by the other Loan Papers and
(ii) releases of assets that (A) are being sold by the Borrower in its ordinary
course of business and (B) are obsolete or immaterial to the business of the
Borrower, (C) are immaterial and were acquired by the Borrower in connection
with a Permitted Acquisition but never contemplated to be used in the operations
of the Borrower, (which such releases do not require the consent of any Lender
except the Administrative Agent), (e) change the meaning of "Revolver A
Specified Percentage", "Revolver B Specified Percentage"(except in accordance
with the terms of Section 2.18 hereof), "Term Loan A Specified Percentage",
"Term Loan B Specified Percentage" or "Total Specified Percentage" (except in
accordance with the terms of Section 2.18 hereof), or the number of Lenders
required to take any action hereunder, (f) change the definitions of "Revolver A
Commitment", "Revolver B Commitment", "Commitments", "Unavailable Commitment",
"First Maturity Date", "Final Maturity Date", "Majority Lenders", or "Letter of
Credit Commitment", (g) or amend any provision of Section 2.18 hereof which
would affect any of the items listed in Section 11.01(a) through (f) above, or
(h) amend this Section 11.01. No amendment, waiver, or consent shall affect the
Rights or duties of Administrative Agent under any Loan Papers, unless it is in
writing and signed by Administrative Agent in addition to the requisite number
of Lenders.
91
<PAGE>
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 Agent, 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
(ii) If to Administrative Agent:
NationsBank, N.A.
Bank of America Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Telephone No.: (214) 209-0988
Telecopier No.: (214) 209-9390
Attention: Ms. Roselyn M. Drake
Principal
92
<PAGE>
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 Agent pursuant to Article II shall be effective when received.
The Borrower agrees that Administrative Agent 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 Agent and Lenders for
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 Agent.
93
<PAGE>
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 Agent 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 Agent and (iv) no such assignment is for an amount less than
$3,000,000 (and, if such assignment is a partial assignment, no Lender shall
hold less than $3,000,000 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 Agent. Within five Business Days
after Administrative Agent receives notice of any such assignment, the Borrower
shall execute and deliver to Administrative Agent, 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 Revolver A Specified Percentages of the
Revolver A Commitment, the Revolver B Specified Percentages of the Revolver B
Commitment, their respective Term Loan A Specified Percentages of $125,000,000
and their respective Term Loan B Specified Percentages of $175,000,000. 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, (v) Obligor, Administrative Agent,
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
94
<PAGE>
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 under this Agreement and the other
Loan Papers, whether or not Administrative Agent 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 Agent and BAS 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 of
Administrative Agent and BAS in connection with any syndication of the Loans,
including without limitation the costs of all amendments to this Agreement and
the Loan Papers and the reasonable fees and out-of-pocket expenses of Special
Counsel, (iii) all costs and expenses (including reasonable attorneys' fees and
expenses) of Administrative Agent in connection with any interpretation, grant
and perfection of any Lien, modification, amendment, waiver, release of any Loan
Papers, restructuring or work-out and (iv) all costs and expenses (including
reasonable attorneys' fees and expenses) of Administrative Agent 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.
95
<PAGE>
(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 Agent or
any Lender or franchise Taxes or Taxes on capital or capital receipts of
Administrative Agent or any Lender), or the execution, delivery, or recordation
of any Loan Papers, and agrees to save Administrative Agent 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 Agent
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 Agent
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 Agent or any Lender pursuant to this sentence),
Administrative Agent 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 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 Commitments, 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
Agent 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 Agent 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 Agent 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 Agent nor any
Lender shall be subject to any penalties
96
<PAGE>
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, 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
97
<PAGE>
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 AGENT 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.
11.14. Amendment, Restatement, Extension, Renewal and Increase. This
Agreement is a renewal and amendment and restatement of the Original Credit
Agreement, and, as such, except for the "Obligation" as defined in the Original
Credit Agreement (which shall survive, be renewed and restated by the terms of
this Agreement), all other terms and provisions supersede in their entirety the
Original Credit Agreement. All subordination agreements, security agreements,
pledge agreements, mortgages, deeds of trust and other documents and instruments
granting any security interest or assigning any interest in any assets of the
Borrower or any Subsidiary to secure the Obligation executed and delivered in
connection with this Agreement that restate any previously granted interest
shall supersede any subordination agreements, security agreements, pledge
agreements, mortgages, deeds of trust and other documents and instruments
granting any security interest or assigning any interest in any assets of the
Borrower or any Subsidiary that were executed and delivered in connection with
the Original Credit Agreement (the "Original Security Documents"), except for
the Liens created under the Original Security Documents which shall remain
valid, binding and enforceable Liens against the Borrower, the Subsidiaries and
each of the other Persons granting any such Liens. All other Original Security
Documents shall continue to secure the Obligations as herein defined, and shall
be in full force and effect.
===============================================================================
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
===============================================================================
98
<PAGE>
IN WITNESS WHEREOF, this Fourth Amended and Restated Credit Agreement is
executed as of the date first set forth above.
THE BORROWER:
PINNACLE TOWERS INC.
___________________________________________
By:________________________________________
Its:_______________________________________
Administrative Agent:
NATIONSBANK, N.A., as Administrative Agent
___________________________________________
By: Roselyn M. Drake
Its: Principal
LENDERS:
Term Loan A
Specified Percentage: 100.00% NATIONSBANK, N.A., individually as a Lender
Term Loan B
Specified Percentage: 100.00%
___________________________________________
By: Roselyn M. Drake
Revolver A Its: Principal
Specified Percentage: 100.00%
Revolver B
Specified Percentage: 100.00%
Total
Specified Percentage: 100.00%
Address:
Bank of America Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn.: Roselyn M. Drake
Telephone: (214) 209-0988
Telecopy: (214) 209-9390
99
<PAGE>
EXHIBIT 10.31
================================================================================
AGREEMENT
FOR PURCHASE AND SALE OF ASSETS
BY AND BETWEEN
MOTOROLA, INC., SELLER
AND
PINNACLE TOWERS INC., PURCHASER
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE TRANSACTION......................................... 1
1.1. Purchase and Sale of Purchased Assets................... 1
1.2. Purchased Assets........................................ 1
1.3. Excluded Assets......................................... 2
1.4. Assumed Liabilities and Obligations..................... 3
1.5. Excluded Liabilities and Obligations.................... 3
1.6. Assignment of Contracts................................. 3
1.7. Bulk Transfer........................................... 4
ARTICLE II CONSIDERATION FOR TRANSFER............................. 4
2.1. Consideration........................................... 4
2.2. Payment of Consideration................................ 4
2.3. Purchase Price Allocation............................... 4
2.4. Post-Closing Adjustment................................. 4
2.5. Costs................................................... 5
2.6. Deposit................................................. 6
ARTICLE III THE CLOSING AND TRANSFER OF PURCHASED ASSETS.......... 6
3.1. Closing................................................. 6
3.2. Deliveries by Purchaser................................. 6
3.3. Deliveries by Seller.................................... 7
3.4. Deliveries by Purchaser and Seller...................... 7
3.5. Mutual Assurances....................................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER............... 8
4.1. Authority............................................... 8
4.2. Validity................................................ 8
4.3. Due Organization........................................ 8
4.4. Financial Information................................... 9
4.5. Interim Change.......................................... 9
4.6. Title to Purchased Assets............................... 10
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.7. Owned and Ground Leased Real Estate..................... 10
4.8. Other Real Estate Leases and Management Contracts....... 11
4.9. Employee Plans.......................................... 11
4.10. Material Contracts...................................... 11
4.11. Intellectual Property and Proprietary Information....... 12
4.12. Legal Proceedings....................................... 12
4.13. Compliance with Law..................................... 12
4.14. Permits................................................. 12
4.15. Taxes................................................... 12
4.16. Employees............................................... 13
4.17. Environmental Matters................................... 13
4.18. Brokers' Fees........................................... 14
4.19. Disclaimer.............................................. 14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER............. 14
5.1. Authority............................................... 15
5.2. Validity................................................ 15
5.3. Due Organization........................................ 15
5.4. Brokers' Fees........................................... 15
5.5. Financing............................................... 15
ARTICLE VI COVENANTS OF SELLER.................................... 15
6.1. Interim Conduct of Business............................. 15
6.2. Access.................................................. 16
6.3. Records and Documents................................... 16
6.4. Consummation............................................ 16
6.5. Hart-Scott-Rodino Consent............................... 16
6.6. Real Estate............................................. 17
6.7. Confidentiality......................................... 19
6.8. Contracts............................................... 20
6.9. Audits.................................................. 20
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
6.10. Financial Information................................... 20
ARTICLE VII COVENANTS OF PURCHASER................................ 21
7.1. Consummation............................................ 21
7.2. HSR Consent............................................. 21
7.3. Confidentiality......................................... 21
7.4. Records and Documents................................... 21
7.5. Insurance............................................... 21
7.6. Termination of Contracts................................ 22
7.7. Notification of Breach.................................. 22
7.8. Non-Solicitation........................................ 22
7.9. Transfer of Environmental Permits....................... 22
ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS............... 22
8.1. Continued Association with Business..................... 22
8.2. Employee Benefit Plans.................................. 23
8.3. WARN Act Compliance..................................... 24
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER....... 24
9.1. Accuracy of Warranties and Performance of Covenants..... 24
9.2. No Pending Action....................................... 25
9.3. Condition of Purchased Assets........................... 25
9.4. Hart-Scott-Rodino....................................... 25
9.5. Other Items............................................. 25
9.6. Cure Period............................................. 25
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........... 26
10.1. Accuracy of Warranties and Performance of Covenants.... 26
10.2. No Pending Action...................................... 26
10.3. Hart-Scott-Rodino...................................... 26
10.4. Other Items............................................ 26
10.5. Cure Period............................................ 26
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE XI SURVIVAL AND INDEMNIFICATION........................... 26
11.1. Survival............................................... 26
11.2. Indemnification........................................ 27
11.3. General Provisions Relating to Indemnification......... 27
ARTICLE XII TERMINATION........................................... 29
12.1. Termination or Abandonment............................. 29
12.2. Effect of Termination.................................. 29
ARTICLE XIII SOFTWARE TRANSFER AND LICENSE........................ 29
13.1. Motorola Owned Software to be Transferred.............. 29
13.2. Motorola Owned Software to be Licensed................. 30
13.3. Other Software to be Licensed.......................... 30
13.4. Non-Transferable Software.............................. 30
13.5. Motorola Site Express Web Page......................... 31
ARTICLE XIV DEFINITIONS........................................... 31
ARTICLE XV GENERAL PROVISIONS..................................... 35
15.1. Amendments and Waiver................................. 35
15.2. Notices............................................... 35
15.3. Expenses.............................................. 36
15.4. Tax Matters........................................... 36
15.5. Counterparts.......................................... 37
15.6. Successors and Assigns; Beneficiaries................. 37
15.7. Entire Agreement...................................... 38
15.8. Announcements......................................... 38
15.9. Partial Invalidity.................................... 38
15.10. Governing Law; Jurisdiction........................... 38
15.11. Disputes.............................................. 38
15.12. Further Assurances.................................... 39
15.13. Other Rules of Construction........................... 39
</TABLE>
-iv-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
15.14. Authorship............................................ 39
</TABLE>
-v-
<PAGE>
SCHEDULES
1.0 Sites
1.2(b) Purchased Assets
1.2(i) Purchased Software
1.3 Excluded Assets
2.4 Working Capital Calculation
4.0 Knowledge Persons
4.4 Financial Information
4.4(d) Site Contracts to be Reviewed
4.5 Interim Change
4.7(a) Owned Real Estate
4.7(b) Ground Leased Real Estate
4.8 Real Estate Leases and Management Contracts
4.9 Employee Plans
4.10 Material Contracts
4.11 Intellectual Property
4.12 Legal Proceedings
4.13 Compliance with Laws
4.16 Employees
4.17 Environmental Matters
6.1 Interim Conduct of Business
7.5 Purchaser's Insurance
13.2 Licensable Motorola Software
13.3 Third Party Transferable Software
ATTACHMENTS
I. Form of Trademark Assignment
II. Form of General Assignment, Bill of Sale and Assumption of
Liabilities
III. Form of Transition Services Agreement
IV. [Intentionally Left Blank]
V. [Intentionally Left Blank]
VI. Form of Standard Surveyor Certificate
VII. Form of Escrow Agreement
VIII. Standby Letter of Credit
-vi-
<PAGE>
AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
---------------------------
THIS AGREEMENT is made and entered into this 29/th/ day of June, 1999, by
and between PINNACLE TOWERS INC., a Delaware corporation ("Purchaser") and
MOTOROLA, INC., a Delaware corporation ("Seller").
WHEREAS, Seller is engaged through its North American Antenna Site business
in the business of owning, leasing, operating and managing the antenna sites
listed on Schedule 1.0 and the Purchased Assets (as defined below), which serve
------------
wireless network operators and private users of wireless networks (the
"Business");
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser, subject to the assumption of the associated liabilities and
obligations, certain of the assets, properties and rights used in the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1. Purchase and Sale of Purchased Assets. At the Closing (as defined
-------------------------------------
below), Seller shall sell, transfer, assign and deliver to Purchaser, and
Purchaser shall purchase, accept and receive, all of Seller's right, title and
interest in and to the Purchased Assets as they exist at the Closing.
1.2. Purchased Assets. The "Purchased Assets" are all of Seller's right,
----------------
title and interest in and to the following :
(a) all accounts and notes receivable of the Business;
(b) the assets listed on Schedule 1.2(b);
---------------
(c) all deposits and prepaid assets of the Business;
(d) the performance and other bonds, security and other deposits,
and advances maintained solely for use in the conduct of the Business;
(e) all Intellectual Property (as defined below);
(f) the customer files and all lists of customers, suppliers and
vendors of the Business;
<PAGE>
(g) all rights and claims under lease, management or sale contracts,
customer orders, service agreements and other similar commitments of the
Business;
(h) rights in, to and under agreements directly and solely relating
to the Business, including the Material Contracts (as defined below), the
Management Agreements (as defined below), the Tenant Leases (as defined
below), the Ground Leases (as defined below) and the Other Real Estate
Leases (as defined below);
(i) the software listed on Schedule 1.2(i);
---------------
(j) documents and records directly and solely relating to the
Purchased Assets, including accounts receivable and accounts payable
ledgers, records and files;
(k) master customer and vendor lists directly and solely relating to
the operation of the Business and the Purchased Assets;
(l) to the extent assignable and transferable to Purchaser, permits
and licenses (and pending applications for any thereof) related to the
operation of the Business or the Purchased Assets; and
(m) the telephone number 1-888-888-7750;
provided, however, that the definition of Purchased Assets shall not include any
items defined as Excluded Assets in Section 1.3 below.
1.3. Excluded Assets. Seller will retain and not transfer, and Purchaser
---------------
will not acquire any assets of Seller, other than the Purchased Assets,
(collectively, the "Excluded Assets"), including the following assets which
shall not be sold or transferred to Purchaser:
(a) all cash and cash equivalents, including cash on hand or in bank
accounts;
(b) the "Motorola" name, including any derivations thereof;
(c) corporate accounting journals and corporate books of account
which comprise Seller's permanent accounting or tax records;
(d) corporate minute books, stock records and corporate seals of
Seller;
(e) refunds pertaining to any Tax obligations of Seller;
(f) software and information systems, including the software listed
on Schedule 1.3, but excluding the software listed on Schedule 1.2(i);
------------ ---------------
-2-
<PAGE>
(g) any cash management or other treasury services, legal, patent,
tax, insurance administration, corporate accounting, audit, human resources
or other services provided to the Business by Seller;
(h) certain assets listed on Schedule 1.3; and
------------
(i) items sold, transferred, disposed of or consumed in the ordinary
course prior to the Closing;
provided, however, that the definition of Excluded Assets shall not include any
items defined as Purchased Assets in Section 1.2.
1.4. Assumed Liabilities and Obligations. At the Closing, Purchaser shall
-----------------------------------
assume and agrees to discharge promptly as they become due any and all
liabilities and obligations and agreements related to or arising from the
operation of Business or the ownership of the Purchased Assets, including all
contracts and obligations which constitute Purchased Assets or to which the
Purchased Assets are subject or by which they are bound (the "Assumed
Liabilities"); provided, however, that notwithstanding the foregoing, none of
the Excluded Liabilities (as defined below) shall be included as Assumed
Liabilities. Purchaser shall forever defend, indemnify and hold harmless Seller
from and against any and all liabilities, obligations, claims, damages, costs
and expenses (including court costs and reasonable attorneys' fees) related to
or arising from Purchaser's failure to fully perform and discharge the
responsibilities of Seller with respect to the Assumed Liabilities. Purchaser
further agrees to pay and discharge all such liabilities and obligations as they
become due.
1.5. Excluded Liabilities and Obligations. Purchaser shall not assume any
------------------------------------
liabilities or obligations of Seller or the Business for Federal, state or local
taxes on income for all periods prior to the Closing and any obligation or
liability to pay benefits under Seller Benefit Plans to the Transferred
Employees or any other employees of Seller (the "Excluded Liabilities"). Seller
shall forever defend, indemnify and hold harmless Purchaser from and against any
and all liabilities, obligations, claims, damages, costs and expenses (including
court costs and reasonable attorneys' fees) related to or arising from Seller's
failure to fully perform and discharge the Excluded Liabilities. Seller further
agrees to pay and discharge all such liabilities and obligations as they become
due.
1.6. Assignment of Contracts. Anything contained in this Agreement to the
-----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign the right, title or interest of Seller in, to or under any contract or
any claim or right of any benefit arising thereunder or resulting therefrom if
any attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach thereof or in any way adversely affect the rights of
Purchaser or Seller thereunder or if by its nature such contract cannot be
assigned. Seller shall use its reasonable commercial efforts to obtain, and
Purchaser agrees to cooperate with Seller in its efforts to obtain, the consent
of each such third party to the assignment or transfer thereof to Purchaser in
all cases in which such consent is required for assignment or transfer. If such
consent is not obtained, Seller and Purchaser shall cooperate in any reasonable
arrangements on mutually acceptable terms designed to provide Purchaser the
obligations and benefits thereunder such as, by example, entering into a
subcontract, management agreement or other similar
-3-
<PAGE>
relationship, which arrangements shall include self-operative provisions for
transfer of the affected agreements to Purchaser after Closing upon receipt of
the applicable consents. Notwithstanding the foregoing, the obligations of
Seller under this Section shall not include any obligation to make any payment
or incur any economic burden.
1.7. Bulk Transfer. Purchaser hereby waives compliance by Seller with all
-------------
applicable bulk transfer, bulk sales and similar laws and requirements of all
jurisdictions in connection with the transactions contemplated hereby.
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1. Consideration.
-------------
(a) The aggregate consideration for the Purchased Assets shall
be:
(i) Two Hundred Fifty-Five Million Dollars ($255,000,000),
subject to adjustment pursuant to Section 2.4 (the "Purchase Price"); and
(ii) assumption by Purchaser of the Assumed Liabilities.
(b) All payments hereunder shall be made in U.S. dollars by wire
transfer or other immediately-available funds, and all currency amounts
referred to throughout this Agreement are to U.S. dollars.
2.2. Payment of Consideration. At Closing, Purchaser shall pay the
------------------------
Purchase Price less, if applicable, the Deposit (together with all interest
thereon) to an account designated by Seller by wire-transfer of immediately
available funds.
2.3. Purchase Price Allocation. The consideration for the Purchased
-------------------------
Assets shall be allocated by Purchaser and Seller as mutually agreed upon by the
parties prior to Closing. Such allocation shall be used for all purposes,
including preparation and filing of Internal Revenue Service Form 8594. Seller
and Purchaser shall cooperate in filing this Form 8594.
2.4. Post-Closing Adjustment.
-----------------------
(a) Within thirty (30) days following the Closing, Seller shall prepare
and deliver to Purchaser a balance sheet of the Business as of the Closing Date
in substantially the form set forth in Schedule 2.4, setting forth the Working
------------
Capital Value (as defined below) as of the Closing Date (the "Working Capital
Value Calculation") from which the post-closing adjustment as set forth in this
Section 2.4 will be made. "Working Capital Value" shall mean the sum of current
assets (but excluding cash) less the sum of current liabilities (but excluding
any liabilities for Taxes or any other items provided for in Sections 2.5, 15.3
and 15.4) of the Business as of the Closing Date, computed in accordance with
the principles contained in Schedule 2.4. Purchaser, at its own expense, shall
------------
render all reasonable assistance in connection with the preparation of the
Working Capital Value Calculation, including providing access to
-4-
<PAGE>
books and records as well as the assistance of Purchaser's employees who were
previously employed by Seller.
(b) Within forty-five (45) days after delivery of the Working Capital
Value Calculation to Purchaser, Purchaser may assert that the Working Capital
Value Calculation delivered by Seller is not in conformance with the provisions
of this Section and specify the amount of the inaccuracy (the "Disputed Amount")
in a written notice delivered to Seller. If Purchaser fails to deliver such
written assertion to Seller within such forty-five (45) days after delivery of
the Working Capital Value Calculation to Purchaser, Purchaser shall be
conclusively presumed to agree to the calculation of the Working Capital Value
delivered by Seller.
(c) If Purchaser delivers such written assertion to Seller within the
forty-five (45) day period, Purchaser and Seller shall negotiate in good faith
with respect to the Disputed Amount and if they are unable to reach agreement
within ten (10) days after delivery of Purchaser's assertion, the dispute shall
be settled by submitting such dispute to Arthur Andersen LLP (the "Accountants")
for final determination in accordance with procedures established by the
Accountants. The decision of the Accountants as to the Working Capital Value
Calculation as of the Closing Date shall be final and binding on the parties.
Purchaser and Seller shall each pay one-half of the costs of the Accountants.
(d) In the event the Working Capital Value as of the Closing Date as
finally determined in accordance with this Section 2.4 is:
(i) an amount greater (i.e., a Working Capital Value deficit of
less than Three Thousand Dollars ($3,000) or a positive Working Capital
Value) than the Three Thousand Dollars ($3,000) deficit, the Working
Capital Value as of April 3, 1999, Purchaser shall pay Seller the amount of
the difference in cash within forty-six (46) days of the delivery of the
Working Capital Value Calculation to Purchaser or within two (2) days of
the date of the final determination of the Working Capital Value pursuant
to Section 2.4(c), whichever is later, with such payment accompanied by
interest at seven percent (7%) per annum from the Closing Date; or
(ii) an amount smaller (i.e., a Working Capital Value deficit of
more than Three Thousand Dollars ($3,000)) than the Three Thousand Dollars
($3,000) deficit, the Working Capital Value as of April 3, 1999, Seller
shall pay Purchaser the amount of the difference in cash within forty-six
(46) days of the delivery of the Working Capital Value Calculation to
Purchaser or within two (2) days of the date of the final determination of
the Working Capital Value pursuant to Section 2.4(c), whichever is later,
with such payment accompanied by interest at seven percent (7%) per annum
from the Closing Date.
2.5. Costs. The parties shall share equally the costs of the following:
-----
(a) except as set forth in Section 6.6(a), premiums for Title Policies (as
defined below) (other than costs for endorsements), (b) except as set forth in
Section 6.6(a), Surveys (as defined below), (c) all Taxes arising in connection
with any deed or other conveyance document relating to the Purchased
-5-
<PAGE>
Assets, (d) all recording costs arising in connection with the transactions
contemplated hereby and (e) any resale exemption certificates procured pursuant
to Section 3.2(c).
2.6. Deposit.
-------
(a) As of the date hereof, Purchaser has caused to be paid a Twenty-Five
Million Dollar ($25,000,000) cash deposit (the "Deposit") to a segregated,
interest bearing account established by Seller at one of the commercial banks
used by Seller. The Deposit, plus any interest accrued thereon, will be applied
to the cash portion of the consideration to be delivered at Closing. In the
event that (a) all of the conditions precedent to the obligations of Purchaser
set forth in Article IX of this Agreement have been fulfilled, and (b)(i)
Purchaser terminates this Agreement (other than pursuant to Article XII or
Section 9.1(ii)), (ii) Purchaser fails to consummate the transactions
contemplated by this Agreement and any applicable cure period under Section 10.5
shall have expired and Seller is ready, willing and able to consummate the
transactions contemplated hereby, or (iii) Seller terminates this Agreement
pursuant to 12.1(d) (provided, however, that the conditions set forth in Section
10.2 and Section 10.3 are satisfied), Seller shall be entitled to retain the
Deposit and all interest accrued thereon. If this Agreement is terminated
pursuant to Section 12.1 (except pursuant to Section 12.1(d) as provided in the
immediately preceding sentence), or Section 9.1(ii), Seller will return the
Deposit plus all interest accrued thereon to Purchaser within ten (10) business
days of termination of this Agreement.
(b) In lieu of making the Deposit in cash as provided in clause (a)
above, Purchaser may satisfy the requirements with respect to the Deposit by
causing the issuance of a standby letter of credit by NationsBank N.A. (the
"Letter of Credit") (or, if applicable, Bank of America, N.A.) for the benefit
of Seller in the form attached hereto as Attachment VIII; provided, if the
transfer of assets contemplated by this Agreement shall not have occurred by
October 27, 1999, Purchaser, if requested by Seller, shall arrange for the
issuance of a substitute letter of credit or an extension of the Letter of
Credit to a "Stated Expiry Date" reasonably acceptable to Seller.
ARTICLE III
THE CLOSING AND TRANSFER OF PURCHASED ASSETS
3.1. Closing. The transfer of assets contemplated by this Agreement (the
-------
"Closing") shall occur at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, Illinois 60606-5096 at 10:00 A.M. on the later to occur
of September 30, 1999 or the date which is three (3) business days following
satisfaction of all of the conditions set forth in Articles IX and X or at such
other time or place as may be mutually agreed upon by the parties (the "Closing
Date"). Upon consummation, the Closing shall be deemed to take place as of the
close of business on the Closing Date.
3.2. Deliveries by Purchaser. At the Closing, Purchaser shall deliver the
-----------------------
following:
(a) an amount equal to the Purchase Price less, if applicable,
the Deposit (together with all interest thereon) payable by wire transfer
of immediately available funds to the account designated by Seller;
-6-
<PAGE>
(b) the officer's certificate to be delivered pursuant to Section
10.1;
(c) any resale exemption certificates or other similar items as
may be reasonably requested by Seller and which are available under
applicable law as reasonably determined by the parties; and
(d) such other instruments or documents as may be reasonably
necessary or appropriate to carry out the transactions contemplated hereby
or as specifically required to fulfill Purchaser's covenants hereunder.
3.3. Deliveries by Seller. At the Closing, Seller shall deliver the
--------------------
following:
(a) special warranty deeds for each parcel of Owned Real Estate;
(b) Trademark Assignment in substantially the form attached
hereto as Attachment I;
(c) "marked-up" Title Policies (as defined below) and Surveys (as
defined below) to be provided pursuant to Section 6.6;
(d) the officer's certificate to be delivered pursuant to Section
9.1; and
(e) such other instruments or documents as may be reasonably
necessary or appropriate to carry out the transactions contemplated by this
Agreement or as specifically required to fulfill Seller's covenants
hereunder.
3.4. Deliveries by Purchaser and Seller. At the Closing, Purchaser and
----------------------------------
Seller shall deliver the following:
(a) General Assignment, Bill of Sale and Assumption of
Liabilities in substantially the form attached hereto as Attachment II;
(b) an assignment in recordable form for each parcel of Ground
Leased Real Estate (as defined below);
(c) Transition Services Agreement in substantially the form
attached hereto as Attachment III, providing for, if necessary, the
provision of certain billing services and other limited accounting services
for an interim period at an appropriate cost; and
(d) License Agreement in the form to be agreed upon by Seller and
Purchaser, providing for the license of certain software listed on Schedule
--------
1.3.
---
3.5. Mutual Assurances. At the Closing, the parties shall execute,
-----------------
acknowledge and deliver such other instruments or documents as may be reasonably
necessary or appropriate to carry out the transactions contemplated by this
Agreement.
-7-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser, as of the date hereof,
and as of the Closing Date, as set forth below. For purposes of this Agreement,
a "Material Adverse Effect" shall mean any effect which is materially adverse to
the Purchased Assets when taken as a whole. For purposes of this Agreement, the
phrase "to the knowledge of Seller," or other language of similar effect, shall
mean to the actual knowledge at the time of execution of this Agreement of the
persons listed on Schedule 4.0. No further due diligence or investigation shall
------------
be attributed to or required of such persons. The exceptions, modifications,
descriptions and disclosures in any Schedule attached hereto are made for all
purposes of this Agreement and are exceptions to all representations and
warranties set forth in this Agreement or in any agreement or instrument
delivered pursuant to or in connection with this Agreement. Disclosure of an
item in response to one Section of this Agreement shall constitute disclosure in
response to every Section of this Agreement notwithstanding the fact that no
express cross-reference is made. Disclosure of any items not otherwise required
to be disclosed shall not create any inference of materiality.
4.1. Authority. Seller has the full right, power and authority, without
---------
the consent of any other person, to execute and deliver this Agreement and the
agreements contemplated hereby to which it is a party and to consummate the
transactions contemplated on its part hereby and thereby. All corporate acts
required to be taken by Seller to authorize the execution and delivery of this
Agreement and all agreements and transactions contemplated hereby have been duly
and properly taken.
4.2. Validity. This Agreement has been, and the agreements and other
--------
documents to be delivered by Seller at Closing will be, duly executed and
delivered and constitute the valid and legally binding obligations of Seller
enforceable in accordance with their respective terms. The execution and
delivery by Seller of this Agreement and the agreements contemplated hereby to
which it is a party and the consummation of the transactions contemplated hereby
and thereby will not (immediately, with notice, the passage of time or both)
result in the creation of any lien, charge or encumbrance or the acceleration of
any indebtedness or other obligation of Seller and are not prohibited by, do not
violate or conflict with any provision of, and do not and will not (immediately,
with notice, the passage of time or both) constitute a default under or a breach
of (i) the charter or by-laws of Seller, (ii) any note, bond, indenture,
contract, agreement, permit, license or other instrument to which Seller is a
party or by which Seller is bound, (iii) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (iv) any law, rule or
regulation applicable to Seller, except in each of the foregoing cases for such
creations, accelerations, terminations, violations, conflicts, breaches,
defaults, charges or encumbrances which in the aggregate will not have an
adverse effect on Seller's ability to consummate the transactions contemplated
hereby.
-8-
<PAGE>
4.3. Due Organization. Seller is a corporation in good standing and
----------------
validly existing under the laws of Delaware.
4.4. Financial Information.
---------------------
(a) The audited financial statements of the Business as of December 31,
1998 and December 31, 1997, and for each of the years in the three-year period
ended December 31, 1998 (the "Audited Financial Statements") attached hereto as
Schedule 4.4 are (i) accurate and complete in all material respects, (ii) in
- ------------
accordance with the books of account and records of Seller in all material
respects, and (iii) prepared in accordance with U.S. generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby ("GAAP").
(b) The interim financial statements of the Business for the three (3)
months ended April 3, 1999 (the "Interim Financial Statements") attached hereto
as Schedule 4.4 were prepared from Seller's books of account and records,
------------
consistent with the same accounting principles used in the preparation of the
Audited Financial Statements, except that the Interim Financial Statements have
not been audited, are subject to adjustments and contain no notes which are
typically included as part of financial statements prepared in accordance with
GAAP. Subject to the immediately preceding sentence, the Interim Financial
Statements are accurate and complete in all material respects.
(c) The Audited Financial Statements and the Interim Financial Statements
accurately reflect, in all material respects, the rental fees, management fees
and operating expenses paid, accrued, received or owed by or to the Business for
the periods covered thereby.
(d) With respect to the contracts of the Business listed on Schedule
--------
4.4(d), there are no liabilities or obligations which are materially different
- ------
than the types of liabilities and obligations contained in or related to the
Material Contracts, the Ground Leases, the Other Real Estate Leases, the
Management Agreements and the Tenant Leases, which could reasonably be expected
to have, in the aggregate, a Material Adverse Effect.
(e) One or more of the persons listed on Schedule 4.0, has signed the
------------
management representation letter to KPMG LLP with respect to the Audited
Financial Statements.
4.5. Interim Change. Except as set forth in Schedule 4.5, since March
-------------- ------------
31, 1999, the Business has been operated in the ordinary course, consistent with
past operations and without limiting the foregoing, there has not been:
(a) any material damage to, destruction of or claim against any
Purchased Assets, or any disposition of any material Purchased Assets,
other than sales in the ordinary course of business on terms consistent
with past practice in an aggregate amount that do not exceed $1,000,000;
(b) the entering into of any agreement which constitutes an
Assumed Liability, other than in the ordinary course of business or as set
forth on Schedule 6.1; or
------------
-9-
<PAGE>
(c) any new or revised arrangement relating to the compensation or
benefits of an employee of the Business, other than normal salary
adjustments or otherwise in the ordinary course of business.
4.6. Title to Purchased Assets. Seller has good and marketable title
-------------------------
to the personal property included in the Purchased Assets it purports to own
(except such property as has been disposed of in the ordinary course of business
in accordance with Section 4.5 or Section 6.1). At the Closing, Purchaser will
receive the Purchased Assets free and clear of any liens, claims or encumbrances
except for (a) liens, claims or encumbrances which will be discharged upon
payment by Purchaser of the associated Assumed Liabilities, (b) liens, claims
and encumbrances which do not detract from the value or interfere with the
present use of the Purchased Assets in such manner as could reasonably be
expected to have, in the aggregate, a Material Adverse Effect, (c)
materialmen's, mechanics', carriers', workmen's, repairmen's and other like
liens arising in the ordinary course of business, or (d) liens for current Taxes
not yet due or payable or any Taxes being contested in good faith by Seller .
The Purchased Assets are in good operating condition and repair (reasonable wear
and tear excepted).
4.7. Owned and Ground Leased Real Estate.
-----------------------------------
(a) Schedule 4.7(a) sets forth an accurate and complete list of each
---------------
parcel of real property owned by Seller, used in the Business and included in
the Purchased Assets (the "Owned Real Estate"), including a street address or
other description. Schedule 4.7(b) sets forth an accurate and complete list of
---------------
each parcel of real property in which Seller has a ground leasehold interest,
used in the Business and included in the Purchased Assets (the "Ground Leased
Real Estate"), including a street address or other description. Seller owns fee
simple title to the Owned Real Estate, and has a valid leasehold interest in the
Ground Leased Real Estate, in each case free and clear of all tenancies and
other possessory interests, security interests, conditional sale or other title
retention agreements, liens, encumbrances, mortgages, pledges, assessments,
easements, rights of way, covenants, restrictions, reservations, options, rights
of first refusal, defects in title, encroachments and other burdens, except in
such instances as could not reasonably be expected to result, in the aggregate,
in a Material Adverse Effect.
(b) To Seller's knowledge, the Owned Real Estate and the Ground Leased
Real Estate, together with all buildings, structures and improvements thereon,
are in compliance in all material respects with all applicable zoning, building,
health, fire, water, use or similar statutes, codes, ordinances, laws, rules or
regulations, except for such instances as could not reasonably be expected to
result, in the aggregate, in a Material Adverse Effect. To Seller's knowledge,
the zoning of each parcel of Owned Real Estate and the Ground Leased Real Estate
permits the existing improvements, except for such instances as could not
reasonably be expected to result, in the aggregate, in a Material Adverse
Effect. Except as set forth on Schedules 4.7(a) or (b), Seller has all material
---------------- ---
licenses, certificates of occupancy, permits and authorizations required to
operate the Business and utilize the Owned Real Estate and the Ground Leased
Real Estate, except for such instances as could not reasonably be expected to
result, in the aggregate, in a Material Adverse Effect. Seller has all
easements and rights necessary to conduct the Business, including easements for
all utilities, services, roadway, railway and other means of ingress and egress,
and any guy wires, except for such instances as could not reasonably be expected
to result, in the aggregate, in a Material Adverse Effect.
-10-
<PAGE>
(c) To Seller's knowledge, all utilities necessary for the operation of
the Purchased Assets are installed and operating, except for such instances as
could not reasonably be expected to result, in the aggregate, in a Material
Adverse Effect.
4.8. Other Real Estate Leases and Management Contracts. Schedule 4.8
------------------------------------------------- ------------
sets forth a list of all real property leased, subleased, licensed and/or
occupied by Seller, used in the Business and included in the Purchased Assets
other than pursuant to Ground Leases (the "Other Leased Real Estate"), as well
as each management contract of the Business (the "Management Agreements") with
an annual revenue in excess of $100,000, pursuant to which Seller leases real
property or antenna site space on behalf of third parties. Schedule 4.8
------------
identifies the associated sites and the street address or other description with
respect to each parcel of Other Leased Real Estate (the "Other Real Estate
Leases") and identifies each Management Agreement with annual revenue in excess
of $100,000.
4.9. Employee Plans. Schedule 4.9 lists all of the employee benefit
-------------- ------------
plans which are sponsored, maintained or contributed to by Seller for the
benefit of the employees of the Business currently performing services
(collectively, the "Seller Benefit Plans").
4.10. Material Contracts. Schedule 4.10 sets forth an accurate list of
------------------ -------------
all written contracts and agreements solely related to the Business or the
Purchased Assets meeting any of the descriptions set forth below (the "Material
Contracts"):
(a) all Other Real Estate Leases and Ground Leases requiring
annual payments in excess of $100,000;
(b) all Management Agreements and lease agreements (the "Tenant
Leases") with an annual revenue in excess of $100,000;
(c) all management and service contracts and purchase orders and
other contracts for the purchase of materials or services requiring annual
payments in excess of $100,000;
(d) all machinery leases, equipment leases and other personal
property leases requiring annual payments in excess of $100,000; and
(e) all other contracts, commitments, agreements, arrangements and
understandings which provide for annual payment to or from Seller having
an aggregate value of $100,000 or more.
Except as set forth on Schedule 4.10, each Material Contract is valid and
-------------
binding and is in full force and effect as to Seller, assuming the other party
thereto is bound which, to Seller's knowledge, is the case for each Material
Contract. To the knowledge of Seller, no event has occurred which is or, after
the giving of notice or passage of time, or both, would constitute a material
default under or a material breach of any Material Contract by Seller or, to the
knowledge of Seller, by any other party thereto which could reasonably be
expected to result in a Material Adverse Effect. To Seller's knowledge, no
-11-
<PAGE>
defenses, off-sets, or counterclaims have been asserted by any party thereto,
which could reasonably be expected to result, in the aggregate, in a Material
Adverse Effect. To Seller's knowledge, (i) Seller has not waived any material
rights under any Material Contracts and (ii) there are no disputes with respect
to any Material Contract, which could reasonably be expected to result, in the
aggregate, in a Material Adverse Effect. Except as set forth on Schedule 4.10,
-------------
to Seller's knowledge, Seller has not received notice of any plan or intention
of any other party to any Material Contract to exercise any right to cancel or
terminate any Material Contract, except for such cancellations or terminations
which could not reasonably be expected to result, in the aggregate, in a
Material Adverse Effect.
4.11. Intellectual Property and Proprietary Information. With respect to
-------------------------------------------------
all patents, trademarks, copyrights, registrations and intellectual property
licenses of the Business listed on Schedule 4.11 (the "Intellectual Property"),
-------------
(a) Seller is the owner or has the right to use the Intellectual Property, (b)
to Seller's knowledge, no action, suit or proceeding is pending or threatened
against Seller, (c) to the knowledge of Seller, none of the Intellectual
Property infringes upon the rights of others or is subject to any outstanding
order, decree or judgment, and (d) except as set forth on Schedule 4.11, there
-------------
are no royalty, commission or similar arrangements, and no licenses, sublicenses
or agreements, pertaining to any of the Intellectual Property.
4.12. Legal Proceedings. Except as set forth in Schedule 4.12, (a)
----------------- --------------
neither Seller nor the Business is engaged in or a party to or, to the knowledge
of Seller, threatened with any action, suit or other legal proceeding involving
the Purchased Assets, (b) Seller has no knowledge of any investigation
threatened by any governmental or regulatory authority with respect to the
Purchased Assets, and (c) the Purchased Assets are not subject to any judgment,
order, writ, injunction, stipulation or decree of any court or any governmental
agency.
4.13. Compliance with Law. Except as set forth on Schedule 4.13, to the
------------------- -------------
knowledge of Seller, the operation of the Business and the Purchased Assets
complies as of the date hereof in all material respects with all applicable
statutes, codes, laws, ordinances, rules and regulations (including all Federal
Aviation Administration and Federal Communications Commission rules and
regulations), except where non-compliance could not reasonably be expected to
result, in the aggregate, in a Material Adverse Effect.
4.14. Permits. To the knowledge of Seller, Seller currently has all the
-------
permits from all Federal, state, local and foreign authorities as are necessary
for the conduct of the Business as currently conducted as of the date hereof,
except where the failure to have any permit could not reasonably be expected to
result in a Material Adverse Effect.
4.15. Taxes. Seller has filed, or will file when due, all reports and
-----
returns ("Tax Returns") of all Federal, state, local and provincial and other
foreign net or gross income, gross receipts, sales, use, ad valorem, value
added, franchise, withholding, payroll, employment, excise, property, transfer
or other taxes and assessments, together with any penalties, additions to or
additional amounts with respect thereto and any interest (collectively referred
to as "Taxes"
-12-
<PAGE>
and individually as a "Tax") required to be filed relating to the Business or
the Purchased Assets for the periods up to the Closing, except where failure to
file could not reasonably be expected to result, in the aggregate, in a Material
Adverse Effect. With respect to the Business and the Purchased Assets, (a)
Seller has paid all material amounts of Taxes when due, except to the extent
Seller is disputing such Taxes with the applicable Tax authority in the manner
permitted by the local Tax authority (including posting any required deposits),
(b) to Seller's knowledge, there is no Tax deficiency or delinquency in any
material amount asserted or threatened against Seller, except to the extent
Seller is disputing such Taxes with the applicable Tax authority and (c) there
is no unpaid Tax in any material amount that could be asserted by a Tax
authority for which Purchaser may become liable or the liability for which might
encumber the Purchased Assets after the Closing as a result of the transactions
contemplated by this Agreement.
4.16. Employees.
---------
(a) The Business has paid or properly accrued for all wages, salaries,
commissions, bonuses and other cash compensation (other than accrued vacation,
holiday and sick pay) to which employees and former employees of the Business
are entitled to as of the Closing. Schedule 4.16 contains a list of the
-------------
employees of the Business as of the date of this Agreement.
(b) Except as set forth on Schedule 4.16, with respect to the employees
-------------
of the Business (i) to the knowledge of Seller, Seller has complied in all
material respects with all applicable laws regarding labor, employment and
employment practices, terms and conditions of employment, occupational safety
and health and wages and hours, except in such instances as could not reasonably
be expected to result, in the aggregate, in a Material Adverse Effect, (ii)
Seller is not a party to or bound by, any collective bargaining agreement or
other written contract concerning employment, and (iii) to Seller's knowledge,
there is no labor strike or labor dispute, slowdown or stoppage actually pending
or threatened against or affecting the Business and to Seller's knowledge, the
Business has not experienced any labor strikes or material labor disputes,
slowdowns or organized stoppages in the last three (3) years.
4.17. Environmental Matters.
---------------------
(a) Except as set forth on Schedule 4.17 or disclosed in the
-------------
Environmental Reports (as defined below), to Seller's knowledge, the operation
and use of the Owned Real Estate or the Ground Leased Real Estate, are each in
material compliance with all applicable Environmental Laws (as defined below),
except in such instances as could not reasonably be expected to result, in the
aggregate, in a Material Adverse Effect.
(b) Except as set forth on Schedule 4.17, disclosed in the Environmental
-------------
Reports, as permitted in accordance with any applicable Environmental Laws, or
in such instances as could not reasonably be expected to result, in the
aggregate, in a Material Adverse Effect, to the knowledge of Seller, there are
no Hazardous Materials present in the surface water, groundwater or soil (either
surface or subsurface) at the Owned Real Estate or the Ground Leased Real Estate
relating to the operation of the Business.
(c) Seller has made available to Purchaser copies and results of all
material reports, studies, analysis, tests or monitoring possessed or initiated
by Seller pertaining to Hazardous
-13-
<PAGE>
Materials in, on or under the Owned Real Estate or the Ground Leased Real Estate
or concerning compliance with Environmental Laws (collectively, the
"Environmental Reports"). The representations and warranties contained in this
Section 4.17 are deemed to be made subject to and modified by the disclosures
set forth in Schedule 4.17 and the foregoing data and information, and this
-------------
Section shall not be deemed to be breached with respect to any matter disclosed
in Schedule 4.17 and such data and information.
-------------
"Environmental Laws" means all present Federal, state, and local administrative,
regulatory and judicial laws, rules, statutes, codes, ordinances, regulations,
directives, binding interpretations, binding policies, licenses, permits,
approvals, plans, authorizations, rulings, injunctions, decrees, judgments and
any similar items, which are in effect on the date hereof relating to the
protection of human health, safety, or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata).
"Hazardous Materials" means any solid, liquid or gaseous material, alone or in
combination, mixture or solution, which are now defined, listed or identified as
"hazardous" (including "substances" or "wastes"), "toxic", a "pollutant" or a
"contaminant" pursuant to any Environmental Law which is applicable to the site
in question, including asbestos, chlorinated solvents, polychlorinated
biphenyls, fuel oil, petroleum (including its derivatives, by-products or other
hydrocarbons) and any other dangerous, explosive, corrosive, flammable,
radioactive or carcinogenic material which is prohibited, limited, controlled or
regulated under any applicable Environmental Law.
4.18. Brokers' Fees. Seller has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Purchaser could become
liable or obligated.
4.19. Disclaimer. The representations and warranties set forth in this
----------
Article IV are the only representations and warranties made by Seller with
respect to the Business and the Purchased Assets. Except as specifically set
forth herein, Seller is selling the Purchased Assets to Purchaser "as is" and
"where is" and with all faults. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, ALL
WARRANTIES, EXPRESS OR IMPLIED, ARE HEREBY DISCLAIMED AND EXCLUDED, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT
SHALL SELLER BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES. Seller
makes no representation or warranty as to the accuracy or reliability of any
forecasts or projections of revenues, sales, expenses or profits of the
Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as of the date hereof,
and as of the Closing Date, as set forth below.
-14-
<PAGE>
5.1. Authority. Purchaser has full right, power and authority, without
---------
the consent of any other person, to execute and deliver this Agreement and the
agreements contemplated hereby and to consummate the transactions contemplated
hereby and thereby. All corporate acts required to be taken by Purchaser to
authorize the execution and delivery of this Agreement and the agreements
contemplated hereby and all transactions contemplated hereby and thereby have
been duly and properly taken.
5.2. Validity. This Agreement has been, and the agreements and other
--------
documents to be delivered by Purchaser at Closing will be, duly executed and
delivered by Purchaser and will constitute lawful, valid and legally binding
obligations of Purchaser, enforceable in accordance with their respective terms.
The execution and delivery by Purchaser of this Agreement and the agreements
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby will not (immediately, with notice, the passage of time or both)
result in the creation of any lien, charge or encumbrance or the acceleration of
any indebtedness or other obligation of Purchaser and are not prohibited by, do
not violate or conflict with any provision of, and do not and will not
(immediately, with notice, the passage of time or both) result in a default
under or a breach of (i) the charter or by-laws of Purchaser, (ii) any contract,
agreement, permit, license or other instrument to which Purchaser is a party or
by which either is bound, (iii) any order, writ, injunction, decree or judgment
of any court or governmental agency, or (iv) any law, rule or regulation
applicable to Purchaser, except for such creations, accelerations, terminations,
violations, conflicts, breaches, defaults, charges or encumbrances which, in the
aggregate will not have an adverse effect on Purchaser's ability to consummate
the transactions contemplated hereby.
5.3. Due Organization. Purchaser is a corporation duly organized, in
----------------
good standing and validly existing under the laws of Delaware.
5.4. Brokers' Fees. Purchaser has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.
5.5. Financing. Purchaser has sufficient funds or financing in place as
---------
of the date hereof to fund the consideration to be paid at Closing to Seller for
the Purchased Assets. The principal asset of Pinnacle Holdings Inc., the parent
of Purchaser, is the stock of Purchaser. Seller agrees that from the date
hereof until the Closing, Seller shall have and maintain funds available for
borrowing under the Fourth Amended and Restated Credit Agreement, dated as of
June 25, 1999, between Purchaser and NationsBank, N.A. of at least $200,000,000
for use in funding the Purchase Price and for no other purposes.
-15-
<PAGE>
ARTICLE VI
COVENANTS OF SELLER
6.1. Interim Conduct of Business. From the date hereof until the
---------------------------
Closing, Seller shall:
(a) operate the Business consistent with past practice and in the
ordinary course of business, except as set forth on Schedule 6.1 or otherwise
------------
specifically provided herein;
(b) not solicit, initiate or encourage, or authorize any person to
solicit, initiate or encourage, directly or indirectly, any inquiry or proposal
for the acquisition of all or any material part of the Purchased Assets, or
enter into negotiations for any such proposal, or provide any person with
information or assistance in furtherance of any such inquiry or proposal;
(c) use commercially reasonable efforts to not take any action
that would cause or permit the representations and warranties of Seller
contained in this Agreement to be untrue in any material respect at the Closing;
and
(d) use commercially reasonable efforts to procure the consents
required under the Material Contracts, the Ground Leases and the Management
Agreements.
6.2. Access. From the date hereof through the Closing Date, Seller
------
shall give Purchaser and its representatives access during normal business hours
and under reasonable circumstances to all properties and records of the Business
and furnish Purchaser with all financial and other information in its possession
relating to the Business and the Purchased Assets as Purchaser may from time to
time reasonably request. Except as specifically provided in this Agreement,
Purchaser shall not contact any employee, customer, supplier, landlord or tenant
of Seller without the prior written consent of an officer of Seller.
6.3. Records and Documents. Following the Closing Date, Seller shall
---------------------
grant to Purchaser and its representatives, at Purchaser's reasonable request,
reasonable access to and the right to make copies at its expense of those
records and documents in Seller's possession related to the Business or the
Purchased Assets as may be reasonably necessary for litigation, preparation of
financial statements, Tax returns and audits or other valid business purposes,
or otherwise related to Purchaser's operation of the Business after the Closing
and which do not constitute Purchased Assets.
6.4. Consummation. Subject to the terms and conditions provided herein,
------------
Seller agrees to use all commercially reasonable efforts to take, or cause to be
taken all actions and to do, or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement in accordance with its terms;
except that this covenant shall not require Seller to make any payment or incur
any economic burden not provided for herein.
-16-
<PAGE>
6.5. Hart-Scott-Rodino Consent. As promptly as practicable, Seller
-------------------------
shall file with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division") a
pre-merger notification in accordance with the Hart-Scott-Rodino Act (the "HSR
Act") with respect to the sale of the Purchased Assets pursuant to this
Agreement. Seller shall furnish promptly to the FTC and the Antitrust Division
any additional information requested by either of them pursuant to the HSR Act
in connection with such filings and shall diligently take, or cooperate in the
taking of, all steps that are necessary or desirable and proper to expedite the
termination of the waiting period under the HSR Act.
6.6. Real Estate.
-----------
(a) As soon as practicable after the date of this Agreement, Seller shall
obtain and furnish to Purchaser, with respect to (i) each parcel of Owned Real
Estate and (ii) each parcel of Ground Leased Real Estate which has a site(s)
situated thereon that was one of the top 400 revenue producing sites in fiscal
1998 (the "Designated Ground Leased Real Estate"), an ALTA Form B (1992) title
insurance commitment (each, a "Commitment") in each case insuring Seller's
interest, if any, in each related guy wire and access easement, for the issuance
of an ALTA Form B (1992) title insurance policy (each, a "Title Policy"), issued
by Chicago Title Insurance Company (the "Title Company"), each in an amount
mutually agreed upon between Seller and Purchaser and which Commitments shall be
delivered no less than fifteen (15) business days prior to the Closing, showing
Purchaser as the proposed insured. Each Commitment may also include the general
exceptions customarily set forth therein; provided, however, that with respect
to the Owned Real Estate and Designated Ground Leased Real Estate, Seller shall
deliver an ALTA statement and provide a Survey as required by the Title Company
in connection with the issuance of "extended coverage" over such general
exceptions. At Closing, Seller shall cause the Title Company to issue a "marked
up" Title Policy for each parcel of Owned Real Estate and Designated Ground
Leased Real Estate, and with "extended coverage" over the general exceptions,
showing Purchaser as the insured. Notwithstanding anything stated herein to the
contrary, Seller and Purchaser shall share equally the cost of the title premium
for each Title Policy; provided, however, any endorsements to the Title Policy
shall be issued at the sole cost and expense of Purchaser (other than
endorsements issued to insure over an Unpermitted Exception). Seller shall
cooperate with Purchaser in obtaining Title Policies and Surveys for the Ground
Leased Real Estate other than the Designated Ground Leased Real Estate;
provided, however, that Purchaser shall pay all costs and expenses related to
such Title Policies and Surveys.
(b) As soon as practicable after the date of this Agreement, Seller shall
obtain and furnish to Purchaser, with respect to each parcel of Owned Real
Estate and Designated Ground Leased Real Estate, a current survey (each, a
"Survey") sufficient to cause the Title Insurer to delete the standard printed
survey exception set forth in each Commitment, which Survey shall be certified
to Seller, Purchaser and Purchaser's lender, and shall bear Purchaser's standard
surveyor certificate in the form of the attached Attachment VI. Notwithstanding
anything stated herein to the contrary, Seller and Purchaser shall share equally
the cost of each Survey.
(c) Purchaser shall have fifteen (15) days subsequent to the receipt of
the later of the Commitment and the Survey for each parcel of Owned Real Estate
or Designated Ground Leased
-17-
<PAGE>
Real Estate to notify Seller in writing as to Purchaser's objections relative to
matters of title or survey for the applicable parcel of Owned Real Estate or
Designated Ground Leased Real Estate other than (i) materialmen's, mechanics',
carriers', workmen's, repairmen's and other like liens arising in the ordinary
course of business, (ii) liens for current Taxes not yet due or payable or any
Taxes being contested in good faith by Seller, (iii) any other covenants,
conditions and restrictions, of record or otherwise, affecting title to the
Owned Real Estate or Designated Ground Leased Real Estate that could not
reasonably be expected to result in a Material Adverse Effect on the use or
marketability of such real estate, and (iv) matters that were caused by
Purchaser or any party claiming through or on behalf of Purchaser (such matters,
the "Unpermitted Exceptions"). In the event Purchaser does not notify Seller of
Unpermitted Exceptions within such fifteen (15) day period, Purchaser shall be
deemed to have accepted the Commitment and Survey for the applicable parcel of
Owned Real Estate or Designated Ground Leased Real Estate without objection, and
Purchaser shall accept title to the same at Closing subject to the matters set
forth in such Commitment and Survey (the "Permitted Exceptions"). In the event
Purchaser notifies Seller of Unpermitted Exceptions within such fifteen (15) day
period, then Seller shall use commercially reasonable efforts to cure the
Unpermitted Exceptions by having the Title Company waive such exceptions or
defects or commit to insure over the same. If Seller reasonably determines that
it is unable to cure any Unpermitted Exception (1) due to impracticality, or (2)
because it is not commercially reasonable to do so, Seller shall notify
Purchaser in writing that Seller shall not cure such Unpermitted Exception(s).
Unpermitted Exceptions that are accepted by Purchaser shall be deemed Permitted
Exceptions. Purchaser hereby agrees that Seller need not remove liens, mortgages
or security interests affecting the Owned Real Estate constituting Unpermitted
Exceptions until the Closing, and that Seller shall have no obligation
whatsoever to remove liens, mortgages, deeds of trust or security interests
affecting the ground lessor's interest in the Ground Leased Real Estate. Seller
shall reasonably cooperate, at no cost or expense to Seller, to enable Purchaser
to obtain (i) subordination, non-disturbance and attornment agreements from any
mortgagee of a ground lessor's interest in the Ground Leased Real Estate, and
(ii) a lender's title insurance policy simultaneously issued with each Title
Policy.
(d) (i) If, at the Closing, there remain Unpermitted Exceptions that
Seller has committed to cure, and the estimated aggregate out-of-pocket cost (as
determined by mutual agreement of the parties no later than five (5) days prior
to the Closing) to cure such Unpermitted Exceptions exceeds One Million Dollars
($1,000,000), the amount of such costs in excess of One Million Dollars
($1,000,000) shall be held back from the Purchase Price and set aside and held
in accordance with the escrow agreement in substantially the form attached
hereto as Attachment VII (the "Escrow Agreement"), pending the cure of such
Unpermitted Exceptions. In the event the parties are unable to agree on the
amount to be held in escrow pursuant to the Escrow Agreement, or whether any
amount shall be held in escrow, after good faith negotiations, such amount shall
be the diminution in the fair market value of the affected real estate
occasioned by reason of the existence of any such Unpermitted Exception(s) (the
"Reduction Amount"), as determined by the average of two appraisals prepared by
appraisers, one selected by each of Seller and Purchaser, each of which
appraisers shall be independent and members in good standing of the American
Institute of Real Estate Appraisers and shall have had not less than ten (10)
years' experience with commercial real estate of the same type as the affected
real estate in the location where such real estate is located. Each of Seller
and Purchaser shall bear the costs of its
-18-
<PAGE>
respective appraiser, and, in the event a third appraiser is necessary, each of
Seller and Purchaser shall share equally the costs of such appraiser. Each
appraiser shall independently determine the diminution in the fair market value
of the affected real estate and complete and forward to Seller and Purchaser
their separate appraisal reports within forty-five (45) days after the parties'
failure to agree. Any appraisal report not so forwarded within such time period
shall be excluded. If only one such report is timely forwarded, then the
appraisal set forth therein shall establish the Reduction Amount. If both
reports are timely forwarded and the lower appraisal is not less than ninety
percent (90%) of the higher appraisal, then the average of the two appraisals
shall establish the Reduction Amount. If the lower appraisal is less than ninety
percent (90%) of the higher appraisal, then the two appraisers shall meet and
select an independent third appraiser within ten (10) days after the expiration
of the forty-five (45) day period. In the event the two appraisers fail to so
select a third appraiser, either party may obtain court appointment of such
third appraiser. The third appraiser shall independently determine the
diminution in the fair market value of the affected real estate and promptly
complete and forward its report to Seller and Purchaser. The average of the two
appraisals closest in amount shall be the Reduction Amount.
(ii) If, at the Closing, there remain Unpermitted Exceptions that Seller
has notified Purchaser that Seller is unwilling to cure, and the estimated
aggregate out-of-pocket cost (as determined by mutual agreement of the parties
no later than five (5) days prior to the Closing) to cure such Unpermitted
Exceptions exceeds One Million Dollars ($1,000,000), Purchaser shall take title
to the affected real estate as it then exists, and, except as provided below,
Purchaser shall deduct from the Purchase Price either an amount (but only that
amount in excess of One Million Dollars ($1,000,000)) (A) agreed to by the
parties as the estimated aggregate out-of-pocket cost of curing such Unpermitted
Exception(s), or (B) if the parties are unable to agree as to such amount an
amount equal to the diminution in the fair market value of the affected real
estate occasioned by reason of the existence of any such Unpermitted
Exception(s), as determined in accordance with the appraisal method described
above in clause (i); provided, however, that in the event the amount determined
in accordance with either clause (i) above or this clause (ii) is less than One
Million Dollars ($1,000,000), Purchaser shall have no right to a reduction in
the Purchase Price. In no event shall Seller's liability, the amount held in
escrow and the aggregate amount deducted from the Purchase Price pursuant to
this Section 6.6(d), exceed in the aggregate Five Million Dollars ($5,000,000).
(e) Notwithstanding anything to the contrary contained in this Agreement,
in no event shall Seller be obligated to furnish Purchaser with Commitments or
Title Policies for Owned Real Estate or Designated Ground Leased Real Estate
located in jurisdictions where title insurance is not issued, and accordingly,
the failure of Seller to furnish Commitments or Title Policies in such
jurisdictions shall not constitute a breach by Seller of this Agreement;
provided, however that, subject to this Section 6.6, Seller will provide, if
available or if it exists, the commercially reasonable equivalent to the
Commitments or Title Policies in such jurisdictions.
6.7. Confidentiality. In addition to its obligations under the
---------------
Confidentiality Agreement between Seller and Purchaser (the "Confidentiality
Agreement"). Seller agrees that it will not disclose, nor will it permit any of
its employees, agents or representatives to disclose, to any third party any
confidential information obtained from Purchaser in connection with this
-19-
<PAGE>
Agreement, or the fact that discussions regarding this transaction are taking
place, except as needed in connection with obtaining any consents with respect
to any Material Contracts, Management Agreements, Ground Leases, Other Real
Estate Leases and Tenant Leases and as otherwise contemplated by this Agreement.
If this Agreement is terminated without consummation of the transactions
contemplated hereunder, promptly after termination, Seller shall destroy or
return to Purchaser all such confidential information, including any copies,
extracts or other reproductions in whole or in part. Such return or destruction
shall be certified in writing to Purchaser by an authorized officer of Seller.
The provisions of this Section 6.7 shall survive any termination of this
Agreement.
6.8. Contracts. Seller will provide to Purchaser correct and complete
---------
copies of substantially all of the Management Agreements, leases for tower
space, Ground Leases and all Other Real Estate Leases within seven (7) business
days of the date hereof. Seller will provide to Purchaser correct and complete
copies of substantially all of the Material Contracts (other than those set
forth in the immediately preceding sentence and customer licenses) within 30
days of the date hereof.
6.9. Audits. Seller will cooperate reasonably with Purchaser and, subject
------
to the Confidentiality Agreement and Section 6.7, will make accessible to
Purchaser and Purchaser's accountants Seller's financial books and records
regarding the Business and the Purchased Assets in connection with any audits of
Purchaser or its business pertaining to financings done by Purchaser and will,
to the extent Seller is able to, using commercially reasonable efforts, provide
customary consents and accounting management letters; provided, however, that
Purchaser shall pay all out-of-pocket expenses incurred by Seller in connection
with the foregoing.
6.10. Financial Information. In the event that Purchaser undertakes a
---------------------
private or public equity and/or debt offering:
(a) Seller shall furnish or shall cause Seller's independent
accountants (i) to furnish Purchaser audited consolidated financial statements
for the Business as of December 31, 1998 and December 31, 1997 and for each of
the years in the three-year period ended December 31, 1998 or such shorter
period as may be required in a form meeting the requirements of Regulation S-X
under the Securities Act of 1933, as amended, (ii) to furnish to Purchaser upon
receipt of a final draft of any registration statement (or offering memorandum),
the consent of KPMG LLP to the inclusion of their reports on such financial
statements in a registration statement (or offering memorandum) and any
amendments thereto and (iii) to cooperate regarding comfort letters that may be
requested by underwriters or placement agents in connection with such matters.
(b) For purposes of assisting Purchaser with a potential
registration statement and related subsequent reporting requirements, Seller
will deliver to Purchaser (i) unaudited income statements, statements of cash
flows, balance sheets, and related schedules of capital expenditures and
depreciation for each 1998 and 1999 fiscal quarter, as may be required by
Purchaser, (ii) unaudited income statements, and related schedules of capital
expenditures and depreciation
-20-
<PAGE>
for each 1997 fiscal quarter corresponding to each 1998 fiscal quarter, as may
be required by Purchaser and (iii) an unaudited income statement, statement of
cash flows, balance sheet and related schedules of capital expenditures and
depreciation for the period from June 30, 1999 through the Closing Date. All
costs and fees of KPMG LLP, as well as any other out-of-pocket expenses of
Seller shall be paid by Purchaser.
ARTICLE VII
COVENANTS OF PURCHASER
7.1. Consummation. Subject to the terms and conditions provided herein,
------------
Purchaser agrees to use all commercially reasonable efforts to take, or cause to
be taken all actions and to do, or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement in accordance with its
terms, including maintaining any financing commitments related to funding the
consideration for the Purchased Assets.
7.2. HSR Consent. As promptly as practicable, Purchaser shall file with
-----------
the FTC and the Antitrust Division, including payment of the required filing
fee, a pre-merger notification in accordance with the HSR Act with respect to
the purchase of the Purchased Assets pursuant to this Agreement. Purchaser
shall furnish promptly to the FTC and the Antitrust Division any additional
information requested by either of them pursuant to the HSR Act in connection
with such filings and shall diligently take, or cooperate in the taking of, all
steps that are necessary or desirable and proper to expedite the termination of
the waiting period under the HSR Act.
7.3. Confidentiality. In addition to its obligations under the
---------------
Confidentiality Agreement. Purchaser agrees that it will not disclose, nor will
it permit any of its employees, agents or representatives to disclose, to any
third party any confidential information obtained from Seller in connection with
this Agreement, including any information provided pursuant to Section 6.2, or
the fact that discussions regarding this transaction are taking place, except as
needed in connection with obtaining any consents with respect to any Material
Contracts, Management Agreements, Ground Leases, Other Real Estate Leases and
Tenant Leases and as otherwise contemplated by this Agreement. If this
Agreement is terminated without consummation of the transactions contemplated
hereunder, promptly after termination, Purchaser shall destroy or return to
Seller all such confidential information, including any copies, extracts or
other reproductions in whole or in part. Such return or destruction shall be
certified in writing to Seller by an authorized officer of Purchaser. The
provisions of this Section 7.3 shall survive any termination of this Agreement.
7.4. Records and Documents. Following the Closing Date, Purchaser shall
---------------------
grant to Seller and its representatives, at Seller's reasonable request,
reasonable access to and the right to make copies at its expense of those
records and documents included in the Purchased Assets covering any period prior
to the Closing related to the Business or the Purchased Assets as may be
reasonably necessary for litigation, preparation of financial statements, tax
returns and audits or other valid business purposes. If Purchaser elects to
dispose of such records, Purchaser shall
-21-
<PAGE>
first give Seller sixty (60) days' written notice, during which period Seller
shall have the right to take such records without further consideration.
7.5. Insurance. Purchaser shall procure and maintain general liability
---------
insurance with carriers and in a form and with such limits as set forth on
Schedule 7.5. All premiums, assessments and other charges incurred in
- ------------
maintaining such insurance in full force and effect, as well as the payment of
any deductibles or self-insured retentions, shall be the sole responsibility of
Purchaser.
7.6. Termination of Contracts. For a period of one (1) year from the
------------------------
Closing Date, Purchaser agrees not to terminate any contract or agreement with
any existing customer of the Business without providing such customer and Seller
with at least 90 days prior written notice of such termination; provided,
however, that Purchaser shall have the right to terminate any contract or
agreement with any existing customer of the Business, if such customer is more
than 30 days delinquent in paying any amounts owed to Purchaser from the normal
payment date set forth in such contract or agreement. Purchaser shall give
Seller at least ten (10) days prior written notice of any termination pursuant
to the immediately preceding sentence.
7.7. Notification of Breach. Purchaser shall promptly notify Seller of
----------------------
any information which makes, or if known to Seller would make, any
representation, warranty or covenant of Seller contained herein untrue.
7.8. Non-Solicitation. For the period beginning on the date hereof and
----------------
ending on the earlier to occur of the Closing or one (1) year from the date this
Agreement is terminated, neither Purchaser nor any of its Representatives (as
defined in the Confidentiality Agreement) will (a) except as provided in Section
8.1, solicit for employment or employ any employees of the Business or cause any
employees of the Business to leave the employment of Seller and work for
Purchaser or any of its Representatives; provided, however, that the foregoing
shall not apply to employees of the Business hired by Purchaser or any of its
Representatives as a result of the use of general solicitation (such as an
advertisement) not specifically directed to employees of the Business or (b)
interfere with any relationships with any customers, lessors, lessees or
suppliers of the Business.
7.9. Transfer of Environmental Permits. As soon as practicable after
---------------------------------
the date hereof, but no later than five (5) business days before Closing, Seller
will provide Purchaser with a list and copies of environmental permits, licenses
and registrations which have been issued by or submitted to a governmental
agency for the Owned Real Estate and the Ground Leased Real Estate
("Environmental Permits"). Purchaser shall take whatever action is necessary to
transfer the Environmental Permits to Purchaser (or to obtain new ones, if any
terminate by operation of law) and Seller will cooperate with Purchaser to
effect such transfer. Within ninety (90) days after the Closing, Purchaser
shall use commercially reasonable efforts to provide Seller with appropriate
documentation showing that Seller is no longer listed as the permit or license
holder (or the registrant) for any Environmental Permits.
-22-
<PAGE>
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
8.1. Continued Association with Business.
-----------------------------------
(a) Purchaser shall offer employment to all of the employees of the
Business, all of whom are listed on Schedule 4.16 hereto (the "Transferred
-------------
Employees").
(b) Terms of employment for the Transferred Employees shall be offered
(i) at the same or greater cash compensation and (ii) with the benefits
currently provided by Purchaser to its employees, without requiring relocation
of the employee (unless Purchaser pays the reasonable costs of any such
relocation), and with credit for years of service with Seller and any
predecessors for purposes of eligibility, participation, vesting entitlement and
all other relevant purposes under Purchaser's employee benefit plans. In
addition, each Transferred Employee shall receive on the Closing Date an initial
grant of options to purchase 3,000 shares of common stock of Pinnacle Holdings
Inc., the parent of Purchaser, pursuant and subject to the stock option plan of
Pinnacle Holdings Inc. Purchaser will not terminate any of such Transferred
Employees (other than for Cause) or otherwise alter their terms of employment
during the first two (2) years after Closing; provided, however, that
notwithstanding the foregoing, Purchaser shall be entitled to terminate any
Transferred Employee other than for Cause, but if Purchaser does terminate any
Transferred Employee (other than for Cause) or requires the Transferred Employee
to relocate and the Transferred Employee refuses, during the first two (2) years
after the Closing, Purchaser shall pay the Transferred Employee severance equal
to the compensation such Transferred Employee would have otherwise received from
the date of termination through the second anniversary of the Closing Date.
Such payment shall be made to the Transferred Employee within ten (10) business
days of termination and shall be subject to all applicable withholding Tax
requirements. Purchaser will inform each Transferred Employee within six (6)
months from the Closing Date whether Purchaser intends to retain or relocate the
Transferred Employee; provided, however, that Purchaser shall have the right to
relocate or terminate a particular Transferred Employee at any time thereafter,
subject, in all instances, to the terms of this Agreement. Purchaser shall not
be obligated to provide any employee benefits to any employees of Seller other
than the Transferred Employees.
8.2. Employee Benefit Plans.
----------------------
(a) Seller and Purchaser agree that within two (2) weeks from the date
hereof they shall negotiate in good faith the resolution of the account balances
of the Transferred Employees in the Motorola Profit Sharing and Investment Plan.
The resolution shall be documented in a separate agreement between Seller and
Purchaser and shall be part of this Agreement.
(b) Health and Welfare Plans
(i) Pre-Existing Conditions and Waiting periods. With respect to
-------------------------------------------
all Transferred Employees who are eligible and elect to become participants in
any Purchaser employee benefit plan (as such term is defined in Section 3(3) of
ERISA) providing medical, dental, life or disability benefits, Purchaser shall
-23-
<PAGE>
waive any pre-existing condition exclusion and waiting periods under the
applicable Purchaser employee benefit plan for coverage to be effective on
the Closing Date.
(ii) Pre-Closing Claims. From and after the Closing Date, Seller
------------------
shall remain solely responsible for all obligations, costs and expenses
under Seller employee benefit plans in respect of such Transferred
Employee's claims incurred prior to the Closing Date, whether such claims
are made or reported before or after the Closing Date.
(iii) Health Care Plan Expenses. Any health care plan expenses
-------------------------
(excluding office visit co-pays) incurred by Transferred Employees on or
after the start of the calendar year in which the transfer date occurs and
prior to the Closing Date will be recognized by Purchaser's health care
plan for purposes of plan year deductibles and out-of-pocket maximums.
Seller agrees to cooperate with Purchaser in the transmission of data to
Purchaser's applicable claims administrator; provided, however, that Seller
shall transmit all of the data in one transmission only.
(iv) Workers' Compensation. Responsibility for workers'
---------------------
compensation claims in respect of the Business arising out of conditions
having a date of injury (or, in the case of a claim relating to
occupational illness or disease, the last significant exposure) prior to
the Closing Date shall remain with Seller. Purchaser shall have
responsibility for workers' compensation claims in respect of the Business
arising out of conditions having a date of injury (or, in the case of a
claim relating to occupational illness or disease, the last significant
exposure) on or after the Closing Date.
(v) Vacation. Purchaser shall, effective as of the Closing Date
--------
recognize such Transferred Employees' service with Seller for purposes of
future vacation accrual.
8.3. WARN Act Compliance. Purchaser shall retain full responsibility for
-------------------
compliance with the Worker's Adjustment and Retraining Notification Act of 1988,
as amended, and be solely responsible for furnishing any required notice of any
"plant closing" or "mass layoff", as applicable and shall indemnify Seller for
any liability, expense and cost related thereto, including reasonable attorneys'
fees related thereto.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to consummate the transactions contemplated by
this Agreement is subject to fulfillment prior to or at the Closing of the
following conditions (unless waived in writing in the sole discretion of
Purchaser):
-24-
<PAGE>
9.1. Accuracy of Warranties and Performance of Covenants. The
---------------------------------------------------
representations and warranties of Seller contained herein shall be accurate in
all material respects when made and as of the Closing Date except as to matters
arising from the date of this Agreement through Closing in the ordinary course
of business pursuant to Section 6.1 of this Agreement or as contemplated by this
Agreement and, except for such instances which, in the aggregate, do not result
in a Material Adverse Effect. Seller shall have performed, in all material
respects, all obligations and complied with each and all of the covenants,
agreements and conditions required to be performed or complied with on or prior
to the Closing, except for such instances which, in the aggregate, do not result
in a Material Adverse Effect. Seller shall have delivered an officer's
certificate confirming the matters in each of the foregoing sentences; provided,
however, that at least five (5) business days before Closing such certificate
may disclose any facts or circumstances arising or coming to the attention of
Seller after the date hereof which would cause any representations and
warranties to be incorrect or agreements or covenants to be unfulfilled and (i)
if Purchaser nevertheless decides to consummate the transactions contemplated
hereby, the breach or failure so disclosed by Seller shall be deemed cured and
waived by Purchaser and may not be relied upon by Purchaser to avoid any of its
obligations hereunder, impose any liabilities or obligations upon Seller or
otherwise recover from Seller with respect thereto or (ii) if Purchaser decides
not to consummate the transactions contemplated hereby, this Agreement and the
proposed transactions contemplated hereunder shall terminate, and each party
hereto shall thereafter have no obligation or liability hereunder and, if
applicable, the Deposit (together with all interest thereon) shall be paid to
Purchaser as provided in Section 2.6. Purchaser's sole and exclusive remedy, in
law or in equity, for any claim related to or arising out of a failure of a
condition or breach, whether in contract, tort or otherwise, shall be to
receive, if applicable, the Deposit (together with all interest thereon), and
refuse to complete the Closing under this Agreement.
9.2. No Pending Action. No action, suit, proceeding or investigation
-----------------
before any court, administrative agency or other governmental authority shall be
pending or threatened wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded.
9.3. Condition of Purchased Assets. The tangible Purchased Assets shall
-----------------------------
not have been adversely affected in any material way by any act of God, flood,
fire, accident, war or other event, which could reasonably be expected to result
in a material adverse effect on the Business, after giving due consideration to
the application of any insurance proceeds.
9.4. Hart-Scott-Rodino. The waiting period under the HSR Act required to
-----------------
permit the consummation of the transactions provided for herein shall have
expired or early termination has been granted.
9.5. Other Items. All other documents and deliveries required under
-----------
Section 3.3 shall have been provided to Purchaser.
9.6. Cure Period. If any of the conditions set forth in Section 9.1 are
-----------
not satisfied in all Material Respects, Seller shall have until the date
specified in Section 12.1(c) to cure such condition (the "Cure Period").
"Material Respect" with respect to Section 9.1 being one
-25-
<PAGE>
which has a material impact on the value of the Business or the amount of
Assumed Liabilities or on the ability of Purchaser to carry on the Business in
substantially the same manner as it was carried on by Seller immediately prior
to the Closing. Purchaser may waive any condition specified in Section 9.1 if
Purchaser executes a written waiver so stating at or prior to the Closing. If
Seller does not cure such condition within the Cure Period and Purchaser chooses
not to waive such condition, Purchaser's sole remedy under the Agreement shall
be as set forth in Section 2.6, Section 9.1 and Article XII.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement is subject to fulfillment prior to or at the Closing of the
following conditions (unless waived in writing in the sole discretion of
Seller):
10.1. Accuracy of Warranties and Performance of Covenants. The
---------------------------------------------------
representations and warranties of Purchaser contained herein shall be accurate
in all material respects when made and as of the Closing Date. Purchaser shall
have performed all obligations and complied with each and all of the covenants,
agreements and conditions required to be performed or complied with on or prior
to the Closing. Purchaser shall have delivered an officer's certificate
confirming the matters set forth in each of the foregoing sentences.
10.2. No Pending Action. No action, suit, proceeding or investigation
-----------------
before any court, administrative agency or other governmental authority shall be
pending or threatened wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded.
10.3. Hart-Scott-Rodino. The waiting period under the HSR Act required to
-----------------
permit the consummation of the transactions provided for herein shall have
expired or early termination has been granted.
10.4. Other Items. All other documents and deliveries required under
-----------
Section 3.2 shall have been provided to Seller.
10.5. Cure Period. Other than with respect to the delivery required by
-----------
Section 2.6, Section 3.2(a) and Section 5.5, if any of the conditions set forth
in Section 10.1 are not satisfied in all Material Respects, Purchaser shall have
until the date specified in Section 12.1(d) to cure such condition. "Material
Respect" with respect to Section 10.1 being one which has a material effect on
Purchaser's ability to consummate this Agreement and the transactions
contemplated herein. Seller may waive any condition specified in Section 10.1 if
Seller executes a written waiver so stating at or prior to the Closing. If
Purchaser does not cure such condition within the cure period set forth above
and Seller chooses not to waive such condition, Seller's sole remedy under the
Agreement shall be as set forth in Section 2.6 and Article XII.
-26-
<PAGE>
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1. Survival. All representations and warranties contained in this
--------
Agreement or in any agreement or other document delivered pursuant hereto shall
survive the Closing for a period of eighteen (18) months from the Closing Date,
except for the representation and warranty set forth in the first sentence of
Section 4.6 which shall survive for three (3) years from the Closing Date, and
thereafter shall expire and be of no force or effect. Any claim for
indemnification that is asserted by written notice as provided in Section 11.3
within the survival period shall survive until resolved pursuant to a final non-
appealable judicial determination or otherwise.
11.2. Indemnification.
---------------
(a) Purchaser shall indemnify and hold harmless Seller from and against
any and all loss, damage, cost or expense (including reasonable attorneys' fees
and expenses), judgments and fines (collectively, "Damages") (i) caused by any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of Purchaser contained herein or in any other agreement or document
delivered pursuant hereto, (ii) arising from the Assumed Liabilities, (iii)
arising from any action or inaction of Purchaser after the Closing, other than
in accordance with the terms hereof (provided, however, that the foregoing shall
not relieve Seller of any of its obligations hereunder unless and to the extent,
Purchaser's actions or inactions expand or increase Seller's obligations and
liabilities hereunder) or (iv) arising as a result of, in connection with, or
related to the operation of the Business and the Purchased Assets following
Closing.
(b) Seller shall indemnify and hold harmless Purchaser from and against
any Damages (i) caused by any misrepresentation, breach of warranty or failure
to fulfill any covenant or agreement of Seller contained herein, or in any other
agreement or document delivered pursuant hereto or (ii) arising from the
Excluded Liabilities.
11.3. General Provisions Relating to Indemnification.
----------------------------------------------
(a) Seller shall not be required to make any payments pursuant to this
Article XI, unless and until the aggregate amount of all claims pursuant to this
Article XI shall exceed an amount equal to three percent (3%) of the total cash
consideration for the Purchased Assets (the "Threshold Amount"), as to which
Seller shall be responsible only for the excess over (i) One Million Dollars
($1,000,000) with respect to any indemnification claims for a breach of the
representations and warranties set forth in Section 4.4(d) and (ii) Three
Million Dollars ($3,000,000) with respect to any other indemnification claims;
provided, however, that any indemnification claim arising from the
representation and warranty set forth in the first sentence of Section 4.6 and
Section 4.18 shall not be subject to the Threshold Amount. The maximum
aggregate amount recoverable from Seller with respect to any claims relating to
this Agreement or the transactions contemplated hereby shall not exceed an
amount equal to twenty-five percent (25%) of the total cash consideration for
the Purchased Assets (the "Cap"); provided, however, that the maximum aggregate
amount recoverable from Seller with respect to any claim for a breach of the
representations and warranties set forth in Section 4.4(d) shall not exceed
Eight
-27-
<PAGE>
Million Dollars ($8,000,000), which amount shall not be subject to and shall be
excluded from, the Cap.
(b) The party seeking indemnification shall give written notice to the
indemnifying party of the facts and circumstances giving rise to any claim for
indemnification as soon as reasonably possible but in any event within thirty
(30) days after it obtains knowledge of the basis for a claim for
indemnification hereunder. The party entitled to indemnification shall take all
reasonable steps to mitigate all indemnifiable liabilities and damages upon and
after becoming aware of any event which could reasonably be expected to give
rise to any liabilities and damages that are indemnifiable hereunder. No party
shall be entitled to indemnification to the extent of any insurance, tax or
other benefits (if applicable, computed on a present value basis using a 6%
discount rate) resulting from or which may be claimed as a result of the facts
and circumstances relating to any indemnifiable claim. If any Damages are
covered by insurance, Purchaser shall use all reasonable efforts to recover the
amount of such Damages from the insurer of such insurance which recovery (net of
any retroactive premium adjustments and the aggregate amount of reasonably
anticipated (based or written advice from insurance brokers or providers)
increased insurance premiums over the following two policy years) shall reduce
the amount of Damages hereunder; provided, however, that Purchaser shall not be
required to obtain such recovery as a condition to making a claim against Seller
pursuant to this Article XI.
(c) With respect to each claim by a third party which could give rise to
an indemnification obligation under this Article XI (a "Third Party Claim"), the
party seeking indemnification (the "Indemnified Party") must give prompt notice
to the indemnifying party (the "Indemnifying Party") of the Third Party Claim.
The Indemnifying Party may, at its sole cost and expense, upon notice to the
Indemnified Party within thirty (30) days after the Indemnifying Party receives
notice of the Third Party Claim, assume the defense of the Third Party Claim,
with counsel of its choice. The Indemnifying Party shall not consent to a
settlement of, or the entry of any judgment arising from, any Third Party Claim,
unless (i) the settlement or judgment is solely for money damages, or (ii) the
Indemnified Party consents thereto, which consent shall not be unreasonably
withheld. The Indemnifying Party shall provide the Indemnified Party with
fifteen (15) days prior notice before it consents to a settlement of, or the
entry of a judgment arising from, any Third Party Claim. The Indemnified Party
shall be entitled to participate in the defense of (but not control) any Third
Party Claim, the defense of which is assumed by the Indemnifying Party, with its
own counsel and at its own expense. The parties shall cooperate in the defense
of any Third Party Claim and the relevant records of each party shall be made
available on a timely basis. If the Indemnifying Party does not assume the
defense of any such claim or proceeding resulting therefrom in accordance with
the terms hereof, the Indemnified Party may defend such claim or proceeding in a
reasonable manner, including settling such claim or proceeding on such terms as
the Indemnified Party may deem appropriate after giving fifteen (15) days'
notice of the same to the Indemnifying Party and obtaining the written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld. To
the extent applicable, the Indemnified Party shall keep the Indemnifying Party
reasonably informed, in writing, as to the defense of any such matter hereunder.
-28-
<PAGE>
(d) Neither party shall have any obligation to indemnify the other party
or otherwise have liability to the other party for consequential damages,
special damages, incidental damages, indirect damages, lost profits or similar
items.
(e) Seller shall have no liability under this Article XI to the extent
arising from actions taken or not taken by Purchaser or its affiliates after the
Closing Date (provided, however, that the foregoing shall not relieve Seller of
any obligations hereunder unless and to the extent, Purchaser's actions or
inactions expand or increase Seller's obligations and liabilities hereunder).
(f) To the extent that Seller discharges any claim for indemnification
hereunder, Seller shall be subrogated to all rights of Purchaser against third
parties.
(g) After the Closing, the indemnification rights provided hereunder shall
be the exclusive remedy of Seller and Purchaser and each of their respective
Affiliates and their officers, directors, employees, stockholders, Affiliates,
agents or representatives with respect to any dispute arising out of or related
to this Agreement.
ARTICLE XII
TERMINATION
12.1. Termination or Abandonment. Notwithstanding anything contained in
--------------------------
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser;
(b) by either Seller or Purchaser if any court of competent
jurisdiction or governmental body, authority or agency having jurisdiction shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by Purchaser, if one or more of the conditions to the obligation
of Purchaser to Close has not been fulfilled by October 31, 1999; and
(d) by Seller, if one or more of the conditions to the obligation of
Seller to Close has not been fulfilled by October 31, 1999.
12.2. Effect of Termination. If any party terminates this Agreement
---------------------
pursuant to Section 12.1 above, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except as set
forth in Section 2.6); provided, however, that the provisions of Section 2.5,
Section 2.6, Section 6.7, Section 7.3, Section 12.1, this Section 12.2 and
Section 15.3 shall survive termination of this Agreement.
-29-
<PAGE>
ARTICLE XIII
SOFTWARE TRANSFER AND LICENSE
13.1. Motorola Owned Software to be Transferred.
-----------------------------------------
(a) At Closing, Seller will assign ownership of any copyright rights in
the completely transferable Motorola software identified in Schedule 1.2(i) to
---------------
Purchaser (the "Completely Transferable Motorola Software").
(b) Notwithstanding any representations and warranties in Article IV,
Seller makes no representation or warranty, express or implied, at law or in
equity, in respect of the Completely Transferable Motorola Software, with
respect to the operation of such software, including, with respect to
merchantability or fitness for any particular purpose, and any such other
representations or warranties are hereby expressly disclaimed. PURCHASER HEREBY
ACKNOWLEDGES AND AGREES THAT, PURCHASER IS PURCHASING THE COMPLETELY
TRANSFERABLE MOTOROLA SOFTWARE ON AN "AS-IS, WHERE-IS" BASIS.
(c) At Closing, Seller will retain a royalty-free, world-wide, non-
exclusive, irrevocable license to copy, use, modify, and make derivatives of
such Completely Transferable Motorola Software.
(d) All installation, maintenance, and/or support of the Completely
Transferable Motorola Software reasonably requested by Purchaser will be by, and
at the sole expense of, Purchaser.
13.2. Motorola Owned Software to be Licensed.
--------------------------------------
(a) At Closing, Seller will grant to Purchaser a royalty-free, perpetual,
non-exclusive, non-transferable license to use the licensable Motorola software
identified in Schedule 13.2 (the "Licensable Motorola Software") for use in the
-------------
United States and Canada.
(b) Notwithstanding any representations or warranties in Article IV, Seller
makes no representation or warranty, express or implied, at law or in equity, in
respect of the Licensable Motorola Software, with respect to the operation of
such software, including with respect to merchantability or fitness for any
particular purpose, and any such other representations or warranties are hereby
expressly disclaimed.
(c) Except as specifically agreed to in the Transition Services Agreement,
Seller is not obligated to provide any services related to installation,
maintenance, and/or support of the Licensable Motorola Software for use by
Purchaser and all services reasonably requested by Purchaser related to
installation, maintenance, and/or support of Licensable Motorola Software will
be by, and at the sole expense of Purchaser.
13.3. Other Software to be Licensed. To the extent transferable, at
-----------------------------
Closing Seller will transfer to Purchaser Seller's rights in copies of the
third-party transferable software identified in
-30-
<PAGE>
Schedule 13.3 (the "Third Party Transferable Software"), all as subject to the
- -------------
rights and obligations as defined in the various applicable license agreements
between Seller and such third parties.
13.4. Non-Transferable Software. Purchaser hereby acknowledges and agrees
-------------------------
that the software identified in Schedule 1.3 is currently used by Seller in its
------------
operation of the Business and is not being transferred or licensed under this
Agreement.
13.5. Motorola Site Express Web Page.
------------------------------
(a) Seller currently operates several pages on Seller's World Wide Web
(WWW) page (www.mot.com) which have a URL of www.antennasite.motorola.com. At
Closing, Seller, if so requested by Purchaser, will transfer the code which
generates the web pages to Purchaser. However, the URL address will not be
transferred and any rights in such URL address will be retained by Seller.
(b) Prior to use or installation of such web page, Purchaser shall insure
that all references to Seller or any of its affiliates and all trademarks, trade
names, service marks, and/or logos of Seller and its affiliates (excluding "Site
Express" and derivatives therein) are removed from such web page.
(c) Seller makes no representations or warranties with regard to any
material in the web page.
ARTICLE XIV
DEFINITIONS
(a) "Accountants" has the meaning assigned to such term in Section
2.4(c).
(b) "ADR" has the meaning assigned to such term in Section 15.11(b).
(c) "Antitrust Division" has the meaning assigned to such term in Section
6.5.
(d) "Apportioned Obligations" has the meaning assigned to such term in
Section 15.4(a).
(e) "Assumed Liabilities" has the meaning assigned to such term in
Section 1.4.
(f) "Audited Financial Statements" has the meaning assigned to such term
in Section 4.4(a).
(g) "Business" has the meaning assigned to such term in the preamble.
(h) "Cap" has the meaning assigned to such term in Section 11.3(a).
(i) "Cause" shall mean (i) documented material performance deficiencies
which remain uncorrected after reasonable warning, (ii) dishonest, fraudulent or
illegal conduct, (iii)
-31-
<PAGE>
misappropriation of Purchaser's funds, (iv) conviction of a felony or (v) breach
of any statutory or common law duty of loyalty to Purchaser.
(j) "Closing" has the meaning assigned to such term in Section 3.1.
(k) "Closing Date" has the meaning assigned to such term in Section 3.1.
(l) ""Code" shall mean the Internal Revenue Code of 1986, as amended.
(m) "Commitment" has the meaning assigned to such term in Section 6.6(a).
(n) "Completely Transferable Motorola Software" has the meaning assigned
to such term in Section 13.1(a).
(o) "Confidentiality Agreement" has the meaning assigned to such term in
Section 6.7.
(p) "Cure Period" has the meaning assigned to such term in Section 9.6.
(q) "Damages" has the meaning assigned to such term in Section 11.2.(a).
(r) "Deposit" has the meaning assigned to such term in Section 2.6.
(s) "Designated Ground Leased Real Estate" has the meaning assigned to
such term in Section 6.6(a).
(t) "Disputed Amount" has the meaning assigned to such term in Section
2.4(b).
(u) "Environmental Laws" has the meaning assigned to such term in Section
4.17.
(v) "Environmental Permits" has the meaning assigned to such term in
Section 7.9.
(w) "Environmental Reports" has the meaning assigned to such term in
Section 4.17(c).
(x) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(y) "Escrow Agreement" has the meaning assigned to such term in Section
6.6(d)(i).
(z) "Excluded Assets" has the meaning assigned to such term in Section
1.3.
(aa) "Excluded Liabilities" has the meaning assigned to such term in
Section 1.5.
(bb) "FTC" has the meaning assigned to such term in Section 6.5.
(cc) "GAAP" has the meaning assigned to such term in Section 4.4(a).
-32-
<PAGE>
(dd) "Ground Leased Real Estate" has the meaning assigned to such term in
Section 4.7(a).
(ee) "Ground Leases" shall mean the lease agreements with respect to the
Ground Leased Real Estate.
(ff) "Hazardous Materials" has the meaning assigned to such term in
Section 4.17.
(gg) "HSR Act" has the meaning assigned to such term in Section 6.5.
(hh) "Indemnified Party" has the meaning assigned to such term in Section
11.3(c).
(ii) "Indemnifying Party" has the meaning assigned to such term in
Section 11.3(c).
(jj) "Intellectual Property" has the meaning assigned to such term in
Section 4.11.
(kk) "Interim Financial Statements" has the meaning assigned to such term
in Section 4.4(b).
(ll) "IRS" shall mean the Internal Revenue Service.
(mm) "Letter of Credit" has the meaning assigned to such term in Section
2.6.
(nn) "Licensable Motorola Software" has the meaning assigned to such term
in Section 13.2(a).
(oo) "Management Agreements" has the meaning assigned to such term in
Section 4.8.
(pp) "Material Adverse Effect" has the meaning assigned to such term in
Article IV.
(qq) "Material Contracts" has the meaning assigned to such term in
Section 4.10.
(rr) "Material Respect" has the meaning assigned to such term in Sections
9.6 and 10.5.
(ss) "Other Leased Real Estate" has the meaning assigned to such term in
Section 4.8.
(tt) "Other Real Estate Leases" has the meaning assigned to such term in
Section 4.8.
(uu) "Owned Real Estate" has the meaning assigned to such term in Section
4.7(a).
(vv) "Permitted Exceptions" has the meaning assigned to such term in
Section 6.6(c).
(ww) "Post-Closing Tax Period" has the meaning assigned to such term in
Section 15.4(a).
(xx) "Pre-Closing Tax Period" has the meaning assigned to such term in
Section 15.4(a).
-33-
<PAGE>
(yy) "Purchase Price" has the meaning assigned to such term in Section
2.1.
(zz) "Purchased Assets" has the meaning assigned to such term in Section
1.2.
(aaa) "Purchaser" shall mean Pinnacle Towers Inc., a Delaware
corporation.
(bbb) "Reduction Amount" has the meaning assigned to such term in
Section 6.6(d)(i).
(ccc) "REIT" has the meaning assigned to such term in Section 15.6(b).
(ddd) "Seller" shall mean Motorola, Inc., a Delaware corporation.
(eee) "Seller Benefit Plans" has the meaning assigned to such term in
Section 4.9.
(fff) "sites" shall mean the sites listed on Schedule 1.0.
------------
(ggg) "Survey" has the meaning assigned to such term in Section 6.6(b).
(hhh) "Tax" has the meaning assigned to such term in Section 4.15.
(iii) "Tax Returns" has the meaning assigned to such term in Section
4.15.
(jjj) "Taxes" has the meaning assigned to such term in Section 4.15.
(kkk) "Tenant Leases" has the meaning assigned to such term in Section
4.10(b).
(lll) "Third Party Claim" has the meaning assigned to such term in
Section 11.3(c).
(mmm) "Third Party Transferable Software" has the meaning assigned to
such term in Section 13.3.
(nnn) "Threshold Amount" has the meaning assigned to such term in
Section 11.3(a).
(ooo) "Title Company" has the meaning assigned to such term in Section
6.6(a).
(ppp) "Title Policy" has the meaning assigned to such term in Section
6.6(a).
(qqq) "To the knowledge of Seller" has the meaning assigned to such term
in Article IV.
(rrr) "Transferred Employees" has the meaning assigned to such term in
Section 8.1(a).
(sss) "Unpermitted Exceptions" has the meaning assigned to such term in
Section 6.6(c).
(ttt) "Working Capital Value" has the meaning assigned to such term in
Section 2.4(a).
-34-
<PAGE>
(uuu) "Working Capital Value Calculation" has the meaning assigned to such
term in Section 2.4(a).
ARTICLE XV
GENERAL PROVISIONS
15.1. Amendments and Waiver. No amendment, waiver or consent with respect
-----------------------
to any provision of this Agreement shall in any event be effective, unless the
same shall be in writing and signed by the parties hereto, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
15.2. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be, personally delivered or sent by
facsimile transmission with confirming copy sent by overnight courier (such as
Express Mail, Federal Express, etc.) and a delivery receipt obtained and
addressed to the intended recipient as follows:
(a) If to Seller:
Motorola, Inc.
1301 East Algonquin Road
Schaumburg, Illinois 60196-1065
Attention:
Telephone No.: (847) 576-5012
Facsimile No.: (847) 576-3628
With copies to:
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196-1065
Attention: General Counsel
Telephone No.: (847) 576-5012
Facsimile No.: (847) 576-3628
(b) If to Purchaser:
Pinnacle Towers Inc.
1549 Ringling Boulevard
Third Floor
Sarasota, Florida 34236
Attention: Steve Day
Telephone No.: (941) 364-8886
Facsimile No.: (941) 364-8761
-35-
<PAGE>
With copies to:
Holland & Knight LLP
400 North Ashley
Tampa, Florida 33601-1288
Attention: Anderson L. Baldy, III
Telephone No.: (813) 227-6520
Facsimile No.: (813) 229-0134
Any party may change its address or add or change parties for receiving notice
by written notice given to the others named above. Notices shall be deemed
given as of the date of receipt.
15.3. Expenses. Except as otherwise expressly provided herein, each party
--------
to this Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby; provided that the cost of all permit, license
or other similar fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by Purchaser when due, and
Purchaser will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such permit, license or other similar fees,
and, if required by applicable law, Seller will, and will cause its affiliates
to, join in the execution of any such Tax Returns and other documentation
15.4. Tax Matters. The following provisions shall govern the allocation of
-----------
responsibility as between Purchaser and Seller for certain tax matters following
the Closing Date:
(a) Prorations. All real property taxes, personal property taxes, ad
---------- --
valorem obligations and similar Taxes imposed on a periodic basis, in each
-------
case levied with respect to the Purchased Assets, other than conveyance
taxes provided for in Section 2.5, for a taxable period which includes (but
does not end on) the Closing Date (collectively, the "Apportioned
Obligations") shall be apportioned between Seller and Purchaser as of the
Closing Date based on the number of days of such taxable period occurring
prior to the Closing Date (the "Pre-Closing Tax Period") and the number of
days of such taxable period occurring on or after the Closing Date (the
"Post-Closing Tax Period"). Seller shall be liable for the proportionate
amount of such Taxes that is attributable to the Pre-Closing Tax Period. As
soon as practical after the Closing but in all events within 180 days
following the Closing Date, Seller and Purchaser shall present a statement
for reimbursement for such Taxes with respect to which each is entitled to
reimbursement under this Section 15.4(a), together with such supporting
evidence as is reasonably necessary to calculate the proration amount. The
proration amount shall be paid by the party owing it to the other within
ten (10) days after delivery of such statement. Thereafter, Seller shall
notify Purchaser upon receipt of any bill for such Taxes relating to the
Purchased Assets, part or all of which are attributable to the Post-Closing
Tax Period, and shall promptly deliver such bill to Purchaser who shall pay
the same to the appropriate Taxing authority, provided that if such bill
covers the Pre-Closing Tax Period, Seller shall also remit to
-36-
<PAGE>
Purchaser prior to the due date of assessment payment the proportionate
amount of such bill that is attributable to the Pre-Closing Tax Period. In
the event that either Seller or Purchaser shall thereafter make a payment
for which it is entitled to reimbursement under this Section 15.4(a), the
other party shall make such reimbursement promptly but in no event later
than thirty (30) days after the presentation of a statement setting forth
the amount of reimbursement to which the presenting party is entitled along
with such supporting evidence as is reasonably necessary to calculate the
amount of reimbursement. Any payment required under this Section and not
made within ten (10) days of delivery of the statement shall bear interest
at the rate per annum determined, from time to time, under the provisions
of Section 6621(a)(2) of the Code for each day until paid.
(b) Cooperation on Tax Matters. Purchaser and Seller shall cooperate
--------------------------
fully, as and to the extent reasonably requested by the other party, in
connection with any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
Purchaser and Seller agree (i) to retain all books and records with respect
to Tax matters relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Purchaser or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered
into with any Tax authority, and (ii) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the other party so requests, Purchaser or Seller,
as the case may be, shall allow the other party to take possession of such
books and records.
15.5. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
15.6. Successors and Assigns; Beneficiaries.
-------------------------------------
(a) This Agreement shall bind and inure to the benefit of the parties
named herein and their respective successors and assigns. Purchaser shall be
entitled to assign its right and duties (in whole or in part) under this
Agreement to one or more subsidiaries of Purchaser or an affiliate of Purchaser
which subsidiary or affiliate is controlled, directly or indirectly, by
Purchaser or such other arrangement, pursuant to a mutually acceptable agreement
between Seller and Purchaser; provided, however, that Purchaser shall in all
events remain liable hereunder. Except as provided in the foregoing sentence,
no party may assign any rights, benefits, duties or obligations under this
Agreement without the prior written consent of the other party. No third party
shall be entitled to enforce any provision hereof; and no third party is
intended to benefit from this Agreement.
-37-
<PAGE>
(b) Notwithstanding anything to the contrary in this Agreement, if
Purchaser reasonably determines that the consummation of the transactions
hereunder may adversely affect the status of Purchaser or its parent entity as a
Real Estate Investment Trust ("REIT") under the Code, then Purchaser and Seller
shall cooperate to achieve an alternative structure of the transactions provided
for herein that would not adversely affect such REIT status, on mutually
acceptable terms designed to provide Purchaser and Seller their respective
obligations and benefits under this Agreement; provided, however, that if the
parties cannot agree on an alternative structure, the transactions contemplated
hereby shall be consummated as set forth in this Agreement. Purchaser agrees to
provide Seller with its recommendation with respect to the resolution of the
matters set forth in this Section 15.6 within two (2) weeks from the date
hereof.
15.7. Entire Agreement. This Agreement, the Confidentiality Agreement, the
----------------
Nonsolicitation Agreement by and between Seller and Purchaser and the documents
referred to herein contain the entire agreement and understanding among the
parties with respect to the transactions contemplated hereby and supersede all
other agreements, understandings and undertakings among the parties on the
subject matter hereof.
15.8. Announcements. No announcement of the specific terms of this
-------------
Agreement shall be made by any party without the written approval of the other
party (which approval shall not be unreasonably withheld), except for filings
required under the HSR Act and as otherwise required by applicable law.
15.9. Partial Invalidity. In the event that any provision of this
------------------
Agreement shall be held invalid or unenforceable by any court or competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
15.10. Governing Law; Jurisdiction. This Agreement shall be interpreted in
---------------------------
accordance with the substantive laws of the State of Illinois applicable to
contracts made and to be performed wholly within said state. Except as set forth
in Section 15.11, all disputes, legal actions, suits and proceedings arising out
of or relating to this Agreement shall be brought in a federal district or state
court located in Chicago, Illinois. Each party hereby consents to the
jurisdiction of the federal district or state court in Chicago, Illinois. Each
party hereby irrevocably waives all claims of immunity from jurisdiction and any
right to object on the basis that any dispute, action, suit or proceeding
brought in the federal district or state court of Chicago, Illinois has been
brought in an improper or inconvenient venue or forum.
15.11. Disputes.
--------
(a) Seller and Purchaser mutually desire that friendly collaboration will
develop between themselves. Accordingly, they shall try to resolve in a
friendly manner all disagreements and misunderstandings connected with their
respective rights and obligations under this Agreement, including any amendments
hereof.
(b) (i) To the extent that any misunderstanding or dispute cannot be
resolved agreeably in a friendly manner, the dispute will be mediated by a
mutually acceptable mediator to be chosen by Seller and Purchaser within forty-
five (45) days after written notice by one of the parties demanding mediation.
Neither party may unreasonably withhold consent to the selection
-38-
<PAGE>
of a mediator, however, by mutual agreement Seller and Purchaser may postpone
mediation until each has completed specified but limited discovery with respect
to a dispute. The parties may also agree to attempt some other form of
alternative dispute resolution ("ADR") in lieu of mediation, including by way of
example and without limitation, neutral fact-finding or a mini-trial.
(ii) Any dispute which the parties cannot resolve through negotiation,
mediation or other form of ADR within six (6) months of the date of the initial
demand for it by one of the parties may then be submitted to the courts for
resolution. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to affect adversely the rights of either
party. Nothing in this Section 15.11 will prevent either party from resorting to
judicial proceedings if (A) good faith efforts to resolve the dispute under
these procedures have been unsuccessful or (B) interim relief from a court is
necessary to prevent serious and irreparable injury to one party or to others.
(c) Each of Purchaser and Seller shall bear their own respective costs of
mediation or ADR but Purchaser and Seller agree to share the costs of the
mediation or ADR equally.
15.12. Further Assurances.
------------------
(a) In case at any time after the Closing any further commercially
reasonable action is necessary to carry out the purposes of this Agreement, each
of the parties shall take such further commercially reasonable action (including
the execution and delivery of such further instruments and documents) as the
other party may reasonably request, all at the sole cost and expense of the
requesting party.
(b) Seller and Purchaser agree that as promptly as possible but in any
event prior to Closing they shall negotiate in good faith the resolution of any
issues with respect to or modification of this Agreement, regarding (i)
transferring the Purchased Assets located in Canada, (ii) employee benefits and
pension matters with respect to the Canadian Transferred Employees, (iii) the
Owned Real Estate, Ground Leased Real Estate and Other Leased Real Estate
located in Canada, (iv) any Canadian tax issues with respect to the transfer of
the Canadian Purchased Assets, (v) any regulatory issues with respect to the
transfer of the Purchased Assets in Canada, and (vi) any other similar matters
regarding the transfer of the Canadian Purchased Assets. The resolution shall be
documented in a separate agreement between Seller and Purchaser and shall be
part of this Agreement as set forth therein.
15.13. Other Rules of Construction. References in this Agreement to
---------------------------
sections, schedules, attachments and exhibits are to sections of, and schedules,
attachments and exhibits to, this Agreement unless otherwise indicated. Words in
the singular include the plural and in the plural include the singular. The word
"including" shall mean including, without limitation. The Section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
15.14. Authorship. The parties hereto agree that the terms and language of
----------
this Agreement were the result of negotiations between the parties and, as a
result, there shall be no
-39-
<PAGE>
presumption that any ambiguities in this Agreement shall be resolved against
either party. Any controversy over construction of this Agreement shall be
decided without regard to events of authorship or negotiation.
* * *
-40-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the date first
written above.
PINNACLE TOWERS INC. MOTOROLA, INC.
By: _____________________________ By: _________________________
Its:_____________________________ Its:_________________________
-41-
<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 Form S-3 of Pinnacle Holdings Inc. of our report
dated January 11, 1999 relating to the consolidated financial statements of
Pinnacle Holdings Inc., which appear in such Prospectus. We also consent to the
reference to us under the heading "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that PricewaterhouseCoopers LLP
has not prepared or certified such "Selected Financial Data."
PRICEWATERHOUSECOOPERS LLP
Tampa, Florida
July 2, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use 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
July 2, 1999
<PAGE>
Exhibit 23.4
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 13, 1998, with respect to the financial
statements of the Tower Operations of MobileMedia Communications, Inc. and
Subsidiaries included in the Registration Statement on Form S-3 and related
Prospectus of Pinnacle Holdings Inc. dated July 2, 1999 for the registration of
12,305,000 shares of its common stock.
/s/ Ernst & Young LLP
MetroPark, New Jersey
July 1, 199
<PAGE>
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
The financial statements of the North American Antenna Sites Business of
Motorola, Inc. as of December 31, 1997 and 1998, and for each of the years in
the three-year period ended December 31, 1998, have been included herein in
reliance upon the report of KPMG LLP, independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
KPMG LLP
Chicago, Illinois
July 2, 1999
