PINNACLE HOLDINGS INC, S-11/A, 1999-01-21

PINNACLE HOLDINGS INC
S-11/A, 1999-01-21
REAL ESTATE

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As filed with the Securities and Exchange Commission on January 21, 1999
Registration Statement No. 333-59297
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE

AMENDMENT NO. 5
to
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PINNACLE HOLDINGS INC.
(Exact name of registrant as specified in its governing instruments)

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Delaware 4899 65-0652634
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Identification Number)
incorporation or Code Number)
organization)

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)
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Copies of communications to:

Chester E. Bacheller, Esq. Robert E. Buckholz, Jr., Esq.
Holland & Knight LLP Sullivan & Cromwell
400 North Ashley Drive, Suite 2300 125 Broad Street
Tampa, Florida 33602 New York, New York 10004
(813) 227-8500 (212) 558-4000

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of
earlier effective registration statements for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration number of the earlier effective
registration statement for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Title of each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Share(2) Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, par value
$.001................. 23,000,000 shares(1) $16 $368,000,000(1) $4,122(3)
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</TABLE>

(1) Includes 3,000,000 shares of Common Stock to cover over-allotments, if
any, pursuant to over-allotment options granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.

(3) The Company previously paid a registration fee of $97,078 with the
original Registration Statement filed on July 17, 1998, with Pre-effective
Amendment No. 1 to the Registration Statement filed on July 27, 1998 and
with Pre-effective Amendment No. 4 to the Registration Statement filed on
January 5, 1999.

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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.
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<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering of Common Stock in the United States and
Canada (the "U.S. Prospectus") and one to be used in connection with a
concurrent international offering of Common Stock outside the United States
and Canada (the "International Prospectus"). The complete U.S. Prospectus
follows this explanatory note. After the U.S. Prospectus are the following
alternate pages for the International Prospectus: a front cover page, a
separate Underwriting section and a back cover page. All other pages of the
U.S. Prospectus are to be used for both the United States offering and the
international offering. Each alternative page for the International Prospectus
included herein is labeled "Alternate Page for International Prospectus."
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion,

January 21, 1999

20,000,000 Shares
Pinnacle Holdings Inc.
Common Stock

[LOGO OF PINNACLE --------
HOLDINGS INC
APPEARS HERE
APPEARS HERE]

All of the 20,000,000 shares of Common Stock offered hereby are being sold by
Pinnacle Holdings Inc. (the "Company"). Of the 20,000,000 shares of Common
Stock offered hereby, 16,000,000 shares are being offered in the United States
and Canada by the U.S. Underwriters and 4,000,000 shares are being offered
outside the United States and Canada by the International Underwriters. The
initial public offering price and the aggregate underwriting discount per share
will be identical in both offerings. Prior to this offering there has been no
public market for the Common Stock of the Company. It is presently estimated
that the initial public offering price will be between $14 and $16 per share.
See "Underwriting."

--------

The Common Stock offered hereby involves a high degree of risk.

See "Risk Factors" beginning on page 11.

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THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
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<CAPTION>
Underwriting
Price to Discount and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
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</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(2) Before deducting estimated expenses of $1.5 million payable by the Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 2,400,000 shares at the initial public
offering price per share, less underwriting discount, solely to cover over-
allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 600,000 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting".

--------

The shares of Common Stock are offered by the several U.S. Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to the right of the U.S. Underwriters to reject any order in whole or
in part. It is expected that delivery of the shares of Common Stock will be
ready for delivery in Baltimore, Maryland on or about , 1999, against
payment therefor in immediately available funds.

BTAlex.Brown

Salomon Smith Barney

NationsBanc Montgomery Securities LLC

Raymond James & Associates, Inc.

The date of this Prospectus is , 1999.
<PAGE>

[Partial map of U.S. indicating Company's current tower sites and proposed
tower sites.]

<PAGE>

No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this
Prospectus, and if given or made, such information or representation must not
be relied upon as having been authorized by the Company or by any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which it is
unlawful to make any such offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereby shall under any
circumstances imply that the information contained herein is correct as of any
date subsequent to the date hereof.

----------------

No action has been or will be taken in any jurisdiction by the Company or by
any Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Common Stock and the distribution of this Prospectus.

----------------

Market data used throughout this Prospectus was obtained from industry
publications that generally state that the sources used to acquire such data
are believed to be reliable, but that the accuracy and completeness of such
data is not guaranteed. Although the Company believes the data to be reliable,
it has not independently verified such data.

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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

* Further Note: Map on opposite page also does not include 78 additional
towers from pending acquisitions in Southeastern United States.
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements contained elsewhere in this Prospectus. Except as otherwise
indicated by the context: (i) references in this Prospectus to the "Company"
include Pinnacle Holdings Inc., a Delaware corporation, and its consolidated
subsidiaries; (ii) the information contained in this Prospectus assumes no
exercise of the Underwriters' over-allotment options; and (iii) all references
to shares of Common Stock, per share amounts and other information set forth in
this Prospectus have been adjusted to reflect certain actions taken by the
Company to effect the Recapitalization (as defined herein), which will result
in a conversion of all shares of Class A, Class B, Class C, Class D and Class E
Common Stock of the Company into shares of Common Stock, effective upon the
closing of the Offering.

THE COMPANY

The Company is the leading provider of wireless communication tower space in
the Southeastern United States. Since its formation in May 1995, the Company
has focused exclusively on creating a portfolio of dense clusters of
geographically contiguous towers and renting tower space to wireless
communications providers and users. The Company believes that the rental of
tower space is the sector of the tower industry in which it can earn the
highest cash flow margins and risk adjusted return on invested capital. This
strategy also presents significant opportunities for continued revenue and cash
flow growth through the addition of new tenants on its existing towers and
towers that may be acquired in the future.

Since commencing operations in May 1995 and through December 31, 1998, the
Company has completed 210 acquisitions through which it has acquired 799 towers
and has constructed an additional 77 towers in such high growth markets as
Atlanta, Birmingham, New Orleans, Orlando and Tampa. Subsequent to December 31,
1998 and prior to January 18, 1999, the Company acquired an additional tower.
As of January 18, 1999, the Company had agreements or letters of intent to
acquire 135 towers. As a result of its extensive existing tower base, the
Company believes it is well-positioned to continue to capitalize on the growth
opportunities available in the rapidly consolidating and highly fragmented
tower rental industry. For the year ended December 31, 1998, on a pro forma as
adjusted basis, the Company had tower rental revenue and EBITDA of $48.4
million and $28.4 million, respectively. See "Unaudited Pro Forma Financial
Data."

The Company has a diversified base of over 800 customers consisting of all
forms of wireless communications providers, operators of private networks and
government agencies that include Southern Communications Services, Inc.
("Southern Communications"), Nextel, Sprint PCS, PageNet, Motorola, BellSouth
Mobility, MobileMedia Communications, Inc. ("MobileMedia Communications"),
Teletouch, Skytel, Pagemart, Federal Bureau of Investigation and Bureau of
Alcohol, Tobacco & Firearms. The Company's leases generally range in duration
from three to five years, and many provide for scheduled minimum rent increases
of the greater of a specified percentage (which typically ranges from 3 to 5%)
or the change for the relevant period in the Consumer Price Index ("CPI").

The Company is experiencing strong demand for tower rental space fueled by
the deployment of new wireless technologies and strong underlying growth in
wireless services. The Company believes that "same tower" revenue growth
(measured by comparing the Annualized Run Rate Revenue (as defined herein) of
the Company's towers at the end of a period to the Annualized Run Rate Revenue
for the same towers at the end of a prior period), is a meaningful indicator of
the Company's ability to generate incremental revenue on such towers. Taking
into consideration new leases written as of December 31, 1998, the Company
experienced "same tower" revenue growth of approximately 20% for the year ended
December 31, 1998 on its base of towers

1
<PAGE>

owned as of December 31, 1997. The Company's Annualized Run Rate Revenue as of
December 31, 1998 was $44.7 million.

Business and Growth Strategy

The Company's objective is to create substantial value from both its position
as the leading provider of wireless communications rental tower space in the
Southeastern United States and its expansion into additional wireless
communications markets. In order to achieve this objective, the Company has
designed and implemented a three-tiered growth strategy that focuses on: (i)
increasing revenue yield per tower through aggressive marketing and
development; (ii) continuing acquisitions of towers in key markets; and (iii)
selective new tower construction.

I. Marketing and Development Strategy

The Company aggressively markets rental space on its towers to capitalize on
the operating leverage of its business. The Company's customers are generally
responsible for the installation of their own equipment and the incremental
utility costs associated with that equipment. In addition, adding customers to
an existing tower does not result in increased monitoring, maintenance or
insurance costs. Accordingly, when customers are added to an existing tower,
additional revenue can be achieved at low incremental costs, thereby yielding
increased cash flow margins. The key elements of the Company's marketing and
development strategy include the following:

. Offer Strategically Located Clusters of Towers. By owning and assembling
clusters of towers in high growth regions, the Company believes it is able
to offer its customers the ability to rapidly and efficiently fulfill their
network expansion plans across a particular market or region, which the
Company believes provides it with a significant competitive advantage.

. Target a Diversified Customer Base. The number of antennae a tower can
accommodate varies depending on the type of tower (self-supporting monopole,
guyed, self-supporting lattice), the height of the tower and the nature of
the services provided by such antennae. The substantial majority of the
Company's towers are self-supporting lattice and guyed towers that can
support a large number of antennae and therefore enable the Company to
market its tower space to a diverse group of wireless communication
providers.

. Leverage Customer Relationships. The Company believes it has established a
reputation among its customers as a highly professional and reliable tower
space provider. This has been achieved through ongoing investment in the
development of relationships at multiple levels of customer organizations.
The Company believes that important factors in generating interest in its
towers are the customer's awareness of the quality of a particular site, the
ease of doing business with one lessor, the location of other Company-owned
towers and the Company's ability to construct new towers.

. Track FCC Filings. All FCC licensees must file applications for site
locations. As part of its disciplined approach to acquisitions and new tower
construction activities, the Company tracks these filings, which provide
market intelligence as to existing wireless communications providers' build-
out plans and new market entrants.

II. Acquisition Strategy

Ownership of rental towers in many parts of the United States remains highly
fragmented, although the consolidation of tower ownership has begun to
accelerate as larger independent owners acquire small local owners in certain
regions. The Company believes that its acquisition strategy has allowed it to
achieve the highest density of towers across nine states located in the
Southeastern United States, which the Company believes provides it with a
significant competitive advantage.

2
<PAGE>

with existing tenants and the capacity to add multiple, additional tenants;
(iii) not seek build-to-suit mandates from customers, which may result in
towers being built in unprofitable locations; and (iv) lower its risk as cash
flow from existing tenants is predetermined.

The Company's acquisition strategy continues to focus on: (i) rapidly
acquiring towers in key markets as a means to quickly gain critical mass,
thereby discouraging other tower consolidators from entering its markets;
(ii) completing follow-on acquisitions to enhance its coverage in selected
wireless communications markets; and (iii) penetrating new markets as a
platform for future growth. Through December 31, 1998, the Company acquired 799
towers at an average of approximately four towers per acquisition and at a pace
of greater than one acquisition per week. The key elements of the Company's
acquisition strategy are set forth below:

. Focus on Compatibility with Existing Tower Network. In evaluating a
potential acquisition, the Company considers whether it will be compatible
with the Company's existing tower inventory. In general, the Company aims to
acquire sites that will result in clusters of towers that provide the
critical mass necessary to achieve certain competitive advantages within a
given market. The MobileMedia Acquisition and the Southern Towers
Acquisition (as defined herein) expanded the Company's presence to
contiguous markets in the Southeastern United States.

. Employ a Disciplined Valuation Process. The Company seeks to acquire towers
that have existing cash flow and identified potential for significant future
cash flow growth from additional tenants. For each potential acquisition,
the Company reviews the current population coverage of each tower to be
acquired, the nature and quality of the existing and potential customer
base, coverage of current and future major transportation corridors and the
location and desirability of competing towers. The Company also makes an
assessment of potential cash flow growth and estimates whether additional
capital expenditures will be required to add capacity to accommodate future
growth.

Consistent with the Company's acquisition criteria and strategy of
accumulating clusters of towers in regions that are highly attractive to
wireless communications providers, the Company has recently completed the
following major acquisitions:

Southern Towers Acquisition: In March 1998, the Company 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 Enhanced Specialized Mobile Radio ("ESMR") provider.
Substantially all of these towers, which are located in Georgia, Alabama,
Mississippi and Florida, were constructed within the prior four years. See
"Business--Southern Towers Acquisition."

The Southern Towers Acquisition represented an attractive opportunity to
significantly accelerate the achievement of the Company's goal of becoming the
leading provider of rental tower space in the Southeastern United States. Prior
to the acquisition, these towers, which had only a limited number of third
party tenants, were principally for the use of Southern Communications and its
affiliates. The towers were generally constructed with capacity significantly
exceeding Southern Communications' specific capacity requirements. Accordingly,
the Company believes that there is substantial potential for additional revenue
from these towers.

3
<PAGE>

MobileMedia Acquisition: In September 1998, the Company acquired 166 towers
from MobileMedia Corporation ("MobileMedia") and its affiliates for
approximately $170.0 million (the "MobileMedia Acquisition"). Subsequent to its
announced merger with Arch Communications, Inc., MobileMedia will be the second
largest paging company in the United States. See "Business-- MobileMedia
Acquisition".

The MobileMedia Acquisition represented an attractive opportunity to acquire
towers that (i) further strengthened the Company's tower portfolio in certain
existing markets, (ii) provided entry into geographically contiguous markets
and (iii) expanded the Company's operations into new markets in Southern
California and New England.

III. New Tower Construction Strategy

. Disciplined Build Selection Criteria. Through its sales and marketing
efforts, the Company seeks to identify suitable tower construction sites
based on information obtained from wireless communications providers
regarding their network construction plans. The Company carefully evaluates
such plans to meet customer requirements, which may result in selling space
on an existing tower, acquiring an existing tower, augmenting an existing
tower or constructing a new tower. Tower construction is only initiated
after at least one anchor customer is identified and the Company has
determined, based on market research, that the capital outlay for the
construction project would generate returns that exceed the Company's
minimum required return on invested capital.

. Rapid Construction/Build Implementation. After identifying an attractive
construction opportunity, the Company moves quickly to: (i) secure access to
the site by either purchasing or entering into a long-term lease for a
parcel of land; (ii) select the appropriate type of tower based on
structural capacity needs; (iii) initiate sales and marketing efforts to
rent space on the tower; and (iv) complete the necessary steps to obtain
zoning approvals and building permits. The Company acquires tower structures
from a variety of vendors and oversees the construction of the tower by
hired sub-contractors.

Company Strengths

The Company believes that its business is characterized by the following
strengths:

. Exclusive Focus on Tower Rental Business. The Company exclusively focuses on
the rental of wireless communications tower space as opposed to other
aspects of the tower industry such as site acquisition, tower construction
services and ancillary services. Furthermore, the Company does not engage in
large-scale "build-to-suit" programs, preferring instead to focus on its
core acquisition strategy and complementary selective construction strategy
designed to enhance coverage in targeted markets. The Company believes by
focusing on this sector of the tower industry, it can earn the highest cash
flow margins and risk adjusted return on invested capital.

. Disciplined and Efficient Acquirer of Tower Assets. At December 31, 1998,
the Company had a network of approximately 801 towers (excluding one tower
acquired subsequent to December 31, 1998 and 135 towers to be acquired
pursuant to probable acquisitions), geographically clustered in the
Southeastern United States as well as 75 towers located in Southern
California and New England. The Company's proven acquisition process
identifies towers that typically have an established foundation of existing
cash flow and are geographically complementary to its existing portfolio.
The Company has demonstrated the ability to identify and successfully
negotiate the purchase of what it believes to be value enhancing tower
acquisitions.

4
<PAGE>

. Ability to Successfully Increase Tower Rental Revenue. The Company's
aggressive marketing efforts to all major wireless communication providers
has resulted in the signing of a significant number of new tenants over the
last three years. Additional tenants increase the operating leverage of the
Company's portfolio and generally increase the Company's overall cash flow
margins. In order to measure the revenue growth performance of acquired
towers, the Company tracks the cumulative increase in monthly revenue from
towers acquired during different periods. The Company has 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.

The Company believes that its business will continue to be characterized by
high cash flow margins, stable and predictable cash flow and high barriers to
entry. Moreover, the Company expects to experience strong ongoing growth as it
benefits from additional consolidation opportunities while increasing overall
tower revenues on existing towers.

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The Company's headquarters are located at 1549 Ringling Boulevard, Third
Floor, Sarasota, Florida 34236, and its telephone number is (941) 364-8886. The
Company's website is www.pinnacletowers.com. The information provided on the
Company's website is not incorporated into this Prospectus.

5
<PAGE>

THE OFFERING(1)

The offering hereby of 16,000,000 shares of Common Stock in the United States
and Canada (the "U.S. Offering") and the concurrent offering of 4,000,000
shares of Common Stock outside the United States and Canada (the "International
Offering") are collectively referred to as the "Offering."

Common Stock offered in:
U.S. Offering .............
International Offering .... 16,000,000 shares

4,000,000 shares

Total.................... 20,000,000 shares

Common Stock to be
Outstanding after the
Offering................... 30,000,000 shares (2)
Nasdaq National Market BIGT
Symbol......................

- --------

(1) Does not include the Underwriters' over-allotment options for an aggregate
of 3,000,000 shares of Common Stock.

(2) Excludes approximately 3,000,000 shares of Common Stock reserved for
issuance pursuant to the Company's stock incentive plan (the "Stock
Incentive Plan"). See "Management--Stock Incentive Plan".

Use of Proceeds

The Company intends to use the net proceeds of the Offering as follows: (i)
approximately $31.4 million to redeem the outstanding shares of the Company's
Series A senior preferred stock (the "Senior Preferred Stock");
(ii) approximately $60.4 million to redeem the outstanding shares of the
Company's Series B junior preferred stock (the "Junior Preferred Stock" and
collectively with the Senior Preferred Stock, the "Existing Preferred Stock");
(iii) $15.7 million, including accrued interest, to repay in full and retire
the ABRY Bridge Loan (as defined herein); (iv) approximately $43.7 million to
be distributed to certain stockholders in connection with the Recapitalization
(as defined herein) to occur upon the closing of the Offering; and (v)
approximately $129.3 million to repay outstanding borrowings under the Senior
Credit Facility (as defined herein). After giving effect to this use of
proceeds there will be $129.7 million of availability under the Senior Credit
Facility, after giving effect to approximately $17.0 million of outstanding
letters of credit, which reduce availability thereunder.

6
<PAGE>

THE RECAPITALIZATION

In connection with the Offering, pursuant to a recapitalization agreement
between the Company, its largest stockholder, ABRY II (as defined herein), and
certain members of the Company's management that are stockholders of the
Company, the Company will convert all outstanding shares of each class of the
Company's five classes of common stock into shares of a single class of common
stock (the "Common Stock") and pay to the holders of certain of such classes of
common stock preferential amounts and yields. Such actions are collectively
referred to herein as the "Recapitalization." As a result, (i) the certificate
of incorporation of the Company will be amended immediately prior to the
consummation of the Offering to eliminate the current multiple classes of the
Company's common stock and create a single class of common stock, with all of
the outstanding shares of all the classes of common stock of the Company other
than Class D Common Stock being converted into approximately 8,571,309 shares
of Common Stock and all shares of Class D Common Stock being converted into
approximately 1,428,691 shares of Common Stock; (ii) the holders of the
Company's currently outstanding shares of Class A Common Stock, Class B Common
Stock and Class E Common Stock will collectively be paid approximately $38.9
million by the Company from proceeds of the Offering, which amount equals the
amount of the preferences such shares are entitled to over the other classes of
the Company's common stock pursuant to the Company's certificate of
incorporation in its current form; and (iii) the holders of the Company's
currently outstanding shares of Class A Common Stock will collectively be paid
approximately $4.8 million by the Company from proceeds of the Offering, which
amount equals the amount of the yield such shares have accrued from the date of
their issuances through June 30, 1997 pursuant to the Company's certificate of
incorporation in its current form.

7
<PAGE>

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following table presents summary historical and unaudited pro forma
consolidated financial data of the Company. 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 consolidated historical financial statements of the Company,
including the related notes thereto, which have been audited by
PricewaterhouseCoopers LLP, independent certified public accountants. The
unaudited pro forma consolidated financial data as of and for the year ended
December 31, 1998 were derived from audited consolidated financial statements
and the Unaudited Pro Forma Consolidated Financial Statements of the Company
contained elsewhere herein. The summary financial information should be read in
conjunction with, and are qualified in their entirety by, the information
contained in the audited consolidated financial statements of the Company and
the related notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial Data" and
"Selected Historical Consolidated Financial Data" included elsewhere herein.

The following summary unaudited pro forma statement of operations data has
been prepared to reflect the results of operations of the Company as if each of
the following had been completed as of January 1, 1998: (i) all individually
insignificant acquisitions completed during 1998; (ii) the Southern Towers
Acquisition; (iii) the MobileMedia Acquisition; (iv) acquisitions of other
rental towers by the Company completed since January 1, 1999; (v) other
individually insignificant acquisitions of rental towers for which the Company
has entered into agreements or letters of intent to acquire as of January 18,
1999, the acquisitions of which the Company believes are probable; (vi) the
financing of the acquisitions referred to in (i) through (v) above; (vii) the
Recapitalization; and (viii) the issuance of the Common Stock and the
application of the net proceeds therefrom as described under "Use of Proceeds"
(collectively, the "Transactions"). The pro forma balance sheet data as of
December 31, 1998 have been prepared as if each such transaction referred to in
(i) through (viii) above not completed by December 31, 1998 had occurred on
that date. The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The pro forma
consolidated financial data do not purport to present what the Company's
results of operations or financial position would actually have been, or to
project the Company's results of operations or financial position at any future
period.

<TABLE>
<CAPTION>
Period from
Inception
(May 3, 1995) Pro Forma
through Year Ended Year Ended Year Ended as Adjusted
December 31, December 31, December 31, December 31, December 31,
1995 1996 1997 1998 1998 (a)
------------- ------------ ------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Tower rental revenue.... $ 733 $ 4,842 $12,881 $ 32,019 $ 48,398
Tower operating
expenses, excluding
depreciation and
amortization........... 181 1,135 2,633 6,166 8,333
------ ------- ------- -------- --------
Gross profit, excluding
depreciation and
amortization........... 552 3,707 10,248 25,853 40,065
Other expenses:
General and
administrative (b).... 306 916 1,367 4,175 4,571
Corporate
development (b)....... 369 1,421 3,723 6,382 6,382
State franchise, excise
and minimum taxes..... -- 26 67 686 686
Depreciation........... 282 2,041 6,335 22,513 37,064
------ ------- ------- -------- --------
Loss from operations.... (405) (697) (1,244) (7,903) (8,638)
Interest expense........ 181 1,155 6,925 12,300 12,628
Amortization of original
issue discount and debt
issuance costs ........ 59 164 292 16,427 20,565
------ ------- ------- -------- --------
Loss before
extraordinary item..... (645) (2,016) (8,461) (36,630) (41,831)
Extraordinary loss from
extinguishment of
debt................... -- -- -- 5,641 5,641
------ ------- ------- -------- --------
Net loss................ (645) $ 2,016 $(8,461) $(42,271) $(47,472)
====== ======= ======= ======== ========
Dividends and accretion
on Preferred Stock..... -- -- -- 3,094 9,532
------ ------- ------- -------- --------
Loss attributable to
Common Stock........... $ (645) $(2,016) $(8,461) $(45,365) $(57,004)
====== ======= ======= ======== ========
Basic loss per Common
Share:
Loss before
extraordinary item.... $(6.31) $ (8.10) $(27.28) $ (94.95) $ (1.71)
Extraordinary item..... -- -- -- (13.48) (0.19)
------ ------- ------- -------- --------
Net loss............... $(6.31) $ (8.10) $(27.28) $(108.43) $ (1.90)
====== ======= ======= ======== ========
Weighted average number
of Shares of Common
Stock.................. 102 249 310 418 30,000
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
Period from
Inception
(May 3, 1995) Pro Forma
through Year Ended Year Ended Year Ended as Adjusted
December 31, December 31, December 31, December 31, December 31,
1995 1996 1997 1998 1998 (a)
------------- ------------ ------------ ------------ -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Other Operating Data:
Tower Level Cash Flow
(c).................... $ 552 $ 3,707 $ 10,248 $ 25,853 $ 40,065
Tower Level Cash Flow
Margin (d)............. 75.3% 76.6% 79.6% 80.7% 82.8%
Adjusted EBITDA (c)..... $ 246 $ 2,791 $ 8,881 $ 21,678 $ 35,494
Adjusted EBITDA Margin
(d).................... 33.6% 57.6% 68.9% 67.7% 73.3%
EBITDA (c).............. $ (123) $ 1,344 $ 5,091 $ 14,610 $ 28,426
EBITDA Margin (d)....... -- 27.8% 39.5% 45.6% 58.7%
Number of Towers: (e)
Beginning of period..... 0 33 156 312 --
Towers acquired during
the period............. 29 119 134 517 --
Towers constructed
during the period...... 4 4 22 47 --
End of period........... 33 156 312 876 1,012
<CAPTION>
Pro Forma
December 31, as Adjusted
---------------------------------------------------- December 31,
1995 1996 1997 1998 1998 (a)
------------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ 31 $ 47 $ 1,694 $ 13,801 $ 13,801
Tower assets, net....... 11,551 48,327 127,946 473,942 534,293
Total assets............ 14,573 55,566 143,178 516,148 576,499
Total debt.............. 6,124 30,422 120,582 433,218 349,350
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............ -- -- -- -- 30
Additional paid-in
capital................ 7,051 24,881 25,876 33,137 270,609
Common stock warrants... -- -- -- 1,000 --
Accumulated deficit..... (645) (2,661) (11,123) (53,394) (53,394)
------ ------- -------- -------- --------
Stockholders' equity.... 6,226 22,220 14,753 40,672 217,245
</TABLE>
- --------

(a) Reflects the historical amounts adjusted for the effects of tower
acquisitions including the adjustment to show a full year of activity for
517 towers acquired in 1998 (including the Southern Towers Acquisition of
201 towers and the MobileMedia Acquisition of 166 towers), the acquisition
of one tower subsequent to December 31, 1998 and before January 18, 1999,
the probable acquisitions as of January 18, 1999 of 135 towers, the effects
of the Recapitalization, the Offering and the redemption of the Existing
Preferred Stock as further described in "Unaudited Pro Forma Financial
Data."

(b) "General and administrative" expenses represent those costs directly
related to the day-to-day management and operation of towers owned by the
Company. "Corporate development" expenses represent costs incurred in
connection with acquisitions and 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 towers.

(c) "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" represents loss from operations before depreciation and
amortization, not including the effect of accretion and accrued dividends
on Existing Preferred Stock. The Company has included Tower Level Cash
Flow, Adjusted EBITDA and EBITDA in Other Operating Data because the
Company believes such information

9
<PAGE>

may be useful to certain investors in evaluating the Company's ability to
service its debt. Tower Level Cash Flow, Adjusted EBITDA and EBITDA should
not be considered as an alternative to Gross Profit, net loss or net cash
provided by operating activities (or any other measure of performance in
accordance with generally accepted accounting principles) as a measure of
the Company's ability to meet its cash needs or as an indication of the
Company's operating performance. Moreover, Tower Level Cash Flow, Adjusted
EBITDA and EBITDA is not a standardized measure and may be calculated in a
number of ways. Accordingly, the Tower Level Cash Flow, Adjusted EBITDA and
EBITDA information provided may not be comparable to other similarly titled
measures provided by other companies.

(d) Represents Tower Level Cash Flow, Adjusted EBITDA and EBITDA each as a
percentage of tower rental revenue.

(e)Includes towers managed by the Company, which at December 31, 1998 were 32
towers.

10
<PAGE>

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of the federal securities laws.
Discussions containing such forward-looking statements may be found in the
material set forth below and under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as in
the Prospectus generally. The words "believe," "estimate," "expect," "intend,"
"anticipate," "plan," and similar expressions and variations of such
expressions identify certain of such forward-looking statements that speak
only as of the dates on which they were made. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties. Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including, without limitation, the
risk factors set forth below and the matters set forth in this Prospectus
generally.

Substantial Indebtedness; Ability to Service Indebtedness

The Company has a significant amount of indebtedness. As of December 31,
1998, on a pro forma basis as adjusted, after giving effect to the
Transactions, the Company would have had approximately $348.7 million of
consolidated long-term debt outstanding, stockholders' equity of approximately
$217.2 million, a ratio of debt to equity of 1.6 to 1.0. Subject to the
restrictions in the Senior Credit Facility and an indenture (the "Indenture"),
under which the Company issued its 10% senior discount notes due 2008 (the
"Senior Discount Notes"), the Company expects to incur additional indebtedness
from time to time to finance acquisitions, capital expenditures, working
capital or for other purposes.

The level of the Company's indebtedness could have important consequences to
stockholders, including, but not limited to, the following: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to the
repayment of indebtedness and the payment of interest thereon and will not be
available for other purposes; (ii) the Company's future ability to obtain
additional debt financing for working capital, capital expenditures,
acquisitions or other purposes may be limited; (iii) the Company's leveraged
position and covenants contained in the Indenture and the Senior Credit
Facility could limit its ability to expand and make capital improvements and
acquisitions; (iv) the Indenture and the Senior Credit Facility contain
restrictive covenants, including covenants that restrict or prohibit the
payment of dividends or other distributions by the Company to its
stockholders; and (v) the Company's level of indebtedness could limit its
flexibility in reacting to changes in its industry and general economic
conditions and its ability to withstand a prolonged downturn in the wireless
communications or tower rental industries. Existing or potential competitors
of the Company may operate on a less leveraged basis and have significantly
greater operating and financing flexibility than the Company.

The Company's ability to service its debt obligations will depend upon its
future operating performance, which will be affected by prevailing economic
conditions in the wireless communications industry, and financial, business
and other factors, certain of which are beyond its control. If the Company is
unable to generate sufficient cash flow from operations to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing, delaying or eliminating acquisitions, tower
construction and other capital expenditures, selling assets, restructuring or
refinancing its indebtedness or seeking additional equity capital. There can
be no assurance that any of these alternative strategies could be effected on
satisfactory terms, if at all, and the implementation of any of these
alternative strategies could have a negative impact on the value of the Common
Stock.

The Senior Credit Facility and the Indenture each contain certain
restrictive covenants. The Senior Credit Facility also requires the Company to
maintain specified financial ratios and satisfy certain financial condition
tests. The Company's ability to meet these financial ratios and tests can be
affected by events beyond its control,

11
<PAGE>

and there can be no assurance that the Company will meet those tests. A breach
of any of these covenants could result in a default under the Senior Credit
Facility and the Indenture. If an event of default should occur under the
Senior Credit Facility, the lenders thereunder can elect to declare all
amounts of principal outstanding under the Senior Credit Facility, together
with all accrued interest, to be immediately due and payable. This could also
result in the triggering of cross-default or cross-acceleration provisions in
other instruments, thereby permitting acceleration of the maturity of
additional indebtedness. If the Company were unable to repay amounts that
become due under the Senior Credit Facility, the lenders thereunder could
proceed against the collateral granted to them to secure that indebtedness. If
the indebtedness under the Senior Credit Facility were to be accelerated,
there can be no assurance that the assets of the Company would be sufficient
to repay in full such indebtedness and any other indebtedness of the Company.
Substantially all the assets of the Company are pledged as security under the
Senior Credit Facility. See "Description of Certain Indebtedness." The Senior
Credit Facility and the Indenture each limit the ability of the Company to pay
dividends on its Common Stock, other than the payment of dividends required to
maintain the Company's status as a REIT.

Until March 15, 2003, the Company's interest expense on the Senior Discount
Notes will consist solely of the accretion of original issue discount.
Thereafter, the Senior Discount Notes will require annual cash interest
payments of $32.5 million. The Company's ability to make scheduled payments of
principal of, or to pay interest on, its debt obligations and its ability to
refinance any such obligations, will depend on its future performance, which,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. As
discussed, the Company's business strategy contemplates substantial capital
expenditures in connection with the execution of its business plan. There can
be no assurance that the Company will generate sufficient cash flow from
operations in the future, that anticipated revenue growth will be realized or
that future borrowings or equity contributions will be available in an amount
sufficient to service its indebtedness and make anticipated capital
expenditures. The Company may need to refinance all or a portion of its
indebtedness on or prior to its scheduled maturity. There can be no assurance
that the Company will be able to effect any required refinancing of its
indebtedness on commercially reasonable terms or at all.

Potential Need for Additional Financing

The Company's business plan is materially dependent upon the acquisition of
additional suitable towers at prices the Company considers reasonable in light
of the revenue it believes it will be able to generate from such towers when
acquired. The Company may require significant additional capital to finance
future acquisitions as well as its tower construction plan and other capital
expenditures. During 1996, 1997 and 1998, the Company made capital investments
aggregating approximately $42.2 million, $88.4 million and $372.1 million,
respectively, in tower acquisitions, site upgrades and new tower construction.
The Company estimates capital expenditures in each of 1999 and 2000 to be
approximately $150.0 million. The Company historically has financed its
capital expenditures through a combination of borrowings under bank credit
facilities, the Senior 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 the Company's revenue and cash flow are not
as expected, or if the Company's borrowing base is reduced as a result of
operating performance, the Company may have limited ability to access
necessary capital under its Senior Credit Facility or otherwise. There can be
no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company or permitted under the terms of
its existing indebtedness. Additional debt financing could have important
consequences to the holders of Common Stock. See "-- Substantial Indebtedness;
Ability to Service Indebtedness." If additional funds are raised by issuing
equity securities, existing stockholders may experience dilution. Insufficient
available funds may require the Company to scale back or eliminate some or all
of its planned expansion. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

Dependence on Acquisitions; Integration of Acquisitions

The Company's business plan is materially dependent upon the acquisition of
suitable communications towers at prices the Company considers reasonable in
light of the revenue it believes it will be able to generate

12
<PAGE>

from such towers when acquired. Since the Company's inception, however, the
price of acquisitions within the industry have generally increased over time.
Additionally, the Company competes with certain wireless communications
providers, site developers and other independent tower owners and operators
for acquisitions of towers some of which have greater financial and other
resources than the Company. Increased demand for acquisitions may result in
fewer acquisition opportunities for the Company as well as higher acquisition
prices. The Company's inability to grow by acquisition or to accurately
estimate the amount of revenue that will be generated from such acquisitions
may have a material adverse effect on the Company. Although the Company
believes that opportunities may exist for the Company to grow through
acquisitions, there can be no assurance that the Company will be able to
identify and consummate acquisitions on terms acceptable to the Company.
Certain provisions of the Senior Credit Facility or the Indenture may limit
the Company's ability to effect acquisitions. See "--Substantial Indebtedness;
Ability to Service Indebtedness." Further, there can be no assurance that the
Company will be able to profitably manage and market the space on additional
towers acquired or successfully integrate acquired towers with the Company's
operations and sales and marketing efforts without substantial costs or
delays. Acquisitions involve a number of potential risks, including the
potential loss of customers, increased leverage and debt service requirements,
combining disparate company cultures and facilities and operating towers in
geographically diverse markets. Accordingly, there can be no assurance that
one or more of the Company's past or future acquisitions may not have a
material adverse effect on the Company's financial condition and results of
operations.

Risks Associated with Acquiring Real Property

The Company's real property interests relating to its tower sites consist of
fee interests, leasehold interests, private easements and licenses, easements
and rights-of-way. The Company generally obtains title insurance on fee
properties it acquires and relies on title warranties from sellers. The
Company's ability to protect its rights against persons claiming superior
rights in tower sites depends on the Company's ability to (i) recover under
title policies, the policy limits of which may be less than the purchase price
of the particular site; (ii) 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 (iii)
realize on title covenants from landlords contained in leases.

Customer Concentration

The Company has certain customers that account for a significant portion of
its revenue. MobileMedia Communications and its affiliates and
Southern Communications and certain of its affiliates would have accounted for
approximately 24% and 11%, respectively, of the Company's revenue, on a run
rate basis, for the year ended December 31, 1998. Southern Communications
holds leases with initial terms of 10 years each. The Master Lease (as defined
herein) has an initial term of 15 years. The loss of one or more of these
major customers, or a reduction in their utilization of the Company's tower
rental space due to their insolvency or other inability or unwillingness to
pay, could have a material adverse effect on the Company's business, results
of operations and financial condition.

Because MobileMedia and certain of its affiliates are currently seeking
reorganization of its business under bankruptcy laws, after emerging from
bankruptcy, there can be no assurance that MobileMedia Communications will be
able to manage its operations successfully and meet its obligations under the
Master Lease nor can there be any assurance regarding who will control
MobileMedia Communications in the future. In the event of a default by
MobileMedia Communications as to the payment of rent, the Company has the
right to terminate the Master Lease with respect to 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 the Master Lease, could
have a material adverse effect on the Company's business, operating results
and financial position.

Barriers to New Construction

As of December 31, 1998, the Company had 16 towers under construction and
100 additional tower projects in various stages of development. The success of
the Company's growth strategy is dependent in part on

13
<PAGE>

its ability to construct new towers. Such construction can be delayed by
factors beyond the control of the Company, including zoning and local
permitting requirements, availability of erection equipment and skilled
construction personnel and weather conditions. Certain communities have placed
restrictions on new tower construction or have delayed granting permits
required for construction. In addition, as the pace of tower construction has
increased in recent years, manpower and equipment needed to erect towers have
been in increasing demand. Additionally, there can be no assurance that build
opportunities will become available that meet the Company's economic criteria.
The Company's expansion plans call for a significant increase in construction
activity. There can be no assurance that the Company will be able to overcome
the barriers to new construction or that the number of towers planned for
construction will be completed. The failure of the Company to complete the
necessary construction could have a material adverse effect on the Company's
business, financial condition and results of operations.

Competition

The Company competes for customers with wireless communications providers
and utility companies that own and operate their own tower networks and lease
tower space to other carriers, site development companies that acquire space
on existing towers for wireless communications providers and manage new tower
construction, other independent tower companies and traditional local
independent tower operators. Wireless communications providers that own and
operate their own tower networks generally are substantially larger and have
greater financial resources than the Company. The Company believes that tower
location and capacity, price, quality of service, type of service and density
within a geographic market historically have been and will continue to be the
most significant competitive factors affecting tower rental companies. The
Company believes that competition for tower acquisitions will increase and
that additional competitors will enter the tower rental market, certain of
which may have greater financial resources than the Company.

Dependence on the Wireless Communications Industry

Substantially all of the Company's revenue is derived from leases of tower
space, most of which are with wireless communications providers. Accordingly,
the future growth of the Company depends, to a considerable extent, upon the
continued growth and increased availability of cellular and other wireless
communications services. There can be no assurance that the wireless
communications industry will not experience severe and prolonged downturns in
the future or that the wireless communications industry will expand as quickly
as forecasted. The wireless communications industry, which includes paging,
cellular, PCS, fixed microwave, SMR, ESMR and other wireless communications
providers, has undergone significant growth in recent years and remains highly
competitive, with service providers in a variety of technologies and two or
more providers of the same service (up to 7 for PCS) within a geographic
market competing for subscribers. The demand for rental space on the Company's
towers is dependent on a number of factors beyond the Company's control,
including demand for wireless services, the financial condition and access to
capital of wireless communications providers, the strategy of wireless
communications providers with respect to owning or leasing towers, government
licensing of broadcast rights, changes in telecommunications regulations and
general economic conditions. The demand for space on the Company's towers is
primarily dependent on the demand for wireless communications services. A
slowdown in the growth of the wireless communications industry in the United
States would depress network expansion activities and reduce the demand for
the Company's rental towers. In addition, a downturn in a particular wireless
segment as a result of technological competition or other factors beyond the
control of the Company could adversely affect the demand for rental towers.
Advances in technology could also reduce the need for tower-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 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

14
<PAGE>

alternatives to constructing their own facilities or leasing space on
communications sites owned by the Company. If such arrangements were to become
common, there could be a material adverse effect on the Company's 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 the Company's financial condition and results of operations.
This Prospectus contains a number of estimates by industry experts regarding
expected growth rates and penetration for wireless communications
technologies. There can be no assurance that these estimates will prove to be
accurate.

Regulatory Compliance and Approval

Both the Federal Communications Commission (the "FCC") and the Federal
Aviation Administration (the "FAA") regulate towers used for wireless
communications transmitters and receivers. Such regulations control siting,
lighting and marking of towers and may, depending on the characteristics of
the tower, require registration of tower facilities. Wireless communications
equipment operating on towers is separately regulated and independently
licensed by the FCC. Certain proposals to construct new towers or to modify
existing towers are reviewed by the FAA to ensure that the tower will not
present a hazard to aviation. Tower owners may have an obligation to paint
towers or install lighting to conform to FAA standards and to maintain such
painting and lighting. Tower owners may also bear the responsibility of
notifying the FAA of any tower lighting failures. Failure to comply with
existing or future applicable requirements may lead to civil penalties or
other liabilities. Such factors could have a material adverse effect on the
Company's financial condition or results of operations.

Local regulations, including municipal or local ordinances, zoning
restrictions and restrictive covenants imposed by community developers, vary
greatly, but typically require tower owners to obtain approval from local
officials or community standards organizations prior to tower construction.
Local regulations can delay or prevent new tower construction or site upgrade
projects, thereby limiting the Company's ability to respond to customer
demand. In addition, such regulations increase costs associated with new tower
construction. There can be no assurance that existing regulatory policies will
not adversely affect the timing or cost of new tower construction or that
additional regulations will not be adopted that increase such delays or result
in additional costs to the Company. Such factors could have a material adverse
effect on the Company's future growth. The Company's customers may also become
subject to new regulations or regulatory policies that adversely affect the
demand for tower sites.

The Company's growth strategy will be affected by its ability to obtain the
permits, licenses and zoning relief necessary to build new towers. The tower
rental industry often encounters significant public resistance when attempting
to obtain the necessary permits, licenses and zoning relief for construction
or improvements of towers. There can be no assurance that the Company can
obtain the permits, licenses and zoning relief necessary to continue the
expansion of its tower rental business. The failure of the Company to obtain
such permits, licenses and zoning relief would have a material adverse effect
on the Company's business, financial condition and results of operations.

Dependence on Key Personnel

The Company's success depends to a significant degree upon the continued
contributions of key management, engineering, sales and marketing, customer
support and finance personnel, certain of whom may be difficult to replace.
The loss of the services of certain of these executives could have a material
adverse effect on the Company. There can be no assurance that the services of
such personnel will continue to be available to the Company. The Company does
not maintain key man life insurance policies on its executives that would
adequately compensate the Company for any loss of services of such executives.
See "Management--Employment Agreements" and "Certain Relationships and
Transactions."

Risk Associated with New Technologies

The emergence of new technologies could reduce the need for tower-based
transmission and reception and, thereby, have a negative impact on the
Company's operations. For example, the FCC has granted license applications
for several low-earth orbiting satellite systems that are intended to provide
mobile voice and/or data services. Although such systems are highly capital-
intensive and are not yet commercially tested, mobile satellite

15
<PAGE>

systems could compete with land-based wireless communications systems, thereby
reducing the demand for the infrastructure services provided by the Company.
Additionally, the growth in delivery of video services by direct broadcast
satellites and the development and implementation of signal combining
technologies (which permit one antenna to service two different frequencies of
transmission and, thereby, two customers) and satellite-delivery systems may
reduce the need for tower-based broadcast transmission. The occurrence of any
of these factors could have a material adverse effect on the Company's
prospects, financial condition and results of operations.

Environmental Matters

The Company's operations and its ownership or leasing of real property are
subject to federal, state and local environmental laws and regulations
regarding the use, storage, disposal, emission, release and remediation of
hazardous and nonhazardous substances, materials or wastes ("Environmental
Laws"). Under certain Environmental Laws, the Company could be held jointly
and severally liable for the remediation of hazardous substance contamination
at its facilities or at third-party waste disposal sites regardless of fault
or the legality of the original disposal and could also be held liable for any
personal injury or property damage related to such contamination. Although the
Company is not presently aware of any material environmental liabilities
pertaining to its operation, ownership or use of real property, there can be
no assurance that liability under, or the costs of compliance with, existing
or future Environmental Laws will not have a material adverse effect on the
Company's financial condition and results of operations. See "Business--
Regulatory Matters."

Risks Associated with Damage to Towers

The Company's towers are subject to risks from vandalism and risks
associated with natural disasters such as tornados, hurricanes, fires and
earthquakes. The Company maintains certain insurance to cover the cost of
replacing damaged towers and general liability insurance to protect the
Company in the event of an accident involving a tower, but the Company does
not maintain business interruption insurance. Accordingly, damage to a group
of the Company's towers could result in a significant loss of revenue and
could have a material adverse effect on the Company's results of operations
and financial condition. In addition, a tower accident for which the Company
is uninsured or underinsured could have a material adverse effect on the
Company's financial condition or results of operations.

Controlling Stockholder

After the Offering, ABRY Broadcast Partners II, L.P. ("ABRY II"), the
Company's primary stockholder, will hold approximately 27.3% of the Company's
outstanding voting stock and will initially hold four of seven seats on the
Board of Directors. Therefore, ABRY II has the power to exercise control over
the business, policies and affairs of the Company. Moreover, subject to
contractual restrictions and general fiduciary duties, the Company is not
prohibited from engaging in transactions with management and principal
stockholders, or with entities in which such persons are interested. The
Company's certificate of incorporation does not provide for cumulative voting.
See "Certain Relationships and Transactions."

Change of Control or Management

A "change of control" (as defined in the Senior Credit Facility) or certain
changes in management constitute an event of default under the Senior Credit
Facility. In the event of a "change of control" (as defined in the Indenture),
the Company will be required to offer to repurchase all of the outstanding
Senior Discount Notes at a price equal to 101% of the principal amount thereof
plus any accrued and unpaid interest thereon to the date of the purchase. The
repurchase by the Company of the Senior Discount Notes upon a change of
control could also cause a default under the Senior Credit Facility. There can
be no assurance that in the event of any such change of control or other event
of default, the Company will have, or will have access to, sufficient funds or
will be contractually permitted under the terms of outstanding indebtedness to
repay its indebtedness under the Senior Credit Facility or pay the required
purchase price for all Senior Discount Notes tendered by holders upon a change
of control. See "Description of Certain Indebtedness."

16
<PAGE>

Perceived Health Risks Associated with Radio Frequency Emissions

The Company and the wireless communications providers that utilize the
Company's towers are subject to government requirements and other guidelines
relating to radio frequency ("RF") emissions. The potential connection between
RF emissions and certain negative health effects, including some forms of
cancer, has been the subject of substantial study by the scientific community
in recent years. To date, the results of these studies have been inconclusive.
Although the Company has not been subject to any claims relating to RF
emissions, there can be no assurance that it will not be subject to such
claims in the future, which could have a material adverse effect on the
Company's results of operations and financial condition. See "Business--
Regulatory Matters."

Shares Eligible for Future Sale

Sales of shares of Common Stock in the public market after the Offering
under Rule 144 under the Securities Act or otherwise, or the perception that
such sales could occur, may adversely affect prevailing market prices of the
Common Stock and could impair the future ability of the Company to raise
capital through an offering of its equity securities or to consummate
acquisitions using Common Stock as consideration. The Company and its officers
and directors have agreed, subject to certain exceptions, not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for Common Stock,
for a period of 180 days after the date of this Prospectus without the prior
written consent of BT Alex. Brown Incorporated. See "Shares Eligible for
Future Sale" and "Underwriting."

Anti-Takeover Effect of Charter Provisions, Bylaws and State Law

The Company's certificate of incorporation and bylaws as well as Delaware
law contain provisions that may have the effect of inhibiting a non-negotiated
merger or other business combination. These provisions are intended to
encourage a person interested in acquiring the Company to negotiate with, and
to obtain the approval of, the Board of Directors in connection with the
transaction. However, certain of these provisions may discourage a future
acquisition of the Company, including an acquisition in which stockholders
might otherwise receive a premium for their shares. As a result, stockholders
who might desire to participate in such a transaction may not have the
opportunity to do so. Additionally, because the Company wishes to retain its
status as a REIT, there are certain restrictions on transfers of both the
Common Stock. See "Description of Capital Stock--Certain Provisions of the
Company's Certificate of Incorporation and Bylaws" and "Description of Capital
Stock--Certain Provisions of Delaware Law."

After giving effect to the Recapitalization, in addition to its authorized
shares of Common Stock, the Company will be authorized to issue up to
5,000,000 shares of preferred stock, $.001 par value (the "Preferred Stock").
The Board of Directors has the authority to determine the price, rights,
preferences, privileges and restrictions, including the voting rights of those
shares, without any further vote or action by the stockholders. The rights of
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company.

No Prior Public Market; Potential Volatility of Stock Price

Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or
continue following the Offering, or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price for the Common Stock will be determined by negotiations among
the Company and the Underwriters based on several factors, and may not be
indicative of the market price for the Common Stock after the Offering. See
"Underwriting."

The Company believes that various factors, such as general economic
conditions and changes or volatility in the financial markets, announcements
or significant developments with respect to the wireless communications
industry, actual or anticipated variations in the Company's quarterly or
annual financial results, the introduction of new services by the Company or
its competitors, changes in or other trends in the Company's industry or in
the industries of any of the Company's significant customers, changes in
governmental regulation or changes in securities analysts' estimates of the
Company's future performance or that of its competitors or its industry, could
cause the market price of the Common Stock to fluctuate substantially.

17
<PAGE>

Dilution

Investors purchasing Common Stock in the Offering will incur immediate
dilution in net tangible book value of $7.98 per share (assuming an initial
public offering price of $15.00 per share, the midpoint of the range set forth
on the cover page of this Prospectus). See "Dilution."

REIT Status

The Company has elected to be taxed as a Real Estate Investment Trust
("REIT") under Sections 856-860 of the Internal Revenue Code of 1986 (the
"Code"). The Company believes that it has been organized and operates in such
a manner as to qualify for taxation as a REIT, and it currently intends to
continue to operate in such a manner. However, prospective investors should be
aware that the federal tax rules and regulations relating to REITs are highly
technical and complex, and that the Company's qualification as a REIT during
each taxable year (including prior years) will depend upon its ability to meet
these requirements, through various factual matters and circumstances not
entirely within the Company's control, including actual annual operating
results, income distribution levels, stock ownership requirements and tests
relating to the Company's assets and sources of income. Although the Company
has not requested, and does not expect to request, a ruling from the Service
that it qualifies as a REIT, it has received an opinion of its counsel that,
based on certain assumptions and representations, it so qualifies. Investors
should be aware, however, that opinions of counsel are not binding on the
Service or any court. The REIT qualification opinion only represents the view
of counsel to the Company based on counsel's review and analysis of existing
law, which includes no controlling precedent. Furthermore, both the validity
of the opinion and the qualification of the Company as a REIT will depend on
the Company's continuing ability to meet various requirements concerning,
among other things, the ownership of its outstanding stock, the nature of its
assets, the sources of its income, and the amount of its distributions to its
stockholders. Therefore, no assurance can be given that the Company has
operated or will operate in a manner so as to qualify or remain qualified as a
REIT. In addition, no assurance can be given that new legislation, regulation,
administrative interpretation or court decision will not change the
requirements with respect to the Company's qualification as a REIT or the
federal income tax consequences of such qualification. The Company is not,
however, aware of any currently pending tax legislation that would adversely
affect its ability to continue to qualify as a REIT. See "Certain Federal
Income Tax Considerations" for a more detailed discussion of the opinion of
counsel and the requirements for qualification as a REIT.

The Company could be subject to a variety of taxes and penalties if it
engages in certain prohibited transactions, fails to satisfy certain REIT
distribution requirements or recognizes gain on the sale or other disposition
of certain types of property. Further, if the Company fails to qualify as a
REIT, the Company will be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at corporate rates
unreduced by distribution to stockholders, together with interest and
penalties. However, because the Company has not reported any net taxable
income (determined before the deduction of dividends) in its corporate income
tax returns following its filing of its election to be a REIT, unless its
reported net taxable losses are adjusted, the risk of any corporate income tax
liability with regard to prior periods would be minimal. However, with respect
to any year in which the Company recognizes positive taxable income, the loss
of REIT status may have a material adverse effect on the Company's financial
condition or results from operations. In addition, unless entitled to relief
under certain statutory provisions, the Company will also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of the
Company available for investment or distribution to shareholders because of
the additional tax liability to the Company for the year or years involved.
Also, distributions would no longer be required to be made. To the extent that
distributions to shareholders would have been made in anticipation of the
Company's qualifying as a REIT, the Company might be required to borrow funds
or to liquidate certain of its investments to pay the applicable tax. Failing
to qualify as a REIT would also constitute a default under certain debt
obligations of the Company which would cause the obligations to become due and
would have a negative impact on the Company's operating results and its
ability to pay dividends. See "Certain Federal Income Tax Considerations" for
a more detailed discussion of the consequences to the Company of a loss of or
failure to maintain the REIT status of the Company.

18
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the Offering (after deducting
underwriting discounts and commissions and the estimated expenses of the
Offering payable by the Company), assuming an initial public offering price of
$15.00 per share for the Common Stock, will be approximately $280.5 million
(approximately $322.8 million if the Underwriters' over-allotment options are
exercised in full).

The Company intends to use such net proceeds of the Offering as follows: (i)
approximately $31.4 million to redeem the outstanding shares of the Senior
Preferred Stock; (ii) approximately $60.4 million to redeem the outstanding
shares of the Junior Preferred Stock; (iii) $15.7 million, including accrued
interest, to repay in full and retire the ABRY Bridge Loan; (iv) approximately
$43.7 million to be distributed to certain stockholders in connection with the
Recapitalization to occur upon the closing of the Offering and (v)
approximately $129.3 million to repay outstanding borrowings under the Senior
Credit Facility.

The Company has entered into a senior credit facility with NationsBank, N.A.
and certain other lenders (the "Senior Credit Facility") that provides a
revolving line of credit for borrowings, repayments and reborrowings of up to
$250.0 million, of which $200.0 million is currently committed. Beginning on
March 31, 2000 the availability under the revolving line of credit starts
reducing by specific amounts on a quarterly basis until December 31, 2005 when
the availability will be reduced to zero. Loans under the Senior Credit
Facility bear interest at a rate per annum, at the borrower's request, equal
to the agent bank's prime rate plus a margin ranging from 0% to 2.0% or the
90-day London Interbank Offered Rate ("LIBOR") plus a margin ranging from 0%
to 3.0%. Outstanding borrowings under the Senior Credit Facility amounted to
$182.5 million at December 31, 1998. Advances under the Senior Credit Facility
have been used primarily to fund acquisitions and construction of towers. Upon
the closing of the Offering, outstanding borrowings and availability under the
Senior Credit Facility would be approximately $53.2 million and $129.7
million, respectively, after giving effect to (i) repayment of $129.3 million
of outstanding borrowings with a portion of the proceeds of the Offering and
(ii) consideration of $17.0 million of outstanding letters of credit which
reduce availability under the Senior Credit Facility.

In September 1998, the Company borrowed $15.0 million from ABRY II (the
"ABRY Bridge Loan") to partially finance the MobileMedia Acquisition. The ABRY
Bridge Loan bears interest at a rate of 9.0%. Interest and principal under the
ABRY Bridge Loan are payable within one year from the date of borrowing.

Pending such uses, the Company intends to invest the net proceeds of the
Offering in short-term, investment grade, interest bearing securities or money
market instruments. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--The Pinnacle Approach to the Tower Rental Industry--Business and
Growth Strategy."

19
<PAGE>

DILUTION

As of December 31, 1998, the Company had a pro forma negative net tangible
book value related to common stockholders of approximately $67.9 million or
$(6.79) per share of Common Stock. Pro forma net tangible book value per
common share represents the amount of total tangible assets less total
liabilities and Preferred Stock, after giving effect to the Recapitalization
divided by the number of shares of Common Stock outstanding, including all
outstanding stock grants and excluding all outstanding stock options. Without
taking into account any other changes in the pro forma net tangible book value
after December 31, 1998, other than to give effect to the receipt by the
Company of the net proceeds from the sale of 20,000,000 shares of Common Stock
offered by the Company hereby (assuming an initial public offering price of
$15.00 per share), the pro forma net tangible book value of the Company as of
December 31, 1998 would have been approximately $210.6 million or $7.02 per
common share. This represents an immediate increase in pro forma net tangible
book value of $13.81 per common share to existing stockholders and an
immediate dilution of $7.98 per common share to new investors. The following
table illustrates this per common share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per common share....... $15.00
------
Pro forma net tangible book value per common share at
December 31, 1998......................................... $(6.79)
Increase per common share attributable to new investors.... 13.81
------
Pro forma net tangible book value per common share after the
Offering.................................................... 7.02
------
Pro forma net tangible book value dilution per common share
to new investors............................................ $ 7.98
======
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1998, the differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid (assuming an initial public offering price of
$15.00 per share) and the average price per share paid:

<TABLE>
<CAPTION>
Total Weighted
Shares Purchased (1) Consideration Average
------------------------------------ Price Per
Number Percent Amount Share (2)
------------ ----------------------- ---------
<S> <C> <C> <C> <C>
Existing common stockhold-
ers...................... 10,000,000 33.3% $ (5,224,400) $(0.52)
New common stockholders... 20,000,000 66.7 300,000,000 15.00
------------ ------- ------------
Total................... 3 0,000,000 100.0% $294,775,600
============ ======= ============
</TABLE>
- --------

(1) These computations assume no exercise of any outstanding stock options or
of the Underwriters' over-allotment options. As of December 31, 1998,
there were no options to purchase Common Stock outstanding. See
"Management--Stock Incentive Plan." To the extent that any stock options
or the Underwriters' over-allotment options are exercised, there will be
further dilution to new investors. See "Underwriting" for information
concerning the Underwriters' over-allotment options.

(2) In connection with the Offering, the Company will pay $43.7 million to
the existing stockholders, which represents a return of capital
contributed of $38.9 million plus $4.8 million, which amount equals the
amount of the yield on the contributed capital from the date of its
contribution through June 30, 1997. Because of the Recapitalization, the
calculated weighted average price per share is negative.

20
<PAGE>

DIVIDEND POLICY

In order to qualify as a REIT for federal income tax purposes, among other
things, the Company must make distributions each taxable year (not including
any return of capital for federal income tax purposes) equal to at least 95%
of its real estate investment trust taxable income, although the 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 the Board of Directors and depends
upon the Company's cash available for distribution, current and projected cash
requirements, tax considerations and other factors.

The Company intends 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 the
Company's business. In this regard, the Company does 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 its 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 the Company's Board of
Directors and will depend on the Company's results of operations, financial
condition and any contractual restrictions, considerations imposed by
applicable law and other factors deemed relevant by the Board of Directors.
The Senior Credit Facility and Indenture currently limit the ability of the
Company to make cash distributions, in each case except for such distributions
necessary to maintain its REIT status. See "Risk Factors--Substantial
Indebtedness; Ability to Service Indebtedness."

21
<PAGE>

CAPITALIZATION

The following table sets forth: (i) the actual capitalization (including
short-term debt) of the Company as of December 31, 1998; (ii) the pro forma
capitalization of the Company after giving effect to (A) all acquisitions
completed after December 31, 1998 and all other individually immaterial
acquisitions of rental towers for which the Company has entered into letters
of intent as of January 18, 1999 (the acquisitions of which the Company
believes are probable) and (B) the effects of the Recapitalization; and (iii)
the pro forma as adjusted capitalization of the Company after giving effect to
the pro forma adjustments set forth in clause (ii) above, the Offering and the
application of the proceeds thereof, as described in "Use of Proceeds," as if
each had been completed on December 31, 1998. This table should be read in
conjunction with the information contained in the "Unaudited Pro Forma
Financial Data" and the Company's consolidated financial statements and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
As of December 31, 1998
-----------------------------------
Pro Forma As
Actual Pro Forma Adjusted(1)
-------- --------- ------------
(in thousands)
<S> <C> <C> <C>
Short-term debt:
Current portion of notes payable.......... $ 693 $ 693 $ 693
ABRY Bridge Loan.......................... 15,000 15,000 --
-------- -------- --------
Total current maturities.................. 15,693 15,693 693
-------- -------- --------
Long-term debt, net of current maturities:
Senior Credit Facility.................... 182,450 286,539(2) 113,582(2)
Senior Discount Notes..................... 215,958 215,958 215,958
Notes payable(3).......................... 19,117 19,117 19,117
-------- -------- --------
Total long-term debt...................... 417,525 521,614 348,657
-------- -------- --------
Redeemable stock:
Senior Preferred Stock.................... 29,882 29,882 --
Class B Common Stock, $0.001 par value,
12,000 shares authorized; 12,000 issued
and outstanding on an actual basis....... 1,761 -- --
Class D Common Stock, $0.001 par value,
100,000 shares authorized; 40,000 issued
and outstanding on an actual basis....... -- -- --
-------- -------- --------
Total redeemable stock.................... 31,643 29,882 --
-------- -------- --------
Stockholders' equity(4):
Junior Preferred Stock, redeemable, 14%
dividends, $.001 par value; 100 shares
authorized; 60 shares issued and
outstanding.............................. 59,929 59,929 --
Class A Common Stock, $0.001 par value,
202,500 shares authorized; 202,500 issued
and outstanding on an actual basis....... -- -- --
Class E Common Stock, $0.001 par value,
302,500 shares authorized; 174,766 issued
and outstanding on an actual basis....... -- -- --
Common Stock, $0.001 par value,
100,000,000 shares authorized; 10,000,000
shares issued and outstanding on a
pro forma basis; 30,000,000 shares issued
on a pro forma as adjusted basis......... -- 10 30
Common Stock Warrants(5).................. 1,000 1,000 --
Additional paid-in capital................ 33,137 (8,850) 270,609
Accumulated deficit....................... (53,394) (53,394) (53,394)
-------- -------- --------
Total stockholders' equity................ 40,672 (1,305) 217,245
-------- -------- --------
Total capitalization..................... $505,533 $565,884 $566,595
======== ======== ========
</TABLE>
- --------

(1) As adjusted to give effect to the sale by the Company of the Common Stock
at an assumed offering price of $15.00 per share.

(2) Pro forma presentation assumes an increase in the Senior Credit Facility
for the pro forma borrowing of $43.7 million to be distributed to certain
stockholders in connection with the Recapitalization. Pro forma as
adjusted presentation reflects assumed borrowing of $43.7 million and
repayment of approximately $129.3 million from the use of proceeds.
Availability under the Senior Credit Facility after giving effect to the
use of proceeds from the Offering will be $129.7, after giving effect to
$17.0 million of outstanding letters of credit, which reduce availability
thereunder.

(3) Notes payable consists of notes issued to tower sellers in the Company's
acquisition of towers. Interest rates range from 8.5% to 13.0% and the
notes mature at varying dates through December 2020.

(4) Does not include approximately 3,000,000 shares of Common Stock reserved
for issuance in connection with incentive stock options expected to be
granted at the time of the Offering.

(5) These warrants were issued in connection with the issuance of the Senior
Preferred Stock. The warrants are not exercisable prior to March 3, 2000.
If the Senior Preferred Stock is redeemed prior to March 3, 2000, such
warrants are not exercisable and are cancelled.

22
<PAGE>

UNAUDITED PRO FORMA FINANCIAL DATA

The Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1998
gives pro forma effect to: (i) the acquisition of individually immaterial
rental tower businesses completed by the Company in the period subsequent to
December 31, 1998 through January 18, 1999; (ii) other individually immaterial
acquisitions of rental tower businesses for which the Company has entered into
agreements or letters of intent to acquire as of January 18, 1999, and that
the Company believes are probable; (iii) the related financing of the
acquisitions referred to in (i) and (ii) above; (iv) the Recapitalization; and
(v) the Offering and the application of the net proceeds therefrom as
described under "Use of Proceeds," as if each had occurred as of December 31,
1998.

The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998 gives pro forma effect to: (i) all individually
insignificant acquisitions completed during 1998; (ii) the Southern Towers
Acquisition; (iii) the MobileMedia Acquisition; (iv) acquisitions of other
rental towers by the Company completed since January 1, 1999; (v) other
individually insignificant acquisitions of rental towers for which the Company
has entered into agreements or letters of intent to acquire as of January 18,
1999, the acquisitions of which the Company believes are probable; (vi) the
financing of the acquisitions referred to in (i) through (v) above; (vii) the
Recapitalization; and (viii) the issuance of the Common Stock and the
application of the net proceeds therefrom as described under "Use of
Proceeds," (collectively, the "Transactions"), as if each had occurred as of
January 1, 1998.

The Company accounts for its acquisitions under the purchase method of
accounting. The total cost of rental tower 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, the Company
does 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 the results of operations
or financial position of the Company had the transactions assumed therein
occurred, nor are they necessarily indicative of the results of operations
which 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 the Company believes are
reasonable and should be read in conjunction with the financial statements and
the accompanying notes thereto included elsewhere in this Prospectus.

23
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of December 31, 1998
(in thousands)

<TABLE>
<CAPTION>
Adjustments for
Acquisitions
Pinnacle Completed
Holdings Subsequent to Adjustments Adjustments
December 31, December 31, for Probable Other for the Pro Forma
1998 1998 (a) Acquisitions (a) Adjustments Pro Forma Offering as Adjusted
------------ --------------- ---------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.......... $ 13,801 $ -- $ -- $ -- $ 13,801 $ -- $ 13,801
Accounts receivable... 1,679 -- -- -- 1,679 -- 1,679
Prepaid expenses and
other current
assets............... 1,433 -- -- -- 1,433 -- 1,433
--------- ------- -------- ------- --------- -------- ---------
Total current assets.. 16,913 -- -- -- 16,913 -- 16,913
Restricted cash....... -- -- -- -- -- -- --
Tower assets, net..... 473,942 172 60,179 -- 534,293 -- 534,293
Fixed assets, net..... 2,477 -- -- -- 2,477 -- 2,477
Land.................. 14,613 -- -- -- 14,613 -- 14,613
Deferred debt costs,
net.................. 6,687 -- -- -- 6,687 -- 6,687
Other assets.......... 1,516 -- -- -- 1,516 -- 1,516
--------- ------- -------- ------- --------- -------- ---------
$ 516,148 $ 172 $ 60,179 $ -- $ 576,499 $ -- $ 576,499
========= ======= ======== ======= ========= ======== =========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable...... $ 3,281 $ -- $ -- $ -- $ 3,281 $ -- $ 3,281
Accrued expenses...... 5,761 -- -- -- 5,761 (711)(b) 5,050
Deferred revenue...... 1,448 -- -- -- 1,448 -- 1,448
Current portion of
long-term debt........ 15,693 -- -- -- 15,693 (15,000)(b) 693
--------- ------- -------- ------- --------- -------- ---------
Total current
liabilities........... 26,183 -- -- -- 26,183 (15,711) 10,472
Long-term debt......... 417,525 172 60,179 43,738(c) 521,614 (172,957)(d)(e) 348,657
Other liabilities...... 125 -- -- -- 125 -- 125
--------- ------- -------- ------- --------- -------- ---------
443,833 172 60,179 43,738 547,922 (188,668) 359,254
--------- ------- -------- ------- --------- -------- ---------
Redeemable Stock:
Senior Preferred
Stock................. 29,882 -- -- -- 29,882 (29,882) --
Class B Common Stock... 1,761 -- -- (1,761)(f) -- -- --
Class D Common Stock... -- -- -- -- -- -- --
--------- ------- -------- ------- --------- -------- ---------
31,643 -- -- (1,761) 29,882 (29,882) --
--------- ------- -------- ------- --------- -------- ---------
Stockholders' Equity:
Junior Preferred
Stock................. 59,929 -- -- 59,929 (59,929)(g) --
Common Stock........... -- -- -- 10(f) 10 20(h) 30
Common stock warrants.. 1,000 -- 1,000 (1,000)(g) --
Additional paid-in
capital............... 33,137 -- -- (41,987)(f) (8,850) 280,480(h) 270,609
(1,021)(g)
Accumulated deficit.... (53,394) -- -- -- (53,394) -- (53,394)
--------- ------- -------- ------- --------- -------- ---------
Total stockholders'
equity............... 40,672 -- -- (41,977) (1,305) 218,550 217,245
--------- ------- -------- ------- --------- -------- ---------
$ 516,148 $ 172 $ 60,179 $ -- $ 576,499 $ -- $ 576,499
========= ======= ======== ======= ========= ======== =========
</TABLE>

See accompanying notes to Unaudited Pro Forma Consolidated Balance Sheet

24
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands)

(a) Reflects the Company's preliminary allocation of purchase price in
accordance with the purchase method of accounting for individually
immaterial acquisitions of rental tower assets, and the related debt
financing under the Senior Credit Facility, as follows:

<TABLE>
<CAPTION>
Aggregate
Number of Number of Purchase
Acquisitions Towers Price (1)
------------- --------- ---------
<S> <C> <C> <C>
(i) Acquisitions of individually
immaterial rental tower businesses
completed by the Company in the
period January 1, 1999 through
January 18, 1999.................. 1 1 $ 172
(ii) Other individually immaterial
acquisitions of rental tower
businesses for which the Company
has entered into agreements or
letters of intent to acquire as of
January 18, 1999, and which the
Company believes are probable..... 24 135 $ 60,179
</TABLE>
--------

(1) Includes estimated fees and expenses related to the acquisitions of
$14, and $1,263, respectively.

(b) Reflects the use of a portion of the net proceeds from the Offering to
repay the outstanding balance of the ABRY Bridge Loan and accrued interest
thereon, as required under the ABRY Bridge Loan.

(c) Assumes an increase in the Senior Credit Facility for the pro forma
borrowing of $43.7 million to be distributed to certain stockholders in
connection with the Recapitalization.

(d) Represents the use of a portion of the net proceeds from the Offering to
pay the applicable distribution preference and yield to holders of Class A
Common Stock, Class B Common Stock and Class E Common Stock in connection
with the Recapitalization.

(e) Reflects the use of the remaining net proceeds from the Offering to repay
a portion of the Senior Credit Facility.

(f) Reflects the effects of the Recapitalization.

(g) Adjusted to give effect to the repayment of the Junior Preferred Stock,
the Senior Preferred Stock and the cancellation of the related warrants.

(h) Reflects the estimated net proceeds of the Offering to the Company of
$280,500 net of the estimated underwriting discounts and commissions and
offering expenses totaling $19,500.

25
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 1998
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Pinnacle
Holdings Adjustments Adjustments Adjustments Adjustments Pro
Year ended for for Southern for for Forma
December 31, Completed Towers MobileMedia Probable for
1998 Acquisitions (a) Acquisition (b) Acquisition (c) Acquisitions (d) Acquisitions
------------ ---------------- --------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tower rental
revenue......... $ 32,019 $ 1,707 $ 836 $ 8,863 $ 4,973 $ 48,398
Tower operating
expenses
excluding
depreciation and
amortization.... 6,166 343 185 836 803 8,333
-------- ------- ------- -------- ------- --------
Gross profit
excluding
depreciation and
amortization.... 25,853 1,364 651 8,027 4,170 40,065
Other expenses:
General and
administrative.. 4,175 -- 15 381 -- 4,571
Corporate
development.... 6,382 -- -- -- -- 6,382
State franchise,
excise and
minimum taxes.. 686 -- -- -- -- 686
Depreciation.... 22,513 1,948 955 7,636 4,012 37,064
-------- ------- ------- -------- ------- --------
33,756 1,948 970 8,017 4,012 48,703
Income/(loss)
from
operations...... (7,903) (584) (319) 10 158 (8,638)
Interest
expense......... 12,300 2,939 (1,969) 5,599 6,018 24,887
Amortization of
original issue
discount and
debt issuance
costs........... 16,427 -- 4,138 -- -- 20,565
-------- ------- ------- -------- ------- --------
Income/(loss)
before
extraordinary
item............ (36,630) (3,523) (2,488) (5,589) (5,860) (54,090)
Extraordinary
loss from
extinguishment
of debt......... 5,641 -- -- -- -- 5,641
-------- ------- ------- -------- ------- --------
Net loss......... (42,271) (3,523) (2,488) (5,589) (5,860) (59,731)
======== ======= ======= ======== ======= ========
Dividends and
accretion on
Preferred
Stock........... 3,094 -- -- 6,438 (g) -- 9,532
-------- ------- ------- -------- ------- --------
Net loss
attributable to
Common Stock.... $(45,365) $(3,523) $(2,488) $(12,027)(g) $(5,860) $(69,263)
======== ======= ======= ======== ======= ========
Basic loss per
common share:
Loss before
extraordinary
item........... $ (94.95) $ (6.36)
Extraordinary
item........... (13.48) (0.56)
-------- --------
Net loss........ $(108.43) $ (6.92)
======== ========
Weighted average
number of shares
of Common Stock
outstanding .... 418 10,000
<CAPTION>
Pro
Adjustments Forma
for as
Offering Adjusted (e)
------------------ ------------
<S> <C> <C>
Tower rental
revenue......... $ -- $ 48,398
Tower operating
expenses
excluding
depreciation and
amortization.... -- 8,333
------------------ ------------
Gross profit
excluding
depreciation and
amortization.... -- 40,065
Other expenses:
General and
administrative.. -- 4,571
Corporate
development.... -- 6,382
State franchise,
excise and
minimum taxes.. -- 686
Depreciation.... -- 37,064
------------------ ------------
-- 48,703
Income/(loss)
from
operations...... -- (8,638)
Interest
expense......... (12,259) (e)(f) 12,628
Amortization of
original issue
discount and
debt issuance
costs........... 20,565
------------------ ------------
Income/(loss)
before
extraordinary
item............ 12,259 (41,831)
Extraordinary
loss from
extinguishment
of debt......... -- 5,641
------------------ ------------
Net loss......... 12,259 (47,472)
================== ============
Dividends and
accretion on
Preferred
Stock........... 9,532
------------------ ------------
Net loss
attributable to
Common Stock.... $ 12,259 $(57,004)
================== ============
Basic loss per
common share:
Loss before
extraordinary
item........... $ (1.71)
Extraordinary
item........... (0.19)
------------
Net loss........ $ (1.90)
============
Weighted average
number of shares
of Common Stock
outstanding .... 30,000
</TABLE>

See accompanying notes to Unaudited Consolidated Statements of Operations

26
<PAGE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)

(a) Relects the historical, pre-acquisition results of operations (in
aggregate) for the acquisitions of rental tower 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 January
18, 1999), and the related debt financing under the Senior Credit
Facility, as follows:

<TABLE>
<CAPTION>
Acquisitions Acquisitions
Completed as Completed Adjustments
of Subsequent to for
December 31, December 31, Completed
1998 1998 Acquisitions
------------ ------------- ------------
<S> <C> <C> <C>
Tower rental revenues.............. $ 1,699 $ 8 $ 1,707
Tower operating expenses, excluding
depreciation and amortization..... 340 3 343
------- ---- -------
Gross profit excluding depreciation
and amortization.................. 1,359 5 1,364
General and administrative......... -- -- --
Depreciation....................... 1,948 -- 1,948
------- ---- -------
Loss from operations............... (589) 5 (584)
Interest expense................... 2,922 17 2,939
------- ---- -------
Net loss........................... $(3,511) $(12) $(3,523)
======= ==== =======
</TABLE>

(b) Reflects the historical operating results of Southern Communications
Services, Inc. tower operations and the pro forma effect of tower rental
revenue, tower operating expenses and tower asset depreciation, and the
related financing of the Southern Towers Acquisition under the Senior
Credit Facility, assuming the transaction was completed on January 1,
1998, as follows:

<TABLE>
<CAPTION>
Southern Towers Adjustments
for the Period for Southern
Ended Towers
March 3, 1998 Adjustments Acquisitions
--------------- ----------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Tower rental revenues........... $ 178 $ 658 (1) $ 836
Tower operating expenses,
excluding depreciation and
amortization................... 153 32 (1) 185
----- ------- -------
Gross profit excluding
depreciation and amortization.. 25 626 651
General and administrative...... 15 -- 15
Corporate development........... -- -- --
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 tower 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 tower 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 the 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 tower
rental revenue, tower operating expenses and tower 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 Adjustments
Period Ended for
September 2, MobileMedia
1998 Adjustments Acquisition
------------ ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Tower rental revenues.............. $1,698 $ 7,165 (1) $ 8,863
Tower 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
Corporate development.............. -- -- --
Depreciation....................... 356 7,280 (2) 7,636
------ -------- --------
Income (loss) from operations...... 271 (261) 10
Interest expense................... -- 5,599 (3) 5,599
Amortization of original issue
discount and debt issuance costs.. -- -- --
------ -------- --------
Net income (loss).................. 271 (5,860) (5,589)
Dividends and accretion on Existing
Preferred Stock................... -- 6,438 (4) 6,438
------ -------- --------
Net income (loss) attributable to
Common Stock...................... $ 271 $(12,298) $(12,027)
====== ======== ========
</TABLE>
--------
(1) Represents incremental increases in pro forma tower revenues and
operating expenses 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 the Senior Credit
Facility.
(4) Reflects dividends accrued and accretion to liquidation value on the
Existing Preferred Stock.

(d) Reflects the adjustment to results of operations for 24 separate
acquisitions pending as of January 18, 1999 of 135 towers, 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.

(e) Reflects the pro forma effect of the Offering.

(f) Reflects the decrease in pro forma interest expense resulting from the use
of a portion of the net proceeds from both the Senior Notes Offering and
the Offering to repay pro forma outstanding debt under the Senior Credit
Facility, assuming such transactions were completed as of January 1, 1998.

(g) Reflects dividends accrued and accretion to liquidation value on the
Existing Preferred Stock.

28
<PAGE>

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 consolidated
historical financial statements of the Company, including the related notes
thereto, which have been audited by PricewaterhouseCoopers LLP, independent
certified public accountants. The selected historical consolidated financial
information should be read in conjunction with and are qualified in their
entirety by, the information contained in the consolidated audited financial
statements of the Company and the related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Unaudited Pro Forma Financial Data" included elsewhere herein.

<TABLE>
<CAPTION>
Period from
inception
(May 3, 1995)
through Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1995 1996 1997 1998
------------- ------------ ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Tower rental revenue..... $ 733 $ 4,842 $12,881 $ 32,019
Tower operating expenses,
excluding depreciation
and amortization........ 181 1,135 2,633 6,166
------ ------- ------- --------
Gross profit, excluding
depreciation and
amortization............ 552 3,707 10,248 25,853
Other expenses:
General and
administrative (a)..... 306 916 1,367 4,175
Corporate
development (a)........ 369 1,421 3,723 6,382
State franchise, excise
and minimum taxes...... -- 26 67 686
Depreciation............ 282 2,041 6,335 22,513
------ ------- ------- --------
Loss from operations..... (405) (697) (1,244) (7,903)
Interest expense......... 181 1,155 6,925 12,300
Amortization of original
issue discount and debt
issuance costs ......... 59 164 292 16,427
------ ------- ------- --------
Loss before extraordinary
item.................... (645) (2,016) (8,461) (36,630)
Extraordinary loss from
extinguishment of debt.. -- -- -- 5,641
------ ------- ------- --------
Net loss................. (645) 2,016 (8,461) (42,271)
====== ======= ======= ========
Dividends and accretion
on Preferred Stock...... -- -- -- 3,094
------ ------- ------- --------
Loss attributable to
Common Stock............ $ (645) $(2,016) $(8,461) $(45,365)
====== ======= ======= ========
Basic loss per Common
Share:
Loss before
extraordinary item..... $(6.31) $ (8.10) $(27.28) $ (94.95)
Extraordinary item...... -- -- -- (13.48)
------ ------- ------- --------
Net loss................ $(6.31) $ (8.10) $(27.28) $(108.43)
====== ======= ======= ========
Weighted average number
of Shares of Common
Stock................... 102 249 310 418
Other Operating Data:
Tower Level Cash Flow
(b)..................... $ 552 $ 3,707 $10,248 $ 25,853
Tower Level Cash Flow
Margin (c).............. 75.3% 76.6% 79.6% 80.7%
Adjusted EBITDA (b)...... $ 246 $ 2,791 $ 8,881 $ 21,678
Adjusted EBITDA Margin
(c)..................... 33.6% 57.6% 68.9% 67.7%
EBITDA (b)............... $ (123) $ 1,344 $ 5,091 $ 14,610
EBITDA Margin (c)........ -- 27.8% 39.5% 45.6%
Number of Towers:
Beginning of period..... 0 33 156 312
Towers acquired during
the period............. 29 119 134 517
Towers constructed
during the period...... 4 4 22 47
End of period........... 33 156 312 876
</TABLE>

29
<PAGE>

<TABLE>
<CAPTION>
December 31,
------------------------------------
1995 1996 1997 1998
------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. 31 $ 47 $ 1,694 $ 13,801
Tower assets, net..................... 11,551 48,327 127,946 473,942
Total assets.......................... 14,573 55,566 143,178 516,148
Total debt............................ 6,124 30,422 120,582 433,218
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.......................... -- -- -- --
Additional paid-in capital............ 7,051 24,881 25,876 33,137
Stock subscription receivable......... (180) -- -- --
Common Stock warrants................. -- -- -- 1,000
Accumulated deficit................... (645) (2,661) (11,123) (53,394)
------- ------- -------- --------
Stockholders' equity.................. 6,226 22,220 14,753 40,672
</TABLE>
- --------
(a) "General and administrative" expenses represent those costs directly
related to the day-to-day management and operation of towers owned by the
Company. "Corporate development" expenses represent costs incurred in
connection with acquisitions and development of new business initiatives,
consisting primarily of allocated compensation, benefits and overhead
costs that are not directly related to the administration or management of
existing towers.

(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" represents loss from operations before depreciation and
amortization not including the effect of accretion and accrued dividends
on Existing Preferred Stock. The Company has included Tower Level Cash
Flow, Adjusted EBITDA and EBITDA in Other Operating Data because the
Company believes such information may be useful to certain investors in
evaluating the Company's ability to service its debt. Tower Level Cash
Flow, Adjusted EBITDA and EBITDA should not be considered as an
alternative to Gross Profit, net loss or net cash provided by operating
activities (or any other measure of performance in accordance with
generally accepted accounting principles) as a measure of the Company's
ability to meet its cash needs or as an indication of the Company's
operating performance. Moreover, Tower Level Cash Flow, Adjusted EBITDA
and EBITDA are standardized measures and may be calculated in a number of
ways. Accordingly, the Tower Level Cash Flow, Adjusted EBITDA 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 and EBITDA each as a
percentage of tower rental revenue.

30
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of the financial condition and results of
operations of the Company for each of the three years ended December 31, 1996,
1997 and 1998. The discussion should be read in conjunction with the Financial
Statements of the Company and the notes thereto included in this Prospectus.
The statements in this discussion regarding the wireless communications
industry, the Company's expectations regarding its future performance and
other non-historical statements in this discussion are forward-looking
statements. These forward-looking statements include numerous risks and
uncertainties, as described in "Risk Factors."

Overview

The Company acquires and constructs rental towers and leases space on such
towers to a broad base of wireless communications providers, operators of
private networks, government agencies and other customers. The Company's
objective is to acquire or construct clusters of rental towers in areas where
there is significant existing and expected continued growth in the demand for
rental towers by wireless communications providers. The Company seeks to
obtain a significant ownership position of tower assets in its targeted
markets in order to offer "one-stop shopping" to wireless communications
providers who are deploying or expanding wireless communications networks.

The Company's growth has come primarily from the acquisition and
construction of towers and from adding new tenants to these towers. The
Company's business strategy focuses on aggressively pursuing tower
acquisitions and selectively constructing towers in areas that complement the
Company's existing base of rental towers and the expansion into additional
high growth wireless communications markets. Since commencing operations in
May 1995, the Company has completed acquisitions and builds as follows:

<TABLE>
<CAPTION>
Periods Ended
December 31,
-------------------
1995 1996 1997 1998 Total(1)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Number of towers acquired........................ 29 119 134 517 799
Number of towers built........................... 4 4 22 47 77
--- --- --- --- ---
Number of towers acquired or built during the pe-
riod............................................ 33 123 156 564 876
=== === === === ===
Number of acquisition transactions completed..... 13 49 72 82 210
</TABLE>
- --------

(1) Included in the number of towers acquired are 32 tower sites that the
Company manages.

As of December 31, 1998, the Company also had 16 towers under construction
and 100 additional tower projects in various stages of development. Subsequent
to December 31, 1998 and prior to January 18, 1999, the Company acquired an
additional tower. As of January 18, 1999, the Company had agreements or
letters of intent to acquire 135 towers. In addition, the Company has
identified numerous additional acquisition candidates. The Company expects
that internal growth related to completed acquisitions and the business
potential of pending acquisitions will have a material impact on future
revenues and EBITDA.

The Company believes that significant opportunities for growth exist by
maximizing the use of existing and future towers. Because the costs of
operating a site are largely fixed, increasing tower utilization significantly
improves tower operating margins. The Company believes that "same tower"
revenue growth on towers (measured by comparing the Annualized Run Rate
Revenue of the Company's towers at the end of a period to the Annualized Run
Rate Revenue for the same towers at the end of a prior period), is a
meaningful indicator of the quality of the Company's towers and its ability to
generate incremental revenue on such towers. Taking into consideration new
leases written as of December 31, 1998, the Company experienced "same tower"
revenue growth of approximately 20% for the year ended December 31, 1998 on
its base of towers owned as of December 31, 1997.

The Company has generated net losses since inception and at December 31,
1998, had an accumulated deficit totalling $53.4 million. Due to the nature of
the Company's business (the leasing of cash-generating assets) and the
Company's 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, the
Company expects to continue to generate losses for the foreseeable future.

31
<PAGE>

The Company's Annualized Run Rate Revenue is calculated as of a given date
by annualizing the monthly rental rates then in effect for customer lease
contracts as of such date. The Company believes that growth in its Annualized
Run Rate Revenue is a meaningful indicator of its performance. As of December
31, 1998, the Company's Annualized Run Rate Revenue was $44.7 million.

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 the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------------
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Statement of Operations Data:
Tower rental revenue........................ 100.0% 100.0% 100.0%
Tower operating expenses, excluding depreci-
ation and amortization..................... 23.4 20.4 19.3
Gross profit................................ 76.6 79.6 80.7
Expenses:
General and administrative.................. 18.9 10.6 13.0
Corporate development....................... 29.3 28.9 19.9
State franchise, excise and minimum taxes... 0.5 0.5 2.1
Depreciation................................ 42.2 49.2 70.3
Loss from operations......................... (14.3) (9.6) (24.6)
Interest expense............................. 23.9 53.8 38.4
Amortization of original issue discount...... 3.4 2.3 51.3
Net loss before extraordinary items.......... (41.6%) (65.7%) (114.3%)
</TABLE>

1998 Compared to 1997

Tower 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 towers during the twelve month period ended December 31,
1998. In addition, the increase is due to growth in per tower revenue as a
result of expanded marketing efforts to increase the number of customers per
tower, as well as regular, contractual price escalations for existing
customers.

Tower operating expenses, excluding depreciation and amortization, which
consist primarily of costs relating to the ongoing maintenance of properties
such as air conditioning and grounds maintenance, ground lease expense,
utilities, property taxes and other direct costs of tower operation, increased
134.2% to $6.2 million in 1998 from $2.6 million in 1997. This increase is
consistent with the purchase and construction of towers as discussed above.

General and administrative expenses, which are expenses associated with
supporting the Company's day-to-day management of its existing properties and
primarily consist of employee compensation and related benefits costs,
advertising, professional and consulting fees, office rent and related
expenses and travel costs as a percentage of revenue, increased to 13.0% of
revenue in 1998 from 10.6% in 1997. This increase resulted from increases in
staffing related to the Company becoming 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 the Company's tower and increases in rent and related costs.

Corporate development expenses, which represent costs incurred in connection
with acquisitions and construction of new towers, 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 Company's
expansion of its acquisition and construction strategies. Corporate
development expenses decreased as a percentage of tower rental revenue to
19.9% in 1998 from 28.9% in 1997 because of the incremental increase in tower
rental revenue from the comparative period in 1997 and economies of scale
resulting from such growth.

32
<PAGE>

State franchise, excise and minimum taxes, which represent taxes assessed in
connection with the Company's 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 the Company's property
within a given state, the Company's capital structure or based upon a minimum
tax in lieu of income taxes. The increase in 1998 is primarily attributable to
the Company's significant expansion of its 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 the
Company's acquisitions and construction activity during the period.

1997 Compared to 1996

Tower rental revenue increased 166.0% to $12.9 million in 1997 from $4.8
million in 1996. This increase is primarily attributable to the acquisition
and construction of 156 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.

Tower 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 towers during the year. However, tower operating expenses,
excluding depreciation and amortization, decreased as a percentage of tower
rental revenue to 20.4% in 1997 from 23.4% in 1996, reflecting operating
efficiencies gained on existing towers as well as on new 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 tower rental revenue to 10.6% in 1997 from 18.9% in 1996 because
of lower overhead costs as a percentage of tower 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
the Company's expansion of its acquisition and construction strategies.
Corporate development expenses remained relatively constant as a percentage of
tower 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 the Company's acquisitions during the period.

Liquidity and Capital Resources

The Company's liquidity needs arise from its acquisition-related activities,
debt service, working capital and capital expenditures. The Company has
historically funded its liquidity needs with proceeds from equity
contributions, bank borrowings, cash flow from operations and the offering of
its Senior Discount Notes (the "Senior Notes Offering"). The Company had a
working capital deficit of $9.3 million (inclusive of the $15.0 million ABRY
Bridge Loan), $12.8 million and $1.5 million as of December 31, 1998, 1997 and
1996, respectively. Excluding the current portion of long-term debt, current
assets exceeded current liabilities by $6.4 million as of December 31, 1998.
Excluding the current portion of long-term debt, current liabilities exceeded
current assets by $1.7 million and $0.8 million as of December 31, 1997 and
1996, respectively. The Company's 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 as adjusted basis as of
December 31, 1998, after giving effect to the Transactions, the Company would
have had consolidated cash and cash equivalents of $13.8 million,
$348.7 million of consolidated long-term debt outstanding, consolidated
stockholders' equity of $217.2 million and a ratio of total debt to
stockholders' equity of 1.6 to 1.0.

The Company has a Senior Credit Facility that provides the Company a
revolving line of credit for borrowings of up to $250 million, of which $200
million is currently committed. The Company may make borrowings and repayments
until December 31, 2005. Beginning March 31, 2000, the availability under the
revolving line of credit starts decreasing by specified amounts on a quarterly
basis until December 31, 2005 when the availability will be reduced to zero.
Loans under the Senior Credit Facility bear interest at a rate per annum,

33
<PAGE>

at the borrower's request, equal to the agent bank's prime rate plus a margin
of up to 2.0% or the 90-day LIBOR plus a margin of up to 3.0%. Outstanding
borrowings under the Senior Credit Facility are currently approximately $182.5
million. Advances under the Senior Credit Facility have been used primarily to
fund acquisitions and construction of towers. As of December 31, 1998, after
giving effect to the Transactions, there would have been approximately $69.4
million available under the Senior Credit Facility, after giving effect to
approximately $17.0 million of outstanding letters of credit, which reduce
availability thereunder.

The principal stockholders of the Company (ABRY II, and Messrs. Wolsey,
Dell'Apa and Day) are parties to a Subscription and Stockholders Agreement,
dated as of May 16, 1996, as amended (the "Stockholders Agreement"). Pursuant
to the Stockholders Agreement, ABRY II agreed to make capital contributions to
the Company, up to an aggregate capital contribution of $50.0 million. As of
December 31, 1998, ABRY II had contributed $37.2 million and had guaranteed an
additional $3.9 million of other debt under the aggregate $50.0 million
capital contribution commitment. Such capital contribution commitment will
terminate upon the closing of the Offering. Additionally, as of December 31,
1998, ABRY II or an affiliate had contributed separately $47.5 million to the
Company, including $15.0 million outstanding under the ABRY Bridge Loan and
$59.9 million of Junior Preferred Stock.

The Company also uses seller financing to fund certain of its tower
acquisitions. The Company had outstanding notes that it issued to sellers
bearing interest at rates ranging from 8.5% to 13.0% per annum in the
aggregate amount of $19.8 million at December 31, 1998.

In March 1998, the Company completed its Senior Notes Offering. The Company
received net proceeds of approximately $192.8 million from the Senior Notes
Offering. The proceeds were used to repay outstanding borrowings under the
Senior 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
holders of Class B Common Stock. The Senior Discount Notes were issued under
the Indenture and will mature on March 15, 2008. Until March 15, 2003, the
Company's interest expense on the Senior Discount Notes will consist solely of
the accretion of original issue discount. Thereafter, the Senior Discount
Notes will require annual cash interest payments of $32.5 million.

In September 1998, in order to finance the MobileMedia Acquisition, the
Company sold two newly issued series of Preferred Stock, the Senior Preferred
Stock with a liquidation preference of $30.0 million and the Junior Preferred
Stock with a liquidation preference of $32.5 million. Included in the sale of
the Senior Preferred Stock were warrants to purchase approximately .75% of the
Company's outstanding common stock. The warrants will be cancelled upon the
redemption of the Senior Preferred Stock. ABRY/Pinnacle, Inc., an affiliate of
ABRY II, purchased the Junior Preferred Stock. In addition to the proceeds
from the above sales, the MobileMedia Acquisition was funded with the ABRY
Bridge Loan and borrowings under the Senior Credit Facility. In December 1998,
the Company issued $26.2 million of additional Junior Preferred Stock to
ABRY/Pinnacle, Inc. The proceeds from the sale of Junior Preferred Stock were
used to fund tower acquisitions and pay operating costs. The Junior Preferred
Stock currently has a liquidation preference of $60.4 million. The Existing
Preferred Stock is entitled to receive dividends, payable quarterly, at a
current rate of 14% per annum. The Existing Preferred Stock is redeemable, at
the option of the Company, 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.

Capital expenditures, including acquisitions, were $42.8 million, $89.4
million and $373.6 million for the periods ended December 31, 1996, 1997 and
1998, respectively, and related primarily to acquisitions.

The Company estimates capital expenditures in each of 1999 and 2000 to be
approximately $150.0 million.

To the extent the Company may seek to close additional acquisitions pending
completion of the Offering, it would seek additional capital contributions
from ABRY II. ABRY II currently has a remaining capital contribution
commitment of approximately $9 million under the Stockholders Agreement. Any
such additional capital contribution would be repaid with proceeds from the
Offering.

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<PAGE>

The Company believes that the proceeds from the Offering, cash flow from
operations and existing cash balances will be sufficient to meet working
capital requirements for existing properties and fund its current probable
acquisitions. To the extent that the Company pursues additional acquisitions,
construction activity and other capital expenditures requiring funding in
excess of that then available under its Senior Credit Facility, the Company
will be required to obtain additional financing. There can be no assurance
that such financing will be commercially available through an increased
commitment under the Senior Credit Facility or otherwise or be permitted by
the terms of the Company's existing indebtedness. To the extent that the
Company is unable to finance future capital expenditures, it may not be able
to achieve its current business strategy.

Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain market risks inherent in the Company's
financial instruments. These instruments arise from transactions entered into
in the normal course of business and, in some cases, relate to the Company's
acquisitions of related businesses. The Company is subject to interest rate
risk on its existing Senior Credit Facility and any future financing
requirements. The Company's fixed rate debt consists primarily of outstanding
balances on its Senior Discount Notes and notes payable to former tower owners
and its variable rate debt relates to borrowings under its Senior Credit
Facility. See "--Liquidity and Capital Resources".

The following table presents the future principal payment obligations and
weighted-average interest rates associated with the Company's existing long-
term debt instruments assuming the Company's actual level of long-term
indebtedness of $398,408,000 under the Senior Discount Notes and the Senior
Credit Facility as of December 31, 1998:

Expected Maturity Date

<TABLE>
<CAPTION>
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%)............. -- $18,245,000 $27,367,500 $36,490,000 $36,490,000 $63,857,500
</TABLE>

The Company's primary market risk exposure relates to (i) the interest rate
risk on long-term and short-term borrowings, (ii) its ability to refinance its
Senior Discount Notes at maturity at market rates, (iii) the impact of
interest rate movements on its ability to meet interest expense requirements
and exceed financial covenants and (iv) the impact of interest rate movements
on the Company's ability to obtain adequate financing to fund future
acquisitions. The Company manages interest rate risk on its outstanding long-
term and short-term debt through its use of fixed and variable rate debt.
While the Company can not predict or manage its ability to refinance existing
debt or the impact interest rate movements will have on its existing debt,
management continues to evaluate its financial position on an ongoing basis.

Inflation

Because of the relatively low levels of inflation experienced in 1996, 1997
and 1998, inflation did not have a significant effect on the Company's results
in such years.

Year 2000

The Company utilizes management information systems and software technology
that may be affected by Year 2000 issues throughout its businesses. During
fiscal 1996, the Company began to implement plans to ensure those systems
continue to meet its internal and external requirements. During fiscal 1998,
the Company completed the modifications and testing of its information systems
and is Year 2000 compliant. The Company has developed questionnaires and
contacted key suppliers and customers regarding their Year 2000 compliance to
determine any impact on its operation. In general, the suppliers and customers
have developed or are in the process of developing plans to address Year 2000
issues. The Company will continue to monitor and evaluate the progress of its
suppliers and customers on this critical matter.

35
<PAGE>

The Year 2000 is not expected to have a material impact on the Company's
current information systems as a result of the steps already completed to make
the Company's systems Year 2000 compliant. Based on the nature of the
Company's business, the Company anticipates it is not likely to experience
material business interruption due to the impact of Year 2000 compliance on
its customers and vendors. As a result, the Company does not anticipate that
incremental expenditures to address Year 2000 compliance will be material to
the Company's liquidity, financial position or results of operations prior to
the Year 2000.

Recent Accounting Pronouncements

In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," was issued, establishing standards for public
enterprises to disclose certain information about operating segments and
related disclosures about products and services, geographic areas and
significant customers. The Company will adopt this pronouncement in 1998 in
accordance with the implementation requirements. Management believes that the
adoption of SFAS No. 131 will not have a material impact on the Company's
financial statements.

36
<PAGE>

BUSINESS

Company Overview

The Company is the leading provider of wireless communication tower space in
the Southeastern United States. Since its formation in May 1995, the Company
has focused exclusively on creating a portfolio of dense clusters of
geographically contiguous towers and renting tower space to wireless
communications providers and users. The Company believes that the rental of
tower space is the sector of the tower industry in which it can earn the
highest cash flow margins and risk adjusted return on invested capital. This
strategy also presents significant opportunities for continued revenue and
cash flow growth through the addition of new tenants on its existing towers
and towers that may be acquired in the future.

Since commencing operations in May 1995 and through December 31, 1998, the
Company has completed 210 acquisitions through which it has acquired 799
towers and has constructed an additional 77 towers in such high growth markets
as Atlanta, Birmingham, New Orleans, Orlando and Tampa. Subsequent to December
31, 1998 and prior to January 18, 1999, the Company acquired an additional
tower. As of January 18, 1999, the Company had agreements or letters of intent
to acquire 135 towers. As a result of its extensive existing tower base, the
Company believes it is well-positioned to continue to capitalize on the growth
opportunities available in the rapidly consolidating and highly fragmented
tower rental industry. For the year ended December 31, 1998, on a pro forma as
adjusted basis, the Company had tower rental revenue and EBITDA of $48.4
million and $28.4 million, respectively. See "Unaudited Pro Forma Financial
Data."

The Company has a diversified base of over 800 customers consisting of all
forms of wireless communications providers, operators of private networks and
government agencies that include Southern Communications, Nextel, Sprint PCS,
PageNet, Motorola, BellSouth Mobility, MobileMedia, Teletouch, Skytel,
Pagemart, Federal Bureau of Investigation and Bureau of Alcohol, Tobacco &
Firearms. The Company's leases generally range in duration from three to five
years and many provide for scheduled minimum rent increases of the greater of
a specified percentage (which typically ranges from 3 to 5%) or the change for
the relevant period in the CPI.

The Company is experiencing strong demand for tower rental space fueled by
the deployment of new wireless technologies and strong underlying growth in
wireless services. The Company believes that "same tower" revenue growth
(measured by comparing the Annualized Run Rate Revenue of the Company's towers
at the end of a period to the Annualized Run Rate Revenue for the same towers
at the end of a prior period), is a meaningful indicator of the Company's
ability to generate incremental revenue on such towers. Taking into
consideration new leases written as of December 31, 1998, the Company
experienced "same tower" revenue growth of approximately 20% for the year
ended December 31, 1998 on its base of towers owned as of December 31, 1997.
The Company's Annualized Run Rate Revenue as of December 31, 1998 was $44.7
million.

Industry Background

Communications towers are primary infrastructure components for wireless
communications services such as cellular, paging, PCS, SMR, wireless data
transmission and radio and television broadcasting. Wireless communications
companies require specialized wireless transmission networks in order to
provide service to their customers. Each of these networks is configured
specifically to meet the coverage requirements of the particular carrier and
includes transmission equipment such as antennae, transmitters and receivers
placed at various locations throughout the covered area. These locations, or
communications sites, are critical to the operation of wireless communications
networks and consist of towers, rooftops and other structures upon which such
equipment may be placed. Wireless communications providers design their
network and select their communications sites in order to optimize available
frequencies relative to their projected usage patterns, topography and service
requirements.

37
<PAGE>

The Wireless Communications Industry

The wireless communications industry is growing rapidly as: (i) consumers
become increasingly aware of the uses and benefits of wireless communications
services; (ii) the costs of wireless communications services decline; and
(iii) new wireless communications technologies continue to be developed.
Changes in U.S. federal regulatory policy have led to a significant increase
in the number of competitors in the wireless communications industry, most
recently through the auction of radio spectrum for PCS. This competition,
combined with an increasing reliance on wireless communications services by
consumers and businesses, has increased demand for higher quality networks
characterized by uninterrupted service and improved coverage. As new carriers
build out their networks and existing carriers upgrade and expand their
networks to maintain their competitiveness, the demand for communications
sites is expected to continue to increase dramatically.

The wireless communications industry is comprised of the following segments:

. Cellular--Currently each market in the United States has two cellular
operators. Cellular networks consist of numerous geographic "cells" in
which frequencies are reused every few miles. Each cell includes a
communications site which includes transmission equipment generally
residing on a wireless communications tower. According to industry
publications, as of June 30, 1997 there were 48.7 million wireless
telephone subscribers in the United States, representing a 27.5% growth
rate over the prior 12 months, and an overall penetration of approximately
18.0%. In addition, as the cellular market migrates from an analog based
transmission technology to a digital based transmission technology, demand
is expected to increase as prices decline. In order to increase network
capacity and improve service quality, cellular carriers are re-engineering
their networks to have smaller and more numerous cells. While historically
cellular operators have generally built their own towers, the growing
demand for tower space and restrictions on new tower construction are
making rental towers an increasingly important component of their
transmission networks.

The following illustrates the growth in the United States' wireless
communications industry from 1987 to 1998.

[BAR CHART SHOWING GROWTH IN THE UNITED STATES' WIRELESS COMMUNICATIONS
INDUSTRY BY SUBSCRIBERS.]
US Wireless Subscribers
Total Subscribers

June 1985 - June 1998
---------------------

1985 203,600
1986 500,000
1987 883,778
1988 1,608,697
1989 2,691,793
1990 4,368,686
1991 6,380,063
1992 8,892,636
1993 13,067,318
1994 19,283,306
1995 28,154,414
1996 38,196,466
1997 48,705,563
1998 60,831,431

. PCS--PCS is an emerging wireless communications technology competing with
cellular that offers a digital signal that is clearer and offers greater
privacy than typical analog cellular systems. Up to six PCS licenses have
been issued by the FCC in each market (versus two for cellular). PCS system
construction began in 1995, and due to their small cell size, PCS companies
are expected to be substantial users of tower space. According to industry
publications, there were approximately 2.2 million PCS subscribers in the
United States as of December 31, 1997. The Personal Communications Industry
Association ("PCIA") estimates that on December 31, 1997 there were
approximately 45,000 antennae sites (cellular and PCS) in the United

38
<PAGE>

States. PCIA estimates that this number will increase by approximately
100,000 additional antennae sites over the next 10 years. While some of
these sites may use existing towers, it is expected that a large number of
new towers will be required for the deployment of PCS networks. As an
example, PrimeCo, Aerial and Sprint PCS are currently building out PCS
systems in the Company's target region and are co-locating their equipment
on many of the Company's rental towers, as opposed to constructing their own
towers.

. Paging--Paging has also enjoyed dramatic growth over the last ten years.
According to industry publications, there were 49.8 million pagers at the
end of 1997, representing an average annual growth rate of 26.8% since 1992.
This growth was spurred by declining prices, wider coverage and increasing
expansion into the consumer market. While network construction by the paging
industry appears to be reaching a certain level of maturity, the increased
number of subscribers is expected to require utilization of additional
channels and related transmitter equipment. Utilization of these additional
channels will result in additional revenue on rental towers. Paging
companies have historically relied heavily on rental towers and are expected
to continue to do so.

. SMR / ESMR--SMR companies provide two-way radio communications for primarily
commercial purposes, especially fleet vehicles. Two-way private business
radio is used primarily for businesses engaged in dispatching personnel or
equipment to work sites and includes construction and trucking companies,
courier services, hospitals and taxicabs. Each service provider holds an FCC
radio license that allows it to transmit over a particular frequency, and
most lease space on a local tower for transmission purposes. As a result of
advances in digital technology, some wireless communications providers have
begun to design or modify networks that utilize SMR frequencies by deploying
advanced digital technologies called ESMR. ESMR increases the capacity of
radio networks allowing more efficient use of allocated frequencies. These
efficiencies and improvements allow ESMR to provide wireless telephone
service that can compete more effectively with cellular and PCS. As more
commercial users are attracted to such enhanced services, the demand for
tower space to support such usage also continues to increase. Nextel and
Southern Communications are the leading ESMR providers in the United States.

. Government Agencies--Federal, state and local government agencies are major
users of wireless communications services and typically operate their own
dedicated frequencies. These government agencies, in certain circumstances,
often find it easier to lease rather than own tower space. As new
technologies are developed in law enforcement, emergency and other
government services, various municipalities and government agencies are
becoming more significant users of wireless communications services.
Examples of government customers of tower space include the Federal Bureau
of Investigation, U.S. Coast Guard, U.S. Secret Service and various
municipal agencies.

. Broadcast and Wireless Cable--Broadcasters transmit AM/FM radio signals and
VHF and UHF television signals in order to obtain the broadest, clearest
coverage available. A broadcast station's coverage is one of the primary
factors that influences the station's ability to attract advertising
revenue. Once a tower location is chosen, broadcasters rarely change sites
due to complex regulatory requirements, high switching costs and business
disruption. The U.S. broadcasting industry is generally mature with respect
to demand for transmission tower capacity. However, a significant increase
in demand for tower capacity may occur when digital spectrum is used to
deliver high definition television ("HDTV") or digital multi-casting, i.e.,
multiple "normal" definition television channels. In addition, wireless
cable television is being developed and positioned as a potentially more
accessible alternative to traditional cable television. Wireless cable
operates by receiving programming from a satellite which is retransmitted
from an antenna on a tower to a receiving antenna on a subscriber's
residence. Several wireless cable companies are now in the process of
constructing their systems in the Company's region.

. Emerging Technologies and Availability of FCC Spectrum--Several new entrants
in the wireless communications industry are emerging as new technology
becomes available and additional radio spectrum is authorized for use by the
FCC. For example, Local Multipoint Distribution Service ("LMDS"), has
diverse applications including wireless video, telephone, paging and
wireless local loop. Wireless local loop

39
<PAGE>

("WLL") systems are seen as an alternative to traditional copper and fiber-
optic based services with the potential to be implemented more quickly and
at lower costs than fixed wireline services. WLL systems provide non-mobile
telecommunications services to users by transmitting voice messages over
radio waves from the public switched network to the location of the fixed
telephone. The installation of WLL systems minimizes the need to obtain
right-of-ways and excavate existing roads and infrastructure in order to
install or upgrade a local telephone system serving non-mobile telephones.
Also, wireless data transmission is widely viewed as being in its infancy
as the development of Personal Digital Assistants and a variety of
applications are being developed. In addition to private networks, several
companies are building national wireless data transmission networks
including Motorola's EMBARC system, Nationwide Wireless Network (an
affiliate of MTEL), RAM Mobile Data (10% owned by BellSouth), and Racotek's
and Geotek's SMR based data networks. Automatic Vehicle Monitoring/Location
and Monitoring Services ("AVM/LMS") systems generally require a minimum of
three towers to band a coverage area. The Company believes that AVM/LMS
service providers will use the band to provide fleet tracking, rail and
container transportation monitoring, security and access control, etc.
Other new developments including the auction of 220 and 450 Megahertz
spectrum are expected to increase available radio spectrum for commercial
applications.

These recent developments in the wireless communications industry indicate
continuing opportunities for the tower rental industry. Industry analysts
project rapid and continued growth in the major wireless communications
industry segments and these projections all share a common outcome: more
equipment needs to be installed on a limited supply of towers.

The Tower Rental Industry

A typical tower consists of a compound enclosing the tower and an equipment
shelter which houses a variety of transmitting, receiving and switching
equipment. There are three types of towers: (i) guyed; (ii) self-supporting
lattice; and (iii) self-supporting monopole. Guyed towers gain their support
capacity from a series of cables attaching separate levels of the tower to
anchor foundations in the ground. A lattice model is usually tapered from the
bottom up and can have three or four legs. A monopole is a tubular structure
that typically accommodates fewer customers and may be used as a single
purpose tower or in locations where there are space constraints or a need to
address aesthetic concerns. Self-supporting towers typically range in height
from 50-200 feet for monopoles and up to 1,000 feet for lattices, while guyed
towers can reach a height of up to 2,000 feet. Different wireless
communications technologies require that equipment be located at various
heights to optimize signal propagation. As of December 31, 1998, the Company's
tower inventory was comprised of 646 guyed, 192 self-supporting lattices and
38 monopoles.

Wireless communications equipment can also be placed on building rooftops.
Traditionally, rooftop sites have been common in urban downtown areas where
tall buildings are available and multiple communications sites are required
because of high wireless traffic density. Today, rooftop sites are used less
for certain types of customers as current technology requirements cause an
increasing number of providers to place antennae lower on buildings.

The value of a rental tower is principally determined by the desirability of
its location to customers and the amount of customer equipment installations
that it can support. Several customers may share one tower through "vertical
separation" with each type of customer on a different level. While many
existing towers were not originally built with the capacity to support
multiple customers, these towers can often be upgraded to support additional
equipment.

Historically, wireless communications providers and broadcasters built,
owned and operated their own towers, which were typically constructed and
designed for their exclusive use. As recent technologies emerged, the original
equipment on many of these towers became obsolete, resulting in these towers
becoming available for other uses, and in some cases, for acquisition. For
example, fiber optic cables have largely replaced transmission traffic
traditionally carried by wireless microwave networks. The paging and SMR
industries were traditionally owned by local or regional companies which
constructed their own networks and transmission

40
<PAGE>

towers. As these industries consolidated over the past ten years, the
acquiring companies typically purchased the radio licenses and subscriber
leases and entered into lease agreements with the original tower owner.
Wireless communications providers today are generally more focused on
developing their subscriber base and relatively less focused on building and
owning tower networks. An opportunity to acquire towers arose as a result of
these developments.

During the mid-to-late 1980s, a number of independent tower owners began to
emerge, marking the beginning of the tower rental industry. These independent
tower owners focused on owning and managing towers with multiple customers by
adding customers to existing and reconstructed towers. The Company believes
the majority of these tower operators were individuals with a small number of
local rental towers offering very limited coverage areas. In the last three
years, several larger independent tower owners have emerged as demand for
wireless communications services continued to grow and as additional high
frequency licenses were awarded for new wireless communications services
(including PCS, narrowband paging and LMDS) each requiring networks with
extensive tower infrastructure. As the demand for towers has been increasing,
there has been a growing trend by municipalities to slow the proliferation of
towers. These trends have contributed to a growing need for towers that can
accommodate co-location of wireless communications providers. In this regard,
an opportunity to acquire towers and lease space to multiple wireless
communications providers was created.

The Pinnacle 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, the
Company's founders recognized a significant opportunity to consolidate
strategically located wireless communications towers and enhance rental
revenue on those towers. In particular, the Company's 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.

Business and Growth Strategy

The Company's objective is to create substantial value from both its
position as the leading provider of wireless communications rental tower space
in the Southeastern United States and its expansion into additional wireless
communication markets. In order to achieve this objective, the Company has
designed and implemented a three-tiered growth strategy that focuses on:
(i) increasing revenue yield per tower through aggressively marketing
available rental space; (ii) continuing acquisitions of towers in key markets;
and (iii) implementing a selective tower construction program designed to
complement its acquisition strategy. However, there can be no assurance that
the Company will successfully implement its strategy and achieve its
objective.

I. Marketing and Development Strategy

. Offer Strategically Located Clusters of Towers. By owning and assembling
clusters of towers in high growth regions, the Company believes it is able
to offer its customers the ability to rapidly and efficiently fulfill the
network expansion plans across a particular market or region, which the
Company believes provides it with a significant competitive advantage.

. Target a Diversified Customer Base. The number of antennae a tower can
accommodate varies depending on the type of tower (self-supporting
monopole, guyed, self-supporting lattice), the height of the tower and the
nature of the services provided by such antennae. The substantial majority
of the Company's towers are self-supporting lattice and guyed towers that
can support a large number of antennae and therefore enable the Company to
market its tower space to a diverse group of wireless communications
providers.

41
<PAGE>

. Leverage Customer Relationships. The Company believes it has established a
reputation among its customers as a highly professional and reliable tower
space provider. This has been achieved through ongoing investment in the
development of relationships at multiple levels of customer organizations.
The Company believes that important factors in generating interest in its
towers are the customer's awareness of the quality of a particular site,
the ease of doing business with one lessor, the location of other Company-
owned towers and the Company's ability to construct new towers.

. 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, the Company tracks these filings, which provide
market intelligence as to existing wireless communications providers'
build-out plans and new market entrants.

II. Acquisition Strategy

The Company believes that growth through acquisition is an attractive
strategy because it allows the Company to: (i) choose the location of its
towers in key urban and other desired locations; (ii) acquire towers with
existing tenants and the capacity to add multiple, additional tenants; (iii)
not seek build-to-suit mandates from customers, which may result in towers
being built in unprofitable locations; and (iv) lower its risk as cash flow
from existing tenants is predetermined and immediate.

The Company's acquisition strategy continue to focus on: (i) rapidly
acquiring towers in key markets as a means to quickly gain critical mass,
thereby discouraging other tower consolidators from entering its markets; (ii)
completing follow-on acquisitions to enhance its coverage in selected wireless
communications markets; and (iii) penetrating new markets as a platform for
future growth. In executing its acquisition strategy, the Company generally
targets strategically located individual towers or small groups of towers. The
Company's focus on individual towers or small groups of towers, however, does
not preclude potential acquisitions of a large number of towers in a single
transaction. The Company's completion of the Southern Towers Acquisition (201
towers) in March 1998 and the MobileMedia Acquisition in September 1998 (166
towers) are two of the largest acquisition transactions in the industry to
date. Since commencing operations in 1995 and through December 31, 1998, the
Company completed the acquisition of 799 towers in 210 separate transactions.
Subsequent to December 31, 1998 and prior to January 18, 1999, the Company
acquired an additional tower. As of January 18, 1999, the Company had
agreements or letters of intent to acquire 135 towers.

The Company conducts extensive due diligence prior to consummating an
acquisition, leveraging what the Company believes to be its competitive
advantage in terms of its experience in, and knowledge of, the tower rental
industry. Of the Company's 108 total employees as of December 31, 1998, 25%
are dedicated to completing acquisitions. The Company utilizes 10 full-time
tower buyers, who spend substantially all of their time in the field
identifying, evaluating and generating acquisition opportunities for the
Company. The Company uses a standardized process that it has developed to
ensure that acquisitions are evaluated, documented and rapidly processed. In
order to execute and ensure the integrity and quality of this process, the
Company utilizes outside independent professionals to verify certain
accounting, legal and engineering data. The Company believes that this
approach has proven effective in permitting the Company to more accurately
predict the performance of acquired assets and reduce the risks associated
with the Company's acquisitions. However, acquisitions involve a number of
potential risks, including the potential loss of customers and unanticipated
events or liabilities. Because of such risks, there can be no assurance that
the Company will be able to successfully implement its acquisition strategy.
See "Risk Factors--Dependence on Acquisitions; Integration of Acquisitions."

42
<PAGE>

The key elements of the Company's acquisition strategy are set forth below:

. Target High Growth Wireless Communications Markets. The Company targets
population centers and key transportation corridors in wireless
communications markets where there is evidence of high potential growth.
The Southeastern United States is attractive because of its relatively high
population and economic growth rates with 4 of the top 10 fastest growing
cities in the United States located in this region, according to the U.S.
Census Bureau. In addition, according to the U.S. Census Bureau, the
population growth rate in Florida for the three years ending July 1, 1997,
was 5.0%, nearly double that of the overall rate of 2.8% for the United
States. Within the Southeastern United States, the Company has established
strong market positions in densely populated areas such as Atlanta,
Birmingham, New Orleans, Orlando and Tampa. The MobileMedia Acquisition
provided the Company with strong market positions in Knoxville, Mobile and
Nashville, as well as towers in Southern California and New England that
provide the Company a base for penetrating these attractive wireless
markets. The Company has also established strong market positions along key
transportation corridors in the Southeastern United States.

. Focus on Compatibility with Existing Tower Network. The Company considers
many factors when evaluating a potential acquisition. In particular, the
Company considers whether an acquisition will, when combined with existing
tower inventory, result in the Company owning a cluster of towers in a
given area, thereby providing the Company with a stronger market position
and competitive advantage. The Company also considers whether the towers in
a particular acquisition meet demand for enhanced coverage that has been
previously identified by customers. In some instances, the Company may
acquire, as part of a group of towers being purchased, an individual tower
which falls outside of normal acquisition parameters. Such acquisitions
occur only when the Company has determined that the overall transaction is
attractive. The MobileMedia Acquisition and the Southern Towers Acquisition
expanded the Company's presence to contiguous markets in the Southeastern
United States.

. Employ a Disciplined Valuation Process. The Company seeks to acquire towers
that have existing cash flow and identified potential for significant
future cash flow growth from additional tenants. For each potential
acquisition, the Company reviews the current population coverage of each
tower to be acquired, the nature and quality of the existing and potential
customer base, coverage of current and future major transportation
corridors and the location and desirability of competing towers. The
Company also makes an assessment of potential cash flow growth and
estimates whether additional capital expenditures will be required to add
capacity to accommodate future growth.

Southern Towers Acquisition. In March 1998, the Company acquired 201 towers
from Southern Communications for approximately $83.5 million plus fees and
expenses. 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 four years.

In connection with the Southern Towers Acquisition, the Company entered into
leases with Southern Communications and its affiliates to provide tower 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 (the "Southern Communications
Leases"). In addition, the Company has entered into an option agreement with
Southern Communications whereby Southern Communications may require the
Company to use commercially reasonable efforts to supply, acquire or construct
an additional 80

43
<PAGE>

towers for rental by Southern Communications or its affiliates. The Company
has initiated construction on approximately half of the tower opportunities
presented by Southern Communications to date. The Company evaluates these
opportunities with respect to the towers' potential strategic fit with the
Company's existing tower portfolio and ability to capture additional third
party tenants.

Prior to the acquisition, these towers, which had only a limited number of
third party tenants, were principally for the use of Southern Communications
and its affiliates. The towers were generally constructed with capacity
significantly exceeding Southern Communications' specific capacity
requirements. Accordingly, the Company believes that there is substantial
potential for additional revenue from these towers. Since the closing of the
Southern Towers Acquisition, the Company has already experienced significant
interest from potential customers in the towers and has negotiated new leases
totaling approximately $724,000 in annualized lease revenue.

MobileMedia Acquisition: In September 1998, the Company acquired 166 towers
from MobileMedia and its affiliates for approximately $170.0 million.
Subsequent to its announced merger with Arch Communications, Inc., MobileMedia
will be the second largest paging company in the United States.

In connection with this acquisition, the Company entered into a lease
arrangement to provide rental tower space to MobileMedia Communications, an
affiliate of MobileMedia (the "Master Lease"). The Master Lease provides for
an initial 15 year noncancellable term with one five-year renewal period,
exercisable at the option of the lessee. Under the Master Lease, MobileMedia
Communications secured tower 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. The monthly rental rate reflects (i) current pricing
available to other customers of the Company for similar equipment
configurations, (ii) the request of MobileMedia that the rental rate be fixed
and not subject to escalation during the initial lease term, (iii) the ability
of MobileMedia Communications to transfer its existing transmitters on the 166
towers to the Company's other towers and (iv) the reservation of space to
accommodate the full complement of equipment necessary for the deployment of
MobileMedia Communications' two-way paging services.

In connection with the Master Lease, the Company has also given MobileMedia
Communications the right to a defined pricing discount for additional tower
space on the Company's tower portfolio, which, MobileMedia Communications may
lease in the future as it continues to expand its paging network. The Company
believes this favorable pricing arrangement may benefit the Company in two
ways. First, the Company is positioned to benefit from additional revenues for
new sites required by MobileMedia Communications as its network expands.
Second, as MobileMedia Communications continues to rationalize its network, it
will need to eliminate redundancy of transmitter systems at certain towers and
will therefore need to relocate these transmitters on new towers, many of
which may be provided by the Company. The Company believes that this discount
arrangement is an incentive for MobileMedia Communications to utilize the
Company as a preferred provider of rental tower space for new tower locations
it may require in the future.

The acquired towers had previously only been marketed on a limited basis,
despite the fact that they are predominantly either self-supporting or guyed
towers capable of supporting multiple tenants. The Company believes these
towers are attractively located and therefore highly marketable to a diverse
group of additional wireless communications providers. Further, the location
of these towers enhances and strengthens the Company's existing portfolio of
towers in the Southeastern United States and, with respect to the towers in
Southern California and New England, provides the basis for penetrating these
new markets. Since the closing of the MobileMedia Acquisition, the Company has
already experienced significant interest from potential customers in the
towers and has negotiated new leases totaling $305,000 in annualized lease
revenue.

44
<PAGE>

Additionally, when acquired, the towers had existing third party tenants that
generated annual revenue of approximately $2.2 million.

III. New Tower Construction Strategy

An additional element of the Company's growth strategy is to selectively
construct new towers in and around major markets in which it already has a
presence in order to enhance coverage in existing markets. In addition, the
Company intends to pursue new build opportunities in order to expand capacity
or otherwise improve already existing sites. In both cases, the Company
adheres to its own requirements of return on invested capital. The Company
does not engage in speculative construction projects or large scale build-to-
suit projects. During 1997 and 1998, the Company constructed 22 and 47 towers,
respectively. As a result of opportunities generated through its marketing
efforts, the Company estimates that it will identify 80 to 100 new tower build
opportunities over the next 12 months. As of December 31, 1998 16 new towers
were under construction by the Company and there were in excess of 100
additional tower projects in various stages of development. There are,
however, risks associated with new development and tower construction. Because
of such barriers, there can be no assurance that the Company's new tower
construction strategy will be successful. See "Risk Factors--Barriers to New
Construction." The elements of the Company's tower build program include the
following:

. Disciplined Build Selection Criteria. Through its sales and marketing
efforts, the Company seeks to identify suitable tower construction sites
based on information obtained from wireless communications providers
regarding their network construction plans. The Company carefully evaluates
such plans to meet customer requirements, which may result in selling space
on an existing tower, acquiring an existing tower, augmenting an existing
tower or constructing a new tower. Once such opportunities are identified,
the Company acts quickly to select only those opportunities which are
financially attractive. Tower construction is only initiated after at least
one anchor customer is identified and after the Company has determined,
based on market research, that the capital outlay for the construction
project would generate returns that exceed the Company's minimum required
return on invested capital.

. Rapid Construction/Build Implementation. After identifying an attractive
construction opportunity, the Company moves quickly to: (i) secure access
to the site by either purchasing or entering into a long-term lease for a
parcel of land; (ii) select the appropriate type of tower based on
structural capacity needs; (iii) initiate sales and marketing efforts to
rent space on the tower; and (iv) complete the necessary steps to obtain
zoning approvals and building permits. The Company acquires tower
structures from a variety of vendors and oversees the construction of the
tower by hired sub-contractors.

Company Strengths

The Company believes its business is characterized by the following
strengths:

. Exclusive Focus on Tower Rental Business. The Company exclusively focuses
on the rental of wireless communications tower space as opposed to other
aspects of the tower industry such as site acquisition services, tower
construction services and ancillary services. Furthermore, the Company does
not engage in large scale build-to-suit programs, preferring instead to
focus on its core acquisition strategy and complimentary selective
construction strategy designed to enhance coverage in targeted markets. The
Company believes that by focusing on this sector of the tower industry, it
can earn the highest risk adjusted return on invested capital.

. Disciplined and Efficient Acquirer of Tower Assets. At December 31, 1998
the Company had a network of approximately 801 towers (excluding one tower
acquired subsequent to December 31, 1998, and 135 towers to be acquired
pursuant to probable acquisitions), geographically clustered in the
Southeastern United States as well as 75 towers located in Southern
California and New England. The Company's proven acquisition process
identifies towers that typically have an established foundation of existing
cash flow and are geographically complementary to its existing portfolio.
The Company has demonstrated the ability to identify and successfully
negotiate the purchase of what it believes to be value enhancing tower
acquisitions.

45
<PAGE>

. Ability to Successfully Increase Tower Rental Revenue. The Company's
aggressive marketing efforts to all major wireless communication providers
has resulted in the signing of a significant number of new tenants over the
last three years. Additional tenants increase the operating leverage of the
Company's portfolio and generally increase the Company's overall cash flow
margins. In order to measure the revenue growth performance of acquired
towers, the Company tracks the cumulative increase in monthly revenue from
towers acquired during different periods. The Company has generated a
cumulative increase in total monthly revenues for the 29 towers acquired in
1995 of approximately 133% through December 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 1998.

In addition to the above strengths, the Company believes that its
business will be characterized by the following:

. High Cash Flow Margins with Significant Operating Leverage. The Company's
towers are fixed-cost assets with minimal variable costs associated with
revenue from leasing available space to additional or existing customers,
as each customer generally assumes the costs of installation, utilities and
equipment maintenance. Accordingly, the Company can generate increasing
operating margins when new customers are added, resulting in high
incremental free cash flow. For the year ended December 31, 1998, the
Company's Tower Level Cash Flow Margin was 80.7%.

. Consolidation Opportunities in a Highly Fragmented Industry. The tower
rental industry remains highly fragmented, with 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. The Company
further believes that significant opportunities for growth exist in this
current industry environment and that it is well-positioned to continue to
be a significant consolidator of towers. Since commencing operations in May
1995, through December 31, 1998, the Company has successfully completed 210
acquisitions through which it has acquired 799 towers.

. Attractive Growth Prospects. According to industry publications, as of
December 31, 1997, penetration for wireless services was approximately
21.0% and is projected to grow to 53.0% by 2007. The Company's rental
towers 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, the Company believes that it can achieve a level of
growth in its tower rental revenue that will in general reflect the growth
of its customer base over the next several years.

. Stable and Predictable Cash Flow. The Company believes that it benefits
from the long-term contract nature of its tower rental business and the
predictability and stability of monthly, prepaid and recurring revenue. The
Company generally leases space on its towers to wireless communications
providers under three- to five-year leases. In addition, many of the
Company's leases provide built-in annual rate increases of the greater of a
specified percentage (which typically ranges from 3 to 5%) the change for
the relevant period in the CPI. Furthermore, 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 tower owner if rent is not paid), the Company
generally experiences low levels of bad debt expense. In addition, the
Company has a broad representation of wireless communications providers and
underlying technologies reflected in its customer base of over 800
customers, which the Company believes enhance the stability and
predictability of its cash flow.

. Barriers to Entry. Towers 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, the Company believes
that in areas where it has established a critical mass of rental tower
inventory, construction of alternative towers will be less attractive to
others due to the likelihood of lower returns on those towers. Wireless
communications providers seeking to construct their own proprietary,
limited use towers face continued opposition by municipalities, which are
reducing the opportunities for such new towers to be built and supporting
the trend toward co-location on rental towers.

46
<PAGE>

. 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
reconfiguration and obtaining FCC and municipal or local approval may also
discourage customer relocation. The Company believes that the high levels
of commitment made by its customers benefit the Company in the form of
recurring and highly predictable revenue stream. The Company experienced
customer churn of approximately 1.0% per annum for the twelve month period
ended December 31, 1998.

Company Operations

Through its centralized management structure, the Company is designed to be
an efficient consolidator and operator of rental towers. This is reflected in
the methods and processes that the Company employs in managing its day-to-day
operations, including the rapid integration of acquisition, tower construction
and sales and marketing data into the Company's proprietary management
information systems. This approach ensures that tower management is
coordinated across the Company's functional areas and that such information is
accurate, timely and easily available. The Company has invested heavily in its
information systems and believes that its investments in these areas will
accommodate significant additional growth. As the Company seeks to expand its
size, it will continue to evaluate the need to supplement its current
workforce.

The key components of the Company's operations include: (i) effective
integration of tower assets into the Company's existing portfolio; (ii)
ongoing monitoring of the Company's portfolio of tower assets; and
(iii) customer sales and support.

Integration. The pace and level of activity which characterize the Company's
acquisition, construction and marketing strategies create certain operational
challenges including the efficient integration of the due diligence data and
other accounting, legal, regulatory, real estate, engineering and lease
information. In response to these challenges, two years ago the Company
committed substantial resources to the development of its proprietary
management information systems to accommodate the Company's overall
acquisition, construction and marketing strategies. As a result, the Company
has developed the capability to rapidly integrate new acquisitions and tower
construction activity and initiate sales and marketing efforts immediately
upon closing or completion.

Ongoing Monitoring. The Company's operations personnel perform routine,
ongoing monitoring to ensure the maintenance of accurate data with regard to
the Company's tower inventory. Such inventory management includes radio
frequency audits and regulatory compliance. The Company seeks to maintain
accurate information with regard to customers' equipment that is installed on
its towers. The Company believes that this area is overlooked by many rental
tower owners, resulting in erroneous information about the availability of
tower space and certain existing customers using more capacity than is
reflected in their lease. To minimize such errors, the Company conducts radio
frequency audits and matches each customer's equipment (which includes base
stations, frequencies, coaxial lines and antennas) to those allowed under the
customer's lease. Discrepancies are identified and customers are informed of
required modifications to the lease terms in order to provide for additional
rent. In addition, the Company utilizes this information to facilitate future
capacity calculations and predict where and when capital expenditures may be
required to provide additional space to new customers. Regulatory compliance
and respect for the needs of the communities in which the Company operates are
essential to the Company as well as to its customers. Operations personnel
ensure that all sites are in compliance with all FAA and FCC regulations and
other local requirements. Regulatory data is integrated into the Company's
management information systems and is provided to current and potential
customers as part of equipment installation support efforts.

Customer Sales and Support. The Company's customer sales support group is
dedicated to responding to the needs of current and potential customers.
Support is offered to customers in connection with assessing a selected
tower's capacity, determining the potential for radio frequency interference
from new equipment and providing required documentation as to ownership and
other property issues. This service function seeks to

47
<PAGE>

facilitate the customer's decision to initiate installation on the Company's
tower and, the Company believes, has enhanced the Company's reputation as a
full-service and responsive provider of rental tower space.

Customers and Customer Leases

As of December 31, 1998, the Company had over 4,200 separate tower space
leases. The Company has 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 the Company's revenues, respectively, for the year ended December 31, 1998
on a run rate basis. See "Risk Factors--Customer Concentration."

The Company has a diverse mix of customers representing the various
technologies and segments of the wireless communications industry. As a
result, the Company believes it is not dependent on any one segment of the
wireless communications industry for future revenue growth. The following is a
summary of the Company's Annualized Run Rate Revenue by customer type and
approximate percentage of revenue derived therefrom as of December 31, 1998:

<TABLE>
<CAPTION>
Percentage of
Customer Type Revenue
------------- -------------
<S> <C>
Paging......................................................... 43%
SMR............................................................ 18
2-Way Services................................................. 14
PCS............................................................ 11
Cellular....................................................... 5
Broadcasting................................................... 4
Government..................................................... 4
Data........................................................... 1
---
Total........................................................ 100%
===
</TABLE>

In connection with the Southern Towers Acquisition, the Company and Southern
Communications entered into leases providing that Southern Communications or
one of its affiliates would be a customer on each of the 201 towers acquired.
Under the Southern Communications 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 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.
The Company also entered into a 10 year option agreement with Southern
Communications whereby Southern Communications may require the Company 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, the Company entered into the
Master 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 Master Lease has a 15
year term with one five-year renewal term exercisable at the option of the
lessee. Rent under the Master Lease during the initial 15 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.

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<PAGE>

Properties

The Company both owns and leases the real property upon which its towers are
located. As of December 31, 1998, the Company owned 542 towers on parcels of
real estate that are leased and 302 towers on parcels of real estate that are
owned. Additionally, the Company currently manages 32 tower sites.

The following is a summary of the Company's sites by state, as of December
31, 1998:

<TABLE>
<CAPTION>
Number Number Total
of Tower of Tower Number of
State Sites Leased Sites Owned Tower Sites*
----- ------------ ----------- ------------
<S> <C> <C> <C>
Florida................................ 92 71 181
Georgia................................ 67 80 147
Alabama................................ 81 31 113
Louisiana.............................. 60 15 75
Tennessee.............................. 32 25 68
Mississippi............................ 42 15 58
North Carolina......................... 39 12 51
California............................. 29 12 41
Texas.................................. 20 12 32
South Carolina......................... 18 9 27
Virginia............................... 17 2 19
Maryland............................... 13 0 13
New Hampshire.......................... 3 6 9
Washington............................. 8 0 8
New York............................... 2 4 7
Arkansas............................... 4 2 6
Rhode Island........................... 1 4 5
Maine.................................. 2 1 3
Ohio................................... 2 0 2
Connecticut............................ 2 0 2
New Mexico............................. 2 0 2
Massachusetts.......................... 2 0 2
Wisconsin.............................. 1 0 1
Michigan............................... 1 0 1
New Jersey............................. 0 1 1
Delaware............................... 1 0 1
--- --- ---
Total................................ 542 302 876
=== === ===
</TABLE>

* Includes 32 tower sites managed by the Company.

The Company believes it has effectively executed its strategy to accumulate
clusters of towers in designated market areas especially with respect to
certain urban areas within its targeted region. For example, as of December
31, 1998, the Company had 39 towers in the Orlando, Florida market, 38 towers
in the Atlanta, Georgia market, 46 towers in the Birmingham, Alabama market,
37 towers in the Tampa/Sarasota, Florida market and 28 towers in the New
Orleans, Louisiana market.

In rural areas, a tower 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. Leases generally have 10 to 25
year terms, with options for the Company to renew the leases for an average of
approximately 10 years. Pursuant to the Senior Credit Facility, the senior
lenders have liens on, among other things, tenant leases, equipment, inventory
and interests in all real property of the Company on which towers are located
or which constitute a tower.

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 the Company is not satisfied with the renewal terms with
respect to such leases, the Company has the right to put back these properties
to MobileMedia and

49
<PAGE>

MobileMedia will still be obligated to pay its rent on these properties. The
Company may incur significant additional operating expenses in connection with
the renewal of such leases. There can be no assurances regarding the extent of
such increases or whether such increases could have an adverse effect on the
Company's results of operations.

The Company leases its 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 rent paid by the
Company for its headquarters was approximately $207,000 in 1998. The Company
believes that its facilities are adequate for its short-term needs and does
not expect difficulty replacing such facilities or locating additional
facilities, if needed.

Competition

The markets in which the Company operates are highly competitive. The
Company competes with wireless communications providers who own and operate
their own tower networks, site development companies which acquire space on
existing towers, rooftops and other sites, other independent tower companies
and traditional local independent tower operators. Wireless communications
providers who own and operate their own tower networks generally are larger
and have greater financial resources than the Company. The Company believes
that tower location and capacity, price, quality of service and density within
a geographic market historically have been and will continue to be the most
significant competitive factors affecting tower rental companies. The Company
believes that competition for tower acquisitions will increase and that
additional competitors will enter the tower rental market, some of which may
have greater financial resources than the Company. See "Risk Factors--
Competition."

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 are separately regulated by the FCC and
independently licensed based upon the particular frequency used.

The Telecommunications Act of 1996 (the "Telecom Act") amended the
Communications Act of 1934 to prevent the FCC preemption of local and state
land use decisions and preserves the authority of state and local governments
over zoning and land use matters concerning the construction, modification and
placement of towers, except in limited circumstances. The Telecom Act
prohibits any action that would (i) discriminate between different wireless
communications providers or (ii) ban altogether the construction, modification
or placement of radio communications towers. The Telecom Act requires the
federal government to establish procedures to make available on a fair,
reasonable and nondiscriminatory basis property rights-of-way and easements
under federal control for the placement of new telecommunications services.
This may require that federal agencies and departments work directly with
licensees to make federal property available for tower facilities.

All towers must comply with the National Environmental Policy Act of 1969 as
well as other federal environmental statutes. The FCC's environmental rules
place responsibility on each applicant to investigate any

50
<PAGE>

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 Regulation. In addition to the FCC's environmental
regulations, the Company is subject to various other federal, state and local
health, safety and environmental laws and regulations. The current cost of
complying with those laws is not material to the Company's financial condition
or results of operations.

Employees

As of December 31, 1998, the Company had approximately 108 full-time
employees, of which 78 work in the Company's Sarasota, Florida headquarters
office. None of the Company's employees are unionized, and the Company
considers its relationship with its employees to be good.

REIT Status

The Company has elected, and intends to continue to elect, to be treated as
a REIT. A REIT is generally not subject to federal corporate income taxes on
that portion of its ordinary income or capital gain for a taxable year that is
distributed to stockholders within such year. To qualify and remain qualified
as a REIT, the Company is required for each taxable year to satisfy certain
requirements pertaining to organization, sources of income, distributions and
asset ownership, among others. Among the numerous requirements which must be
satisfied with respect to each taxable year in order to qualify and remain
qualified as such, a REIT generally must: (i) distribute to stockholders 95%
of its taxable income computed without regard to net capital gains and
deductions for distributions to stockholders; (ii) maintain at least 75% of
the value of the Company's total assets in real estate assets (generally real
property and interests therein), cash, cash items and government securities;
(iii) derive at least 75% of its gross income from investments in real
property or mortgages on real property; and (iv) derive at least 95% of its
gross income from real property investments described in (iii) and from
dividends, interest and gain from the sale or disposition of stock and
securities and certain other types of gross income. Income tax regulations
provide that the term "real property" for the foregoing requirements means
land or improvements thereon, such as buildings or other inherently permanent
structures thereon, including items which are structural components of such
buildings or structures. The Internal Revenue Service (the "Service") has
ruled in a revenue ruling that transmitting and receiving communications
towers built upon pilings or foundations similar to those of the Company as
well as ancillary buildings, heating and air conditioning systems and fencing
constitutes inherently permanent structures and are therefore real estate
assets. See "Certain Federal Income Tax Considerations" for a detailed
discussion of the REIT qualification requirements.

Legal Proceedings

The Company is from time to time involved in ordinary litigation incidental
to the conduct of its business. The Company believes that none of its pending
litigation will have a material adverse effect on the Company's business,
financial condition or results of operations.

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<PAGE>

MANAGEMENT

Executive Officers, Directors and Key Employees

Set forth below is certain information concerning the Company's directors,
executive officers and key employees. All of the directors have served as
directors of the Company since the Company's inception, except for Steven Day
who has served since February 1997.

<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.................. 45 Director, Vice President, Secretary and Chief
Financial Officer
David Zahn.................. 33 Vice President of Operations
Ben Gaboury................. 47 Vice President of Sales and Marketing
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 the
Company's acquisitions and operations and has substantial experience in
consolidating fragmented industries. From 1990 to 1994, Mr. Wolsey, as Chief
Executive Officer of Pittencrieff Communications, Inc. ("PCI"), a regional
consolidator of SMR operators, spearheaded the acquisition of 28 SMR
businesses and related assets (including over 100 towers) for a purchase price
of over $30 million. During Mr. Wolsey's tenure at PCI, revenue increased from
$100,000 to over $28 million. In June 1993, PCI 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 the Company's financial, legal and
administrative affairs and for the integration of acquired properties. Mr. Day
was a partner in the accounting firm of Price Waterhouse LLP until joining the
Company in February 1997. Since 1986, he has been involved with high-growth
companies, principally in technology-based industries and, for the last
several years, worked with large venture capital and leveraged buyout firms in
his role in the Price Waterhouse Mergers and Acquisitions Group. Mr. Day has
substantial experience in dealing with companies that have filed initial
public offerings. Mr. Day earned a

52
<PAGE>

Masters of Business Administration at Loyola University of Chicago and a
Bachelor of Arts degree at the University of West Florida.

David Zahn is primarily responsible for the ongoing maintenance of the
Company's existing tower 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.

Ben Gaboury is primarily responsible for the sales and marketing operations
of the Company. Mr. Gaboury was employed for 17 years with Motorola Inc. in
various sales and sales management positions. Before joining the Company in
October 1996, Mr. Gaboury was responsible for planning the strategy that
Motorola employed in connection with the build out of its SMR network in New
York and the New England area. He then executed the plan to market SMR
services as well as related rental towers. Mr. Gaboury holds a Masters Degree
from Jersey City State College and a Bachelors Degree from Fairleigh Dickinson
University.

Martin Alvarez is primarily responsible for the Company's Information
Technology and Services. Prior to joining the Company in June 1997, Mr.
Alvarez was a Senior Manager in the Management Consulting Services division of
Price Waterhouse LLP. Mr. Alvarez has been involved with the growth and
management of Information Technology and Services at Pinnacle since April of
1996. His experience includes work for a variety of industries that include
telecommunications, entertainment, manufacturing, utilities, among other
industries. Mr. Alvarez' experience includes management of various technology
areas, systems development and implementation, systems programming,
effectiveness evaluation and strategic planning. Mr. Alvarez earned his degree
in Bachelor of Science in Engineering Science, Computer Science Option from
the University of South Florida.

Andrew Banks is Chairman of ABRY Holdings Inc. Previously, Mr. Banks was
affiliated with Bain & Company, an international management consulting firm.
At Bain, where he was a partner from 1986 until 1988, he shared significant
responsibility for the firm's media practice. Mr. Banks is presently a
director (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. ("ABRY").
She joined ABRY in 1990 from Price Waterhouse LLP where she served as Senior
Accountant in the Audit Division from 1985 to 1990. Ms. Garber is presently a
director (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. She joined ABRY in 1993. From 1988 to
1992, Ms. Koenig was a Vice President, partner and member of the Board of
Directors of Sillerman Communications Management Corporation, a merchant bank,
which made investments principally in the radio industry. Ms. Koenig was the
Director of Finance from 1986 to 1988 for Magera Management, an independent
motion picture financing company. She is presently a director (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. 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

53
<PAGE>

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.

Composition of the Board of Directors

Pursuant to the terms of the Company's Certificate of Incorporation and
Bylaws, the Board of Directors has the power to set the number of directors
(not less than one nor more than 10) by resolution adopted by the directors of
the Company. Each director is elected to serve until the next annual meeting
of the stockholders, except in the case of removal or vacancy, and until his
successor is duly elected and qualified or until his death or retirement or
until he resigns or is removed. Currently, the number of directors is set at
seven. The Company intends to maintain at all times at least two independent
directors on its Board of Directors.

Committees of the Board of Directors

Audit Committee. The Company has established an Audit Committee composed of
Ms. Garber and Ms. Koenig. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the accountants, reviews the
independence of the accountants, considers the range of audit and non-audit
fees and reviews the adequacy of the Company's internal accounting controls.
The Audit Committee is also responsible for the review of transactions between
the Company and any affiliate or entity in which a Company affiliate has a
material interest.

Compensation Committee. The Company has established a Compensation
Committee, consisting of Mr. Yudkoff and Ms. Koenig. The Compensation
Committee establishes the compensation of the Company's executive officers.
The Compensation Committee also administers the Company's Stock Incentive Plan
and determines the amount, exercise price and vesting schedules of stock
options awarded thereunder.

Executive Committee. The Company has established an Executive Committee
consisting of Mr. Wolsey, Ms. Koenig and Mr. Yudkoff. The Executive Committee
has the authority to act in place of the Board of Directors on all matters
which would otherwise come before the Board, except for such matters which are
required by law or by the Company's Certificate of Incorporation or Bylaws to
be acted upon exclusively by the Board.

Other Committees. The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time.

Compensation of Directors

All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board of Directors. Directors who
are employees of the Company do not receive any fee in addition to their
regular salary for serving on the Board of Directors. Non-employee directors
currently do not receive any fee, but will be eligible to participate in the
Company's Stock Incentive Plan.

54
<PAGE>

Compensation of Executive Officers

The following table sets forth information concerning the compensation for
each of the last three years for the Chief Executive Officer and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers").

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------------------- ----------------------------------
Awards Payouts
Other ---------------------- -----------
Annual Restricted Securities All Other
Compen- Stock Underlying LTIP Compen-
Name and Principal Position(a) Year Salary ($) Bonus ($) sation ($) Awards ($) Options (#) Payouts ($) sation ($)
- ------------------------------ ---- ---------- --------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Wolsey........... 1998 230,731 -- -- -- -- -- --
President, Chief 1997 156,000 70,000 6,500(b) -- -- -- --
Executive
Officer 1996 129,698 30,000 -- -- -- -- --
James Dell'Apa.......... 1998 200,000 50,000 -- -- -- -- --
Executive Vice 1997 156,248 -- -- -- -- -- --
President and Chief 1996 128,125 30,000 -- -- -- -- --
Operating Officer
Steven Day.............. 1998 153,808 15,000 -- -- -- -- --
Vice President, 1997 131,250 -- -- 10,000 -- -- --
Secretary and 1996 -- -- -- -- -- -- --
Chief Financial Officer
David Zahn.............. 1998 129,453 15,000 -- -- -- -- --
Vice President of 1997 126,260 -- -- -- -- -- --
Operations 1996 36,102 -- -- 1,200 -- -- --
Ben Gaboury............. 1998 129,453 15,000 -- -- -- -- --
Vice President of Sales 1997 126,094 -- -- -- -- -- --
and Marketing 1996 31,789 -- -- 1,200 -- -- --
</TABLE>

- -------
(a) See also, "Employment Agreements".
(b) Amount of reimbursement for payment of income taxes.

Employment Agreements

The Company has entered into employment agreements (the "Employment
Agreements") with each of Messrs. Wolsey, Dell'Apa and Day (the "Principal
Employees"). The terms of the Employment Agreements are substantially similar.
The Employment Agreements provide that each of the Principal Employees will be
employed by the Company until his resignation, death or disability or other
incapacity, or until terminated by the Company. Under the Employment
Agreements, each of the Principal Employees will receive, among other things,
(i) an annual base salary and (ii) other benefits as described in the
Employment Agreements (including those provided all employee benefit plans and
arrangements that are generally available to other employees). Each of the
Employment Agreements includes noncompetition and nonsolicitation provisions
restricting the respective employees' ability to engage in activities
competitive with the Company for a period of two years following termination
of employment. In the event of the termination of an executive, the agreements
provide for severance benefits including salary and health plan benefits for
periods ranging from six to 18 months.

Stock Options

There were no stock options granted or exercised during the last fiscal
year. The Company currently intends to grant no more than one-half of the
options available under its Stock Incentive Plan to its employees during the
next twelve months. A significant portion of those options are expected to be
granted on or about the date of the

55
<PAGE>

consummation of the Offering. The Company currently anticipates that less than
one-half of such options granted during such twelve months will be granted to
Named Executive Officers and that substantially all such options will have an
exercise price no less than the fair market value of the Common Stock on the
date of grant.

Stock Incentive Plan

General

The Pinnacle Holdings Inc. Stock Incentive Plan became effective July 1,
1998. The Stock Incentive 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.

Administration

The Stock Incentive Plan is administered by a committee consisting of at
least two directors of the Company who are "non-employee directors" within the
meaning of Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and
who are "outside directors" within the meaning of Section 162(m) of the Code
and the regulations promulgated under Section 162(m) of the Code (the
"Committee"). The Committee is authorized to select the individuals to whom
Awards will be granted, determine the type, size and terms and conditions of
Awards, and construe and interpret the Stock Incentive Plan. The Company's
Board of Directors may appoint a different committee for the purpose of
approving Awards to persons who are not subject to the requirements of Section
16(b) of the Exchange Act and Section 162(m) of the Code.

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 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 to the Award again become available for grant under the
Stock Incentive Plan.

Eligibility

The Committee may grant Awards to any employee, non-employee director,
consultant, advisor or independent contractor of the Company.

Stock Options

The Committee is authorized to grant to eligible persons options to purchase
a specified number of shares of Common Stock at a stated price per share
("Options"). 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. An Option may be intended to qualify as an "incentive stock option"
("ISO") pursuant to the Code, or may be intended to be a nonqualified option
("NSO"). 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 by the Optionee on the
date or dates specified by the Committee. The Committee may provide that an
Option becomes exercisable in installments over a period of years or upon the
attainment of stated goals. The Committee, in its sole discretion, may
accelerate the date or dates on which an Option becomes exercisable.

56
<PAGE>

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.

Payment for shares of Common Stock purchased upon exercise of an Option must
be made in full at the time of purchase. Payment may be made in cash or in any
other manner as may be authorized by the Committee. Each Option shall be
evidenced by a written agreement containing such terms and conditions
consistent with the Incentive Plan as shall be established by the Committee.

Restricted Stock

The Committee may 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.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of December 31, 1998, after giving effect
to the Recapitalization, information as to the Company's stock beneficially
owned by (i) each director of the Company; (ii) each Named Executive Officer;
(iii) all directors and executive officers of the Company as a group; and
(iv) any person who is known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's capital stock.

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned After the
the Offering Offering (b)
Name and Address of Beneficial ----------------------- -----------------------
Owner(s)(a) Number Percent Number Percent
------------------------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
ABRY II (c).................... 8,196,983 82.0% 8,196,983 27.3%
Robert Wolsey (d).............. 613,082 6.1 613,082 2.0
James M. Dell'Apa (e).......... 408,632 4.1 408,632 1.4
Steven Day (f)................. 368,182 3.7 368,182 1.2
David Zahn..................... 35,717 * 35,717 *
Ben Gaboury.................... 35,717 * 35,717 *
Andrew Banks (g)............... 550 * 550 *
Peni Garber.................... 550 * 550 *
Peggy Koenig (h)............... 1,100 * 1,100 *

Royce Yudkoff (i).............. 8,198,084 82.0 8,198,084 27.3
------------ ------- ------------ -------
All directors and executive
officers as a group
(10 persons).................. 9,697,273 97.0% 9,697,273 32.3%
</TABLE>
- --------
* Indicates less than 1 percent.
(a) The address of all persons in this table is c/o Pinnacle Towers Inc., 1549
Ringling Blvd., Sarasota, Florida 34236.

(b) Assumes no exercise of the Underwriters' over-allotment options to
purchase up to an aggregate of 3,000,000 shares of Common Stock from the
Company.
(c) ABRY Holdings, Inc., the general partner of ABRY Capital, which is the
general partner of ABRY II, is wholly-owned by Mr. Yudkoff.
(d) Includes 5,774 shares of Common Stock held by Pantera, Inc. and 288,682
shares of Common Stock held by Pantera Partnership Ltd.
(e) Excludes 36,618 shares of Common Stock held by relatives of Mr. Dell'Apa
of which he disclaims beneficial ownership.
(f) 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.
(g) Mr. Banks beneficially owns 550 shares of Common Stock held by Audemi
Corporation.
(h) Includes 550 shares of Common Stock held by Ms. Koenig's spouse.
(i) 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.

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<PAGE>

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Subscription and Stockholders Agreement

The principal stockholders of the Company (ABRY II, and Messrs. Wolsey,
Dell'Apa and Day) are parties to the Stockholders Agreement. The Stockholders
Agreement gives such stockholders the preemptive right, with some exceptions,
to acquire their pro rata share of future issuances of capital stock of the
Company. The following issuances are exempt from this preemptive right: (a) to
any employee of the Company; (b) in connection with an acquisition or merger;
(c) pursuant to a public offering; (d) upon the exercise, conversion, or
exchange of any option or convertible security; (e) of up to a total of
200,000 shares of Class A Common Stock to ABRY II at a price of $100 per
share; (f) as a part of any recapitalization or reorganization; (g) upon the
conversion of Class D Common Stock into Class C Common Stock; and (h) as a
distribution to stockholders in the form of securities of the Company. This
preemptive right will terminate upon the closing of the Offering. The
Stockholders Agreement also provides that ABRY II will make a capital
contribution of up to an aggregate of $50 million. Such capital contribution
commitment will terminate upon the closing of the Offering.

Parties to the Stockholders Agreement have certain rights and obligations in
connection with (i) a sale by ABRY II of shares in the Company, (ii) a sale of
the Company, and (iii) a reorganization or recapitalization of the Company in
anticipation of a sale of the Company or a public offering. In the case of a
sale by ABRY II of shares in the Company, the other stockholders party to the
Stockholders Agreement will have the right to participate pro rata in such a
sale, but such right to participate will terminate upon the closing of the
Offering. In the case of a sale of the Company approved by its stockholders or
a reorganization or recapitalization in anticipation of a sale or a public
offering, stockholders party to the Stockholders Agreement will have the
obligation to participate in such transaction.

The Stockholders Agreement also governs the vesting of the Class D Common
Stock issued to certain executives and employees of the Company. Pursuant to
the Agreement, all shares of Class D Common Stock issued and outstanding will
automatically vest and convert into Class C Common Stock upon the consummation
of the Offering (and thereafter will convert into Common Stock). The
Stockholders Agreement also provides for certain put and call rights among the
Company and its current stockholders with respect to the Class B Common Stock
and Class D Common Stock upon the termination of employment or death of
Messrs. Wolsey, Dell'Apa or Day.

The parties to the Stockholders Agreement have also entered into an
agreement to effect the Recapitalization.

Capital Contribution Agreement

The Company and ABRY II entered into a capital contribution agreement with
NationsBank of Texas, N.A. (the "Capital Contribution Agreement"), pursuant to
which ABRY II agreed to make capital contributions to the Company, up to an
aggregate capital contribution of $50.0 million, in an amount equal to (i)
100.0% of the Company's general and administrative expenses and corporate
development expenses and (ii) the amount necessary to cure any payment or
financial covenant default under the Senior Credit Facility. As of
December 31, 1998, ABRY II had contributed $37.2 million, not including $15.0
million of the ABRY Bridge Loan and had guaranteed an additional $3.9 million
of other debt of the aggregate $50.0 million associated with the capital
contribution commitment.

Junior Preferred Stock

In September 1998, ABRY/Pinnacle, Inc., an affiliate of ABRY II, purchased
32.5 shares of Junior Preferred Stock with a liquidation preference of $32.5
million. The proceeds of the sale were used to partially finance the

59
<PAGE>

MobileMedia Acquisition. In December 1998, ABRY/Pinnacle Inc. purchased an
additional 26.2 shares of Junior Preferred Stock with a liquidation preference
of $26.2 million. The proceeds of the sale were used to partially pay down the
Senior Credit Facility.

Management and Consulting Services Agreement

The Company and ABRY entered into a Management Services and Consulting
Agreement as of April 17, 1995, pursuant to which the Company pays up to
$75,000 per year plus reimbursable expenses in exchange for certain consulting
services. The Company paid approximately $12,500 for such services and
expenses from the period of inception through December 31, 1995 and
approximately $55,162, $78,166 and $834,192 for such services and expenses for
the years ended December 31, 1996, 1997 and 1998, respectively. The Management
Services and Consulting Agreement is terminable at any time by either party
with prior written notice.

Registration Rights Agreement

The parties to the Stockholders Agreement have entered into a registration
rights agreement (the "Registration Rights Agreement") pursuant to which ABRY
II and its assigns may require the Company, subject to certain conditions and
limitations, to register with the Securities and Exchange Commission (the
"Commission") in accordance with the Securities Act of 1933, as amended (the
"Securities Act") all or part of the shares of Common Stock currently owned by
ABRY II at the request of the holders of a majority of such shares of Common
Stock. If the Company proposes to file on its own behalf or on behalf of any
holders of its equity securities a registration statement under the Securities
Act, then the Company is required, subject to certain conditions and
limitations, to give notice thereof to the parties to the Registration Rights
Agreement and to offer to include such parties shares of Common Stock in such
registration. The Company may not cause any registration statement to be
declared effective by the Commission within 180 days after the effective date
of any other registration statement registering equity securities of the
Company. The Company is generally required to bear the expenses of all such
registrations, except underwriting discounts and commissions. See "Shares
Eligible for Future Sale."

Pinnacle Towers II Inc.

In November 1997, certain Company stockholders formed Pinnacle Towers II
Inc. ("PTI II"). PTI II is under common control with, and therefore is an
affiliate of the Company, because ABRY II and certain executives of the
Company control a majority of PTI II stock. PTI II was formed for the purpose
of pursuing certain opportunities such as potential joint ventures and other
businesses related to the tower rental industry.

In November 1997, the Company sold to PTI II, for approximately $2.2
million, certain of its towers and projects-in-progress. Effective April 30,
1998, the Company repurchased all of those assets from PTI II. Currently, PTI
II has minimal assets and is an inactive company.

Management Indebtedness

During the 1998 fiscal year, the Company had a loan receivable from Mr.
Dell'Apa, an executive officer, in the amount of $94,000. The loan to Mr.
Dell'Apa was secured by a mortgage on certain real property and by a pledge of
all of Mr. Dell'Apa's Class D Common Stock of the Company. The loan bore
interest payable quarterly at a rate equal to the Company's bank rate less 600
basis points. This loan was repaid in August 1998.

60
<PAGE>

DESCRIPTION OF CERTAIN INDEBTEDNESS

Senior Credit Facility

The Company has entered into the Senior Credit Facility with NationsBank,
N.A. and certain other lenders that provides a revolving line of credit for
borrowings of up to $250.0 million, of which $200.0 million is currently
committed. The Company may make borrowings and repayments until December 31,
2005. Beginning March 31, 2000, the availability under the revolving line of
credit starts reducing by specified amounts on a quarterly basis until
December 31, 2005 when the availability will be reduced to zero. Loans under
the Senior Credit Facility 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 2.0% or the 90-day LIBOR plus a margin of up to 3.0%. Outstanding
borrowings under the Senior Credit Facility amounted to $182.5 million at
December 31, 1998. Advances under the Senior Credit Facility have been used
primarily to fund acquisitions and construction of towers. As of December 31,
1998, after giving effect to the Transactions, there would have been $69.4
million available under the Senior Credit Facility, after giving effect to
approximately $17.0 million of outstanding letters of credit, which reduce
availability under the Senior Credit Facility.

The Senior Credit Facility is secured by a lien on substantially all of the
assets of the Company and its subsidiaries and a pledge of substantially all
of the capital stock of the subsidiaries and the Company has guaranteed the
obligations of Pinnacle Towers, Inc. under the Senior Credit Facility. The
credit agreement contains customary covenants such as limitations on the
Company's ability to incur indebtedness, to incur liens or encumbrances on
assets, to make certain investments, to make distributions to stockholders, or
to prepay subordinated debt. A "change of control" (as defined in the Senior
Credit Facility) constitutes an event of default under the Senior Credit
Facility. A "change of control" under the Senior Credit Facility includes the
acquisition by a person or group of related persons (other than ABRY II and
Robert Wolsey and their affiliates) of control of in excess of 30% of the
ordinary voting power of the Common Stock of the Company. A further event of
default includes any one of the Chief Executive Officer, Chief Operating
Officer or Chief Financial Officer failing to perform the primary roles and
functions of such positions on behalf of the Company (whether pursuant to
death, extended disability, termination, resignation or otherwise) and the
Company not having replaced such executive officer with a new employee
reasonably acceptable to two-thirds of the lending banks within 60 days of
such failure. In addition, the Company may not permit the Leverage Ratio (as
defined therein) to exceed certain amounts.

ABRY Bridge Loan

As of December 31, 1998, ABRY II had advanced to the Company a total of
$15.0 million to partially finance the MobileMedia Acquisition and certain
other acquisitions. The ABRY Bridge Loan will be repaid in full with a portion
of the proceeds from the Offerings. ABRY II may continue to make such
advances. Amounts outstanding under the ABRY Bridge Loan bear interest at the
rate of 9.0% per annum. Interest and principal under the ABRY Bridge Loan are
payable within one year from the date of the related borrowing.

10% Senior Discount Notes

The Senior Discount Notes were initially issued in aggregate principal
amount of $325 million and are senior unsecured obligations of the Company.
The Senior Discount Notes will mature on March 15, 2008. Prior to March 15,
2003, the Company's interest expense on the Senior Discount Notes will be
comprised solely of the accretion of original issue discount. Thereafter, the
Senior Discount Notes will accrue cash interest at a rate of 10.0% per annum,
payable semi-annually in arrears on March 15 and September 15 of each year,
commencing September 15, 2003.

The Senior Discount Notes are redeemable at the option of the Company, 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, the Company at its
option, may redeem at least $5.0 million and in the aggregate up to 35% of the
original principal amount of the Senior

61
<PAGE>

Discount 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) thereof to
but excluding the redemption date plus accrued and unpaid Liquidated Damages
(as defined in the Indenture) to the redemption date with the net proceeds of
one or more Public Equity Offerings (as defined in the Indenture); 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) the Company will be required to repurchase all
of the outstanding Senior Discount Notes at a price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest thereon to the
date of the purchase. A "change of control" under the Indenture includes the
acquisition by a person or group of related persons (other than ABRY II and
Robert Wolsey and their affiliates) of control of a majority of the ordinary
voting power of the Common Stock of the Company.

In the event of a Change of Control (as defined in the Indenture) of the
Company, the Company will be required to make an offer to purchase all
outstanding Senior Discount Notes at a price equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages 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
thereof on the date of purchase plus accrued and unpaid Liquidated Damages
thereon to the date of purchase.

The Indenture contains covenants for the benefit of the holders of the
Senior Discount Notes that, among other things, and subject to certain
exceptions, restrict the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to: (i) incur additional
indebtedness; (ii) guarantee payment of debt; (iii) pay dividends and make
distributions; (iv) restrict dividend or other payments of Restricted
Subsidiaries; (v) create liens; (vi) issue stock of subsidiaries; (vii) enter
into transactions with affiliates; (viii) merge or consolidate the Company;
and (ix) transfer and sell assets.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

General

The Company's capital stock currently consists of 1,817,000 shares of common
stock with a par value of $.001 per share and 1,000,000 shares of preferred
stock with a par value of $.001 per share. Of the 1,817,000 shares of common
stock that the Company is authorized to issue: (a) 202,500 shares are
designated as Class A Common Stock (the "Class A Common Stock"); (b) 12,000
shares are designated as Class B Common Stock (the "Class B Common Stock");
(c) 200,000 shares are designated as Class C Common Stock; (d) 100,000 shares
are designated as Class D Common Stock (the "Class D Common Stock"); (e)
302,500 shares are designated as Class E Common Stock (the "Class E Common
Stock"); and (f) 1,000,000 shares are designated as Class F Common Stock (the
"Class F Common Stock"). Currently, 202,500 shares of Class A Common Stock,
12,000 shares of Class B Common Stock, 40,000 shares of Class D Common Stock
and 174,766 shares of Class E Common Stock are outstanding. There are no
shares of Class C Common Stock or Class F Common Stock currently outstanding.
The Existing Preferred Stock is to be redeemed from the proceeds of the
Offering and is treated as no longer outstanding for purposes of the
discussion below.

As a result of the Recapitalization, effective immediately prior to the
closing of the Offering, the following will occur: (i) the holders of Class B
and Class E Common Stock will receive cash in payment of the distribution
preference; (ii) the holders of Class A Common Stock will receive cash in
payment of both the distribution preference and guaranteed yield related to
such stock (iii) the holders of Class A, Class B and Class E Common Stock will
receive approximately 22.02 shares of the Company's Common Stock for each of
such shares; (iv) all of the outstanding Class D Common Stock will immediately
become vested and will convert into 1.6221 shares of Class C Common Stock; (v)
each of the shares of Class C Common Stock will convert into
approximately 22.02 shares of Common Stock; (vi) certain amounts equal to the
amount of the existing preferential amounts and accreted yield on the Class A
Common Stock, Class B Common Stock and Class E Common Stock will be paid to
the holders thereof out of the proceeds of the Offering; and (vii) the
Company's certificate of incorporation will be amended to reflect that only
the Common Stock and Preferred Stock is authorized. In addition, approximately
3,000,000 shares of Common Stock will be reserved for issuance with respect to
the exercise of certain rights under the Stock Incentive Plan. Therefore, upon
the completion of the Offering, there will be outstanding only one class of
common stock, to be known as the "Common Stock." After giving effect to the
Recapitalization, the authorized capital stock of the Company will consist of
100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock.

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 the Company's
directors and otherwise control the affairs of the Company, subject to any
voting rights of the then outstanding preferred stock, if any. See "Risk
Factors--Controlling Stockholder" and "Risk Factors--Anti-Takeover Effect of
Charter Provisions, Bylaws and State Law."

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 the Company's Board of
Directors and will depend on the Company's results of operations, financial
condition, contractual or legal restrictions and other factors deemed relevant
by the Board of Directors. In order to maintain the Company's REIT status,
however, the Company is required to distribute to stockholders 95% of its
taxable income. The Senior Credit Facility and Indenture currently prohibit
the Company from paying any dividends other than those required to be paid to
maintain the Company's REIT Status. See "Dividend Policy."

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Upon a liquidation of the Company, holders of the Common Stock will be
entitled to a pro rata distribution of the assets of the Company, after
payment of all amounts owed to the Company's creditors, and subject to any
preferential amount payable to holders of Preferred Stock of the Company, if
any.

Preferred Stock

The Company's certificate of incorporation permits the Company's 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 dividend 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.

Certain Provisions of the Company's Certificate of Incorporation and Bylaws

Restrictions on Transfer. Because the Company wishes to retain its status as
a REIT, the Company's certificate of incorporation provides that no holder of
Common Stock may transfer any such share or interest therein, if as a result,
either (a) the total number of stockholders would thereby drop to less than
100 (the "Aggregate Ownership Limit"), or (b) a violation of the Percentage
Ownership Limit (as defined herein) would occur. The certificate of
incorporation also provides that no share of any series of Preferred Stock may
be sold or otherwise transferred to any individual if such transfer would
result in the ownership by such individual in combination with four or fewer
individuals of more than 50% of the aggregate value of all shares of all
classes of capital stock of the Company (the "Percentage Ownership Limit").
Any transfer of shares of Common Stock or Preferred Stock which would violate
the Aggregate Ownership Limit or the Percentage Ownership Limit will be void
and of no legal effect. Any such purported transfer will cause such shares to
be transferred to the Company, as trustee, in trust for the benefit of one or
more qualified charitable organizations. The Company will be deemed to own
such shares as trustee on the day prior to the purported transfer. While such
shares are held in trust, any dividends or distributions paid to the purported
transferee of the shares will be disgorged and repaid to the Company as
trustee, and any vote taken by the purported transferee prior to the discovery
of such purported transfer will be void ab initio. All certificates
representing shares of Common Stock or Preferred Stock will bear a legend
referring to the restrictions described above.

Such restrictions may delay or make more difficult acquisitions or changes
of control of the Company.

Preferred Stock and Additional Common Stock. As discussed above, the
Company's Board of Directors has the authority to provide by board resolution
for the issuance of shares of one or more series of Preferred Stock. The
Company's Board of Directors is authorized to fix by resolution the terms and
conditions of each such series.

The Company believes 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 the Company's stockholders, unless
stockholder action is required by applicable law or by the rules of any stock
exchange on which any series of the Company's stock may then be listed.

These provisions give the Company's 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 (the "DGCL"), the Company's Certificate of
Incorporation provides that directors of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. In addition, the Company's Bylaws provide that
the Company shall, to the fullest extent authorized by

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Section 145 of the DGCL, as amended from time to time, indemnify all directors
and officers and all persons serving at the request of the Company 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 the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and, therefore, is unenforceable.

Certain Provisions of Delaware Law

Delaware Business Combination Statute. Section 203 of the DGCL ("Section
203") provides that, subject to certain exceptions specified therein, an
interested stockholder of a Delaware corporation shall not engage in any
business combination with the corporation for a three-year period following
the date that such stockholder becomes an interested stockholder unless (i)
prior to such date, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding
certain shares) or (iii) on or subsequent to such date, the business
combination is approved by the board of directors of the corporation and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder. Except as otherwise specified in Section 203, an
interested stockholder is defined to include (x) any person that is the owner
of 15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date and (y) the affiliates and associates
of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The certificate of incorporation does not exclude the Company from
the restrictions imposed under Section 203. The provisions of Section 203 may
encourage companies interested in acquiring the Company to negotiate in
advance with the Company's board of directors because the stockholder approval
requirement can be avoided 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 the management of the Company. 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 the Common Stock is First Union
National Bank.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have a total of 30,000,000
shares of Common Stock outstanding (33,000,000 shares if the Underwriters'
over-allotment options are exercised in full). Of these shares, the 20,000,000
shares of Common Stock offered hereby (23,000,000 shares if the Underwriters'
over-allotment options are exercised in full) will be freely tradeable without
restriction or registration under the Securities Act by persons other than
"affiliates" of the Company, as defined in the Securities Act, who would
otherwise be required to sell such shares under Rule 144 under the Securities
Act ("Rule 144"). The remaining 10,000,000 shares of Common Stock outstanding
will be "restricted securities" as defined by Rule 144 (the "Restricted
Shares") and may not be resold in the absence of registration under the
Securities Act or pursuant to exemptions from such registration, including
among others, the exemption provided by Rule 144 under the Securities Act. The
Restricted Shares were issued and sold by the Company in private transactions
in reliance upon exemptions from registration under the Securities Act.

In general, pursuant to Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities for at least one
year (including the holding period of any prior owner except an affiliate),
including persons who may be deemed "affiliates" of the Company, is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of one percent of the number of shares of Common Stock then
outstanding (approximately 300,000 shares upon completion of the Offering) or
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions and
notice requirements, and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at the time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years (including the holding period of any prior owner except an affiliate),
is entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. Rule 144 also provides that affiliates who are
selling shares that are not restricted securities must nonetheless maintain
the same restrictions applicable to restricted securities, with the exception
of the holding period requirement.

Each of the Company, each of the directors and executive officers of the
Company have agreed that, without the prior written consent of BT Alex. Brown
Incorporated on behalf of the Underwriters, they will not, during the period
ending 180 days after the date of this Prospectus, engage in specified
transactions relating to the Common Stock. See "Underwriting."

Pursuant to the Registration Rights Agreement, ABRY II and its assigns may
require the Company, subject to certain conditions and limitations, to
register with the Commission in accordance with the Securities Act all or part
of the shares of Common Stock currently owned by ABRY II at the request of the
holders of a majority of such shares of Common Stock. The Company may be
required on three separate occasions to register shares of Common Stock on a
Form S-1 Registration Statement and on unlimited number of occasions to
register shares of Common Stock on a Form S-2 or Form S-3 Registration
Statement. If the Company proposes to file on its own behalf or on behalf of
any holders of its equity securities a registration statement under the
Securities Act, then the Company is required, subject to certain conditions
and limitations, to give notice thereof to the parties to the Registration
Rights Agreement and to offer to include shares of Common Stock in such
registration. The Company may not cause any registration statement to be
declared effective by the Commission within 180 days after the effective date
of any other registration statement registering equity securities of the
Company. The Company is generally required to bear the expenses of all such
registrations, except underwriting discounts and commissions. The parties to
the Stockholders Agreement will own approximately 32.0% of the shares of
Common Stock immediately after the Offering.

Approximately 3,000,000 shares of Common Stock are reserved for issuance
under the Stock Incentive Plan. The Company currently intends to file a
registration statement on Form S-8 under the Securities Act to register all
shares of Common Stock issuable pursuant to the Stock Incentive Plan. The
Company expects to file such registration statement within 90 days following
the date of this Prospectus, and such registration statement will

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become effective upon filing. Shares covered by the registration statement on
Form S-8 will thereon be eligible for sale in the public markets, subject to
Rule 144 under the Securities Act limitations applicable to affiliates.

Prior to the Offering, there has been no public market for the Common Stock,
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through a
future offering of its equity securities.

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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain material federal income tax
considerations that may be relevant to a holder of Common Stock. The summary
does not address all aspects of taxation that may be relevant to particular
shareholders in light of their personal investment or tax circumstances, or to
certain types of shareholders (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 U.S. (except as described herein), 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. EACH SHAREHOLDER
IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF THE COMMON STOCK
AND OF THE COMPANY'S 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 the Company

The Company currently has in effect an election to be taxed as a REIT under
Sections 856 through 860 of the Code. The Company believes that it has since
its inception been organized and operated in such a manner as to qualify for
taxation as a REIT under the Code and its proposed method of operation will
enable it to continue to meet the requirements for continued qualification and
taxation as a REIT under the Code. The Company's continued qualification as a
REIT will depend upon the Company's qualification as a REIT in prior years.
The Company intends to continue to operate in a manner so as to qualify as a
REIT, but no assurance can be given that the Company will qualify or remain
qualified as a REIT. In the opinion of Holland & Knight LLP, the Company has
been organized and operated in conformity with the requirements for
qualification as a REIT under the Code and the continued operation of the
Company in a manner consistent with the statements made in the Management
Representation Certificate and the requirements for REIT qualification as
described in this Prospectus will enable it to continue to meet the
requirements for qualification and taxation as a REIT. 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 the Company, the nature of the Company's
assets, the conduct of its business, the sources of its revenues, the amounts
distributed by it to shareholders and other matters germane to the
requirements for qualification as a REIT. In addition, Holland & Knight LLP
will not review the Company's compliance with these requirements on an ongoing
basis, and there can be no assurance that the Company, the sources of its
income, the composition of its assets, the level of its dividends or the
diversity of its share ownership for any given year will satisfy the
requirements for qualification and taxation as a REIT. Prospective investors
also should be aware that an opinion of counsel is not binding on 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 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.

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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 shareholders. 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 the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income tax on its net income that is distributed
currently to its shareholders. That treatment substantially eliminates the
"double taxation" (i.e., taxation at both the corporate and shareholder
levels) that generally results from investment in a corporation. However, the
Company will be subject to federal income tax in the following circumstances.
First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on undistributed items of tax preference, if any.
Third, if the Company has (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 the Company has 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 the Company should fail to satisfy the 75% gross income
test or the 95% gross income test (as discussed below), and nonetheless has
maintained its qualification as a REIT because certain other requirements have
been met, it 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 the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii)
any undistributed taxable income from prior periods, it would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. If the Company elects to retain and pay income tax on
its 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 the Company acquires 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 the Company's hands is determined by reference to the
basis of the asset (or any other asset) in the hands of the C corporation and
the Company recognizes gain on the disposition of such asset during the 10-
year period beginning on the date on which such asset was acquired by it, 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 the Company 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
the Company has 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 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

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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.

The Company's certificate of incorporation contains restrictions regarding
transfer of its shares that are intended to assist the Company 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 the Company's Certificate of Incorporation and
Bylaws."

In connection with the Offering, the Company's executive officers and
directors, who will own in the aggregate approximately 32.3% of the stock of
the Company 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
180 days after the date of this Prospectus. See "Underwriting." In addition,
since the time the Company was organized, an agreement among the Company and
its major stockholders has imposed certain restrictions on the transfers of
shares of the stock of the Company under certain circumstances (the
"Stockholders Agreement"). See "Certain Relationships and Transactions--
Subscription and Stockholders Agreement." Futhermore, in connection with the
issuance of certain classes of its stock, the Company has 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
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,
the Stockholders Agreement or the Restrictive Legends is deemed to be a
transfer restriction contrary to the transferability requirement for REIT
qualification, the Company may not currently qualify as a REIT or may, in
connection with the completion of the Offering, lose its REIT status and
possibly incur other adverse tax consequences. See "Risk Factors--REIT
Status."

The Company currently has wholly-owned corporate subsidiaries (the
"Corporate Subsidiaries"). The Company 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 "qualified REIT subsidiaries" of the Company will be

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ignored, and all assets, liabilities, and items of income, deduction, and
credit of such subsidiaries will be treated as assets, liabilities, and items
of income, deduction, and credit of the Company. The Company believes its
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. The Company believes that neither it
has, nor any acquisition by it of a C corporation has resulted in the Company
having, any such accumulated "earnings and profits." However, an adjustment of
the Company's earnings and profits for a prior year, resulting from an audit
adjustment of the Service or otherwise, could cause the Company 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 the Company to qualify and to maintain its 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 the Company is discussed below.

The rent received by the Company from its 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. Second, the Code
provides that rents received from a tenant of the Company will not qualify as
"rents from real property" in satisfying the gross income tests if the Company
or a direct or indirect owner of 10% or more of the Company 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," the Company
generally must not operate or manage its 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 the Company derives no
revenue. The "independent contractor" requirement, however, does not apply to
the extent the services provided by the Company 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 its 1998 taxable year, the Company 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 the Company receives 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 the Company's direct cost of providing the services.

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The Company does 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, the Company 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 the Company does not exceed 15% of the total Rent received under
the Lease. Finally, subject to the 1% de minimis exception, the Company
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 the Company 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 would lose its 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 the Company under such Lease would
qualify as "rents from real property." In that case, if the Rent received by
the Company 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, it likely would
lose its 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 the
Company furnishes noncustomary services with respect to a property other than
through a qualifying independent contractor, none of the Rent received by it
with respect to the such property would qualify as "rents from real property."
In that case, if the Rent received by the Company 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, it would lose its REIT status.

In addition to the Rent, certain of the Company's 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, the Company has entered into hedging transactions with
respect to one or more of its assets or liabilities, and the Company may
continue to enter into such hedging transactions. Such transactions include or
may include interest rate swap contracts, interest rate cap or floor
contracts, futures or forward contracts, and options. To the extent that the
Company has entered or enters 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 the Company hedges 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. The Company has structured, and the
Company intends to structure in the future, any hedging transactions in a
manner that will not jeopardize its status as a REIT.

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it nevertheless may qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. Those
relief provisions generally will be available if the Company's failure to meet
such tests is due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its 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
the Company would be entitled to the benefit of those relief

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provisions. As discussed above in "Certain Federal Income Tax Considerations--
Taxation of the Company," even if those relief provisions apply, the Company
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

The Company, at the close of each quarter of each taxable year, also must
satisfy two tests relating to the nature of its assets. First, at least 75% of
the value of its 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 of the Company as well as ancillary buildings, heating and air
conditioning systems and fencing constitute inherently permanent structures
and are therefore real estate assets. Second, of the investments not included
in the 75% asset class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of its total assets and the Company may
not own more than 10% of any one issuer's outstanding voting securities
(except for the interest of the Company in any qualified REIT subsidiary).

If the Company should fail to satisfy the asset tests at the end of a
calendar quarter, such a failure would not cause it to lose its REIT status if
(i) it satisfied the asset tests at the close of the preceding calendar
quarter and (ii) the discrepancy between the value of its 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 its assets.
If the condition described in clause (ii) of the preceding sentence were not
satisfied, the Company still could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which it
arose.

Distribution Requirements

The Company, in order to qualify as a REIT, is required to distribute with
respect to each taxable year dividends (other than capital gain dividends or
retained capital gains) to its shareholders in an aggregate amount at least
equal to (i) the sum of (A) 95% of its "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 the Company timely files its 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 the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of
its "REIT taxable income," as adjusted, it will be subject to tax thereon at
capital gains and regular ordinary corporate tax rates, as the case may be.
Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, it 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 the Company elects to retain
and pay income tax on its long-term capital gain in a taxable year, as
described in "--Taxation of Taxable U.S. Shareholders," such retained amount
will be treated as having been distributed for purposes of the 4% excise tax.
To the extent that the Company is required to include items in "REIT taxable
income" in advance of the receipt of cash payments associated with such income
or is required to expend cash for the repayment of debt or in any other manner
for which no current deduction is available in computing the Company's "REIT
taxable income," the Company

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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 its REIT
qualification.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirements for a year by paying "deficiency dividends"
to its shareholders in a later year, which may be included in its deduction
for dividends paid for the earlier year. Although the Company may be able to
avoid being taxed on amounts distributed as deficiency dividends, it 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,
the Company must maintain certain records. In addition, to avoid a monetary
penalty, the Company must request on an annual basis certain information from
its shareholders designed to disclose the actual ownership of its outstanding
shares.

Failure to Qualify

If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, it will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to shareholders in any year in which the
Company fails 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 shareholders 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, the Company also will be disqualified from
taxation as a REIT for the four taxable years following the year during which
it ceased to qualify as a REIT. It is not possible to predict whether in all
circumstances the Company would be entitled to such statutory relief.

Taxation of Taxable U.S. Shareholders

As used herein, the term "U.S. Shareholder" 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, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (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 Shareholders on Distributions

As long as the Company qualifies as a REIT, distributions made to taxable
U.S. Shareholders 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. Shareholders 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 the
Company's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held his shares. However, corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Beginning with its 1998 taxable year, the
Company may elect to retain and pay income tax on its net long-term capital
gains. In that case, the Company's shareholders would include in income as
long-term capital gain their proportionate share of its undistributed long-
term capital gains. In addition, the shareholders would be deemed to have paid
their proportionate share of the tax paid by the Company, which would be
credited or refunded to the shareholders. Each shareholder's basis in his
shares would be increased by the amount of the undistributed long-term capital
gains included in the shareholder's income, less the shareholder's share of
the tax paid by the Company.

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Distributions in excess of current and accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder'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
shareholder'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 shareholder. In addition, any distribution declared by the
Company in October, November, or December of any year and payable to a
shareholder of record on a specified date in any such month shall be treated
as both paid by the Company and received by the shareholder on December 31 of
such year, provided that the distribution is actually paid by the Company
during January of the following calendar year. The Company may be required to
withhold a portion of capital gain distributions to shareholders who fail to
certify their nonforeign status to the Company.

Shareholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company. Instead, such losses would
be carried over by the Company for potential offset against its future income
(subject to certain limitations). Taxable distributions from the Company and
gain from the disposition of Common Stock will not be treated as passive
activity income and, therefore, shareholders generally will not be able to
apply any "passive activity losses" (such as losses from certain types of
limited partnerships in which a shareholder is a limited partner) against such
income. In addition, taxable distributions from the Company 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 shareholder so elects, in which case
such capital gains will be taxed at ordinary income rates. The Company will
notify shareholders after the close of the Company's 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 Shareholders on the Disposition of Common Stock

In general, any gain or loss realized upon a taxable disposition of shares
of Common Stock by a shareholder 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 from the
Company is required to be treated by such shareholder 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 the Company as capital gain
dividends and any retained capital gains that the Company is deemed to
distribute in taxable years beginning on and after January 1, 1998, the
Company may designate (subject to certain limits) whether such a dividend or
distribution is taxable to its noncorporate shareholders 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

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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

The Company will report to its U.S. Shareholders 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 shareholder 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 shareholder who does not provide the Company
with his correct taxpayer identification number also may be subject to
penalties imposed by the Service. Any amount paid as backup withholding will
be creditable against the shareholder's income tax liability.

Taxation of Tax-Exempt Shareholders

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 the Company 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 the Company as UBTI. In addition, in certain circumstances, a pension
trust that owns more than 10% of the stock of the Company may be required to
treat a percentage of the dividends received with respect to its Company
shares as UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross
income derived by the Company from an unrelated trade or business (determined
as if the Company were a pension trust) divided by the gross income of the
Company for the year in which the dividends are paid. The UBTI rule applies to
a pension trust holding more than 10% of the Common Stock of the Company only
if (i) the UBTI Percentage is at least 5%, (ii) the Company qualifies 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 the
Company 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 the
Company's shares or (B) a group of pension trusts individually holding more
than 10% of the value of the Company's shares collectively owns more than 50%
of the value of the Company's shares.

Taxation of Non-U.S. Shareholders

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
holders of Common Stock (collectively, "Non-U.S. Shareholders") are complex
and no attempt will be made herein to provide more than a summary of such
rules. NON-U.S. SHAREHOLDERS 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.

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Taxation of Shareholders on Distributions

Distributions to Non-U.S. Shareholders that are not attributable to gain
from sales or exchanges of U.S. real property interests and are not designated
by the Company as capital gains dividends or retained capital gains (i.e.,
undistributed capital gains to the extent so designated by the Company) will
be treated as dividends of ordinary income to the extent that they are made
out of the Company's 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. Shareholder's conduct of
a U.S. trade or business, the Non-U.S. Shareholder generally will be subject
to federal income tax at graduated rates, in the same manner as U.S.
Shareholders 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. Shareholder
that is a non-U.S. corporation). The Company expects to withhold U.S. income
tax at the rate of 30% on the gross amount of any such distributions made to a
Non-U.S. Shareholder unless (i) a lower treaty rate applies and any required
form evidencing eligibility for that reduced rate is filed with the Company or
(ii) the Non-U.S. Shareholder files an IRS Form 4224 or its successor form
with the Company claiming that the distribution is effectively connected
income. The Service has issued regulations that modify the manner in which the
Company must comply with the withholding requirements. Those regulations are
effective for distributions made after December 31, 1999.

Distributions in excess of current and accumulated earnings and profits of
the Company will not be taxable to a shareholder to the extent that such
distributions do not exceed the adjusted basis of the shareholder'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. Shareholder's Common Stock, such
distributions will give rise to tax liability if the Non-U.S. Shareholder
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 the Company's 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 the Company's current and
accumulated earnings and profits.

For any year in which the Company qualifies 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. Shareholder
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. Shareholder as if such
gain were effectively connected with a U.S. business without regard to whether
the Company designates such distribution as capital gain dividends. Non-U.S.
Shareholders thus would be taxed at the normal capital gain rates applicable
to U.S. Shareholders (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. The Company is 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.
Shareholder's FIRPTA tax liability.

Taxation of Shareholders on the Disposition of Common Stock

Gain recognized by a Non-U.S. Shareholder upon a sale of his Common Stock
generally will not be taxed under FIRPTA if the Company is 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. The Company believes that it is currently,
and expects to continue to be, a "domestically controlled REIT" and,
therefore, the sale of Common Stock will not be subject to taxation under
FIRPTA. However, no

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assurance can be given that the Company will continue to be a "domestically
controlled REIT." Furthermore, gain not subject to taxation under FIRPTA will
be taxable to a Non-U.S. Shareholder if (i) investment in Common Stock is
effectively connected with the Non-U.S. Shareholder's U.S. trade or business,
in which case the Non-U.S. Shareholder will be subject to the same treatment
as U.S. Shareholders with respect to such gain, or (ii) the Non-U.S.
Shareholder 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 the Company were not a "domestically
controlled REIT, " gain recognized upon the sale of Common Stock by a Non-U.S.
Shareholder 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.
Shareholder held 5% or less of the Common Stock of the Company at all times
within a specified testing period. If the gain on the sale of Common Stock
were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder would be
subject to the same treatment as U.S. Shareholders 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

The Company will report to its Non-U.S. Shareholders 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. Shareholder
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 the Company nor its 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. Shareholders. Those
regulations alter the current system of backup withholding compliance and are
effective for distributions made after December 31, 1999. 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 the Company and an investment in the Company
may be modified by legislative, judicial or administrative action at any time,
and that any such action may affect the Company 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 the Company or of an investment in
the Company.

Other Tax Consequences

The Company, the Corporate Subsidiaries, or the shareholders of the Company
may be subject to state or local taxation in various state or local
jurisdictions, including those in which it or they own property, transact

78
<PAGE>

business, or reside. The state and local tax treatment of the Company and its
shareholders may not conform to the federal income tax consequences discussed
above. CONSEQUENTLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE EFFECT OF STATE AND LOCAL TAX LAWS ON AN INVESTMENT IN
THE COMPANY.

79
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom BT Alex. Brown Incorporated, Salomon
Smith Barney Inc., NationsBanc Montgomery Securities LLC and Raymond James &
Associates, Inc. are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite its name below:

<TABLE>
<CAPTION>
Number of
Shares of
Common
Stock
----------
<S> <C>
Underwriter
-----------
BT Alex. Brown Incorporated.......................................
Salomon Smith Barney Inc. ........................................
NationsBanc Montgomery Securities LLC.............................
Raymond James & Associates, Inc. .................................
----------
Total........................................................... 16,000,000
==========
</TABLE>

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.

The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and sale
of 4,000,000 shares of Common Stock in an International Offering outside the
United States and Canada. The offering price and aggregate underwriting
discounts and commissions per share for the two offerings are identical. The
closing of the Offering made hereby is a condition to the closing of the
International Offering, and vice versa. The representatives of the
International Underwriters are BT Alex. Brown International, Salomon Smith
Barney International, NationsBanc Montgomery Securities LLC, Raymond James &
Associates, Inc. and Deutsche Bank AG London.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States"), in Canada and to U.S.
persons, which term shall mean, for purposes of this paragraph: (a) any
individual who is a resident of the United States or (b) any corporation,
partnership or other entity organized in or under the laws of the United
States or any political subdivision thereof and whose office most directly
involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that,
as a part of the distribution of the shares offered as a part of the
international offering, and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in
the United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to
any U.S. persons, and (ii) cause any dealer to whom it may sell such shares at
any concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.

80
<PAGE>

The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
2,400,000 additional shares of Common Stock solely to cover over-allotments,
if any. If the U.S. Underwriters exercise their over-allotment option, the
U.S. Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
16,000,000 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
600,000 additional shares of Common Stock.

The Company and its directors and executive officers have agreed that during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing, or on
the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus) which are substantially similar
to the shares of the Common Stock or which are convertible into or
exchangeable for securities which are substantially similar to the shares of
the Common Stock without the prior written consent of the representatives,
except for the shares of Common Stock offered in connection with the
concurrent U.S. and International Offerings.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Common Stock offered by them.

At the request of the Company, the Underwriters have reserved up to
1,000,000 shares of Common Stock offered hereby for sale at the initial public
offering price to certain employees of the Company. The number of shares
available for sale to the general public will be reduced to the extent that
such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the
same basis as the other shares of Common Stock offered hereby.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock
than they are required to purchase from the Company in the Offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
securities sold in the Offering for their account may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the over-the-counter market or otherwise.

Prior to the Offering, there has been no public market for the Shares. The
initial public offering price will be negotiated among the Company and the
U.S. Representatives. Among the factors to be considered in determining the
initial public offering price of the Common Stock in addition to prevailing
market conditions will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.

The Common Stock will be quoted on the Nasdaq National Market under the
symbol "BIGT".

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

Certain of the Underwriters have performed various investment banking
services for the Company in the past and may do so from time to time in the
future.

81
<PAGE>

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of Common Stock, including shares sold initially in the
International Offering, to persons located in the United States.

Because of relationships between certain existing stockholders of the
Company and members of the NASD, the Company is subject to the "Venture
Capital Restrictions" of the National Association of Securities Dealers, Inc.
(the "NASD"). In accordance with the Venture Capital Restrictions, the public
offering price of the shares offered hereby can be no higher than that
recommended by a "qualified independent underwriter" (within the meaning of
NASD Rule 2720(b)(15)) meeting certain standards and who must also perform
certain other functions in connection with the offering. BT Alex. Brown
Incorporated has assumed the responsibilities of acting as a "qualified
independent underwriter" in pricing the offering and conducting due diligence
with respect thereto, and the public offering price of the Common Stock is not
higher than that recommended by BT Alex. Brown Incorporated.

NationsBank, N.A. ("NationsBank") is a lender under the Senior Credit
Facility. NationsBank is an affiliate of NationsBanc Montgomery Securities
LLC. A portion of the outstanding indebtedness under the Senior Credit
Facility will be repaid with a portion of the net proceeds of the Offering.
See "Use of Proceeds".

82
<PAGE>

VALIDITY OF COMMON STOCK

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Holland & Knight LLP, Tampa, Florida, and
passed upon for the Underwriters by Sullivan & Cromwell, New York, New York.

EXPERTS

The financial statements for Pinnacle Holdings Inc. as of December 31, 1998,
1997 and 1996 and for the years then ended Shore Communications as of December
3, 1997 and for the period from January 1, 1997 through December 3, 1997,
Tidewater Communications as of July 31, 1997 and for the period from January
1, 1997 through July 31, 1997 and Majestic Communications as of June 27, 1997
and for the period from January 1, 1997 through June 27, 1997 included in this
Prospectus, have been so included in reliance on the reports of
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 and Registration Statement 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.

83
<PAGE>

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files, or will file when appropriate,
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549 at prescribed rates. In addition, the
Commission maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, including the Company.

The Company has filed with the Commission a registration statement on Form
S-11 (the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. For the purposes hereof, the term
"Registration Statement" means the original registration statement and any and
all amendments thereto. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is hereby made to such Registration Statement,
including the exhibits and schedules filed as part thereof. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits filed as a
part thereof, may be inspected and copied at the public reference facilities
maintained by the Commission as set forth above.

84
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PINNACLE HOLDINGS INC.
Report of Independent Certified Public Accountants........................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. F-3
Consolidated Statements of Operations for each of the three years ended
December 31, 1996, 1997 and 1998......................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for each of the
three years ended December 31, 1996, 1997 and 1998....................... F-5
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1996, 1997 and 1998......................................... F-6
Notes to Consolidated Financial Statements................................ F-7
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES TOWER OPERATIONS
Report of Independent Auditors............................................ F-20
Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997 and
1996 .................................................................... F-21
Statements of Income for the six months ended June 30, 1998 and 1997 (un-
audited) and for each of the two years ended December 31, 1997 and 1996
......................................................................... F-22
Statements of Changes in Net Tower Operation Assets as of December 31,
1996 and 1997 and June 30, 1998 (unaudited).............................. F-23
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-24
Notes to Financial Statements............................................. F-25
SOUTHERN COMMUNICATIONS SERVICES, INC. TOWER OPERATIONS
Report of Independent Public Accountants.................................. F-28
Balance Sheets as of December 31, 1997 and 1996........................... F-29
Statements of Operations for the years ended December 31, 1997 and 1996... F-30
Statements of Changes in Accumulated Deficit for the years ended December
31, 1997 and 1996........................................................ F-31
Statements of Cash Flows for the years ended December 31, 1997 and 1996... F-32
Notes to Financial Statements............................................. F-33
SHORE COMMUNICATIONS
Report of Independent Certified Public Accountants........................ F-36
Combined Balance Sheet as of December 3, 1997............................. F-37
Combined Statement of Operations and Retained Earnings for the period from
January 1, 1997 through December 3, 1997................................. F-38
Combined Statement of Cash Flows for the period from January 1, 1997
through December 3, 1997................................................. F-39
Notes to Combined Financial Statements.................................... F-40
TIDEWATER COMMUNICATIONS
Report of Independent Certified Public Accountants........................ F-45
Combined Balance Sheet as of July 31, 1997................................ F-46
Combined Statement of Operations and Retained Earnings for the period from
January 1, 1997 through July 31, 1997.................................... F-47
Combined Statement of Cash Flows for the period from January 1, 1997
through July 31, 1997.................................................... F-48
Notes to Combined Financial Statements.................................... F-49
MAJESTIC COMMUNICATIONS
Report of Independent Certified Public Accountants........................ F-54
Combined Balance Sheet as of June 27, 1997................................ F-55
Combined Statement of Operations and Retained Earnings for the period from
January 1, 1997 through June 27, 1997.................................... F-56
Combined Statement of Cash Flows for the period from January 1, 1997
through June 27, 1997.................................................... F-57
Notes to Combined Financial Statements.................................... F-58
</TABLE>

F-1
<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-2
<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-3
<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>
Tower rental revenue................ $ 4,841,752 $12,880,631 $ 32,018,651
Tower 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-4
<PAGE>

PINNACLE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Series B Junior Class A Class E
preferred stock common stock common 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-5
<PAGE>

PINNACLE HOLDINGS

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-6
<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
towers and leases space on its towers 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 over the term of
the lease or the remaining life of the leased property, whichever is shorter.
Betterments, renewals and

F-7
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

Tower Rental Revenue Recognition

Tower 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.

F-8
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 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 towers 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 tower assets and fixtures
for a purchase price of $3,000,000 which was paid in cash. In July 1996, the
Company purchased the tower 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 tower 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 towers 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 towers 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 towers 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

F-9
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

revenues as the Company grows. The Company 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 towers for an aggregate
purchase price of approximately $170 million. 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 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 towers 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>
Tower 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>

F-10
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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>

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>

F-11
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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

F-12
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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>

F-13
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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
tower 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-14
<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 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 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.

F- 15
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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
of shares
remaining unvested
------------------
<S> <C>
Anniversary of
the closing date
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:

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.

F-16
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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>

F-17
<PAGE>

PINNACLE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 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

F-18
<PAGE>

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 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 towers, reflecting an
aggregate commitment to pay approximately $60.2 million.

F-19
<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-20
<PAGE>

MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
June 30, -----------------------
1998 1997 1996
----------- ----------- ----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable (net of allowance
for doubtful accounts of $80,000,
$57,000 and $18,000 at June 30, 1998,
December 31, 1997 and 1996, respective-
ly).................................... $ 283,294 $ 196,307 $ 179,960
Prepaid site lease rentals.............. 46,248 49,710 46,934
----------- ----------- ----------
Total current assets................. 329,542 246,017 226,894
Property and equipment:
Land.................................... 2,401,987 2,401,987 2,401,987
Tower assets and other equipment........ 4,910,330 4,891,859 4,670,431
Less accumulated depreciation........... (1,544,396) (1,279,937) (758,456)
----------- ----------- ----------
Net property and equipment............... 5,767,921 6,013,909 6,313,962
----------- ----------- ----------
Total assets......................... $ 6,097,463 $ 6,259,926 $6,540,856
=========== =========== ==========
Liabilities and net tower operation
assets
Liabilities:
Accounts payable........................ $ 214,316 $ 520,318 $ 282,045
Unearned revenue........................ 172,829 165,241 29,411
----------- ----------- ----------
387,145 685,559 311,456
Commitments and contingencies
Net tower operation assets............... 5,710,318 5,574,367 6,229,400
----------- ----------- ----------
Total liabilities and net tower oper-
ation assets........................ $ 6,097,463 $ 6,259,926 $6,540,856
=========== =========== ==========
</TABLE>

See accompanying notes.

F-21
<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-22
<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-23
<PAGE>

MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Six months ended
----------------------
Year ended December 31,
June 30, June 30, -------------------------
1998 1997 1997 1996
----------- ---------- ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net income................. $ 201,224 $ 171,294 $ 255,862 $ 578,017
Adjustments to reconcile
net income to net cash
provided by operating ac-
tivities:
Depreciation............. 264,459 257,576 521,481 489,271
Change in operating as-
sets and liabilities:
Accounts receivable.... (86,987) (6,186) (16,347) (50,889)
Prepaid expenses....... 3,462 (2,777) (2,776) --
Accounts payable....... (306,002) 131,694 238,273 248,015
Unearned revenue....... 7,588 89,654 135,830 (27,082)
--------- --------- ----------- ------------
Net cash provided by oper-
ating activities.......... 83,744 641,255 1,132,323 1,237,332
Investing activities
Tower acquisitions and cap-
ital expenditures......... (18,471) (216,973) (221,428) (2,929,838)
--------- --------- ----------- ------------
Net cash used in investing
activities................ (18,471) (216,973) (221,428) (2,929,838)
Financing activities
Net activity with Parent... (65,273) (424,282) (910,895) 1,692,506
--------- --------- ----------- ------------
Net cash (used in) provided
by financing activities... (65,273) (424,282) (910,895) 1,692,506
--------- --------- ----------- ------------
Net increase in cash....... -- -- -- --
Cash at beginning of peri-
od........................ -- -- -- --
--------- --------- ----------- ------------
Cash at end of period...... $ -- $ -- $ -- $ --
========= ========= =========== ============
</TABLE>

See accompanying notes.

F-24
<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-25
<PAGE>

MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)

NOTES TO FINANCIAL STATEMENTS--(continued)
1. Summary of Significant Accounting Policies (continued)

Revenue Recognition

The Tower Operations earns revenues by leasing space on its towers to
customers in the broadcast and communication industries or to customers that
have internal communication systems. Lease revenues are recognized on a
periodic basis over the non-cancelable lease term. The effect of escalation
clauses within such leases is not material. No revenue is recognized in the
accompanying financial statements related to the Parent's usage of space on
the Tower Operations towers.

Allocation of Expenses

Certain administrative expenses were allocated from the Parent based on the
ratio of revenue generated from the Tower Operations to the Parent's revenues
from services, rents and maintenance. Additionally, certain operational
expenses were allocated from the Parent based on the estimated percentage of
such costs which are deemed to be applicable to the Tower Operations.
Management believes that these are the most appropriate methodologies for
allocating such expenses.

Income Taxes

The Tower Operations is not in itself a taxable entity and no provision or
benefit for United States federal or state income taxes has been recorded.

Unaudited Interim Financial Statements

The interim financial information as of June 30, 1998 and the six months
ended June 30, 1998 and 1997 contained herein is unaudited but, in the opinion
of management, includes all adjustments of a normal recurring nature which are
necessary for a fair presentation of the financial position, results of
operations, and cash flows for the periods presented. Results of operations
for the periods presented herein are not necessarily indicative of results of
operations for the entire year.

2. Commitments and Contingencies

The Tower Operations' property and equipment are part of the collateral for
MobileMedia's secured debt. MobileMedia is seeking the consent of the secured
debt holders and the Bankruptcy Court for the sale of certain assets of the
Tower Operations to Pinnacle free and clear of the liens (see Note 4).
Management believes it will receive such consents from the secured debt
holders and the Bankruptcy Court.

The land on which certain towers are constructed is leased pursuant to
operating leases. Rental expenses under operating leases were approximately
$277,000, $298,000, $597,000 and $563,000 for the six months ended June 30,
1998 (unaudited) and 1997 (unaudited) and the years ended December 31, 1997
and 1996, respectively. The effect of escalation clauses within such leases is
not material. At December 31, 1997, the aggregate minimum rental commitments
under leases were as follows:

<TABLE>
<S> <C>
1998........................................................... $ 570,916
1999........................................................... 454,913
2000........................................................... 330,408
2001........................................................... 203,091
2002........................................................... 177,582
Thereafter..................................................... 639,760
----------
$2,376,670
==========
</TABLE>

F-26
<PAGE>

MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
TOWER OPERATIONS
(A Carve-Out Entity of MobileMedia Communications, Inc. and Subsidiaries)

NOTES TO FINANCIAL STATEMENTS--(continued)
2. Commitments and Contingencies (continued)

One ground lease, which extends until October 2003, stipulates that the
tower on the land becomes the property of the city in which it is located upon
expiration of the lease.

One tower asset represents an exclusive lease agreement for use of the tower
by the Tower Operations. Additionally, the Company believes that it has title
to all Tower Operations land; however, for one such parcel, the Tower
Operations may only have an easement to use the property.

3. Impact of Year 2000 (Unaudited)

The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Parent's
computer programs that have time-sensitive software may recognize a date using
"00" as the Year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

While the Parent is aware that certain of its software requires
modification, it is in the process of determining the full extent that it will
be required to modify or replace significant portions of its software so that
its computer systems function properly with respect to dates in the Year 2000
and thereafter. If such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material impact on the
operations of the Parent and the Tower Operations.

4. Subsequent Event--Sale and Leaseback of Tower Assets

On July 7, 1998, MobileMedia and the Parent entered into an agreement to
sell 163 towers and 49 parcels of land related to the Tower Operations to
Pinnacle Towers Inc. for $170,000,000. The transaction also includes the
assignment of leases and related lease payments for 89 land leases related to
towers included in the sale. It is anticipated that such transaction will
close on August 25, 1998, subject to the approval of the Bankruptcy Court.

In connection with the transaction, MobileMedia and the Parent will enter
into a lease agreement with Pinnacle in which the Parent will lease space on
towers for 683 transmitters for a period of fifteen years at a cost of $1,300
per month per transmitter.

F-27
<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.

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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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 antennae and related equipment.

F-35
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Shore
Communications ("Shore") at December 3, 1997, and the results of its
operations and their cash flows for the eleven month period from January 1,
1997 through December 3, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Shore's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit 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 audit provides a
reasonable basis for the opinion expressed above.

/s/PricewaterhouseCoopers LLP
Price Waterhouse LLP
Tampa, Florida
February 9, 1998

F-36
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
December 3, 1997
----------------
<S> <C>
Assets
Current assets:
Accounts receivable......................................... $ 3,548
Due from affiliate.......................................... 58,107
Prepaid expenses............................................ 16,447
Stockholder receivable...................................... 91,745
Deferred tax asset.......................................... 22,007
Other current assets........................................ 6,948
----------
Total current assets...................................... 198,802
Fixed assets, net............................................. 9,638
Tower assets, net of accumulated depreciation of $229,580..... 2,254,591
Deferred loan costs, net of accumulated amortization of
$26,777...................................................... 48,599
----------
$2,511,630
==========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and other current liabilities.............. $ 62,251
Deferred revenue............................................ 60,391
Stockholder payable......................................... 328,494
Short-term debt............................................. 2,000,084
----------
Total current liabilities................................. 2,451,220
Customer deposits............................................. 2,600
----------
2,453,820
----------
Commitments and Contingencies (Note 6)
Stockholder's equity:
Common stock, $1 par value; 10,000 shares authorized; 100
shares issued and outstanding.............................. 100
Common stock, no par value; 5,000 shares authorized; 100
shares issued and outstanding.............................. --
Additional paid in capital.................................. 66,900
Retained earnings........................................... (9,190)
----------
57,810
----------
$2,511,630
==========
</TABLE>

The accompanying Notes to Combined Financial Statements
are an integral part of these combined financial statements.

F-37
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
Period from January 1,
through December 3, 1997
------------------------
<S> <C>
Revenue.............................................. $667,263
Tower operating expenses, excluding depreciation and
amortization........................................ 145,938
--------
Gross margin..................................... 521,325
--------
Expenses:
General and administrative expenses................ 235,108
Depreciation and amortization...................... 96,554
--------
331,662
--------
Income from operations............................... 189,663
Interest expense..................................... 197,909
--------
Loss from operations................................. (8,246)
Income tax benefit................................... 22,007
--------
Net income........................................... $ 13,761
========
Pro-forma income tax benefit......................... $ 2,849
--------
Pro-forma net loss................................... $ (5,397)
========
Retained earnings at December 31, 1996............... $(22,951)
Net income........................................... 13,761
--------
Retained earnings at December 3, 1997................ $ (9,190)
========
</TABLE>

The accompanying Notes to Combined Financial Statements
are an integral part of these combined financial statements.

F-38
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc., West Shore Communications,
Inc., and 28 Walker Associates, LLC)

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Period from January 1,
through December 3, 1997
------------------------
<S> <C>
Cash flows from operating activities:
Net income.......................................... $ 13,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 96,554
Deferred tax asset................................. (22,007)
(Increase) decrease in:
Accounts receivable............................... (3,548)
Due from affiliate................................ (58,107)
Prepaid expenses.................................. (11,261)
Stockholder receivable............................ 146,567
Other current assets.............................. 40,722
Increase (decrease) in:
Accounts payable and other current liabilities.... 52,011
Deferred revenue.................................. 42,874
Stockholder payable............................... 181,800
---------
Total adjustments............................... 465,605
---------
Net cash provided by operating activities............. 479,366
---------
Cash flows from investing activities:
Capital expenditures:
Tower assets...................................... (571,259)
Fixed assets...................................... (3,023)
---------
Net cash used in investing activities................. (574,282)
Cash flows from financing activities:
Borrowings under term note.......................... 339,379
Repayment of short-term debt........................ (403,662)
---------
Net cash used in financing activities................. (64,283)
Net decrease in cash.................................. (159,199)
---------
Cash at December 31, 1996............................. 159,199
---------
Cash at December 3, 1997.............................. $ --
=========
Supplemental Disclosure of Cash Flows
Cash paid for interest................................ $ 199,547
=========
</TABLE>

The accompanying Notes to Combined Financial Statements are an integral part of
these combined financial statements.

F-39
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Nature of Business

On December 3, 1997, Pinnacle Towers Inc. acquired all of the outstanding
stock of Shore Communications, Inc. ("Shore Communications", a C Corporation)
and West Shore Communications, Inc. ("West Shore", a C Corporation) and
certain of the assets and business operations of 28 Walker Associates, LLC (
"Walker", a limited liability company). Shore Communications and West Shore
were wholly-owned by an individual. Walker is owned by two individuals.
Collectively, the acquired corporations, assets and related operations are
referred to hereafter as Shore Communications ("Shore"). Shore owns
telecommunication towers and leases space on these towers to customers in the
wireless communications industries in Maryland and Virginia.

Basis of Presentation

The combined financial statements of Shore have been derived from the
accounting records of Shore Communications, West Shore and Walker. Additional
allocations were made to reflect Shore's share of general and administrative
expenses on a carve-out basis as described in Note 2.

2. Summary of Significant Accounting Policies

Use of Estimates

Due from Affiliate

Tower revenues related to Walker are collected by an affiliate on behalf of
Walker. Similarly, all direct tower operating expenses and general and
administrative expenses are paid by an affiliate on behalf of Walker.
Accordingly, a receivable from and payable to affiliates are recorded (see
Note 8).

Tower Assets

Tower assets consist of towers, buildings, and related attachments which are
recorded at cost and depreciated using the straight-line method over the
estimated useful lives of the assets, which range from 6 to 31.5 years.
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 life of the assets, which range from 5 to 7
years. Improvements, renewals and extraordinary repairs which increase the
value or extend the life of the assets are capitalized. Repairs and
maintenance costs are expensed as incurred.

F-40
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Impairment of Long-lived Assets

Shore 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 3, 1997, management does
not believe that an impairment reserve is required.

Fair Value of Financial Instruments

The carrying amount of Shore's financial instruments at December 3, 1997,
which consists of accounts receivable, due from affilliate and short-term
debt, approximates fair value due to the short maturity of those instruments.

Revenue Recognition

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.

Allocation of Expenses

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 is reasonable.

Income Taxes

Shore accounts for income taxes using the liability method as required by
Statement No. 109, Accounting for Income Taxes, issued by the Financial
Accounting Standards Board.

Deferred income taxes are provided for temporary differences between the
basis of assets and liabilities for financial reporting and income tax
reporting.

As described in Note 1, Shore consisted of two C Corporations and a portion
of a limited liability company. As such, the combined accounts reflect an
income tax benefit for only the operations of the C Corporations at December
3, 1997. The Combined Statement of Operations and Retained Earnings also
reflects an income tax benefit for the operations of Shore at December 3, 1997
on a pro-forma basis as if Shore were treated as a C Corporation.

3. Fixed Assets

Fixed assets consist of the following:
<TABLE>
<CAPTION>
Estimated
useful lives December 3,
in years 1997
------------ -----------
<S> <C> <C>
Furniture, fixtures................................. 5, 7 $ 11,691
Automobile.......................................... 5 13,784
--------
25,475
Accumulated depreciation............................ (15,837)
--------
Fixed assets, net................................... $ 9,638
========
</TABLE>

F-41
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

4. Short-term Debt

Shore maintained line of credit facilities with a bank under guidance line
notes which provided for secured borrowings up to $1,900,000. Amounts borrowed
under these lines of credit have been converted to term notes which bore
interest from 9.75% to 10.5% through December 3, 1997. At December 3, 1997,
$400,223 was available under the line of credit facilities. Shore paid $2,637
in unused commitment fees as of December 3, 1997. Shore also had a term note
which bore a variable interest rate (10.25% at December 3, 1997) which
$500,277 was outstanding at December 3, 1997. The term notes provided
borrowings for construction of tower sites and were secured by all of the
business assets of Shore Communications and the towers owned by Shore
Communications and West Shore. The term notes originally matured through
December 10, 2002. However, the outstanding balance was repaid subsequent to
December 3, 1997 as part of the purchase agreement with Pinnacle Towers, Inc.
(Note 10).

5. Income Taxes

Significant components of the income tax benefit on a historical and pro-
forma basis were as follows:

<TABLE>
<CAPTION>
Pro-forma
December 3, 1997 December 3, 1997
---------------- ----------------
<S> <C> <C>
Current:
Federal.................................. $17,867 $2,313
State.................................... 4,140 536
------- ------
Income tax benefits........................ $22,007 $2,849
======= ======
</TABLE>

Significant components of the deferred tax asset on a historical and pro-
forma basis were as follows:

<TABLE>
<CAPTION>
Pro-forma
December 3, 1997 December 3, 1997
---------------- ----------------
<S> <C> <C>
Deferred tax asset:
Net operating loss....................... $22,007 $2,849
------- ------
$22,007 $2,849
======= ======
</TABLE>

The effective tax rate approximates the statutory federal and state rates on
a historical and pro-forma basis as no permanent differences exist for either
the C Corporations or Shore.

At December 3, 1997, Shore had cummulative federal tax net operating loss
("NOL") carryforward of approximately $8,246 which the Company was unable to
use due to its operating loss. This NOL carryforward expires in the year
ending December 3, 2013. Shore believes that it is more likely than not that
the NOL carryforward will be utilized prior to its expiration by continuing to
achieve future profitable operations. Shore does not believe that the change
in ownership (Note 10) will impact such operations. Because of the extremely
long period that is available to realize these future tax benefits, a
valuation allowance for the deferred tax asset is not necessary.

F-42
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

6. Commitments and Contingencies

Operating Leases

Shore is obligated under noncancelable leases for ground leases which expire
at various times through 2009. The majority of these leases have renewal
options which range up to 15 years. The future minimum lease commitments under
these leases are as follows:

<TABLE>
<S> <C>
Period from December 4, 1997 through December 31, 1997........... $ 4,583
Year ended December 31,
1998........................................................... 55,554
1999........................................................... 47,864
2000........................................................... 34,521
2001........................................................... 22,806
2002........................................................... 14,419
2003 and thereafter............................................ 131,531
----------
$ 311,278
==========
</TABLE>

Rental expense under noncancelable ground leases for the period ended
December 3, 1997 was $52,299.

7. Tenant Leases

The following is a schedule by year of total future rentals to be received
for tower space under noncancelable lease agreements as of December 3, 1997:

<TABLE>
<S> <C>
Period December 4, 1997 through December 31, 1997................ $ 87,124
Year ended December 31,
1998........................................................... 732,032
1999........................................................... 685,567
2000........................................................... 594,445
2001........................................................... 419,552
2002........................................................... 139,683
2003 and thereafter............................................ 13,200
----------
$2,671,603
==========
</TABLE>

8. Related Party Transactions

Shore paid certain expenses related to development of a microwave
communications system on behalf of a company wholly owned by the sole
stockholder of Shore Communications and West Shore. Expenditures related to
the development of the microwave communications system were to be reimbursed
to Shore upon completion of the project. However, as Shore entered into a
purchase agreement with Pinnacle Towers Inc. (Note 10), the project was
terminated and the entire receivable from the related party of $91,461 was
expensed as of December 3, 1997 and is included in general and administrative
expenses.

Prior to the acquisition by Pinnacle Towers Inc., the carve-out entity of
Walker included transactions with the surviving Walker ("affiliate"). These
transactions are disclosed as related party transactions in these financial
statements.

F-43
<PAGE>

SHORE COMMUNICATIONS

(A carve-out entity of Shore Communications, Inc.,
West Shore Communications, Inc., and 28 Walker Associates, LLC)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

The affiliate received rent payments related to Walker's lease agreements.
At December 3, 1997, due from affiliate of $72,818 reflected these receipts.

The affiliate paid tower operating expense related to Walker. For the period
January 1, 1997 through December 3, 1997, Walker incurred tower operating
expense of $6,701.

For the period January 1, 1997 through December 3, 1997, general and
administrative expenses of $8,010 were allocated to Walker from the affiliate.

9. Employee Benefit Plans

Shore Communications has defined contribution plans covering employees with
two years of service and are of the age of 21. Contributions under these plans
are based primarily on the performance of Shore Communications and employee
compensation. Total expense amounted to $7,130 for the period from January 1,
1997 through December 3, 1997.

10. Subsequent Events

On December 3, 1997, Shore sold all of the outstanding stock of Shore
Communications and West Shore and certain of the assets of Walker to Pinnacle
Towers Inc. In accordance with the purchase agreement, Shore received
approximately $8,973,300 for the outstanding stock, a tower and related
assets. Also under the agreement, rent revenue reverted to Pinnacle Towers
Inc. as of December 4, 1997. Deferred revenue as of December 3, 1997 reflects
rent received by Shore to be remitted to Pinnacle Towers Inc. Of the total
purchase price, $2,000,084 was used by Pinnacle Towers Inc. to repay the
outstanding bank notes subsequent to December 3, 1997 in accordance with the
purchase agreement.

F-44
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Tidewater
Communications ("Tidewater") at July 31, 1997, and the results of their
operations and their cash flows for the seven month period January 1, 1997
through July 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Tidewater's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit 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 audit provides a reasonable basis
for the opinion expressed above.

Tidewater is a member of a group of affiliated companies and, as disclosed
in the financial statements, has extensive transactions and relationships with
members of the group. Because of these relationships, it is possible that the
terms of these transactions are not the same as those that would result from
transactions among wholly unrelated parties.

/s/PricewaterhouseCoopers LLP
Price Waterhouse LLP
Tampa, Florida
February 9, 1998

F-45
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc., and Dare County Properties)

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
July 31, 1997
-------------
<S> <C>
Assets
Current assets:
Due from affiliate.............................................. $ 249,796
Accounts receivable............................................. 33,843
Prepaid expenses................................................ 1,043
----------
Total current assets.......................................... 284,682
Tower assets, net of accumulated depreciation of $326,373......... 553,450
Land.............................................................. 380,009
----------
$1,218,141
==========
Liabilities and Retained Earnings
Current liabilities:
Accounts payable and other current liabilities.................. $ 10,596
Deferred revenue................................................ 10,505
Short-term debt................................................. 264,982
----------
Total current liabilities..................................... 286,083
Commitments and Contingencies (Note 5)
Retained earnings................................................. 932,058
----------
$1,218,141
==========
</TABLE>

The accompanying Notes to Combined Financial Statements
are an integral part of these combined financial statements.

F-46
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc.,
and Dare County Properties)

COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
Period from January 1,
through July 31, 1997
----------------------
<S> <C>
Revenue.................................................. $368,011
Tower operating expenses, excluding depreciation....... 56,961
--------
Gross margin......................................... 311,050
--------
Other expenses:
General and administrative expenses.................... 29,609
Depreciation........................................... 26,009
--------
55,618
--------
Income from operations................................... 255,432
Interest expense......................................... 14,055
--------
Net income............................................... $241,377
========
Pro-forma income tax expense............................. $ 91,785
--------
Pro-forma net income..................................... $149,592
========
Retained earnings at December 31, 1996................... $690,681
Net income............................................... 241,377
--------
Retained earnings at July 31, 1997....................... $932,058
========
</TABLE>

The accompanying Notes to Combined Financial Statements
are an integral part of these combined financial statements.

F-47
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc., and Dare County Properties)

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Period from January 1,
through July 31, 1997
----------------------
<S> <C>
Cash flows from operating activities:
Net income............................................ $ 241,377
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation......................................... 26,009
(Increase) decrease in:
Due from affiliates................................. (249,796)
Accounts receivable................................. (11,529)
Prepaid expenses.................................... 2,353
Increase (decrease) in:
Accounts payable and other current liabilities...... 661
Deferred revenue.................................... (9,075)
---------
Total adjustments................................. (241,377)
---------
Net cash provided by operating activities............... --
---------
Cash flows from investing activities:
Capital expenditures.................................. (46,189)
---------
Net cash used in investing activities................... (46,189)
Cash flows from financing activities:
Repayment of short-term debt.......................... (28,811)
Borrowing under promissory notes...................... 75,000
---------
Net cash provided by financing activities............... 46,189
---------
Net increase in cash.................................... --
---------
Cash at December 31, 1996............................... --
---------
Cash at July 31, 1997................................... $ --
---------
Supplemental Disclosure of Cash Flows
Cash paid for interest.................................. $ 12,863
=========
</TABLE>

The accompanying Notes to Combined Financial Statements are an integral part of
these combined financial statements.

F-48
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc., and Dare County Properties)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Nature of Business

On July 31, 1997, Pinnacle Towers Inc. acquired certain of the assets and
business operations of Antenna Rentals Corporation, Inc. (an S Corporation),
John Harris & Associates, Inc. (a partnership), and Dare County Properties (a
partnership). John W. Harris is the majority shareholder of Antenna Rentals
Corporation, Inc. and the general partner of John Harris & Associates, Inc.
and Dare County Properties. Collectively, the acquired assets and related
operations are referred to hereafter as Tidewater Communications
("Tidewater"). Tidewater owns telecommunication towers and leases space on
these towers to customers in the wireless communications industries in
Virginia and North Carolina.

Basis of Presentation

The combined financial statements of Tidewater have been derived from the
accounting records of Antenna Rentals Corporation, Inc., John Harris &
Associates, Inc., and Dare County Properties. Additional allocations were made
to reflect Tidewater's share of general and administrative expenses on a
carve-out basis as described in Note 2.

2. Summary of Significant Accounting Policies

Use of Estimates

Due from Affiliate

All tower rent revenues are collected by affiliates on behalf of Tidewater.
Similarly, all direct tower operating expenses, general and administrative
expenses, and interest are paid by affiliates on behalf of Tidewater.
Accordingly, a receivable from and payable to affiliates are recorded (see
Note 7).

Tower Assets

Tower assets consist of towers, buildings, and related attachments which are
recorded at cost and depreciated using the straight-line method over the
estimated useful life of the assets, which range from 15 to 30 years.
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.

Impairment of Long-lived Assets

Tidewater 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 July 31, 1997, management does not
believe that an impairment reserve is required.

F-49
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc.,
and Dare County Properties)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Fair Value of Financial Instruments

The carrying amount of Tidewater's financial instruments at July 31, 1997,
which includes due from affiliate, accounts receivable and short-term debt,
approximates fair value due to the short maturity of those instruments.

Revenue Recognition

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.

Allocation of Expenses

Income Taxes

Tidewater consisted of certain assets of an S Corporation and two
partnerships. As such, net income was not subject to income taxes as the
income is taxed directly to their owners. Pro forma income taxes are presented
using the liability method as required by Statement No. 109, Accounting for
Income Taxes, issued by the Financial Accounting Standards Board. Deferred
income taxes are provided for temporary differences between the basis of
assets and liabilities for financial reporting and income tax reporting.

3. Short-term Debt

At July 31, 1997, $264,982 was outstanding under three bank loans, which
provided secured borrowings for the purchases of land and towers in North
Carolina. The loans were secured by mortgage deeds of trust on the land, the
tower assets and an assignment of rents and leases. The interest rates on all
the notes were prime plus 0.5%. The original maturity dates were July 30,
2001, October 9, 2001, and February 12, 2002. However, the outstanding balance
was repaid subsequent to July 31, 1997 as part of the purchase agreement with
Pinnacle Towers, Inc. (see Note 8).

4. Income Taxes

As described in Note 1, Tidewater consisted of certain assets of an S
Corporation and of two partnerships. As such, net income related to the S
Corporation and partnerships was not subject to income taxes as the income is
taxed directly to their owners. The Combined Statement of Operations and
Retained Earnings reflects a tax provision for the operations of Tidewater at
July 31, 1997 on a pro-forma basis as if Tidewater were treated as a C
Corporation.

F-50
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc.,
and Dare County Properties)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Significant components of the provision for income taxes on a pro-forma basis
were as follows:

<TABLE>
<CAPTION>
Pro-forma
July 31, 1997
-------------
<S> <C>
Current:
Federal..................................................... $ 85,918
State....................................................... 17,567
--------
Total current............................................. 103,485
Deferred:
Federal..................................................... (9,822)
State....................................................... (1,878)
--------
Total deferred............................................ (11,700)
--------
Provision for income taxes.................................... $ 91,785
========
</TABLE>

Significant components of the deferred tax liability on a pro-forma basis
were as follows:

<TABLE>
<CAPTION>
Pro-forma
July 31, 1997
-------------
<S> <C>
Deferred tax liability:
Tax over book depreciation................................... $68,607
=======

The effective tax rate approximates the statutory federal and state rates on
a pro-forma basis as no permanent differences exist for Tidewater.

5. Commitments and Contingencies

The Company is obligated under a noncancelable lease for land which expires
February 20, 2005. The lease has two five-year renewal options. The future
minimum lease commitments under these leases are as follows:

Period August 1, 1997 through December 31, 1997................ $ 2,750
Year ended December 31,
1998......................................................... 6,500
1999......................................................... 6,500
2000......................................................... 6,500
2001......................................................... 6,500
2002......................................................... 6,500
2003 and thereafter.......................................... 14,300
-------
$49,550
=======
</TABLE>

Rental expense for the seven month period ended July 31, 1997 was $3,792.

F-51
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc.,
and Dare County Properties)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

6. Tenant Leases

The following is a schedule by year of total future rentals to be received
for tower space under noncancelable lease agreements as of July 31, 1997.

<TABLE>
<S> <C>
Period August 1, 1997 through December 31, 1997.................. $ 202,501
Year ended December 31,
1998........................................................... 431,775
1999........................................................... 388,806
2000........................................................... 335,024
2001........................................................... 139,554
2002........................................................... 82,200
2003 and thereafter............................................ 151,550
----------
$1,731,410
==========
</TABLE>

7. Related Party Transactions

Prior to the acquisition by Pinnacle Towers Inc. as described in Note 1, the
carve out entity of Tidewater included transactions with the surviving Antenna
Rentals Corporation, Inc., John Harris and Associates, Inc. and Dare County
Properties ("affiliates"). These transactions are disclosed as related party
transactions in these financial statements.

Affiliates received rent payments related to Tidewater's lease agreements.
At July 31, 1997, due from affiliates of $347,407 reflected these receipts.

Affiliates paid tower operating and interest expense as well as short-term
debt related to Tidewater. For the period January 1, 1997 through July 31,
1997, Tidewater incurred tower operating and interest expense of $56,961 and
$14,055, respectively. Short-term debt of $28,811 was paid by affiliates for
this period.

For the period January 1, 1997 through July 31, 1997, general and
administrative expenses of $29,609 were allocated to Tidewater from
affiliates.

Bay Tower Corporation, a minority shareholder in one of the entities which
owned Tidewater, is a customer on one tower. Bay Tower performs monthly
routine maintenance on all of Tidewater's towers at a reduced price, in
exchange for free rent on the tower. Tidewater has recorded both revenue and
maintenance expense related to Bay Tower Corporation at their fair market
value. Tower revenue and maintenance expense amounted to $2,100 and $5,600,
respectively, for the period January 1, 1997 through July 31, 1997.
Additionally, Bay Tower has built all of Tidewater's towers. Other related
parties are customers on two towers. Accounts receivable of $2,120 is due from
these related parties at July 31, 1997 and $6,920 of rent revenue was earned
for the period January 1, 1997 through July 31, 1997. Management believes that
these transactions were under terms no different than those arranged with
other parties.

F-52
<PAGE>

TIDEWATER COMMUNICATIONS

(A carve-out entity of Antenna Rentals Corporation, John Harris & Associates,
Inc.,
and Dare County Properties)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

8. Subsequent Events

On July 31, 1997, Tidewater was sold to Pinnacle Towers Inc. In accordance
with the purchase agreement, the owners of Tidewater received approximately
$8,400,000 for thirteen towers, related assets and management contracts on two
additional towers. Deferred revenue as of July 31, 1997 reflects rent received
by Tidewater to be remitted to Pinnacle Towers Inc. Of the total purchase
price, $264,982 was used by Pinnacle Towers Inc. to repay outstanding bank
loans (see Note 3) subsequent to July 31, 1997 in accordance with the purchase
agreement.

Prior to the closing, Pinnacle Towers Inc. placed approximately $650,000 in
escrow due to conflicts with the terms under a land lease agreement related to
one of the management contracts. However, as the lease between Tidewater and
the lessor was amended to increase the initial lease period from 15 to 20
years, the consideration in escrow will be released in fulfillment of the
purchase agreement.

F-53
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.

In our opinion, the accompanying combined balance sheet and the related
combined statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Majestic
Communications ("Majestic") at June 27, 1997, and the results of their
operations and their cash flows for the six month period January 1, 1997
through June 27, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Majestic's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit 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 audit provides a reasonable basis
for the opinion expressed above.

/s/PricewaterhouseCoopers LLP
Price Waterhouse LLP
Tampa, Florida
February 9, 1998

F-54
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
June 27, 1997
-------------
<S> <C>
Assets
Current assets:
Due from affiliate.............................................. $133,348
Accounts receivable............................................. 5,290
Prepaid expenses................................................ 4,014
--------
Total current assets.......................................... 142,652
Tower assets, net of accumulated depreciation of $227,974......... 511,571
Land.............................................................. 277,562
--------
$931,785
========
Liabilities and Retained Earnings
Current liabilities:
Accounts payable and other current liabilities.................. $ 5,801
Taxes payable................................................... 10,339
Deferred revenue................................................ 18,831
Short-term debt................................................. 161,712
--------
Total current liabilities..................................... 196,683
Deferred tax liability............................................ 48,257
--------
244,940
Retained earnings................................................. 686,845
--------
$931,785
========
</TABLE>

The accompanying Notes to Combined Financial Statements
are an integral part of these combined financial statements.

F-55
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
Period from January 1,
through June 27, 1997
----------------------
<S> <C>
Revenue.................................................. $192,123
Tower operating expenses, excluding depreciation....... 19,425
--------
Gross margin......................................... 172,698
--------
Other expenses:
General and administrative expenses.................... 27,739
Depreciation........................................... 24,033
--------
51,772
--------
Income from operations................................... 120,926
Interest expense......................................... 6,036
--------
Income before taxes...................................... 114,890
Income tax expense....................................... 9,838
--------
Net income............................................... $105,052
========
Pro-forma income tax expense............................. $ 40,895
--------
Pro-forma net income..................................... $ 73,995
========
Retained earnings at December 31, 1996................... $581,793
Net income............................................... 105,052
--------
Retained earnings at June 27, 1997....................... $686,845
========
</TABLE>

The accompanying Notes to Combined Financial Statements are an integral part of
these combined financial statements.

F-56
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Period from January 1,
through June 27, 1997
----------------------
<S> <C>
Cash flows from operating activities:
Net income............................................ $105,052
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Depreciation......................................... 24,033
(Increase) decrease in:
Due from affiliates................................. (133,348)
Accounts receivable................................. (1,530)
Prepaid expenses.................................... (4,014)
Increase (decrease) in:
Accounts payable and other current liabilities...... 3,444
Taxes payable....................................... 10,339
Deferred revenue.................................... 9,351
Deferred tax liability.............................. (501)
--------
Total adjustments................................. (92,226)
--------
Net cash provided by operating activities............... 12,826
--------
Cash flows from financing activities:
Repayment of short-term debt.......................... (12,826)
--------
Net increase in cash.................................... --
--------
Cash at December 31, 1996............................... --
--------
Cash at June 27, 1997................................... $ --
--------
Supplemental Disclosure of Cash Flows
Cash paid for interest.................................. $ 6,036
========
</TABLE>

The accompanying Notes to Combined Financial Statements are an integral part of
these combined financial statements.

F-57
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Nature of Business

On June 27, 1997, Pinnacle Towers Inc. acquired certain of the assets and
business operations of Majestic Communications, Inc. (a C Corporation) and two
sole proprietors. Majestic Communications, Inc. is owned 75%/25% by these two
sole proprietors. Collectively, the acquired assets and related operations are
referred to hereafter as Majestic Communications ("Majestic"). Majestic owns
telecommunication towers and leases space on these towers to customers in
wireless communications industries in Tennessee and Mississippi.

Basis of Presentation

The combined financial statements of Majestic have been derived from the
accounting records of Majestic Communications, Inc. and the two sole
proprietors. Additional allocations were made to reflect Majestic's share of
general and administrative expenses on a carve-out basis as described in Note
2.

2. Summary of Significant Accounting Policies

Use of Estimates

Due from Affiliate

All tower rent revenues are collected by affiliates on behalf of Majestic.
Similarly, all direct tower operating expenses, general and administrative
expenses, and interest are paid by affiliates on behalf of Majestic.
Accordingly, a receivable from and payable to affiliates are recorded (see
Note 6).

Tower Assets

Impairment of Long-lived Assets

Majestic 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 June 27, 1997, management does not
believe that an impairment reserve is required.

Fair Value of Financial Instruments

The carrying amount of Majestic's financial instruments at June 27, 1997,
which includes due from affiliate, accounts receivable and short-term debt,
approximates fair value due to the short maturity of those instruments.

F-58
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

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.

Allocation of Expenses

Income Taxes

Majestic accounts for income taxes using the liability method as required by
Statement No. 109, Accounting for Income Taxes, issued by the Financial
Accounting Standards Board.

Deferred income taxes are provided for temporary differences between the
basis of assets and liabilities for financial reporting and income tax
reporting.

As described in Note 1, Majestic consisted of a C Corporation and of two
sole proprietorships. As such, the combined accounts reflect a tax provision
for only the operations of the C Corporation at June 27, 1997. The Combined
Statement of Operations and Retained Earnings also reflects a tax provision
for the operations of Majestic at June 27, 1997 on a pro-forma basis as if
Majestic were treated as a C Corporation.

3. Short-term Debt

At June 27, 1997, $161,712 was outstanding under a bank loan, which provided
secured borrowings for the purchases of land, a building and a tower in
Tennessee. The loan was secured by a mortgage deed of trust on the land, the
tower assets and an assignment of rents and leases. In addition, the loan as
guaranteed by Majestic Communications, Inc. The interest rate on this
borrowing was 7%. The original maturity date was August 1, 1999. However, the
outstanding balance was repaid subsequent to June 27, 1997 as part of the
purchase agreement with Pinnacle Towers Inc. (see Note 7).

4. Income Taxes

As described in Note 1, Majestic consisted certain assets of a C Corporation
and of two sole proprietorships. As such, the combined accounts reflect a tax
provision for only the operations of the C Corporation at June 27, 1997. The
Combined Statement of Operations and Retained Earnings also reflects a tax
provision for the operations of Majestic at June 27, 1997 on a pro-forma basis
as if Majestic were treated as a C Corporation.

F-59
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Significant components of the provision for income taxes on a historical and
pro-forma basis were as follows:

<TABLE>
<CAPTION>
Pro-forma
June 27, 1997 June 27, 1997
------------- -------------
<S> <C> <C>
Current:
Federal....................................... $ 7,449 $37,610
State......................................... 2,890 6,840
------- -------
Total current............................... 10,339 44,450
Deferred:
Federal....................................... (367) (3,034)
State......................................... (134) (521)
------- -------
Total Deferred.............................. (501) (3,555)
------- -------
Provision for income taxes...................... $ 9,838 $40,895
======= =======
</TABLE>

Significant components of the deferred tax liability on a historical and
pro-forma basis were as follows:

<TABLE>
<CAPTION>
Pro-forma
June 27, 1997 June 27, 1997
------------- -------------
<S> <C> <C>
Deferred tax liability:
Tax over book depreciation..................... $48,257 $24,756
======= =======
</TABLE>

The effective tax rate approximates the statutory federal and state rates on
a historical and pro-forma basis as no permanent differences exist for either
the C Corporation or Majestic.

Net income related to sole proprietors was not subject to income taxes as
the income is taxed directly to their owners. The reported amounts for fixed
assets related to these sole proprietors was approximately $169,400 less than
its tax basis.

5. Tenant Leases

The following is a schedule by year of total future rentals to be received
for tower space under noncancelable lease agreements as of June 27, 1997.

<TABLE>
<S> <C>
Period June 28, 1997
through December 31, 1997.......................................... $187,929
Year ended December 31,
1998.............................................................. 247,633
1999.............................................................. 185,029
2000.............................................................. 155,688
2001.............................................................. 84,493
2002.............................................................. 11,250
2003 and thereafter............................................... 25,860
--------
$897,882
========
</TABLE>

F-60
<PAGE>

MAJESTIC COMMUNICATIONS

(A carve-out entity of Majestic Communications, Inc.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

6. Related Party Transactions

Prior to the acquisition by Pinnacle Towers Inc. (as described in Note 1),
the carve out entity of Majestic included transactions with the surviving
Majestic Communications, Inc. ("affiliates"). These transactions are disclosed
as related party transactions in these financial statements.

Affiliates received rent payments related to Majestic's lease agreements. At
June 27, 1997, due from affiliates of $199,944 reflected these receipts.

Affiliates paid tower operating and interest expense as well as short-term
debt related to Majestic. For the period January 1, 1997 through June 27,
1997, Majestic incurred tower operating and interest expense of $19,425 and
$6,036, respectively. Short-term debt of $12,826 was paid by affiliates for
this period.

For the period January 1, 1997 through June 27, 1997, general and
administrative expenses of $27,739 were allocated to Majestic from affiliates.

7. Subsequent Events

On June 27, 1997, Majestic was sold to Pinnacle Towers Inc. In accordance
with the purchase agreement, the owners of Majestic received approximately
$4,758,500 for four towers and related assets. Also under the agreement, rent
revenue reverted to Pinnacle Towers Inc. as of July 1, 1997. Rent received by
Majestic related to the remaining days in June 1997 was adjusted as part of
the purchase price. Deferred revenue as of June 27, 1997 reflects rent
received by Majestic to be remitted to Pinnacle Towers Inc. Of the total
purchase price, $161,712 was used by Pinnacle Towers Inc. to repay the
outstanding bank loan subsequent to June 27, 1997 in accordance with the
purchase agreement.

F-61
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

No dealer, sales person or any other person has been authorized to give any
information or to make any representation in connection with this offering
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or any underwriter. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to the date hereof. The Prospectus does not constitute
an offer to sell, or solicitation of an offer to buy, any securities other
than the registered securities to which it relates, or an offer to sell to, or
solicitation of, any person in any circumstances in which such offer or
solicitation is unlawful.

-----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 19
Dilution................................................................. 20
Dividend Policy.......................................................... 21
Capitalization........................................................... 22
Unaudited Pro Forma Financial Data....................................... 23
Selected Historical Consolidated Financial Data.......................... 29
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 31
Business................................................................. 37
Management............................................................... 52
Principal Stockholders................................................... 58
Certain Relationships and Transactions................................... 59
Description of Certain Indebtedness...................................... 61
Description of Capital Stock ............................................ 63
Shares Eligible for Future Sale.......................................... 66
Certain Federal Income Tax Considerations ............................... 68
Underwriting............................................................. 80
Validity of Common Stock ................................................ 83
Experts.................................................................. 83
Additional Information................................................... 84
Index to Consolidated Financial Statements............................... F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

20,000,000 Shares

-----------------

[LOGO OF PINNACLE HOLDINGS INC. APPEARS HERE]

-----------------

Pinnacle Holdings Inc.

Common Stock

-----------------

Prospectus

-----------------

BTAlex.Brown

Salomon Smith Barney

NationsBanc Montgomery Securities LLC

Raymond James &

Associates, Inc.

, 1999

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion,

January 21, 1999

20,000,000 Shares
Pinnacle Holdings Inc.
Common Stock

----------

[LOGO OF PINNACLE
HOLDINGS INC.
APPEARS HERE]

The Common Stock offered hereby involves a high degree of risk.

See "Risk Factors" beginning on page 11.

----------

<TABLE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<CAPTION>
Underwriting
Price to Discount and Proceeds to
Public Commissions(1) Company(2)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
- -----------------------------------------------------------------------------
Total(3)............................... $ $ $
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(2) Before deducting estimated expenses of $1.5 million payable by the Company.

(3) The Company has granted the International Underwriters an option for 30
days to purchase up to an additional 600,000 shares at the initial public
offering price per share, less underwriting discount, solely to cover over-
allotments. Additionally, the Company has granted the U.S. Underwriters a
similar option with respect to an additional 2,400,000 shares as part of
the concurrent U.S. offering. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Company will be $ , $ and $ , respectively. See "Underwriting".

----------

The shares of Common Stock are offered by the several International
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by them, and subject to the right of the International Underwriters to reject
any order in whole or in part. It is expected that delivery of the shares of
Common Stock will be ready for delivery in Baltimore, Maryland on or about ,
1999, against payment therefor in immediately available funds.

BT Alex. Brown International

Salomon Smith Barney International

NationsBanc Montgomery Securities LLC

Raymond James & Associates, Inc.

Deutsche Bank

The date of this Prospectus is , 1999.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom BT Alex. Brown
International, Salomon Brothers International Limited, NationsBanc Montgomery
Securities LLC, Deutsche Bank AG London and Raymond James & Associates, Inc.
are acting as representatives, has severally agreed to purchase from the
Company, the respective number of shares of Common Stock set forth opposite
its name below:

<TABLE>
<CAPTION>
Number of
Shares of
Common
Underwriter Stock
----------- ---------
<S> <C>
BT Alex. Brown International.......................................
Salomon Brothers International Limited.............................
NationsBanc Montgomery Securities LLC..............................
Deutsche Bank AG London............................................
Raymond James & Associates, Inc. ..................................
---
Total..........................................................
===
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.

The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.

The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 16,000,000
shares of Common Stock in a U.S. Offering in the United States and Canada. The
offering price and aggregate underwriting discounts and commissions per share
of the two offerings are identical. The closing of the offering made hereby is
a condition to the closing of the U.S. Offering, and vice versa. The
representatives of the U.S. Underwriters are BT Alex. Brown Incorporated,
Salomon Smith Barney Inc., NationsBanc Montgomery Securities LLC and Raymond
James & Associates, Inc.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States"), in Canada and to U.S. persons which term shall mean,
for purposes of this paragraph: (a) any Individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof
and whose office most directly involved with the purchase is located in the
United States. Each of the International Underwriters named herein has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as a part of the International offering, and subject to certain
exceptions, it will (i) not, directly of indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b)
to any person who it believes intends to reoffer, resell or deliver the shares
in the United States or to any U.S. persons, and (ii) cause any dealer to whom
it may sell such shares at any concession to agree to observe a similar
restriction.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

The Company has granted the International Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate
of 600,000 additional shares of Common Stock solely to cover over-allotments,
if any. If the International Underwriters exercise their over-allotment
option, the International Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the 4,000,000 shares of Common Stock offered hereby.
The Company has granted the U.S. Underwriters a similar option to purchase up
to an aggregate of 2,400,000 additional shares of Common Stock.

The Company and its directors and executive officers have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date 180 days after the date of the Prospectus, they will
not offer, sell, contract to sell or otherwise dispose of any securities of
the Company (other than pursuant to employee stock option plans existing, or
on the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus) which are substantially similar
to the shares of the Common Stock or which are convertible into or
exchangeable for securities which are substantially similar to the shares of
the Common Stock without the prior written consent of the representatives,
except for the shares of Common Stock offered in connection with the
concurrent U.S. and International offerings.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (a) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares to the International Underwriters, will not offer or
sell any Shares in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing, or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (b) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares in, from, or otherwise
involving the United Kingdom; and (c) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the offering of the Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996, or to any person to whom such
document may lawfully be issued or passed on.

Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the initial public offering price.

penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities sold in the Offering for their
account may be reclaimed by the syndicate if such shares of Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock, which may be higher than the price that might otherwise prevail
in the open market; and these activities, if commenced, may be discontinued at
any time. These transactions may be effected in the over-the-counter market or
otherwise.

Prior to this offering, there has been no public market for the shares. The
initial public offering price was negotiated among the Company and the
representatives of the U.S. Underwriters and the international Underwriters.
Among the factors considered in determining the initial public offering price
of the Common Stock, in addition to prevailing market conditions, were the
Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.

The Common Stock will be quoted on the Nasdaq National Market under the
symbol "BIGT".

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

Because of relationships between certain existing stockholders of the Company
and members of the NASD, the Company is subject to the "Venture Capital
Restrictions" of the National Association of Securities Dealers, Inc. (the
"NASD"). In accordance with the Venture Capital Restrictions, the public
offering price of the shares offered hereby can be no higher than that
recommended by a "qualified independent underwriter" (within the meaning of
NASD Rule 2720(b)(15)) meeting certain standards and who must also perform
certain other functions in connection with the offering. BT Alex. Brown
Incorporated has assumed the responsibilities of acting as a "qualified
independent underwriter" in pricing the offering and conducting due diligence
with respect thereto, and the public offering price of the Common Stock is not
higher than that recommended by BT Alex. Brown Incorporated.

NationsBank, N.A. ("NationsBank") is a lender under the Senior Credit
Facility. NationsBank is an affiliate of NationsBanc Montgomery Securities LLC.
A portion of the outstanding indebtedness under the Senior Credit Facility will
be repaid with a portion of the net proceeds of the Offering. See "Use of
Proceeds".
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

No dealer, salesperson or any other person has been authorized to give any
information or to make any representation in connection with this offering
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or any Underwriter. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to the date hereof. This Prospectus does not constitute
an offer to sell, or solicitation of an offer to buy, any securities other
than the registered securities to which it relates, or an offer to sell to, or
solicitation of, any person in any circumstances, in which such offer or
solicitation is unlawful.

-----------------

TABLE OF CONTENTS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

20,000,000 Shares

-----------------

[LOGO OF PINNACLE HOLDINGS INC. APPEARS HERE]

-----------------

Pinnacle Holdings Inc.

Common Stock

-----------------

Prospectus

-----------------

BTAlex.Brown International

Salomon Smith Barney International

NationsBanc Montgomery Securities LLC

Raymond James &

Associates, Inc.

Deutsche Bank

, 1999

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 31. 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.............. $ 101,200
NASD filing fee.................................................. $ 30,500
Nasdaq listing fee............................................... $ 95,000
Printing and engraving expenses.................................. $ 300,000
Accounting fees and expenses..................................... $ 350,000
Legal fees and expenses.......................................... $ 450,000
Blue Sky fees and expenses....................................... $ 5,000
Transfer Agent's fees and expenses............................... $ 20,000
Directors' and Officers' insurance............................... $ 70,000
Miscellaneous.................................................... $ 178,300
----------
Total.......................................................... $1,500,000
==========
</TABLE>
- --------
* Estimated

Item 32. Sales to Special Parties.

Not applicable.

Item 33. Recent Sales of Unregistered Securities.

The securities issued or sold by the Company since May 1995, the date of
inception, which were not registered under the Securities Act are listed
below:

(i) Pursuant to the Stockholders Agreement, since December 31, 1995, the
Company has issued to ABRY II 200,000 shares of Class A Common Stock and
172,266 shares of Class E Common Stock. 35,000 shares of the Class A Common
Stock were issued in exchange for shares of Pinnacle Towers Inc. that were
held by ABRY II and the remaining shares were issued in exchange for
capital contributions made by ABRY II to the Company at a rate of 1 share
per each $100 contribution. Additionally, a total of 12,000 shares of Class
B Common Stock and a total of 31,000 shares of Class D Common Stock were
issued to the Company's founders in exchange for all of the capital stock
of Pinnacle Towers Inc. held by them. Furthermore, 2,500 shares of Class A
Common Stock were issued to the REIT investors for $100 per share.

(ii) From February 16, 1996 through June 25, 1997, the Company issued
19,000 shares of Class D Common Stock to certain employees of the Company
as compensation pursuant to their employee subscription agreements.
Pursuant to his subscription agreement, Mr. Day also purchased 500 shares
of Class B Common Stock for $100 per share.

(iii) On April 30, 1997, the Company sold 2,500 shares of Class E Common
Stock to James Dell'Apa for consideration of $100 per share.

(iv) On March 17, 1998, the Company issued $325,000,000 in principal
amount of its 10% Senior Discount Notes due 2008, pursuant to a Purchase
Agreement dated as of March 17, 1998, between the Company and the initial
purchasers thereof.

(v) On September 3, 1998, the Company sold 30,000 shares of the Senior
Preferred Stock and warrants to purchase up to 3,432 shares of Class F
Common Stock to New York Life Insurance Company for an aggregate purchase
price of $30.0 million.

II-1
<PAGE>

(vi) On September 3, 1998, the Company sold 32.5 shares of Junior
Preferred Stock to ABRY/Pinnacle, Inc., an affiliate of ABRY II, for an
aggregate purchase price of $32.5 million.

(vii) On December 16, 1998, the Company sold 26.2 shares of the Junior
Preferred Stock to ABRY/Pinnacle, Inc. for an aggregate purchase price of
$26.2 million.

The shares of capital stock issued in the above transactions were offered
and sold in reliance upon the exemption from registration under Section 4(2)
as transactions by an issuer not involving any public offering. The recipients
of securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transaction. All recipients had
adequate access, through their relationship with the Company to information
about the Company.

Item 34. Indemnification of Directors and Officers.

Pinnacle Holdings Inc., a Delaware corporation (the "Delaware Corporation").
The Delaware Corporation's Certificate of Incorporation and Bylaws contain
provisions limiting the personal liability of its directors for monetary
damages resulting from breaches of their duty of care to the extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law. The Delaware
Corporation's Certificate of Incorporation and Bylaws also contain provisions
making indemnification of the Delaware Corporation's directors and officers
mandatory to the fullest extent permitted by the Delaware General Corporation
Law, including circumstances in which indemnification is otherwise
discretionary.

The Delaware General Corporation Law permits the indemnification by a
Delaware corporation of its directors, officers, employees and other agents
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than
derivative actions which are by or in the right of the corporation) if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceedings, had no reasonable cause to believe their
conduct was illegal. A similar standard of care is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement
of such an action and require court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. 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 35. Treatment of Proceeds from Stock Being Registered.

Not applicable.

Item 36. Exhibits and Financial Statement Schedules.

(a) Exhibits

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**
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.3 Specimen Stock Certificate*****
4.4 Registration Agreement+
4.5 Recapitalization Agreement+
4.6 Certificate of Designation Series A Senior Preferred Stock******
4.7 Certificate of Designation Series B Junior Preferred Stock******
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 Form of Purchase and Sale Agreement dated January 9, 1998 by and
among PTI and Southern Communications**
10.8 Form of Southern Communications Master Site Lease Agreement by and
among PTI and Southern Communications**
10.9 Form of Option to Direct Construction or Acquisition of Additional
Tower Facilities by and among PTI and Southern Communications**
10.10 Form of Exchange Agreement by and among PTI and Southern
Communications**
10.11 Form of Lease Agreement--Non-Restricted Premises**
10.12 Form of Lease Agreement--Restricted Premises**
10.13 Form of Master Antenna Site Lease by and among PTI and Teletouch
Communications, Inc.**
10.14 Contract of Sale by and among PTI and Teletouch Communications,
Inc. and First Amendment to Contract of Sale**
10.15 Executive Employment Agreement between the Company and Robert
Wolsey dated May 3, 1995**
10.16 Executive Employment Agreement between the Company and Steven Day
dated February 17, 1997**
10.17 Executive Employment Agreement between the Company and James
Dell'Apa dated May 3, 1995**
10.18 Subscription Agreement dated December 31, 1995 by and among ABRY
II and PTI**
10.19 Second Amended and Restated Subscription and Stockholders
Agreement dated May 16, 1996 by and among PTI, the Company and
certain stockholders**
10.20 Capital Contribution Agreement dated February 26, 1998**
10.21 Convertible Promissory Note due 1998 dated February 11, 1998 by
and among the Company and ABRY II**
10.22 Services Agreement by and among PTI and PTI II**
10.23 Amended Capital Contribution Agreement dated May 29, 1998***
10.24 Purchase Agreement dated as of July 7, 1998 among MobileMedia, its
affiliates and the Company****
10.25 Amendment to Purchase Agreement dated September 2, 1998 between
PTI and MobileMedia and certain of its affiliates******
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.26 Form of Master Lease for Transmitter Systems Space between the
Company and MobileMedia Communications, Inc.****
10.27 Form of Management and Consulting Services Agreement dated as of
April , 1995 between Pinnacle Towers Inc. and ABRY*
10.28 Stock Incentive Plan*****
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
24.1 Powers of Attorney (included on signature pages of Registration
Statement)****
27.1 Financial Data Schedule
</TABLE>
- --------
+To be filed by amendment.
* Previously filed on July 27, 1998 with Amendment No. 1 to the Company's
Registration Statement on Form S-11.
** Previously filed on April 1, 1998 with the Company's Registration
Statement on Form S-4 (SEC file no. 333-49147).
*** Previously filed on June 11, 1998 with Amendment No. 1 to the Company's
Registration Statement on Form S-4.
**** Previously filed on July 17, 1998 with the Company's Registration
Statement on Form S-11 (SEC file no. 333-59297).
***** Previously filed on August 11, 1998 with Amendment No. 2 to the Company's
Registration Statement on Form S-11.
******Previously filed on September 18, 1998 with the Company's Report on Form
8-K.

******* Previously filed on January 5, 1999 with Amendment No. 4 to the
Company's Registration Statement on Form S-11.

(b) Financial Statement Schedules

None

Item 37. 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 14, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

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.

II-4
<PAGE>

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, 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 of 1933 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
of 1933, 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-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-11 and has duly caused this
Amendment No. 5 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Sarasota, State of
Florida, on January 20, 1999.

Pinnacle Holdings, Inc.

/s/ Steven Day
By: _________________________________
Steven Day, Chief Financial
Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<S> <C>
Signatures Title
Date

* Chief Executive January
- ------------------------------------- Officer, President 20, 1999
Robert Wolsey and Director

/s/ Steven Day Vice President, January
- ------------------------------------- Chief Financial 20, 1999
Steven Day Officer, Secretary
and Director

* Executive Vice January
- ------------------------------------- President, Chief 20, 1999
James Dell'Apa Operating Officer
and Director

* Director January
- ------------------------------------- 20, 1999
Andrew Banks

* Director January
- ------------------------------------- 20, 1999
Peni Garber

* Director January
- ------------------------------------- 20, 1999
Peggy Koenig

* Director January
- ------------------------------------- 20, 1999
Royce Yudkoff

/s/ Steven Day
*By: _______________________________,
Steven Day
Attorney-in-fact
</TABLE>

II-6
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.0 Underwriting Agreement+
3.1.1 Amended and Restated Certificate of Incorporation of the Company+
3.1.2 Bylaws of the Company**
Indenture dated as of March 20, 1998 among the Company and The
4.1 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+
4.6 Certificate of Designation Series A Senior Preferred Stock******
4.7 Certificate of Designation Series B Junior Preferred Stock******
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 Form of Purchase and Sale Agreement dated January 9, 1998 by and
among PTI and Southern Communications**
10.8 Form of Southern Communications Master Site Lease Agreement by and
among PTI and Southern Communications**
10.9 Form of Option to Direct Construction or Acquisition of Additional
Tower Facilities by and among PTI and Southern Communications**
10.10 Form of Exchange Agreement by and among PTI and Southern
Communications**
10.11 Form of Lease Agreement--Non-Restricted Premises**
10.12 Form of Lease Agreement--Restricted Premises**
10.13 Form of Master Antenna Site Lease by and among PTI and Teletouch
Communications, Inc.**
10.14 Contract of Sale by and among PTI and Teletouch Communications,
Inc. and First Amendment to Contract of Sale**
10.15 Executive Employment Agreement between the Company and Robert
Wolsey dated May 3, 1995**
10.16 Executive Employment Agreement between the Company and Steven Day
dated February 17, 1997**
10.17 Executive Employment Agreement between the Company and James
Dell'Apa dated May 3, 1995**
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.18 Subscription Agreement dated December 31, 1995 by and among ABRY
II and PTI**
10.19 Second Amended and Restated Subscription and Stockholders
Agreement dated May 16, 1996 by and among PTI, the Company and
certain stockholders**
10.20 Capital Contribution Agreement dated February 26, 1998**
10.21 Convertible Promissory Note due 1998 dated February 11, 1998 by
and among the Company and ABRY II**
10.22 Services Agreement by and among PTI and PTI II**
10.23 Amended Capital Contribution Agreement dated May 29, 1998***
10.24 Purchase Agreement dated as of July 7, 1998 among MobileMedia, its
affiliates and the Company****
10.25 Amendment to Purchase Agreement dated September 2, 1998 between
PTI and MobileMedia and certain of its affiliates******
10.26 Form of Master Lease for Transmitter Systems Space between the
Company and MobileMedia Communications, Inc.****
10.27 Form of Management and Consulting Services Agreement dated as of
April , 1995 between Pinnacle Towers Inc. and ABRY*
10.28 Stock Incentive Plan*****
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
Powers of Attorney (included on signature pages of Registration
24.1 Statement)****
27.1 Financial Data Schedule
</TABLE>
- --------
+To be filed by amendment.
* Previously filed on July 27, 1998 with Amendment No. 1 to the Company's
Registration Statement on Form S-11.
** Previously filed on April 1, 1998 with the Company's Registration
Statement on Form S-4 (SEC file no. 333-49147).
*** Previously filed on June 11, 1998 with Amendment No. 1 to the Company's
Registration Statement on Form S-4.
**** Previously filed on July 17, 1998 with the Company's Registration
Statement on Form S-11 (SEC file no. 333-59297).
***** Previously filed on August 11, 1998 with Amendment No. 2 to the
Company's Registration Statement on Form S-11.
******Previously filed on September 18, 1998 with the Company's Report on Form
8-K.

******* Previously filed on January 5, 1999 with Amendment No. 4 to the
Company's Registration Statement on Form S-11.

<PAGE>
Exhibit 10.4

FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------------

THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT is
dated as of the day of June 29, 1998 (this "First Amendment"), and entered into
among PINNACLE TOWERS INC., a Delaware corporation (the "Borrower"), the Lenders
signatory hereto, NATIONSBANK, N.A., a national banking association,
individually and as Administrative Lender (in such latter capacity, the
"Administrative Lender"), and GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication
Agent (the "Syndication Agent").

WITNESSETH:
----------

WHEREAS, the Borrower, the Administrative Lender, the Syndication Agent,
and Lenders entered into a Third Amended and Restated Credit Agreement, dated as
of May 29, 1998 (as amended, restated, or otherwise modified from time to time,
the "Credit Agreement");

WHEREAS, the Lenders, the Borrower, the Administrative Lender, and the
Syndication Agent have agreed to amend the Credit Agreement to make certain
changes to the terms therein upon the terms and conditions set forth below;

NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Borrower, the Lenders, the Administrative Lender, and the Syndication Agent
agree as follows:

SECTION 1. Definitions. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.

SECTION 2. Amendment to the definition of "Earn-Out Liability". The
definition of ""Earn-Out Liability" in Article I is amended in its entirety as
follows:

"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.

SECTION 3. Amendment to the definition of "Eligible Assignee". The
definition of "Eligible Assignee" in Article I is amended in its entirety as
follows:

"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

1
<PAGE>

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
Lender, which approval will not be unreasonably withheld.

SECTION 4. Amendment to Section 2.18(f). Subsection 2.18(f) of the Credit
Agreement is amended in its entirety as follows:

(f) Upon satisfaction of each of the conditions precedent in this
Section 2.18, the Borrower shall be entitled to increase the Available
Commitment not more than five times, in an aggregate amount for such
increases not to exceed the Unavailable Commitment . Each Lender
specified by the Borrower shall have received not less than twenty
days' prior written notice from the Borrower requesting such Available
Commitment increase. Each such Lender electing to participate in such
Available Commitment increase shall commit to an amount not less than
$5,000,000, but shall accept any allocation amount designated by the
Borrower and the Administrative Lender that is equal to or less than
its proposed portion of the Available Commitment increase; and

SECTION 5. Amendment to Section 2.18(h). Subsection 2.18(h) of the Credit
Agreement is amended in its entirety as follows:

(h) Each of the proposed increases shall be in an aggregate minimum
amount of $10,000,000 and $5,000,000 multiples thereof; and

SECTION 6. Amendment to Section 8.01(a)(i). The last sentence of
subsection 8.01(a)(i) of the Credit Agreement is amended in its entirety as
follows:

(a)(i) Notwithstanding anything in this Agreement to the contrary, the
second time that ABRY makes any capital contribution or Cure Sub Debt loan
to cure any Event of Default as a result of a violation of this Section
8.01(a) as permitted above or 8.01 (b) as permitted therein, any such
capital contribution or Cure Sub Debt loan shall be applied in accordance
with the terms of Section 2.05(b) hereof, but shall permanently reduce the
outstanding Obligations by a reduction in the Available Commitment in
accordance with the terms of Section 2.11(c)(i) hereof; and

SECTION 7. Amendment to Section 8.01(b)(i). The last sentence of
subsection 8.01(b(i)

2
<PAGE>

of the Credit Agreement is amended in its entirety as follows:

Notwithstanding anything in this Agreement to the contrary, the second time
that ABRY makes any capital contribution or Cure Sub Debt loan to cure any
Event of Default as a result of a violation of this Section 8.01(b) as
permitted above or Section 8.01(a) as permitted therein, any such capital
contribution or Cure Sub Debt loan shall be applied in accordance with the
terms of Section 2.05(b) hereof, but shall permanently reduce the
outstanding Obligations by a reduction in the Available Commitment in
accordance with the terms of Section 2.11(c)(ii) hereof; and

SECTION 8. Amendment to Section 11.01. The first sentence of 11.01 of the
Credit Agreement is amended by adding the following proviso at the end of the
sentence : and "provided further, 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 a Supermajority Lenders and Administrative Lender, change
the definition of "Supermajority Lenders" or Section 8.02(c)."

SECTION 9. Conditions Precedent. This First Amendment shall not be
effective until all proceedings of the Borrower taken in connection with this
First Amendment and the transactions contemplated hereby shall be satisfactory
in form and substance to the Administrative Lender and Lenders, and the
Administrative Lender and Lenders shall have each received such other documents,
instruments, and certificates, in form and substance satisfactory to the
Administrative Lender, as the Administrative Lender shall deem necessary or
appropriate in connection with this First Amendment and the transactions
contemplated hereby.

SECTION 10. Representations and Warranties. The Borrower represents and
warrants to the Lenders and the Administrative Lender that (a) this First
Amendment constitutes its legal, valid, and binding obligations, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (b) there
exists no Event of Default or Default under the Credit Agreement both before and
after giving effect to this First Amendment, (c) its representations and
warranties set forth in the Credit Agreement and other Loan Papers are true and
correct on the date hereof both before and after giving effect to this First
Amendment, (d) it has complied with all agreements and conditions to be complied
with by it under the Credit Agreement and the other Loan Papers by the date
hereof, (e) the Credit Agreement, as amended hereby, and the other Loan Papers
remain in full force and effect, and (f) no notice to, or consent of, any Person
is required under the terms of any agreement of the Borrower in connection with
the execution of this First Amendment.

SECTION 11. Further Assurances. The Borrower shall execute and deliver
such further agreements, documents, instruments, and certificates in form and
substance satisfactory to the Administrative Lender, as the Administrative
Lender or any Lender may deem necessary or appropriate in connection with this
First Amendment.

3
<PAGE>

SECTION 12. Counterparts. This First Amendment 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.

SECTION 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 AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

SECTION 14. GOVERNING LAW. (a) THIS AGREEMENT AND ALL LOAN PAPERS SHALL
BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO THE
EXTENT (A) FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF ALL OR ANY PART OF THIS AGREEMENT AND ALL LOAN PAPERS OR (B)
STATE LAW GOVERNS UCC COLLATERAL INTERESTS FOR PROPERTIES OF THE BORROWER AND
THE SUBSIDIARIES OUTSIDE THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, THE BORROWER AND EACH SUBSIDIARY AGREES THAT THE COURTS OF TEXAS
WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.

(b) THE BORROWER AND EACH SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE OF ANY
LEGAL PROCESS UPON IT. IN ADDITION, THE BORROWER AND EACH SUBSIDIARY AGREES
THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO THE BORROWER AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER
THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT
BY THE BORROWER. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE LENDER OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

SECTION 15. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
THE BORROWER, EACH SUBSIDIARY AND EACH LENDER HEREBY WAIVES ANY RIGHT THAT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE OTHER
LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

4
<PAGE>

- --------------------------------------------------------------------------------
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------

5
<PAGE>

IN WITNESS WHEREOF, this First Amendment to Third Amended and Restated
Credit Agreement is executed as of the date first set forth above.

THE BORROWER: PINNACLE TOWERS INC.

----------------------------------

By:
----------------------------

Its:
----------------------------

ADMINISTRATIVE LENDER: NATIONSBANK,N.A.,as Administrative Lender

----------------------------------

By:
----------------------------

Its:
----------------------------

SYNDICATION AGENT: GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent

----------------------------------

By:
----------------------------

Its:
----------------------------

LENDERS: NATIONSBANK, N.A., individually as a Lender

---------------------------------
By: Roselyn M. Reid
Its: Vice President

6
<PAGE>

GOLDMAN SACHS CREDIT PARTNERS L.P.

----------------------------------

By:
----------------------------

Its:
----------------------------

BANKBOSTON, N.A.

----------------------------------

By:

----------------------------
Its:

----------------------------

SOCIETE GENERALE, NEW YORK BRANCH

----------------------------------

By:
----------------------------

Its:
----------------------------

BANK OF AMERICA

----------------------------------

By:
----------------------------

Its:
----------------------------

7
<PAGE>

KEY CORPORATE CAPITAL INC.

----------------------------------

By:

----------------------------
Its:

----------------------------

UNION BANK OF CALIFORNIA, N.A.

----------------------------------

By:
----------------------------

Its:
----------------------------

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 5 to Registration Statement No. 333-59297 on Form S-11 of
Pinnacle Holdings Inc. of the following: (1) our report dated January 11, 1999
relating to the consolidated financial statements of Pinnacle Holdings Inc.,
(2) our report dated February 9, 1998 relating to the combined financial
statements of Shore Communications, (3) our report dated February 9, 1998
relating to the combined financial statements of Tidewater Communications and
(4) our report dated February 9, 1998 relating to the combined financial
statements of Majestic Communications, which appear in such Prospectus. We
also consent to the reference to us under the 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."

/s/ Pricewaterhousecoopers LLP

Tampa, Florida

January 20, 1999

<PAGE>

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

January 20, 1999

<PAGE>

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 Pre-Effective Amendment No. 5 to the Registration
Statement (Form S-11 No. 333-59297) and related Prospectuses of Pinnacle
Holdings Inc. for the registration of 20,000,000 shares of its common stock.

/s/ Ernst & Young LLP

MetroPark, New Jersey

January 20, 1999

<PAGE>

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<CASH> 1,693,923 13,801,190
<SECURITIES> 0 0
<RECEIVABLES> 1,647,575 1,804,390
<ALLOWANCES> 70,000 125,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,308,945 16,913,008
<PP&E> 144,570,666 519,996,802
<DEPRECIATION> 8,278,524 28,964,462
<TOTAL-ASSETS> 143,177,903 516,148,101
<CURRENT-LIABILITIES> 17,098,983 26,183,169
<BONDS> 109,459,790 417,524,802
0 29,882,298
0 59,928,980
<COMMON> 1,761,309 1,761,418
<OTHER-SE> 14,752,809 (19,257,718)
<TOTAL-LIABILITY-AND-EQUITY> 143,177,903 516,148,101
<SALES> 12,880,631 32,018,651
<TOTAL-REVENUES> 12,880,631 32,018,651
<CGS> 2,632,274 6,165,897
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 11,784,434 50,182,076
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,925,094 12,300,182
<INCOME-PRETAX> (8,461,171) (36,629,504)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,461,171) (36,629,504)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 5,641,573
<CHANGES> 0 0
<NET-INCOME> (8,461,171) 42,271,077
<EPS-PRIMARY> (27.28) (108.43)
<EPS-DILUTED> (27.28) (108.43)

</TABLE>