<PAGE> 1
EXHIBIT 99.1
MICROCELL MANAGEMENT, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Pinnacle Holdings Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations and of changes in shareholders' equity and of cash flows present
fairly, in all material respects, the financial position of Microcell
Management, Inc. (the "Company") at December 31, 1999, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, 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.
As discussed in Note 11 to the financial statements, on March 3, 2000 the
Company sold its telecommunication tower portfolio to Pinnacle Towers Inc. for
$80,000,000.
PricewaterhouseCoopers LLP
Tampa, Florida
July 10, 2000
1
<PAGE> 3
MICROCELL MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,643
Receivables:
Trade.................................................. 124,349
Other.................................................. 1,005
Prepaid expenses and other current assets................. 53,110
-----------
Total current assets.............................. 180,107
Property and equipment, net................................. 31,995,668
Long-term deferred tax asset................................ 3,720,785
Other assets................................................ 295,226
-----------
Total assets...................................... $36,191,786
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 1,715,432
Deferred revenue.......................................... 310,937
-----------
Total current liabilities......................... 2,026,369
Note payable to related party............................... 29,672,764
Deferred lease liability.................................... 117,030
-----------
Total liabilities................................. 31,816,163
-----------
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock; $0.01 par value, 100,000 shares authorized,
issued and outstanding................................. 1,000
Additional paid-in capital................................ 10,000,000
Shareholders' loan........................................ (1,000)
Accumulated deficit....................................... (5,624,377)
-----------
Total shareholders' equity........................ 4,375,623
-----------
Total liabilities and shareholders' equity........ $36,191,786
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
MICROCELL MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenues.................................................... $ 2,912,950
Direct operating expenses, excluding depreciation and
amortization.............................................. 1,165,937
-----------
Gross margin, excluding depreciation and
amortization...................................... 1,747,013
-----------
Expenses:
Selling, general, and administrative...................... 3,097,576
Depreciation and amortization............................. 1,225,383
-----------
Total operating expenses.......................... 4,322,959
-----------
Operating loss.............................................. (2,575,946)
Interest expense............................................ 1,715,232
-----------
Loss before income taxes.................................... (4,291,178)
Benefit for income taxes.................................... 3,720,785
-----------
Net loss.......................................... $ (570,393)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
MICROCELL MANAGEMENT, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL
COMMON SHAREHOLDERS' PAID-IN ACCUMULATED
STOCK LOAN CAPITAL DEFICIT TOTAL
------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998........... $1,000 $(1,000) $ -- $(5,053,984) $(5,053,984)
Net loss........................... -- -- -- (570,393) (570,393)
Capital contribution............... -- -- 10,000,000 -- 10,000,000
------ ------- ----------- ----------- -----------
Balance, December 31, 1999........... $1,000 $(1,000) $10,000,000 $(5,624,377) $ 4,375,623
====== ======= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
MICROCELL MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (570,393)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 1,225,383
Deferred income taxes..................................... (3,720,785)
Changes in assets and liabilities:
Receivables............................................ (116,363)
Prepaid expenses and other current assets.............. 37,124
Other assets........................................... (3,390)
Accounts payable and accrued expenses.................. (2,434,955)
Deferred revenue....................................... 161,209
Deferred lease liability............................... 39,030
------------
Net cash used in operating activities............. (5,383,140)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction/purchase of tower and related assets........... (15,303,543)
Purchase of property and equipment.......................... (82,149)
------------
Net cash used in investing activities............. (15,385,692)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable to related party................. 22,188,485
Repayment of amounts due to related party................... (1,419,014)
------------
Net cash provided by financing activities......... 20,769,471
------------
Net increase in cash and cash equivalents................... 639
Cash and cash equivalents at beginning of period............ 1,004
------------
Cash and cash equivalents at end of period.................. $ 1,643
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (includes capitalized interest of $101,566)...... $ 1,888,568
============
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES;
Conversion of debt outstanding under revolving credit
facility to equity as discussed in Note 2................. $ 10,000,000
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements reflect the financial position,
results of operations, and cash flows of Microcell Management, Inc. ("Microcell"
or the "Company," a Delaware corporation), an 83.75 percent owned subsidiary of
LCC International, Inc. ("LCC"). On February 12, 1996, (date of inception),
Microcell Management, LLC ("Microcell LLC") was formed for the purpose of
acquiring, building and constructing multi-tenant radio frequency communication
towers and leasing space thereon to wireless communication carriers. On December
31, 1996, LCC, through its newly formed subsidiary, Microcell, acquired certain
of the assets and liabilities of Microcell LLC. Microcell was incorporated on
November 26, 1996. Assets acquired from Microcell LLC included the rights to
certain tower contracts, which were valued at $392,201 at the time of purchase
(see Note 8). Microcell currently owns and operates 169 towers and has 23
additional towers under construction or in the process of acquisition.
Microcell operates in a highly competitive environment subject to rapid
technological change and emergence of new technologies. The demand for rental
space on Microcell's towers is dependent on the demand for wireless
communications and demand for tower sites from wireless communication companies.
The wireless communications industry, which includes paging, cellular, PCS,
fixed microwave, SMR, ESMR, and other wireless services, has undergone
significant growth in recent years and remains highly competitive. There are
often service providers in a variety of technologies and two or more providers
of the same service within a geographic market competing for subscribers. In
order to meet increasing subscriber demand, wireless service providers must
either construct their own tower network or lease space on existing, or new,
communications sites.
2. RISKS AND UNCERTAINTIES
Dependence on LCC
The Company is currently in the start-up phase of its business strategy and
therefore is not generating sufficient cash flow through operations to cover its
operating expenses and debt service or to fund its tower development program.
The Company expects to incur operating losses and generate negative cash flows
during the next several years as it continues its tower development program. As
of December 31, 1999, there is approximately $5.3 million of additional
availability remaining under the Company's revolving line of credit with LCC
(see Note 6). In April 1999, LCC converted $10.0 million of debt outstanding
under the $35.0 million revolving credit facility (see Note 6) from debt to
equity of the Company. As a result, the amount outstanding under the credit
facility decreased to approximately $16.3 million as of the date of the
conversion. In order to carry out its business plan, the Company will need
additional sources of financing from LCC or other external sources.
Consequently, until the Company has signed lease agreements for its rental
towers and begins to receive substantial operating revenues, the Company's
continued existence as a going concern will be dependent on continuing to
receive funding from LCC (see Note 6 and 9) or other sources. LCC has
represented that it is committed to provide the necessary level of financial
support to the Company to enable it to pay its debts through December 31, 2000,
and believes LCC has the financial resources to fulfill that commitment. The
accompanying financial statements do not contain any adjustments that might
result from this uncertainty.
Based on the current projections of LCC management, LCC will also require
outside sources of financing in order to conduct its current business strategy.
As discussed in Note 6, LCC currently has in place a credit facility in the
amount of $22.5 million, of which $2.5 million is considered available to LCC
for one of its European businesses, up to $7.5 million is considered available
to LCC for the Company, based on the attainment of certain financial
requirements by LCC, and the remaining $12.5 million is available to LCC,
contingent on the guarantee of such draws by the Chairman of LCC. In addition,
in March 1999, LCC received representation from an affiliate of both LCC and the
Chairman, that it would provide to LCC funds in an amount up to $12.5 million,
subject to certain defined limitations, to the extent not available under the
credit arrangement due to the Chairman not providing the required guarantee. LCC
believes that these funding sources will be sufficient to cover its funding
requirements in
6
<PAGE> 8
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2000, including those of the Company. As of December 31, 1999, LCC has $4.5
million outstanding under the credit facility, with $18.0 million remaining
available for draw. Outstanding letters of credit were $.8 million at December
31, 1999.
Wireless Communications
The Company derives all of its revenues from customers in the wireless
communications industry. The amount of leasing activity in the wireless
communications industry is dependent on a number of factors beyond Microcell's
control, including demand for wireless services, the financial condition and
access to capital of wireless providers, the strategy of wireless providers with
respect to owning or leasing communications sites, government licensing of
broadcast rights, changes in the telecommunications regulations, and general
economic conditions. A slowdown in the growth of wireless communications in the
United States would depress network expansion activities and reduce the demand
for Microcell's tower sites. In addition, a downturn in a particular wireless
segment as a result of technological competition or other factors beyond the
control of Microcell could adversely affect the demand for rental towers.
Finally, advances in technology could reduce the need for tower-based
transmission and reception. The occurrence of any of these factors could have a
material adverse effect on Microcell's financial condition and results of
operations.
Significant Tenants
For the year ended December 31, 1999, the Company had three tenants who
represented approximately 11%, 15% and 15% of the Company's revenues and whose
leases will begin to expire in 2007, 2008, and 2004, respectively.
3. 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 Equivalents
Cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated on the straight-line method over the estimated useful
life of the assets. Rental towers are depreciated over a useful life of 25
years, and computer equipment, software, furniture and equipment are depreciated
over a useful life of 3 years. Leasehold improvements are amortized over the
lesser of the life of the lease or useful life of the asset. Construction in
progress includes direct and indirect costs incurred during tower construction,
including interest. Capitalization of interest and other indirect costs ceases
when the asset is ready for its intended use. Depreciation is not recorded on
construction in progress until the asset is ready for its intended use, at which
time related amounts are reclassified as rental towers. Additions, renewals and
improvements are capitalized, while maintenance and repairs are expensed. Upon
the sale or retirement of an asset, the related cost and accumulated deprecation
are removed and any gain or loss is recognized.
7
<PAGE> 9
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Impairment of Long-Lived Assets
The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." This statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Fair Value of Financial Instruments
The Company adopted SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments," which requires the disclosure of the fair value of financial
instruments when fair value is estimable. The carrying amounts of cash and cash
equivalents, receivables, accounts payable and accrued expenses approximate fair
value due to the short-term maturities of such items. It is not practical to
estimate the fair value of the amounts due to related party, including the note
payable to related party, due to the related party nature of the liabilities.
Revenue Recognition
Revenues are recognized on a straight-line basis over the term of the
related lease. Amounts billed or received prior to services being performed are
deferred until such time as the revenue is earned.
Income Taxes
For the year ended December 31, 1999, the Company was a taxable entity and
therefore accounts for income taxes in accordance with the requirements of SFAS
No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
At December 31, 1999, prepaid expenses and other current assets consisted
of the following:
<TABLE>
<S> <C>
Prepaid land leases......................................... $46,810
Other....................................................... 6,300
-------
$53,110
=======
</TABLE>
8
<PAGE> 10
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
At December 31, 1999, property and equipment consisted of the following:
<TABLE>
<S> <C>
Rental towers............................................... $32,461,078
Construction in progress.................................... 793,017
Computer equipment.......................................... 147,728
Purchased computer software................................. 76,095
Furniture and office equipment.............................. 157,785
Leasehold improvements...................................... 17,435
-----------
33,653,138
Less accumulated depreciation and amortization.............. (1,607,470)
Less allowance for site costs............................... (50,000)
-----------
$31,995,668
===========
</TABLE>
6. NOTE PAYABLE TO RELATED PARTY
On December 31, 1996, Microcell entered into a $35.0 million revolving
credit facility (the "Facility") and note agreement with LCC. At December 31,
1999, $29.7 million had been drawn against the Facility. Interest under the
Facility accrues at a rate per annum equal to the prime rate as published in The
Wall Street Journal (8.50 percent at December 31, 1999). The Company incurred
approximately $1,817,000 of interest on the Facility for the year ended December
31, 1999. Monthly payments are to be made based on the Company's cash
collections, and any unpaid principal, together with any accrued and unpaid
interest, is due upon termination of the Facility. The Facility terminates upon
the earlier of (i) the dissolution and liquidation of Microcell, or (ii) 120
days after written notice of termination is provided by LCC to Microcell. It is
the intention of LCC not to terminate the Facility prior to January 1, 2001. The
Facility is secured by substantially all the assets of Microcell.
In April 1999, LCC converted $10.0 million of debt outstanding under the
$35.0 million revolving credit facility from debt to equity of the Company. As a
result, the amount outstanding under the credit facility decreased to
approximately $16.3 million as of the date of the conversion.
In March 1999, LCC amended and restated its credit facility with the Chase
Manhattan Bank ("Chase"). The payment and performance obligations of LCC under
its credit facility are guaranteed by the Company solely to the extent of the
amount outstanding from time to time under the Facility from LCC to the Company
and any payments made by the Company under its guaranty shall reduce its
outstanding obligations under such Facility on a dollar-for-dollar basis. Any
payments of principal by the Company under the Facility must be used to prepay
any outstanding loans under the LCC credit facility with Chase and the amount
available under such credit facility shall be permanently reduced by the amount
of such prepayment. As of December 31, 1999, LCC has $4.5 outstanding under the
credit facility with Chase, with approximately $18 million remaining available
for draw.
7. INCOME TAXES
The Company files a consolidated tax return with LCC. At December 31, 1999,
there were no tax-related balances due to or from the Company and LCC. The
consolidated amount of current and deferred expenses or benefit is allocated to
members of the consolidated group based on the application of SFAS No. 109 to
the separate taxable income (loss) of each member of the group.
At December 31, 1999, the Company had cumulative net operating loss
carryforwards ("NOLs") of approximately $9.9 million. The NOLs, if unused, will
expire between 2012 and 2013. As noted below, the tax effect of the NOLs gave
rise to the majority of the deferred tax assets at December 31, 1999. As of
December 31, 1999, there were no other significant temporary differences giving
rise to a deferred tax asset or liability. The sale by the Company of its assets
(Note 12) should allow the Company to utilize its net operating losses.
9
<PAGE> 11
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $3,968,763
Capitalization of interest................................ 196,233
Deferred rent liability................................... 112,071
Other temporary differences............................... 58,400
----------
Total deferred tax assets......................... 4,335,467
----------
Deferred tax liabilities:
Depreciation of rental towers............................. 613,341
Other temporary differences............................... 1,341
----------
Total deferred tax liabilities.................... 614,682
----------
Net deferred tax asset............................ $3,720,785
==========
</TABLE>
The provision for income taxes for the year ended December 31, 1999
consisted of the following:
<TABLE>
<S> <C>
Current..................................................... $ --
Deferred:
Federal................................................... 3,005,274
State..................................................... 715,511
----------
Total............................................. $3,720,785
==========
</TABLE>
A reconciliation between the provision for income taxes and the amount
computed by applying the federal statutory rate for the year ended December 31,
1999 is as follows:
<TABLE>
<S> <C>
Benefit at federal statutory rate........................... $(1,501,912)
State tax benefit........................................... (208,468)
Other....................................................... 42,581
Change in valuation allowance for net deferred tax assets... (2,052,986)
-----------
Total............................................. $(3,720,785)
===========
</TABLE>
8. RELATED PARTY TRANSACTIONS
The Company has entered into agreements with LCC for the provision of radio
frequency engineering and program management services. Costs incurred during the
year ended December 31, 1999 for services provided by LCC were approximately
$337,000, all of which has been capitalized and is recorded as property and
equipment in the accompanying balance sheet. Accounts payable to LCC for
services provided were $117,000 at December 31, 1999. Also, LCC provides funds
for the Company's operations, including payroll expenses and payment of accounts
payable. All amounts advanced to the Company are accounted for as draws on the
outstanding revolving credit facility agreement with LCC (see Note 6).
10
<PAGE> 12
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. TENANT LEASES
The Company leases space on its various tower properties to tenants, which
generally have initial terms of 3 to 15 years and generally include multiple
options to renew under similar terms at the option of the lessee. Certain of the
leases provide for scheduled increases to base rent. Revenue under such leases
is recognized on a straight-line basis over the initial term of the lease.
Minimum future rents for tenant leases as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 4,356,216
2001........................................................ 4,430,524
2002........................................................ 4,434,217
2003........................................................ 4,169,330
2004........................................................ 2,936,949
Thereafter.................................................. 14,443,616
-----------
$34,770,852
===========
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
In December 1997, the Company entered into a five-year noncancelable
operating lease for office space in Laurel, Maryland. In July 1998, the Company
entered into a second lease for additional office space with terms designed to
coincide with those of the first lease. Minimum future rental payments under the
lease as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000........................................................ $132,678
2001........................................................ 137,913
2002........................................................ 143,328
2003........................................................ 11,982
2004........................................................ --
--------
Total $425,901
========
</TABLE>
Rental expense incurred under these leases during 1999 was approximately
$121,000.
The Company also leases the land on which it purchases or builds towers.
These operating leases expire over various terms from 5 to 11 years. Many of
these leases contain renewal options with specified increases in lease payments
upon exercise of the renewal option at the option of the Company. Certain of the
ground leases provide for scheduled increases to base ground rent. Expense under
such leases is recognized on a straight-line basis over the initial term of the
lease.
Minimum future rental payments under ground leases as of December 31, 1999
are as follows:
<TABLE>
<S> <C>
2000........................................................ $1,087,549
2001........................................................ 1,099,491
2002........................................................ 1,065,319
2003........................................................ 827,055
2004........................................................ 369,453
Thereafter.................................................. 568,333
----------
$5,017,200
==========
</TABLE>
Rental expense incurred under ground leases during 1999 was approximately
$967,000 and is included in direct tower costs on the statement of operations.
On February 12, 1999, the minority shareholders filed a suit against the
Company, the directors appointed by LCC to the Company's Board and LCC seeking
rescission of the shareholders' agreement between LCC and the
11
<PAGE> 13
MICROCELL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
minority shareholders, the appointment of a custodian or receiver and
unspecified monetary damages. On February 16, 1999, the plaintiffs filed a
motion to expedite and a motion for appointment of a receiver or custodian. The
suit alleges breach of a fiduciary duty to ensure the Company's financial
health, usurping corporate opportunities, waste of the Company's assets,
tortuous interference with the Company's prospective business relations, and
violations of the shareholders' agreement. The Company and LCC have filed a
motion to dismiss. In connection with the sale of the Company towers to Pinnacle
Towers Inc., the partners settled all pending litigation, and all claims were
dismissed with prejudice on March 7, 2000 (see Note 12).
11. SALE OF COMPANY
On February 15, 2000, Microcell Management, Inc., a subsidiary of LCC
International, Inc., and LLC entered into a Settlement and Release Agreement
("Settlement Agreement") with the minority shareholders of Microcell. Pursuant
to the Settlement Agreement, the 16.25% minority shareholder interest was
redeemed for approximately $4.2 million. Pursuant also to the Settlement
Agreement, the pending litigation involving LCC, Microcell, and the minority
shareholders was settled and dismissed with prejudice. As a result of the
redemption, Microcell became a wholly owned subsidiary of the Company.
On March 3, 2000, Microcell completed the initial closing of the sale of
its telecommunication tower portfolio to Pinnacle Towers Inc. ("Pinnacle")
pursuant to an Asset Purchase Agreement between Pinnacle and Microcell. Pursuant
to the Asset Purchase Agreement, Microcell agreed to sell up to 197 tower sites
owned or to be constructed by Microcell for a total purchase of $80 million in
cash payable when the sites are conveyed to Pinnacle. At the initial closing,
134 tower sites were conveyed to Pinnacle for proceeds of $56.7 million. As a
part of the sale transaction, Microcell and Pinnacle entered into a Master
Antenna Site Lease pursuant to which Microcell has agreed to lease, until
December 31, 2002, the unoccupied space on each telecommunication tower sold to
Pinnacle. Microcell and Pinnacle have also entered into a Tower Services
Agreement pursuant to which Microcell will provide Pinnacle with site audit,
maintenance, and program management services regarding site improvements and
capacity upgrades for an initial 204 sites and additional sites for which
Pinnacle deems the services are necessary. The Services Agreement provides for
minimum annual payments to Microcell of $10.0 million for project management and
site audit services; it also provides for approximately $1.0 million per year
for maintenance services based on the current number of sites as to which
Microcell has been engaged.
12
