SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
PINNACLE HOLDINGS INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
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PINNACLE HOLDINGS INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2000
Dear Pinnacle Stockholders:
The 2000 meeting of Stockholders of Pinnacle Holdings Inc., a Delaware
corporation ("Pinnacle" or the "Company"), will be held on Tuesday, May 2, 2000
at 10:00 a.m., local time, at the Hyatt Sarasota located at 1000 Boulevard of
the Arts, Sarasota, Florida 34236.
Only stockholders who owned shares of our common stock at the close of
business on March 21, 2000, can vote at this meeting or any adjournment that may
take place. At the meeting we will:
o elect six directors to serve for the ensuing year or until their
successors are duly elected and qualified;
o approve an amendment to Pinnacle's Certificate of Incorporation to
increase the number of authorized shares of Pinnacle common stock from
100,000,000 shares to 150,000,000 shares;
o approve an amendment to the Pinnacle Holdings Inc. Stock Incentive
Plan to increase the shares reserved for issuance under the plan from
3,000,000 shares to 5,000,000 shares; and
o attend to any other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the proposals
set forth in this proxy statement.
A list of all stockholders entitled to vote at the meeting will be
available for examination at our principal executive office located at 1549
Ringling Boulevard, Third Floor, Sarasota, Florida 34236, for the 10 days before
the meeting between 9:00 a.m. and 5:00 p.m., local time, and at the place of the
meeting during the meeting.
All stockholders are cordially invited to attend the meeting. Whether or
not you expect to attend the meeting, please fill in, date, sign and return the
enclosed proxy card as promptly as possible in the postage-prepaid envelope
enclosed for that purpose.
This proxy statement, accompanying proxy card and 1999 annual report are
being mailed to stockholders beginning on or about March 28, 2000, in connection
with the solicitation of proxies by the Board of Directors of Pinnacle.
FOR THE BOARD OF DIRECTORS OF
PINNACLE HOLDINGS INC.
Steven Day
Secretary
April 7, 2000
Sarasota, Florida
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TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS....................................................... 1
PROPOSALS YOU MAY VOTE ON................................................... 3
Proposal No. 1. Election of Directors.............................. 3
Proposal No. 2. Approval of Amendment to Certificate of
Incorporation to Increase the Number of Authorized Shares
of Common Stock.................................................... 3
Proposal No. 3. Approval of Amendments to the Pinnacle
Holdings Inc. Stock Incentive Plan................................. 4
STOCK OWNERSHIP............................................................. 9
STOCK PERFORMANCE GRAPH..................................................... 10
Section 16(a) Beneficial Ownership Reporting Compliance............ 11
DIRECTORS AND EXECUTIVE OFFICERS............................................ 11
BOARD MEETINGS AND COMMITTEES............................................... 14
COMPENSATION OF DIRECTORS................................................... 14
EXECUTIVE OFFICER COMPENSATION.............................................. 15
Summary Compensation Table......................................... 15
Employment Agreements.............................................. 15
Option Grants During 1999.......................................... 16
Option Exercises During 1999 and Year End Option Values............ 16
Compensation Committee Interlocks and Insider Participation........ 16
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.............. 17
CERTAIN RELATIONSHIPS AND TRANSACTIONS...................................... 19
OTHER MATTERS............................................................... 22
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED.
PINNACLE HOLDINGS INC.
PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Pinnacle Holdings Inc. ("Pinnacle" or
the "Company") of proxies to be voted at the meeting of Stockholders to be held
on Tuesday, May 2, 2000, at 10:00 a.m., and at any adjournment that may take
place.
The following is important information in a question-and-answer format
regarding the meeting and this proxy statement.
QUESTIONS AND ANSWERS
Q: Why did you send me this proxy statement?
A: We sent you this proxy statement and the enclosed proxy card because
Pinnacle's Board of Directors is soliciting your proxy to vote your shares
at Pinnacle's 2000 meeting of Stockholders. This proxy statement
summarizes information that we are required to provide to you by the
Securities and Exchange Commission ("SEC") and which is designed to assist
you in voting.
Q: What may I vote on?
A:
o the election of six directors to serve for the ensuing year or until
their successors are duly elected and qualified;
o a proposal to approve an amendment to Pinnacle's Certificate of
Incorporation to increase the number of authorized shares of Pinnacle
common stock from 100,000,000 shares to 150,000,000 shares;
o a proxy to approve an amendment to the Pinnacle Holdings Inc. Stock
Incentive Plan (the "Plan") to increase the shares reserved for
issuance under the plan from 3,000,000 shares to 5,000,000 shares; and
o to any other business properly presented at the meeting.
Q: How does the Board recommend I vote on the proposals?
A: The Board recommends a vote FOR each of the proposals.
Q: Who is entitled to vote?
A: Only those who owned shares of Pinnacle's common stock at the close of
business on March 21, 2000 (the "Record Date") are entitled to vote at
the meeting.
Q: How do I vote?
A: You may vote your shares either in person or by proxy. Whether you plan to
attend the meeting and vote in person or not, we urge you to complete the
enclosed proxy card and return it promptly in the enclosed envelope. If
you return your signed proxy card but do not mark the boxes showing how
you wish to vote, your shares will be voted FOR the proposals. You have
the right to revoke your proxy at any time before the meeting by:
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o notifying Pinnacle's Corporate Secretary in writing;
o voting in person; or
o returning a later-dated proxy card.
Q: How many shares can vote?
A: As of the Record Date, 48,294,471 shares of Pinnacle's common stock were
issued and outstanding. Every Pinnacle stockholder is entitled to one vote
for each share of common stock held on the Record Date.
Q: How can I change my vote or revoke my proxy?
A: You have the right to revoke your proxy and change your vote at any time
before the meeting by notifying Pinnacle's Secretary in writing, or
returning a later-dated proxy card. You may also revoke your proxy and
change your vote by voting in person at the meeting.
Q: What does it mean if I get more than one proxy card?
A: It means you hold shares registered in more than one account. Sign and
return all proxies to ensure that all your shares are voted.
Q: Who will count the vote?
A: Representatives of First Union, Pinnacle's transfer agent, will count the
votes and act as the inspector of election. Pinnacle believes that the
procedures to be used by the inspector of election to count the votes are
consistent with Delaware law concerning voting of shares and determination
of a quorum.
Q: What is a "quorum"?
A: A "quorum" is a majority of the outstanding shares of Pinnacle's common
stock. The shares may be present at the meeting or represented by proxy.
There must be a quorum for the meeting to be held and action to be validly
taken. If you submit a properly executed proxy card, even if you abstain
from voting, you will be considered part of the quorum. Abstentions are
not counted in the tally of votes FOR or AGAINST a proposal. A withheld
vote is the same as an abstention. If a broker indicates on a proxy that
it does not have discretionary authority as to certain shares to vote on a
particular matter (broker non-votes), those shares will not be counted as
present with respect to that matter for purposes of establishing a quorum.
Q: Who can attend the Annual Meeting?
A: All stockholders as of the Record Date can attend. If your shares are held
in the name of a broker or other nominee, please bring proof of share
ownership with you to the meeting. A copy of your brokerage account
statement or an omnibus proxy (which you can get from your broker) will
serve as proof of share ownership.
Q: How will voting on any other business be conducted?
A: Although we do not know of any business to be considered at the meeting
other than the proposals described in this proxy statement, if any other
business is properly presented at the meeting, your signed proxy card
gives authority to Steven Day and Robert Wolsey, or either of them, to
vote on such matters at their discretion.
Q: When are stockholder proposals for the next Annual Meeting of Stockholders
due?
A: All stockholder proposals to be considered for inclusion in next year's
proxy statement must be submitted in writing, no later than November 24,
2000, to Pinnacle's Corporate Secretary, c/o Pinnacle Holdings Inc., 1549
Ringling Boulevard, Third Floor, Sarasota, Florida 34236. You should also
be aware of certain other requirements you must meet to have your proposal
included in Pinnacle's proxy statement for the 2001 Annual Meeting of
Stockholders that are explained in Rule 14a-8 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934 (the "Exchange Act").
Q: Who will pay for this proxy solicitation?
A: Pinnacle will pay all the costs of soliciting these proxies. In addition
to mailing proxy solicitation materials, our directors and employees may
also solicit proxies in person, by telephone or by other electronic means
of communication. We will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to our
stockholders.
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PROPOSALS YOU MAY VOTE ON
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
PROPOSAL
Pinnacle has nominated six candidates for election to the Board. Detailed
information on each of Pinnacle's nominees is provided beginning on page 11. All
directors are elected annually and serve a one-year term until the next annual
meeting. If any director is unable to stand for re-election, the Board may
reduce the size of the Board, designate a substitute or leave a vacancy
unfilled. If a substitute is designated, proxies voting on the original director
candidate will be cast for the substituted candidate. We expect that each
nominee, listed beginning on page 11, will be able and will not decline to serve
as a director.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD
With respect to the election of directors, the six nominees receiving the
highest number of FOR votes shall be elected to Pinnacle's Board. An abstention
will have the same effect as a vote withheld for the election of directors, and,
pursuant to Delaware law, a broker non-vote will not be treated as voting in
person or by proxy on this proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 2 - APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL
Our Amended and Restated Certificate of Incorporation, as currently in
effect (the "Certificate"), provides that Pinnacle is authorized to issue two
classes of stock consisting of 100,000,000 shares of common stock, $.001 par
value per share, and 5,000,000 shares of preferred stock, $.001 par value per
share. On February 17, 2000, the Board authorized an amendment to the
Certificate to increase the authorized number of shares of common stock to
150,000,000 (the "Amendment"). You are being asked to approve the Amendment at
the meeting.
As of the Record Date 48,294,471 shares of Pinnacle's common stock were
issued and outstanding. In addition, as of February 17, 2000, a total of
3,000,000 shares of common stock were reserved for future grant or for issuance
upon the exercise of outstanding options under Pinnacle's Stock Incentive Plan.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed increase in the authorized number of
shares of common stock is to provide sufficient shares for such corporate
purposes as may be determined by the Board to be necessary or desirable. Such
purposes may include, without limitation, facilitating broader ownership of our
common stock by effecting a stock dividend or stock split, raising additional
capital through the sale of securities, acquiring another company or its
business or assets, establishing strategic relationships with corporate
partners, providing equity incentives to employees, officers or directors or
pursuing other matters. The Board as of the date of this proxy statement has no
agreement, arrangement or intention to issue any of the shares for which
approval is sought.
The increase in authorized common stock will not have any immediate effect
on the rights of existing stockholders. However, under Delaware law, the Board
generally may issue authorized but unissued shares of common stock without
stockholder approval. The Board does not currently intend to seek stockholder
approval prior to any future issuance of additional shares of common stock
unless stockholder action is required in a specific case by applicable law, the
rules of any exchange or market on which our securities may then be listed, or
the certificate of incorporation or bylaws of Pinnacle then in effect.
Frequently, opportunities arise that require prompt action, and we believe that
the delay necessitated for stockholder approval of a specific issuance could be
detrimental to Pinnacle and its stockholders.
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The additional shares of common stock authorized pursuant to the Amendment
would have all the rights and privileges which the presently outstanding shares
of common stock possess. The increase in authorized shares would not immediately
affect the terms or rights of holders of existing shares of common stock. All
outstanding shares would continue to have one vote per share on all matters to
be voted on by the stockholders, including the election of directors. However,
to the extent that the additional authorized shares are issued in the future,
except in the case of a stock split or stock dividend, such issuances will
decrease existing stockholders' percentage equity ownership and could have the
effect of diluting the earnings per share and book value per share of
outstanding stock ownership. The holders of common stock have no preemptive
rights.
POTENTIAL ANTI-TAKEOVER EFFECT
The authorized but unissued shares of common stock could be used to make a
change in control of Pinnacle more difficult. For example, such shares could be
sold to purchasers who might side with the Board in opposing a takeover bid that
the Board determines not to be in the best interests of Pinnacle and its
stockholders. Such a sale could have the effect of discouraging an attempt by
another person or entity, through the acquisition of a substantial number of
shares of Pinnacle's common stock, to acquire control of Pinnacle, because the
issuance of new shares could be used to dilute the stock ownership of such
person or entity. Pinnacle is not aware, however, of any pending or threatened
efforts to obtain control of Pinnacle.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD
This proposal will be approved if a majority of the shares of Pinnacle's
outstanding common stock vote "FOR" the proposal. Abstention and broker
"non-votes" will have the effect of a vote "AGAINST" the proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL NO. 3 - APPROVAL OF AMENDMENTS TO THE PINNACLE HOLDINGS INC. STOCK
INCENTIVE PLAN
PROPOSAL
The Board is asking Pinnacle stockholders to amend the Pinnacle Holdings
Inc. Stock Incentive Plan (the "Plan") to increase the number of shares of
common stock reserved for issuance under the Plan from 3,000,000 to 5,000,000
(the "Reserve Share Amendment"). On February 17, 2000, the Board adopted this
proposal, subject to stockholder approval. As of the date of the approval by the
Board of the Reserve Share Amendment, options to purchase a total of 2,954,693
shares were outstanding under the Plan, and options to purchase 45,307 shares
remained available for future grants.
The Reserved Share Amendment is proposed in order to give the Board
flexibility to grant stock options and restricted stock under the Plan. We
believe that grants of stock options and restricted stock motivate high levels
of performance and provide an effective means of recognizing employee
contributions to our success. Moreover, such grants align the interests of our
employees with the interests of our stockholders. When we perform well, our
employees are rewarded along with our stockholders. We believe that option and
restricted stock grants are of great value in recruiting and retaining highly
qualified technical and other key personnel who are in great demand, which will
be important to Pinnacle's future success by allowing us to remain competitive
in attracting and retaining such key personnel.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD
Approval of this proposal requires the affirmative vote of the majority of
shares of common stock present in person or represented by proxy at the meeting
and entitled to vote on the proposal; abstentions will have the same effect as a
vote against the proposal; the broker non-votes will have no effect on the
outcome of this proposal.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SUMMARY DESCRIPTION OF THE PLAN
GENERAL. The Plan is not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), nor is it a qualified plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan
became effective July 1, 1998. In addition to the Plan, we entered into written
agreements with each of the participants describing the terms of the grants.
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PURPOSE. The purpose of the Plan is to further the interests of Pinnacle,
its subsidiaries and its stockholders by providing incentives in the form of
grants of stock options and restricted stock to key employees, non-employee
directors and other persons who contribute materially to the success and
profitability of Pinnacle. The grants recognize and reward outstanding
individual performances and contributions and give such persons a proprietary
interest in Pinnacle, thus enhancing their personal interest in Pinnacle's
continued success and progress. Pinnacle expects that the Plan will also assist
it and its subsidiaries in attracting and retaining key persons.
ADMINISTRATION OF THE PLAN. The Plan may be administered by one or more
committees appointed by the Board, one of which must consist of two or more
directors of Pinnacle who are "outside directors" as such term is defined in
Section 162(m) of the Code, and "nonemployee directors" as such term is defined
in Rule 16b-3 under the Exchange Act. The Compensation Committee (the
"Committee") currently administers the Plan and has the exclusive power under
the Plan to determine which participants will be granted awards, to establish
the terms of the awards granted to each participant, and to make all other
determinations necessary or advisable under the Plan. The Committee has the sole
and absolute discretion to determine whether an eligible individual warrants an
award under the Plan, and to determine the size and type of the award. The
Committee has full and exclusive power to construe and interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to the Plan, and to
take all actions necessary or advisable for the Plan's administration. The
Committee, in the exercise of its powers, may correct any defect or supply any
omission, or reconcile any inconsistency in the Plan, or in any option or
restricted stock agreement, in the manner and to the extent it deems necessary
or expedient to make the Plan fully effective. The Committee shall also have the
power to determine the duration and purposes of leaves of absence which may be
granted to a participant without constituting a termination of the participant's
employment for purposes of the Plan. Any of the Committee's determinations will
be final and binding on all persons. A member of the Committee will not be
liable for performing any act or making any determination in good faith. The
Committee members are appointed for indefinite terms by the Board. The Board may
remove a Committee member or appoint additional members at any time or for any
reason.
SECURITIES SUBJECT TO THE PLAN. The aggregate number of shares available
for issuance under the Plan is 3,000,000 shares of common stock, subject to
adjustment to give effect to future changes in the number of outstanding shares
of common stock of Pinnacle by virtue of a merger, consolidation,
recapitalization, reclassification, combination or exchange of shares, stock
dividend, stock split, or other similar change.
ELIGIBILITY. Each person who performs or has in the past performed services
for Pinnacle or a subsidiary of Pinnacle, whether as a director, officer,
employee, consultant or other independent contractor, and any person who
performs services relating to Pinnacle in his or her capacity as an employee or
independent contractor of a corporation or other entity that provides services
for Pinnacle is eligible to participate in the Plan.
AWARDS. Awards under the Plan may be in the form of grants of stock options
or restricted stock as determined by the Committee in its sole and absolute
discretion.
STOCK OPTIONS. Participants in the Plan are eligible to receive grants of
stock options, as determined by the Committee in its sole and absolute
discretion. Awards of stock options pursuant to the Plan may be in the form of
incentive stock options or nonqualified stock options. An incentive stock option
is an award that qualifies as an "incentive stock option" under Section 422 of
the Code. Only participants who are employees of Pinnacle are eligible to
receive grants of incentive stock options. Stock options may be granted under
the Plan on such terms and conditions not inconsistent with the provisions of
the Plan and in such form as the Committee deems appropriate at the time of
grant. Summarized below are certain provisions of the Plan relating to the grant
of stock options.
o EXERCISE PRICE. Except with respect to option grants to Ten Percent
Stockholders (as defined below), the exercise price of each share of Pinnacle's
common stock subject to an incentive stock option shall equal the exercise price
designated by the Committee on the date the option is granted, but shall not be
less than the fair market value of the common stock on the date the option is
granted. In general, "fair market value" with respect to a particular date is
defined as the sale price of the common stock on the trading day next preceding
such date as reported on the registered national exchange providing the primary
market in the common stock, or if the common stock was not traded on such
market, the average of the closing bid prices as reported by The Nasdaq Stock
Market on that date. If the common stock is not publicly traded on the date as
of which fair market value is being determined, the Board of Pinnacle shall
determine the fair market value of the common stock as of that date, using such
factors as the Board considers relevant, such as the price at which recent sales
have been made, the book value of the common stock, and Pinnacle's current and
projected earnings. An incentive stock option granted to an individual who, on
the date of grant,
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owns stock processing more than 10% of the total combined voting power of all
classes of stock of Pinnacle or any parent or subsidiary of Pinnacle (a "Ten
Percent Stockholder"), shall be granted at an exercise price of 110% of the fair
market value of Pinnacle's common stock on the date of grant. The exercise price
with respect to shares of the common stock subject to a nonstatutory stock
option will be determined by the Committee on the date the option is granted.
o TIME OF EXERCISE. An option shall be exercisable only to the extent it is
vested. At the date of grant, the Committee shall specify the vesting schedule
applicable to an option and any additional conditions required for the exercise
of the option. The Committee, in its sole and absolute discretion, may
accelerate the vesting of any option at any time.
o EXPIRATION OF OPTIONS. In general, each stock option shall expire on the
earliest of (1) 10 years from the date of its grant, or such earlier date as may
be set by the Committee in establishing the terms of the option, (2) in the case
of a Ten Percent Stockholder, five years from the date of grant, or such earlier
date as may be set by the Committee in establishing the terms of the option, (3)
one year after the date of the option holder's death, (4) in the case of total
and permanent disability of an option holder resulting in termination of
employment with Pinnacle, one year after the option holder's last day of
employment, (5) in the event of normal retirement from Pinnacle, 90 days after
the last day of the option holder's employment, or (6) in the event of
termination of employment for any reason other than death, disability or normal
retirement, 30 days after the last day that the option holder is employed by
Pinnacle.
o TRANSFERABILITY. A stock option granted under the Plan is not
transferable except by will or the laws of descent and distribution. During the
lifetime of the option holder, all rights of the stock option are exercisable
only by the option holder.
RESTRICTED STOCK. Participants in the Plan are eligible to receive grants
of restricted stock, as determined by the Committee in its sole and absolute
discretion. Restricted stock may be granted alone or in addition to other awards
under the Plan. Restricted stock may be granted under the Plan on such terms and
conditions not inconsistent with the provisions of the Plan and in such form as
the Committee deems appropriate at the time of grant. Summarized below are
certain provisions of the Plan relating to the grant of restricted stock.
o TRANSFERABILITY. Restricted stock shares granted under the Plan may not
be sold, transferred, pledged, assigned or otherwise alienated or hypothecated
until the end of the applicable period of restriction established by the
Committee at the date of grant, or upon earlier satisfaction of any other
conditions established by the Committee at the date of grant.
o OTHER RESTRICTIONS. The Committee shall impose such other restrictions on
any restricted stock shares as it may deem advisable including, without
limitation, vesting restrictions, restrictions based upon the achievement of
specific Company-wide, subsidiary, and/or individual performance goals, and/or
any other criteria that the Committee may select, and/or restrictions under
applicable federal or state securities laws, and may legend the certificate
representing restricted stock to give appropriate notice of such restrictions.
The Committee may also require that restricted stock recipients make cash
payments at the time of grant or upon lapsing of restrictions in an amount not
less than the par value of the restricted stock shares.
o RIGHTS OF HOLDERS OF RESTRICTED STOCK. Except for restrictions on
transfer and other restrictions imposed by the Committee, the participant shall
be the owner of the restricted stock and shall have all the rights of a
stockholder, including the right to receive dividends or other distributions
paid with respect to such restricted stock and the right to vote such restricted
stock. If any dividends or distributions are paid in shares of stock, such
shares shall be subject to the same restrictions on transferability and
forfeitability as the restricted stock shares with respect to which they were
paid.
o REMOVAL OF RESTRICTIONS. In general, restricted stock shares granted to a
participant shall be released from the restrictions imposed by the Committee on
the earliest of (1) the end of the period of restriction established by the
Committee at the date of grant, (2) the date of the participant's death, (3) in
the case of total and permanent disability of a participant resulting in
termination of employment with Pinnacle, the participant's last day of
employment, or (4) in the event of normal retirement from Pinnacle, the last day
of the participant's employment.
o FORFEITURES. If a participant ceases employment all nonvested restricted
stock shares held by the participant shall be forfeited immediately and returned
to Pinnacle. The Committee, in its sole and absolute discretion,
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shall have the right to provide for expiration of the restrictions on restricted
stock shares following termination of employment, upon such terms and provisions
as it deems proper.
DURATION OF PLAN. Awards may be granted under the Plan only during the 10
years immediately following the effective date of the Plan. Accordingly, options
and restricted stock may not be granted under the Plan after July 1, 2008.
AMENDMENT AND TERMINATION. The Board may alter, amend, or terminate the
Plan from time to time without approval of the stockholders. The Board may,
however, condition any amendment on the approval of the stockholders of Pinnacle
if such approval is necessary with respect to tax, securities or other
applicable laws to which Pinnacle, the Plan, the participants or eligible
persons are subject. Any amendment, whether with or without stockholder
approval, that alters the terms or provisions of an award granted before the
amendment (unless the alteration is expressly permitted under the Plan) will be
effective only with the consent of the participant to whom the award was granted
or the holder currently entitled to exercise it.
DESIGNATION OF BENEFICIARY. Each participant may designate a beneficiary to
receive, in the event of the participant's death, any rights to which the
participant may be entitled under the Plan. Designation of a beneficiary by a
participant shall be made in writing and shall be filed with Pinnacle. If no
such beneficiary is designated or if the beneficiary so designated does not
survive the participant, the estate of such participant shall be deemed to be
his beneficiary. A participant may, by written notice to Pinnacle, change his
beneficiary designation.
ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other expansion or
contraction of Pinnacle's common stock occurs, the Committee will equitably
adjust the number and class of shares for which awards are authorized to be
granted under the Plan, the number and class of shares then subject to awards
previously granted to participants under the Plan, and the price per share
payable upon exercise of each award outstanding under the Plan.
FEDERAL TAX INFORMATION
Pursuant to the Plan, Pinnacle may grant either "incentive stock options,"
as defined in Section 422 of the Code, nonstatutory options or restricted stock.
INCENTIVE STOCK OPTIONS. A participant who receives an incentive stock
option grant will not recognize any taxable income either at the time of grant
or exercise of the option, although the exercise may subject the participant to
the alternative minimum tax. Upon the sale or other disposition of the shares
more than two years after the grant of the option and one year after the
exercise of the option, any gain or loss will be treated as a long-term or
short-term capital gain or loss, depending upon the holding period. If these
holding periods are not satisfied, the participant will recognize ordinary
income at the time of sale or disposition equal to the difference between the
exercise price and the lower of (1) the fair market value of the shares at the
date of the option exercise or (2) the sale price of the shares. Pinnacle will
be entitled to a deduction in the same amount as the ordinary income recognized
by the participant. Any gain or loss recognized on such a premature disposition
of the shares in excess of the amount treated as ordinary income will be
characterized as long-term or short-term capital gain or loss, depending on the
holding period.
NONSTATUTORY STOCK OPTIONS. All options that do not qualify as incentive
stock options are referred to as nonstatutory options. A participant will not
recognize any taxable income at the time he receives a nonstatutory option
grant. However, upon exercise of the nonstatutory option, the participant will
recognize ordinary taxable income generally measured as the excess of the fair
market value of the shares purchased on the date of exercise over the purchase
price. Any taxable income recognized in connection with an option exercise by a
participant who is also an employee of Pinnacle will be subject to tax
withholding by Pinnacle. Upon the sale of such shares by the participant, any
difference between the sale price and the fair market value of the shares on the
date of exercise of the option will be treated as long-term or short-term
capital gain or loss, depending on the holding period. Pinnacle will be entitled
to a tax deduction in the same amount as the ordinary income recognized by the
participant with respect to shares acquired upon exercise of a nonstatutory
option.
RESTRICTED STOCK. A participant who receives a grant of restricted stock in
accordance with the terms of the Plan will recognize as ordinary income the
excess of the fair market value of the shares over the amount paid for such
shares at the time the shares become transferable or are no longer subject to
forfeiture. However, the participant may
7
<PAGE>
make an election under Section 83(b) of the Code to be taxed in the year the
restricted stock is granted. Pinnacle is entitled to a deduction in an amount
equal to the amount included in the participant's income (1) when the shares
become nonforfeitable, (2) when the participant makes an election under Section
83(b) of the Code, or (3) when Pinnacle cancels the restriction on the shares.
Pinnacle will generally not be allowed any deductions unless it makes proper
withholdings with respect to the income recognized by the participant.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and Pinnacle with respect to the grant and exercise of
options and restricted stock under the Plan, does not purport to be complete,
and does not discuss the tax consequences of the participant's death or the
income tax laws of any municipality, state or foreign country in which a
participant may reside. It is emphasized that, while Pinnacle believes that the
foregoing statements are correct based on existing provisions of the Code and
the interpretations thereof, no assurance can be given that legislative,
administrative, or judicial changes or interpretations will not occur that would
modify such statements. Also, individual financial situations may vary and state
and local taxation may be significant. Any participant in the Plan should,
therefore, consult his own tax advisor concerning the tax consequences of the
Plan and participation therein.
8
<PAGE>
STOCK OWNERSHIP
The following table shows the amount of Pinnacle common stock beneficially
owned (unless otherwise indicated) as of the Record Date by (1) any person who
is known by Pinnacle to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (2) Pinnacle's directors, (3) the executive
officers named in the Summary Compensation Table below, and (4) all directors
and executive officers of Pinnacle as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
- ------------------------ ----------- -----------
<S> <C> <C>
ABRY II(a) ................................................ 3,930,330 8.1%
Robert Wolsey (b) ......................................... 339,591 *
James M. Dell'Apa(c) ...................................... 236,111 *
Steven Day (d) ............................................ 202,527 *
David Zahn (e) ............................................ 46,211 *
Ben Gaboury (f) ........................................... 46,211 *
Andrew Banks .............................................. 550 *
G. Peter O'Brien (g) ...................................... 10,000 *
Royce Yudkoff (h) ......................................... 3,931,430 *
J. Clarke Smith (i) ....................................... 12,000 *
Marsh & McLennan Companies, Inc. (j) ...................... 3,267,309 6.8%
All directors and executive officers as a group (13)(k).... 4,842,043 10.0%
- ----------
</TABLE>
* Less than 1% of the outstanding common stock.
(a) ABRY Holdings Co., the sole member of the general partner of ABRY Capital,
which is the general partner of ABRY II, is wholly owned by Mr. Yudkoff.
(b) Includes 5,774 shares of common stock held by Pantera, Inc. and 288,682
shares of common stock held by Pantera Partnership Ltd. Includes 30,505
shares of common stock that are subject to stock options exercisable within
60 days.
(c) Includes 25,670 shares of common stock that are subject to stock options
exercisable within 60 days.
(d) Includes 7,143 shares of common stock held by South Creek, Inc. and 185,384
shares of common stock held by South Creek Partnership Ltd. Includes 10,000
shares of common stock that are subject to stock options exercisable within
60 days.
(e) Includes 25,670 shares of common stock that are subject to stock options
exercisable within 60 days.
(f) Includes 25,670 shares of common stock that are subject to stock options
exercisable within 60 days.
(g) Represents shares subject to options held by Mr. O'Brien that are
exercisable within 60 days.
(h) Mr. Yudkoff is deemed the beneficial owner of the common stock held by ABRY
II. See note (a) above. Also includes 550 shares of common stock held by
Mr. Yudkoff and his spouse.
(i) Includes 10,000 shares of common stock that are subject to stock options
exercisable within 60 days.
(j) The number of shares shown in the table is based on a Schedule 13G filed
with the SEC on July 9, 1999.
(k) Includes 154,927 shares of common stock that are subject to stock options
held by 9 executive officers and 4 non-employee directors that are
exercisable within 60 days.
9
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for
Pinnacle's common stock as compared with the cumulative total return for The
Nasdaq Stock Market (U.S.) Index and the average performance of a group
consisting of Pinnacle's peer corporations on a line-of-business basis. The
corporations making up the peer group are American Tower Corp., Crown Castle
International Corp., SBA Communications Corp. and Spectrasite Holdings Inc. The
cumulative return of Pinnacle was computed by dividing the difference between
the price of Pinnacle's common stock at the end and the beginning of the
measurement period (February 19, 1999 to December 31, 1999) by the price of
Pinnacle's common stock at the beginning of the measurement period. The total
return calculations are based upon an assumed $100 investment on February 19,
1999, the date of Pinnacle's initial public offering.
[GRAPH]
DATE PINNACLE HOLDINGS INC. NASDAQ INDEX PEER INDEX
---- ---------------------- ------------ ----------
02/19/1999 100.000 100.000 100.000
02/26/1999 100.889 100.158 97.140
03/31/1999 107.556 107.520 92.592
04/30/1999 145.778 110.529 85.497
05/28/1999 129.333 108.024 90.512
06/30/1999 174.222 117.581 95.726
07/30/1999 175.556 115.751 94.245
08/31/1999 179.111 120.314 84.196
09/30/1999 185.778 120.302 81.467
10/29/1999 170.667 129.201 80.290
11/30/1999 203.111 143.168 107.581
12/31/1999 301.333 174.605 129.611
10
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Pinnacle's officers and
directors, and persons who own more than ten percent of a registered class of
Pinnacle's equity securities, to file initial reports of ownership on Form 3 and
changes in ownership on Form 4 and Form 5 with the SEC. Such officers, directors
and ten-percent stockholders are also required by SEC rules to furnish Pinnacle
with copies of all such forms that they file.
Based solely on its review of the copies of such forms received by Pinnacle
from certain reporting persons, Pinnacle believes that, during 1999, all Section
16(a) filing requirements applicable to its officers, directors and ten percent
stockholders were complied with.
DIRECTORS AND EXECUTIVE OFFICERS
Set for the below is certain information as of the Record Date, concerning
Pinnacle's executive officers, continuing directors, and nominee for re-election
as a director.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME POSITION(S) AGE DIRECTOR
- ---- ----------- --- --------
<S> <C> <C> <C>
Robert Wolsey Director, President and Chief Executive Officer 49 1995
James Dell'Apa Manager of Acquisitions 41 --
Steven Day Director, Vice President, Secretary and Chief Financial
Officer 47 1997
Ben Gaboury President of Pinnacle Towers Inc. 49 --
David Zahn Vice President of Operations of Pinnacle Towers Inc. 34 --
Decker A. Todd Assistant Secretary and Controller 38 --
Christine Shirley Vice President and Treasurer 37 --
David Koehler Vice President of Finance 42 --
Martin Alvarez Chief Information Officer 46 --
Andrew Banks Director 44 1995
G. Peter O'Brien (1) Director 54 1999
J. Clarke Smith Director 57 2000
Royce Yudkoff (1) Director 44 1995
- ---------------
</TABLE>
(1) Messrs. Yudkoff, O'Brien and Smith serve on Pinnacle's Audit and
Compensation Committees.
ROBERT WOLSEY. Mr. Wolsey is primarily responsible for the overall direction of
our acquisitions and operations and has substantial experience in consolidating
fragmented industries. From 1990 to 1994, Mr. Wolsey was Chief Executive Officer
of Pittencrieff Communications, Inc., a regional consolidator of SMR
operators. From 1983 to 1989, as President of Pittencrieff PLC and a predecessor
company, Mr. Wolsey was involved with oil and gas assets. He has a Bachelor of
Science (Honors) degree in Color Physics from the University of Manchester.
JAMES DELL'APA. Mr. 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. 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 Infrastructures 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. Mr. Day is primarily responsible for our financial, legal and
administrative affairs and for the integration of acquired properties. Mr. Day
was a partner in the accounting firm of Price Waterhouse LLP until joining us 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 earned a Masters of
Business Administration at Loyola University of Chicago and a Bachelor of Arts
degree at the University of West Florida.
11
<PAGE>
BEN GABOURY. Mr. Gaboury is primarily responsible for our sales and marketing
operations. Mr. Gaboury was employed for 17 years with Motorola in various sales
and sales management positions. Before joining us in October 1996, Mr. Gaboury
was responsible for planning the strategy that Motorola employed in connection
with the build out of its SMR network in New York and the New England area. He
then executed the plan to market SMR services as well as related rental towers.
Mr. Gaboury holds a Masters Degree from Jersey City State College and a
Bachelors Degree from Fairleigh Dickinson University.
DAVID ZAHN. Mr. Zahn is primarily responsible for the ongoing maintenance of our
existing communications site inventory, new site construction, capacity
augmentation and new customer equipment integration. He joined us in September
1996. From 1987 to 1996, Mr. Zahn worked for 360 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 last management position with that company
was Director of Engineering where he was responsible for a 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.
DECKER A. TODD. Mr. Todd has served as Pinnacle's Assistant Secretary and
Controller since January, 1998. Mr. Todd also served as Pinnacle's Treasurer
until October 1, 1999. Prior to joining Pinnacle, Mr. Todd was the Director of
Operations of Progressive Business Solutions, Inc. (October 1996 through October
1997) and as Vice President of Finance, Chief Financial Officer, Secretary and
Director of Check Express, Inc. (October 1993 through February 1996). From 1984
to 1993 Mr. Todd was an accountant serving in various capacities with Price
Waterhouse, LLP.
CHRISTINE SHIRLEY. Ms. Shirley has served as Pinnacle's Vice President and
Treasurer since October 1, 1999. Prior to joining Pinnacle, Ms. Shirley served
as Vice President of Finance of Riscorp, Inc. (November 1991 through April
1998), Chief Financial Officer of Spartan Premier, Inc. (June 1998 through
January 1999) and as an Independent Consultant (January 1999 through September
1999).
DAVID KOEHLER. Mr. Koehler joined the Company as the Vice President of Finance
in September, 1999. Previously, Mr. Koehler was the Chief Financial Officer of
Fauquier Bank: a Virginia based commercial bank from 1994 to 1999. Prior to
1994, Mr. Koehler served four years as Vice President with Crestar Security
Corporation's investment banking division. Additionally, he worked in Price
Waterhouse's and Ernst & Young's consulting practices. He graduated in 1984 with
a Bachelor of Science from Old Dominion University with majors in accounting,
finance, and management information services. He is a Certified Public
Accountant in Virginia.
MARTIN ALVAREZ. Mr. Alvarez is primarily responsible for our Information
Technology and Services. Prior to joining us in June 1997, Mr. Alvarez was a
Senior Manager in the Management Consulting Services division of Price
Waterhouse LLP. Mr. Alvarez has been involved with the growth and management of
Information Technology and Services at Pinnacle since April of 1996. His
experience includes work for a variety of industries that include
telecommunications, entertainment, manufacturing and utilities, among other
industries. Mr. Alvarez's 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. Mr. Banks is Chairman of ABRY Holdings Co. 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 Muzak, LLC and U.S. Telemetry, Inc. Mr. Banks is a
graduate of Harvard Law School, a Rhodes Scholar holding a Master's degree from
Oxford University and a graduate of the University of Florida.
G. PETER O'BRIEN. Mr. O'Brien recently retired as a managing director of Merrill
Lynch, Pierce, Fenner & Smith Incorporated after working in the Equity Capital
Markets area for 28 years. Mr. O'Brien is presently a member of the Board of the
Legg Mason Family of Mutual Funds and a member of the Colgate University Board
of Trustees. Mr. O'Brien is a graduate of the Columbia Business School and a
graduate from Colgate University.
J. CLARKE SMITH. Mr. Smith has been Vice President - Finance and Administration,
Chief Financial Officer and Treasurer of Aerial Communications, Inc. ("Aerial")
since November, 1995. He has served as a Director of Aerial since February,
1996. Prior to that, he was President and Chief Executive Officer of Mortgage
Edge Corporation from 1993 to 1995 and President of Sears Savings Bank from 1989
to 1993.
ROYCE YUDKOFF. Mr. Yudkoff is a partner in ABRY Capital and President and Chief
Executive Officer of ABRY Partners Co. 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
12
<PAGE>
media practice. Mr. Yudkoff is presently a director (or the equivalent) of
Quorum Broadcast Holdings Inc., Nexstar Broadcasting Group, LLC, Audio
Communications Network, LLC, Metrocall, Sullivan Broadcasting Company, Inc.,
Avalon Cablevision and Muzak, LLC. He graduated as a Baker Scholar from the
Harvard Business School and is an honors graduate of Dartmouth College.
13
<PAGE>
BOARD MEETINGS AND COMMITTEES
During 1999, the Board held a total of six meetings and took action by
written consent three times. No director attended fewer than 75% of the
aggregate of either (1) the total number of Board meetings that were held during
the period for which he was a director or (2) the total number of committee
meetings of the Board on which he served that were held during the period for
which he was a director. The Board currently has a Compensation Committee,
Executive Committee and an Audit Committee; however, it currently has no
nominating committee or other committee performing similar functions.
o COMPENSATION COMMITTEE. Pinnacle's Compensation Committee consists of Mr.
Yudkoff, Mr. O'Brien and Mr. Smith. The Compensation Committee establishes
the compensation of Pinnacle's executive officers. The Compensation
Committee also administers Pinnacle's Stock Incentive Plan and determines
the amount, exercise price and vesting schedules of stock options awarded
thereunder.
o AUDIT COMMITTEE. Pinnacle's Audit Committee consists of Mr. Yudkoff, Mr.
O'Brien and Mr. Smith. 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 Pinnacle's internal
accounting controls. The Audit Committee is also responsible for the review
of transactions between Pinnacle and any affiliate or entity in which a
Company affiliate has a material interest.
o EXECUTIVE COMMITTEE. Pinnacle's Executive Committee consists of Mr. Wolsey,
Mr. Clarke and Mr. Yudkoff. The Executive Committee has the authority to
act in place of the Board on all matters that would otherwise come before
the Board, except for such matters that are required by law or by
Pinnacle's certificate of incorporation or bylaws to be acted upon
exclusively by the Board..
COMPENSATION OF DIRECTORS
All directors receive reimbursement of reasonable out-of-pocket expenses
incurred in connection with meetings of the Board and committees of the Board.
Directors who are employees of Pinnacle do not receive any fee in addition to
their regular salary for serving on the Board. Directors who are affiliated with
our largest stockholder, ABRY II, do not receive any fee, but are eligible to
participate in Pinnacle's Stock Incentive Plan. Non-employee directors who are
unaffiliated with ABRY II generally receive an annual fee of approximately
$25,000 for each full year on the Board; plus $1,000 for each Board meeting
attended; an additional $1,000 for each Committee meeting attended, if such
meeting occurs on a day other than the day the Board meets; and are eligible to
participate in Pinnacle's Stock Incentive Plan.
14
<PAGE>
EXECUTIVE COMPENSATION
Under rules established by the SEC, Pinnacle is required to provide certain
information concerning total compensation earned or paid to: (1) the Chief
Executive Officer of Pinnacle and (2) the four other most highly compensated
executive officers whose annual salaries and bonuses exceeded $100,000 during
1999 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
Named Executive Officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- -----------------------------------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION (1) YEAR SALARY($) BONUS($) SATION ($) AWARDS ($) OPTIONS (#) PAYOUTS ($) SATION ($)
- ------------------------------- ------ ---------- -------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Wolsey................. 1999 284,124 100,000
Director, President and 1998 230,731 70,000 -- -- --
Chief Executive Officer 1997 156,000 30,000 $ 6,500 (2) -- -- -- --
Steven Day.................... 1999 189,449 75,000
Director, Vice President, 1998 153,808 15,000 -- -- -- -- --
Secretary and 1997 131,250 -- -- $ 10,000 -- -- --
Chief Financial Officer
David Zahn.................... 1999 145,954 20,000
Vice President of Operations 1998 129,453 15,000 -- -- -- -- --
1997 126,260 -- -- -- -- -- --
Ben Gaboury................... 1999 168,487 75,000
Vice President of Sales and 1998 129,453 15,000 -- -- -- -- --
Marketing 1997 126,094 -- -- -- -- -- --
James Dell'Apa................ 1999 238,008 50,000
Manager of Acquisitions 1998 200,000 50,000 -- -- -- -- --
1997 156,248 -- -- -- -- -- --
</TABLE>
- -----------------------
(1) See also, "Employment Agreements."
(2) Amount of reimbursement for payment of income taxes.
EMPLOYMENT AGREEMENTS
Pinnacle 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 Pinnacle until his resignation, death or disability or other
incapacity, or until terminated by Pinnacle. Under the Employment Agreements,
each of the Principal Employees will receive, among other things, (1) an annual
base salary and (2) other benefits as described in the Employment Agreements
(including all employee benefit plans and arrangements that are generally
available to other employees). Each of the Employment Agreements includes
noncompetition and nonsolicitation provisions restricting the respective
employees' ability to engage in activities competitive with Pinnacle 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.
15
<PAGE>
OPTION GRANTS DURING 1999
The following table sets forth information as to stock options granted to
all Named Officers during the 1999. These options were granted under our Stock
Incentive Plan and, unless otherwise indicated, provide for vesting as to 20% of
the underlying common stock one year after the date of grant, then 20% each year
thereafter. Options were granted at an exercise price equal to or greater than
110% of the fair market value of our common stock on the date of grant. The
amounts under "Potential Realizable Value at Assumed Annual Rate of Stock
Appreciation for Option Term" represent the hypothetical gains of the options
granted based on assumed annual compound stock appreciation rates of 5% and 10%
over their exercise price for the full ten-year term of the options. The assumed
rates of appreciation are mandated by the rules of the SEC and do not represent
our estimate or projection of future common stock prices.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED(#) 1999 SHARE ($) DATE 5% ($) 10% ($)
---- ------------- ------------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert Wolsey........... 192,525 6.5 $ 14.00 2/18/09 $ 1,695,091 $ 4,295,694
500,000 17.0 16.50 6/04/09 5,188,381 13,148,375
Steven Day.............. 50,000 1.7 14.00 2/18/09 440,226 1,115,620
275,000 9.3 16.50 6/04/09 2,853,609 7,231,606
David Zahn.............. 128,350 4.4 14.00 2/18/09 1,130,061 2,863,796
225,000 7.6 16.50 6/04/09 2,334,771 5,916,769
Ben Gaboury............. 128,350 4.4 14.00 2/18/09 1,130,061 2,863,796
325,000 11.0 16.50 6/04/09 3,372,447 8,546,444
James M. Dell'Apa....... 128,350 4.4 14.00 2/18/09 1,130,061 2,863,796
275,000 9.3 16.50 6/04/09 2,853,609 7,231,606
</TABLE>
OPTION EXERCISES DURING 1999 AND YEAR END OPTION VALUES
There were no stock options exercised during the last year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Pinnacle's Compensation Committee is currently composed of Mr. Yudkoff, Mr.
O'Brien and Mr. Smith. No current or former member of the Compensation Committee
is currently or was formerly an officer or an employee of Pinnacle or its
subsidiaries.
16
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
THE COMMITTEE'S RESPONSIBILITIES: The Compensation Committee of Pinnacle's
Board (the "Committee") has responsibility for setting and administering the
policies which govern executive compensation. The Committee is composed entirely
of outside directors. Reports of the Committee's actions are presented to the
full Board. The purpose of this report is to summarize the philosophical
principals, specific program objectives and other factors considered by the
Committee in reaching its determinations regarding the compensation of
Pinnacle's executive officers.
COMPENSATION PHILOSOPHY: The Committee has approved principals for the
management compensation program which:
o encourage the development and the achievement of strategic objectives
that enhance long-term stockholder value,
o attract, retain and motivate key personnel who contribute to long-term
success of Pinnacle, and
o provide a compensation package that recognizes individual
contributions and Company performance.
COMPENSATION METHODOLOGY: Pinnacle strives to provide a comprehensive
executive compensation program that is competitive and performance-based in
order to attract and retain superior executive talent. The Committee reviews
market data and assesses Pinnacle's competitive position for three components of
executive compensation:
o base salary,
o annual incentives, and
o long-term incentives.
To assist in benchmarking the competitiveness of its compensation programs, we
use PricewaterhouseCoopers LLP ("PWC"), a nationally recognized public
accounting firm. PWC has utilized a number of national compensation surveys and
has provided data for companies of similar size to Pinnacle, as well as specific
analysis of the compensation information contained in the proxy statements of a
number of companies in the same industry as Pinnacle.
COMPONENTS OF COMPENSATION:
o BASE SALARY. Base salary for all executive officer positions is
targeted to be competitive with the average salaries of comparable
executives at tower industry companies of similar size and is also
intended to reflect consideration of an officer's experience,
business judgment, and role in developing and implementing overall
business strategy for Pinnacle. The Committee believes that
Pinnacle's compensation of executive officers falls within the median
of industry compensation levels. Base salaries are based upon
qualitative and subjective factors, and no specific formula is
applied to determine the weight of each factor.
o BONUSES. Bonuses for executive officers are intended to reflect
Pinnacle's belief that a significant portion of the annual
compensation of the executive should be contingent upon the
performance of Pinnacle, as well as the individual's contribution.
Bonuses are paid on an annual basis and are based on qualitative and
subjective factors, including the earnings before interest,
depreciation and amortization of Pinnacle, business development,
operational performance and other measures of performance appropriate
to the officer compensated.
o LONG-TERM INCENTIVES. Pinnacle utilizes stock options as long-term
incentives to attract and retain key personnel or reward exceptional
performance. Stock options are granted periodically by the Stock
Option Committee and are based on both qualitative and subjective
factors. Options are granted with an exercise price equal to the fair
market value of Pinnacle's Common Stock on the last market trading
day prior to the date of determination (determined in accordance with
the option plan) and grants made during the last year vest over a
period of 60 months. This is designed to create an incentive to
increase stockholder value over the long-term since the options will
provide value to the recipient only when the price of the stock
increases above the exercise price.
17
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION: The base salary of Mr. Wolsey was
increased to be competitive with the average salaries of comparable executives
at companies of similar size, based on the findings of the PWC report, and to
reflect the overall operating performance of Pinnacle during 1999. The
Compensation Committee also awarded a bonus to Mr. Wolsey based upon certain
subjective factors and the overall operating performance of Pinnacle during
1999.
IRS Limits on Deductibility of Compensation: Section 162(m) of the Internal
Revenue Code of 1986, as amended, with certain exceptions, limits Pinnacle's tax
deduction for compensation paid to Named Executives to $1,000,000 per covered
executive year. Pinnacle expects no adverse tax consequences under Section
162(m) for 1999.
By the Compensation Committee
Royce Yudkoff
Peggy Koenig
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
STOCKHOLDERS AGREEMENT
The principal stockholders of Pinnacle (ABRY II and Messrs. Wolsey,
Dell'Apa and Day) were parties to a Stockholders Agreement. The Stockholders
Agreement was terminated in connection with our Initial Public Offering ("IPO").
The Stockholders Agreement gave such stockholders the preemptive right, with
respect to some exceptions, to acquire their pro rata share of future issuances
of capital stock of Pinnacle. The following issuances were exempt from this
preemptive right: (1) to any employee of Pinnacle; (2) in connection with any
acquisition of merger; (3) pursuant to a public offering; (4) upon the exercise,
conversion, or exchange of any option or convertible security; (5) of up to a
total of 200,000 shares of the previously existing Class A common stock to ABRY
II at a price of $100 per share; (6) as a part of any recapitalization or
reorganization; (7) upon the conversion of the previously existing Class D
common stock into Class C common stock; and (8) as a distribution to
stockholders in the form of securities of Pinnacle. The Stockholders Agreement
also provided that ABRY II would make a capital contribution of up to an
aggregate of $50 million.
Parties to the Stockholders Agreement had certain rights and obligations in
connection with (1) a sale by ABRY II of shares in Pinnacle, (2) a sale of
Pinnacle, and (3) a reorganization or recapitalization of Pinnacle in
anticipation of a sale of Pinnacle or a public offering. In the case of a sale
by ABRY II of shares in Pinnacle, the other stockholders party to the
Stockholders Agreement would have had the right to participate pro rata in such
a sale. In the case of a sale of Pinnacle approved by its stockholders or a
reorganization or recapitalization in anticipation of a sale or a public
offering, stockholders party to the Stockholders Agreement would have had the
obligation to participate in such transaction.
The Stockholders Agreement also governed the vesting of the Class D common
stock issued to certain executives and employees of Pinnacle. Pursuant to the
Stockholders Agreement, all shares of the previously existing Class D common
stock issued and outstanding would have automatically vested and converted into
the previously existing Class C common stock upon the consummation of a public
stock offering (and thereafter converted into common stock). The Stockholders
Agreement also provided for certain put and call rights among Pinnacle and
certain of its stockholders with respect to the previously existing Class B
common stock and the previously existing Class D common stock upon the
termination of employment or death of Messrs. Wolsey, Dell'Apa or Day.
ABRY BRIDGE LOANS
Previously, under our credit facility, we were permitted to borrow money,
from time to time, from our principal stockholder, ABRY II, to help us finance
certain acquisitions. The maximum aggregate amount of such loans could not
exceed $15 million. In February 1998, we entered into a bridge loan with ABRY II
to borrow $12.5 million to partially finance the Southern Towers Acquisition.
This bridge loan was repaid in full in March 1998 with proceeds from the
offering of the Existing Notes. In April and September of 1998, ABRY II advanced
to us a total of $15 million to partially finance the MobileMedia Acquisition
and certain other acquisitions. These bridge loans were repaid in full in
February 1999 with proceeds from the IPO.
The amounts outstanding under these bridge loans bore interest at the rate
of 9.0% per annum. Interest and principal were payable within one year from the
date of the related borrowing.
RECAPITALIZATION AGREEMENT
In connection with the IPO, the parties to the Stockholders Agreement
entered into a recapitalization agreement (the "Recapitalization Agreement") to
effect the conversion of all of our outstanding shares of each of the five
classes of our common stock into shares of a single class of common stock (the
"Common Stock"). Our certificate of incorporation was amended immediately prior
to the consummation of the IPO to eliminate the multiple classes of our common
stock and to create the now single class of common stock. All of the outstanding
shares of all classes of our common stock, other than Class D common stock, were
converted into approximately 8,571,309 shares of common stock and all of the
shares of Class D common stock were converted into approximately 1,428,691
shares of common stock.
Pursuant to the Recapitalization Agreement, we collectively paid the
holders of the outstanding shares of our Class A, Class B and Class E common
stock (prior to the above described conversion) approximately $38.9 million with
proceeds from the IPO. This amount equaled the amount of preferences these
shares were entitled to over the other classes of our common stock. In addition,
we collectively paid the holders of the outstanding shares of our Class A common
stock (prior to the above described conversion) approximately $4.8 million with
proceeds from the IPO. This
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amount equaled the amount of yield these shares had accrued from the date of
their issuances through September 30, 1997 pursuant to our certificate of
incorporation before giving effect to the amendment relative to the conversion
of those shares as described above.
JUNIOR PREFERRED STOCK
In September 1998, ABRY/Pinnacle, Inc., an affiliate of ABRY II, purchased
32.5 shares of Series B Junior Preferred Stock (the "Junior Preferred Stock")
with a liquidation preference of $32.5 million. The proceeds of the sale of the
Junior Preferred Stock were used to partially finance the 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 of those shares were used to partially pay down our
credit facility. Proceeds from the IPO were used to redeem the Junior Preferred
Stock.
PINNACLE TOWERS II INC.
In November 1997, certain Pinnacle stockholders formed Pinnacle Towers II
Inc. ("PT II"). PT II is under common control with, and therefore is an
affiliate of Pinnacle, because ABRY II and certain executives of Pinnacle
control a majority of PT II stock. PT 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, Pinnacle sold to PT II, for approximately $2.2 million,
certain of its towers and projects-in-progress. Effective April 30, 1998,
Pinnacle repurchased all of those assets from PT II. Currently, PT II has
minimal assets and is an inactive company.
PINNACLE TOWERS III INC.
Following the closing of Pinnacle's acquisition of approximately 1,858
communications sites from Motorola, Inc., we transferred a portion of the
rooftop communication sites we acquired from Motorola, Inc. to Pinnacle Towers
III Inc. ("PT III"), a corporation in which we own substantially all of the
equity interests, in exchange for $9.8 million of convertible preferred stock
and a $39.2 million convertible promissory note, in order to minimize the risk
that the ownership of or income from such assets might negatively affect our
qualification as a Real Estate Investment Trust ("REIT"). In January, 2000, in
two separate transactions, we transferred additional rooftop communications
sites to PT III in exchange for $206,501 of convertible preferred stock and a
$826,005 convertible promissory note in the first deal and in exchange for
$2,716,000 of convertible preferred stock and a $8,701,000 convertible
promissory note in the second deal, in order to minimize the risk that the
ownership of or income from such assets might negatively affect our
qualification as a REIT. In connection with each of those transfers, we agreed
to make our personnel, facilities and general and administrative overhead
available to PT III with the cost thereof to be reimbursed to us by PT III.
Messrs. Day and Wolsey, each executive officers of Pinnacle, currently own
approximately 91% of the outstanding voting stock of PT III, which represents a
very limited portion of the overall equity capital of PT III. Pinnacle
anticipates transferring additional communication sites, to PT III, in order to
minimize the risk that ownership of or income from such assets might negatively
affect our qualification as a REIT.
MANAGEMENT INDEBTEDNESS
In 1998, we 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 Pinnacle. The loan bore interest payable quarterly at a rate equal to
Pinnacle's bank rate less 600 basis points. This loan was repaid in August 1998.
CAPITAL CONTRIBUTION AGREEMENT
Pursuant to our credit facility, we entered into a capital contribution
agreement with ABRY II and NationsBank of Texas, N.A. on February 26, 1998,
which agreement was replaced by a similar capital contribution agreement between
the same parties as of May 29, 1998, which was thereafter amended in January
1999 (as amended, the "Capital Contribution Agreement"), pursuant to which ABRY
II agreed to make capital contributions to us, up to an aggregate capital
contribution of $50.0 million, in an amount equal to (1) 100% of our general and
administrative expenses and corporate development expenses and (2) certain
amounts, including the amount necessary to cure any payment or financial
covenant default under our credit facility. From January 1, 1999 through the
Company's IPO on February 19, 1999, $37.2 million remained outstanding under the
Capital Contribution
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Agreement, at which time such amount was paid in full with proceeds from the
IPO. A subsequent amendment to our credit facility eliminated the requirement
that we have the Capital Contribution Agreement in effect. In addition, ABRY II
has guaranteed an additional $3.9 million of other Company debt that remains
outstanding.
MANAGEMENT AND CONSULTING SERVICES AGREEMENT
We entered into a Management Services and Consulting Agreement with ABRY II
as of April 17, 1995, pursuant to which we pay up to $75,000 per year plus
reimbursable expenses in exchange for certain consulting services. We paid
approximately $78,166, $834,192 and $232,500 for such services and expenses for
the years ended December 31, 1997, 1998 and 1999, respectively. The Management
Services and Consulting Agreement was terminable at any time by either party
with prior written notice. On or about February 19, 1999, the Management and
Consulting Services Agreement was terminated.
REGISTRATION RIGHTS AGREEMENT
Our principal stockholders (ABRY II and Messrs. Wolsey, Dell'Apa and Day)
entered into a registration rights agreement (the "Registration Rights
Agreement") pursuant to which ABRY II and its assigns may require us, subject to
certain conditions and limitations, to register with the SEC in accordance with
the Securities Act of 1933, as amended (the "Securities Act") all or part of the
shares of our common stock currently owned by ABRY II at the request of the
holders of a majority of such shares of common stock. If we propose to file on
our own behalf or on behalf of any holders of our equity securities a
registration statement under the Securities Act, then we are 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. We may not cause any registration statement
to be declared effective by the SEC within 180 days after the effective date of
any other registration statement registering our equity securities. We are
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company for the year ended
December 31, 1999 have been audited by PricewaterhouseCoopers LLP, an
independent auditor. The Board of Directors is scheduled to select, later this
year, the independent auditor to perform the audit for the Company for the
current year ending December 31, 2000, accordingly, no independent accountant
has yet been selected for the current year. A representative of
PricewaterhouseCoopers LLP will be present at the annual meeting of stockholders
in order to make a statement if they desire and to be available to respond to
appropriate questions.
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OTHER MATTERS
ADDITIONAL MATTERS
Pinnacle knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
Pinnacle may recommend.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares that you hold. You are, therefore, urged to
fill-in, date, execute and return, at your earliest convenience, the
accompanying proxy card in the enclosed envelope.
THE BOARD OF DIRECTORS OF
PINNACLE HOLDINGS INC.
Sarasota, Florida
April 7, 2000
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PINNACLE HOLDINGS INC.
ANNUAL MEETING OF STOCKHOLDERS
HYATT SARASOTA
1000 BOULEVARD OF THE ARTS
SARASOTA, FLORIDA 34236
MAY 2, 2000
10:00 A.M.
- FOLD AND DETACH HERE -
PROXY SOLICITED BY THE BOARD FOR
ANNUAL MEETING OF STOCKHOLDERS
THE UNDERSIGNED HEREBY APPOINTS ROBERT WOLSEY AND STEVEN DAY, OR EITHER OF
THEM, EACH WITH THE POWER OF SUBSTITUTION AND REVOCATION, AS THE PROXY OR
PROXIES OF THE UNDERSIGNED TO REPRESENT THE UNDERSIGNED AND VOTE ALL SHARES OF
THE COMMON STOCK OF PINNACLE HOLDINGS INC., THAT THE UNDERSIGNED WOULD BE
ENTITLED TO VOTE IF PERSONALLY PRESENT AT THE ANNUAL MEETING OF STOCKHOLDERS OF
PINNACLE HOLDINGS INC., TO BE HELD AT THE HYATT SARASOTA, LOCATED AT 1000
BOULEVARD OF THE ARTS, SARASOTA, FLORIDA 34236 ON MAY 2, 2000, AT 10:00 A.M.,
AND AT ANY ADJOURNMENTS THEREOF, UPON THE MATTERS SET FORTH ON THE REVERSE SIDE
AND MORE FULLY DESCRIBED IN THE NOTICE AND PROXY STATEMENT FOR SAID ANNUAL
MEETING AND IN THEIR DISCRETION UPON ALL OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SAID ANNUAL MEETING.
[X] Please Mark
Votes as in
This Example.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
CHOICES MADE. WHEN NO CHOICE IS MADE, THIS PROXY WILL BE VOTED FOR ALL
LISTED NOMINEES FOR DIRECTOR, FOR PROPOSALS 2, 3 and 4, AND AS THE
PROXYHOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS. FOR AGAINST ABSTAIN
----- --------- --------
<S> <C> <C> <C> <C> <C>
NOMINEES: Robert Wolsey, Steven Day, Andew Banks, 2. To approve an amendment to Pinnacle's [ ] [ ] [ ]
G. Peter O'Brien, J. Clarke Smith and Certificate of Incorporation to increase
Royce Yudkoff the number of authorized shares of
common stock from 100,000,000 shares
[ ] FOR [ ] WITHHELD to 150,000,000 shares.
ALL FROM ALL 3. To approve an amendment to the
NOMINEES NOMINEES Pinnacle Holdings Inc. Stock Incentive [ ] [ ] [ ]
[ ]______________________________________________________ Plan to increase the shares reserved
For all nominees except as noted on the line above for issuance under the plan from
3,000,000 shares to 5,000,000 shares.
(continued and to be signed on reverse side)
</TABLE>
<PAGE>
- FOLD AND DETACH HERE -
FOR AGAINST ABSTAIN
----- --------- --------
4. With discretionary authority on such [ ] [ ] [ ]
other matters as may properly
come before the Annual Meeting.
MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
The Annual Meeting may be held as scheduled only if a majority
of the shares outstanding are represented at the Annual
Meeting by attendance or proxy. Accordingly, please complete
this proxy, and return it promptly in the enclosed envelope.
Please date and sign exactly as your name(s) appear on your
shares. If signing for estates, trusts, partnerships,
corporations or other entities, your title or capacity should
be stated. If shares are held jointly, each holder should sign.
DATED:_______________________ 2000
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
_______________________________________________________________
Signature
_______________________________________________________________
Signature if held jointly
