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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1999
REGISTRATION NO. 333-67043
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPECTRASITE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATES OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
4899
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
56-2027322
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
8000 REGENCY PARKWAY
SUITE 570
CARY, NORTH CAROLINA 27511
(919) 468-0112
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
DAVID P. TOMICK
SPECTRASITE HOLDINGS, INC.
8000 REGENCY PARKWAY
SUITE 570
CARY, NORTH CAROLINA 27511
(919) 468-0112
(NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S AGENT FOR SERVICE)
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Please address a copy of all communications to:
TIMOTHY J. KELLEY
THOMAS D. TWEDT
DOW, LOHNES & ALBERTSON, PLLC
1200 NEW HAMPSHIRE AVENUE, N.W.
WASHINGTON, D.C. 20036
(202) 776-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR IS IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 8, 1999
PROSPECTUS [SPECTRASITE LOGO]
$225,238,000
SPECTRASITE HOLDINGS, INC.
OFFER TO EXCHANGE SERIES B 12% SENIOR DISCOUNT NOTES DUE 2008 FOR ANY AND
ALL OUTSTANDING 12% SENIOR DISCOUNT NOTES DUE 2008.
TERMS OF EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time, , 1999, unless extended
- - All outstanding notes that are validly tendered and not withdrawn will be
exchanged
- - Tenders of outstanding notes may be withdrawn any time prior to the expiration
of the exchange offer
- - The exchange of notes will not be a taxable exchange for U.S. Federal tax
purposes
- - We will not receive any proceeds from the exchange offer
- - The terms of the notes we will issue in the exchange offer are substantially
identical to the outstanding notes, except that certain transfer restrictions
and registration rights relating to the outstanding notes will not apply to
the exchange notes
The notes are eligible for trading in The Portal(SM) Market, a subsidiary
of The Nasdaq Market, Inc. The notes also may be sold in the over-the-counter
market, in negotiated transactions or through a combination of such methods.
WE ARE NOT MAKING AN OFFER TO EXCHANGE NOTES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE
PARTICIPATING IN THIS EXCHANGE OFFER, SEE "RISK FACTORS" COMMENCING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR
HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
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PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety. In this prospectus, "SpectraSite"
refers to SpectraSite Holdings, Inc., a Delaware corporation, and the "Company"
and "we" or "our" each refers to SpectraSite, its subsidiaries and all
predecessor entities to SpectraSite and its subsidiaries collectively, unless
the context otherwise requires.
THE EXCHANGE OFFER
On June 26, 1998, we completed the private offering of $225,238,000
aggregate original principal amount at maturity of 12% Senior Discount Notes Due
2008. SpectraSite entered into a registration rights agreement with the initial
purchasers of the notes in the private offering in which we agreed, among other
things, to deliver to you this prospectus and to complete the exchange offer on
or prior to March 10, 1999. This exchange offer allows you to exchange your
notes for registered notes with substantially identical terms. If the exchange
offer is not completed on or prior to March 10, 1999, the interest rate on the
notes will be increased at a rate of 0.50% per annum until, among other things,
the completion of the exchange offer. You should read the discussions under the
heading "-- Summary of Terms of the Exchange Notes" and "Description of the
Notes" for further information regarding the registered notes.
We believe that you may resell the notes issued in the exchange offer
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, as amended (the "Securities Act"), subject to
certain conditions. You should read the discussion under the headings
"-- Summary of the Exchange Offer" and "The Exchange Offer" for further
information regarding the exchange offer and resale of the registered notes.
THE COMPANY
We are one of the leading full service providers of tower related services
in the U.S. wireless communications industry. The Company develops and manages
build-to-suit tower networks and provides site acquisition and site management
services for major wireless communications companies. We are capitalizing on the
growing trend toward antennae co-location and independent tower ownership, as
leading wireless providers increasingly redirect their capital outlays from
tower development to subscriber acquisition activities and local municipalities
encourage multiple tenants on single towers. In addition, we plan to expand our
tower inventory through future acquisitions or partnerings with major wireless
communications service providers and by building or acquiring selective tower
assets in strategic geographic areas that will be attractive to multiple
tenants.
Our primary focus is the ownership of multi-tenant towers and the leasing,
under long-term contracts, of antennae space on such towers to a variety of
wireless service providers, including personal communications service ("PCS"),
cellular, paging, specialized mobile radio, enhanced specialized mobile radio
and other providers. Our build-to-suit programs provide a comprehensive solution
to those wireless service providers seeking to minimize their capital
expenditures, overhead and time associated with the build-out and ongoing
maintenance of their wireless network infrastructure. We also offer
comprehensive site acquisition services, including site location analysis; site
acquisition; zoning and land use permitting; Federal Aviation Administration
("FAA") compliance analysis and filing; and contract, title and building permit
administration. In addition, we provide comprehensive site management services
for communications sites. We manage not only our own tower sites, but also over
1,000 sites for carriers. Site acquisition and site management allow us to offer
a complete product line of tower services.
Our principal executive offices are located at 8000 Regency Parkway, Suite
570, Cary, North Carolina 27511, and our telephone number is (919) 468-0112.
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BUSINESS AND GROWTH STRATEGIES
Our strategic objective is to be one of the largest owners and operators of
communications towers and to become the premier build-to-suit provider of tower
networks in the United States. Our strategy involves the following elements:
- Build towers in areas of increasing wireless demand.
- Partner with major wireless service providers to acquire existing towers
and build-to-suit contracts.
- Acquire underutilized towers.
- Maximize co-location on towers.
- Capitalize on our strong relationships with major wireless service
providers.
- Leverage our site acquisition services to support and expand our
build-to-suit business and tower inventory.
COMPANY STRENGTHS
We believe that the following strengths will enable us to successfully
expand our business:
- Build-to-suit focus.
- Experienced management.
- Capability to manage multiple projects.
- Standardized procedures and specifications for tower construction.
- Integrated provider of site development services.
RECENT EVENTS
AIRADIGM ACQUISITION. We have acquired 40 towers from Airadigm
Communications, Inc., and we may purchase an additional seven towers. The total
purchase price for all 47 towers is $11.75 million. In connection with this
acquisition, we are negotiating with Airadigm for an exclusive multi-year
build-to-suit contract.
GLOBALCOMM ACQUISITION. In September 1998, we acquired GlobalComm, Inc., a
co-location marketing company, for approximately $2 million. GlobalComm's
founder and president, Michael Garrett, joined the Company and is now
responsible for our co-location marketing efforts. See "Management" and "Certain
Transactions -- GlobalComm Acquisition."
AMICA ACQUISITION. In August 1998, we acquired 14 ground leases and two
towers in inventory for an aggregate purchase price of approximately $474,000
from Amica Wireless PhoneService, Inc.
H&K ACQUISITION. In June 1998, we acquired five towers for an aggregate
purchase price of $1.4 million.
CMS DISPOSITION. In May 1998, we sold our minority interest in
Communications Management Specialists, LLC ("CMS") for $375,000.
ISSUANCE OF SERIES B PREFERRED STOCK. In three separate transactions in
March, August and September of 1998, we sold 7,000,000 shares of our Series B
Redeemable Preferred Stock to a group of investors for an aggregate purchase
price of $28 million. See "Certain Transactions -- The Series A and Series B
Preferred Stock Offerings."
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SUMMARY OF THE EXCHANGE OFFER
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Registration Rights Agreement............. You have the right to exchange your notes for registered
notes with substantially identical terms. This exchange
offer is intended to satisfy these rights. After the
exchange offer is complete, you will no longer be
entitled to any exchange or registration rights with
respect to your notes.
The Exchange Offer........................ We are offering to exchange $1,000 principal amount at
maturity of SpectraSite's Series B 12% Senior Discount
Notes Due 2008 which have been registered under the
Securities Act (the "Exchange Notes") for each $1,000
principal amount at maturity of SpectraSite's
outstanding 12% Senior Discount Notes Due 2008 which
were issued in June 1998 in a private offering (the "Old
Notes"). In order to be exchanged, an Old Note must be
properly tendered and accepted. We will exchange all
outstanding Old Notes validly tendered and not validly
withdrawn.
As of this date there is $225,238,000 aggregate
principal amount at maturity of Old Notes outstanding.
We will issue Exchange Notes on or promptly after the
expiration of the exchange offer.
Resales................................... We believe that the Exchange Notes may be offered for
resale, resold and otherwise transferred by you without
compliance with the registration and prospectus delivery
provisions of the Securities Act provided that:
- you acquire the Exchange Notes issued in the exchange
offer in the ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution of
the Exchange Notes issued to you in the exchange
offer; and
- you are not an "affiliate," as defined under Rule 405
of the Securities Act, of ours.
If our belief is inaccurate and you transfer any
Exchange Note issued to you in the exchange offer
without delivering a prospectus meeting the requirements
of the Securities Act or without an exemption from
registration of your Exchange Notes from such
requirements, you may incur liability under the
Securities Act. We do not assume or indemnify you
against such liability. Each broker-dealer that is
issued Exchange Notes for its own account in exchange
for Old Notes which were acquired by such broker-dealer
as a result of market-making or other trading
activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities
Act in connection with any resale of the Exchange Notes.
A broker-dealer may use this prospectus for an offer to
resell, resale or other retransfer of the Exchange Notes
issued to it in the exchange offer.
Record Date............................... We mailed this prospectus and the related exchange offer
documents to registered holders of Old Notes on
, 1999.
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Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York
City time, , 1999, unless we decide to extend
the expiration date.
Conditions to the Exchange Offer.......... We may terminate or amend the exchange offer if:
- any legal proceeding, government action or other
adverse development materially impairs our ability to
complete the exchange offer;
- any SEC rule, regulation or interpretation materially
impairs the exchange offer; or
- we have not obtained any necessary governmental
approvals with respect to the exchange offer.
We may waive any or all of these conditions. At this
time, there are no adverse proceedings, actions or
developments pending or, to our knowledge, threatened
and no governmental approvals are necessary to complete
the exchange offer.
Procedures for Tendering Old Notes........ Each holder of Old Notes wishing to accept the exchange
offer must:
- complete, sign and date the accompanying letter of
transmittal, or a facsimile thereof; or
- arrange for The Depository Trust Company ("DTC") to
transmit certain required information to the exchange
agent in connection with a book-entry transfer.
You must mail or otherwise deliver such documentation
and your Old Notes to the United States Trust Company of
New York, as exchange agent, at the address set forth
under "The Exchange Offer -- Exchange Agent."
By tendering your Old Notes in this manner, you will be
representing, among other things, that:
- you are acquiring the Exchange Notes pursuant to the
exchange offer in the ordinary course of your
business;
- you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution of
the Exchange Notes issued to you in the exchange
offer; and
- you are not an "affiliate" of ours.
Untendered Old Notes...................... If you are eligible to participate in the exchange offer
and you do not tender your Old Notes, you will not have
any further registration or exchange rights and your Old
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of
the market for such Old Notes could be adversely
affected.
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Special Procedures for Beneficial
Owners.................................. If you beneficially own Old Notes registered in the name
of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender your Old Notes in
the exchange offer, you should contact such registered
holder promptly and instruct it to tender on your
behalf. If you wish to tender on your own behalf, you
must, prior to completing and executing the letter of
transmittal for the exchange offer and delivering your
Old Notes, either arrange to have your Old Notes
registered in your name or obtain a properly completed
bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery Procedures............ If you wish to tender your Old Notes and time will not
permit your required documents to reach the exchange
agent by the expiration date of the exchange offer, or
you cannot complete the procedure for book-entry
transfer on time or you cannot deliver certificates for
your Old Notes on time, you may tender your Old Notes
pursuant to the procedures described in this prospectus
under the heading "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights......................... You may withdraw the tender of your Old Notes at any
time prior to 5:00 p.m., New York City time, on
, 1999.
Certain U.S. Federal Tax Considerations... The exchange of notes will not be a taxable event for
United States federal income tax purposes.
Use of Proceeds........................... We will not receive any proceeds from the issuance of
Exchange Notes pursuant to the exchange offer. We will
pay all our expenses incident to the exchange offer.
Exchange Agent............................ United States Trust Company of New York is serving as
the exchange agent in connection with the exchange
offer.
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SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that the Exchange Notes will be registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not be entitled to registration under the Securities Act. In this
regard, we use the term "Notes" when describing provisions that govern or
otherwise pertain to both the Old Notes and the Exchange Notes. The Exchange
Notes will evidence the same debt as the Old Notes, and the same indenture will
govern both the Old Notes and the Exchange Notes.
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Exchange Notes............................ Series B 12% Senior Discount Notes Due 2008 of
SpectraSite Holdings, Inc.
Maturity.................................. July 15, 2008
Accreted Value and Interest............... The initial accreted value of the Exchange Notes will be
$554.97 per $1,000 principal amount at maturity. The
Exchange Notes will accrete at a daily rate of 12% per
year, compounded semiannually, to an aggregate principal
amount of $225,238,000 by July 15, 2003. Cash interest
will begin to accrue on July 15, 2003, and we will pay
cash interest on January 15, 2004, and on each July 15
and January 15 thereafter, at a rate of 12% per year.
Optional Redemption....................... After July 15, 2003, we may redeem all or a portion of
the Notes at specified redemption prices, plus accrued
and unpaid interest, to the applicable redemption date.
On any one or more occasions prior to July 15, 2001, we
may redeem up to 25% of the aggregate principal amount
at maturity of the Notes with the net cash proceeds from
one or more equity offerings. The redemption price would
be 112% of the accreted value on the redemption date.
You should refer to the heading "Description of Notes --
Optional Redemption" for further details.
Ranking................................... The Notes:
- are general unsecured obligations of SpectraSite;
- rank equal in right of payment with all existing and
future unsecured senior indebtedness of SpectraSite;
- are senior in right of payment to all future
subordinated indebtedness of SpectraSite; and
- are effectively subordinated to all indebtedness,
liabilities and other obligations of SpectraSite's
subsidiaries.
SpectraSite conducts all operations through its
subsidiaries, and SpectraSite's subsidiaries are not
guarantors of the Notes. As of September 30, 1998,
SpectraSite had no outstanding liabilities other than
the Notes, and SpectraSite's subsidiaries had
approximately $3.0 million of indebtedness and other
liabilities.
Certain Covenants......................... The indenture governing the Notes contains certain
covenants for your benefit which, among other things and
subject to certain qualifications, restrict our ability
to:
- incur indebtedness;
- make certain payments;
- issue preferred stock;
- enter into transactions with affiliates;
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- create liens;
- sell assets; and
- consolidate, merge or sell substantially all of our
assets.
Change of Control......................... Upon the occurrence of a change of control of
SpectraSite, we will offer to repurchase your Notes, in
whole or in part, at a price equal to 101% of their
accreted value to the date of purchase prior to July 15,
2003 or 101% of their principal amount, plus accrued and
unpaid interest, if any, to the date of purchase on or
after July 15, 2003. There can be no assurance, however,
that we will have sufficient funds available to repur-
chase all of the Notes which holders may deliver in
connection with a change of control repurchase offer.
Form of Exchange Notes.................... The Exchange Notes will be represented by one or more
permanent global securities in bearer form deposited
with United States Trust Company of New York, as book
entry depositary, for the benefit of DTC. You will not
receive Exchange Notes in registered form unless one of
the events set forth under the heading "Description of
the Exchange Notes -- Book-Entry; Delivery and Form"
occurs. Instead, beneficial interests in the Exchange
Notes will be shown on, and transfers of these will be
effected only through, records maintained in book-entry
form by DTC with respect to its participants.
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RISK FACTORS
Ownership of the Old Notes or the Exchange Notes involves a high degree of
risk. Holders of the Old Notes should consider carefully the risk factors below,
as well as the other information in this prospectus, before tendering the Old
Notes in the exchange offer.
Some of the statements contained in this prospectus are forward-looking.
They include statements concerning:
- growth strategy;
- liquidity and capital expenditures;
- construction and acquisition activities;
- debt levels and ability to obtain financing and service debt;
- competitive conditions in the communications site and wireless carrier
industries;
- regulatory matters affecting the communications site and wireless carrier
industries;
- projected growth of the wireless communications and wireless carrier
industries; and
- general economic conditions.
Actual results may differ materially from those suggested by the
forward-looking statements for various reasons, including those discussed in
this section.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF THE COMPANY.
The Company is and will continue to be highly leveraged. As of September
30, 1998, the Company had total consolidated indebtedness of approximately
$131.9 million, total redeemable preferred stock of $39.9 million and total
shareholders' deficiency of approximately $8.7 million. Also, the Company's pro
forma earnings would have been inadequate to service its pro forma fixed charges
by $18.5 million for the year ended December 31, 1997 and $14.7 million for the
nine months ended September 30, 1998. We expect that earnings will continue to
be inadequate to service the Company's fixed charges at least through fiscal
2000.
The degree to which the Company will be leveraged could have important
consequences. For example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the Notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to obtain additional financing;
- require the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, thereby reducing the availability of such cash flow to fund
our growth strategy, working capital, capital expenditures or other
general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry; and
- place us at a competitive disadvantage vis-a-vis less leveraged
competitors.
ABILITY TO SERVICE DEBT -- WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO
SERVICE OUR INDEBTEDNESS.
OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make scheduled payments of principal of, or to pay interest
on, the Company's debt obligations, and our ability to refinance any such debt
obligations, or to fund planned capital expenditures, will depend on the
Company's future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. We
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anticipate substantial capital expenditures in connection with our planned tower
build out and acquisitions. After 1999 or in the event we exceed our budgeted
capital expenditures for 1998 and 1999, we will need to seek additional equity
or debt financing to fund our business plan. Failure to obtain any such
financing could require us to reduce significantly planned capital expenditures
or scale back the scope of build-to-suit activity or acquisitions, any of which
could have a material adverse effect on our business, financial condition or
results of operations. In addition, we may need to refinance all or a portion of
the Company's indebtedness on or prior to its scheduled maturity. There can be
no assurance that we will generate sufficient cash flow from operations in the
future, that anticipated revenue growth will be realized or that future
borrowings or equity contributions will be available in amounts sufficient to
service the Company's indebtedness and make anticipated capital expenditures. In
addition, there can be no assurance that the Company will be able to effect any
required refinancing of its indebtedness on commercially reasonable terms or at
all.
HOLDING COMPANY STRUCTURE -- OUR ONLY SOURCE OF CASH TO PAY INTEREST ON AND THE
PRINCIPAL OF THE NOTES IS DISTRIBUTIONS FROM OUR SUBSIDIARIES.
SpectraSite is a holding company with no business operations of its own.
SpectraSite's only significant asset is and will be the outstanding capital
stock of its subsidiaries. SpectraSite conducts all of its business operations
through its subsidiaries. Accordingly, SpectraSite's only source of cash to pay
interest on and the principal of the Notes is distributions with respect to its
ownership interest in its subsidiaries from the net earnings and cash flow
generated by such subsidiaries. We currently expect that SpectraSite's
subsidiaries will retain and use any earnings and cash flow to support their
operations, including to service their respective debt obligations. Even if we
decided to pay a dividend on or to make a distribution in respect of the capital
stock of SpectraSite's subsidiaries, there can be no assurance that the
subsidiaries will generate sufficient cash flow to pay such a dividend or
distribute such funds to SpectraSite or that applicable state law and
contractual restrictions, including negative covenants contained in the debt
instruments of such subsidiaries, will permit such dividends or distributions.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS EFFECTIVELY
JUNIOR TO THE COMPANY'S EXISTING INDEBTEDNESS AND POSSIBLY ALL FUTURE
BORROWINGS.
SpectraSite's subsidiaries are not guarantors of the Notes. As a result,
all indebtedness, including trade payables, of SpectraSite's subsidiaries,
including any borrowings under a new credit facility pursuant to a commitment
letter which we have received from Credit Suisse First Boston, will be
structurally senior to the Notes. As of September 30, 1998, SpectraSite's
subsidiaries had approximately $3.0 million of liabilities, including trade
payables, all of which will be structurally senior in right of payment to the
Notes.
WE EXPECT THAT OUR ANTICIPATED NEW CREDIT FACILITY WILL RESTRICT THE ABILITY OF
SPECTRASITE'S SUBSIDIARIES TO MAKE DISTRIBUTIONS TO SPECTRASITE, WHICH MAY
ADVERSELY AFFECT OUR ABILITY TO PAY INTEREST ON OR THE PRINCIPAL OF THE NOTES.
This exchange offer is likely to close before our new credit facility is in
place. We expect that the new credit facility will, subject to certain limited
exceptions, prohibit dividends or other distributions by SpectraSite's
subsidiaries to SpectraSite. In addition, SpectraSite's subsidiaries will be
permitted under the terms of the indenture governing the Notes to incur certain
additional indebtedness that may restrict or prohibit the subsidiaries from
making distributions, paying dividends or making loans to SpectraSite. If any or
all of SpectraSite's subsidiaries become subject to bankruptcy proceedings
before payment of the Notes, we do not expect the Notes holders to have claims
in such proceedings. Only after such subsidiaries' creditors are fully paid
would any remaining value of the subsidiaries' assets be available to
SpectraSite or its creditors, including the Notes holders. See
"-- Subordination."
We expect that the new credit facility will permit distributions to
SpectraSite in an amount sufficient to pay scheduled interest payments on the
notes commencing in 2004, provided that there is no default or event of default
outstanding under the new credit facility, including under the financial
maintenance tests
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the new credit facility will set forth. If SpectraSite's subsidiaries are not
able to make distributions to SpectraSite, we will have to pursue other
alternatives which may include refinancing the new credit facility, seeking
other sources of debt or equity capital. For more information regarding the new
credit facility, see "Description of New Credit Facility."
REPAYMENT UNCERTAINTY -- REPAYMENT OF THE PRINCIPAL OF THE NOTES LIKELY WILL
REQUIRE ADDITIONAL FINANCING. WE ARE NOT CERTAIN OF THE SOURCE OR AVAILABILITY
OF ANY SUCH FINANCING AT THIS TIME.
We currently anticipate that, in order to pay the principal of the Notes or
to redeem or repurchase the Notes upon a change of control under the indenture
governing the Notes, we will be required to adopt one or more alternatives, such
as refinancing the Company's indebtedness or selling its equity securities or
the equity securities or assets of its subsidiaries. There can be no assurance
that any of the foregoing actions could be effected on satisfactory terms, that
any of the foregoing actions would enable us to pay the principal of the Notes
or that any of such actions would be permitted by the terms of the indenture
governing the Notes or any other debt instruments then in effect.
WE CANNOT ASSURE YOU THAT MANDATES WILL YIELD BINDING AGREEMENTS.
As of September 30, 1998, we had non-binding requests from customers (or
"mandates") to build up to 126 towers under build-to-suit programs. Although we
believe that the substantial majority of these mandates will result in long-term
anchor leases for specific communications towers, there are a number of steps
that need to occur before any such leases are executed. These steps include, in
some cases, finalization of build-out plans by the customers who have awarded
the mandates, completion of due diligence by us and our customers and
finalization of other definitive documents between the parties. In addition,
consistent with industry practice, mandates are typically verbal agreements. As
a result, there can be no assurance as to the percentage of current and future
non-binding mandates that will ultimately result in binding anchor tenant leases
and constructed towers.
THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH CONSTRUCTION AND ACQUISITION OF
TOWERS.
Our growth strategy depends on our ability to construct, acquire and
operate towers in conjunction with the expansion by wireless service providers
of their tower network infrastructure. Our ability to construct new towers can
be affected by a number of factors beyond our control, including zoning and
local permitting requirements, FAA considerations, availability of tower
components and construction equipment, availability of skilled construction
personnel and weather conditions. In addition, because the concern over tower
proliferation has grown in recent years, certain communities now restrict new
tower construction or delay granting permits required for construction. There
can be no assurance:
- of the number of mandates that the Company will be awarded or the number
of mandates that will result in towers;
- that we will be able to overcome regulatory or other barriers to new
construction;
- that the number of towers planned for construction will be completed in
accordance with the requirements of our customers; or
- that there will be significant need for the construction of new towers
once the wireless service providers complete their tower network
infrastructure build-out.
Anchor tenant leases may contain penalty or forfeiture provisions in the
event the towers are not completed within specified time periods.
Our expansion plans call for a significant increase in construction
activity. There can be no assurance that we will be able to overcome the
barriers to new construction or that the number of towers planned for
construction will be completed. The failure to complete the necessary
construction could have a material adverse effect on our business, financial
condition and results of operations.
10
<PAGE> 13
With respect to the acquisition of towers, we compete with certain wireless
service providers, broadcasters, site developers and other independent tower
owners and operators for acquisitions of towers, and we expect such competition
to increase. Increased competition for acquisitions may result in fewer
acquisition opportunities, as well as higher acquisition prices. We regularly
explore acquisition opportunities; however, there can be no assurance that we
will be able to identify towers or tower companies to acquire in the future.
WE ANTICIPATE SIGNIFICANT CAPITAL EXPENDITURES.
Our current plans call for at least $140 million of capital expenditures
through fiscal 1999 for the construction and acquisition of communication sites,
primarily towers. However, if acquisitions or other opportunities present
themselves more rapidly than we currently anticipate or if estimates prove
inaccurate, we may seek additional sources of debt or equity capital prior to
the end of 1999 or scale back the scope of tower construction activity. The
availability of additional financing cannot be assured and could be restricted
by the terms of a new credit facility pursuant to a commitment letter which we
have received from Credit Suisse First Boston and the indenture governing the
Notes.
SUCCESS OF OUR BUSINESS PLAN REQUIRES US TO ACT QUICKLY AND IMPLEMENTATION OF
OUR STRATEGY COULD STRAIN OUR RESOURCES.
We cannot be certain that we will be able to identify, finance and complete
future acquisitions on acceptable terms or that we will be able to manage
profitably and market available space on the Company's towers. Our business plan
depends on the construction or acquisition of additional towers and the
profitable operation of our tower assets. Failure to execute our business plan
will have a material adverse effect on the Company's business, financial
condition or results of operations.
In addition, the time frame for the current wireless build-out cycle may be
limited to the next few years, and many PCS networks already have been
substantially completed in large markets. Failure to move quickly and
aggressively to obtain growth capital and capitalize on this infrastructure
development opportunity could have a material adverse effect on our business,
financial condition or results of operations with respect to both site
acquisition services and site leasing.
Implementation of our strategy to expand our site leasing business may
impose significant strains on our management, operating systems and financial
resources. In addition, we anticipate that operating expenses will increase
significantly as we build and acquire additional tower assets. Failure to manage
growth or unexpected difficulties encountered during expansion could have a
material adverse effect on our business, financial condition or results of
operations. The pursuit and integration of build-to-suit prospects,
acquisitions, investments, joint ventures and strategic alliances will require
substantial attention from the senior management, which will limit the amount of
time available to devote to the existing operations. Future acquisitions could
result in the incurrence of debt and contingent liabilities and an increase in
amortization expenses related to goodwill and other intangible assets, which
could have a material adverse effect upon our business, financial condition or
results of operations.
OUR BUSINESS DEPENDS ON DEMAND FOR WIRELESS COMMUNICATIONS.
Our business depends on demand for communications sites from wireless
service providers, which, in turn, depends on the demand for wireless services.
Success of the Company's business model requires us to secure co-location
tenants, and securing co-location tenants depends upon the demand for
communications sites from a variety of service providers in a particular market.
Factors outside of the Company's control affect the demand for wireless
communications services and competition for co-location tenants. A reduction in
demand for communications sites or increased competition for co-location tenants
could have a material adverse effect on the Company's business, financial
condition or results of operations.
The wireless communications industry has undergone significant growth in
recent years. A slowdown in the growth of, or reduction in, demand in a
particular wireless segment could adversely affect the demand for communications
sites. Moreover, wireless service providers often operate with substantial
11
<PAGE> 14
leverage, and financial problems for the Company's customers could result in
accounts receivable going uncollected, as well as the loss of customers and the
associated lease revenue. A slowdown in growth or reduction in demand affecting
the wireless communications industry could have a material adverse effect on our
business, financial condition or results of operations.
COMPETING TECHNOLOGIES AND OTHER ALTERNATIVES COULD REDUCE THE DEMAND FOR OUR
SERVICES.
Most types of wireless services currently require ground-based network
facilities, including communications sites for transmission and reception. The
extent to which wireless service providers lease such communications sites
depends on a number of factors beyond the Company's control, including the level
of demand for such wireless services, the financial condition and access to
capital of such providers, the strategy of providers with respect to owning or
leasing communications sites, government licensing of broadcast rights, changes
in telecommunications regulations and general economic conditions. In addition,
wireless service providers frequently enter into roaming agreements with
competitors allowing each other to utilize one another's wireless communications
facilities to accommodate customers who are out of range of their home
provider's services. Such roaming agreements may be viewed by wireless service
providers as a superior alternative to leasing antenna space on communications
sites we own. The proliferation of such roaming agreements could have a material
adverse effect on our business, financial condition or results of operations.
The emergence of new technologies could also have a negative impact on our
operations. For example, the Federal Communications Commission (the "FCC") has
granted license applications for three low-earth orbiting satellite systems that
are intended to provide mobile voice and data services. Although such systems
are highly capital-intensive and technologically untested, mobile satellite
systems could compete with land-based wireless communications systems, thereby
reducing the demand for the infrastructure services we provide. The occurrence
of any of these factors could have a material adverse effect on our business,
financial condition or results of operations.
WE COMPETE WITH COMPANIES WHO HAVE GREATER FINANCIAL RESOURCES.
The Company competes for site leasing tenants with:
- wireless service providers that own and operate their own towers and
lease, or may in the future decide to lease, antennae space to other
providers;
- site acquisition companies which acquire antennae space on existing
towers for wireless service providers, manage new tower construction and
provide site acquisition services;
- other independent tower construction companies; and
- traditional local independent tower operators.
Wireless service providers that own and operate their own towers generally
are substantially larger and have greater financial resources than the Company.
We believe that tower location and capacity, price, quality of service and
density within a geographic market historically have been and will continue to
be the most significant competitive factors affecting the site leasing business.
The Company competes for acquisition and new tower construction
opportunities primarily with site developers and other independent tower
companies. Some of these competitors have or are expected to have greater
financial resources than the Company has.
CUSTOMER CONCENTRATION -- OUR HISTORICAL REVENUES COME FROM A FEW CUSTOMERS.
We currently derive almost all of our revenues from site acquisition
activities, and a significant portion of such revenues from a small number of
customers. For example, five customers each accounted for over 10% of the
Company's revenue during 1997, and those customers in the aggregate represented
over 90% of total revenue for the year ended December 31, 1997. For the nine
months ended September 30, 1998, only one customer accounted for over 10% of the
Company's revenue, but that customer represented almost
12
<PAGE> 15
60% of the Company's revenue for such period. Customers engage the Company for
site acquisition services on a project-by-project basis, and a customer
generally can terminate an assignment at any time without penalty. In addition,
a customer's need for site acquisition services can decrease, and there can be
no assurance that we will be successful in establishing relationships with new
clients. Moreover, there can be no assurance that our existing customers will
continue to engage the Company for additional projects. The loss of any
significant site acquisition customer could have a material adverse effect on
our business, financial condition or results of operations.
We currently have mandates from AT&T Wireless, Airadigm, Nextel and Sprint
PCS. Mandates awarded under a build-to-suit program can be decreased by the
carrier at any time, and a carrier generally can discontinue a build-to-suit
program in its entirety at any time. Furthermore, there can be no assurance that
current build-to-suit customers will award additional mandates to the Company. A
material decrease in the number of mandates awarded by a significant customer or
the failure to secure additional mandates in the future could have a material
adverse effect on our business, financial condition or results of operations.
PROJECT RISKS -- ANY FAILURE TO MEET CUSTOMER EXPECTATIONS COULD REQUIRE
ADDITIONAL EXPENDITURES TO CORRECT AND ADVERSELY AFFECT FUTURE ORDERS.
Most of the Company's site acquisition services and build-to-suit programs
involve projects which are critical to the operations of its customers'
businesses. Any failure to meet customer expectations in the performance of its
services could damage our reputation and adversely affect our ability to attract
new business. In addition, we could incur substantial costs and expend
significant resources correcting errors in the Company's work and could become
liable for damages caused by such errors. When we bid on fixed-price contracts,
the Company could incur losses with regard to such projects if the expenditures
associated with such projects exceed our estimate in making the bid pursuant to
that contract.
REGULATORY COMPLIANCE AND APPROVAL -- OUR OPERATIONS REQUIRE COMPLIANCE WITH AND
APPROVAL FROM FEDERAL AND STATE REGULATORY AUTHORITIES.
The Company is subject to a variety of regulations, including those at the
federal, state and local levels. Both the FCC and the FAA regulate towers and
other sites used for wireless communications transmitters and receivers. Such
regulations control siting and marking of towers and may, depending on the
characteristics of the tower, require registration of tower facilities. Wireless
communications devices operating on towers are separately regulated and
independently licensed based upon the regulation of the particular frequency
used. All proposals to construct new communications sites or to modify existing
communications sites are reviewed by both the FCC and the FAA to ensure that a
site will not present a hazard to aviation. Tower owners may have an obligation
to paint them or install lighting to conform to FCC and FAA standards, and to
maintain such painting or lighting. Tower owners also may bear the
responsibility for notifying the FAA of any tower lighting failure. The Company
generally indemnifies its customers against any failure by the Company to comply
with applicable standards. Failure to comply with applicable requirements may
lead to civil penalties.
Local regulations include city or other local ordinances, zoning
restrictions and restrictive covenants imposed by community developers. These
regulations vary greatly, but typically require tower owners to obtain approval
from local officials or community standards organizations prior to tower
construction. Local regulations can delay or prevent new tower construction or
site upgrade projects, thereby limiting the Company's ability to respond to
customers' demands. In addition, such regulations increase the costs associated
with new tower construction. There can be no assurance that existing regulatory
policies will not adversely affect the timing or cost of new tower construction
or that additional regulations will not be adopted that will increase such
delays or result in additional costs to the Company. Such factors could have a
material adverse effect on the Company's business, financial condition or
results of operations and on the Company's ability to implement or achieve its
business objectives in the future.
13
<PAGE> 16
Our customers also may become subject to new regulatory policies which
adversely affect the demand for communications sites. In addition, if we pursue
international opportunities, we will be subject to regulation in foreign
jurisdictions. However, we are not actively considering any international
opportunities at this time.
REAL PROPERTY -- WE DO NOT OWN THE LAND UNDER OUR TOWERS.
Our real property interests relating to towers consist of leasehold
interests, private easements and licenses, easements and rights-of-way granted
by governmental entities. Our ability to protect our rights against persons
claiming superior rights in towers depends on our ability to:
- recover under title policies, the policy limits of which may be less than
the purchase price of a particular tower;
- in the absence of title insurance coverage, realize on title warranties
given by tower sellers, which warranties often terminate after the
expiration of a specific period, typically one to three years; and
- realize on title covenants from landlords contained in lease agreements.
ENVIRONMENTAL MATTERS -- WE ARE SUBJECT TO ENVIRONMENTAL LAWS THAT IMPOSE
LIABILITY WITHOUT REGARD TO FAULT.
Our operations are subject to federal, state and local environmental laws
and regulations regarding the use, storage, disposal, emission, release and
remediation of hazardous and nonhazardous substances, materials or wastes. Under
certain of these laws, the Company could be held strictly, jointly and severally
liable for the remediation of hazardous substance contamination at its
facilities or at third-party waste disposal sites and also could be held liable
for any personal or property damage related to such contamination. Although we
believe that we are in substantial compliance with and have no material
liability under all applicable environmental laws, there can be no assurance
that the costs of compliance with existing or future environmental laws and
liability related thereto will not have a material adverse effect on our
business, financial condition or results of operations.
DAMAGED TOWERS -- OUR TOWERS ARE SUBJECT TO NATURAL DISASTERS.
Our towers are subject to risks associated with natural disasters such as
tornadoes, hurricanes and earthquakes. A tower accident for which we are
uninsured or underinsured, or damage to a tower or group of towers, could have a
material adverse effect on our business, financial condition or results of
operations.
RADIO FREQUENCY EMISSIONS -- PERCEIVED HEALTH RISKS.
The Company and the wireless service providers that utilize the Company's
towers are subject to government requirements and other guidelines relating to
radio frequency emissions. The potential connection between radio frequency
emissions and certain negative health effects, including some forms of cancer,
has been the subject of substantial study by the scientific community in recent
years. To date, the results of these studies have been inconclusive. If radio
frequency emissions were conclusively proved harmful, we could be subject to
lawsuits claiming damages from such emissions and demand for wireless services
and new towers would be adversely affected. Although we have not been subject to
any claims relating to radio frequency emissions, there can be no assurance that
we will not be subject to such claims in the future.
KEY PERSONNEL -- OUR SUCCESS DEPENDS ON CERTAIN KEY SENIOR EXECUTIVES.
The Company's success depends to a significant extent upon the continued
services of Stephen H. Clark, its Chairman and Chief Executive Officer, Joe L.
Finley, III, its Vice Chairman and David P. Tomick, its Chief Financial Officer.
Mr. Finley has an employment agreement. The Company does not have an employment
agreement with Messrs. Clark or Tomick. Mr. Clark has entered into a
Confidentiality and Non-Competition Agreement with the Company, and his
compensation and other terms of employment will be determined by the Board of
Directors. The loss of the services of
14
<PAGE> 17
Messrs. Clark, Finley or Tomick could have a material adverse effect upon the
Company's business, financial condition or results of operations.
SIGNIFICANT STOCKHOLDERS -- A GROUP OF AFFILIATED STOCKHOLDERS CONTROLS THE
VOTING POWER OF SPECTRASITE.
Affiliates of J. H. Whitney & Co. own approximately 8.36 million shares of
SpectraSite's Series A preferred stock and Series B preferred stock representing
approximately 72% of the voting power of SpectraSite's capital stock on a
fully-diluted basis as of December 31, 1998. Whitney also has the right to
appoint up to five members of SpectraSite's Board of Directors. Accordingly,
Whitney is able to influence the Company's management and operations. In
addition, action requiring the approval of SpectraSite's stockholders, such as
mergers, requires Whitney's consent. There can be no assurance that Whitney's
interests will not conflict with the interests of the Note holders.
LACK OF PUBLIC MARKET FOR THE NOTES -- YOU MAY NOT BE ABLE TO SELL YOUR NOTES.
The Old Notes were not registered under the Securities Act or under the
securities laws of any state and may not be resold unless they are subsequently
registered or an exemption from the registration requirements of the Securities
Act and applicable state securities laws is available. The Exchange Notes will
be registered under the Securities Act, but will constitute a new issue of
securities with no established trading market, and there can be no assurance as
to:
- the liquidity of any such market that may develop;
- the ability of Exchange Note holders to sell their notes; or
- the price at which the Exchange Note holders would be able to sell their
notes. If such a market were to exist, the Exchange Notes may trade at
higher or lower prices than their principal amount or purchase price,
depending on many factors, including prevailing interest rates, the
market for similar debentures and the financial performance of the
Company.
The Notes are designated for trading among qualified institutional buyers
in The Portal(SM) Market. We understand that Credit Suisse First Boston
Corporation, Lehman Brothers Inc. and CIBC Oppenheimer Corp. presently intend to
make a market in the Notes. However, they are not obligated to do so, and any
market-making activity with respect to the Notes may be discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and may be limited during the exchange offer or
the pendency of an applicable shelf registration statement. There can be no
assurance that an active trading market will exist for the Notes or that such
trading market will be liquid.
Notes that are not tendered or are tendered but not accepted will,
following the consummation of the exchange offer, continue to be subject to the
existing restrictions upon transfer thereof, and, upon consummation of the
exchange offer, certain registration rights with respect to the Old Notes will
terminate. In addition, any Old Note holder who tenders in the exchange offer
for the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. To the extent that Old
Notes are tendered and accepted in the exchange offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
WE ARE NOT OBLIGATED TO NOTIFY YOU OF UNTIMELY OR DEFECTIVE TENDERS OF OLD
NOTES.
We will issue Exchange Notes pursuant to this exchange offer only after a
timely receipt of your outstanding Old Notes, a properly completed and duly
executed letter of transmittal and all other required documents. Therefore, if
you want to tender your Old Notes, please allow sufficient time to ensure timely
delivery. We are under no duty to give notification of defects or irregularities
with respect to the tenders of Old Notes for exchange.
15
<PAGE> 18
USE OF PROCEEDS
SpectraSite will not receive any cash proceeds from the issuance of the
Exchange Notes in exchange for the outstanding Old Notes. In consideration for
issuing the Exchange Notes, SpectraSite will receive Old Notes in like original
principal amount at maturity. Old Notes received in the exchange offer will be
cancelled.
The net proceeds to the Company from the original issuance of the Old
Notes, after deducting discount and estimated expenses, was approximately $120
million. The Company has deposited $11.75 million of such proceeds into escrow
for the acquisition of up to 47 towers from Airadigm. Airadigm has received $10
million from escrow as payment for 40 towers and the balance remains in escrow.
In addition, the Company used:
- approximately $500,000 to acquire 14 ground leases and two towers in
inventory from Amica;
- $1.9 million to acquire GlobalComm, Inc.; and
- $2.3 million to repay an outstanding note payable.
SpectraSite holds the remaining net proceeds in interest bearing accounts. The
Company intends to use the remaining proceeds for general corporate purposes,
including working capital, and may use all or a portion of such proceeds to
acquire additional tower assets or related businesses. SpectraSite is actively
considering, and intends to continue considering, opportunities to acquire
communication sites, tower assets and related businesses. However, the Company
currently has no binding commitments or agreements with respect to any material
acquisitions.
The Company issued the note payable repaid with Old Note proceeds in
connection with the acquisition of Telesite and Metrosite in May 1997. The note
had a stated interest rate of 7%. See "Certain Transactions -- Telesite and
Metrosite Acquisition."
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents
and capitalization of the Company as of September 30, 1998 on a historical
basis. This table should be read in conjunction with the Company's historical
financial statements and the related notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
ACTUAL
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and short term investments............................. $121,766
========
Long-term debt, including current maturities:
New credit facility(a).................................... --
12% Senior Discount Notes Due 2008........................ $128,916
Notes payable and other................................... 133
--------
Total long-term debt, including current maturities..... 129,049
Redeemable preferred stock:
Series A preferred stock(b)............................... 11,100
Series B preferred stock(b)............................... 28,796
Shareholders' deficiency:
Common stock.............................................. 1
Accumulated deficit....................................... (8,682)
--------
Total shareholders' deficiency......................... (8,681)
--------
Total capitalization.............................. $160,264
========
</TABLE>
- ---------------
(a) Credit Suisse First Boston has committed, subject to certain standard
conditions, to provide a seven year $50 million credit facility to the
Company to fund the construction and acquisition of towers and to provide
for working capital. See "Description of New Credit Facility."
(b) Each share of Series A preferred stock and Series B preferred stock is
convertible into one share of common stock. Shares of Series A preferred
stock and Series B preferred stock accrue dividends at a rate of 8% per
annum, and must be redeemed by the Company on December 15, 2008. Accrued
dividends are payable at redemption or upon liquidation, dissolution or
winding-up of SpectraSite.
17
<PAGE> 20
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data present the unaudited pro
forma consolidated balance sheet of the Company as of September 30, 1998 and the
unaudited pro forma consolidated statements of operations of the Company for the
year ended December 31, 1997 and the nine months ended September 30, 1998. The
unaudited pro forma consolidated balance sheet reflects the acquisition of 40
towers from Airadigm Communications, Inc. as if such acquisition had occurred on
September 30, 1998. The unaudited pro forma consolidated statements of
operations reflect the following adjustments as if the underlying transactions
had occurred on January 1, 1997:
- the disposition of Metrosite Management LLC;
- the acquisition of five towers from H&K Investments LLC;
- the disposition of a minority interest in CMS;
- the issuance of the Old Notes;
- the acquisition of GlobalComm; and
- the acquisition of 40 towers from Airadigm.
The unaudited pro forma financial data are based on the historical
financial statements of the Company and the adjustments described in the
accompanying notes. The unaudited pro forma financial data do not purport to
represent what would actually have been included in the Company's financial
statements at such dates had the transactions occurred as of the dates assumed
or to project the Company's financial position or results of operations at any
future date or for any future period. The unaudited pro forma financial data
should be read in conjunction with "Capitalization," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes thereto
included elsewhere in this prospectus.
18
<PAGE> 21
SPECTRASITE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PENDING ASSET
HISTORICAL (a) ACQUISITION PRO FORMA
-------------- ---------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 76,204 $ -- $ 76,204
Investments....................................... 45,561 45,561
Accounts receivable............................... 1,467 -- 1,467
Prepaid expenses and other........................ 257 -- 257
-------- -------- --------
Total current assets...................... 123,489 -- 123,489
Property and equipment, net......................... 14,818 10,000(b) 24,818
Goodwill, net....................................... 8,087 -- 8,087
Notes receivable.................................... 257 -- 257
Deposits............................................ 11,750 (10,000)(b) 1,750
Debt issuance costs, net............................ 4,596 4,596
Other............................................... 174 -- 174
-------- -------- --------
Total assets.............................. $163,171 $ -- $163,171
======== ======== ========
Current liabilities:
Accounts payable.................................. $ 2,262 $ -- $ 2,262
Accrued and other expenses........................ 645 -- 645
Current portion of long-term debt................. 128 -- 128
-------- -------- --------
Total current liabilities................. 3,035 -- 3,035
Long-term debt, less current portion................ 5 -- 5
Senior notes due 2008............................... 128,916 128,916
-------- -------- --------
Total liabilities......................... 131,956 -- 131,956
Preferred Stock (Series A).......................... 11,100 -- 11,100
Preferred Stock (Series B).......................... 28,796 -- 28,796
Shareholders' deficiency:
Common stock...................................... 1 -- 1
Accumulated deficit............................... (8,682) -- (8,682)
-------- -------- --------
Total shareholder's deficit............... (8,681) -- (8,681)
-------- -------- --------
Total liabilities, preferred stock and
shareholders' deficiency................ $163,171 $ -- $163,171
======== ======== ========
</TABLE>
19
<PAGE> 22
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the historical consolidated balance sheet of the Company as of
September 30, 1998.
(b) The Company has agreed to purchase up to 47 towers from Airadigm and has
deposited the aggregate purchase price of $11,750 into escrow. The
adjustment represents the asset acquisition of the 40 towers accepted by the
Company for a total purchase price of $10,000 as if it had occurred on
September 30, 1998. The acquisition of the remaining 7 towers is subject to
additional due diligence by the Company.
20
<PAGE> 23
SPECTRASITE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------
SPECTRASITE
TELESITE 4/25/97 ACQUISITION ACTIVITY
1/1/97 - (INCEPTION) - COMBINED ---------------------------------------
5/12/97 (A) 12/31/97 (B) 1997 (C) ADJUSTMENTS AIRADIGM (H) H&K (I) GLOBALCOMM (J)
----------- ------------- -------- ----------- ------------ ------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Site acquisition revenue......... $1,926 $ 5,002 $ 6,928 $ -- $ -- $ -- $1,902
Site leasing revenue............. -- -- -- -- 904 162 --
------ ------- ------- ----- ----- ----- ------
Total revenues.............. 1,926 5,002 6,928 -- 904 162 1,902
Cost of revenues:
Cost of site acquisition
revenue........................ 595 1,120 1,715 -- -- -- 163
Cost of site leasing revenue
(exclusive of depreciation
shown separately below)........ -- -- -- -- 289 39 --
------ ------- ------- ----- ----- ----- ------
Total cost of revenues...... 595 1,120 1,715 -- 289 39 163
------ ------- ------- ----- ----- ----- ------
Gross profit...................... 1,331 3,882 5,213 -- 615 123 1,739
Selling, general, &
administrative................... 1,742 5,659 7,401 (476)(d) -- -- 654
Depreciation and amortization..... 56 489 545 190(e) 667 93 111
------ ------- ------- ----- ----- ----- ------
Operating income (loss)........... (467) (2,266) (2,733) 286 (52) 30 974
Other income (expense):
Equity in earnings (loss) of
affiliate........................ (1) 205 204 (204)(g) -- -- --
Interest income................... 121 121 -- -- -- --
Interest expense.................. (36) (164) (200) -- -- -- --
Other expense..................... (56) (56) -- -- -- --
------ ------- ------- ----- ----- ----- ------
(37) 106 69 (204) -- -- --
------ ------- ------- ----- ----- ----- ------
Net income (loss)................. $ (504) $(2,160) $(2,664) $ 82 $ (52) $ 30 $ 974
====== ======= ======= ===== ===== ===== ======
<CAPTION>
OFFERING
ADJUSTMENT PRO FORMA
SUBTOTAL (K) AS ADJUSTED
-------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Site acquisition revenue......... $ 8,830 $ -- $ 8,830
Site leasing revenue............. 1,066 -- 1,066
------- -------- --------
Total revenues.............. 9,896 -- 9,896
Cost of revenues:
Cost of site acquisition
revenue........................ 1,878 -- 1,878
Cost of site leasing revenue
(exclusive of depreciation
shown separately below)........ 328 -- 328
------- -------- --------
Total cost of revenues...... 2,206 -- 2,206
------- -------- --------
Gross profit...................... 7,690 -- 7,690
Selling, general, &
administrative................... 7,579 7,579
Depreciation and amortization..... 1,606 -- 1,606
------- -------- --------
Operating income (loss)........... (1,495) -- (1,495)
Other income (expense):
Equity in earnings (loss) of
affiliate........................ -- -- --
Interest income................... 121 -- 121
Interest expense.................. (200) (15,824) (16,024)
Other expense..................... (56) -- (56)
------- -------- --------
(135) (15,824) (15,959)
------- -------- --------
Net income (loss)................. $(1,630) $(15,824) $(17,454)
======= ======== ========
</TABLE>
21
<PAGE> 24
SPECTRASITE HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ACQUISITION ACTIVITY
---------------------------------------
HISTORICAL (b) ADJUSTMENTS AIRADIGM (h) H&K (i) GLOBALCOMM (j) SUBTOTAL
-------------- ----------- ------------ ------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Site acquisition revenue........... $ 5,154 $ -- $ -- $ -- $2,176 $ 7,330
Site leasing revenue............... 211 -- 678 81 -- 970
------- ----- ---- ---- ------ -------
Total revenues............... 5,365 -- 678 81 2,176 8,300
Cost of revenues:
Cost of site acquisition revenue... 1,721 -- -- -- 128 1,849
Cost of site leasing revenue
(exclusive of depreciation shown
separately below)................ 142 -- 217 19 -- 378
------- ----- ---- ---- ------ -------
Total cost of revenues....... 1,863 -- 217 19 128 2,227
------- ----- ---- ---- ------ -------
Gross profit......................... 3,502 -- 461 62 2,048 6,073
Selling, general, & administrative... 6,516 (35)(d) -- -- 866 7,347
Depreciation and amortization........ 261 -- 500 47 83 891
------- ----- ---- ---- ------ -------
Operating income (loss).............. (3,275) 35 (39) 15 1,099 (2,165)
Other income (expense): -- -- --
Interest income...................... 2,110 (13)(g) -- -- -- 2,097
Interest expense..................... (4,335) -- -- -- -- (4,335)
Other expense........................ 473 (446)(f) -- -- -- 27
------- ----- ---- ---- ------ -------
(1,752) (459) -- -- -- (2,211)
------- ----- ---- ---- ------ -------
Net income (loss).................... $(5,027) $(424) $(39) $ 15 $1,099 $(4,376)
======= ===== ==== ==== ====== =======
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENT (k) AS ADJUSTED
-------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues
Site acquisition revenue........... $ -- $ 7,330
Site leasing revenue............... -- 970
------- --------
Total revenues............... -- 8,300
Cost of revenues:
Cost of site acquisition revenue... -- 1,849
Cost of site leasing revenue
(exclusive
of depreciation shown separately
below)........................... -- 378
------- --------
Total cost of revenues....... -- 2,227
------- --------
Gross profit......................... -- 6,073
Selling, general, & administrative... 7,347
Depreciation and amortization........ 891
------- --------
Operating income (loss).............. -- (2,165)
Other income (expense):
Interest income...................... -- 2,097
Interest expense..................... (9,134) (13,469)
Other expense........................ -- 27
------- --------
(9,134) (11,345)
------- --------
Net income (loss).................... $(9,134) $(13,510)
======= ========
</TABLE>
22
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE NINE MONTHS ENDED SEPTEMBER 30,
1998
(a) Represents the historical Statement of Operations for the Company's
predecessor, Telesite, for the period shown.
(b) Represents the historical Statement of Operations for the Company for the
period shown, which includes site acquisition activities during such period.
(c) Represents the combined historical Statements of Operations for the Company
and Telesite for the period shown.
(d) Represents the reduction of historical selling, general and administrative
expenses of Metrosite as if the sale of Metrosite had occurred on January 1,
1997. There was no material historical revenue for Metrosite during the year
ended December 31, 1997 or during the nine months ended September 30, 1998.
(e) Represents an increase to amortization expense resulting from additional
straight-line amortization of the $7.2 million of goodwill resulting from
the acquisition of Telesite as if the acquisition of Telesite had occurred
on January 1, 1997. The terms of the purchase agreement provide for
additional consideration up to a maximum of 204,382 shares of SpectraSite's
common stock to be issued to the former owners of Telesite if certain
operating goals are met in 1998. If such operating goals are met in 1998,
these shares will be valued at the time they are issued and will be
accounted for as an additional cost of the acquisition. Such amounts are not
included in these pro forma financial statements.
(f) Represents the elimination of the historical gain of $257 on the sale of
Metrosite and the historical gain of $189 on the sale of CMS as if the sale
had occurred on January 1, 1997.
(g) Represents the elimination of the $204 of historical equity in earnings and
the elimination of $13 of historical interest income related to the note
receivable received as consideration on the sale of CMS for the respective
period as if the sale of CMS had occurred on January 1, 1997.
(h) Represents the pending acquisition of assets from Airadigm and leaseback of
antennae space, as if the purchase of assets had occurred on January 1,
1997. Adjustments for revenue are based on the executed tenant lease terms
for the 40 Airadigm towers. Cost of revenues represents the cost of the
executed ground leases and the historical routine maintenance costs and real
estate taxes associated with the land underlying the towers. Depreciation
expense is straight-line depreciation of the aggregate cost of $10,000 of
the 40 towers. The Airadigm ground leases are non-cancelable operating
leases, generally for terms of five years and include options for renewal.
The pro forma minimum lease payments are based on the executed ground
leases. Airadigm has leased space on these towers for a five year term with
options for renewal. Five towers of the 40 towers had space leased to other
wireless service providers under non-cancelable operating leases, generally
with terms of five years and options for renewal. The pro forma future
minimum lease payments and minimum rental income for these leases assuming
the transaction occurred and the related leases commenced January 1, 1997
are as follows:
<TABLE>
<CAPTION>
LEASE PAYMENTS RENTAL INCOME
-------------- -------------
<S> <C> <C>
1997.............................................. $ 240 $ 904
1998.............................................. 240 904
1999.............................................. 240 904
2000.............................................. 240 904
2001.............................................. 240 904
------ ------
Total................................... $1,200 $4,520
====== ======
</TABLE>
(i) Represents the results of operations of H&K, as if the business combination
had occurred on January 1, 1997. Adjustments for revenue are based on the
executed tenant lease terms for the five H&K towers. Cost of revenues
represents the cost of the executed ground leases and the historical
23
<PAGE> 26
routine maintenance costs and real estate taxes associated with the land
underlying the towers. Depreciation expense is computed using the straight-line
method based on the aggregate cost of $1,400 for the five towers. The H&K ground
leases are non-cancelable operating leases, generally for terms of five
years and include options for renewal. The pro forma minimum lease payments
are based on the executed ground leases. The antennae space on the H&K
multi-tenant towers are leased to a variety of wireless service providers
under non-cancelable operating leases. The tenant leases are generally for
terms of five years and include options for renewal. The pro forma future
minimum lease payments and minimum rental income for these leases assuming
the transaction occurred and the related leases commenced January 1, 1997
are as follows:
<TABLE>
<CAPTION>
LEASE PAYMENTS RENTAL INCOME
-------------- -------------
<S> <C> <C>
1997.............................................. $ 32 $162
1998.............................................. 32 162
1999.............................................. 32 162
2000.............................................. 32 162
2001.............................................. 32 162
---- ----
Total................................... $160 $810
==== ====
</TABLE>
(j) Represents the results of operations of GlobalComm as if the business
combination had occurred on January 1, 1997. The adjustments are based on
historical revenues, historical expenses and straight-line amortization of
$1,700 of goodwill attributable to the acquisition over 15 years.
(k) The adjustment for the year ended December 31, 1997 and the nine months
ended September 30, 1998, respectively, represents pro forma interest
expense at a rate of 12.0% per annum, compounded semiannually, applied to
the $125,000 gross proceeds received from the private sale of the Notes of
$15,450 and $12,893, less the $3,916 of historical interest expense incurred
related to the Notes in the nine months ended September 30, 1998, plus
straight-line amortization of $4,750 of debt issuance costs over 10 years of
$475 and $238, less $101 and $81 of historical interest expense incurred
related to the note payable issued to Joe L. Finley III in connection with
the acquisition of Telesite and Metrosite, as if the sale of the Notes had
occurred on January 1, 1997. The note payable to Mr. Finley was repaid with
a portion of the proceeds from the sale of the notes.
24
<PAGE> 27
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data of the
Company and its predecessor, Telesite, as derived from the audited financial
statements as of and for:
- the year ended December 31, 1996;
- the period from January 1, 1997 to May 12, 1997;
- the period from the Company's inception (April 25, 1997) to December 31,
1997; and
- the nine-month period ended September 30, 1998.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that you should expect for the entire
year.
The combined financial data presented below for the nine months ended
September 30, 1997 were derived from the audited financial statements of
Telesite for the period from January 1, 1997 to May 12, 1997 and the unaudited
financial statements of the Company from April 25, 1997 to September 30, 1997.
We have prepared the unaudited financial data on the same basis as the audited
financial statements and, in our opinion, included all adjustments, consisting
only of normal recurring adjustments, necessary to present the included
information fairly.
<TABLE>
<CAPTION>
TELESITE TELESITE
-------------------------- -------------
(PREDECESSOR) SPECTRASITE COMBINED (PREDECESSOR) SPECTRASITE
-------------------------- ------------ ------------ ------------- -----------
YEAR ENDED JANUARY 1 - APRIL 25 - YEAR ENDED JANUARY 1 - APRIL 25 -
DECEMBER 31, MAY 12, DECEMBER 31, DECEMBER 31, MAY 12 SEPTEMBER
1996 1997 1997 1997 1997 30, 1997
------------ ----------- ------------ ------------ ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Site acquisition revenue........ $8,841 $1,926 $ 5,002 $ 6,928 $1,926 $ 3,427
Site leasing revenue............ -- -- -- -- -- --
------ ------ ------- ------- ------ -------
Total revenues.................... 8,841 1,926 5,002 6,928 1,926 3,427
Cost of revenues:
Cost of site acquisition
revenue....................... 2,255 595 1,120 1,715 595 978
Cost of site leasing revenue,
exclusive of depreciation..... -- -- -- -- -- --
------ ------ ------- ------- ------ -------
Total cost of revenues............ 2,255 595 1,120 1,715 595 978
------ ------ ------- ------- ------ -------
Gross profit...................... 6,586 1,331 3,882 5,213 1,331 2,449
Selling, general and
administrative(a)............... 4,347 1,798 6,148 7,946 1,798 3,522
------ ------ ------- ------- ------ -------
Operating income (loss)(a)........ 2,239 (467) (2,266) (2,733) (467) (1,073)
Net income(loss).................. 2,289 (503) (2,160) (2,663) (503) (1,128)
Net income (loss)
applicable to common
shareholders.................... 2,289 (503) (2,660) (2,163) (503) (628)
<CAPTION>
SPECTRASITE
-----------
COMBINED
----------- NINE
NINE MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1997 30, 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING DATA:
Revenues:
Site acquisition revenue........ $ 5,353 $ 5,154
Site leasing revenue............ -- 211
------- ---------
Total revenues.................... 5,353 5,365
Cost of revenues:
Cost of site acquisition
revenue....................... 1,573 1,721
Cost of site leasing revenue,
exclusive of depreciation..... -- 142
------- ---------
Total cost of revenues............ 1,573 1,863
------- ---------
Gross profit...................... 3,780 3,502
Selling, general and
administrative(a)............... 5,320 6,777
------- ---------
Operating income (loss)(a)........ (1,540) (3,275)
Net income(loss).................. (1,631) (5,038)
Net income (loss)
applicable to common
shareholders.................... (1,131) (6,424)
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
TELESITE TELESITE
-------------------------- -------------
(PREDECESSOR) SPECTRASITE COMBINED (PREDECESSOR) SPECTRASITE
-------------------------- ------------ ------------ ------------- -----------
YEAR ENDED JANUARY 1 - APRIL 25 - YEAR ENDED JANUARY 1 - APRIL 25 -
DECEMBER 31, MAY 12, DECEMBER 31, DECEMBER 31, MAY 12 SEPTEMBER
1996 1997 1997 1997 1997 30, 1997
------------ ----------- ------------ ------------ ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Net cash provided by operating
activities...................... $1,109 $ (71) $ 223 $ 152 $ (71) $ 183
Net cash used in investing
activities...................... (853) (322) (7,178) (7,500) (322) (5,229)
Net cash provided by financing
activities...................... (266) 390 9,189 9,579 390 9,364
EBITDA(b)......................... 2,330 (411) (1,777) (2,188) (411) (857)
Adjusted EBITDA(c)
Site acquisition................ -- -- -- -- -- --
Site leasing.................... -- -- -- -- -- --
Depreciation and amortization..... 91 56 489 545 56 216
Capital expenditures(d)........... 498 64 850 914 64 156
Cash interest expense............. 64 31 64 95 31 40
Ratio of earnings to fixed
charges(e)...................... 23.2x -- -- -- -- --
Deficiency of earnings to fixed
charges......................... -- 503 2,160 2,663 503 1,128
SELECTED OPERATING DATA (AT END OF
PERIOD):
Number of owned towers....................................................................................................
Number of mandated towers(f)..............................................................................................
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and short term investments...........................................................................................
Total assets..............................................................................................................
Total liabilities.........................................................................................................
Preferred stock...........................................................................................................
Shareholders' deficiency..................................................................................................
<CAPTION>
SPECTRASITE
-----------
COMBINED
----------- NINE
NINE MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 1997 30, 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OTHER DATA:
Net cash provided by operating
activities...................... $ 112 $ 340
Net cash used in investing
activities...................... (5,551) (71,348)
Net cash provided by financing
activities...................... 9,754 144,978
EBITDA(b)......................... (1,268) (2,495)
Adjusted EBITDA(c)
Site acquisition................ -- (2,328)
Site leasing.................... -- 225
Depreciation and amortization..... 272 780
Capital expenditures(d)........... 220 12,496
Cash interest expense............. 71 211
Ratio of earnings to fixed
charges(e)...................... -- --
Deficiency of earnings to fixed
charges......................... 1,631 5,027
SELECTED OPERATING DATA (AT END OF
PERIOD):
Number of owned towers............ 45 85
Number of mandated towers(f)...... 126 126
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and short term investments... $ 121,766
Total assets...................... 163,171
Total liabilities................. 131,956
Preferred stock................... 39,896
Shareholders' deficiency.......... (8,681)
</TABLE>
26
<PAGE> 29
- ---------------
Notes to Selected Financial Data
(a) Selling, general and administrative expense and operating income
attributable to site acquisition activities for the period April 25-December
31, 1997 were $2,706 and $1,110, respectively. In addition, selling, general
and administrative expense includes approximately $1,463 of non-recurring
charges primarily related to formation costs and the operations of
Metrosite.
(b) EBITDA consists of operating income (loss) before depreciation and
amortization. EBITDA is provided because it is a measure commonly used in
the industry. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and should not be considered an
alternative to net income as a measure of performance or to cash flow as a
measure of liquidity. EBITDA is not necessarily comparable with similarly
titled measures for other companies.
EBITDA is widely used in the communications site industry as a measure of a
company's operating performance. SpectraSite believes that EBITDA can assist
in comparing company performance on a consistent basis without regard to
depreciation and amortization, which may vary significantly depending on
accounting methods where acquisitions are involved or non-operating factors
such as historical cost bases. EBITDA presented in the table is consistent
with EBITDA calculated under the indenture governing the Notes.
(c) Adjusted EBITDA for any stated period means the sum of the EBITDA of the
Company for the fiscal quarters included within the stated period, less the
Company's site leasing EBITDA for such stated period, plus the product of
the most recent quarter's site leasing EBITDA included within the stated
period and the total number of fiscal quarters within the stated period.
Site leasing EBITDA includes, for any stated period, the EBITDA directly
attributable to site rental revenue, license or management fees paid to
manage, lease or sublease space on communications sites owned, leased or
managed by the Company (collectively, "site leasing revenues"). For the
purposes of calculating Adjusted EBITDA, the site leasing EBITDA for the
most recent quarter included in the stated period shall be determined on a
pro forma basis after giving effect to acquisitions or dispositions, new
contracts and rent increases as if these events had occurred at the
beginning of the fiscal quarter, and eliminating losses related to
individual lease or site management contracts. In allocating corporate,
general administrative and other operating expenses that are not allocated
to any particular line of business in the financial statements of the
Company, such expense shall be allocated to the Company's site leasing
business in proportion to its percentage of the total revenues for the
applicable period. Adjusted EBITDA for site leasing includes the acquisition
from Airadigm of certain towers without co-location tenants.
For the nine months ended September 30, 1998, Adjusted EBITDA was computed
as follows:
<TABLE>
<S> <C>
EBITDA for the nine months.................................. $(2,495)
Less site leasing EBITDA for the nine months................ (167)
-------
Adjusted EBITDA -- site acquisition.................... $(2,328)
=======
Pro forma revenue........................................... $ 472
Pro forma cost of site leasing revenue...................... 161
Pro forma selling, general and administrative............... 236
-------
Pro forma site leasing EBITDA for the three months ended
September 30, 1998........................................ 75
X 3
-------
Adjusted EBITDA -- site leasing........................ $ 225
=======
</TABLE>
Adjusted EBITDA is used in the communications tower industry as a measure of
a company's operating performance, and it is presented as additional
information because management believes that it serves as a useful financial
analysis tool for measuring and comparing companies in several areas, such
as liquidity, operating performance and leverage. In addition, Adjusted
EBITDA is a measure used in the indenture governing the Notes, and the
measure reported in the table is
27
<PAGE> 30
consistent with the calculation under the indenture. Adjusted EBITDA is not
a measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity. Adjusted
EBITDA is not necessarily comparable with similarly titled measures for
other companies.
(d) Capital expenditures for Telesite have been reduced for the periods ended
December 31, 1996 and May 12, 1997 by $340 and $258, respectively. These
expenditures were for land and construction in progress which were sold
prior to the closing of the acquisition of Telesite.
(e) The ratio of earnings to fixed charges is computed by dividing income (loss)
before income taxes and fixed charges by fixed charges. Fixed charges
consist of interest charges, amortization of debt discount and debt issuance
costs, and that portion of rental expense of the Company believes to be
representative of interest. Earnings were not sufficient to cover fixed
charges for all periods presented in the table, except for the year ended
December 31, 1996, and, therefore, the ratio is not meaningful for such
periods.
(f) Mandates are non-binding requests from customers to construct towers. See
"Risk Factors -- We cannot assure you that mandates will yield binding
agreements."
28
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Integrated Site Development, Inc. ("ISD"), a Delaware corporation which has
since been renamed SpectraSite Holdings, Inc., was incorporated on April 25,
1997. ISD, U.S. Towers, Inc. (since renamed SpectraSite Communications, Inc.),
Metrosite and Telesite were combined to form the Company through a series of
transactions effected as of May 12, 1997, and on October 31, 1997, Telesite was
merged into SpectraSite Communications. On February 27, 1998, the Company sold
Metrosite to an unaffiliated third party for approximately $299,000 in cash,
plus the right to certain royalty payments which continue for a period of six
years. Metrosite primarily provides site acquisition services to municipal
governments. As a result of the foregoing transactions and as of the date
hereof, SpectraSite Communications is a wholly owned subsidiary of SpectraSite,
and substantially all of the Company's operations are conducted through
SpectraSite Communications.
SpectraSite has operated the site acquisition services business for a
limited period of time and had no operations prior to May 12, 1997. The
acquisitions were accounted for as a purchase and, accordingly, the results of
operations of the respective former entities are included in the consolidated
operations of the Company from the date of acquisition to, in Metrosite's case,
the date of disposition.
The Company plans to continue to offer site acquisition services in the
future. However, its primary focus will be on the ownership of multi-tenant
towers and leasing of antenna space on such towers. As of September 30, 1998,
the Company had 45 towers in service. As a result of its limited operating
history and primary focus on tower ownership and leasing, management believes
that its results of operations for the period ended December 31, 1997 and for
the nine months ended September 30, 1998 are not indicative of the Company's
results of operations in the future.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- --------------------
1997 1997
1996 (COMBINED) (COMBINED) 1998
------ ---------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................................ $8,841 $ 6,928 $ 5,353 $ 5,365
Cost of revenues................................ 2,255 1,715 1,573 1,863
------ ------- ------- -------
Gross profit.................................... 6,586 5,213 3,780 3,502
Selling, general and administrative............. 4,347 7,946 5,320 6,777
------ ------- ------- -------
Operating income (loss)......................... 2,239 (2,733) (1,540) (3,275)
------ ------- ------- -------
Other income, net............................... 116 148 281 472
Interest expense, net........................... (66) (78) (142) (2,225)
------ ------- ------- -------
Net income (loss)............................... $2,289 $(2,663) $(1,401) $(5,028)
====== ======= ======= =======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE COMBINED RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
The following is a discussion of the financial condition and results of
operations of the Company for the nine month period ended September 30, 1998 and
for the period from inception (April 25, 1997) through September 30, 1997, and
Telesite's results of operations for the period from January 1, 1997 through May
12, 1997.
Cost of revenues increased to $1.9 million for the nine months ended
September 30, 1998 from $1.6 million for the nine months ended September 30,
1997. Gross profit decreased to $3.5 million for the
29
<PAGE> 32
nine months ended September 30, 1998 from $3.8 million for the nine months ended
September 30, 1997. As a percentage of total revenues, gross profit decreased to
65.3% for the nine months ended September 30, 1998 from 70.6% for the nine
months ended September 30, 1997, reflecting competitive pricing and margin
pressure as the volume of new site acquisition services projects coming to
market has declined. Management believes that the decline in the volume of site
acquisition service projects is generally a result of more established PCS
licensees completing the first phase of construction in their initial markets
and not yet commencing secondary buildouts in such markets or in additional
markets, and the fact that holders of certain more recently issued licenses have
not yet commencing construction of tower networks in their respective markets.
Selling, general and administrative expenses increased to $6.8 million for
the nine months ended September 30, 1998 from $5.3 million for the nine months
ended September 30, 1997. The increase is a result of expenses related to
additional corporate overhead to manage and operate the ongoing activities of
the Company. Marketing expenses related to tower development activities as well
as the site acquisition operations also contributed to the increase in expenses.
Telesite did not actively market its services, but relied primarily on
reputation in the industry and customer referral to generate revenues. To
support the Company's entry into tower development and leasing, a marketing
effort has been established which promotes both the tower development and
leasing as well as site acquisition services. Amortization of goodwill was
$374,000 in the nine months ended September 30, 1998 compared to $181,000 in the
nine months ended September 30, 1997.
Operating loss was $3.3 million for the nine months ended September 30,
1998, compared to $1.5 million for the nine months ended September 30, 1997.
Other income, which consists primarily of gain on sale of assets and equity
in earnings of affiliates, increased to $472,000 for the nine months ended
September 30, 1998 from $281,000 for the nine months ended September 30, 1997.
The increase is a result of a gain on the sale of assets in connection with the
disposal of Metrosite during the first quarter of 1998 of $472,000. During the
nine months ended September 30, 1997, $281,000 was recognized as equity earnings
of CMS. The Company disposed of its interest in CMS during the second quarter of
1998 and did not recognize any equity in the earnings of the affiliate during
1998. See "Business -- Recent Events -- CMS Disposition."
COMBINED RESULTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO
TELESITE'S RESULTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996.
The following is a discussion of the financial condition and results of
operations of the Company for the nine month period ended September 30, 1998 and
for the period from inception (April 25, 1997) through September 30, 1997 and
through December 31, 1997, and Telesite's results of operations for the period
from January 1, 1997 through May 12, 1997, April 1, 1997 through May 12, 1997
and for the twelve month period ended December 31, 1996.
Total revenues decreased to $6.9 million for the twelve months ended
December 31, 1997 from $8.8 million for the twelve months ended December 31,
1996 due primarily to the decreased demand for site development services from
more established PCS licensees as a result of their completing the first phase
of construction in their initial markets and not yet commencing secondary
build-outs in such markets or in additional markets, and the fact that holders
of certain more recently issued licenses have not yet commencing construction of
tower networks in their respective markets.
Total costs of revenues decreased to $1.7 million for the twelve months
ended December 31, 1997 from $2.3 million for the twelve months ended December
31, 1996, due primarily to decreased site acquisition revenues. Gross profit
decreased to $5.2 million for 1997 from $6.6 million for 1996. As a percentage
of total revenues, gross profit increased to 75.3% for 1997 from 74.5% for 1996.
Selling, general and administrative expenses increased to $7.9 million for
the twelve months ended December 31, 1997 from $4.3 million for the twelve
months ended December 31, 1996. The increase is a result of the expenses related
to management of the ongoing activities of the Company, expenses related to
30
<PAGE> 33
the implementation of tower development and marketing activities, one-time
non-cash charges of approximately $869,000 as a result of the formation of the
Company, amortization of goodwill of approximately $278,000 in connection with
the Company's acquisition of Telesite and expenses incurred in connection with
the operations of Metrosite. The Company sold its interest in Metrosite during
early 1998. The Company anticipates that in the future costs related to tower
development activities will be capitalized as part of the cost of the towers.
Operating loss was $2.7 million for the twelve months ended December 31,
1997 compared to $2.2 million during the twelve months ended December 31, 1996.
The change is a result of the decline in revenues and the increase in selling,
general and administrative expenses attributable to the commencement of
operations of the Company.
Other income, which consists primarily equity in earnings of affiliates,
increased to $148,000 for the twelve months ended December 31, 1997 from
$116,000 for the twelve months ended December 31, 1996. The increase is a result
of improved performance by such affiliates.
LIQUIDITY AND CAPITAL RESOURCES
SpectraSite is a holding company whose only significant asset is the
outstanding capital stock of its subsidiary, SCI. Our only source of cash to pay
interest on and principal of the Notes is distributions from SCI. Prior to July
15, 2003, interest expense on the Notes will consist solely of non-cash
accretion of an original issue discount and the Notes will not require annual
cash interest payments. After such time, the Notes will have accreted to
approximately $225 million and will require semi-annual cash interest payments
of $13.5 million. In addition, the Notes mature on July 15, 2008. Furthermore,
pursuant to the commitment letter, the new credit facility is expected to
provide for quarterly interest payments commencing as soon as any funds are
borrowed thereunder.
As a result of the issuance and sale of its Series B preferred stock and
the Notes, the Company realized net proceeds of $147.8 million, after deducting
fees and expenses. The Company has deposited $11.7 million of the proceeds in
escrow towards the acquisition of 47 towers from Airadigm and has used (i)
approximately $474,000 to acquire 14 ground leases and two towers in inventory
from Amica and to construct towers on the sites, (ii) $1.9 million for the
acquisition of GlobalComm and (iii) $2.3 million to repay outstanding
indebtedness. The remaining proceeds will be used for the construction and
acquisition of towers and for general working capital purposes. As of September
30, 1998, the Company had approximately $122 million of cash and short term
investments.
Net cash provided by operations during the nine months ended September 30,
1998 was $340,000 compared to $184,000 having been provided by operations during
the comparable 1997 period. The increase in cash provided by operations was
primarily attributable to an increase in accounts payable, offset by the net
loss incurred during the period. The increase in accounts payable was primarily
the result of liabilities incurred in conjunction with tower construction. Net
cash used for investing for the nine months ended September 30, 1998 was $71.3
million compared to $5.2 million for the nine months ended September 30, 1997.
The cash used for investing activities during the nine months ended September
30, 1998 was primarily the result of the investment of unused proceeds from the
sale of the Notes in short-term investments, costs associated with tower
construction, acquisition of towers from Airadigm and the acquisition of
GlobalComm. The cash used for investing activities during the nine months ended
September 30, 1997 primarily related to the acquisition of Telesite. Net cash
provided by financing activities for the nine months ended September 30, 1998
was $144.9 million compared to $9.4 million for the same period in 1997. The
increase in cash provided by financing activities was attributable to the
proceeds from the sales of Series B preferred stock and the Notes.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, its debt obligations, and its ability to refinance any such debt
obligations (including the Notes) or to fund planned capital expenditures, will
depend on its future performance, which, to a certain extent is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. The Company's business strategy
contemplates substantial capital expenditures in connection with its planned
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tower buildout. Based on the Company's current operations and anticipated
revenue growth, management believes that cash flow from operations, available
cash of approximately $122 million and anticipated available borrowings under
the new credit facility will be sufficient to fund the Company's capital
expenditures of approximately $140 million through fiscal 1999. Thereafter,
however, or in the event the Company exceeds its currently anticipated capital
expenditures for fiscal 1998 or 1999, the Company anticipates that it will seek
additional equity or debt financing to fund its business plan. Failure to obtain
any such financing could require the Company to significantly reduce its planned
capital expenditures or scale back the scope of its tower buildout or
acquisition activities, any of which could have a material adverse effect on the
Company's business, prospects, financial condition or results of operations.
There can be no assurance that the Company will generate sufficient cash flow
from operations in the future, that anticipated revenue growth will be realized
or that future borrowings or equity contributions will be available in amounts
sufficient to service its indebtedness and make anticipated capital
expenditures.
Certain of the Company's expenses, such as those for marketing, wages and
benefits generally increase with inflation. However, the Company does not
believe that its financial results have been, or will be, adversely affected by
inflation in a material way.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for the reporting and
disclosure of comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 131 changes the manner in which public
companies report segment information in annual reports and requires companies to
report selected segment information in interim financial reports. Both these
statements are effective for fiscal years beginning after December 15, 1997,
with reclassification of the financial statements for earlier periods required
for comparative purposes. The Company has adopted these statements in 1998. SFAS
No. 130 did not have an impact on the Company's historical financial statements,
as the Company has no items of other comprehensive income. SFAS No. 131 does not
have a significant impact on the Company's historical financial statements, as
the Company conducts business in only one operating segment.
YEAR 2000 COMPLIANCE
The Company is in the process of conducting a comprehensive review of its
computer systems to identify which of its systems will have to be modified,
upgraded or converted to recognize and process dates after December 31, 1999,
and developing an implementation plan to resolve this issue. Although the
Company believes that most, if not all, of its computer software and systems are
year 2000 compliant, because most of the Company's hardware and software has
been purchased within the past 18 months. The Company expects to incur internal
staff costs, as well as other expenses, related to testing and updating its
systems to prepare for the millennium date change. The Company presently
believes that, with minor modifications and upgrades to existing software and
successful conversion to new software, the year 2000 issue will not pose
significant operational problems for the Company's systems as so modified,
upgraded or converted. In fact, even if all of the Company's computer systems
and other equipment vulnerable to the millennium date change failed, the Company
could continue operations uninterrupted after such failures. Like most other
companies, the Company is dependent upon a variety of external suppliers
including vendors providing electrical power, telephony, water and other
necessary commodities. SpectraSite also relies upon the interstate banking
system and related electronic communications for functions such as transmitting
financial data from field offices. The Company is not aware currently of any
material non-compliance by these vendors that will materially affect the
Company's business operations; however, SpectraSite does not control these
systems and cannot assure that they will be converted in a timely fashion. Any
delays or omissions by the Company or its customers, suppliers or contractors to
resolve the year 2000 issue could materially adversely affect the Company's
business, financial condition or results of operations. We do not anticipate
material expenditures related to the year 2000 issue and incremental costs to
date have been negligible, but there can be no assurance that amounts to be
spent on addressing the year 2000 issue will not be material.
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INDUSTRY OVERVIEW
GENERAL
The Company was formed in 1997 through the combination of three existing
companies in the tower development, site acquisition and site management
businesses to capitalize on the trend toward co-location and independent tower
ownership in the wireless communications industry and has grown into a leading
build-to-suit provider of tower networks. As wireless services and current
wireless technologies are used in more applications, the cost of wireless
services to consumers declines and new wireless technologies are developed.
Changes in U.S. federal regulatory policy, including the implementation of the
Telecommunications Act of 1996, have led to a significant number of competitors
in the industry through the auction of frequency spectrum for a wide range of
uses, most notably PCS. This competition, combined with a growing reliance on
wireless services by consumers, has led to an increased demand for higher
quality, uninterrupted service and improved coverage, which, in turn, has led to
increased demand for communication sites as new providers build out their
networks and existing providers upgrade and expand their networks to maintain
their competitiveness. The Company believes that, as the wireless communications
industry has become more competitive, wireless service providers have sought
operating and capital efficiencies by outsourcing certain network services and
build-out activities and by co-locating transmission equipment with other
providers on multi-tenant towers. The need for co-location has also been driven
by the growing trend by municipalities to slow the proliferation of towers by
requiring that towers accommodate multiple tenants.
All of these factors provide an opportunity for the Company to identify and
acquire communication sites, lease antennae space on such sites and provide
related network infrastructure and support services.
NETWORK AND TOWERS
Wireless service providers require wireless transmission "networks" in
order to provide service to their customers. Each of these networks is
configured specifically to meet the coverage requirements of the particular
provider and includes transmission equipment such as antennae placed at various
locations throughout the service area. These locations, or "communication
sites," are critical to the operation of a wireless network. A communication
site may have the capacity for multiple antennae installations, or "antennae
sites," depending on the size and type of the communication site. The potential
value of a tower generally depends on its location and the number of antennae
that it can support.
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Set forth below is a diagram illustrating the basic functions of each of
the primary components of a wireless communication network.
[WIRELESS COMMUNITCATIONS NETWORK DIAGRAM]
Communication sites consist of towers, rooftops and other structures upon
which antennae are placed. A typical tower includes a compound enclosing the
tower and an equipment shelter. The equipment shelter houses a variety of
transmitting, receiving and switching equipment. The tower can be either a
self-support or guyed model. There are two types of self-supported models: the
lattice and the monopole. A lattice model is usually tapered from the bottom up
and can have three or four sides of open-framed steel supports. A monopole is a
free standing tubular structure. Guyed towers gain their support capacity from a
series of guy cables attaching separate levels of the tower to anchor
foundations in the ground. Monopoles typically range in height from 50-200 feet,
lattice towers can reach up to 350 feet and guyed towers can reach 2000 feet or
more.
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<PAGE> 37
TYPES OF TOWERS
(DIAGRAM NOT TO SCALE)
[TYPES OF TOWERS DIAGRAM]
Rooftop sites are more common in urban areas where tall buildings are
generally available and multiple communication sites are required because of
high wireless traffic density. One advantage of a rooftop site is that zoning
regulations typically permit installation of antennae. In cases of such high
population density, neither height nor extended radius of coverage are as
important and the installation of a tower structure may prove to be impossible
because of zoning restrictions, land cost and land availability. Other
structures on which antennae have been installed include billboards, electric
transmission towers, silos, water tanks and smokestacks.
OPERATION OF TWO-WAY WIRELESS SYSTEMS. Wireless transmission networks use
a variety of radio frequencies to transmit voice and data. Wireless transmission
networks include two-way radio applications, such as cellular, PCS, specialized
mobile radio and enhanced specialized mobile radio networks, and one-way radio
applications, such as paging services. Each application operates within a
distinct radio frequency. Although cellular currently represents the largest
segment of the wireless communications industry, other wireless technologies are
expected to grow significantly.
Two-way wireless service areas are divided into multiple regions called
"cells," each of which contains a base station consisting of a low-power
transmitter, a receiver and signaling equipment, typically located on a tower.
The cells are usually configured in a grid pattern, although terrain factors,
including natural and man-made obstructions, and signal coverage patterns may
result in irregularly shaped cells and overlaps or gaps in coverage. Cellular
system cells generally have a radius ranging from two miles to 25 miles and PCS
and other higher frequency services system cells generally have a radius ranging
from one-quarter mile to 12 miles, depending on the technology being used, level
of customer usage, installation,
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height and the terrain. Growing demand for cell sites is one of the primary
reasons for the expected growing demand for the Company's services. The base
station in each cell is connected by microwave, fiber optic cable or telephone
wires to a switch, which uses computers and specially developed software to
control the operation of the wireless telephone system for an entire service
area. The switch controls the transfer of calls from cells within the system and
connects calls to the local landline telephone system or to a long distance
telephone carrier.
Each wireless transmission network is planned to meet a certain level of
subscriber density and traffic demand in addition to providing a certain
geographic coverage. Each transmission requires a certain amount of radio
frequency, so a system's capacity is limited by the amount of frequency that is
available. The same frequency can be reused by each separate transmitter,
subject to certain interference limitations. The design of each wireless system
involves the placement of transmission equipment in locations that will make
optimal use of available frequency based upon projected usage patterns, subject
to the availability of such locations and the ability to use them for wireless
transmission under applicable zoning requirements.
WIRELESS COMMUNICATIONS. The wireless communications industry now provides
a broad range of services, including cellular, PCS, paging, specialized mobile
radio and enhanced specialized mobile radio. The industry has benefited in
recent years from increasing demand for its services and industry experts expect
this demand to continue to increase. The following table sets forth industry
estimates regarding projected subscriber growth for certain types of wireless
communications services:
<TABLE>
<CAPTION>
1997-2002 1997-2007
ESTIMATED PROJECTED PROJECTED COMPOUNDED COMPOUNDED
1997 2002 2007 ANNUAL ANNUAL
SUBSCRIBERS SUBSCRIBERS SUBSCRIBERS GROWTH RATE GROWTH RATE
----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Cellular...................... 53.0 84.2 95.7 9.7% 6.1%
PCS........................... 2.9 33.8 55.8 63.9% 34.6%
Enhanced Specialized Mobile
Radio....................... 1.3 7.7 11.6 42.8% 24.5%
</TABLE>
- ---------------
Source: Paul Kagan Associates, Inc. There can be no assurance that these
projections will prove to be accurate.
The Company believes that more communication sites will be required in the
future to accommodate the expected increase in demand for wireless
communications services. Current emerging wireless communications systems, such
as PCS and enhanced specialized mobile radio, represent an immediate and sizable
market for providers of communication site services as they build out large
nationwide and regional networks. The development of higher frequency
technologies such as PCS offers the Company opportunities as the reduced cell
range of those technologies require a more concentrated network of towers. While
several PCS and enhanced specialized mobile radio providers have already built
limited networks in certain markets, these providers still need to fill in "dead
zones" and expand geographic coverage. The Cellular Telecommunications Industry
Association (the "CTIA") estimates that, as of June 30, 1997, there were 38,650
antennae sites in the United States. In November 1997, the Personal
Communications Industry Association estimated that the number of antennae sites
in the United States for both cellular and PCS providers will increase by an
additional 100,000 antennae sites (more than one of which can be located on a
single communication site) over the next ten years as cellular systems expand
coverage and PCS systems are deployed.
As a result of advances in digital technology, enhanced specialized mobile
radio operators have also begun to design and deploy digital mobile
telecommunications networks in competition with cellular providers. In response
to the increased competition, cellular operators are re-engineering their
networks by increasing the number of sites, locating sites within a smaller
radius, filling in "dead zones" and converting from analog to digital cellular
service in order to manage subscriber growth, extend geographic coverage and
provide competitive services. The demand for communication sites is also being
stimulated by the
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development of new paging applications, such as e-mail and voicemail
notification and two-way paging, as well as other wireless data applications.
Licenses are also being awarded, and technologies are being developed, for
numerous new wireless applications that will require networks of communication
sites. These potential applications include local multi-point distribution
services, such as wireless local loop, wireless cable television, data and
Internet access. Radio spectrum required for these technologies has, in many
cases, already been awarded and licensees have begun to build out and offer
services through local loop networks operated by Winstar and Teligent, through
new wireless cable networks operated by companies such as CellularVision, and
through data networks being constructed and operated by RAM Mobile Data, MTEL
and Ardis.
CHARACTERISTICS OF THE TOWER INDUSTRY
In addition to the increased demand for wireless services and the need to
develop and expand wireless communications networks, the Company believes that
other trends influencing the wireless communications industry have important
implications for independent tower operators. In this increasingly competitive
wireless industry environment, the Company believes that many providers are
dedicating their capital and operations primarily to those activities that
directly contribute to subscriber growth, such as marketing and distribution.
Management believes these providers, therefore, will seek to reduce costs and
increase efficiency through the outsourcing of infrastructure network functions
such as communication site ownership, construction, operation and maintenance.
As a result of FCC regulations mandating deployment of digital television
transmitters, broadcast industry trade associations estimate that 66 percent of
existing television broadcasters will require new or upgraded towers, involving
an estimated 1000 television towers. As a result of the increased weight and
windloading of digital television facilities and other tower constraints, a
number of FM broadcast stations that have collocated their FM antennas on
television towers will be forced to relocate to other existing towers or to
construct new transmission facilities. The mandatory timetable for deploying
digital television transmitters, which will begin in 1999 and extend to 2003 for
various categories of stations will create a spike in demand. This is expected
to drive the scarcity value of towers upward but could entail scarcities in the
supply of construction crews with relevant training and experience. In order to
speed new network deployment and expansion and generate efficiencies, providers
are increasingly co-locating transmission equipment with that of other wireless
service providers. The trend towards co-location has been furthered by the
"Not-In-My-Backyard" arguments generated by local zoning and planning
authorities in opposition to the proliferation of towers.
Management believes that, in addition to the favorable growth and
outsourcing trends in the wireless communications industry and high barriers to
entry as a result of regulatory and local zoning restrictions associated with
new tower sites, tower operators benefit from several favorable characteristics.
The ability of tower operators to provide antennae sites to customers on
multiple tenant towers diversifies them against the specific technology, product
and market risks typically faced by an individual provider. The emergence of new
technologies, providers, products and markets may allow independent tower
operators to further diversify against such risks. The Company believes that
independent tower operators also benefit from the contract nature of the site
leasing business and the predictability and stability of these recurring
revenues. In addition, the site leasing business has low variable operating
costs and significant operating leverage. Towers generally are fixed cost assets
with minimal variable operating costs associated with additional tenants. A
tower operator can generally expect to experience increasing margins when new
tenants are added to existing towers.
The site leasing business typically experiences low customer churn rates as
a result of the high costs that would be incurred by a wireless service provider
were it to relocate an antennae to another site and consequently be forced to
re-engineer its network. Moving a single antenna may alter the pre-engineered
maximum signal coverage, requiring a reconfiguration of the network at
significant cost to maintain the same coverage. Municipal approvals are becoming
increasingly difficult to obtain and may also affect the provider's decision to
relocate. The Company believes that the costs associated with network
reconfiguration and municipal approval and the time required to complete these
activities are usually not justified by the potential savings in reduced site
rental expense.
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BUSINESS
OVERVIEW
SpectraSite is one of the leading full service providers of tower related
services in the U.S. wireless communications industry. The Company develops and
manages build-to-suit tower networks and provides site acquisition services for
major wireless communication companies such as AT&T Wireless, Nextel and Sprint
PCS, as well as numerous other entrepreneurial service providers. SpectraSite's
business enjoys favorable unit economics which include stable and recurring
revenues, low operating costs, minimal post-construction capital requirements,
high customer retention levels and a diversified asset and customer base. The
Company is capitalizing on the growing trend toward antennae co-location and
independent tower ownership, as leading wireless providers increasingly redirect
their capital outlays from tower development to subscriber acquisition
activities and local municipalities encourage multiple tenants on single towers.
The Company builds towers suited for multi-tenant use generally under
build-to-suit programs and typically does not start construction of a tower
until an anchor tenant has agreed to lease antenna space on such tower. The
Company has the capacity to develop a large number of towers as (i) a typical
tower takes approximately two months to construct, once zoning approval is
obtained, (ii) the Company utilizes a standard set of proprietary building
specifications, and (iii) SpectraSite capitalizes on its program management
expertise and its established relationships with highly experienced,
pre-qualified third-party engineers and construction firms that specialize in
the wireless communications industry. As of September 30, 1998, the Company
owned 45 towers and had an additional 100 towers either under construction or
scheduled to be constructed for anchor tenants during 1998. In addition, the
Company plans to expand its tower inventory through future acquisitions or
partnerings with wireless service providers and by building selective tower
assets in strategic geographic areas that will be attractive to and usable by
multiple tenants. The Company also assists in the acquisition of antenna
locations on behalf of cellular and PCS carriers and has provided an array of
site acquisition services for major wireless service providers in 22 states,
covering approximately 3,700 sites. In addition, the Company manages 1,030
communication sites for carriers. Site acquisition and site management allow
SpectraSite to offer a complete product line of tower services and further
allows the Company to access customers in the early stages of their tower
network development.
The Company's primary focus is the ownership of multi-tenant towers and the
leasing, under long-term contracts, of antennae space on such towers to a
variety of wireless service providers, including PCS, cellular, paging,
specialized mobile radio, enhanced specialized mobile radio and other providers.
Since a typical tower has and will have multiple antennae positions that are
leased to different wireless providers and the towers are dispersed
geographically, the Company will benefit from a recurring revenue base that is
diversified in terms of customer mix, geographic presence and industry segment.
The relatively low, fixed costs associated with maintaining a tower network
allow for incremental leasing revenue from co-location tenants to result in
disproportionately greater increases in tower cash flow. Management believes
that tower cash flow margins will range from approximately 35% to 80% depending
upon the level of co-location. Additionally, the capital requirements beyond
initial construction are minimal. Assuming a conservative level of tenants per
tower, the payback period on construction investment is approximately five
years, while the usable life of the tower asset is estimated to be at least 15
years. The tower franchise is further enhanced by the high cost of antenna
relocation, which reduces customer turnover, and the high barriers to entry
resulting from local opposition to the proliferation of towers.
Under a build-to-suit program for an anchor wireless service provider, the
Company is awarded non-binding mandates and undertakes all site development
activities and costs. In return, the anchor wireless service provider enters
into a long-term lease. The Company retains ownership of the tower and has the
ability to co-locate additional tenants. Management believes that many wireless
service providers are using build-to-suit programs as an alternative to tower
ownership and that this outsourcing trend is likely to continue. The Company's
build-to-suit programs provide a comprehensive solution to those wireless
service providers seeking to minimize their capital expenditures, overhead and
time associated with the build-out
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<PAGE> 41
and on-going maintenance of their wireless network infrastructure. The Company
believes that its site leasing business will continue to grow, particularly
through greater acceptance of build-to-suit programs.
The Company also offers comprehensive site acquisition services, including
site location analysis; site acquisition; zoning and land use permitting; FAA
compliance analysis and filing; and contract, title and building permit
administration. One of the three businesses that combined to form SpectraSite in
1997 has been providing site acquisition services since 1992 and has developed
standard procedures for efficiently and effectively identifying locations,
obtaining compliance approvals and acquiring sites. The Company is typically
paid fees for site acquisition services on a project by project basis and as of
September 30, 1998, the Company had a backlog from third parties to assist in
the acquisition of approximately 1,170 sites.
Management believes that the number of communication sites (which include
towers, rooftops and other structures) in use will continue to increase with the
growth in demand for wireless services. This increase is the result of several
factors, including (i) the continuing build-out of higher frequency
technologies, such as PCS, which have a reduced cell range and thus require a
concentrated network of towers; (ii) the need to expand the capacity of existing
networks; (iii) the issuance of new wireless network licenses requiring the
construction of new wireless networks; and (iv) the emergence of new wireless
technologies. In November 1997, the Personal Communications Industry Association
estimated that the number of antenna sites in the United States for both
cellular and PCS providers will increase by an additional 100,000 antenna sites
(more than one of which can be located on a single communication site) over the
next ten years as cellular systems expand coverage and PCS systems are deployed.
Management believes that wireless service providers have begun to focus their
capital and operations primarily on activities that build subscriber growth,
such as marketing and customer services, and, therefore, will increasingly seek
to outsource communication site ownership, construction, management and
maintenance. The Company believes that it will benefit from this trend.
RECENT EVENTS
AIRADIGM ACQUISITION. The Company and Airadigm entered into an agreement,
dated August 14, 1998, covering the Company's acquisition of up to 47
communications towers and certain related assets from Airadigm. Airadigm is
anchor tenant on each tower. Pursuant to the agreement, the Company has acquired
40 of the towers and has identified seven towers as to which additional due
diligence would be required before the Company would accept such towers. The
Company has deposited the aggregate purchase price of $11.75 million in an
escrow account. Airadigm has received $10 million as payment for 40 towers and
$1.75 million remains in escrow pending resolution of the issues identified with
respect to the other seven towers. The Company and Airadigm are also negotiating
an exclusive multi-year build-to-suit contract. The towers are located primarily
in Wisconsin, and Airadigm is or will be the anchor tenant on all towers
purchased or mandated in connection with this transaction.
GLOBALCOMM ACQUISITION. As of September 23, 1998, the Company acquired all
of the shares of capital stock of GlobalComm, Inc. for approximately $2 million
in cash. GlobalComm provides co-location marketing services to Bell South
Mobility and other wireless communications providers in North Carolina, South
Carolina and eastern Tennessee. The founder and president of GlobalComm, Michael
Garrett, joined the Company as Vice President -- Co-location Marketing and, in
this capacity, Mr. Garrett is responsible for marketing available antennae space
on all of the Company's owned towers. See "Management" and "Certain
Transactions -- GlobalComm Acquisition."
AMICA ACQUISITION. As of August 20, 1998, the Company acquired 14 ground
leases and two towers in inventory from Amica for an aggregate cash purchase
price of $473,996. The Company has begun constructing towers on the sites. Amica
will be the anchor tenant on all 14 towers.
H&K ACQUISITION. On June 29, 1998, the Company acquired all of the
membership interests of H&K Investments LLC for an aggregate purchase price of
$1.4 million. H&K owned five towers; three of the towers are located in Kansas
and two are in Missouri. Each of the towers has multiple tenants, and Sprint PCS
is the anchor tenant on all five towers.
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CMS DISPOSITION. In May 1998, the Company sold its 33% interest in CMS to
the other owners for $375,000. As payment, the Company received a note payable
over 60 months and bearing interest at 8.5% per annum. CMS provides construction
management services to telecommunications companies.
ISSUANCE OF SERIES B PREFERRED STOCK. Pursuant to a stock purchase
agreement, dated as of March 23, 1998, Whitney Equity Partners, L.P., Whitney
Strategic Partners III, L.P., J.H. Whitney III, L.P., Waller-Sutton Media
Partners, L.P., Kitty Hawk Capital Limited Partnership, III, Kitty Hawk Capital
Limited Partnership, IV, Eagle Creek, L.L.C., The North Carolina Enterprise
Fund, L.P. ("NCEF"), Finley Family Limited Partnership, William R. Gupton, Jack
W. Jackman and Alton D. Eckert agreed to purchase 7,000,000 shares of the Series
B preferred stock for an aggregate purchase price of $28 million. As of March
23, 1998, the Series B investors purchased the first installment of 4,250,000
shares of Series B preferred stock for $17 million and as of August 27, 1998,
the Series B investors (other than Whitney Equity Partners, L.P.) purchased
2,074,126 shares for an aggregate purchase price of $8,296,504, and as of
September 21, 1998, Whitney Equity Partners, L.P. purchased the remaining
675,874 shares of Series B preferred stock for an aggregate purchase price of
$2,703,496. See "Certain Transactions -- The Series A and Series B Preferred
Stock Offerings."
WHALEN AGREEMENT. In February 1998, the Company entered into an agreement
with Whalen & Company, Inc. to jointly provide services for certain projects.
Management expects such joint projects to generate additional build-to-suit
opportunities. Whalen has been involved in program and project management since
1985 and has participated in the development of over 120 network systems and
10,000 sites in seven countries, including 42 states in the United States, for
various technologies including PCS, cellular and enhanced specialized mobile
radio. In addition to various projects that the parties may pursue together,
Whalen agreed to bring acquisition opportunities to the Company, and Whalen will
receive a fee for any such acquisitions completed by the Company.
BUSINESS AND GROWTH STRATEGIES
The Company's strategic objective is to become the premier build-to-suit
provider of tower networks in the United States and to be one of the largest
owners and operators of communication towers. The Company's strategy involves
the following elements:
BUILD TOWERS IN AREAS OF INCREASING WIRELESS DEMAND. SpectraSite is well
positioned to capitalize on the trend of wireless service providers outsourcing
their investment in, and ownership of, communications sites. The Company's
turnkey operation can develop and implement build-to-suit tower networks and
then provide efficient site management services for completed towers. Carriers
value SpectraSite's ability to serve all of their tower network development
needs. In addition, the Company selectively invests radio frequency engineering
and site acquisition costs into sites that management believes have higher than
average co-location opportunities.
PARTNER WITH MAJOR WIRELESS SERVICE PROVIDERS TO ACQUIRE EXISTING TOWERS
AND BUILD-TO-SUIT CONTRACTS. SpectraSite seeks to partner with major wireless
communications service providers in order to assume ownership of their existing
towers directly or through joint ventures. The Company also offers construction
and program management expertise to potential partners to facilitate timely and
efficient build-out of their tower networks. The Company's ability to offer
end-to-end tower development services position it well for partnering
opportunities with carriers seeking to outsource communication site ownership,
construction and management.
ACQUIRE UNDERUTILIZED TOWERS. The Company intends to continue to make
selective acquisitions in the fragmented tower owner and operator industry.
Management's strategy is to acquire towers that can service multiple tenants and
will be attractive to wireless providers based upon their location, height and
available capacity. Additionally, the Company's strategy is to purchase
under-utilized towers with high future co-location potential. Management
believes that there are small and large acquisition candidates and that the
number of available towers will grow as large PCS and other telecommunications
providers divest their tower holdings. SpectraSite has strict valuation criteria
and believes that certain tower properties can be purchased at reasonable price
levels. The Company regularly evaluates acquisition opportunities,
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engages in negotiations and submits bids with respect to acquisitions of
individual towers, groups of towers and entities that own or manage towers and
related businesses, any of which may be material.
MAXIMIZE CO-LOCATION ON TOWERS. The Company's strategy for its owned and
managed towers is to maximize the number of tenants on each tower in order to
rapidly increase tower cash flow. Since most tower costs are fixed, leasing
available space on an existing tower results in minimal additional expenses and,
therefore, generates a disproportionately large increase in tower cash flow
margins. The Company generally constructs towers to accommodate from three to
six tenants in addition to the anchor tenant. The Company has created a separate
sales force to market available co-location opportunities to wireless
communication providers.
CAPITALIZE ON STRONG RELATIONSHIPS WITH MAJOR WIRELESS SERVICE
PROVIDERS. SpectraSite has established a reputation as a highly professional,
responsive build-to-suit and site acquisition provider. This has been achieved
through ongoing investment in the development of multi-level customer
relationships. The Company's sales force implements a dual marketing strategy
that focuses Company resources on the client's decision maker at the local level
while solidifying relationships with the customer's senior management. The
Company's experience is that a high level of responsiveness and the rapid
development of tower sites for an existing customer ensures that SpectraSite
will continue to be an integral part of that customer's build-out plans.
Additionally, management believes that it will be able to build upon its
existing relationships with wireless service providers to source new
build-to-suit customers.
LEVERAGE SITE ACQUISITION SERVICES. Over the last six years, the Company
has performed an array of site acquisition services covering approximately 3,700
sites for major wireless service providers, including ALLTEL, BellSouth
Mobility, GTE Mobility, Horizon, Nextel and Powertel. The Company has a broad
field organization that allows it to identify and participate in site
acquisition projects across the country. Knowledge of local markets and strong
customer relationships with wireless service providers are competitive strengths
that position the Company to further capitalize on the site acquisition and
build-to-suit needs of the wireless communications industry. The Company
anticipates that site acquisition customers will continue to account for a
significant portion of its build-to-suit mandates and as of September 30, 1998,
approximately 64% of such mandates were from service providers for which the
Company has previously provided site acquisition services.
COMPANY STRENGTHS
The tower leasing business provides a diversified, stable, recurring cash
flow stream due to the long-term nature of the customer contracts, the
significant relocation costs for tower tenants and multiple customers from
different wireless segments. Once a tower is built for an anchor tenant,
co-location tenants provide high incremental cash flow margins due to low, fixed
tower maintenance expense. Leases are typically for an initial term of five
years with four or five additional five-year renewal periods and provide for
regular rent increases throughout their term. The term of the anchor tenant
lease is designed to match the term of the ground lease underlying the tower.
Towers can accommodate a broad array of wireless communication carriers and,
therefore, revenues are not dependent upon any specific wireless segment or
technology. Penetration of PCS, cellular and enhanced specialized mobile radio
was approximately 21% as of December 31, 1997 and is expected to reach 54% by
2007, according to Paul Kagan Associates, Inc. Since towers are a basic
component of a wireless communication network, the Company believes that it is
well positioned to benefit from the proliferation of wireless communication
services.
Management believes that the following strengths will enable the Company to
successfully expand its business:
BUILD-TO-SUIT FOCUS. The Company specializes in developing and building
tower networks to suit the needs of wireless communication carriers. Management
believes that its primary focus on and expertise in build-to-suit programs is
unique among its major competitors. The Company has assembled the resources,
tools and proven personnel which combine to form the program management
organization needed for managing high-speed tower development projects. In
addition, the Company offers professional site leasing and asset management
services for the towers it builds, as well as for towers owned by carriers.
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EXPERIENCED MANAGEMENT. The Company's senior managers have acquired over
3,700 communication sites and built more than 1,000 towers. In addition, the
Company provides tower management services to 1,075 sites, consisting of both
Company owned and carrier owned tower sites. Management believes that its
industry experience allows it to offer quality service and proven results to
wireless communication providers in their network build-outs.
CAPABILITY TO MANAGE MULTIPLE PROJECTS. The Company has been able to
successfully manage multiple site acquisition and tower development projects in
various locations at the same time. SpectraSite utilizes a pre-qualified pool of
local contractors and advisors to build its towers, which allows management to
focus its resources and capital on managing multiple construction projects
simultaneously. The Company's diversified and outsourced labor pool provides
flexibility to handle varying numbers of build-to-suit programs in a variety of
local markets. Management believes that the ability to undertake concurrent
build-to-suit programs in multiple markets is attractive to wireless service
providers.
STANDARDIZED PROCEDURES AND SPECIFICATIONS. The Company has developed
detailed site acquisition procedures and construction specifications and
procedures that allow it to rapidly construct tower networks. Wireless carriers
require aggressive network build-out schedules, and uniform procedures and
specifications allow for reduced employee training time, improved vendor
performance and quicker identification of potential tower sites. The Company
uses a pre-qualified pool of architectural, engineering and construction
contractors that work within its standard guidelines and have a proven capacity
for multiple projects. In addition, the Company is organized to efficiently (i)
plan the project; (ii) secure the sites by purchase or lease; (iii) obtain
zoning approvals; and (iv) manage all site preparation and tower construction.
INTEGRATED PROVIDER OF SITE DEVELOPMENT SERVICES. The Company benefits
from its integrated, comprehensive site development and program management
capabilities, as wireless service providers prefer the flexibility of a vendor
who can program manage all direct and subcontract functions related to real
estate, design, construction and on-going operations. The Company's efficient
site acquisition business provides a competitive advantage by (i) maintaining a
comprehensive project management database; (ii) allowing management to position
the Company with customers as an end-to-end, full service provider of tower
development services; and (iii) permitting tower development mandates to be
fulfilled more rapidly by performing site acquisition services rather than
finding third parties to achieve the same task. The Company has assisted in the
acquisition of sites in 22 states and has a solid customer base that includes
Nextel, Sprint PCS and SBC Communications.
COMPANY SERVICES
The Company's business is divided into three areas: (i) tower development,
(ii) tower operations, including leasing of tower space, and (iii) site
acquisition. These services are centrally managed with proprietary documentation
and through a program and site management database which contains information on
all aspects of individual tower sites.
TOWER DEVELOPMENT. The Company offers comprehensive build-to-suit program
management and also selectively builds towers in strategic geographic locations
for anchor tenant and co-location marketing opportunities. Under its
build-to-suit programs, the Company generally constructs tower networks only
after having signed an antenna site lease agreement with an anchor tenant and
having made the determination that the initial or planned capital investment for
such tower network would not exceed a targeted multiple of tower cash flow after
a certain period of time. In selling its build-to-suit programs, the Company's
representatives utilize their existing relationships in the wireless
communications industry to target wireless service providers interested in
outsourcing their network build-out. Proposals for build-to-suit towers are made
by the Company's sales representatives in response to specific requests for
quotes or proposals from carriers. Although the terms vary from proposal to
proposal, the Company typically offers a five-year lease agreement with four or
five additional five-year renewal periods. The term of the anchor tenant lease
is designed to match the term of the ground lease underlying the tower. While
the proposed monthly rent also varies, anchor tenants will generally pay lower
monthly rents than subsequent tenants.
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Build-to-suit proposal requests typically require the Company to offer a
fixed monthly lease rate for all towers included in the proposed network
build-out. To arrive at this average monthly rate, the Company will analyze a
number of factors including projected construction cost, projected average
monthly ground lease rate, zoning and permitting issues and co-location
opportunities.
If a wireless provider accepts the terms of the proposal submitted by the
Company, the provider will award the Company a mandate (i) to pursue specific
sites, (ii) to identify appropriate sites within specific search rings, or (iii)
to build a tower network within a general area. These mandates are in the form
of non-binding agreements and either party may terminate the mandate at any
time.
Based on the status of the sites the Company has been given a mandate to
pursue, the Company will provide the site development activities required to:
secure and complete a ground lease; obtain zoning approval and other required
permits; design the network and construct all towers within the network. Prior
to starting construction on each site, the Company will enter into an antenna
site lease agreement with a provider. Certain of the build-to-suit agreements
contain penalty provisions in the event the towers are not completed within
specified time periods.
The Company invests resources in radio frequency engineering and site
acquisition of potential tower sites we believe have higher than average
co-location opportunities. The Company does not commence tower construction
until an anchor tenant signs a lease.
The Company also selectively pursues acquisitions of revenue-producing
communication sites. The Company's goal is to acquire towers that have an
initial or planned capital investment not exceeding a targeted multiple of tower
cash flow after a certain period of time. Tower cash flow is determined by
subtracting from gross tenant revenues the direct expenses associated with
operating the communication site, such as ground lease payments, real estate
taxes, utilities, insurance and maintenance.
The Company has had discussions with a number of wireless communication
providers regarding possible strategic partnerships and other investment
arrangements. The Company has no present agreement regarding the terms of any
such transaction. If and when additional attractive opportunities become
available, the Company contemplates pursuing such opportunities. Nonetheless,
there can be no assurance that any such future strategic business arrangement
will be entered into or the timing thereof. Specifically, any decision by the
Company as to whether or not to pursue any such strategic partnership or similar
business arrangement will be based upon, among other things, the relative
attractiveness of available alternative business and investment opportunities,
the regulatory environment for wireless communication properties, future
developments relating to the Company, general economic conditions and other
future developments.
TOWER OPERATIONS. The tower operations business consists of (i) the
leasing of antenna space on tower sites to wireless service providers, and (ii)
the maintenance and management of tower sites. These services are provided for
Company-owned towers and for carrier-owned towers. When the Company provides
site leasing services for carrier-owned towers, the Company receives a
percentage of the revenues of the leases it obtains on behalf of the carrier.
When the Company performs site management services for carrier-owned towers, the
carrier pays the Company a fixed monthly fee for each managed site. The Company
generally receives monthly lease payments from customers payable under written
antenna site leases. The majority of the Company's outstanding customer leases,
and the new leases typically entered into by the Company, have original terms of
five years (with four or five renewal periods of five years each) and usually
provide for periodic price increases. Monthly lease pricing varies with the
number and type of antennae installed on a communication site.
Management believes that the site leasing portion of the Company's business
has significant potential for growth, and the Company intends to expand its site
leasing business through (i) increasing activity from its build-to-suit programs
and (ii) selective acquisitions, such as the recent acquisition of GlobalComm.
Once acquired or constructed, the Company maintains and manages its
communication sites through a combination of in-house personnel and independent
contractors. In-house personnel are responsible for
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oversight and supervision of all aspects of site maintenance and management and
are particularly responsible for monitoring security access and lighting, radio
frequency emission and interference issues, signage, structural engineering and
tower capacity, tenant relations and supervision of independent contractors.
Independent contractors are hired locally by the Company to perform routine
maintenance functions, such as landscaping, pest control, snow removal, site
access and equipment installation oversight. Independent contractors are engaged
by the Company on a fixed fee or time and materials basis.
SITE ACQUISITION. The Company offers a full range of site acquisition
services. Site acquisition typically occur in four phases: (i) network
pre-design; (ii) communication site selection; (iii) communication site
acquisition; and (iv) local zoning and permitting. The Company offers each phase
of its site acquisition services to its customers.
During the initial phase, network pre-design, the Company performs
pre-design analysis by investigating those areas of the Basic Trading Area that
are designated as a priority by the customer. The Company will then identify, to
the extent possible, all sites which met the customer's radio frequency
requirements. Geographic Information Systems specialists create maps of the
sites, analyzing for a number of factors, including which areas may have the
most favorable zoning regulations and availability of co-location opportunities.
A preliminary zoning analysis is typically conducted, and the Company will
determine those areas of the Basic Trading Area where zoning approval is likely,
along with a possible time frame for approval. These initial services are
intended to eliminate costly redesigns once a project is commenced which can
result in significant savings of both time and money.
In the second phase, site selection, the Company determines which sites (i)
most closely meet the radio frequency engineering requirements of the customer;
(ii) can be leased or purchased; (iii) have the potential to be zoned for site
construction or co-location based on the then current zoning requirements; and
(iv) are suitable for the construction of a site. Geographic Information Systems
specialists select the most suitable sites based on demographics, traffic
patterns and signal characteristics. Typically, the Company will identify two or
three potential sites for each location in the radio frequency engineering plan,
with the intent of co-locating on an existing site or constructing a new site on
the location most advantageous to the customer. FAA approval, when necessary, is
also typically sought at this time.
In the third phase, site acquisition, the Company secures the right from
the property owner to construct a tower or co-locate on the site. Depending on
the type of interest in the property that the Company believes will best suit
the needs of the customer, the Company will negotiate and enter into on behalf
of the customer (i) a contract of sale pursuant to which the customer acquires
fee title to the property; (ii) a long-term ground or rooftop lease pursuant to
which the customer acquires a leasehold interest in the property (typically a
five-year lease with four or five renewal periods of five years each); (iii) an
easement agreement pursuant to which the customer acquires an easement over the
property; or (iv) an option to purchase or lease the property pursuant to which
the customer has a future right to acquire fee title to the property or acquire
a leasehold interest. It is during this phase of the site acquisition services
that the Company generally obtains a title report on the site, conducts a survey
of the site, performs soil analysis of the site and obtains an environmental
survey of the site.
The final phase, local zoning and permitting, includes preparing all
appropriate zoning applications and providing representation at any zoning
hearings that may be conducted. The Company also obtains all necessary
entitlement land use permits necessary to commence construction on the site or
install equipment on the site.
The headquarters of SpectraSite's site acquisition business is in Little
Rock. Other offices are in Atlanta, Chattanooga, Cincinnati, Louisville,
Memphis, Orlando and Raleigh. Once the Company is hired on a site acquisition
project, a site acquisition team is dispatched to the project site. A temporary
field office is established for the duration of the project. The site
acquisition team is typically composed of permanent Company employees and
supplemented with local hires employed only for that particular project. A team
leader is assigned to each phase of the site acquisition project and reports to
a project manager who oversees all team leaders. Upon the completion of a site
acquisition project, the field office is
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typically closed and all permanent Company employees are either relocated to
another project or directed to return to headquarters or one of the other
division offices.
The Company generally sets prices for each site acquisition service
separately. Customers are billed for these services on a fixed price or time and
materials basis and the Company may negotiate fees on individual sites or for
groups of sites.
CUSTOMERS
The Company has performed site acquisition, tower construction and site
leasing services for several of the largest wireless service providers. The
majority of the Company's contracts have historically been for PCS customers.
The Company also serves enhanced specialized mobile radio, specialized mobile
radio and cellular wireless providers. In both its site acquisition and site
leasing businesses, the Company works with national, local and regional
operators. For the year ended December 31, 1997, Powertel, Sprint PCS, GTE
Mobility, Intercel and Horizon accounted for 38.9%, 18.8%, 14.7%, 13.0% and
11.2%, respectively, of the Company's revenue, and for the nine months ended
September 30, 1998, Powertel accounted for 59.2% of the Company's revenue. No
other customer accounted for more than 10% of the Company's revenue during the
nine months ended September 30, 1998. See "Risk Factors -- Customer
Concentration."
SALES AND MARKETING
The Company's sales and marketing goals are:
- to further cultivate existing customers in order to obtain mandates for
build-to-suit programs and to maximize sales of site acquisition services;
- to position the Company to become a market leader in the site leasing
business;
- to use existing relationships and develop new relationships with wireless
service providers to lease antennae space on Company owned or managed
communication sites; and
- to form affiliations with select communications system vendors who
utilize end-to-end services, including those provided by the Company, which will
enable the Company to market its services and products through additional
channels of distribution.
Historically, the Company has capitalized on the strength of its
experience, performance and relationships with wireless service providers to
obtain build-to-suit mandates, and expects to continue to enhance and leverage
these attributes to sell site acquisition services, build-to-suit programs and
antennae space on Company owned or managed communication sites.
The Company currently has a sales force of three full-time representatives
supplemented by members of the Company's executive management team. Maintaining
and cultivating relationships with wireless service providers is a main focus of
senior management. The Company's strategy is to delegate sales efforts to those
Company employees who have the best relationships with the wireless service
providers. The representatives are assigned specific accounts based on
historical experience with a provider and the quality of the relationship
between the Company representative and such provider. Most wireless service
providers have national corporate headquarters with regional offices. The
Company believes that most decisions for site acquisition and site leasing
services are made by providers at the regional level with input from their
corporate headquarters. The Company's sales representatives work with provider
representatives at the local level and at the national level when appropriate.
The Company's sales staff compensation is heavily weighted to incentive-based
goals and measurements. In addition to its marketing and sales staff, the
Company relies upon its executive and operations personnel on the national and
field office levels to identify sales opportunities within existing customer
accounts, as well as acquisition opportunities.
COMPETITION
The Company's principal competitors include American Tower Corporation,
Crown Castle International Corp., OmniAmerica, Inc. Pinnacle Tower, SBA
Communications Corporation, TeleCom Towers
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(an affiliate of Cox Enterprises, Inc.) and Unisite. See "Risk Factors -- We
compete with companies who have greater financial resources."
Towers are not the only kind of platform for radio transmitters. See "Risk
Factors -- Competing technologies and other alternatives could reduce the demand
for our services." Iridium, for example, will soon commence space-borne
provision of cellular telephone service, and Teledesic plans to provide high-
speed data services through low-earth-orbit satellites. In 1997, the FCC
allocated one gigahertz of spectrum in the 47 GHz band for any use consistent
with the spectrum allocation table. It is as yet unclear which of these new
technologies will be commercially feasible, and to what extent they will offer
significant competitive alternatives to terrestrial structures.
EMPLOYEES
As of September 30, 1998, the Company had 100 employees, none of whom are
represented by a collective bargaining agreement. The Company considers its
employee relations to be good. Due to the nature of the site acquisition
business of the Company, it may experience increases and decreases in employees
as site acquisition contracts are completed.
PROPERTIES
The Company is headquartered in Cary, North Carolina, where it currently
leases approximately 5,800 square feet of space. The Company also leases offices
in Little Rock, Arkansas; Birmingham, Alabama; Atlanta, Georgia; Cincinnati,
Ohio; New Orleans, Louisiana; and Fond du Lac, Wisconsin. The Company opens and
closes project offices from time to time in connection with its site acquisition
business, which offices are generally leased for periods not exceeding 18
months.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
relating to claims arising in the ordinary course of business. The Company is
not a party to any such legal proceeding, the adverse outcome of which,
individually or in the aggregate, is expected to have a material adverse effect
on the Company's business, financial condition or results of operations.
INTERNATIONAL
The Company's primary focus is on its domestic operations. From time to
time, however, the Company may evaluate international opportunities and take
advantage of those that it feels may be profitable for the Company. Currently,
the Company is not considering any significant international projects.
REGULATORY AND ENVIRONMENTAL MATTERS
Federal Regulations. Both the FCC and FAA regulate towers used for
wireless communications transmitters and receivers. Such regulations control the
siting and marking of towers and may, depending on the characteristics of
particular towers, require registration of tower facilities. Wireless
communications devices operating on towers are separately regulated and
independently licensed based upon the particular frequency used. In addition,
the Company must comply with certain environmental laws and regulations. See
"Environmental Matters -- We are subject to environmental laws that impose
liability without regard to fault."
Pursuant to the requirements of the Communications Act of 1934, as amended,
the FCC, in conjunction with the FAA, has developed standards to consider
proposals for new or modified antennae. These standards mandate that the FCC and
the FAA consider the height of proposed antennae, the relationship of the
structure to existing natural or man-made obstructions and the proximity of the
antennae to runways and airports. Proposals to construct or to modify existing
antennae above certain heights are reviewed by the FAA to ensure the structure
will not present a hazard to aviation. The FAA
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may condition its issuance of no-hazard determination upon compliance with
specified lighting and marking requirements. The FCC will not license the
operation of wireless telecommunications devices on towers unless the tower has
been registered with the FCC or a determination has been made that such
registration is not necessary. The FCC will not register a tower unless it has
been cleared by the FAA. The FCC may also enforce special lighting and painting
requirements. Owners of wireless transmissions towers may have an obligation to
maintain painting and lighting to conform to FCC standards. Tower owners may
also bear the responsibility of notifying the FAA of any tower lighting outage.
The Company generally indemnifies its customers against any failure to comply
with applicable regulatory standards. Failure to comply with the applicable
requirements may lead to civil penalties.
In 1995, the FCC adopted regulations making the owners of towers, rather
than radio licensees, primarily responsible for compliance with antenna
structure painting and lighting requirements. These rule changes are based on
statutory amendments adopted by Congress in 1992 extending regulatory
jurisdiction to tower owners. Radio licensees are now secondarily responsible
for tower maintenance if the tower owners are unwilling or unable to perform
those duties. Currently, these requirements apply to antenna structures that are
more than 200 feet in height, or that may interfere with the approach or
departure space of a nearby airport runway.
The regulatory requirements adopted in 1995 require tower owners to
register existing structures by state, in accordance with filing windows, over a
two year period between July 1, 1996, and June 30, 1998. The FCC has recognized
that, with the proliferation of inexpensive, satellite-based locating devices
such as Global Positioning System receivers, some structures whose positions
were previously determined with area maps can now be easily located with a
higher degree of accuracy. Accordingly, the FCC has granted an amnesty when
tower owners submit location data differing slightly in longitude or latitude
from the site data previously submitted to the FCC by radio licensees. Under the
amnesty policy, the FCC will under some circumstances refrain from imposing
monetary penalties upon tower owners or the radio licensees that use their
structures. For towers that do not conform with radio licensees' construction
permits, however, the FCC will determine on a case-by-case basis whether and to
what extent towers may need to be moved or modified.
The 1996 Telecom Act amended the Communications Act of 1934 by limiting
state and local zoning authorities' jurisdiction over the construction,
modification and placement of towers. The new law preserves local zoning
authority but prohibits any action that would (i) discriminate between different
providers of wireless services or (ii) ban altogether the construction,
modification or placement of radio communication towers. The 1996 Telecom Act
also requires the federal government to help licensees for wireless
communications services gain access to preferred sites for their facilities.
This may require that federal agencies and departments work directly with
licensees to make federal property available for tower facilities.
Owners and operators of antennae may be subject to, and, therefore, must
comply with, Environmental Laws. The FCC's decision to license a proposed tower
may be subject to environmental review pursuant to the National Environmental
Policy Act of 1969 ("NEPA"), which requires federal agencies to evaluate the
environmental impacts of their decisions under certain circumstances. The FCC
has issued regulations implementing NEPA. Such regulations place responsibility
on each applicant to investigate any potential environmental effects of
operations and to disclose any significant effects on the environment in an
environmental assessment prior to constructing a tower. In the event the FCC
determines the proposed tower would have a significant environmental impact
based on the standards the FCC has developed, the FCC would be required to
prepare an environmental impact statement. This process could significantly
delay the registration of a particular tower.
STATE AND LOCAL REGULATIONS. Most states regulate certain aspects of real
estate acquisition and leasing activities. Where required, the Company conducts
the site acquisition portions of its site acquisition services business through
licensed real estate brokers or agents, who may be employees of the Company or
hired as independent contractors. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but
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typically require tower owners to obtain approval from local officials or
community standards organizations prior to tower construction. Local zoning
authorities generally have been hostile to construction of new transmission
towers in their communities because of the height and visibility of the towers.
Companies owning or seeking to build towers have encountered an array of
obstacles arising from state and local regulation of tower site and
construction, including environmental assessments, fall radius assessments,
marketing/lighting requirements, and concerns with interference to other
electronic devices. The delays resulting from the administration of such
restrictions can last for several months, and when appeals are involved, can
take several years.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The executive officers, directors and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen H. Clark................... 54 Chairman of the Board of Directors and Chief
Executive Officer
Joe L. Finley, III................. 49 Vice Chairman of the Board of Directors
David P. Tomick.................... 46 Chief Financial Officer and Secretary
Terry L. Armant.................... 50 Vice President -- Operations
Frank L. Marco..................... 39 Vice President -- Towers
John F. Ricci...................... 31 Vice President -- Marketing
Michael Garrett.................... 35 Vice President -- Co-location Marketing
Tracy E. Gill...................... 38 President -- Services Division
Cathy M. Antee..................... 40 Controller and Assistant Secretary
Michael R. Stone................... 36 Director
James R. Matthews.................. 31 Director
W. Chris Hegele.................... 48 Director
Andrew J. Armstrong, Jr............ 41 Director
</TABLE>
STEPHEN H. CLARK is Chairman of the Board of Directors and Chief Executive
Officer of the Company. He has been a director of SpectraSite since its
formation in May 1997. Mr. Clark has 21 years of general management experience
in high growth, start-up companies in the communications, technology and
manufacturing sectors. In 1994, he co-founded PCX Corporation, a manufacturer of
electrical distribution systems. Prior to starting PCX, Mr. Clark co-founded and
served as Chairman and President of Margaux, a supplier of building automation
systems. Prior to starting Margaux, he worked at several technology based,
start-up companies. Mr. Clark has a BA in physics and an MBA from the University
of Colorado.
JOE L. "BUD" FINLEY, III is Vice Chairman of the Board of Directors. Mr.
Finley has 25 years experience in commercial real estate and mortgage finance.
He has been a director of SpectraSite since its formation in May 1997. He
founded the predecessor to Telesite in 1992 and has successfully managed the
rapid growth of that business during the past 6 years. Prior to founding
Telesite, Mr. Finley was a co-founder of CIERRA, Inc., an environmental
consulting firm. Mr. Finley is a graduate of the University of Arkansas.
DAVID P. TOMICK is Chief Financial Officer and Secretary of the Company.
Mr. Tomick has extensive experience raising capital in both private and public
markets for high growth companies in the telecommunications industry. From 1994
to 1997, Mr. Tomick was Chief Financial Officer of Masada Security, Inc., a
company engaged in the security monitoring business. From 1988 to 1994, he was
Vice President -- Finance of Falcon Cable TV, a multiple system operator of
cable television systems, where he was responsible for debt management, mergers
and acquisitions, equity origination and investor relations. Prior to 1988, he
managed a team of corporate finance professionals focusing on the communications
industry for The First National Bank of Chicago. Mr. Tomick holds a Master of
Management degree from the Kellogg Graduate School of Management at Northwestern
University.
TERRY L. ARMANT is Vice President -- Operations of the Company. Prior to
joining SpectraSite in August 1998, Mr. Armant was Director -- System
Implementation at AT&T Wireless Services. In this position, he was responsible
for site acquisition, construction, equipment installation and site management
for the Northeast region. Mr. Armant oversaw eight departments and a staff of
over 115.
FRANK L. MARCO is Vice President -- Towers of the Company. From 1993 to
1997, Mr. Marco was a Project Director and a Regional Director for SBA
Communications Corporation. In 1997, he co-founded Princeton Towers, Inc., a
wireless communication site development company. Before joining SBA, Mr. Marco
was a customer service manager for McCaw Cellular Communications, Inc.
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JOHN F. RICCI is Vice President -- Marketing of the Company. Prior to
joining SpectraSite in June 1998, Mr. Ricci was Director, Program management and
Due Diligence for SBA Communications Corporation, in which capacity he analyzed
build-to-suit, speculative construction and merger opportunities nationwide. Mr.
Ricci was instrumental in developing marketing and budget materials for SBA's
build-to-suit tower program.
MICHAEL GARRETT is Vice President -- Co-location Marketing of the Company.
Prior to joining SpectraSite in September 1998, Mr. Garrett was president of
GlobalComm, which he founded in 1995.
TRACY E. GILL is President -- Services Division of the Company. Mr. Gill
leads the Company's real estate division and has worked with SpectraSite's
predecessor since 1993 in the acquisition and permitting of antenna sites. From
1985 to 1993, he managed the planning, site selection, site design, permitting,
site development, construction, and development of commercial buildings for New
England Security.
CATHY M. ANTEE is Controller and Assistant Secretary of the Company. From
1995 to 1997, Ms. Antee was Controller of Masada Security, Inc. Prior to 1995,
Ms. Antee was employed by Parisian, Inc., a Birmingham-based retailer, most
recently as Treasury Director and Director of Investor Relations. She is a
certified public accountant.
MICHAEL R. STONE has been a director of SpectraSite since its formation in
May 1997. Mr. Stone has been employed by J.H. Whitney & Co. since 1989 and has
served as a General Partner since 1992. Previously, he was with Bain & Company.
JAMES R. MATTHEWS has been a director of SpectraSite since August 1998. Mr.
Matthews has been employed by J.H. Whitney & Co. since 1994 and has served as a
Principal since 1998. Previously, he was with Gleacher & Co. Inc. and Salomon
Brothers Inc.
W. CHRIS HEGELE has been a director of SpectraSite since its formation in
May 1997. Mr. Hegele has been employed by Kitty Hawk Capital since 1984 and has
been a General Partner since 1986. Previously, Mr. Hegele was employed by Arthur
Andersen & Co.
ANDREW J. ARMSTRONG, JR. has been a director of SpectraSite since March 31,
1998. Mr. Armstrong is a General Partner of Waller-Sutton Media Partners, L.P.
and President of Waller Capital Corporation, where he has been employed since
1985.
BOARD OF DIRECTORS
Each member of the Board of Directors holds office until the next annual
meeting of stockholders and until his or her successor has been duly elected and
qualified. For information regarding certain voting arrangements with respect to
the Board of Directors, see "Certain Transactions -- Stockholders'
Agreement -- Board of Directors."
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation paid by
or incurred on behalf of the Company to its Chief Executive Officer and the only
other executive officer whose salary and bonus exceeded $100,000 for the year
ended December 31, 1997.
50
<PAGE> 53
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------------
ANNUAL COMPENSATION(a) NUMBER OF
------------------------------------------ SECURITIES
OTHER UNDERLYING OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ANNUAL($)(b) SARS(#)
--------------------------- ---- --------- -------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Stephen H. Clark............. 1997 107,046 -0- -- 425,000
Chairman and Chief
Executive Officer
Joe L. Finley, III........... 1997 248,548 -0- 2,576 -0-
Vice Chairman
</TABLE>
- ---------------
(a) Amounts shown for 1997 include compensation paid by the Company to the named
executive officers from April 25, 1997, the date of SpectraSite's inception,
through December 31, 1997.
(b) The amount reported as Other Annual compensation for Mr. Finley is for an
automobile allowance. The Company has not included the value of incidental
perquisites furnished or paid to Mr. Clark, since the value of such
perquisites did not exceed the lesser of 10% of salary and bonus reported
for 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES PRICE PER EXPIRATION GRANT DATE
NAME GRANTED(a) IN 1997 SHARE DATE PRESENT VALUE(b)
---- ------------ ------------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen H. Clark 265,000(c) 27% $2.89 06/24/02 0.87
160,000(d) 17% 2.89 06/24/07 0.87
</TABLE>
- ---------------
(a) All options become exercisable immediately upon a change in control;
provided, however, that no options become exercisable upon a change in
control as to which a performance milestone has not been achieved as of the
date of the change in control. The shares of common stock issuable upon
exercise of the options are subject to certain rights of first refusal. See
"-- 1997 Stock Option Plan."
(b) The present value of the options granted was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
dividend yield of 0%, volatility of .70, risk free interest rate of 6.0% and
expected option lives of seven years.
(c) The options are incentive stock options which vest in equal installments
over a period of four years.
(d) The options are non-qualified stock options which vest upon the first to
occur of the (i) seventh anniversary of the date of grant or (ii) the
Company achieving certain performance goals based upon the number of towers
constructed.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS DECEMBER 31, 1997($)
AT DECEMBER 31, 1997 UNEXERCISABLE
------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stephen H. Clark -0- 425,000 $0 $0
</TABLE>
51
<PAGE> 54
EMPLOYMENT AGREEMENTS
Mr. Finley has an employment agreement with the Company for an initial term
expiring on May 31, 1999, and thereafter his employment is subject to automatic
renewal on a year-to-year basis. The agreement provides for a base salary of
$350,000 per year for this initial term. Base salary after the initial term
shall be determined by the Board of Directors. Mr. Finley is also entitled to
the other benefits afforded executive employees of the Company. The agreement
can be terminated by either Mr. Finley or the Company giving notice to the other
of an intention not to renew at least 90 days prior the last day of the initial
term. After the initial term, the agreement may be terminated at any time with
90 days prior notice to the other party. The agreement also may be terminated by
liquidation, dissolution or discontinuance of the business of the Company, or by
"permanent disability" or "for cause" (as such terms are defined in the
agreement). The agreement requires Mr. Finley to maintain the confidentiality of
certain proprietary information. In addition, Mr. Finley has agreed not to
compete with the Company for up to three years following termination of
employment with the Company.
The Company does not have an employment agreement with Mr. Clark. However,
Mr. Clark and SpectraSite have entered into a Confidentiality and
Non-Competition Agreement, dated as of May 12, 1997, pursuant to which Mr. Clark
agreed:
- to treat as confidential certain information he receives about the
Company or its business, operations or properties;
- not to compete with the Company for three years after the termination of
his employment with the Company; and
- to assign to the Company all of his interest in certain intellectual
property conceived or developed by him while employed by the Company.
1997 STOCK OPTION PLAN
The Company established the SpectraSite Holdings, Inc. Stock Option Plan
(the "1997 Option Plan") effective June 24, 1997. The 1997 Option Plan has a
term of ten years and provides for the issuance of incentive stock options
("ISOs") and non-qualified stock options ("NQSOs") to key employees, directors,
advisors and consultants of the Company (as well as any subsidiary of the
Company). An aggregate of 1,817,700 shares of common stock have been reserved
for issuance under the 1997 Option Plan, of which options to purchase 1,573,900
shares have been granted and remain outstanding as of October 31, 1998. The
number of shares available for grant as options may be adjusted in the event of
a stock split, stock dividend, combination of shares, spin-off, spin-out or
other similar change, exchange or reclassification of the common stock at the
discretion of the Board, and shares subject to an option which expires, is
terminated or canceled, or is repurchased by the Company, shall be available for
future grants under the 1997 Option Plan.
The 1997 Option Plan may be administered by the Board or by a duly
appointed committee having powers specified by the Board. Once the Company
becomes subject to the reporting requirements of the Exchange Act, this
committee shall consist solely of directors who are "non-employee" directors,
for purposes of Section 16 of the Exchange Act, and "outside" directors, for
purposes of Section 162(m) of the Internal Revenue Code. The specific terms of
any option awarded under the 1997 Option Plan will be reflected in a stock
option agreement executed by the Company and the optionee.
The committee administering the 1997 Option Plan has the discretion to
determine which eligible individuals will receive options, the number of shares
to be covered by the options, the exercise date of the options, whether the
options should be ISOs or NQSOs, and the terms and conditions of the options.
The exercise price of any ISO may not be less than the fair market value of the
stock on the date the option is granted, provided the exercise price of any ISO
shall be not less than 110% of the fair market value of a share of stock on the
date the option is granted in the event the optionee owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company. Payment of the option price is to be made in cash, by check, in cash
equivalent or by any other form permitted by the
52
<PAGE> 55
committee, including by promissory note to the Company. Only employees are
eligible to receive ISOs, and at the time an ISO is granted, the fair market
value of the common stock for which the ISO will vest in any year may not exceed
$100,000. Options awarded under the 1997 Option Plan generally are not
assignable or transferable except by the laws of descent and distribution.
Generally, the Company expects the committee to award options that vest and
become exercisable either according to a four year vesting schedule, whereby 25%
of the total grant of shares becomes vested every year for four consecutive
years, or upon the seventh anniversary of the grant date, subject to
acceleration based on the optionee's successful achievement of performance
milestones. In the event of a merger, consolidation, corporate reorganization,
or any transaction in which all or substantially all of the assets of the
Company are sold, leased, transferred or otherwise disposed of, all outstanding
options shall immediately vest and become exercisable as of a date prior to the
transfer of control, as determined by the Board. Notwithstanding the foregoing,
no options will become exercisable upon a transfer of control as to which a
performance milestone has not been achieved as of the date of the change in
control.
Once vested, an option may remain exercisable until the earliest of:
- ten years from the date of grant (five years from the date of grant in
the event the optionee owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company);
- three months from the date on which the optionee terminates employment
with the Company; or
- if the optionee's employment ceases by reason of his or her death or
disability, 12 months from the date on which the optionee's employment
terminated.
In no event shall an ISO be exercisable after one month following the date
an optionee's employment with the Company is terminated for cause, as determined
by the committee.
Generally, the Company expects the committee to award options subject to a
right of first refusal. When an optionee proposes to sell, pledge or otherwise
transfer any shares acquired upon the exercise of an option, the Company would
have the right to repurchase those transfer shares under a right of first
refusal, in accordance with the terms set forth in the individual option
agreements. If the Company fails to exercise the right of first refusal, the
optionee may conclude the proposed transfer, but the subsequent transferee would
be required, as a condition of such transfer, to hold the shares subject to the
Company's right of first refusal with respect to any subsequent transfer. The
Company's right of first refusal would not apply to transfers of shares:
- in connection with a Change in Control;
- to one or more members of the optionee's immediate family;
- which constitutes a pledge to the Company as security for a loan by the
Company to the optionee in connection with exercise of an option; or
- which has been approved by the Board.
In addition, the Company's right of first refusal would terminate upon a Change
in Control, unless the successor assumes the 1997 Option Plan, or the common
stock is traded on a public market.
The 1997 Option Plan may be amended, suspended or terminated by the Board
in whole or in part at any time, provided that no such amendment, suspension or
termination of the 1997 Option Plan may adversely affect the rights of or
obligations to the optionees without such optionees' consent. The Board must
obtain stockholder approval for any change in the 1997 Option Plan that would:
- extend the period during which options may be granted beyond June 24,
2007;
- materially increase the number of shares which may be issued under the
1997 Option Plan; or
- materially modify the requirements as to eligibility for participation
under the 1997 Option Plan.
53
<PAGE> 56
The grant of an option under the 1997 Option Plan will not have any
immediate effect on the federal income tax liability of the Company or the
optionee. If the Board grants an optionee a NQSO, then the optionee will
recognize ordinary income at the time he or she exercises the NQSO equal to the
difference between the fair market value of the common stock and the exercise
price paid by the optionee, and the Company will receive a deduction for the
same amount.
If the Board grants an optionee an ISO, then the optionee generally will
not recognize any taxable income at the time he or she exercises the ISO (other
than potential liability for alternative minimum tax) but will recognize income
only at the time he or she sells the common stock acquired by exercise of the
ISO. Upon sale of the common stock acquired upon exercise of the ISO, the
optionee will recognize income equal to the difference between the exercise
price paid by the optionee and the amount received upon sale, and such income
generally will be eligible for capital gain treatment. The Company generally is
not entitled to an income tax deduction for the grant of an ISO or as a result
of either the optionee's exercise of an ISO or the optionee's sale of the common
stock acquired through exercise of an ISO. However, if the optionee sells the
common stock either within two years of the date of the grant to him or her of
the ISO, or within one year of the date of the transfer to him or her of the
common stock following exercise of the ISO, then the option is treated for
federal income tax purposes as if it were a NQSO; the income recognized by the
optionee will not be eligible for capital gain treatment and the Company will be
entitled to a federal income tax deduction equal to the amount of income
recognized by the optionee.
54
<PAGE> 57
CERTAIN TRANSACTIONS
TELESITE AND METROSITE ACQUISITION
On May 12, 1997, in connection with the formation of the Company, the
Company purchased the outstanding membership units of Telesite and Metrosite for
an aggregate purchase price of $7,233,125 which included 81,753 shares of common
stock valued at $71,125 in the aggregate. In addition, as part of the
acquisition consideration, 408,764 shares of common stock were issued into
escrow and are to be released upon the acquired business achieving certain
operating goals. The escrow arrangement provides that the Company may repurchase
the shares held in escrow if the acquired business does not achieve the
specified operating goals, and in May 1998, the Company exercised its option to
repurchase 204,382 shares of the common stock held in escrow for an aggregate
repurchase price of $204.38.
Joe L. Finley, III, the Vice Chairman of the Company's Board of Directors,
members of Mr. Finley's family and entities controlled by Mr. Finley received
all of the aggregate purchase price, which amount included a note payable to Mr.
Finley in the original principal amount of $2,312,000, and all of the common
stock issued in connection with the acquisitions. The Company used $2,331,953 of
the proceeds from the sale of the Old Notes to pay the outstanding principal
amount of and accrued interest on the note payable to Mr. Finley.
GLOBALCOMM ACQUISITION
As of September 23, 1998, the Company acquired all of the shares of capital
stock of GlobalComm, Inc. for approximately $2 million in cash. In connection
with this acquisition, the founder and president of GlobalComm, Michael Garrett,
joined the Company as Vice President -- Co-location Marketing, and SpectraSite
granted Mr. Garrett an option to purchase 100,000 shares of its common stock for
a nominal price per share. This option vests in equal installments over a
three-year period, with the first installment vesting on June 30, 1999.
REPURCHASE OF COMMON STOCK FROM FORMER EMPLOYEE
In an agreement dated September 15, 1998, a former employee agreed to
release the Company from any potential claims and to sell 125,000 shares of
SpectraSite common stock to the Company for an agreed upon price. In addition,
the agreement provided that shareholders of SpectraSite would have an option to
purchase the former employee's remaining 37,605 shares of SpectraSite common
stock for the same price per share, provided that the Company advise the former
employee in writing of the exercise of all or any portion of such option by
November 15, 1998. On October 9, 1998, the Company paid the former employee
$500,000 for his shares and the release under the agreement.
THE SERIES A AND SERIES B PREFERRED STOCK OFFERINGS
Pursuant to a stock purchase agreement, dated as of May 12, 1997, the
Whitney Equity Partners, L.P. and Kitty Hawk Capital Limited Partnership, III
purchased an aggregate of 3,462,830 shares of SpectraSite's Series A preferred
stock for an aggregate purchase price of $10 million in a transaction exempt
from registration under the Securities Act. Each share of Series A preferred
stock currently is convertible into one share of common stock, subject to
adjustment upon the happening of certain events, accrues dividends at a rate of
8% per annum and entitles the holder to certain voting rights. See "Description
of Capital Stock."
Pursuant to the Series B stock purchase agreement, the Series B investors
agreed to purchase shares of SpectraSite's Series B preferred stock for an
aggregate purchase price of $28 million. Each share of Series B preferred stock
is currently convertible into one share of common stock, subject to adjustment
upon the happening of certain events, accrues dividends at a rate of 8% per
annum and entitles the holder to certain voting rights. See "Description of
Capital Stock." In addition, SpectraSite is obligated under the Series A
agreement and the Series B agreement to pay the Whitney funds a monitoring fee
of $10,000 in the aggregate per month until SpectraSite completes an initial
public offering of its common stock.
55
<PAGE> 58
The Series B investors, including the holders of the Series A preferred
stock and certain other stockholders of SpectraSite, are entitled to certain
rights under the Stockholders' Agreement and the Amended and Restated
Registration Rights Agreement, each as described below.
STOCKHOLDERS' AGREEMENT
As of March 23, 1998, SpectraSite and all of its stockholders and warrant
holders (collectively, the "Stockholders") entered into the Second Amended and
Restated Stockholders' Agreement (the "Stockholders' Agreement"), which sets
forth certain agreements relating to issuances and transfers of SpectraSite's
capital stock and to the governance of SpectraSite. The following is a summary
of the material terms of the Stockholders' Agreement.
PREEMPTIVE RIGHTS. If SpectraSite wishes to issue any of its common stock
or any securities exercisable for, convertible into or exchangeable for common
stock, it shall so notify the Stockholders, and each Stockholder will have the
right, subject to certain exceptions, to acquire its pro rata share of the
offered securities and of any offered securities not purchased by the other
Stockholders. Without the consent of the Whitney funds, SpectraSite may not
issue or sell any capital stock or any securities exercisable for, convertible
into or exchangeable for capital stock unless the purchaser agrees to become a
party to the Stockholders' Agreement, but in any event such purchaser will not
be entitled to the preemptive rights provided in the Stockholders' Agreement.
RIGHTS OF FIRST REFUSAL. With the exception of the Whitney funds, if a
Stockholder desires to sell or otherwise dispose of its stock to a third party,
other than to certain permitted transferees, it must first offer such stock
either to SpectraSite and then to the other Stockholders, or just to certain
Stockholders, depending on the identity of the selling Stockholder, on the same
terms and conditions that the third party has offered to buy such stock. If
SpectraSite and such other Stockholders do not agree to buy all of the offered
stock, the selling Stockholder may either sell the remaining stock not agreed to
be bought by such other Stockholders to the third party, or choose not to sell
any of the offered stock to the third party or the other Stockholders. If any
stock is sold to the third party, it must agree to become a party to the
Stockholders' Agreement.
BRING-ALONG RIGHTS. If the Whitney funds propose to sell or otherwise
dispose of all, but not less than all, of their stock to a third party, other
than certain permitted transferees, the Whitney funds may require the other
Stockholders to sell their stock to the third party for a purchase price equal
to the fair market value thereof, as determined by a nationally recognized
investment bank or appraisal firm, and otherwise on the terms of the Whitney
funds' sale to the third party.
BOARD OF DIRECTORS. The Stockholders' Agreement provides that the
Stockholders will nominate to SpectraSite's seven member Board of Directors:
- three nominees designated by the Whitney funds;
- one nominee designated by Waller-Sutton;
- two nominees designated by the management of SpectraSite; and
- one independent nominee acceptable to the Whitney funds, Waller-Sutton,
Kitty Hawk III, Kitty Hawk IV and SpectraSite management.
In addition, the Stockholders have agreed to elect two nominees of the Whitney
funds and one nominee of management to SpectraSite's audit committee and
compensation committee. As long as the preferred stock owned by the Whitney
funds exceeds a specified amount, the Whitney funds also have the right to cause
the size of SpectraSite's board of directors to be increased to nine and to
appoint two additional directors. However, if the preferred stock owned by the
Whitney funds drops below a specified amount, then the Whitney funds will only
be permitted to appoint one director. The rights of the Whitney funds and
Waller-Sutton to appoint directors terminate when the preferred stock owned by
such stockholders drops below a specified level.
In a separate letter agreement, the Whitney funds have agreed to nominate
W. Chris Hegele as one of their three nominees under the Stockholders' Agreement
to serve as a member of the Board of
56
<PAGE> 59
Directors; provided, however, that Mr. Hegele has agreed to promptly resign from
the Board upon the written request of the Whitney funds. In addition, the
Company has agreed that, if a representative of Kitty Hawk IV is not serving as
a member of the Board of Directors, Kitty Hawk IV will have the right to
designate a representative who may consult with management on significant
business issues and attend meetings of the Board of Directors except in certain
limited circumstances.
CO-SALE RIGHTS. If any of the Whitney funds desires to sell any of its
Series B preferred stock or any shares of common stock issued upon conversion of
any of its Series B preferred stock, to a third party, it shall notify
Waller-Sutton, Kitty Hawk IV or Eagle Creek (the "Co-Sale Parties"), and each
Co-Sale Party shall have the right to sell its pro rata share of Series B
preferred stock, or any shares of common stock issued upon conversion of any of
its Series B preferred stock, to the third party, on the same terms and
conditions that the third party has offered to buy such stock from the Whitney
Funds. If any of the Co-Sale Parties desires to sell any of its Series B
preferred stock, or any shares of common stock issued upon conversion of any of
its Series B preferred stock, to a third party, it shall notify the Whitney
Funds, and each of the Whitney Funds shall have the right to sell its pro rata
share of Series B preferred stock, or any shares of common stock issued upon
conversion of any of its Series B preferred stock, to the third party, on the
same terms and conditions that the third party has offered to buy such stock
from such Co-Sale Party. If any stock is sold to any such third party, it must
agree to become a party to the Stockholders' Agreement.
CONSENT RIGHTS. So long as the Whitney funds and Waller-Sutton own a
specified amount of preferred stock, SpectraSite may not take any of the
following actions without the prior consent of the Whitney funds and
Waller-Sutton:
- engage in any business other than its business or the business of its
subsidiaries as of the date of the Stockholders' Agreement;
- amend its Certificate of Incorporation in any way adverse to the holders
of the Series B preferred stock;
- enter into any agreement or make any payment to a holder of Series A
preferred stock that would be to the advantage of such holder to the
detriment of the holders of the Series B preferred stock;
- liquidate or dissolve; or
- file a petition in bankruptcy.
REGISTRATION RIGHTS AGREEMENT
As of March 23, 1998, SpectraSite, the Series A investors, the Series B
investors and certain members of the Company's management entered into the
Amended and Restated Registration Rights Agreement, which sets forth certain
agreements relating to registration of SpectraSite's capital stock under the
Securities Act. The following is a summary of the material terms of this
registration rights agreement.
Any one or more of the Whitney funds, Waller-Sutton, Eagle Creek, Kitty
Hawk IV, Kitty Hawk III and NCEF (collectively, the "Institutional Investors"),
holding at least 75% of the preferred stock may at any time after May 12, 1998,
request SpectraSite to register under the Securities Act all or any portion of
the common stock issued upon conversion of the preferred stock (the "Restricted
Stock"); provided, however, that at the time of the request, the Institutional
Investors making such request must own in the aggregate 5% or more of the total
shares of Restricted Stock on a diluted basis. However, no request may be made
within 360 days of the effective date of an under-written public offering of
SpectraSite's securities in which holders of Restricted Stock were entitled to
join. SpectraSite will use its best efforts to cause the Restricted Stock held
by such requesting Institutional Investors, as well as any Restricted Stock or
other common stock requested to be included, to be registered, subject to
certain limitations.
If SpectraSite at any time proposes to register any of its securities under
the Securities Act for sale to the public, other than on a Form S-4, S-8 or
other form of registration statement not available for registering the
Restricted Stock for sale to the public, SpectraSite will give written notice to
all holders of Restricted Stock and to Stephen H. Clark, Robert M. Long and
Finley LP (collectively, the "Registration Stockholders") of SpectraSite's
intention to register its securities. SpectraSite will use its best efforts, to
57
<PAGE> 60
the extent requested by the holders of the Restricted Stock or the Registration
Stockholders to cause the Restricted Stock and the common stock held by the
Registration Stockholders to be included in the proposed registration to be
filed by SpectraSite, subject to certain limitations. In addition, Institutional
Investors have a right to require SpectraSite to file a registration statement
on Form S-3 provided that the anticipated aggregate offering price of such
registration shall be equal to or greater than $1 million.
58
<PAGE> 61
OWNERSHIP OF CAPITAL STOCK
The table below sets forth, as of December 31, 1998, certain information
with respect to the beneficial ownership of SpectraSite's capital stock by:
- each person who is known by the Company to be the beneficial owner of
more than 5% of any class or series of capital stock of the Company;
- each of the directors and named executive officers individually; and
- all directors and executive officers as a group.
At December 31, 1998, the Company had outstanding the following shares of
capital stock: common stock -- 1,161,135 shares; Series A preferred
stock -- 3,462,830 shares; and Series B preferred stock -- 7,000,000 shares.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
SHARES OF TOTAL VOTING
COMMON POWER OF
SERIES A SERIES B STOCK BENEFICIALLY
COMMON PREFERRED PREFERRED BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER STOCK STOCK STOCK OWNED(A) COMMON STOCK
------------------------ --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen H. Clark(b)................. 843,185 -- -- 843,185 7.2%
Joe L. Finley(c).................... 286,135 -- 50,000 336,135 2.9%
Michael R. Stone(d)................. -- 3,203,118 5,161,219 8,364,337 72.3%
James R. Matthews(d)................ -- 3,203,118 5,161,219 8,364,337 72.3%
W. Chris Hegele(e).................. 32,761 259,712 368,659 661,132 5.7%
Andrew J. Armstrong, Jr.(f)......... -- -- 1,228,862 1,228,862 10.6%
Whitney Equity Partners, L.P.(d).... -- 3,203,118 1,720,406 4,923,524 42.5%
Whitney Strategic Partners III,
L.P.(d)........................... -- -- 80,961 80,961 0.7%
J. H. Whitney III, L.P.(d).......... -- -- 3,359,852 3,359,852 29.0%
Waller-Sutton Media Partners,
L.P.(f)........................... -- -- 1,228,862 1,228,862 10.6%
Kitty Hawk Capital Limited
Partnership, III(e)............... 32,761 259,712 61,443 353,916 3.1%
Kitty Hawk Capital Limited
Partnership, IV(e)................ -- -- 307,216 307,216 2.7%
All directors and executive officers
as a group (13 persons)(g)........ 1,228,806 3,462,830 6,808,740 11,500,376 97.3%
</TABLE>
- ---------------
(a) Each share of Series A preferred stock and each share of Series B preferred
stock is immediately convertible into one share of the common stock, subject
to certain adjustments, and, therefore, the holders of Series A preferred
stock and Series B preferred stock are deemed to be the beneficial owners of
the shares of common stock into which their preferred stock can be
converted. The amounts and percentages of common stock beneficially owned
are reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. Under the rules of the
SEC, a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to vote or to
direct the voting of such security, or "investment power," which includes
the power to dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60 days.
Under these rules, more than one person may be deemed to be a beneficial
owner of securities as to which such person has an economic interest.
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(b) Includes 106,250 shares of common stock issuable upon the exercise of
options and excludes 618,750 shares issuable upon the exercise of
outstanding options which are not exercisable within 60 days. The business
address for Mr. Clark is 8000 Regency Parkway, Suite 570, Cary, North
Carolina 27511.
(c) Of the shares reported as beneficially owned by Mr. Finley, 81,753 shares
are held by Finley Family Limited Partnership and 204,382 are held in
escrow. Mr. Finley disclaims beneficial ownership of all such shares, and
the shares held in escrow are not considered issued and outstanding for
financial reporting purposes in accordance with generally accepted
accounting principles. The address for Mr. Finley and Finley Family Limited
Partnership is 11 Corporate Hill Drive, Little Rock, Arkansas 72205.
(d) Mr. Stone is a managing member of each of the general partners of each of
the Whitney funds, and Mr. Matthews is a Principal of the Whitney funds.
Messrs. Stone and Matthews own no shares directly and disclaim beneficial
ownership of the shares held by such entities. The business address for Mr.
Stone, Mr. Matthews and the Whitney funds is 177 Broad Street, Stamford,
Connecticut 06901.
(e) Mr. Hegele is a general partner of Kitty Hawk Partners Limited Partnership,
III, the general partner of Kitty Hawk Capital Limited Partners III, and a
managing member of Kitty Hawk Partners Limited Liability Company, IV, the
general partner of Kitty Hawk Capital Limited Partners IV. Mr. Hegele owns
no shares directly and disclaims beneficial ownership of the shares held by
Kitty Hawk Capital Limited Partners III and Kitty Hawk Capital Limited
Partners IV. The business address for Mr. Hegele, Kitty Hawk Capital Limited
Partners III and Kitty Hawk Capital Limited Partners IV is 2700 Coltsgate
Road, Suite 202, Charlotte, North Carolina 28211.
(f) Mr. Armstrong is a principal of Waller-Sutton Management, Inc., which is the
general partner of Waller-Sutton Media Partners, L.P. Mr. Armstrong owns no
shares directly and disclaims beneficial ownership of the shares held by
such entity. The business address for Mr. Armstrong and Waller-Sutton Media
Partners, L.P. is c/o Waller-Sutton Management Group, Inc., 1 Rockefeller
Plaza, New York, New York 10020.
(g) Includes 172,975 shares of common stock issuable upon the exercise of
options, but excludes 1,243,925 shares of common stock issuable upon the
exercise of options which are not exercisable within 60 days.
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DESCRIPTION OF CAPITAL STOCK
The following is a summary of the material terms and provisions of
SpectraSite's capital stock. SpectraSite's Certificate of Incorporation, as
amended, authorizes 20,000,000 shares of common stock, $0.001 par value per
share, and 10,462,830 shares of preferred stock, of which 3,462,830 shares have
been designated as 8% Series A Cumulative Convertible Redeemable Preferred Stock
and 7,000,000 shares have been designated as 8% Series B Cumulative Convertible
Redeemable Preferred Stock. As of December 31, 1998, there were:
- 1,161,135 shares of common stock issued and outstanding;
- 3,462,830 shares of Series A preferred stock issued and outstanding; and
- 7,000,000 shares of Series B preferred stock issued and outstanding.
In addition:
- 243,800 shares of common stock are reserved for issuance upon exercise of
stock options available for future grant under the 1997 Option Plan;
- 1,546,900 shares of common stock are reserved for issuance upon exercise
of outstanding stock options granted under the 1997 Option Plan;
- 10,462,830 shares of common stock are reserved for issuance upon the
conversion of the preferred stock; and
- 270,800 shares of common stock are held in escrow. See "Certain
Transactions -- Telesite and Metrosite Acquisition."
COMMON STOCK
SpectraSite has one class of authorized common stock. The common stock is
entitled to one vote per share. All outstanding shares of common stock are
validly issued, fully paid and nonassessable. The common stock holders have no
cumulative rights, subscription, redemption, sinking fund or conversion rights
and preferences. There are no preemptive rights other than those granted under
the Stockholders' Agreement. See "Certain Transactions -- Stockholders'
Agreement -- Preemptive Rights." Subject to preferences that may be applicable
to the Series A and the Series B preferred stock or any preferred stock which
SpectraSite may issue in the future, the common stock holders will be entitled
to receive such dividends as the board of directors may declare out of funds
legally available for that purpose. The rights and preferences of the common
stock holders are subject to the rights of the preferred stock holders and will
be subject to the rights of any series of preferred stock which SpectraSite may
issue in the future.
PREFERRED STOCK
CONVERSION. Each holder of the Series A and the Series B preferred stock
has the right to convert his or her shares at any time. Currently each share of
preferred stock is convertible into one share of common stock, subject to
adjustment in the event of:
- any dividend or distribution made in shares of common stock;
- subdivision, combination or reclassification of SpectraSite's outstanding
common stock;
- any issue of common stock less than a specified price per share;
- any issue of rights, options or warrants to subscribe for or purchase
shares of common stock less than a specified price per share;
- any issue of rights for the purchase of shares of common stock or other
securities convertible or exchangeable into shares of common stock less
than a specified price per share; and
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- any SpectraSite distribution, to the common stock holders, of any shares
of its capital stock, other than common stock, or evidence of
indebtedness, cash or other assets.
The preferred stock will automatically convert into common stock upon
SpectraSite's completion of a firm commitment underwritten initial public
offering raising gross proceeds of at least $30 million at an offering price per
share greater than or equal to $4.47.
DIVIDENDS. The holders of outstanding shares of preferred stock are
entitled, in preference to the holders of any and all other classes of
SpectraSite's capital stock, to receive, out of funds legally available for that
purpose, cumulative dividends on the preferred stock, in cash, at a rate per
annum of 8% of the original issue price subject to proration for partial years.
The original issue price equals $2.89 per share for the Series A preferred stock
and $4.00 per share for the Series B preferred stock, and dividends begin to
accrue, for each of the Series A and the Series B preferred stock, upon the
original issue date of such series. No dividends will be paid on the common
stock until all accumulated and unpaid dividends have been paid on the preferred
stock, or with the prior written consent of 75% of the holders of outstanding
preferred stock voting as a single class. Accrued and unpaid dividends on the
preferred stock will be payable only upon SpectraSite's liquidation, dissolution
or winding-up, or upon redemption of the preferred stock.
LIQUIDATION. In the event of any liquidation, dissolution or winding-up of
SpectraSite, either voluntary or involuntary, before any distribution or payment
to holders of common stock or other capital stock, other than the Series A and
the Series B preferred stock, the preferred stock holders shall be entitled to
receive an amount equal to the applicable liquidation preference. The
liquidation preference, for this purpose, is equal to the original issue price
plus all unpaid accrued and accumulated dividends on the Series A and the Series
B preferred stock. If SpectraSite's assets are insufficient to permit payment in
full to all the preferred stock holders, the assets shall be distributed ratably
among them. Any remaining assets available for distribution shall be distributed
to the common stock holders.
REDEMPTION RIGHTS. On December 15, 2008, SpectraSite is obligated to
redeem all of the outstanding shares of the Series A and the Series B preferred
stock at the then applicable liquidation preference to the extent it may do so
under applicable law. If SpectraSite is unable to redeem fully all of the
outstanding shares of preferred stock, it must take all actions necessary to
eliminate any restrictions on its ability to so redeem the shares. Dividends
shall continue to accrue and cumulate on any unredeemed shares.
VOTING. Each of the Series A and the Series B preferred stock holders is
entitled to such number of votes equal to the whole number of shares of common
stock into which such holder's preferred stock is convertible immediately after
the close of business on the record date of the meeting.
SPECIAL REQUIRED APPROVAL
SpectraSite may not take the following actions without approval by vote or
written consent of the holders of 75% of all issued shares of the Series A and
the Series B preferred stock, voting as a single class:
- the consummation of any sale or lease of all or substantially all of
SpectraSite's assets, or any merger, consolidation, refinancing or
recapitalization, subject to certain conditions, through May 11, 2007;
- any amendment, restatement or modification of SpectraSite's Certificate
of Incorporation, By-Laws or other government documents which adversely
affects the rights of preferred stock holders;
- any declaration of a dividend or any distribution with respect to the
common stock or any other capital stock, other than the preferred stock;
- the purchase, redemption or retirement of any shares of capital stock or
other equity securities;
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- the authorization, creation or issuance of any shares of capital stock or
other securities which would adversely affect, or are ranked prior to or
ratably with, the preferred stock;
- engaging in any business in which SpectraSite was not engaged as of the
date of the Certificate of Incorporation;
- SpectraSite's voluntary dissolution, liquidation or winding-up;
- the sale of SpectraSite's assets having a fair market value in excess of
$250,000; or
- entering into any transaction or agreement with any SpectraSite
affiliate, or amending or terminating any existing agreement with a
SpectraSite affiliate.
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DESCRIPTION OF NEW CREDIT FACILITY
SpectraSite Communications, Inc. ("SCI"), SpectraSite's wholly owned
subsidiary, received a commitment letter from Credit Suisse First Boston
Corporation on December 22, 1997, which has been renewed through March 31, 1999,
pursuant to which Credit Suisse First Boston will commit to a full $50 million
for a credit facility, but has the right to arrange a syndicate to provide any
portion of that amount. This exchange offer, however, is not contingent on the
execution of this new credit facility, and we expect that SCI will not enter
into the new credit facility prior to the exchange offer closing. The following
is a summary of the material terms of the commitment letter. This summary is
qualified in its entirety by the final terms of the new credit facility, which
may differ from the provisions contained in the commitment letter and described
in this summary. In addition, the commitment letter is subject to various
conditions, and there can be no assurances that SCI will be able to enter into a
definitive credit agreement implementing the terms and conditions of the
commitment letter.
We expect the new credit facility to provide for revolving credit loans of
$50 million to finance the construction and acquisition of towers, and for
working capital and general corporate purposes. We expect the new credit
facility to mature seven years after its closing, with reductions to the amount
of the commitment commencing after two years. In addition, SCI may be required
to prepay the new credit facility in part upon the occurrence of certain events,
such as a sale of assets, the incurrence of certain additional indebtedness, the
issuance of equity, the receipt of insurance proceeds and the generation of
excess cash flow. During any period for which SCI, SpectraSite and SCI's
subsidiaries have earnings before interest, taxes, depreciation and amortization
("EBITDA") of less than $8 million on an annualized basis, the amount that SCI
may borrow or have outstanding will be limited to a specified percentage of the
construction or acquisition cost of certain of SCI's towers.
We expect SpectraSite and each of SCI's direct and indirect subsidiaries to
guarantee SCI's obligations under the new credit facility, which will be secured
by:
- substantially all the tangible and intangible assets of SCI, SpectraSite
and all of their direct and indirect subsidiaries; and
- a pledge of all of SCI's capital stock and all of SCI's and SpectraSite's
direct and indirect subsidiaries' capital stock.
We anticipate that SCI will need to pay, quarterly, a commitment fee of
0.50% per annum on the unused portion of the new credit facility, which fee will
be reduced to 0.375% when the ratio of SCI's total debt to EBITDA is reduced
below a specified level.
We anticipate that the loans under the new credit facility will bear
interest, at SCI's option, at either:
- Credit Suisse First Boston's base rate, plus an applicable margin of 1.5%
per annum initially; or
- the reserve adjusted London Interbank Offered Rate, plus an applicable
margin of 2.5% per annum initially.
In either case, the margin, after a period of time, may decrease based on a
leverage ratio.
We expect the new credit facility to contain a number of covenants that,
among other things, may restrict the ability of SpectraSite, SCI and their
respective subsidiaries to:
- dispose of assets;
- incur additional indebtedness or guaranty obligations;
- pay dividends or make capital distributions;
- create liens on assets;
- make investments or acquisitions;
- engage in mergers, consolidations or certain transactions with
subsidiaries and affiliates; and
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- otherwise restrict corporate activities.
In addition, we expect the new credit facility to require compliance with
certain financial covenants, including requiring SpectraSite, SCI and their
respective subsidiaries, on a consolidated basis, to maintain:
- a maximum ratio of total debt to adjusted EBITDA;
- a minimum interest coverage ratio; and
- a minimum nontower cash flow.
We also anticipate a requirement that the average remaining term on eligible
tower leases shall not at any time be less than three years. SpectraSite does
not expect that such covenants will impact materially SCI's and its
subsidiaries's ability to operate their respective businesses.
The commitment letter states that the new credit facility will contain a
general limitation on capital distributions and dividends, but the terms of the
limitation have not been negotiated. We anticipate that, as long as there is no
default under the new credit facility, SCI will be permitted to distribute to
SpectraSite sufficient amounts to permit SpectraSite to make interest payments
on the Notes when due.
We expect the new credit facility to contain customary events of default,
including:
- the failure to pay principal when due, or any interest or other amount
that becomes due within a period of time after the due date thereof;
- any representation or warranty SCI makes that is incorrect in any
material respect on or as of the date made;
- a default in the performance of any negative covenants, or a default in
the performance of certain other covenants or agreements for a specified
period;
- default in certain other indebtedness;
- certain insolvency events;
- certain change of control events; and
- a default under the indenture governing the Notes.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
SpectraSite originally sold the Old Notes to Credit Suisse First Boston
Corporation, Lehman Brothers, Inc. and CIBC Oppenheimer Corp. These initial
purchasers subsequently placed the Old Notes with:
- qualified institutional buyers in reliance on Rule 144A under the
Securities Act; and
- qualified buyers outside the United States in reliance on Regulation S
under the Securities Act.
SpectraSite entered into a registration rights agreement with the initial
purchasers, as a condition to their purchase of the Old Notes, pursuant to which
SpectraSite has agreed, for the benefit of the Old Note holders, at its own
expense, to file a registration statement for this exchange offer (of which this
prospectus is a part) with the SEC no later than November 15, 1998. When the
exchange offer registration statement is declared effective, SpectraSite will
offer the Exchange Notes in exchange for tender of the Old Notes. For each Old
Note tendered to SpectraSite pursuant to the exchange offer, the holder of such
Old Note will receive an Exchange Note having an original principal amount at
maturity equal to that of the tendered Old Note.
Based upon interpretations by the SEC staff set forth in certain no-action
letters to third parties (including Exxon Capital Holdings Corp., SEC No-Action
Letter (April 13, 1989); Morgan Stanley & Co. Inc., SEC No-Action Letter (June
5, 1991); and Shearman & Sterling, SEC No-Action Letter (July 2, 1993)),
SpectraSite believes that the Exchange Notes issued pursuant to this exchange
offer in exchange for the Old Notes in general, will be freely tradeable after
the exchange offer, without compliance with the registration and prospectus
delivery requirements of the Securities Act. However, any purchaser of Old Notes
who is a SpectraSite "affiliate" (within the meaning of Rule 405 under the
Securities Act), who does not acquire the Exchange Notes in the ordinary course
of business, or who tenders in the exchange offer for the purpose of
participating in a distribution of the Exchange Notes, could not rely on the SEC
staff position enunciated in such no-action letters and, in the absence of an
applicable exemption, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. A
holder's failure to comply with those requirements in such an instance may
result in that holder incurring liability under the Securities Act which
SpectraSite will not indemnify.
As the above mentioned no-action letters and the registration rights
agreement contemplate, each holder accepting the exchange offer is required to
represent to SpectraSite, in a letter of transmittal, that:
- the holder or the person receiving the Exchange Notes, whether or not
such person is the holder, will acquire those Exchange Notes in the
ordinary course of business;
- the holder or any other acquiror is not engaging in a distribution of the
Exchange Notes;
- the holder or any other acquiror has no arrangement or understanding with
any person to participate in a distribution of the Exchange Notes;
- neither the holder nor any other acquiror is a SpectraSite "affiliate"
within the meaning of Rule 405 under the Securities Act; and
- the holder or any other acquiror acknowledges that if that holder or
other acquiror participates in the exchange offer for the purpose of
distributing the Exchange Notes, it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
any such resale and cannot rely on the above mentioned no-action letters.
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As indicated above, each broker-dealer that receives for its own account an
Exchange Note in exchange for Old Notes must acknowledge that it:
- acquired the Old Notes for its own account as a result of market-making
activities or other trading activities;
- has not entered into any arrangement or understanding with SpectraSite or
any SpectraSite "affiliate" to distribute the Exchange Notes; and
- will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of the Exchange Notes.
For a description of the procedures for resales by participating broker-dealers,
see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the SEC staff do not permit SpectraSite to effect this exchange offer, or if for
any other reason the exchange offer is commenced and not consummated within 120
days of November 10, 1998, SpectraSite will:
- file a shelf registration statement covering resales of the Old Notes;
- use reasonable best efforts to cause the shelf registration statement to
be declared effective under the Securities Act; and
- use reasonable best efforts to keep effective the shelf registration
statement until the earlier of two years after the Old Notes' original
issuance date, subject to extension under certain circumstances, or such
time as all of the applicable Old Notes have been sold.
SpectraSite will, if and when it files the shelf registration statement,
provide to each applicable holder of the Old Notes copies of the prospectus
which is a part of the shelf registration statement. A holder that sells the Old
Notes pursuant to the shelf registration statement generally:
- must be named as a selling security holder in the related prospectus;
- must deliver a prospectus to purchasers;
- will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales; and
- will be bound by the provisions of the registration rights agreement
which are applicable to that holder, including certain indemnification
obligations.
In addition, each of the Old Note holders must deliver information to
SpectraSite, to be used in connection with the shelf registration statement, in
order to have his or her Old Notes included in the shelf registration statement
and to benefit from the provisions set forth in the foregoing paragraph.
The registration rights agreement covering the Old Notes provides that
SpectraSite will file an exchange offer registration statement with the SEC no
later than November 15, 1998. SpectraSite filed the exchange offer registration
statement on November 10, 1998. In the event that:
- by the 120th day after the exchange offer registration statement filing
date neither the exchange offer is consummated nor the shelf registration
statement is declared effective; or
- after either the exchange offer registration statement or shelf
registration statement is declared effective, such registration statement
thereafter ceases to be effective or usable (subject to certain
exceptions, including an exception for a period not to exceed 60 days in
any 12-month period during which the Company effects a material corporate
transaction) in connection with resales of the Old Notes or Exchange
Notes in accordance with and during the periods specified in the
registration rights agreement.
The interest rate on the Old Notes will increase by 0.50% per annum from and
including the date on which any such registration default occurred, but
excluding the date on which all registration defaults are cured. The sole remedy
available to the Old Note holders will be the immediate assessment of cash
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interest on the Old Notes, whether or not cash interest is then payable on the
Old Notes under the Indenture. All interest payable because a registration
default occurred will be payable to the Old Notes holders in cash on each
January 15 and July 15, commencing with the first such date occurring after any
such interest begins to accrue, until the registration default is cured. After
the date on which the registration default is cured, the interest rate on the
Old Notes will revert to 12% per annum.
Old Note holders must:
- make certain representations to SpectraSite in order to participate in
the exchange offer;
- deliver information to be used in connection with the shelf registration
statement, if required; and
- provide comments on the shelf registration statement within the time
periods set forth in the registration rights agreement,
in order to have their Old Notes included in the shelf registration statement
and to benefit from the provisions regarding additional interest payable because
a registration default occurred, as set forth above.
The preceding summary of the material provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the registration rights agreement, a copy
of which is filed as an exhibit to the exchange offer registration statement of
which this prospectus is a part.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal for the exchange offer, SpectraSite will accept
any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the expiration date. See "-- Expiration Date; Extensions;
Amendments." SpectraSite will issue $1,000 original principal amount at maturity
of Exchange Notes in exchange for each $1,000 original principal amount at
maturity of outstanding Old Notes accepted in the exchange offer. Holders may
tender some or all of their Old Notes pursuant to the exchange offer. However,
Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that:
- the Exchange Notes have been registered under the Securities Act and
hence will not bear legends restricting their transfer; and
- the Exchange Note holders will not be entitled to certain rights under
the registration rights agreement covering the Old Notes, including the
provisions providing for an increase in the interest rate on the Old
Notes in certain circumstances relating to the timing of the exchange
offer, all of which rights will terminate when the exchange offer is
terminated.
The Exchange Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the indenture governing the Old Notes. As of the
date of this prospectus, $225,238,000 aggregate original principal amount at
maturity of Old Notes were outstanding. SpectraSite has fixed the close of
business on , 1999 as the record date for the exchange offer for
purposes of determining the persons to whom this prospectus and the letter of
transmittal will be mailed initially.
Old Note holders do not have any appraisal or dissenters' rights under the
Delaware General Corporation Law or the indenture in connection with the
exchange offer. SpectraSite intends to conduct the exchange offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC related to such offers.
SpectraSite shall be deemed to have accepted validly tendered Old Notes
when, as and if SpectraSite has given oral or written notice thereof to United
States Trust Company of New York, which is the exchange agent. The exchange
agent will act as agent for the tendering holders for the purpose of receiving
the Exchange Notes from SpectraSite.
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If any tendered Old Notes are not accepted for exchange either because of
an invalid tender, the occurrence of certain other events set forth herein, or
otherwise, the certificates for the unaccepted Old Notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
exchange offer's expiration date.
Holders who tender Old Notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the exchange offer. SpectraSite will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
SpectraSite shall keep the exchange offer open for at least 30 days (or
longer if required by applicable law, including in connection with any material
modification or waiver of the terms or conditions of the exchange offer that
requires such extension) after the date that notice of the exchange offer is
mailed to Old Note holders. The expiration date shall be 5:00 p.m., New York
City time, on , 1999, unless SpectraSite, in its sole discretion,
extends the exchange offer, in which case the expiration date shall be the
latest date and time to which SpectraSite extends the exchange offer.
If SpectraSite decides to extend the exchange offer, SpectraSite will
notify United States Trust Company of New York, which is the exchange agent, of
the extension by oral or written notice, and will mail an announcement of the
extension to the registered holders prior to 10:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
SpectraSite reserves the right, in its sole discretion:
- to delay accepting any Old Notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "-- Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the exchange
agent; or
- to amend the terms of the exchange offer in any manner.
SpectraSite will give oral or written notice of any delay in acceptance,
extension, termination or amendment to the registered holders as promptly as
practicable.
PROCEDURES FOR TENDERING
Only an Old Note holder may tender such Old Notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if the letter of transmittal so requires, or transmit an agent's message in
connection with a book-entry transfer, and mail or otherwise deliver the letter
of transmittal or facsimile, or agent's message, together with the Old Notes and
any other required documents, to Unites States Trust Company of New York, which
is the exchange agent, prior to 5:00 p.m., New York City time, on the expiration
date. In addition, either:
- the exchange agent must receive the letter of transmittal and
certificates for the Old Notes prior to the expiration date;
- the exchange agent must receive a timely confirmation of a book-entry
transfer of the Old Notes into the exchange agent's account at DTC
pursuant to the procedure for book-entry transfer described below, prior
to the expiration date; or
- the holder must comply with the guaranteed delivery procedures described
below.
For effective tender, the exchange agent must receive the Old Notes or
book-entry confirmation, as the case may be, the letter of transmittal, and
other required documents, at the address set forth below under "-- Exchange
Agent" prior to 5:00 p.m., New York City time, on the expiration date. DELIVERY
OF
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DOCUMENTS TO THE BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURE
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
DTC has authorized DTC participants that hold Old Notes on behalf of the
Old Notes' beneficial owners to tender their Old Notes as if they were holders.
To effect a tender of Old Notes, DTC participants should either:
- complete and sign the letter of transmittal (or a manually signed
facsimile thereof), have the signature guaranteed if required by the
instructions, and mail or deliver the letter of transmittal (or the
manually signed facsimile) to the exchange agent pursuant to the
procedure set forth in "Procedures for Tendering;" or
- transmit their acceptance to DTC through the DTC automated tender offer
program for which the transaction will be eligible and follow the
procedure for book-entry transfer set forth in "-- Book-Entry Transfer."
By executing the letter of transmittal or an agent's message, each holder
will make to SpectraSite the representations set forth above in the third
paragraph under the heading "-- Purpose and Effect of the Exchange Offer."
Each holder's tender, and SpectraSite's acceptance, will constitute
agreement between such holder and SpectraSite in accordance with the terms, and
subject to the conditions, set forth herein and in the letter of transmittal or
agent's message.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE, AND ALL OTHER REQUIRED DOCUMENTS, TO THE EXCHANGE AGENT IS AT THE
HOLDER'S ELECTION AND SOLE RISK. AS AN ALTERNATIVE TO MAIL DELIVERY, HOLDERS MAY
WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS
SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO
SPECTRASITE. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the letter of transmittal.
A member of the Medallion System must guarantee signatures on a letter of
transmittal or a notice of withdrawal, as the case may be, unless the Old Notes
tendered pursuant thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of a Medallion System member.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, must be guaranteed, such guarantee must be by a
Medallion System member.
If a person other than the registered holder of any Old Notes listed
therein signs the accompanying letter of transmittal, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as his or name appears on the Old Notes, with the signature
guaranteed by a Medallion System member.
If trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations, or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any Old Notes or bond powers, such
persons should so indicate when signing, and they must submit evidence
satisfactory to SpectraSite of their authority to so act, with the letter of
transmittal.
SpectraSite will determine, in its sole discretion, all questions as to the
validity, form, eligibility (including time of receipt), and acceptance and
withdrawal of tendered Old Notes. This determination will
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be final and binding. SpectraSite reserves the absolute right to reject any and
all Old Notes not properly tendered, or any Old Notes, SpectraSite's acceptance
of which would, in the opinion of SpectraSite's counsel, be unlawful.
SpectraSite also reserves the right, in its sole discretion, to waive any
defects, irregularities or conditions of tender as to particular Old Notes.
SpectraSite's interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as
SpectraSite shall determine. Although SpectraSite intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither
SpectraSite, the exchange agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. If the exchange agent receives any Old Notes that are not properly
tendered, and as to which the defects or irregularities have not been cured or
waived, the exchange agent will return them to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Old Note SpectraSite accepts for exchange, the holder will receive
an Exchange Note having a principal amount at maturity equal to that of the
surrendered Old Note. For purposes of the exchange offer, SpectraSite shall be
deemed to have accepted properly tendered Old Notes for exchange when, as and if
SpectraSite has given oral or written notice thereof to United States Trust
Company of New York, which is the exchange agent.
In all cases, SpectraSite will issue Exchange Notes for Old Notes that are
accepted for exchange pursuant to the exchange offer only after the exchange
agent's timely receipt of certificates for such Old Notes, or a timely
book-entry confirmation of the Old Notes into the exchange agent's account at
the book-entry transfer facility, plus a properly completed and duly executed
letter of transmittal or agent's message and all other required documents. If
SpectraSite does not accept any tendered Old Notes for any reason set forth in
the terms and conditions of the exchange offer, SpectraSite will return the
unaccepted or non-exchanged Old Notes without expense to the tendering holder
(or, in the case of Old Notes tendered by book-entry transfer into the exchange
agent's account, the non-exchanged Old Notes will be credited to an account
maintained with the book-entry transfer facility) as promptly as practicable
after the expiration date.
BOOK-ENTRY TRANSFER
United States Trust Company of New York, which is the exchange agent, will
establish a new account or utilize an existing account at DTC for the Old Notes
promptly after the date of this prospectus, and any financial institution that
is a participant in DTC and whose name appears on a security position listing as
the owner of Old Notes may make a book-entry tender of Old Notes by causing DTC
to transfer such Old Notes into the exchange agent's account in accordance with
DTC's procedures for such transfer. However, the exchange agent must receive, at
its address set forth below under the caption "Exchange Agent," on or prior to
the expiration date, or the holders must comply with the guaranteed delivery
procedures described below to submit, the letter of transmittal (or a manually
signed facsimile thereof), properly completed and validly executed, with any
required signature guarantees, or an agent's message, and any other required
documents. Document delivery to DTC in accordance with DTC's procedures does not
constitute delivery to the exchange agent.
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent, forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the DTC
participant tendering the Old Notes, stating:
- the aggregate principal amount of Old Notes which have been tendered by
such participant;
- that such participant has received and agrees to be bound by the terms of
the letter of transmittal; and
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<PAGE> 74
- that SpectraSite may enforce that agreement against the participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and:
- whose Old Notes are not immediately available;
- who cannot deliver their Old Notes, the letter of transmittal or any
other required documents, to United States Trust Company of New York,
which is the exchange agent; or
- who cannot complete the procedures for book-entry transfer, prior to the
expiration date,
may effect a tender if:
(a) the tender is made through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States;
(b) prior to the expiration date, the exchange agent receives from an
institution listed in clause (a) above a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the holder, the
certificate number(s) of the Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after
the expiration date, the letter of transmittal (or facsimile thereof) or an
agent's message, together with the certificate(s) representing the Old
Notes (or a confirmation of book-entry transfer of the Notes into the
exchange agent's account at the book-entry transfer facility), and any
other documents required by the letter of transmittal, will be deposited by
the institution with the exchange agent; and
(c) the exchange agent receives, no later than five New York Stock
Exchange trading days after the expiration date, the certificate(s)
representing all tendered Old Notes in proper form for transfer, or a
confirmation of book-entry transfer of such Old Notes into the exchange
agent's account at the book-entry transfer facility, together with a letter
of transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an agent's message,
and all other documents required by the letter of transmittal.
Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above may request that the exchange agent send
them a Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on , 1999;
otherwise such tenders are irrevocable.
To withdraw a tender of Old Notes in the exchange offer United States Trust
Company of New York, which is the exchange agent, must receive a telegram,
telex, letter or facsimile transmission notice of withdrawal at its address set
forth herein prior to 5:00 p.m., New York City time, on the expiration date. Any
such notice of withdrawal must:
- specify the name of the person having deposited the Old Notes to be
withdrawn;
- identify the Old Notes to be withdrawn, including the certificate
number(s) and principal amount of such Old Notes, or, in the case of Old
Notes transferred by book-entry transfer, the name and number of the
account at the book-entry transfer facility to be credited;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the Old Notes were tendered (including
any required signature guarantees), or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes
register the transfer of such Old Notes into the name of the person
withdrawing the tender; and
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- specify the name in which to register the Old Notes, if different from
that of the depositor.
SpectraSite will determine all questions as to the validity, form and
eligibility (including time of receipt) of the notices. This determination shall
be final and binding on all parties. Any Old Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the exchange offer and no
Exchange Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly retendered. SpectraSite will return to the holder any Old
Notes which have been tendered but which are not accepted for exchange without
expense to the holder, as soon as practicable after withdrawal, rejection of
tender, or termination of the exchange offer. Holders may retender properly
withdrawn Old Notes by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, SpectraSite shall not
be required to accept for exchange, or offer Exchange Notes for, any Old Notes,
and may terminate or amend the exchange offer as provided herein before the
acceptance of the Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the exchange offer
which, in SpectraSite's sole judgment, might impair materially
SpectraSite's ability to proceed with the exchange offer, or any material
adverse development has occurred in any existing action or proceeding with
respect to SpectraSite or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the SEC
staff is proposed, adopted or enacted, which, in SpectraSite's sole
judgment, might impair materially SpectraSite's ability to proceed with the
exchange offer, or impair materially SpectraSite's contemplated benefits
from the exchange offer; or
(c) any governmental approval has not been obtained, which approval
SpectraSite shall, in its sole discretion, deem necessary for the
consummation of the exchange offer as contemplated hereby.
If SpectraSite determines in its sole discretion that any of the conditions
are not satisfied, SpectraSite may:
- refuse to accept any Old Notes and return all tendered Old Notes to the
tendering holders;
- extend the exchange offer and retain all Old Notes tendered prior to the
expiration of the exchange offer, subject, however, to the holders'
rights to withdraw the Old Notes (see "-- Withdrawal of Tenders"); or
- waive the unsatisfied conditions and accept all properly tendered Old
Notes which have not been withdrawn.
SpectraSite shall keep the exchange offer open for at least 30 days, or
longer if applicable law so requires, including, in connection with any material
modification or waiver of the terms or conditions of the exchange offer that
requires such extension under applicable law, after the date SpectraSite mails
notice of the exchange offer to Old Note holders.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the exchange
agent for this exchange offer. Questions and requests for assistance, requests
for additional copies of this prospectus or of
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the letter of transmittal, and requests for notice of guaranteed delivery should
be directed to the exchange agent, addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Courier:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway, 13th floor
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust Window
Attn: Corporate Trust Services
By Hand: By Facsimile:
United States Trust Company of New York (212) 780-0592
111 Broadway, Lower Level
Corporate Trust Window Confirm by Telephone:
New York, New York 10006 (800)548-6565
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN THOSE SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
SpectraSite will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of SpectraSite and its affiliates or its agents.
SpectraSite has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the exchange offer. SpectraSite, however, will pay the
exchange agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of pocket expenses in connection with the exchange
offer.
SpectraSite will pay the cash expenses incurred in connection with the
exchange offer. Such expenses include the exchange agent's and the Trustee's
fees and expenses, accounting and legal fees, and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in SpectraSite's accounting records on
the date of exchange. Accordingly, SpectraSite will not recognize any gain or
loss for accounting purposes. The exchange offer expenses will be expensed over
the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such Old Notes
may be resold only:
- to SpectraSite (upon redemption thereof or otherwise);
- so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes
is a qualified institutional buyer within the meaning of Rule 144A under
the Securities Act in a transaction meeting the requirements of Rule
144A, in accordance with Rule 144 under the Securities Act, or pursuant
to another exemption from the registration requirements of the Securities
Act, and based upon an opinion of counsel reasonably acceptable to
SpectraSite;
- outside the United States to a foreign person in a transaction meeting
the requirements of Regulation S under the Securities Act; or
- pursuant to an effective registration statement under the Securities Act.
Any resale of Old Notes must comply with any applicable securities laws of
any state of the United States.
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DESCRIPTION OF THE NOTES
The Exchange Notes have the same form and terms as the Old Notes (which
they replace) with two exceptions. First, since the issuance of the Exchange
Notes has been registered under the Securities Act, the Exchange Notes will not
bear legends restricting their transfer. Second, the holders of Exchange Notes
will not be entitled to rights under the registration rights agreement, since
the primary provision of that agreement will terminate when the exchange offer
is consummated. A copy of the Indenture, dated June 26, 1998 (the "Indenture"),
between SpectraSite and United States Trust Company of New York, as trustee (the
"Trustee"), has been filed as an exhibit to the exchange offer registration
statement of which this prospectus forms a part. The Indenture will not be
amended in connection with the exchange offer.
The following is a summary of the material terms of the Indenture. This
summary does not include all the provisions of the Indenture, nor does it
include certain terms made a part of the Indenture by the Trust Indenture Act of
1939, as amended. You can find definitions of certain capitalized terms used in
the following summary under the subheading "-- Certain Definitions." Capitalized
terms contained in this summary but not defined under the subheading "-- Certain
Definitions" or elsewhere in this summary are defined in the Indenture.
GENERAL
Methods of Payment
The principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of SpectraSite in the Borough of Manhattan, The City of New York. The initial
office for transfers is the corporate trust office of the Trustee, at 114 West
47th Street, 25th Floor, New York, New York 10036. However, at SpectraSite's
option, interest payments may be made by check, mailed to the registered Holders
of the Notes at their registered addresses.
Methods of Issuance
SpectraSite will issue the Exchange Notes only in fully registered form,
without coupons, in denominations of $1,000 and any integral multiple of $1,000.
No service charge will be made for any registration of a transfer or an exchange
of Notes, but SpectraSite may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection with any
such transfer or exchange.
Federal Tax Issues
For United States federal income tax purposes, a significant amount of
original issue discount, taxable as ordinary income, will be recognized by a
Holder of Notes as such discount is amortized from the Issue Date. However,
Holders will not receive any payments on the Notes until January 15, 2004. For a
description of certain tax matters related to an investment in the Notes, see
"Certain U.S. Federal Tax Considerations."
TERMS OF THE NOTES
The Notes:
- are unsecured, senior obligations of SpectraSite;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of SpectraSite;
- are senior in right of payment to any future subordinated Indebtedness of
SpectraSite;
- mature on July 15, 2008;
- have a maximum aggregate principal amount at maturity of $225.2 million;
and
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- will accrue interest at a rate of 12% per annum, which will be compounded
semi-annually on each Semi-Annual Accrual Date, but will not be payable
in cash, except that interest on the Accreted Value of each Note as of
July 15, 2003 will continue to accrue at 12% per annum, but will be paid
semi-annually commencing January 15, 2004 and continuing on each July 15
and January 15 thereafter to Holders of record at the close of business
on the first day of the month during which the interest payment will be
made; interest to be paid on a 360-day year, twelve 30-day month basis.
REDEMPTION
Terms of Optional Redemption
Prior to July 15, 2001, SpectraSite may redeem up to 25% of the principal
amount at maturity of the Notes at any time and from time to time but only from
the proceeds of Equity Offerings. The redemption price for any such redemption
will be 112% of the Accreted Value of the Notes being redeemed, plus accrued and
unpaid interest, if any, to the redemption date, subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date. At least 75% of the aggregate principal amount at
maturity of the Notes must remain outstanding after each such redemption,
excluding Notes held by SpectraSite or any of its Subsidiaries, and each such
redemption must occur within 60 days after the date of closing of the related
Equity Offering.
Between July 15, 2001, and July 15, 2003, SpectraSite may not redeem the
Notes.
SpectraSite may redeem the Notes at any time or from time to time on or
after July 15, 2003. SpectraSite shall pay accrued and unpaid interest, if any,
on the Accreted Value of the Notes being redeemed to the redemption date,
subject to the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date. For any Notes being redeemed
in any period in Column A below, SpectraSite shall pay a redemption price equal
to the percentage of the Accreted Value of the Notes being redeemed set forth
opposite such period in Column B below.
<TABLE>
<CAPTION>
COLUMN A COLUMN B
PERIOD REDEMPTION PRICE
-------- ----------------
<S> <C>
July 15, 2003, through July 14, 2004........................ 106.000%
July 15, 2004, through July 14, 2005........................ 104.000%
July 15, 2005, through July 14, 2006........................ 102.000%
July 15, 2006 and thereafter................................ 100.000%
</TABLE>
Partial Redemption: Selection and Notice
In the case of any partial redemption, the Trustee will select the Notes
for redemption:
- in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed; or,
- if the Notes are not so listed, on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided, however, no Note of $1,000 or less, in
original principal amount, will be redeemed in part.
SpectraSite will send notice by first class mail at least 30, but not more
than 60, days before the redemption date, to each Noteholder, to be redeemed at
its registered address. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes, or portions of Notes, called for redemption. If any Note is to be
redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note, in
principal amount equal to the unredeemed portion of the partially redeemed Note,
will be issued in the name of the Holder thereof upon cancellation of the
original Note.
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Mandatory Redemption
SpectraSite will not make mandatory redemption or sinking fund payments
with respect to the Notes.
RANKING
The Indebtedness evidenced by the Notes:
- is unsecured Senior Indebtedness of SpectraSite;
- will rank ratably in right of payment with all existing and future Senior
Indebtedness of SpectraSite; and
- will be senior in right of payment to all existing and future
Subordinated Obligations of SpectraSite.
Also, the Notes will be effectively subordinated to all existing and future
Secured Indebtedness of SpectraSite to the extent of the value of the assets
securing such Indebtedness, and will be structurally subordinated to all
existing and future Indebtedness of any of SpectraSite's Subsidiaries.
At September 30, 1998, SpectraSite had no Indebtedness outstanding other
than the Notes, and SpectraSite's Subsidiaries had approximately $[3.3] million
of liabilities, including trade payables. Although the Indenture contains
limitations on the amount of additional Indebtedness which SpectraSite may
Incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness or
Secured Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness."
SpectraSite conducts all of its operations through Subsidiaries and,
therefore, SpectraSite depends upon the cash flow of its Subsidiaries to meet
its obligations, including its obligations under the Notes. SpectraSite's
Subsidiaries will not be guarantors of the Notes and are separate entities, with
no obligation to make payments on the Notes, or to make funds available
therefor. Generally, with respect to the assets and earnings of such
Subsidiaries, priority will be given to claims of the Subsidiaries' creditors,
including trade creditors, secured creditors, creditors holding indebtedness and
guarantees issued by the Subsidiaries, and claims of preferred stockholders, if
any, of the Subsidiaries over the claims of SpectraSite's creditors, including
Holders. The Notes, therefore, will be effectively subordinated to all
Indebtedness (including all obligations under the New Credit Facility),
Preferred Stock, if any, and other liabilities and commitments (including trade
payables and lease obligations) of SpectraSite's Subsidiaries. SpectraSite
expects that the provisions of the New Credit Facility will contain substantial
restrictions on the ability of SCI to transfer cash or assets to SpectraSite, by
dividend or distribution. Although the Indenture limits the Incurrence of
Indebtedness and Preferred Stock of certain of SpectraSite's Subsidiaries, such
limitation is subject to a number of significant qualifications. Moreover, the
Indenture does not impose any limitation on the Subsidiaries' Incurrence of
liabilities that are not considered Indebtedness or Preferred Stock under the
Indenture. See "-- Certain Covenants -- Limitation on Indebtedness and Preferred
Stock of Restricted Subsidiaries."
As of the date of the Indenture, all of SpectraSite's Subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, SpectraSite may
designate current or future Subsidiaries as Unrestricted Subsidiaries, which
will not be subject to many of the restrictive covenants set forth in the
Indenture.
CHANGE OF CONTROL
If a Change of Control occurs, each Holder will have the right to require
SpectraSite to repurchase all or any part of such Holder's Notes, at a purchase
price in cash equal to 101% of the Accreted Value as of the repurchase date,
plus accrued and unpaid interest, if any, to the repurchase date, subject to the
right of Holders of record on the relevant record date to receive interest due
on the related interest payment date.
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<PAGE> 80
Within 30 days following any Change of Control, SpectraSite shall mail a
notice to each Holder, with a copy to the Trustee, stating:
- that a Change of Control has occurred and that each Holder has the right
to require SpectraSite to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the Accreted Value as of the repurchase
date, plus accrued and unpaid interest, if any, to the repurchase date,
subject to the right of Holders of record on the relevant record date to
receive interest on the relevant interest payment date;
- the circumstances and relevant facts regarding such Change of Control,
including information with respect to pro forma historical income, cash
flow, and capitalization, after giving effect to the Change of Control;
- the repurchase date, which shall be no earlier than 30 days, nor later
than 60 days, from the date such notice is mailed; and
- the instructions SpectraSite determines, consistent with this covenant,
that a Holder must follow in order to have its Notes purchased.
The definition of "Change of Control" includes the phrase "all or
substantially all," as used with respect to a sale of assets. The meaning of
"substantially all" varies according to the facts and circumstances of the
subject transaction. There is no clearly established meaning of "substantially
all" under New York law, the law governing the Indenture, and the phrase thus is
subject to judicial interpretation. Accordingly, in certain circumstances, there
may be uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a Person,
and therefore it may be unclear whether a Change of Control has occurred.
SpectraSite will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, SpectraSite will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue of its compliance with the law.
The Change of Control purchase feature is a result of negotiations between
SpectraSite and the initial purchasers of the Old Notes. Management has no
present intention to engage in a transaction involving a Change of Control,
although it is possible that SpectraSite would decide to do so in the future.
Subject to the limitations discussed below, SpectraSite could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect SpectraSite's capital structure or credit rating.
Restrictions on SpectraSite's ability to Incur additional Indebtedness are
contained in the covenants described under "-- Certain Covenants -- Limitation
on Indebtedness" and "-- Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries." Such restrictions can be waived only with the consent
of the Holders of a majority, in principal amount at maturity, of the Notes then
outstanding. Except for the limitations contained in such covenants, however,
the Indenture does not contain any covenants or provisions that afford Holders
protection in the event of a highly leveraged transaction.
The New Credit Facility is expected to:
- limit SpectraSite's access to its Subsidiaries' cash flow and, therefore,
restrict SpectraSite's ability to purchase any Notes.
- provide, with respect to SpectraSite, that the occurrence of certain
events similar to those included in the definition of the term "Change of
Control" will constitute a default.
In the event that a Change of Control occurs at a time when SpectraSite's
Subsidiaries are prohibited from making distributions to SpectraSite to allow it
to purchase Notes, SpectraSite could cause its
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<PAGE> 81
Subsidiaries to seek the consent of the lenders under the New Credit Facility,
to allow such distributions, or it could attempt to refinance the borrowings
that contain the prohibition against distributions. If SpectraSite does not
obtain such a consent or repay such borrowings, SpectraSite will remain
prohibited from purchasing Notes. In that case, SpectraSite's failure to
purchase tendered Notes would constitute an Event of Default under the Indenture
which would, in turn, constitute a default under the New Credit Facility.
Future Indebtedness of SpectraSite and its Subsidiaries may contain
prohibitions against the occurrence of certain events that would constitute a
Change of Control, or require such Indebtedness to be purchased upon a Change of
Control. Moreover, the Holders' exercise of their right to require SpectraSite
to purchase the Notes could cause a default under such Indebtedness, even if the
Change of Control itself does not cause a default, due to the financial effect
on SpectraSite of such a Notes purchase.
SpectraSite's ability to pay cash to the Holders following the occurrence
of a Change of Control may be limited by SpectraSite's then existing financial
resources, including its ability to access its Subsidiaries' cash flow. See
"Risk Factors -- Repayment Uncertainty" and "Risk Factors -- Holding Company
Structure." There can be no assurance that sufficient funds will be available
when necessary for SpectraSite to make any required purchases.
The Indenture provisions relative to SpectraSite's obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the Holders of a majority, in principal
amount at maturity, of the Notes.
SpectraSite will not be required to make an offer, pursuant to this
Section, upon a Change of Control, if a third party, in compliance with the
requirements set forth in the Indenture applicable to SpectraSite's Change of
Control, makes an offer to purchase, and purchases, all Notes validly tendered
and not withdrawn under such offer.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness
1. SpectraSite will not Incur, directly or indirectly, any Indebtedness unless,
on the date of, and after giving effect to, such Incurrence and the
application of the net proceeds therefrom, SpectraSite's Indebtedness to
Adjusted EBITDA Ratio would be less than 7.00:1. Accrual of interest,
accretion, or amortization of original issue discount, and the payment of
interest in the form of additional Indebtedness, will not be deemed to be an
Incurrence of Indebtedness for purposes of this covenant.
2. Notwithstanding the limitations described in paragraph (1), and regardless
of the amount of SpectraSite's outstanding Indebtedness, SpectraSite may
Incur any or all of the following Indebtedness:
a. Indebtedness of SpectraSite owing to and held by any Restricted
Subsidiary; provided, however, that any subsequent issuance or transfer
of any Capital Stock, or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary, or any
subsequent transfer of any such Indebtedness, except to another
Restricted Subsidiary, will be deemed to constitute SpectraSite's
Incurrence of such Indebtedness;
b. Indebtedness represented by the Notes;
c. Any of SpectraSite's Indebtedness outstanding on the Issue Date, other
than the Indebtedness described in clauses (2) (a) or (b) above;
d. Indebtedness (including Capitalized Lease Obligations) which SpectraSite
Incurs to finance the acquisition, construction or improvement of fixed
or capital assets, in an aggregate principal amount, not to exceed $5.0
million, at any one time outstanding, together with the amount of any
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Indebtedness then outstanding and Incurred pursuant to clause (2)(f) of
the "Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries" covenant; provided, that such Indebtedness is Incurred
within 180 days after the date of such acquisition, construction or
improvement, and does not exceed the fair market value of such acquired,
constructed or improved assets, as SpectraSite's Board of Directors
determines in good faith;
e. Refinancing Indebtedness, Incurred in respect of any Indebtedness
Incurred pursuant to paragraph (1) above or pursuant to clauses (2)(b)
or (c) above or this clause (2)(e);
f. Indebtedness which is:
- in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds provided by SpectraSite in the
ordinary course of its business, which do not secure other
Indebtedness; and
- Incurred under Currency Agreements and Interest Rate Agreements which,
at the time of Incurrence, are in the ordinary course of business;
provided, however, that the Currency Agreements and Interest Rate
Agreements are directly related to Indebtedness which SpectraSite is
permitted to Incur pursuant to the Indenture;
g. Indebtedness represented by Guarantees, by SpectraSite, of Indebtedness
which SpectraSite or any of its Subsidiaries otherwise is permitted to
Incur pursuant to the Indenture;
h. Indebtedness of any other Person, existing at the time such other Person
is merged with or into SpectraSite, and outstanding on, or prior to, the
date on which such Person was merged with or into SpectraSite, other
than Indebtedness Incurred in connection with, or to provide all, or any
portion, of the funds or credit support utilized, to consummate the
transaction, or series of related transactions, pursuant to which such
Person was merged with or into SpectraSite; provided, however, that on
the date of such merger and after giving it effect, SpectraSite would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
paragraph (1) above;
i. Indebtedness Incurred by SpectraSite's Subsidiaries, which the terms of
the Indenture do not otherwise prohibit;
j. Incurrence by SpectraSite of Indebtedness not to exceed, at any one time
outstanding, together with the amount of any Indebtedness then
outstanding and Incurred pursuant to clause (2)(i) of the "Limitation on
Indebtedness and Preferred Stock of Restricted Subsidiaries" covenant,
- 1.5
times
- the aggregate Net Cash Proceeds SpectraSite receives from the issue or
sale of Capital Stock, other than Disqualified Stock, subsequent to
the Issue Date, other than an issuance or sale to a SpectraSite
Subsidiary and other than an issuance or sale to an employee stock
ownership plan or to a trust established by SpectraSite or any of its
Restricted Subsidiaries,
less
- the amount of such Net Cash Proceeds used to make Restricted Payments
pursuant to clause (1)(c)(ii), or applied pursuant to clause
(2)(a)(ii), of the "Limitation on Restricted Payments" covenant;
however, immediately prior to the consummation of each such Capital Stock
issuance or sale, SpectraSite must be able to incur at least $1.00 of
additional Indebtedness pursuant to paragraph (1) above; and
k. other Indebtedness, in an aggregate principal amount outstanding at any
time, not to exceed $5.0 million, together with the amount of any
Indebtedness and Preferred Stock then outstanding
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and Incurred pursuant to clause (2)(j) of the "Limitation on
Indebtedness and Preferred Stock of Restricted Subsidiaries" covenant.
3. SpectraSite shall not Incur any Indebtedness pursuant to the foregoing
paragraph (2) if it uses the proceeds thereof, directly or indirectly, to
Refinance any Subordinated Obligations, unless such new Indebtedness shall:
a. be subordinated to the Notes to at least the same extent as such
Subordinated Obligations being Refinanced; and
b. have a Stated Maturity that is no earlier than the Stated Maturity of
the Subordinated Obligations being Refinanced.
4. For purposes of determining compliance with this covenant:
a. in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, SpectraSite, in
its sole discretion, will classify such Indebtedness, and only be
required to include the amount and type of such Indebtedness in one of
the above clauses; and
b. an item of Indebtedness may be divided and classified into more than one
of the types of Indebtedness described above.
Limitation on Indebtedness and Preferred Stock of Restricted Subsidiaries
1. SpectraSite shall not permit any Restricted Subsidiary to Incur, directly or
indirectly, any Indebtedness or Preferred Stock unless, on the date of, and
after giving effect to, such Incurrence and the application of the net
proceeds therefrom, SpectraSite's Indebtedness to Adjusted EBITDA Ratio
would be less than 7.00:1. Accrual of interest, accretion or amortization of
original issue discount, and the payment of interest in the form of
additional Indebtedness, will not be deemed to be an Incurrence of
Indebtedness for purposes of this covenant.
2. Despite the above paragraph (1), and regardless of the amount of the
Restricted Subsidiaries' outstanding Indebtedness, any Restricted Subsidiary
may Incur any or all of the following Indebtedness:
a. Indebtedness Incurred under the New Credit Facility, in an aggregate
principal amount outstanding at any time, not to exceed the greater of:
i. $50.0 million; and
ii. the product of
- $200,000
times
- the number of Completed Towers on the date of such Incurrence, less
the aggregate amount of all proceeds from all Asset Dispositions of
SpectraSite's Tower Assets that have been applied, since the Issue
Date, to permanently reduce the outstanding amount of such
Indebtedness, pursuant to the "Limitation on Sale of Assets and
Subsidiary Stock" covenant;
b. Indebtedness or Preferred Stock of a Restricted Subsidiary issued to,
and held by, SpectraSite or a Restricted Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock which
results in any Restricted Subsidiary ceasing to be a Restricted
Subsidiary, or any subsequent transfer of such Indebtedness or Preferred
Stock, other than to SpectraSite or a Restricted Subsidiary, shall be
deemed to constitute an Incurrence, by SpectraSite, of such Indebtedness
or Preferred Stock;
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c. Indebtedness or Preferred Stock of a Restricted Subsidiary Incurred and
outstanding on, or prior to, the date on which SpectraSite acquired such
Restricted Subsidiary, other than Indebtedness or Preferred Stock
Incurred in connection with, or to provide all, or any portion of, the
funds or credit support utilized to consummate, the transaction, or
series of related transactions, pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or SpectraSite acquired it;
provided, however, that on the date of such acquisition and after giving
effect thereto, SpectraSite would be permitted to Incur at least $1.00
of additional Indebtedness pursuant to paragraph (1) of the "Limitation
on Indebtedness" covenant above;
d. Indebtedness or Preferred Stock outstanding on the Issue Date, other
than Indebtedness described in clauses (2)(a), (b) or (c) above;
e. Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in clauses (2)(c) and (d) above or this
clause (e); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances a Subsidiary's
Indebtedness or Preferred Stock described in clause (2)(c) above, only
the Subsidiary shall Incur such Refinancing Indebtedness;
f. Indebtedness (including Capitalized Lease Obligations) which a
Subsidiary Incurs to finance the acquisition, construction or
improvement of fixed or capital assets, in an aggregate principal amount
at any one time outstanding, not to exceed $5.0 million, together with
the amount of any Indebtedness then outstanding and Incurred pursuant to
clause (2)(d) of the "Limitation on Indebtedness" covenant; provided,
that such Subsidiary Incurs such Indebtedness within 180 days after the
date of such acquisition, construction or improvement, and that such
Indebtedness does not exceed the fair market value of such acquired,
constructed or improved assets, as SpectraSite's Board of Directors
determines in good faith;
g. Indebtedness which is:
i. in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds provided in the ordinary course of
its business, which do not secure other Indebtedness; and
ii. Incurred under Currency Agreements and Interest Rate Agreements
which, at the time of Incurrence, are in the ordinary course of
business; provided, however, that the Currency Agreements and
Interest Rate Agreements are directly related to Indebtedness which
SpectraSite or any of its Subsidiaries is permitted to Incur
pursuant to the Indenture;
h. Indebtedness represented by Guarantees, by a Subsidiary, of Indebtedness
which SpectraSite or another Subsidiary is otherwise permitted to Incur
pursuant to the Indenture;
i. A Subsidiary's Incurrence of Indebtedness, not to exceed at any one time
outstanding together with the amount of any Indebtedness then
outstanding and Incurred pursuant to clause (2)(j) of the "Limitation on
Indebtedness" covenant,
- 1.5
times
- the aggregate Net Cash Proceeds SpectraSite receives from the issue or
sale of Capital Stock (other than Disqualified Stock) subsequent to
the Issue Date, other than an issuance or sale to a SpectraSite
Subsidiary and other than an issuance or sale to an employee stock
ownership plan, or to a trust established by SpectraSite or any of its
Restricted Subsidiaries,
less
- the amount of such Net Cash Proceeds used to make Restricted Payments
pursuant to clause (1)(c)(ii) of the "Limitation on Restricted
Payments" covenant, or applied pursuant to clause (2)(a)(ii)of the
"Limitation on Restricted Payments" covenant;
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however, immediately prior to the consummation of each such Capital Stock
issuance or sale, SpectraSite would be permitted to Incur at least $1.00
of additional Indebtedness pursuant to paragraph (1) of the "Limitation
on Indebtedness" covenant; and
j. other Indebtedness and Preferred Stock, in an aggregate principal and/or
liquidation amount, not to exceed at any time outstanding, $5.0 million,
less the amount of any Indebtedness then outstanding and Incurred
pursuant to clause (2)(k) of the "Limitation on Indebtedness" covenant.
3. For purposes of determining compliance with this covenant:
a. in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, SpectraSite, in
its sole discretion, will classify such Indebtedness, and only be
required to include the amount and type of such Indebtedness in one of
the above clauses; and
b. an item of Indebtedness may be divided and classified into more than one
of the types of Indebtedness described above.
SpectraSite will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
Limitation on Restricted Payments
1. SpectraSite will not make, and will not permit any Restricted Subsidiary to
make, directly or indirectly, any Restricted Payment, if at the time
SpectraSite or the Restricted Subsidiary makes the Restricted Payment:
a. a Default or Event of Default will have occurred and be continuing, or
would result therefrom;
b. SpectraSite could not Incur at least $1.00 of additional Indebtedness
under paragraph (1) of the "Limitation on Indebtedness" covenant; or
c. the aggregate amount of such Restricted Payment and all other Restricted
Payments, which amount, if other than in cash, the SpectraSite Board of
Directors will determine in good faith, and will evidence such
determination by a Board resolution, declared or made subsequent to the
Issue Date, would exceed the sum of:
i. the aggregate EBITDA (or, in the event such EBITDA shall be a
deficit, minus such deficit) accrued subsequent to the Issue Date to
the most recent date for which financial information is available to
SpectraSite, taken as one accounting period, less 1.4 times
Consolidated Interest Expense for the same period;
plus
ii. 100% of the aggregate Net Cash Proceeds, less the aggregate amount
of such Net Cash Proceeds used to Incur Indebtedness pursuant to
clause (2)(j) of the "Limitation on Indebtedness" covenant and
clause (2)(i) of the "Limitation on Indebtedness and Preferred Stock
of Restricted Subsidiaries" covenant, plus 70% of the GAAP purchase
accounting valuation of Qualified Proceeds, with each such valuation
calculated as of the sale date of the Capital Stock received as
consideration therefor, in each case received by SpectraSite from
the issue or sale of Capital Stock other than Disqualified Stock,
subsequent to the Issue Date, other than an issuance or sale to one
of SpectraSite's Subsidiaries, and other than an issuance or sale to
an employee stock ownership plan, or to a trust established by
SpectraSite or any of its Restricted Subsidiaries;
plus
iii. the amount by which SpectraSite's Indebtedness is reduced on
SpectraSite's balance sheet, upon conversion or exchange, other
than by a Restricted Subsidiary, subsequent to the Issue Date of
any SpectraSite Indebtedness which is convertible or exchangeable
for SpectraSite's
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Capital Stock, other than Disqualified Stock, less the amount of
any cash, or the fair value of any other property, distributed by
SpectraSite upon such conversion or exchange;
plus
iv. an amount equal to the sum of the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of
loans or advances, or other transfers of assets to SpectraSite or
any Restricted Subsidiary from Unrestricted Subsidiaries, plus the
portion, proportionate to SpectraSite's equity interest in such
Subsidiary, of the fair market value of the net assets of an
Unrestricted Subsidiary, at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, that the sum in this
clause (iv) shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments SpectraSite or any Restricted
Subsidiary previously made in such Unrestricted Subsidiary, which
amount was included in the calculation of the amount of Restricted
Payments;
plus
v. dividends and distributions SpectraSite receives, subsequent to the
Issue Date, from Unrestricted Subsidiaries, to the extent such
dividends and distributions are not otherwise included in calculating
EBITDA;
plus
vi. Net Cash Proceeds SpectraSite receives, subsequent to the Issue
Date, from Investments that are not Permitted Investments, to the
extent not otherwise included in calculating EBITDA.
2. The provisions of paragraph (1) of this covenant will not prohibit:
a. any purchase, redemption, defeasance or other acquisition of
SpectraSite's Capital Stock or Subordinated Obligations made by exchange
for, or out of the net proceeds of the substantially concurrent sale of,
SpectraSite's Capital Stock (other than Disqualified Stock and other
than Capital Stock issued or sold to a SpectraSite Subsidiary, or an
employee stock ownership plan, or a trust established by SpectraSite or
any of its Subsidiaries); provided, however, that:
i. such purchase, redemption, defeasance or other acquisition will be
excluded in the calculation of the amount of Restricted Payments; and
ii. to the extent applied toward any such purchase, redemption,
defeasance or other acquisition, the Net Cash Proceeds from such
sale will be excluded from clause (1)(c)(ii) above, clause (2)(j) of
the "Limitation on Indebtedness" covenant and clause (2)(i) of the
"Limitation on Indebtedness and Preferred Stock of Restricted
Subsidiaries" covenant;
b. any purchase, redemption, defeasance or other acquisition of
Subordinated Obligations made by exchange for, or out of the net
proceeds of the substantially concurrent sale of, SpectraSite's
Subordinated Obligations; provided, however, that:
i. the principal amount of such new Indebtedness does not exceed the
principal amount of the Subordinated Obligations being so redeemed,
repurchased, acquired or retired for value, plus the amount of any
premium required to be paid under the terms of the instrument
governing the Subordinated Obligations being so redeemed,
repurchased, acquired or retired;
ii. such new Indebtedness is subordinated to the Notes at least to the
same extent as the Subordinated Obligations so purchased, exchanged,
redeemed, repurchased, acquired or retired for value;
iii. such new Indebtedness has a final scheduled maturity date later
than the earlier of the final scheduled maturity date of the
Subordinated Obligations being so redeemed, repurchased, acquired
or retired, and the final scheduled maturity date of the Notes; and
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iv. such new Indebtedness has an Average Life equal to or greater than
the Average Life of the Notes;
Any purchase redemption, defeasance or other acquisition consistent with
clause 2(b) above will be excluded in the calculation of the amount of
Restricted Payments;
c. dividends paid within 60 days after the date of their declaration, if at
such date of declaration such dividend would have complied with this
covenant; provided, however, that the amount of such dividend will be
included in the calculation of the amount of Restricted Payments; and
d. purchases of outstanding shares of SpectraSite's Capital Stock from
deceased stockholders, in an amount not to exceed $1.0 million in the
aggregate; provided, however, that such purchases will be included in
the calculation of the amount of Restricted Payments.
The Restricted Payments described in clauses (2)(a), (b) and (d) above shall not
be permitted if at the time of, and after giving effect to, such Restricted
Payments, a Default or Event of Default shall have occurred and be continuing.
Limitation on Restrictions on Distributions from Restricted Subsidiaries
SpectraSite will not, and will not permit any Restricted Subsidiary to,
create, or otherwise cause or permit to exist or become effective, any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
1. pay dividends or make any other distributions on its Capital Stock, to
SpectraSite or to a Restricted Subsidiary, or pay any Indebtedness or other
obligation owed to SpectraSite;
2. make any loans or advances to SpectraSite; or
3. transfer any of its property or assets to SpectraSite or any Restricted
Subsidiary, except:
a. any encumbrance or restriction pursuant to the New Credit Facility or
any agreement in effect at, or entered into, on the Issue Date;
b. any encumbrance or restriction, with respect to a Restricted Subsidiary,
pursuant to an agreement relating to any Indebtedness it Incurred on, or
prior to, the date on which SpectraSite or a Restricted Subsidiary
acquired it (other than Indebtedness Incurred as consideration in, or to
provide all, or any portion, of the funds or credit support utilized, to
consummate the transaction, or series of related transactions, pursuant
to which such Restricted Subsidiary became a Subsidiary, or SpectraSite
or a Restricted Subsidiary acquired it) and outstanding on such date;
c. any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred, pursuant to an agreement referred
to in clause (3)(a) or (b) above, or contained in any amendment to an
agreement referred to in clause (3)(a) or (b) above; provided, however,
that the encumbrances and restrictions contained in any such Refinancing
agreement or amendment, taken as a whole, with respect to a Restricted
Subsidiary, are no less favorable to the Holders than the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in
such predecessor agreements, as the SpectraSite Board of Directors
determines in good faith;
d. in the case of paragraph (3), any encumbrance or restriction that
restricts, in a customary manner, the subletting, assignment or transfer
of any property or asset that is subject to a lease, license or other
contract;
e. in the case of paragraph (3), contained in security agreements or
mortgages securing a Restricted Subsidiary's Indebtedness, to the extent
such encumbrance or restrictions restrict the transfer of the property
subject to such security agreements or mortgages;
f. any restriction with respect to a Restricted Subsidiary, imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all of such Restricted Subsidiary's Capital Stock or
assets, pending the closing of such sale or disposition; and
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g. customary provisions with respect to the disposition or distribution of
assets or property in joint venture and other similar agreements.
Limitation on Sales of Assets and Subsidiary Stock
1. SpectraSite will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
a. SpectraSite or such Restricted Subsidiary receives consideration, at the
time of such Asset Disposition, at least equal to the fair market value,
including as to the value of all non-cash consideration, as the
SpectraSite Board of Directors determines in good faith, of the shares
and assets subject to such Asset Disposition; and
b. except in the case of a Tower Asset Exchange, at least 75% of the
consideration SpectraSite or such Restricted Subsidiary receives is in
the form of cash or cash equivalents.
2. Within 365 days after the receipt of any Net Available Cash from an Asset
Disposition, SpectraSite or the applicable Restricted Subsidiary may apply
such Net Available Cash to:
a. prepay, repay, redeem or purchase Indebtedness, other than Disqualified
Stock, of a SpectraSite Wholly Owned Subsidiary, provided, that the
applicable Restricted Subsidiary, whether or not a Wholly Owned
Subsidiary, also may prepay, repay, redeem or purchase its own
outstanding Indebtedness, or Senior Indebtedness, in each case other
than Indebtedness owed to SpectraSite or an Affiliate of SpectraSite;
b. acquire all or substantially all of the assets of an entity engaged in a
Permitted Business;
c. acquire Voting Stock of an entity engaged in a Permitted Business from a
Person that is not a SpectraSite Subsidiary; provided, that after giving
effect thereto, SpectraSite or its Restricted Subsidiary owns a majority
of such Voting Stock, and such acquisition otherwise is made in
accordance with the Indenture, including, without limitation, the
"Limitation on Restricted Payments" covenant; or
d. make a capital expenditure or acquire other long-term assets that are
used or useful in a Permitted Business.
To the extent of the balance of such Net Available Cash, after
application in accordance with clause (2)(a), (b), (c) or (d) above,
SpectraSite shall make an Offer to the Holders to purchase Notes
pursuant to, and subject to, the conditions set forth in paragraph (5)
below.
3. Notwithstanding the foregoing provisions, SpectraSite and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this covenant, except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant, exceeds $2.5 million. Pending application of
Net Available Cash pursuant to this covenant, such Net Available Cash shall
be invested in Permitted Investments.
4. For the purposes of this covenant, the following are deemed to be cash:
a. the transferee's assumption of SpectraSite's Indebtedness, other than
SpectraSite's Disqualified Stock, and other than Indebtedness that is
subordinated to the Notes, or any Restricted Subsidiary's Indebtedness
and the release of SpectraSite or the Restricted Subsidiary from all
liability on such Indebtedness in connection with the Asset Disposition;
b. securities that SpectraSite or any Restricted Subsidiary receives from
the transferee, that SpectraSite or the Restricted Subsidiary converts
into cash within 20 days of the applicable Asset Disposition, to the
extent of the cash received; and
c. the transferee's assumption of any of SpectraSite's or any Restricted
Subsidiary's liabilities, as shown on SpectraSite's or such Restricted
Subsidiary's most recent balance sheet, other than contingent
liabilities and liabilities that are by their terms subordinated to the
Notes or any
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guarantee thereof, of any such assets, pursuant to a customary novation
agreement that releases SpectraSite or the Restricted Subsidiary from
further liability.
5. In the event of an Asset Disposition that requires a Notes purchase pursuant
to paragraph (1) of this covenant, SpectraSite will be required to purchase
Notes tendered, pursuant to SpectraSite's offer for the Notes (the "Offer"),
at a purchase price of:
- 100% of their Accreted Value as of the purchase date (without premium),
plus
- accrued and unpaid interest to the purchase date, in accordance with the
procedures (including prorating in the event of oversubscription) set
forth in the Indenture. If the aggregate purchase price for Notes
tendered pursuant to the Offer is less than the Net Available Cash
allotted to the Notes purchase, SpectraSite may use any remaining Net
Available Cash for general corporate purposes not otherwise prohibited by
the Indenture.
If the aggregate purchase price for Notes tendered pursuant to the Offer is
greater than the Net Available Cash allotted to the Notes purchase, the
Trustee will select the Notes to be purchased on the basis set forth under
"-- Redemption -- Partial Redemption -- Selection and Notice" above. Upon
completion of any required Offer to the Holders, the amount of Net
Available Cash will be reset at zero. SpectraSite shall not be required to
make an Offer for Notes pursuant to this covenant if the Net Available Cash
available therefor, after application of the proceeds as provided in
paragraph (2) of this covenant, is less than $5.0 million for all Asset
Dispositions, which lesser amounts shall be carried forward, for purposes
of determining whether an Offer is required, with respect to the Net
Available Cash, from any subsequent Asset Disposition.
6. SpectraSite will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with a Notes repurchase pursuant to this covenant.
To the extent that the provisions of any securities laws or regulations
conflict with provisions of this covenant, SpectraSite will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this covenant by virtue of its compliance
with the law.
7. The provisions of this covenant shall not apply to any transaction that is
permitted under the provisions of the covenant described under "-- Merger
and Consolidation."
Limitation on Transactions with Affiliates
1. SpectraSite will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or conduct any transaction, or series of
transactions, including the purchase, sale, lease or exchange of any
property, employee compensation arrangements, or the rendering of any
service, with any SpectraSite Affiliate (an "Affiliate Transaction") unless:
a. the terms of such transaction, taken as a whole, are no less favorable
to SpectraSite or such Restricted Subsidiary, as the case may be, than
those that could be obtained, at the time of such transaction, in
arm's-length dealings with a Person who is not an Affiliate;
b. in the event such Affiliate Transaction involves an aggregate amount in
excess of $1.0 million, the terms of such transaction are set forth in
writing and shall have been approved by a majority of the members of the
Board of Directors having no personal stake in such Affiliate
Transaction, and such majority determines that the Affiliate Transaction
satisfies the criteria in clause (1)(a) above; and
c. in the event such Affiliate Transaction involves an aggregate amount in
excess of $5.0 million, SpectraSite has received a written opinion from
a nationally recognized independent investment banking firm that such
Affiliate Transaction is fair to SpectraSite and its Restricted
Subsidiaries from a financial point of view.
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2. The provisions of paragraph (1) above shall not prohibit:
a. any Restricted Payment permitted to be made pursuant to the "Limitation
on Restricted Payments" covenant;
b. any securities issuance, or other payments, awards or grants in cash,
securities or otherwise, pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the
Board of Directors, or any arrangements relating thereto;
c. the grant of stock options or similar rights to SpectraSite employees
and directors, pursuant to plans approved by the Board of Directors;
d. loans or advances to employees, in the ordinary course of business, in
accordance with SpectraSite's or its Restricted Subsidiaries' past
practices, but in any event not to exceed $1.0 million in the aggregate
outstanding at any one time;
e. the payment of reasonable fees to directors of SpectraSite and its
Restricted Subsidiaries who are not employees of SpectraSite or its
Restricted Subsidiaries;
f. any transaction between SpectraSite and a Restricted Subsidiary or
between Restricted Subsidiaries;
g. the issuance or sale of any SpectraSite Capital Stock (other than
Disqualified Stock); and
h. any transaction, consummated pursuant to the terms of any agreement
described in SpectraSite's final offering circular dated June 23, 1998,
to which SpectraSite is a party, in each case as such agreement is in
effect on the Issue Date and without giving any effect to any subsequent
amendments, modifications or alterations thereof.
Limitation on Liens
SpectraSite will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, or permit to exist, any Lien on any of its
property or assets (including Capital Stock), whether owned on the Issue Date or
thereafter acquired, securing any obligation, other than Permitted Liens, unless
effective provision is made contemporaneously to secure the Notes equally and
ratably with or, in the case of Subordinated Obligations, on a senior basis to,
such obligation, for so long as the obligation is so secured.
Limitation on Sale or Issuance of Capital Stock of Restricted Subsidiaries
SpectraSite:
1. will not, and will not permit any Restricted Subsidiary to, transfer,
convey, sell, lease, or otherwise dispose of any Restricted Subsidiary's
Capital Stock, to any Person, other than to SpectraSite or to a Wholly Owned
Subsidiary, unless:
a. such transfer, conveyance, sale, lease, or other disposition is of all
of the Capital Stock of such Restricted Subsidiary, or a majority of the
issued and outstanding Capital Stock, of the Restricted Subsidiary;
provided, however, that SpectraSite's minority equity interest in such
Person, after giving effect to any such disposition, shall be deemed to
constitute an Investment, by SpectraSite, in such Person; and
b. the net cash proceeds from such transfer, conveyance, sale, lease, or
other disposition, are applied in accordance with the "Limitation on
Sales of Assets and Subsidiary Stock" covenant; and
2. will not permit any Restricted Subsidiary to issue any of its Capital Stock
to any Person, other than to SpectraSite or a Wholly Owned Subsidiary, and
other than shares of its Capital Stock constituting directors' qualifying
shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent necessary or mandated by applicable
law.
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Limitation on Sale/Leaseback Transactions
SpectraSite will not, and will not permit any Restricted Subsidiary to,
enter into any Sale/Leaseback Transaction with respect to any property unless:
1. SpectraSite or such Restricted Subsidiary would be entitled to:
a. Incur Indebtedness in an amount equal to the Attributable Indebtedness
with respect to such Sale/ Leaseback Transaction, pursuant to the
"Limitation on Indebtedness" covenant; and
b. create a Lien on such property securing such Attributable Indebtedness,
without equally and ratably securing the Notes, pursuant to the
"Limitation on Liens" covenant;
2. the net cash proceeds received by SpectraSite or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair value of such property, as the SpectraSite Board of Directors
determines in good faith; and
3. the transfer of such property is permitted by, and SpectraSite or such
Restricted Subsidiary applies the proceeds of such transaction in compliance
with, the "Limitation on Sales of Assets and Subsidiary Stock" covenant.
SEC Reports
Notwithstanding that SpectraSite may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act,
SpectraSite will file with the SEC, unless the SEC does not permit such filing,
and provide the Trustee and Noteholders with, the annual reports and such
information, documents and other reports which are specified in Sections 13 and
15(d) of the Exchange Act. SpectraSite also will comply with the other
provisions of the Trust Indenture Act Section 314(a).
MERGER AND CONSOLIDATION
SpectraSite will not, in one transaction or a series of transactions,
consolidate with or merge with or into, or convey, transfer, or lease, all or
substantially all its assets to, any Person, unless:
1. the resulting, surviving or transferee Person (the "Successor Issuer") will
be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia, and the Successor
Issuer, if not SpectraSite, will expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all SpectraSite's obligations under the Notes and the
Indenture;
2. immediately after giving effect to such transaction on a pro forma basis,
and treating any Indebtedness which becomes an obligation of the Successor
Issuer, or any Restricted Subsidiary, as a result of such transaction, as
having been Incurred by the Successor Issuer, or such Restricted Subsidiary,
at the time of such transaction, no Default or Event of Default will have
occurred and be continuing;
3. in the case of a merger of SpectraSite into a Wholly Owned Subsidiary, or a
merger SpectraSite enters into solely for the purpose of reincorporating in
another jurisdiction, immediately after giving effect to such transaction on
a pro forma basis, as if such transaction had occurred at the beginning of
the applicable four quarter period, SpectraSite, or the Person formed by, or
surviving, any such consolidation or merger, if other than SpectraSite, or
to which such conveyance, transfer, lease or other disposition shall have
been made, would have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to paragraph (1) of the "Limitation on Indebtedness"
covenant above;
4. SpectraSite will have delivered to the Trustee an Officer's Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or
transfer, and such supplemental indenture, if any, comply with the
Indenture, as set forth in the Indenture.
The Successor Issuer will succeed to, and be substituted for, and may
exercise every right and power of SpectraSite, under the Indenture, and the
predecessor Issuer, in the case of a conveyance, transfer or
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lease of all or substantially all its assets, will be released from the
obligations under the Indenture and the Notes, including, without limitation,
the obligation to pay the principal of and interest on the Notes.
DEFAULTS
An Event of Default is defined in the Indenture as:
1. a default in any interest payment, when due, on any Note, continued for 30
days;
2. a default in the payment of principal, when due, of any Note at its Stated
Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;
3. SpectraSite's failure to comply with its obligations under "-- Merger and
Consolidation;"
4. SpectraSite's failure to comply, for 30 days after notice, with any of its
obligations under the covenants described under "-- Change of Control" or
"-- Certain Covenants," in each case, other than a failure to purchase
Notes;
5. SpectraSite's failure to comply, for 60 days after notice, with its other
agreements contained in the Indenture;
6. SpectraSite's failure, or the failure of any of SpectraSite's Significant
Subsidiaries, to pay any Indebtedness within any applicable grace period,
after final maturity, or the acceleration of any such Indebtedness by the
holders thereof, because of a default, if the total amount of such
Indebtedness, unpaid or accelerated, exceeds $5.0 million or its foreign
currency equivalent (the "cross acceleration provision");
7. certain events of bankruptcy, insolvency or reorganization of SpectraSite or
any of SpectraSite's Significant Subsidiaries (the "bankruptcy provisions");
or
8. any final judgment or decree, for the payment of money in excess $5.0
million, is rendered against SpectraSite or any of SpectraSite's Significant
Subsidiaries, net of any amounts with respect to which a creditworthy
insurance company has acknowledged full liability, subject to any deductible
amounts of less than $5.0 million required to be paid by SpectraSite in
accordance with the applicable insurance policy, and either:
a. an enforcement proceeding has been commenced by any creditor upon such
judgment or decree; or
b. such judgment or decree remains outstanding for a period of 60 days
following the judgment and is not discharged, waived or stayed within 10
days after notice (the "judgment default provision").
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default, and whether it is voluntary or involuntary, or is
effected by operation of law, or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body.
However, a default under clauses (4), (5) and (8) above will not constitute
an Event of Default until the Trustee or the Holders of 25%, in aggregate
principal amount at maturity, of the outstanding Notes, notify SpectraSite, as
provided in the Indenture, of the default and SpectraSite does not cure such
default within the time specified in clauses (4) and (5) above, after it
receives notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25%, in aggregate principal amount at maturity, of the outstanding
Notes, by notice to SpectraSite, may declare the Accreted Value of, and accrued
but unpaid interest on, all the Notes to be due and payable. Upon such a
declaration, such Accreted Value and interest will be due and payable
immediately. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of SpectraSite occurs and is continuing, the
Accreted Value of, and accrued interest on, all the Notes automatically will
become due and payable immediately, without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority, in aggregate principal amount at maturity, of the outstanding Notes
may rescind any such acceleration, with respect to the Notes, and its
consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture, at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium, if any, or interest when due, no Holder may
pursue any remedy with respect to the Indenture or the Notes unless:
- such Holder shall have previously given the Trustee notice that an Event
of Default is continuing;
- Holders of at least 25%, in aggregate principal amount at maturity, of
the outstanding Notes shall have requested the Trustee to pursue the
remedy;
- such Holders shall have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
- the Trustee shall not have complied with such request, within 60 days
after the receipt of the request and the offer of security or indemnity;
and
- the Holders of a majority, in principal amount at maturity, of the
outstanding Notes shall not have given the Trustee a direction
inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority, in principal
amount at maturity, of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture, or that the Trustee determines is unduly prejudicial to the
rights of any other Holder, or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing, and is
known to the Trustee, the Trustee must mail to each Holder notice of the
Default, within the earlier of 90 days after it occurs, or 30 days after it is
known to a Trust Officer or written notice of it is received by the Trustee.
Except in the case of a Default in the payment of principal of, premium, if any,
or interest on any Note, the Trustee may withhold notice, if and so long as a
committee of its Trust Officers in good faith determines that withholding notice
is not opposed to the interests of the Noteholders. In addition, SpectraSite is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. SpectraSite also is required to deliver
to the Trustee, within 30 days after its knowledge of the occurrence of such
event, written notice of any event which would constitute certain Defaults,
their status, and what action SpectraSite is taking, or proposes to take, in
respect of such event.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended, and any past
Default or compliance with any provisions may be waived, with the consent of the
Holders of a majority, in principal amount at maturity, of the Notes then
outstanding, including consents obtained in connection with a tender offer or
exchange for the Notes. However, without the consent of each Holder of an
outstanding Note affected, no amendment may, among other things:
- reduce the amount of Notes whose Holders must consent to an amendment;
- reduce the rate of, or extend the time for, payment of interest on any
Note;
- reduce the principal of, or extend the Stated Maturity of, any Note;
- reduce the premium payable upon the redemption of any Note, or change the
time at which any Note may be redeemed, as described under "-- Optional
Redemption;"
- make any Note payable in money other than that stated in the Note;
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- impair the right of any Holder to receive payment of principal of, and
interest on, such Holder's Notes on or after the due dates therefor, or
to institute suit for the enforcement of any payment on, or with respect
to, such Holder's Notes; or
- make any change in the amendment provisions which require each Holder's
consent, or in the waiver provisions.
Without the consent of any Holder, SpectraSite and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of SpectraSite's
obligations under the Indenture, to provide for uncertificated Notes in addition
to, or in place of, certificated Notes, provided that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated Notes are as described in Section
163(f)(2)(B) of the Code, to add Guarantees with respect to the Notes, to secure
the Notes, to add to SpectraSite's covenants for the benefit of the Noteholders,
or to surrender any right or power, conferred upon SpectraSite, to make any
change that does not materially adversely affect the rights of any Holder, and
to comply with any requirement of the SEC in connection with the qualification
of the Indenture under the Trust Indenture Act.
The Holders' consent is not necessary, under the Indenture, to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, SpectraSite is
required to mail to the Holders a notice briefly describing such amendment.
However, the failure to give such notice to all Holders, or any defect therein,
will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
Upon any transfer or exchange, the registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents, and SpectraSite may require a Holder to pay any taxes required by law
or permitted by the Indenture, including any transfer tax or other similar
governmental charge payable in connection therewith. SpectraSite is not required
to transfer or exchange any Note selected for redemption, or to transfer or
exchange any Note for a period of 15 days prior to a selection of Notes to be
redeemed. The Notes will be issued in registered form, and the registered holder
of a Note will be treated as the owner of such Note for all purposes.
DEFEASANCE
SpectraSite at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including:
- those respecting the defeasance trust, and obligations to register the
transfer or exchange of the Notes;
- the obligation to replace mutilated, destroyed, lost or stolen Notes; and
- maintenance of a registrar and paying agent in respect of the Notes.
SpectraSite at any time may terminate its obligations under:
- the covenants described under "-- Certain Covenants," other than the
covenant described under "Merger and Consolidation";
- the operation of the cross acceleration provision;
- the bankruptcy provisions with respect to Significant Subsidiaries and
the judgment default provision described under "-- Defaults;" and
- the limitations contained in clause (3) under "-- Merger and
Consolidation" ("covenant defeasance").
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SpectraSite may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If SpectraSite exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If SpectraSite exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default as specified in clauses (4), (5), (6), (7), with respect to
Significant Subsidiaries only, or (8) under "-- Defaults," or because of
SpectraSite's failure to comply with clause (3) under "-- Merger and
Consolidation."
In order to exercise either defeasance option, SpectraSite must deposit, or
cause to be deposited, irrevocably, in trust (the "defeasance trust") with the
Trustee, money or U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof, in accordance with their
terms, will provide cash at such times and in such amounts as will be sufficient
to pay principal and interest, when due, on all the Notes (except lost, stolen
or destroyed Notes which have been replaced or repaid), to maturity or
redemption, as the case may be. SpectraSite must comply with certain other
conditions, including delivery to the Trustee, of an Opinion of Counsel to the
effect that the Noteholders will not recognize income, gain or loss, for federal
income tax purposes, as a result of such deposit and defeasance, and will be
subject to federal income tax on the same amounts, in the same manner, and at
the same times as would have been the case if such deposit and defeasance had
not occurred and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No SpectraSite director, officer, employee, incorporator or stockholder, as
such, shall have any liability for any of SpectraSite's obligations under the
Notes or the Indenture, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Noteholder, by accepting a Note,
waives and releases all such liability. This waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal or state securities law, and it is the view
of the SEC that such a waiver is against public policy.
CONCERNING THE TRUSTEE
United States Trust Company of New York is the Trustee under the Indenture,
and SpectraSite has appointed it as registrar and paying agent with regard to
the Notes.
The Holders of a majority, in principal amount at maturity, of the
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding, for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that if an Event of
Default occurs and is not cured, the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in the conduct of
his or her own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Noteholder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it, against any loss, liability or
expense, and then only to the extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used but not defined in this summary.
"Accreted Value" means, as of any date (the "Specified Date"), with respect
to each $1,000 principal amount at maturity of Notes:
1. if the Specified Date is one of the following semi-annual accrual dates, the
Accreted Value will equal the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
------------------------ --------------
<S> <C>
June 26, 1998.......................................... $ 554.97
January 15, 1999....................................... 591.90
July 15, 1999.......................................... 627.41
January 15, 2000....................................... 665.06
July 15, 2000.......................................... 704.96
January 15, 2001....................................... 747.26
July 15, 2001.......................................... 792.09
January 15, 2002....................................... 839.62
July 15, 2002.......................................... 890.00
January 15, 2003....................................... 943.40
July 15, 2003.......................................... 1,000.00
</TABLE>
2. if the Specified Date occurs between two semi-annual accrual dates, the
Accreted Value will equal the sum of:
a. the Accreted Value for the semi-annual accrual date immediately
preceding such Specified Date;
plus
b. an amount equal to the product of
- the Accreted Value for the immediately following semi-annual accrual
date, less the Accreted Value for the immediately preceding semi-annual
accrual date,
times
- a fraction, the numerator of which is the number of days elapsed from the
immediately preceding Semi-Annual Accrual Date to the Specified Date,
using a 360-day year of twelve 30-day months, and the denominator of
which is 180; or
3. if the Specified Date occurs after the last semi-annual accrual date, the
Accreted Value will equal $1,000.00.
"Adjusted EBITDA" as of any date of determination, means the sum of:
1. SpectraSite's EBITDA for the four most recent full fiscal quarters ending
prior to such date, less SpectraSite's Tower EBITDA for such four-quarter
period; plus
2. the product of four times SpectraSite's Tower EBITDA for the most recent
quarterly period. The Tower EBITDA for the most recent quarterly period
shall be determined on a pro forma basis after giving effect to:
a. all acquisitions or dispositions of assets SpectraSite and its
Subsidiaries make, from the beginning of such quarter through, and
including, the date of determination, including any related financing
transactions, as if the acquisitions and dispositions had occurred at
the beginning of the quarter;
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b. any new lease or Site Management Contract SpectraSite or any Restricted
Subsidiary enters into in the ordinary course of business, with respect
to Tower Assets, from the beginning of the quarter through, and
including, such date of determination, as if such new lease or Site
Management Contract had been signed at the beginning of the quarter, and
SpectraSite or a Restricted Subsidiary had received the rent required by
the terms of such lease or Site Management Contract for such quarter
during the quarter;
c. the loss from the beginning of the quarter through, and including, the
date of determination of any lease or Site Management Contract
SpectraSite or a Restricted Subsidiary has entered into, with respect to
any Tower Assets, that was in effect on the first day of the quarter, as
if the lease or Site Management Contract had not been in effect during
such quarter, and no rent under the lease had been received during the
quarter; and
d. any rent increases SpectraSite or any Restricted Subsidiary receives,
from the beginning of the quarter through, and including, the date of
determination related to leases or Site Management Contracts on Tower
Assets, as if the increased rental rate had been in effect at the
beginning of the quarter and SpectraSite or a Restricted Subsidiary had
received the increased amount of rent during such quarter.
For purposes of making the computation referred to above:
i. acquisitions that SpectraSite or any of its Restricted
Subsidiaries has made, including through mergers or
consolidations, and including any related financing transactions,
during the reference period, or subsequent to such reference
period, and on or prior to the date of determination, shall be
deemed to have occurred on the first day of the reference period,
and EBITDA for the reference period shall be calculated without
giving effect to clause (2) of the proviso set forth in the
definition of Consolidated Net Income; and
ii. the EBITDA attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of
prior to the date of determination, shall be excluded.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by, or under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract, or otherwise, and the terms
"controlling" and "controlled" have correlative meanings. For purposes of the
covenants in the Indenture, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of
SpectraSite's Voting Stock, on a fully diluted basis, or of rights or warrants
to purchase such Capital Stock, whether or not currently exercisable, and any
Person who would be an Affiliate of any such beneficial owner, pursuant to the
first sentence in this definition.
"Asset Disposition" means any sale, lease, transfer, or other disposition,
or series of related sales, leases, transfers, or dispositions, by SpectraSite
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
1. any shares of a Restricted Subsidiary's Capital Stock (other than directors'
qualifying shares, or shares required, by applicable law, to be held by a
Person other than SpectraSite or a Restricted Subsidiary);
2. all or substantially all the assets of any of SpectraSite's or any
Restricted Subsidiary's division or line of business; or
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3. any other of SpectraSite's or any Restricted Subsidiary's assets outside of
the ordinary course of business;
other than in the case of clauses (1), (2) and (3) above:
- a disposition by a Restricted Subsidiary, to SpectraSite, or by
SpectraSite or a Restricted Subsidiary, to a Wholly Owned Subsidiary:
- only for purposes of the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock", a
disposition that constitutes a Restricted Payment permitted by the
covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments";
- a disposition of assets with a fair market value of less than $500,000;
- grants of leases or licenses in the ordinary course of business; and
- disposals of cash equivalents.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value, discounted at the
interest rate borne by the Notes, compounded annually, of the total obligations
of the lessee, for rental payments during the remaining term of the lease
included in the Sale/Leaseback Transaction, including any period for which the
lease has been extended.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:
1. the sum of the product of the numbers of years, from the date of
determination to the dates of each successive scheduled principal payment,
of such Indebtedness, or redemption, or similar payment with respect to such
Preferred Stock, times the amount of such payment;
by
2. the sum of all such payments.
"Board of Directors" means SpectraSite's Board of Directors, or any
committee thereof duly authorized to act on behalf of the Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capitalized Lease Obligation" means an obligation that must be classified
and accounted for as a capitalized lease, for financial reporting purposes, in
accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under the lease, prior to the first date
upon which the lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participation or other equivalents of, or
interests in, however designated, equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following events:
1. prior to the first public offering of SpectraSite common stock, the
Permitted Holders cease to be the "beneficial owner", as defined in Exchange
Act Rules 13d3 and 13d5, directly or indirectly, of a majority, in the
aggregate, of the total voting power of SpectraSite's Voting Stock, whether
as a result of:
- SpectraSite's issuance of any securities;
- any merger or consolidation of SpectraSite;
- any liquidation or dissolution of SpectraSite;
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- any direct or indirect transfer of securities, by SpectraSite or
otherwise.
For purposes of this paragraph (1) and paragraph (2) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of an entity
(the "specified entity") held by any other entity (the "parent entity"), so
long as the Permitted Holders beneficially own, directly or indirectly, in
the aggregate, a majority of the voting power of the parent entity's Voting
Stock);
2. subsequent to the first public offering of SpectraSite common stock, any
"person" (as such term is used in Exchange Act Sections 13(d) and 14(d)),
other than one or more Permitted Holders, is or becomes the beneficial
owner, as defined in paragraph (1) above, except that for purposes of this
paragraph (2) such person shall be deemed to have "beneficial ownership" of
all shares that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, directly or
indirectly, of more than 35% of the total voting power of SpectraSite's
Voting Stock; provided, however, that the Permitted Holders beneficially
own, as defined in paragraph (1) above, directly or indirectly, in the
aggregate, a lesser percentage of the total voting power of SpectraSite's
Voting Stock than such other person, and do not have the right or ability,
by voting power, contract, or otherwise, to elect, or designate for
election, a majority of the SpectraSite Board of Directors.
For purposes of this paragraph (2), such other person shall be deemed to
beneficially own any Voting Stock of a specified entity held by a parent
entity, if such other person is the beneficial owner, as defined in this
paragraph (2), directly or indirectly, of more than 35% of the voting power
of the parent entity's Voting Stock, and the Permitted Holders beneficially
own, as defined in paragraph (1) above, directly or indirectly, in the
aggregate, a lesser percentage of the voting power of the parent entity's
Voting Stock, and do not have the right or ability, by voting power,
contract, or otherwise, to elect, or designate for election, a majority of
the parent entity's board of directors;
3. during any period of two consecutive years (or, in the case this event
occurs within the first two years after the Issue Date, such shorter period
as shall have begun on the Issue Date), individuals who at the beginning of
such period constituted SpectraSite's Board of Directors, together with any
new directors whose election by SpectraSite's Board of Directors or whose
nomination for election by SpectraSite's shareholders was approved by a vote
of a majority of SpectraSite's directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority of the SpectraSite Board of Directors then in office;
4. SpectraSite's merger or consolidation with or into another Person or the
merger of another Person with or into SpectraSite, if SpectraSite's
securities that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of SpectraSite's Voting
Stock are changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
corporation; and
5. the sale of all or substantially all of SpectraSite's assets to another
Person (other than a Permitted Holder or a Person that is controlled by the
Permitted Holders).
"Code" means the Internal Revenue Code of 1986, as amended.
"Completed Tower" means a wireless transmission tower with, as of any date
of determination:
- at least one anchor tenant that has executed a definitive lease with
SpectraSite or any of its Restricted Subsidiaries; and
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- capacity for at least three tenants.
"Consolidated Indebtedness" as of any date of determination means, without
duplication:
- the total amount of Indebtedness of SpectraSite and its Restricted
Subsidiaries;
- the total amount of Indebtedness of any other Person, to the extent that
such Indebtedness has been Guaranteed by SpectraSite or one or more of
its Restricted Subsidiaries; and
- the aggregate liquidation value of all of SpectraSite's Disqualified
Stock and all Preferred Stock of SpectraSite's Restricted Subsidiaries,
in each case determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total interest
expense of SpectraSite and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
Incurred by SpectraSite or its Restricted Subsidiaries, without duplication:
1. interest expense attributable to capital leases and to leases constituting
part of a Sale/Leaseback Transaction;
2. amortization of debt discount and debt issuance cost;
3. capitalized interest;
4. non-cash interest expense;
5. commissions, discounts, and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing;
6. net costs associated with Hedging Obligations, including amortization of
fees;
7. Preferred Stock dividends paid in respect of all of SpectraSite's and its
Subsidiaries' Preferred Stock, held by Persons other than SpectraSite or a
Wholly Owned Subsidiary;
8. interest Incurred in connection with Investments in discontinued operations;
9. interest accruing on any Indebtedness of any other Person, to the extent
such Indebtedness is Guaranteed by, or secured by the assets of, SpectraSite
or any Restricted Subsidiary; and
10. the cash contributions to any employee stock ownership plan or similar
trust, to the extent such contributions are used by such plan or trust to
pay interest or fees to any Person, other than SpectraSite, in connection
with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income or loss of
SpectraSite and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
1. any net income or loss of any Person, other than SpectraSite, if such Person
is not a Restricted Subsidiary, except that:
a. subject to the exclusion contained in clause (4) below, SpectraSite's
equity in the net income of any such Person (other than an Unrestricted
Subsidiary), for such period, shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period, to SpectraSite or a Restricted Subsidiary, as
a dividend or other distribution, subject, in the case of a dividend or
other distribution paid to a Restricted Subsidiary, to the limitations
contained in clause (3) below; and
b. solely for purposes of calculating the Indebtedness to Adjusted EBITDA
Ratio, SpectraSite's equity in a net loss of any such Person (other than
an Unrestricted Subsidiary), for such period, shall be included in
determining such Consolidated Net Income;
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2. any net income or loss of any Person, acquired by SpectraSite or a
Subsidiary, in a pooling of interests transaction for any period prior to
the date of such acquisition;
3. any Restricted Subsidiary's net income, if the Restricted Subsidiary is
subject to restrictions (other than any restrictions contained in the New
Credit Facility), directly or indirectly, on the payment of dividends or the
making of distributions, directly or indirectly, to SpectraSite, except
that:
a. subject to the exclusion contained in clause (4) below, SpectraSite's
equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by the Restricted
Subsidiary during such period to SpectraSite or another Restricted
Subsidiary as a dividend or other distribution, subject, in the case of
a dividend or other distribution paid to another Restricted Subsidiary,
to the limitation contained in this clause; and
b. solely for purposes of calculating the Indebtedness to Adjusted EBITDA
Ratio, SpectraSite's equity in a net loss of any such Restricted
Subsidiary, for such period, shall be included in determining such
Consolidated Net Income;
4. any gain or loss realized upon the sale or other disposition of any assets
of SpectraSite, its consolidated Subsidiaries, or any other Person
(including pursuant to any Sale/Leaseback Transaction), which are not sold
or otherwise disposed of in the ordinary course of business, and any gain or
loss realized upon the sale or other disposition of any Capital Stock of any
Person;
5. any Unrestricted Subsidiary's net income or loss, whether or not distributed
to SpectraSite or one of its Subsidiaries;
6. any extraordinary gain or loss; and
7. the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, only for the purposes of the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments,"
there shall be excluded from Consolidated Net Income, any dividends, repayments
of loans or advances, or other transfers of assets, from Unrestricted
Subsidiaries, to SpectraSite or a Restricted Subsidiary, to the extent such
dividends, repayments, or transfers increase the amount of Restricted Payments
permitted under such covenant, pursuant to clause (1)(c)(iv) thereof.
"Consolidated Tangible Assets" means, with respect to SpectraSite, the
total consolidated tangible assets of SpectraSite and its Restricted
Subsidiaries, as shown on the most recent internal consolidated balance sheet of
SpectraSite and the Restricted Subsidiaries, calculated on a consolidated basis
in accordance with GAAP.
"Currency Agreement" means, in respect of a Person, any foreign exchange
contract, currency swap agreement, or other similar agreement, designed to
protect such Person against fluctuations in currency values, as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or would be, after notice, passage of
time, or both, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms, or by the terms of any security into which it is
convertible, or for which it is exchangeable, or upon the happening of any
event:
1. matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise;
2. is convertible or exchangeable for Indebtedness or Disqualified Stock; or
3. is redeemable at the option of the holder thereof, in whole or in part, in
each case on or prior to the 91st day after the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the
right to require such Person to repurchase or redeem such Capital Stock,
upon the occurrence of an "asset sale" or
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"change of control" occurring prior to the 91st day after the Stated
Maturity of the Notes, shall not constitute Disqualified Stock, if the
"asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the
provisions described under "-- Change of Control," and " -- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock."
"EBITDA" for any period, means the sum of Consolidated Net Income, plus the
following, to the extent deducted in calculating such Consolidated Net Income:
1. Consolidated Interest Expense;
2. all income tax expense of SpectraSite and its consolidated Restricted
Subsidiaries;
3. depreciation expense of SpectraSite and its consolidated Restricted
Subsidiaries;
4. amortization expense of SpectraSite and its consolidated Restricted
Subsidiaries, excluding amortization expense attributable to a prepaid cash
item that was paid in a prior period;
5. all other non-cash charges of SpectraSite and its consolidated Restricted
Subsidiaries, excluding any such non-cash charge to the extent that it
represents an accrual of, or reserve for, cash expenditures in any future
period; and
6. any premium or penalty paid in connection with repurchasing, redeeming,
retiring, defeasing or acquiring any Indebtedness prior to maturity, to the
extent deducted in calculating Consolidated Net Income, in each case, for
such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and non-cash
charges of, a Restricted Subsidiary, shall be added to Consolidated Net
Income to compute EBITDA only to the extent, and in the same proportion,
that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income, and only if a corresponding amount
would be permitted, at the date of determination, to be dividended to
SpectraSite by the Restricted Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Restricted Subsidiary or its stockholders,
without in any event giving effect to any restrictions or limitations
contained in the New Credit Facility.
"Equity Offering" means a public or private issuance by SpectraSite of
SpectraSite "s common stock for cash.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:
1. the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants;
2. statements and pronouncements of the Financial Accounting Standards Board;
3. such other statements by such other entity as approved by a significant
segment of the accounting profession; and
4. the rules and regulations of the SEC governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC.
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"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person, and any
obligation, direct or indirect, contingent or otherwise, of such Person:
1. to purchase or pay, or advance or supply funds for the purchase or payment
of, such Indebtedness or other obligation of such Person, whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to
maintain financial statement conditions or otherwise; or
2. entered into for the purpose of assuring, in any other manner, the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof, in whole or in part; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hedging Obligations" of any Person means the actual obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person,
existing at the time such Person becomes a Subsidiary, whether by merger,
consolidation, acquisition or otherwise, shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
1. the principal in respect of:
a. indebtedness of such Person for money borrowed; and
b. indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or
liable, including, in each case, any premium on such indebtedness, to
the extent such premium has become due and payable;
2. all Capitalized Lease Obligations of such Person, and all Attributable Debt
in respect of Sale/ Leaseback Transactions entered into by such Person;
3. all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement, but
excluding trade accounts payable, arising in the ordinary course of
business;
4. all obligations of such Person, for the reimbursement of any obligor, on any
letter of credit, banker's acceptance or similar credit transaction, other
than obligations with respect to letters of credit and other contingent
liabilities (but only to the extent such contingent liabilities are not
reflected as liabilities on the consolidated balance sheet of such Person)
securing obligations (other than obligations described in clauses (1)
through (3) above) entered into in the ordinary course of business of such
Person, to the extent such letters of credit are not drawn upon, or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following payment on the letter of credit;
5. the amount of all obligations of such Person with respect to the redemption,
repayment, or other repurchase of any Disqualified Stock, or, with respect
to any Subsidiary of such Person, the liquidation preference with respect to
any Preferred Stock, but excluding, in each case, any accrued dividends;
6. all obligations of the type referred to in clauses (1) through (5) above, of
other Persons, and all dividends of other Persons for the payment of which,
in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
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7. all obligations of the type referred to in clauses (1) through (6)above, of
other Persons, secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property
or assets, or the amount of the obligation so secured; and
8. to the extent not otherwise included in this definition, Hedging Obligations
of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance, at such date, of all unconditional obligations, as
described above, or the accreted value of such Indebtedness, in the case of
Indebtedness issued with original issue discount and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date.
"Indebtedness to Adjusted EBITDA Ratio" as of any date of determination
means the ratio of:
- Consolidated Indebtedness as of such date;
to
- Adjusted EBITDA.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement, or other similar agreement
or arrangement designed to protect such Person against fluctuations in interest
rates, as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan,
other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person, or other
extension of credit (including by way of Guarantee or similar arrangement), or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of, Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definitions of
"Unrestricted Subsidiary" and "Restricted Payment," and the "Limitation on
Restricted Payments" covenant:
1. "Investment" shall include the portion (proportionate to SpectraSite's
equity interest in such Subsidiary) of the fair market value of the net
assets of any of SpectraSite's Subsidiaries at the time that such Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, SpectraSite
shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary of an amount, if positive, equal to:
a. SpectraSite's "Investment" in such Subsidiary at the time of such
redesignation; less
b. the portion (proportionate to SpectraSite's equity interest in such
Subsidiary) of the fair market value of the net assets of the Subsidiary
at the time the Subsidiary is so re-designated a Restricted Subsidiary;
and
2. any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each case
as the Board of Directors determines in good faith, and evidenced by a Board
of Directors resolution.
"Issue Date" means the date on which the Old Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien, or
charge of any kind, including any conditional sale or other title retention
agreement, or lease in the nature thereof.
"Net Available Cash" from an Asset Disposition means cash payments
received, including any cash payments received by way of deferred payment of
principal, pursuant to a note or installment receivable or otherwise and
proceeds from the sale, or other disposition, of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by
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the acquiring Person, of Indebtedness or other obligations relating to such
properties or assets, or received in any other non-cash form, from such Asset
Disposition, in each case net of:
1. all legal, title, accounting, investment banking and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition;
2. all payments made on any Indebtedness, which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon, or other security arrangement of any kind with respect to, such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of
the proceeds from such Asset Disposition;
3. all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition;
4. the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the assets disposed of in such Asset Disposition, and retained by
SpectraSite or any Restricted Subsidiary after such Asset Disposition; and
5. any reserves established in respect of the sales price of such asset for
post-closing adjustments, indemnification purposes or employee termination
expenses.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale, net of attorneys' fees,
accountants' fees, printing costs, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees and expenses
actually incurred in connection with such issuance or sale, and net of taxes
paid or payable as a result thereof.
"New Credit Facility" means that certain credit facility, to be entered
into by SpectraSite's Wholly Owned Subsidiary, SpectraSite Communications, Inc.,
pursuant to a commitment letter from Credit Suisse First Boston to SpectraSite
Communications dated December 22, 1997, which has been renewed through March 31,
1999, including any collateral documents, instruments and agreements executed in
connection therewith; the term New Credit Facility also shall include any
amendments, supplements, modifications, extensions, renewals, restatements or
refundings thereof and any credit facilities that replace, refund or refinance
any part of the loans, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility that increases
the amount borrowable thereunder or alters the maturity thereof.
"Non-Recourse Debt" means Indebtedness:
1. as to which neither SpectraSite nor any Restricted Subsidiary:
a. provides any Guarantee or credit support of any kind, including any
undertaking, Guarantee, indemnity, agreement or instrument that would
constitute Indebtedness; or
b. is directly or indirectly liable (as a guarantor or otherwise); and
2. as to which no default, including any rights that the holders thereof may
have to take enforcement action against an Unrestricted Subsidiary, would
permit, upon notice, lapse of time or both, any holder of any other of
SpectraSite's or any Restricted Subsidiary's Indebtedness, to declare a
default under such other Indebtedness, or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Permitted Business" means any business SpectraSite and its Restricted
Subsidiaries conducted on the Issue Date and any other business related,
ancillary or complementary to any such business.
"Permitted Holders" means any or all of Stephen H. Clark, Joe L. Finley,
Whitney Equity Partners, L.P., J.H. Whitney III, L.P., Whitney Strategic
Partners III, L.P., Waller-Sutton Media Partners, L.P., Kitty Hawk Capital
Limited Partnership, III, Kitty Hawk Capital Limited Partnership, IV, Eagle
Creek
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Capital, L.L.C., The North Carolina Enterprise Fund, L.P., Finley Family Limited
Partnership, and their respective Affiliates.
"Permitted Investment" means any of by SpectraSite's or a Restricted
Subsidiary's Investment in:
1. SpectraSite, a Wholly Owned Subsidiary, or a Person which will, upon the
making of such Investment, become a Wholly Owned Subsidiary; provided,
however, that a loan or other extension of credit by SpectraSite or a
Restricted Subsidiary, to a Restricted Subsidiary that is not a Wholly Owned
Subsidiary, also will constitute a "Permitted Investment"; and provided
further, that the primary business of the Person in which any such
Investment is made is a Permitted Business; and
2. another Person if, as a result of such Investment, such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, SpectraSite or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Permitted
Business;
3. Temporary Cash Investments;
4. receivables owing to SpectraSite or any Restricted Subsidiary, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade
terms may include concessionary trade terms which SpectraSite or any such
Restricted Subsidiary deems reasonable under the circumstances;
5. payroll, travel and similar advances to cover matters that are expected, at
the time of such advances, ultimately to be treated as expenses for
accounting purposes, and that are made in the ordinary course of business;
6. loans or advances to employees made in the ordinary course of business,
consistent with the past practices of SpectraSite or such Restricted
Subsidiary, but in any event not to exceed $2.0 million in the aggregate
outstanding at any one time;
7. stock, obligations, or securities, received in settlement of debts created
in the ordinary course of business and owing to SpectraSite or any
Restricted Subsidiary, or in satisfaction of judgments;
8. any Person, to the extent such investment represents the non-cash portion of
the consideration received for an Asset Disposition as permitted pursuant to
the covenant described under "-- Certain Covenants -- Limitation on Sales of
Assets and Subsidiary Stock";
9. SpectraSite's or any Restricted Subsidiary's Capital Stock, purchased,
redeemed or otherwise acquired or retired for value from members of
SpectraSite's management or employees, but in any event not to exceed
$500,000 in the aggregate in any twelve-month period;
10. other Investments in Permitted Businesses not to exceed, at any one time
outstanding, each such Investment being measured as of the date made and
without giving effect to subsequent changes in value, the greater of:
a. $5.0 million; and
b. 5% of SpectraSite's Consolidated Tangible Assets;
11. any Interest Rate Agreement or Currency Agreement;
12. any acquisition of assets solely in exchange for the issuance of
SpectraSite's Capital Stock (other than Disqualified Stock);
13. prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits;
and
14. deposits of proceeds from Asset Dispositions with a "qualified
intermediary," "qualified trustee" or similar person for purposes of
facilitating a "like-kind" exchange made in accordance with the applicable
provisions of the Internal Revenue Code of 1986, as amended; provided,
however, that the making of any Permitted Investment pursuant to this clause
(14) will not in any manner violate the
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covenant described under "-- Certain Covenants -- Limitation on Sales of
Assets and Subsidiary Stock."
"Permitted Liens" means, with respect to any Person:
1. pledges or deposits by such Person, under worker's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is a party, or deposits to
secure public or statutory obligations of such Person, or deposits or cash
or United States government bonds to secure surety or appeal bonds to which
such Person is a party, or deposits as security for contested taxes or
import duties, or for the payment of rent, in each case incurred in the
ordinary course of business;
2. Liens imposed by law, such as carriers' warehousemen's, landlords' and
mechanics' Liens, in each case for sums not yet due, or being contested in
good faith by appropriate proceeding, or judgment Liens not giving rise to
an Event of Default so long as any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated, or the period within which such proceedings may be
initiated shall not have expired;
3. Liens for property taxes not yet subject to penalties for non-payment, or
which are being contested in good faith by appropriate proceedings;
4. Liens in favor of issuers of surety bonds or letters of credit issued
pursuant to the request of, and for the account of, such Person in the
ordinary course of its business;
5. minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties, or Liens incidental to the
conduct of the business of such Person, or to the ownership of its
properties, which were not Incurred in connection with Indebtedness and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business
of such Person;
6. Liens securing Hedging Obligations, so long as the related Indebtedness is,
and the Indenture permits it to be, secured by a Lien on the same property
securing such Hedging Obligations;
7. leases and subleases of real property which do not interfere with
SpectraSite's or any of its Restricted Subsidiaries' ordinary conduct of
business, and which are made on customary and usual terms applicable to
similar properties;
8. Liens existing as of the date on which the Notes are originally issued, and
Liens which the Indenture created;
9. Liens created solely for the purpose of securing the payment of all, or a
part of, the purchase price of assets or property acquired or constructed in
the ordinary course of business, after the date on which the Notes are
originally issued; provided, however, that:
a. the aggregate principal amount of Indebtedness secured by such Liens
shall not exceed the aggregate purchase price of the assets or property
so acquired or constructed;
b. the Indebtedness secured by such Liens is Indebtedness which the
Indenture otherwise permits to be Incurred; and
c. such Liens shall not encumber any other of SpectraSite's or any of its
Restricted Subsidiaries' assets or property, and shall attach to such
assets or property within 90 days of the construction or acquisition of
such assets or property;
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10. Liens on a Restricted Subsidiary's assets or property, existing at the time
such Restricted Subsidiary became a SpectraSite Subsidiary, and not Incurred
as a result of, in connection with, or in anticipation of such Restricted
Subsidiary becoming a SpectraSite Subsidiary; provided, however, that:
a. any such Lien does not by its terms cover any property or assets after
the time such Restricted Subsidiary becomes a Subsidiary, which were not
covered immediately prior to such transaction;
b. the Indebtedness secured by such Liens is Indebtedness which the
Indenture otherwise permits to be Incurred; and
c. such Liens do not extend to or cover any other property or assets of
SpectraSite or any of its Restricted Subsidiaries;
11. Liens securing Indebtedness outstanding under the New Credit Facility;
12. Liens extending, renewing or replacing, in whole or in part, a Lien the
Indenture permits; provided, however, that:
a. such Liens do not extend beyond the property subject to the existing
Lien, and improvements and construction on such property; and
b. the Indebtedness the Lien secures may not exceed the Indebtedness the
existing Lien secured at the time;
13. Liens Incurred in the ordinary course of business, by SpectraSite or any
Restricted Subsidiary of SpectraSite, with respect to obligations that do
not exceed $5.0 million at any one time outstanding, and that:
a. are not Incurred in connection with the borrowing of money or the
obtaining of advances of credit, other than trade credit in the ordinary
course of business; and
b. do not, in the aggregate, materially detract from the value of the
property, or materially impair the use thereof in the operation of
business by SpectraSite or such Restricted Subsidiary;
14. Liens in favor of SpectraSite or a Wholly Owned Subsidiary;
15. any interest in or title of a lessor to any property subject to a
Capitalized Lease Obligation the Indenture permits to be Incurred; and
16. Liens on Unrestricted Subsidiaries' Capital Stock.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes, however designated, which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note, which is due or overdue or is to become due at the
relevant time.
"Qualified Proceeds" means assets that are used or useful in, or Capital
Stock of any Person engaged in, a Permitted Business.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, purchase, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any of
SpectraSite's or any Restricted Subsidiary's Indebtedness existing on the date
of the Indenture, or Incurred in compliance with
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the Indenture, including any of SpectraSite's Indebtedness that Refinances any
Restricted Subsidiary's Indebtedness, and any Restricted Subsidiary's
Indebtedness that Refinances another Restricted Subsidiary's Indebtedness,
including Indebtedness that Refinances Refinancing Indebtedness; provided,
however, that:
1. the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced;
2. the Refinancing Indebtedness has an Average Life, at the time such
Refinancing Indebtedness is Incurred, that is equal to or greater than the
Average Life of the Indebtedness being Refinanced; and
3. such Refinancing Indebtedness is Incurred in an aggregate principal amount
(or if issued with original issue discount, an aggregate issue price) that
is equal to or less than the sum of the aggregate principal amount (or if
issued with original issue discount, the aggregate Accreted Value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided,
however, that Refinancing Indebtedness shall not include:
a. any of a Subsidiary's Indebtedness that Refinances any of SpectraSite's
Indebtedness; or
b. any of SpectraSite's or a Subsidiary's Indebtedness that Refinances an
Unrestricted Subsidiary's Indebtedness.
"Restricted Payment" with respect to any Person means:
1. the declaration or payment of any dividends or any other distributions of
any sort in respect of its Capital Stock, or similar payment to the direct
or indirect holders of its Capital Stock, other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock), and dividends or distributions payable solely to SpectraSite or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions, made by a Subsidiary that is not a Wholly Owned Subsidiary,
to minority stockholders (or owners of an equivalent interest, in the case
of a Subsidiary that is an entity other than a corporation);
2. the purchase, redemption or other acquisition or retirement for value of any
of SpectraSite's Capital Stock held by any Person, or of any of a Restricted
Subsidiary's Capital Stock held by any Person (other than SpectraSite or a
Restricted Subsidiary), including the exercise of any option to exchange any
Capital Stock (other than into SpectraSite's Capital Stock that is not
Disqualified Stock), other than as permitted by clause (9) of the definition
of "Permitted Investments";
3. the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of, any Subordinated Obligations, other than
the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date
of acquisition; or
4. the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of SpectraSite that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired, whereby SpectraSite or a Restricted Subsidiary
transfers such property to a Person, and SpectraSite or a Restricted Subsidiary
leases it from such Person.
"SEC " means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any of SpectraSite's Indebtedness secured by a
Lien.
"Semi-Annual Accrual Date" has the meaning set forth in the definition of
the term "Accreted Value."
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"Senior Indebtedness" means:
1. any of SpectraSite's Indebtedness, whether outstanding on the Issue Date or
thereafter Incurred; and
2. accrued and unpaid interest, including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to
SpectraSite, to the extent post-filing interest is allowed in such
proceeding, in respect of:
a. Indebtedness for money SpectraSite borrowed; and
b. Indebtedness evidenced by notes, debentures, bonds or other similar
instruments which SpectraSite is responsible or liable to make payment
for,
unless, in the case of clauses (1) and (2) above, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include:
- any obligation SpectraSite has to any Subsidiary;
- any liability for Federal, state, local or other taxes SpectraSite owed
or owes;
- any accounts payable or other liability to trade creditors arising in the
ordinary course of business, including guarantees thereof or instruments
evidencing such liabilities;
- any of SpectraSite's Indebtedness, and any accrued and unpaid interest in
respect thereof, which is subordinate or junior in any respect to any
other of SpectraSite's Indebtedness or other obligation; or
- that portion of any Indebtedness which, at the time of Incurrence, is
Incurred in violation of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of SpectraSite within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Site Management Contract" means any agreement pursuant to which
SpectraSite, or any of its Restricted Subsidiaries, has the right to
substantially control Tower Assets and the revenues derived from the rental or
use thereof.
"Specified Date" has the meaning set forth in the definition of the term
"Accreted Value."
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision, but excluding any provision providing for the repurchase of such
security at the holder's option upon the happening of any contingency beyond
SpectraSite's control, unless such contingency has occurred.
"Subordinated Obligation" means any of SpectraSite's Indebtedness, whether
outstanding on the Issue Date or thereafter Incurred, which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests, including partnership interests
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by:
- such Person;
- such Person and one or more Subsidiaries of such Person; or
- one or more Subsidiaries of such Person.
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"Temporary Cash Investments" means any of the following:
1. any investment in direct obligations of the United States of America or any
agency thereof, or obligations Guaranteed by the United States of America or
any agency thereof;
2. investments in time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof,
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country
recognized by the United States of America, having capital, surplus and
undivided profits aggregating in excess of $500 million (or the foreign
currency equivalent thereof), and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act), or any money market fund sponsored by a registered broker dealer or
mutual fund distributor;
3. repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (1) above, entered into with a
bank, meeting the qualifications described in clause (2) above;
4. investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation, other than a SpectraSite
Affiliate, organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America,
with a rating at the time of investment of at least "P-1" according to
Moody's Investors Service, Inc. or at least "A-1" according to Standard &
Poor's Ratings Group; and
5. investments in securities with maturities of six months or less from the
date of acquisition, issued or fully guaranteed by any state, commonwealth
or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard
& Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
The "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
sec.sec. 77aaa-77bbbb) as in effect on the date of the Indenture.
"Tower Asset Exchange" means any transaction in which SpectraSite or a
Restricted Subsidiary exchanges assets for Tower Assets, or Tower Assets and
cash or cash equivalents, where the fair market value, evidenced by a Board of
Directors resolution, set forth in an Officer's Certificate delivered to the
Trustee, of the Tower Assets and cash or cash equivalents which SpectraSite and
its Restricted Subsidiaries received in such exchange, is at least equal to the
fair market value of the assets disposed in such exchange.
"Tower Assets" means wireless communication transmission towers and related
assets that are located on the site of a transmission tower.
"Tower EBITDA" means, for any period, the EBITDA of SpectraSite and its
Restricted Subsidiaries for such period that is directly attributable to site
rental revenue or license or management fees, paid to manage, lease or sublease
space on communication sites owned, leased or managed by SpectraSite
(collectively, "site leasing revenues"), all determined on a consolidated basis
and in accordance with GAAP. Tower EBITDA will not include revenue derived from
the sale of assets. In allocating corporate, general, administrative and other
operating expenses that are not allocated to any particular line of business in
SpectraSite's financial statements, such expenses shall be allocated to
SpectraSite's site leasing business in proportion to the percentage of
SpectraSite's total revenues, for the applicable period, that were site leasing
revenues.
"Unrestricted Subsidiary" means:
1. any SpectraSite Subsidiary that, at the time of determination, shall be
designated an Unrestricted Subsidiary by the Board of Directors in the
manner provided below; and
2. any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors may designate any SpectraSite Subsidiary, including
any newly acquired or newly formed SpectraSite Subsidiary, to be an
Unrestricted Subsidiary unless such Subsidiary, or any of its Subsidiaries,
owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any
property of, SpectraSite or any other SpectraSite Restricted Subsidiary,
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either:
a. the Subsidiary designated as an Unrestricted Subsidiary has total
consolidated assets of $1,000 or less; or
b. if such Subsidiary has consolidated assets greater than $1,000, then
such designation would be permitted under "Limitation on Restricted
Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation:
- SpectraSite would have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to paragraph (1) of the "Limitation on
Indebtedness" covenant above; and
- no Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board of Directors resolution
giving effect to such designation, and an Officer's Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America, including any agency or instrumentality of the United States, for the
payment of which the full faith and credit of the United States of America is
pledged and which are not callable or redeemable at SpectraSite's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests, including partnership interests, of such Person then outstanding and
normally entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers, or trustee thereof.
"Wholly Owned Subsidiary" means a SpectraSite Restricted Subsidiary when
all the Restricted Subsidiary's Capital Stock (other than directors' qualifying
shares) is owned by SpectraSite or another Wholly Owned Subsidiary.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be issued in the form of a Global Senior Note. The
Global Senior Note will be deposited with, or on behalf of, the Depository and
registered in the name of the Depository or its nominee. Except as set forth
below, the Global Senior Note may be transferred, in whole and not in part, only
to the Depository or another nominee of the Depository. Investors may hold their
beneficial interests in the Global Senior Note directly through the Depository
if they have an account with the Depository, or indirectly through organizations
which have accounts with the Depository.
Notes that are issued as described below under "-- Certificated Notes" will
be issued in definitive form. Upon the transfer of a Senior Note in definitive
form, such Senior Note will be exchanged for an interest in the Global Senior
Note representing the principal amount at maturity of Notes being transferred,
unless the Global Senior Note has previously been exchanged for Notes in
definitive form.
The Depository has advised SpectraSite as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions, among its participants, in such
securities, through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers,
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banks, trust companies, clearing corporations and certain other organizations.
Access to the Depository's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Senior Note, the Depository will credit, on
its book-entry registration and transfer system, the principal amount, at
maturity, of the Notes represented by such Global Senior Note, to the accounts
of participants. The accounts to be credited shall be designated by the Notes'
Initial Purchasers. Ownership of beneficial interests in the Global Senior Note
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Senior Note will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'
interest) and such participants (with respect to the owners of beneficial
interests in the Global Senior Note other than participants). The laws of some
jurisdictions may require that certain securities purchasers take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the Global Senior
Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Senior Note, the Depository or such nominee, as the case may
be, will be considered the sole legal owner and holder of the related Notes for
all purposes of such Notes and the Indenture. Except as set forth below, owners
of beneficial interests in the Global Senior Note will not be entitled to have
the Notes represented by the Global Senior Note registered in their names, will
not receive or be entitled to receive physical delivery of certificated Notes in
definitive form, and will not be considered to be the owners or holders of any
Notes under the Global Senior Note. SpectraSite understands that under existing
industry practice, in the event an owner of a beneficial interest in the Global
Senior Note desires to take any action that the Depository, as the holder of the
Global Senior Note, is entitled to take, the Depository would authorize the
participants to take such action, and the participants would authorize
beneficial owners, owning through such participants, to take such action, or
would otherwise act upon the instructions of beneficial owners owning through
them.
Payment of principal of, and interest on, Notes represented by the Global
Senior Note registered in the name of and held by, the Depository or its
nominee, will be made to the Depository, or its nominee, as the case may be, as
the registered owner and holder of the Global Senior Note.
SpectraSite expects that the Depository, or its nominee, upon receipt of
any payment of principal of, or interest on, the Global Senior Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Senior
Note as shown on the records of the Depository or its nominee. SpectraSite also
expects that payments by participants, to owners of beneficial interests in the
Global Senior Note held through such participants, will be governed by standing
instructions and customary practices, and will be the responsibility of such
participants. SpectraSite will not have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial
ownership interests in the Global Senior Note for any Senior Note, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests, or for any other aspect of the relationship between the
Depository and its participants, or the relationship between such participants
and the owners of beneficial interests in the Global Senior Note owning through
such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Senior Note may not be transferred, except as a
whole, by the Depository to a nominee of such Depository, or by a nominee of
such Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Senior Note among participants
of the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor SpectraSite will have any responsibility for the performance by
the Depository or
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its participants or indirect participants, of their respective obligations,
under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Senior Note are exchangeable for
certificated Notes, in definitive form of like tenor as such Notes, in
denominations of U.S. $1,000 and integral multiples thereof if:
- the Depository notifies SpectraSite that it is unwilling or unable to
continue as Depository of the Global Senior Note, or if at any time the
Depository ceases to be a clearing agency registered under the Exchange
Act and a successor Depository is not appointed by SpectraSite within 90
days;
- SpectraSite in its discretion at any time determines not to have all of
the Notes represented by the Global Senior Note; or
- an Event of Default has occurred and is continuing. Any Senior Note that
is exchangeable pursuant to the preceding sentence, is exchangeable for
certificated Notes, issuable in authorized denominations and registered
in such names as the Depository shall direct. Subject to the foregoing,
the Global Senior Note is not exchangeable, except for a Global Senior
Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee. In addition, such certificates will bear
the legend referred to under "Transfer Restrictions" (unless SpectraSite
determines otherwise in accordance with applicable law) subject, with
respect to such Notes, to the provisions of such legend.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
GENERAL
The following is a summary of the material United States federal income,
estate and gift tax consequences of the purchase, ownership and disposition of
the Notes, but is not purported to be a complete analysis of all potential tax
effects. This summary is based upon the Internal Revenue Code of 1986, as
amended, existing and proposed regulations promulgated thereunder, published
rulings and court decisions, all as in effect and existing on the date hereof
and all of which are subject to change at any time, which change may be
retroactive or prospective. Unless otherwise specifically noted, this summary
applies only to those persons that hold the Notes as capital assets within the
meaning of Section 1221 of the Internal Revenue Code. This discussion assumes
that the Notes will be treated as indebtedness for United States federal income
tax purposes.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND DOES NOT ADDRESS THE TAX
CONSEQUENCES TO TAXPAYERS WHO ARE SUBJECT TO SPECIAL RULES (SUCH AS FINANCIAL
INSTITUTIONS, TAX-EXEMPT ORGANIZATIONS, INSURANCE COMPANIES, S CORPORATIONS,
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, BROKER-DEALERS,
TAXPAYERS SUBJECT TO THE ALTERNATIVE MINIMUM TAX AND PERSONS THAT WILL HOLD THE
NOTES AS PART OF A POSITION IN A "STRADDLE" OR AS PART OF A "CONSTRUCTIVE SALE"
OR A "HEDGING" OR "CONVERSION" TRANSACTION) OR ADDRESS ASPECTS OF FEDERAL
TAXATION THAT MIGHT BE RELEVANT TO A PROSPECTIVE INVESTOR BASED UPON SUCH
INVESTOR'S PARTICULAR TAX SITUATION. THIS SUMMARY DOES NOT ADDRESS ANY TAX
CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER
TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX
ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND
DISPOSING OF THE NOTES (INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES
HOLDER OR A NON-UNITED STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY
ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING
JURISDICTION.
EFFECT OF EXCHANGE OF OLD NOTES FOR EXCHANGE NOTES
SpectraSite believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Old Notes. Rather, the Exchange Notes
received by a holder will be treated as a continuation of the Old Notes in the
hands of such holder. As a result, holders will not recognize any taxable gain
or loss or any interest income as a result of exchanging Old Notes for Exchange
Notes pursuant to the Exchange Offer, the holding period of the Exchange Notes
will include the holding period of the Old Notes, and the basis of the Exchange
Notes will equal the basis of the Old Notes immediately before the exchange.
UNITED STATES HOLDERS
GENERAL. The following is a general discussion of certain United States
federal income tax consequences of the ownership and sale or other disposition
of the Notes by a beneficial owner that, for United States federal income tax
purposes, is a "United States person" (a "United States Holder"). For purposes
of this discussion, a "United States person" means a citizen or individual
resident (as defined in Section 7701(b) of the Internal Revenue Code) of the
United States; a corporation or partnership (including any entity treated as a
corporation or partnership for United States federal income tax purposes)
created or organized under the laws of the United States, any State thereof or
the District of Columbia unless, in the case of a partnership, otherwise
provided by regulation; an estate the income of which is subject to United
States federal income tax without regard to its source; or a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. Notwithstanding the
preceding sentence, certain trusts in existence on August 20, 1996, and treated
as United States persons prior to such date that elect to continue to be so
treated shall also be considered to be United States persons.
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ORIGINAL ISSUE DISCOUNT. Because the Notes were issued at a discount from
their stated redemption price at maturity, the Notes have original issue
discount for federal income tax purposes. For federal income tax purposes, the
amount of original issue discount generally equals the excess of the Note's
stated redemption price at maturity over its issue price. The Note's issue price
is the first price at which a substantial amount of the Notes is sold, excluding
sales to bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters or wholesalers. The Note's stated redemption price at
maturity is the sum of all cash payments to be made on such Note (whether
denominated as principal or interest), other than payments of qualified stated
interest. Qualified stated interest is stated interest that is unconditionally
payable at least annually at a single fixed rate that appropriately takes into
account the length of the interval between payments. Because there will be no
required payment of interest on the Notes prior to January 15, 2004, none of the
interest payments on the Notes constitute qualified stated interest; and,
accordingly, each Note bears original issue discount in an amount equal to the
excess of the sum of its principal amount and all stated interest payments, over
its issue price.
A United States Holder is required to include original issue discount in
gross income periodically over the term of a Note before receipt of the cash or
other payment attributable to such income, regardless of such Holder's method of
tax accounting. The amount to be included for any taxable year is the sum of the
daily portions of original issue discount with respect to the Note for each day
during the taxable year or portion of a taxable year during which such Holder
holds the Note. The daily portion is determined by allocating to each day of any
accrual period within a taxable year a pro rata portion of an amount equal to
the Note's adjusted issue price at the beginning of the accrual period
multiplied by the Note's yield to maturity. For purposes of computing original
issue discount, SpectraSite will use six-month accrual periods that end on the
days in the calendar year corresponding to the maturity date of the Notes and
the date six months prior to such maturity date, with the exception of an
initial short accrual period. A United States Holder is permitted to use
different accrual periods; provided that each accrual period is no longer than
one year, and each scheduled payment of interest or principal occurs on either
the first or last day of an accrual period. The adjusted issue price of a Note
at the beginning of any accrual period is its issue price increased by the
amount of original issue discount previously includible in the gross income of
the Holder and decreased by any payments previously made on the Note. The Note's
yield to maturity is the discount rate that, when used in computing the present
value of all payments of principal and interest to be made on a Note, produces
an amount equal to the issue price of the Note. Under these rules, United States
Holders are required to include in gross income increasingly greater amounts of
original issue discount in each successive accrual period. Payments of stated
interest on a Note will not be separately included in income, but rather will be
treated first as payments of previously accrued original issue discount and then
as payments of principal and, consequently, will reduce a United States Holder's
basis in a Note as described below under "-- United States Holders -- Sale,
Exchange or Redemption of the Notes."
SpectraSite intends to treat the possibility of an optional redemption, as
described under "Description of the Notes -- Optional Redemption," and a
repurchase pursuant to a Change in Control, as described under "Description of
the Notes -- Change of Control," as not affecting the determination of the yield
to maturity of the Notes, or giving rise to any additional accrual of original
issue discount or recognition of ordinary income upon the redemption, sale or
exchange of a Note.
ACQUISITION PREMIUM. A United States Holder that purchases a Note for an
amount that is greater than its adjusted issue price as of the purchase date
will be considered to have purchased such Note at an acquisition premium. The
amount of original issue discount that such Holder must include in its gross
income with respect to such Note for any taxable year is generally reduced by
the portion of such acquisition premium properly allocable to such year. The
information reported by SpectraSite to the record Holders of the Notes on an
annual basis will not account for an offset against original issue discount for
any portion of the acquisition premium. Accordingly, each United States Holder
should consult its own tax advisor as to the determination of the acquisition
premium amount and the resulting adjustments to the amount of reportable
original issue discount.
AMORTIZABLE BOND PREMIUM. A United States Holder that purchases a Note for
an amount in excess of its principal amount will be considered to have purchased
the Note at a premium and may elect to
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amortize such premium, using a constant yield method, over the remaining term of
the Note, or, if a smaller amortization allowance would result, by computing
such allowance with reference to the amount payable on an earlier call date and
amortizing such allowance over the shorter period to such call date. The amount
amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Note. Bond premium on a Note held by a United
States Holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Note. The election
to amortize bond premium on a constant yield method, once made, applies to all
debt obligations held or subsequently acquired by the electing United States
Holder on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service.
MARKET DISCOUNT. If a United States Holder purchases, subsequent to its
original issuance, a Note for an amount that is less than its revised issue
price as of the purchase date, the amount of the difference generally will be
treated as market discount, unless such difference is less than a specified de
minimis amount. The Internal Revenue Code provides that the revised issue price
of a Note equals its issue price plus the amount of original issue discount
includable in the income of all holders for periods prior to the purchase date
(disregarding any deduction for acquisition premium) reduced by the amount of
all prior cash payments on the Note. Subject to a de minimis exception, a United
States Holder will be required to treat any gain recognized on the sale,
exchange, redemption, retirement or other disposition of the Note as ordinary
income to the extent of the accrued market discount that has not previously been
included in income. In addition, the United States Holder may be required to
defer, until the maturity date of the Note or its earlier disposition in a
taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue market discount on a constant interest method. A
United States Holder of a Note may elect to include market discount in income
currently as it accrues, under either the ratable or constant interest method.
This election to include currently, once made, applies to all market discount
obligations acquired in or after the first taxable year to which the election
applies and may not be revoked without the consent of the Internal Revenue
Service. If the United States Holder of a Note makes such an election, the
foregoing rules with respect to the recognition of ordinary income on sales and
other dispositions of such instruments, and with respect to the deferral of
interest deductions on debt incurred or maintained to purchase or carry such
debt instruments, would not apply.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A United States
Holder of a Note may elect, subject to certain limitations, to include all
interest that accrues on a Note in gross income on a constant yield basis. For
purposes of this election, interest includes stated interest, original issue
discount, market discount, de minimis original issue discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. Special rules and limitations apply to taxpayers who make
this election; therefore, United States Holders should consult their tax
advisors as to whether they should make this election.
THE AHYDO RULE. The Notes constitute applicable high yield discount
obligations ("AHYDOs"). Accordingly, pursuant to Sections 163(e) and 163(i) of
the Internal Revenue Code, SpectraSite is not entitled to deduct original issue
discount that accrues with respect to such Notes until amounts attributable to
such original issue discount are paid in cash. In addition, to the extent that
the yield to maturity of the Notes exceeds the sum of the applicable federal
rate for the month in which the Notes were issued (5.93%) plus 6 percentage
points (the "Excess Yield"), the disqualified portion of the original issue
discount accruing on the Notes will be disallowed permanently and characterized
as a nondeductible dividend with respect to SpectraSite and also will be treated
as a dividend distribution (to the extent of available current and accumulated
earnings and profits) solely for purposes of the dividends received
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<PAGE> 118
deductions of Sections 243, 246 and 246A of the Internal Revenue Code with
respect to Holders that are U.S. corporations. The disqualified portion for any
accrual period will equal the product of:
- a percentage determined by dividing the Excess Yield by the yield to
maturity,
times
- the original issue discount for the accrual period.
Subject to otherwise applicable limitations, such a corporate Holder will be
entitled to a dividend received deduction with respect to the disqualified
portion if SpectraSite has sufficient current or accumulated earnings and
profits. To the extent that SpectraSite's earnings and profits are insufficient,
any portion of the original issue discount that otherwise would have been
recharacterized as a dividend for purposes of the dividends received deduction
will continue to be treated as ordinary original issue discount income in
accordance with the rules described above under "-- United States
Holders -- Original Issue Discount." Treatment of the Notes as AHYDOs will not
disqualify interest or original issue discount with respect to Notes from the
portfolio interest exception described below under " -- Foreign
Holders -- Interest;" provided that all applicable requirements for the
exception are otherwise satisfied.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES. Generally, a sale, exchange or
redemption of the Notes will result in taxable gain or loss equal to the
difference between the amount of cash or other property received and the United
States Holder's adjusted tax basis in the Notes. A United States Holder's
adjusted tax basis for determining gain or loss on the sale or other disposition
of a Note will initially equal the cost of the Note to such Holder and will be
increased by:
- any amounts included in income as original issue discount, and
- any market discount previously included in income by such Holder,
and decreased by:
- any principal and stated interest payments received by such Holder, and
- any amortized premium previously deducted from income by such Holder.
Except as described above with respect to market discount, such gain or
loss will be capital gain or loss. Capital gain or loss will be long-term gain
or loss if the Note is held by the United States Holder for more than one year,
otherwise such gain or loss will be short-term.
United States Holders that are corporations generally will be taxed on net
capital gains at a maximum rate of 35%. In contrast, United States Holders that
are individuals generally will be taxed on net capital gains at a maximum rate
of 39.6% for property held for 12 months or less, and 20% for property held more
than 12 months. Special rules, and generally lower maximum rates, apply for
individuals in lower tax brackets. Any capital losses realized by a United
States Holder that is a corporation generally may be used only to offset capital
gains. Any capital losses realized by a United States Holder that is an
individual generally may be used only to offset capital gains plus $3,000 of
other income per year.
FOREIGN HOLDERS
The following is a general discussion of certain United States federal
income, estate and gift tax consequences of the ownership and sale or other
disposition of the Notes by any beneficial owner of a Note that is not a United
States Holder (a "Non-United States Holder"). Resident alien individuals are
subject to United States federal income tax with respect to the Notes as if they
were United States Holders.
INTEREST. Under current United States federal income tax law, and subject
to the discussion of backup withholding below, interest (including original
issue discount) paid on the Notes to a Non-United States Holder will not be
subject to the normal 30% United States federal withholding tax; provided that
(i) the interest is "effectively connected with the conduct of a trade or
business in the United States" by the Non-United States Holder and the
Non-United States Holder timely furnishes SpectraSite with two duly executed
copies of Internal Revenue Service Form 4224, or any successor form, or (ii) all
of the
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following conditions of the portfolio interest exception are met: (A) the
Non-United States Holder does not, actually or constructively, own 10% or more
of the total combined voting power of all classes of stock of SpectraSite
entitled to vote, (B) the Non-United States Holder is not a controlled foreign
corporation that is related, directly or indirectly, to SpectraSite through
stock ownership, (C) the Non-United States Holder is not a bank receiving
interest (including original issue discount) pursuant to a loan agreement
entered into in the ordinary course of its trade or business, and (D) either (1)
the Non-United States Holder certifies to SpectraSite or its agent, under
penalties of perjury, that it is a Non-United States Holder and provides its
name and address, or (2) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business, and holds the Notes in such capacity, certifies to
SpectraSite or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner of the Notes by it or by any other
financial institution between it and the beneficial owner and furnishes
SpectraSite or its agent with a copy thereof. The foregoing certification may be
provided by the Non-United States Holder on Internal Revenue Service Form W-8,
or any successor form. Such certificate is effective with respect to payments of
interest (including original issue discount) made after the issuance of the
certificate in the calendar year of its issuance and the two immediately
succeeding calendar years.
On October 14, 1997, final regulations were published in the Federal
Register that affect the United States federal income taxation of Non-United
States Holders. The 1997 regulations are effective for payments after December
31, 1999, regardless of the issue date of the instrument with respect to which
such payments are made, subject to certain transition rules discussed below. The
discussion under this heading and under "-- Backup Withholding Tax and
Information Reporting," below, is not intended to be a complete discussion of
the provisions of the 1997 regulations. Prospective Holders of the Notes are
urged to consult their tax advisors concerning the tax consequences of their
investment in light of the 1997 regulations.
The 1997 regulations provide documentation procedures designed to simplify
compliance by withholding agents. The 1997 regulations generally do not affect
the documentation rules described above, but add other certification options.
Under one such option, a withholding agent will be allowed to rely on an
intermediary withholding certificate furnished by a "qualified intermediary" (as
defined below) on behalf of one or more beneficial owners (or other
intermediaries) without having to obtain the beneficial owner certificate
described above. Qualified intermediaries include:
- foreign financial institutions or foreign clearing organizations, other
than a United States branch or United States office of such institution
or organization, or
- foreign branches or offices of United States financial institutions or
foreign branches or offices of United States clearing organizations,
which have entered into withholding agreements with the Internal Revenue
Service. In addition to certain other requirements, qualified intermediaries
must obtain withholding certificates, such as revised Internal Revenue Service
Form W-8, from each beneficial owner. Under another option, an authorized
foreign agent of a United States withholding agent will be permitted to act on
behalf of the United States withholding agent, including the receipt of
withholding certificates, the payment of amounts of income subject to
withholding and the deposit of tax withheld; provided that certain conditions
are met.
For purposes of the certification requirements, the 1997 regulations
generally treat as the beneficial owners of payments on a Note those persons
that, under United States federal income tax principles, are the taxpayers with
respect to such payments, rather than persons such as nominees or agents legally
entitled to such payments. In the case of payments to an entity classified as a
foreign partnership under United States tax principles, the partners, rather
than the partnership, generally must provide the required certifications to
qualify for the withholding tax exemption described above, unless the
partnership has entered into a special agreement with the Internal Revenue
Service. A payment to a United States partnership, however, is treated for these
purposes as payment to a United States payee, even if the partnership has one or
more foreign partners. The 1997 regulations provide certain presumptions with
respect to withholding for Holders not furnishing the required certifications to
qualify for the withholding
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tax exemption described above. In addition, the 1997 regulations will replace a
number of current tax certification forms (including Internal Revenue Service
Form W-8) with a single, revised Internal Revenue Service Form W-8 (which, in
certain circumstances, requires information in addition to that previously
required). Under the 1997 regulations, this revised Form W-8 will remain valid
until the last day of the third calendar year following the year in which the
certificate is signed.
The 1997 regulations provide transition rules concerning existing
certificates, such as Internal Revenue Service Form W-8. Valid withholding
certificates that are held on December 31, 1999 will generally remain valid
until the earlier of December 31, 2000 or the date of their expiration. Existing
certificates that expire in 1999 will not be effective after their expiration.
Certificates dated prior to January 1, 1998 will generally remain valid until
the end of 1998, irrespective of the fact that their validity expires during
1998.
In the event that the interest (including original issue discount) paid on
the Notes is effectively connected with the conduct of a trade or business
within the United States of the Non-United States Holder, the Non-United States
Holder will generally be taxed on a net income basis (that is, after allowance
for applicable deductions) at the graduated rates that are applicable to United
States Holders in essentially the same manner as if the Notes were held by a
United States Holder, as discussed above. In the case of a Non-United States
Holder that is a corporation, such income may also be subject to the United
States federal branch profits tax (which is generally imposed on a foreign
corporation upon the deemed repatriation from the United States of effectively
connected earnings and profits) at a 30% rate, unless the rate is reduced or
eliminated by an applicable income tax treaty and the Non-United States Holder
is a qualified resident of the treaty country.
If the interest on the Notes is not "effectively connected" and does not
qualify for the portfolio interest exception described above in "-- Foreign
Holders -- Interest", then the interest will be subject to United States federal
withholding tax at a flat rate of 30% (or a lower applicable income tax treaty
rate upon delivery of Internal Revenue Service Form 1001, or any successor form,
certifying eligibility for treaty benefits).
GAIN ON SALE OR OTHER DISPOSITION. Subject to special rules applicable to
individuals as described below, a Non-United States Holder generally will not be
subject to regular United States federal income or withholding tax on gain
recognized on a sale or other disposition of the Notes, unless the gain is
effectively connected with the conduct of a trade or business within the United
States of the Non-United States Holder or of a partnership, trust or estate in
which such Non-United States Holder is a partner or beneficiary.
Gains realized by a Non-United States Holder that are effectively connected
with the conduct of a trade or business within the United States of the
Non-United States Holder generally will be taxed on a net income basis (that is,
after allowance for applicable deductions) at the graduated rates that are
applicable to United States Holders, as described above, unless exempt by an
applicable income tax treaty. In the case of a Non-United States Holder that is
a corporation, such income may also be subject to the United States federal
branch profits tax (which is generally imposed on a foreign corporation upon the
deemed repatriation from the United States of effectively connected earnings and
profits) at a 30% rate, unless the rate is reduced or eliminated by an
applicable income tax treaty and the Non-United States Holder is a qualified
resident of the treaty country.
In addition to being subject to the rules described above, an individual
Non-United States Holder who holds the Notes as a capital asset generally will
be subject to tax at a 30% rate on any gain recognized on the sale or other
disposition of such Notes if:
- such gain is not effectively connected with the conduct of a trade or
business within the United States of the Non-United States Holder;
- such individual is present in the United States for 183 days or more in
the taxable year of the sale or other disposition; and
- either (A) has a "tax home" in the United States (as specially defined
for purposes of the United States federal income tax), or (B) maintains
an office or other fixed place of business in the United
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<PAGE> 121
States and the gain from the sale or other disposition of the Notes is
attributable to such office or other fixed place of business.
Individual Non-United States Holders may also be subject to tax pursuant to
provisions of United States federal income tax law applicable to certain United
States expatriates, including certain former long-term residents of the United
States.
Under the 1997 regulations, described above in "-- Foreign Holders --
Interest", withholding of United States federal income tax may apply to
payments on a taxable sale or other disposition of the Notes by a Non-United
States Holder who does not provide appropriate certification to the withholding
agent with respect to such transaction.
FEDERAL ESTATE AND GIFT TAXES. A Note beneficially owned by an individual
who is neither a United States citizen nor a domiciliary of the United States at
the time of death will not be subject to United States federal estate tax as a
result of such individual's death; provided that any interest thereon would have
been eligible for the portfolio interest exception described above in
"-- Foreign Holders -- Interest," if such interest had been received by the
individual at the time of death.
An individual who is not a United States citizen will not be subject to
United States federal gift tax on a transfer of Notes, unless such person is a
domiciliary of the United States or such person is subject to provisions of
United States federal gift tax law applicable to certain United States
expatriates, including certain former long-term residents of the United States.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to interest (including original issue discount) paid to, and
to the proceeds of sales or other dispositions before maturity by, certain
non-corporate persons. In addition, a 31% backup withholding tax applies if a
non-corporate person:
- fails to furnish such person's taxpayer identification number, which, for
an individual, is his or her Social Security Number, to the payor in the
manner required;
- furnishes an incorrect taxpayer identification number and the payor is so
notified by the Internal Revenue Service;
- is notified by the Internal Revenue Service that such person has failed
properly to report payments of interest and dividends; or
- in certain circumstances, fails to certify, under penalties of perjury,
that such person has not been notified by the Internal Revenue Service
that such person is subject to backup withholding for failure properly to
report interest and dividend payments.
Backup withholding does not apply to payments made to certain exempt recipients,
such as corporations and tax-exempt organizations.
In the case of a Non-United States Holder, under current United States
federal income tax law, backup withholding and information reporting do not
apply to payments of interest (including original issue discount) with respect
to a Note, or to payments on the sale or other disposition of a Note, if such
Holder has provided to SpectraSite or its paying agent the certification
described in clause (ii)(D) of "-- Foreign Holders -- Interest" or has otherwise
established an exemption.
Under current United States federal income tax law, (i) interest payments
(including original issue discount) with respect to a Note collected outside the
United States by a foreign office of a custodian, nominee or broker acting on
behalf of a beneficial owner of a Note, and (ii) payments on the sale or other
disposition of a Note to or through a foreign office of a broker generally are
not subject to backup withholding or information reporting. However, if such
custodian, nominee or broker is a "United States person" (as defined in Section
7701(a)(30) of the Internal Revenue Code), a controlled foreign corporation for
United States tax purposes or a foreign person 50% of more of whose gross income
is effectively connected with the conduct of a United States trade or business
for a specified three-year period (a "U.S. Related Person"), such custodian,
nominee or broker may be subject to certain
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<PAGE> 122
information reporting, but not backup withholding, requirements with respect to
such payments, unless such custodian, nominee or broker has in its records
documentary evidence that the beneficial owner is not a United States person and
certain conditions are met or the beneficial owner otherwise establishes an
exemption. Backup withholding may apply to any payment that such custodian,
nominee or broker is required to report if such person has actual knowledge that
the payee is a United States person. Payments to or through the United States
office of a broker will be subject to backup withholding and information
reporting unless the Holder certifies, under penalties of perjury, that it is
not a United States person or otherwise establishes an exemption.
The 1997 regulations, described above in "-- Foreign Holders -- Interest",
modify certain of the certification requirements for backup withholding and
expand the group of U.S. Related Persons. It is possible that SpectraSite or its
paying agent may request new withholding exemption forms from Holders in order
to qualify for continued exemption from backup withholding when the 1997
regulations become effective.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a Holder under the backup withholding rules are
allowed as a refund or a credit against such Holder's United States federal
income tax; provided that the required information is furnished to the Internal
Revenue Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer, where its Old Notes were acquired by such
broker-dealer as a result of market making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market making or other trading activities.
Until , 1999 (90 days after the commencement of the exchange offer),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
SpectraSite will not receive any proceeds from any sales of the Exchange
Notes by participating broker-dealers. Exchange Notes received by participating
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such participating broker-dealer that resells the Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal for the exchange offer states that, by acknowledging that it will
deliver, and by delivering, a prospectus, a participating broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration date, or until all
broker-dealers who exchange Old Notes which were acquired as a result of market
making activities for Exchange Notes have sold all Exchange Notes held by them,
the Company will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. SpectraSite has agreed to pay all
expenses incident to the exchange offer. The Company will indemnify the holders
of the Exchange Notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act.
The Exchange Notes will not be listed on any stock exchange. The Exchange
Notes are designated for trading in The Portal market.
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<PAGE> 124
LEGAL MATTERS
Dow, Lohnes & Albertson, PLLC, Washington, D.C., will pass upon the
validity of the Exchange Notes.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements for the period from inception (April 25, 1997) to December
31, 1997 and the nine months ended September 30, 1998 and the consolidated
financial statements of our predecessor, Telesite Services, LLC, for the year
ended December 31, 1996 and for the period from January 1, 1997 to May 12, 1997
included in our registration statement Form on Form S-4, as set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
SpectraSite filed a registration statement on Form S-4 with the SEC
covering the Exchange Notes, and this prospectus is part of our registration
statement. For further information on the Company and the Notes, you should
refer to our registration statement and its exhibits. This prospectus summarizes
material provisions of contracts and other documents that we refer you to. Since
the prospectus may not contain all the information that you may find important,
you should review the full text of these documents. We have included copies of
these documents as exhibits to our registration statement.
Following the exchange offer, SpectraSite will file reports with the SEC
pursuant to the Exchange Act. In addition, the indenture governing the Notes
requires that we file Exchange Act reports with the SEC and provide those
reports to the indenture trustee and holders of Notes. Our SEC filings are also
available over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York and Chicago. Please call the SEC at 1-800-SEC-0330
for more information on the public reference rooms and their copy charges.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1997, and
September 30, 1998........................................ F-3
Consolidated Statements of Operations for the period from
inception (April 25, 1997) to December 31, 1997 and for
the nine months ended September 30, 1998.................. F-4
Consolidated Statements of Redeemable Convertible Preferred
Stock and Shareholder's Deficiency........................ F-5
Consolidated Statements of Cash Flows for the period from
inception (April 25, 1997) to December 31, 1997 and for
the nine months ended September 30, 1998.................. F-6
Notes to Consolidated Financial Statements.................. F-7
TELESITE SERVICES, LLC
Report of Independent Auditors.............................. F-19
Consolidated Balance Sheet as of December 31, 1996.......... F-20
Consolidated Statements of Operations for the year ended
December 31, 1996 and the period ended May 12, 1997....... F-21
Consolidated Statements of Members' Equity.................. F-22
Consolidated Statements of Cash Flows for the year ended
December 31, 1996 and the period ended May 12, 1997....... F-23
Notes to Consolidated Financial Statements.................. F-24
</TABLE>
F-1
<PAGE> 126
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SpectraSite Holdings, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of SpectraSite
Holdings, Inc. (the "Company") and subsidiary as of September 30, 1998 and
December 31, 1997, and the related consolidated statements of operations,
redeemable convertible preferred stock and shareholders' deficiency and cash
flows for the nine months ended September 30, 1998 and for the period from April
25, 1997 (inception) to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SpectraSite
Holdings, Inc. and subsidiary at September 30, 1998 and December 31, 1997, and
the consolidated results of its operations and its cash flows for the nine
months ended September 30, 1998 and for the period from April 25, 1997
(inception) to December 31, 1997 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
October 23, 1998
Raleigh, North Carolina
F-2
<PAGE> 127
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,234,148 $ 76,204,475
Investments............................................... -- 45,561,147
Accounts receivable....................................... 1,610,039 1,466,338
Prepaid expenses and other................................ 34,019 257,115
----------- ------------
Total current assets........................................ 3,878,206 123,489,075
Property and equipment, net................................. 1,176,032 14,818,309
Goodwill, less accumulated amortization of $278,381 and
$652,012, respectively.................................... 6,791,663 8,086,801
Deposits.................................................... 1,300,000 11,750,000
Investment in affiliate..................................... 336,095 --
Note receivable............................................. -- 257,130
Debt issuance costs, less accumulated amortization of
$115,362.................................................. -- 4,595,516
Other assets................................................ 159,957 174,166
----------- ------------
Total assets................................................ $13,641,953 $163,170,997
=========== ============
LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Line of credit............................................ $ 628,561 $ --
Accounts payable.......................................... 1,049,157 2,261,599
Accrued and other expenses................................ 1,005,317 645,336
Current portion of long-term debt......................... 25,404 128,044
----------- ------------
Total current liabilities................................... 2,708,439 3,034,979
Long-term debt, less current portion........................ 19,376 4,929
Note payable to shareholder................................. 2,312,000 --
Senior discount notes due 2008, net of unamortized discount
of $96,321,863............................................ -- 128,916,137
----------- ------------
Total liabilities........................................... 5,039,815 131,956,045
Series A redeemable convertible preferred stock, $0.001 par,
3,462,830 shares authorized, 3,462,830 outstanding........ 10,500,000 11,100,000
Series B redeemable convertible preferred stock, $0.001 par,
7,000,000 shares authorized, 7,000,000 outstanding........ -- 28,796,158
Shareholders' deficiency:
Common stock, $0.001 par, 12,000,000 and 20,000,000
authorized, respectively, 931,753 and 1,032,213 issued
and outstanding, respectively.......................... 932 1,032
Additional paid-in-capital................................ 260,802 --
Accumulated deficit....................................... (2,159,596) (8,682,238)
----------- ------------
Total shareholders' deficiency.............................. (1,897,862) (8,681,206)
----------- ------------
Total liabilities, redeemable preferred stock and
shareholders' deficiency.................................. $13,641,953 $163,170,997
=========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 128
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(APRIL 25, 1997) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------------- -------------
<S> <C> <C>
Revenues:
Site acquisition revenue.................................. $ 5,001,668 $ 5,154,265
Site leasing revenue...................................... -- 210,910
----------- -----------
5,001,668 5,365,175
Cost of revenues:
Cost of site acquisition revenue.......................... 1,119,608 1,721,349
Cost of site leasing revenue (exclusive of depreciation
shown separately below)................................ -- 142,495
----------- -----------
1,119,608 1,863,844
----------- -----------
Gross profit................................................ 3,882,060 3,501,331
Selling, general and administrative expenses................ 5,957,042 6,515,595
Depreciation expense........................................ 191,077 261,086
----------- -----------
Operating loss.............................................. (2,266,059) (3,275,350)
Other income (expense):
Equity in earnings of affiliate........................... 204,537 --
Interest income........................................... 121,432 2,110,243
Interest expense.......................................... (163,555) (4,335,285)
Gain on sale of assets.................................... -- 472,594
Other expense............................................. (55,951) --
----------- -----------
106,463 (1,752,448)
----------- -----------
Net loss.................................................... $(2,159,596) $(5,027,798)
=========== ===========
Loss applicable to common shareholders:
Net Loss.................................................... $(2,159,596) $(5,027,798)
Accretion of redemption value of preferred stock............ (500,000) (1,396,158)
----------- -----------
Net loss applicable to common shareholders.................. $(2,659,596) $(6,423,956)
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 129
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDER'S DEFICIENCY
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK SHAREHOLDERS' DEFICIENCY
--------------------------------------- -----------------------------------------------
ADDITIONAL
COMMON PAID-IN ACCUMULATED
SERIES A SERIES B TOTAL STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ----------- ------ ---------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C> <S>
Balance at April 25, 1997
(inception)............... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock................... -- -- -- 932 809,693 -- 810,625
Issuance of warrants...... -- -- -- -- 130,500 130,500
Issuance of preferred
stock................... 10,000,000 -- 10,000,000 -- -- -- --
Stock issuance cost....... -- -- -- -- (179,391) -- (179,391)
Accretion of redemption
value................... 500,000 -- 500,000 -- (500,000) -- (500,000)
Net loss.................. -- -- -- -- -- (2,159,596) (2,159,596)
----------- ----------- ----------- ------ ---------- ----------- -----------
Balance at December 31,
1997...................... 10,500,000 -- 10,500,000 932 260,802 (2,159,596) (1,897,862)
Exercise of warrants...... -- -- -- 100 -- -- 100
Issuance of preferred
stock................... -- 28,000,000 28,000,000 -- -- -- --
Stock issuance cost....... -- -- -- -- (260,802) (98,686) (359,488)
Accretion of redemption
value................... 600,000 796,158 1,396,158 -- -- (1,396,158) (1,396,158)
Net loss.................. -- -- -- -- -- (5,027,798) (5,027,798)
----------- ----------- ----------- ------ ---------- ----------- -----------
Balance at September 30,
1998...................... $11,100,000 $28,796,158 $39,896,158 $1,032 $ -- $(8,682,238) $(8,681,206)
=========== =========== =========== ====== ========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 130
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(APRIL 25, 1997) TO NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
--------------------- ------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(2,159,596) $(5,027,798)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation............................................ 191,077 261,086
Amortization............................................ 297,785 519,220
Loss (gain) on sale of assets........................... 60,048 (472,594)
Equity in earnings of affiliate......................... (204,537) --
Amortization of discount -- senior discount notes....... -- 3,915,803
Non cash charge (Note 1)................................ 869,150 --
Changes in operating assets and liabilities:
Accounts receivable.................................. (288,773) 436,101
Prepaid expenses and other........................... 136,062 (105,348)
Other assets......................................... -- (44,406)
Accounts payable..................................... 316,674 1,217,154
Accrued and other expenses........................... 1,005,317 (359,027)
----------- -----------
Net cash provided by operating activities................. 223,207 340,191
INVESTING ACTIVITIES
Purchases of property and equipment....................... (849,939) (12,496,128)
Distribution from affiliate............................... -- 150,000
Purchases of investments.................................. -- (45,561,147)
Proceeds from sale of assets.............................. -- 298,575
Acquisitions, net of cash acquired........................ (5,028,541) (1,988,864)
Deposits on acquisitions.................................. (1,300,000) (11,750,000)
----------- -----------
Net cash used by investing activities..................... (7,178,480) (71,347,564)
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock................. 10,000,000 28,000,000
Exercise of warrants...................................... -- 100
Stock issuance costs...................................... (179,391) (359,488)
Proceeds from issuance of senior discount notes........... -- 125,000,333
Debt issuance costs....................................... -- (4,710,878)
Net repayments on line of credit.......................... (567,501) (628,561)
Repayment of long-term debt............................... (63,687) (2,323,806)
----------- -----------
Net cash provided by financing activities................. 9,189,421 144,977,700
----------- -----------
Net increase in cash and cash equivalents................. 2,234,148 73,970,327
Cash and cash equivalents at beginning of period.......... -- 2,234,148
----------- -----------
Cash and cash equivalents at end of period................ $ 2,234,148 $76,204,475
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.................. $ 63,989 $ 211,232
=========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 131
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
FORMATION OF COMPANY
SpectraSite Holdings, Inc. (the "Issuer") formerly known as Integrated Site
Development, Inc. ("ISD"), was incorporated in the State of Delaware on April
25, 1997. The Issuer, on May 12, 1997, issued 850,000 shares of its common stock
and common stock warrants for 150,000 shares in exchange for the 850,000 issued
and outstanding shares of common stock and common stock warrants for 150,000
shares of US Towers, Inc. ("UST"). The Issuer's chief executive officer was the
principal shareholder of UST prior to this transaction. One of the primary
purposes of the exchange of shares was the hiring of the chief executive
officer. Since UST had de minimus assets and operations, this transaction was
compensatory in nature, rather than a business combination or an asset
acquisition. Accordingly, this transaction resulted in a non-cash compensation
charge of $869,150, based on the estimated fair value of the stock of $.87 per
share and the estimated fair value of the warrants of $.87 per warrant at the
date of issuance. The warrants entitled the holder the right to purchase 150,000
shares of the Issuers common stock at a price of $0.001 per share, through 2001.
In September and October 1998, all of the warrants were exercised. See Note 4.
On May 12, 1997, the Issuer acquired all of the outstanding membership
interests of TeleSite Services, LLC ("TeleSite") and its subsidiary, MetroSite
Management, LLC ("MetroSite"), for consideration including $4,850,000 in cash,
81,753 shares of common stock valued at $71,125 and a $2,312,000 note payable.
Since the Company had minimal operations prior to this acquisition, TeleSite is
considered the Issuer's predecessor for financial reporting purposes. In October
1997, TeleSite was merged into UST, and UST changed its name to SpectraSite
Communications, Inc. The acquisition was accounted for as a purchase in
accordance with the provisions of APB 16 and, accordingly, the results of
operations of TeleSite are included in the consolidated operations of the Issuer
from the date of acquisition.
In connection with the acquisition of TeleSite, the Issuer may be required
to provide additional consideration in the form of common stock that is
contingent upon the acquired businesses achieving certain operating goals
through fiscal 1998. The maximum amount of remaining contingent shares of common
stock that could be issued as additional consideration at September 30, 1998 is
204,382 shares. Any additional consideration will be accounted for as an
additional cost of the acquisition.
The Issuer, its wholly owned subsidiary SpectraSite Communications, Inc.
("SCI") and the wholly owned subsidiaries of SCI, H&K Investments, LLC ("H&K")
and GlobalComm, Inc. ("GlobalComm") (collectively referred to as the "Company"
throughout), are principally engaged in providing services to companies
operating in the telecommunications industry including site development
services, transmission tower construction and leasing antenna tower sites.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Issuer, SCI, H&K and GlobalComm. All significant intercompany transactions
and balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-7
<PAGE> 132
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
INVESTMENTS
The Company accounts for investments in accordance with the provisions of
Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". At September 30, 1998, the Company's
available for sale securities consisted of commercial paper and certificates of
deposit with maturities of less than one year. The carrying amount of these
investments approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment, including towers, are stated at cost. The Company
is capitalizing costs incurred in bringing towers to an operational state.
Direct costs related to the development and construction of towers, including
interest, are capitalized and are included in construction in progress in Note
2. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from three to fifteen years.
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in purchase transactions. Goodwill is being amortized on a
straight-line basis over fifteen years.
DEBT ISSUANCE COSTS
The Company capitalized costs relating to the issuance of the 12% Senior
Discount Notes Due 2008 (the "Senior Discount Notes") (Note 3). The costs are
amortized using the straight-line method over the term of the these notes.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes, ("SFAS
109"). Under SFAS 109, the liability method is used in accounting for income
taxes and deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities.
FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents and investments
approximates fair value for these instruments. The estimated fair value of the
Senior Discount Notes (see Note 3) is based on the quoted market price in the
private market. The estimated fair values of the Company's financial
instruments, along with the carrying amounts of the related assets
(liabilities), are as follows:
F-8
<PAGE> 133
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
------------------ --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- --------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Cash and cash equivalents.................... $ 2,234 $ 2,234 $ 76,204 $ 76,204
Investments.................................. -- -- 45,561 45,561
Senior Discount Notes........................ -- -- (128,916) (108,114)
</TABLE>
REVENUE RECOGNITION
Revenue from site acquisition services is recognized when services are
rendered. Revenue from site leasing contracts, which include scheduled rent
increases, are recognized ratably, on a straight-line basis, over the term of
the contracts. To date, substantially all of the Company's revenues have been
generated by providing site acquisition services.
COST OF REVENUES
Cost of revenues for site acquisition services consist of the direct costs
incurred to provide the related services.
Cost of revenues for site leasing services consist of the direct costs
incurred to provide the related services including ground lease cost, tower
maintenance and related real estate taxes. Cost of revenues for site leasing
services does not include depreciation expense of the related leased assets.
SIGNIFICANT CONCENTRATIONS
The Company's customer base consists of businesses operating in the
wireless telecommunications industry. The Company's exposure to credit risk
consists primarily of unsecured accounts receivable from these customers. Five
customers accounted for 96.6% of the Company's 1997 revenue. One customer
accounted for 59.2% of the Company's 1998 revenue. Following is a list of
significant customers:
<TABLE>
<CAPTION>
PERCENT OF REVENUE
FOR THE PERIOD FROM PERCENT OF REVENUES PERCENT OF
APRIL 25, 1997 PERCENT OF ACCOUNTS FOR THE NINE ACCOUNTS
(INCEPTION) TO RECEIVABLE AT MONTHS ENDED RECEIVABLE AT
DECEMBER 31, 1997 DECEMBER 31, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Customer 1........... 38.9% 75.0% 59.2% 16.5%
Customer 2........... 18.8% -- -- 14.2%
Customer 3........... 14.7% -- -- --
Customer 4........... 13.0% -- -- --
Customer 5........... 11.2% -- -- --
Customer 6........... -- -- -- 10.4%
Customer 7........... -- -- -- 21.5%
Customer 8........... -- -- -- 25.6%
</TABLE>
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred, and totaled approximately
$131,000 and $70,000 for the period from April 25, 1997 (inception) to December
31, 1997 and for the nine months ended September 30, 1998, respectively.
F-9
<PAGE> 134
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
STOCK OPTIONS
The Company has elected under the provisions of Statement of Financial
Standard's No. 123, Accounting for Stock Based Compensation ("SFAS 123") to
account for its employee stock options in accordance with Accounting Principle
Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25").
Companies that account for stock based compensation arrangements for its
employees under APB No. 25 are required by SFAS 123 to disclose the pro forma
effect on net income (loss) as if the fair value based method prescribed by SFAS
123 had been applied. The Company plans to continue to account for stock based
compensation using the provisions of APB 25 and has adopted the disclosure
requirements of SFAS 123. Under APB 25, no compensation expense has been
recognized for stock options granted to its employees since the exercise price
of the options has equaled or exceeded the estimated fair value of the
underlying stock on the date of grant. Option grants to advisors and consultants
will be accounted for using the fair value method prescribed by SFAS 123.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("Statement No. 130"), which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Statement No. 130 only
impacts financial statement presentation as opposed to actual amounts recorded.
Other comprehensive income includes all nonowner changes in equity that are
excluded from net income. This Statement has no financial statement impact for
an enterprise that has no items of other comprehensive income in any period
presented. During the period form inception (April 25, 1997) to December 31,
1997 and during the nine months ended September 30, 1998, the Company had no
items of other comprehensive income.
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 changes the way public companies report segment
information in annual financial statements and also requires those companies to
report selected segment information in interim financial statements to
shareholders, SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The application of
the new rules does not have a significant impact on the Company's financial
position at September 30, 1998 or its results of operations for the nine months
ended September 30, 1998 as the Company currently only operates in one operating
segment.
F-10
<PAGE> 135
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER, 30
1997 1998
------------ -------------
<S> <C> <C>
Towers...................................................... $ 166,568 $ 8,538,653
Equipment................................................... 465,758 640,828
Furniture and fixtures...................................... 250,408 267,078
Vehicles.................................................... 148,314 173,315
Other....................................................... -- 42,020
---------- -----------
Total....................................................... 1,031,048 9,661,894
Less accumulated depreciation............................... (160,824) (395,186)
---------- -----------
870,224 9,266,708
Construction in progress.................................... 305,808 5,551,601
---------- -----------
Property and equipment, net................................. $1,176,032 $14,818,309
========== ===========
</TABLE>
3. DEBT
12% SENIOR DISCOUNT NOTES DUE 2008
In June 1998, the Company issued $225,238,000 aggregate principal amount at
maturity of Senior Discount Notes with gross proceeds of $125,000,333. The
Senior Discount Notes accrete daily at a rate of 12% per annum, compounded
semiannually, to an aggregate principal amount of $225,238,000 by July 15, 2003.
Cash interest will not accrue on the Senior Discount Notes prior to July 15,
2003. Commencing July 15, 2003, cash interest will accrue and be payable
semiannually in arrears on each January 15 and July 15, commencing January 15,
2004, at rate of 12% per annum. After July 15, 2003 the Company may redeem all
or a portion of the Senior Discount Notes at specified redemption prices, plus
accrued and unpaid interest, to the applicable redemption date. On one or more
occasions prior to July 15, 2001, the Company may redeem up to 25% of the
aggregate principal amount at maturity of the Senior Discount Notes issued with
the net cash proceeds from one or more equity offerings. The redemption price
would be 112% of the accreted value on the redemption date. The Company is
required to comply with certain covenants under the terms of the Senior Discount
Notes that restrict the Company's ability to incur indebtedness, make certain
payments, issue preferred stock among other things. In the nine-month period
ended September 30, 1998, the Company incurred amortization discount recorded as
interest expense of approximately $3,916,000 related to the Senior Discount
Notes.
<TABLE>
<S> <C>
Senior Discount Notes....................................... $225,238,000
Unamortized discount........................................ (96,321,863)
------------
$128,916,137
============
</TABLE>
LINE OF CREDIT
During 1997, the Company maintained a $1.5 million line of credit with a
bank, which bore interest at prime plus 0.5%. The balance at December 31, was
$628,561. The line of credit was repaid in full in March, 1998.
F-11
<PAGE> 136
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DEBT -- (CONTINUED)
OTHER LONG-TERM DEBT
Long-term debt, other than the Senior Discount Notes, consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Note payable, interest at 9%, maturing May 29, 1999,
interest payable quarterly................................ $ -- $ 100,000
Installment notes payable to a bank, bearing interest at
rates ranging from 8.75% to 10.2%, maturing from October
1998 to December 1999, monthly payments of principal and
interest, collateralized by vehicles...................... 44,780 32,973
-------- ---------
44,780 132,973
Less current portion........................................ (25,404) (128,044)
-------- ---------
Long-term debt, less current portion........................ $ 19,376 $ 4,929
======== =========
</TABLE>
Maturities of long-term debt at September 30, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $128,044
2000........................................................ 4,929
--------
Total....................................................... $132,973
========
</TABLE>
BANK CREDIT AGREEMENT
In January, 1998 the Company signed a letter of intent with a bank for a
$50 million revolving credit facility for the purpose of financing the
construction and/or the acquisition of telecommunication towers for PCS or other
wireless communication services and other permitted acquisitions as defined by
the agreement, contingent upon certain events. In the nine months ended
September 30, 1998 the Company incurred approximately $190,000 in commitment
fees related to the agreement. The agreement expires December 31, 1998.
4. REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK AND SHAREHOLDERS' EQUITY
REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK
The Company's mandatorily redeemable convertible preferred stock consists
of Series A and Series B cumulative redeemable convertible preferred stock,
$.001 par value, 10,462,830 shares authorized in the aggregate and 3,462,830 and
7,000,000 shares issued and outstanding at September 30, 1998, respectively.
Dividends accumulate at a rate of 8% per annum per share and are payable when
declared in cash and are subject to certain restrictions. Voting rights for
preferred stock are equal to the voting rights of the largest number of common
shares into which the preferred stock are convertible. Accumulated dividends for
Series A and B cumulative redeemable preferred stock at September 30, 1998 are
$1,896,158.
Contemporaneously with the closing of an underwritten public offering of
common stock resulting in gross proceeds of at least $30 million at a per share
price of $4.47 or greater the outstanding shares of Series A and Series B
Preferred Stock shall automatically convert to common stock.
The Series A and Series B preferred stock is convertible into common stock
based on a share for share basis and can be adjusted upon the occurrence of
certain transactions defined in the Issuer's articles of incorporation. In
December, 2008 each share of Series A and Series B preferred stock shall
F-12
<PAGE> 137
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK AND SHAREHOLDERS'
EQUITY -- (CONTINUED)
automatically be redeemed at a redemption price per share, in cash, equal to
100% of the original issue price plus unpaid dividends. The Company has reserved
a sufficient number of its authorized shares of common stock for the purpose of
effecting the future conversion of the preferred stock.
WARRANTS
During September and October, 1998, 150,000 shares of common stock were
issued in connection with the exercise of common stock warrants at a price of
$0.001 per share.
STOCK OPTIONS
During 1997, the Company adopted a stock option plan which provides for the
purchase of the common stock by key employees, directors, advisors and
consultants of the Company. The maximum number of shares for which options may
be granted under the plans shall not exceed 1,817,700 shares. Stock options are
granted under various stock option agreements. Each stock option agreement
contains specific terms. During the period from inception (April 25, 1997) to
December 31, 1997 and the nine months ended September 30, 1998, option grants
were solely to employees.
The options without performance acceleration under the incentive stock
option agreement and options issued the non qualified stock option agreement
vest and become exercisable ratably over a four year period, commencing one year
after date of grant.
The options with performance acceleration under the incentive stock option
agreement and the non qualified stock option agreement vest and become
exercisable upon the seventh anniversary of the grant date. Vesting, however,
can be accelerated upon the achievement of certain milestones defined in each
agreement.
In accordance with SFAS 123, the fair value of each option grant was
determined by using the Black-Scholes option pricing model with the following
weighted average assumptions for the year ended December 31, 1997 and the nine
months ended September 30, 1998: dividend yield of 0.0%; volatility of .70; risk
free interest rate of 6.0%; and expected option lives of 7 years. Had
compensation cost for the Company's stock options been determined based on the
fair value at the date of grant consistent with the provisions of SFAS 123, the
Company's net loss would have been $2,167,196 for the year ended December 31,
1997 and $5,219,798 for the nine months ended September 30, 1998.
F-13
<PAGE> 138
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK AND SHAREHOLDERS'
EQUITY -- (CONTINUED)
Option activity under the Company's plans is summarized below:
<TABLE>
<CAPTION>
INCENTIVE STOCK NON QUALIFIED STOCK
OPTION PLAN OPTION PLAN
------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of April 25, 1997..... -- -- -- --
Options granted................................ 724,700 $2.89 160,000 $2.89
Options exercised.............................. -- -- -- --
Options canceled............................... -- -- -- --
-------- ----- ------- -----
Outstanding at December 31, 1997............... 724,700 $2.89 160,000 2.89
======== ===== ======= =====
Options granted................................ 367,000 3.56 450,000 3.11
Options exercised.............................. -- -- -- --
Options canceled............................... (125,800) 2.89 -- --
-------- ----- ------- -----
Outstanding at September 30, 1998.............. 965,900 $3.15 610,000 $3.05
======== ===== ======= =====
</TABLE>
At December 31, 1997, there were no options exercisable under the incentive
stock option plan. At September 30, 1998 there were 162,500 options exercisable
under the incentive stock option plan. There were no options exercisable under
the non qualified option plan at December 31, 1997 or September 30, 1998.
At December 31, 1997 and September 30, 1998, the weighted average remaining
contractual life of the incentive stock options outstanding were 8.77 years and
9.14 years, respectively.
At December 31, 1997 and September 30, 1998, the weighted average remaining
contractual life of the non qualified stock options outstanding were 8.73 years
and 9.24 years, respectively.
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
At September 30, 1998 the Company had reserved a total of 12,534,452 of its
authorized 20,000,000 shares of common stock for future issuance as follows:
<TABLE>
<S> <C>
Convertible preferred stock................................. 10,462,830
Outstanding stock options................................... 1,575,900
Outstanding warrants........................................ 49,540
Contingent purchase price consideration..................... 204,382
Possible future issuance under stock option plan............ 241,800
----------
12,534,452
==========
</TABLE>
5. LEASES
OPERATING LEASES FROM OTHERS
The Company leases land (ground leases), office space and certain office
equipment under noncancelable operating leases. Ground leases are generally for
terms of five years and are renewable at
F-14
<PAGE> 139
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASES -- (CONTINUED)
the option of the Company. The future minimum lease payments for these leases at
September 30, 1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $1,059,376
2000........................................................ 909,539
2001........................................................ 863,029
2002........................................................ 589,784
2003........................................................ 283,093
----------
Total....................................................... $3,704,821
==========
</TABLE>
Rent expense was approximately $234,000 and $456,000 for the period from
April 25, 1997 (inception) to December 31, 1997 and for the nine months ended
September 30, 1998, respectively.
ANTENNAE SPACE LEASED TO OTHERS
The Company currently leases antennae space on multi-tenant towers to a
variety of wireless service providers under non cancelable operating leases. The
tenant leases are generally for terms of five years and include options for
renewal. Cost and accumulated depreciation of the leased towers at September 30,
1998, was $8,539,000 and 128,000, respectively, and at December 31, 1997, was
$167,000 and $3,000, respectively.
At September 30, 1998, the approximate future minimum rental income under
operating leases that have initial or remaining non cancelable terms in excess
of one year are as follows:
<TABLE>
<CAPTION>
RENTAL INCOME
-------------
<S> <C>
1999........................................................ $ 820,992
2000........................................................ 820,992
2001........................................................ 764,525
2002........................................................ 637,121
2003........................................................ 81,482
----------
Total....................................................... $3,125,112
==========
</TABLE>
6. INCOME TAXES
The Company did not recognize any income tax expense for the period from
April 25, 1997 (inception) to December 31, 1997 and for the nine months ended
September 30, 1998 as the Company incurred a net loss for the periods and the
resulting deferred tax assets were fully reserved.
The components of net deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
Deferred tax assets
Tax loss carryforwards...................................... $183,000 $2,370,000
======== ==========
Total gross deferred tax assets............................. 183,000 2,370,000
Valuation allowance......................................... (183,000) (2,370,000)
-------- ----------
$ -- $ --
======== ==========
</TABLE>
F-15
<PAGE> 140
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES -- (CONTINUED)
Deferred tax assets result primarily from differences between book and tax
treatment of net operating losses. The Company has a federal net operating loss
carryforward of approximately $6.0 million that expires in the year 2012. Also,
the Company has state tax losses of $6.0 million that expire in 2002. Deferred
tax assets were fully reserved as of December 31, 1997 and September 30, 1998.
Based on the Company's history of losses to date, management has provided a
valuation allowance to offset the deferred assets related to federal and state
net operating losses.
7. RELATED PARTY TRANSACTION
In conjunction with the acquisition of TeleSite, the Company issued a
$2,312,000 note payable to a shareholder. In the period from April 25, 1997
(inception) to December 31, 1997 and the nine months ended September 30, 1998,
the Company incurred approximately $100,000 and $81,000 of interest expense
related to the note payable to shareholder, respectively. The balance at
December 31, 1997 was $2,312,000. In June, 1998, the note was paid in full.
During the period from April 25, 1997 (inception) to December 31, 1997 and
the nine months ended September 30, 1998, the Company paid approximately $60,000
and $90,000 to a related party for management fees.
During the period from April 25, 1997 (inception) to December 31, 1997, the
Company paid approximately $57,000 to a related party for rent expense for an
office facility. In September 1997, the lease with the related party was
terminated.
8. EMPLOYEE BENEFIT PLAN
The Company provides a 401(k) plan for the benefit of all its employees
meeting specified eligibility requirements. The Company's contributions to the
plan are discretionary and totaled approximately $11,000 and $20,000 for the
period from April 25, 1997 (inception) to December 31, 1997 and for the nine
months ended September 30, 1998, respectively.
9. SALE OF AFFILIATES
In February, 1998 the Company entered into a purchase and sale agreement
under which it sold its wholly-owned subsidiary, MetroSite, for $298,575. The
Company recognized a gain on the sale of $257,251.
In May, 1998, the Company sold its ownership interest in Communication
Management Specialists, LLC ("CMS") for $375,000, in exchange for a note
receivable bearing interest at 8.5% per annum, payable to the Company over 60
months. The Company recognized a gain on the sale of approximately $189,000.
Prior to the sale, the Company's ownership interest in CMS was accounted for
using the equity method.
10. ACQUISITION ACTIVITY
In June 1998, the Company entered into an agreement under which it acquired
all of the membership interests of H&K Investments, LLC for $1,400,000 in a
transaction accounted for as a purchase. The results of operations of H&K are
included in the Company's operations from the date of acquisition. The Company
paid $1,300,000 in cash and recorded notes payable for $100,000 in conjunction
with the acquisition.
In August 1998, the Company entered into an asset purchase agreement with
Airadigm Communications, Inc. ("Airadigm") for the purchase of 47 towers for
approximately $11,750,000. The
F-16
<PAGE> 141
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. ACQUISITION ACTIVITY -- (CONTINUED)
Company paid the entire amount to an escrow account pending completion of due
diligence review terms included in the agreement. Accordingly, the Company
recorded the estimated purchase price as a non-current deposit. Under the terms
of the agreement, the Company will lease antenna space on the towers to
Airadigm.
In August 1998, the Company entered into an asset purchase agreement with
Amica Wireless Phone Service, Inc. for the purchase of the construction in
progress of 14 towers for approximately $474,000.
In September 1998, the Company acquired all of the outstanding common stock
of GlobalComm, Inc. for $1,988,864 cash in a transaction accounted for as a
purchase. The Company recorded approximately $1,669,000 of goodwill related to
the transaction.
11. SUBSEQUENT EVENTS
On October 9, 1998, the Company paid a former employee $500,000 under an
agreement to release the Company from any potential claims and to buy 125,000
shares of SpectraSite common stock from the former employee for an agreed upon
price. In addition, the agreement provided that shareholders of SpectraSite
would have an option to purchase the former employee's remaining 37,605 shares
of SpectraSite common stock for the same price per share, provided that the
Company advise the former employee in writing of the exercise of all or any
portion of such option by November 15, 1998.
12. YEAR 2000 ISSUE (UNAUDITED)
Many existing computer systems and applications, and other control devices,
use only two digits to identify a year in the date field, without considering
the impact of the upcoming changes in the century. As a result, such systems and
applications could fail or create erroneous results unless corrected so that
they can process data related to the year 2000. The Company relies on its
systems, applications and devices in operating and monitoring all major aspects
of its business, including the financial systems (such as general ledger,
accounts payable and payroll modules), customer services, infrastructure,
embedded computer chips, networks and telecommunications equipment and products.
The Company also relies, directly and indirectly, on external systems of
business enterprises such as customers, suppliers, creditors, financial
organizations and of governmental entities, both domestic and international, for
accurate exchange of data. The Company's current estimate is that the costs
associated with the year 2000 issue, and the consequences of incomplete or
untimely resolution of the year 2000 issue, will not have a material adverse
effect on the results of operations or financial position of the Company in any
given year. However, despite the Company's efforts to address the year 2000
impact on its internal systems, the Company has not fully identified such impact
or whether such impact can be resolved without disruption of its business and
without incurring significant expense. In addition, even if the internal systems
of the Company are not materially affected by the year 2000 issue, the Company
could be affected through disruption in the operation of the enterprises with
which the Company interacts.
F-17
<PAGE> 142
REPORT OF INDEPENDENT AUDITORS
The Members
TeleSite Services, LLC
We have audited the accompanying consolidated balance sheet of TeleSite
Services, LLC (the "Company") as of December 31, 1996 and the related
consolidated statements of operations and members' equity and cash flows for the
year ended December 31, 1996 and for the period from January 1, 1997 through May
12, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TeleSite
Services, LLC at December 31, 1996 and the consolidated results of its
operations and its cash flows for the year ended December 31, 1996 and for the
period from January 1, 1997 through May 12, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Raleigh, North Carolina
March 27, 1998
F-18
<PAGE> 143
TELESITE SERVICES, LLC
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 4,854
Accounts receivable:
Trade.................................................. 1,777,611
Other.................................................. 37,107
Prepaid expenses and other................................ 39,964
----------
Total current assets........................................ 1,859,536
Property and equipment, net................................. 931,291
Investment in affiliate..................................... 131,459
----------
Total assets................................................ $2,922,286
==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Line of credit............................................ $ 946,724
Accounts payable.......................................... 688,180
Accrued expenses.......................................... 33,092
Current portion of long-term debt......................... 295,711
----------
Total current liabilities................................... 1,963,707
Long-term debt, less current portion........................ 81,106
----------
Total liabilities........................................... 2,044,813
Members' equity............................................. 877,473
----------
Total liabilities and members' equity....................... $2,922,286
==========
</TABLE>
See accompanying notes.
F-19
<PAGE> 144
TELESITE SERVICES, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE JANUARY 1, 1997
YEAR ENDED TO
DECEMBER 31, 1996 MAY 12, 1997
----------------- ---------------
<S> <C> <C>
Revenues.................................................... $8,840,869 $1,925,985
Cost of revenues............................................ 2,254,777 594,683
---------- ----------
Gross profit................................................ 6,586,092 1,331,302
Selling, general and administrative expenses................ 4,255,840 1,741,856
Depreciation expense........................................ 91,133 55,870
---------- ----------
Operating income (loss)..................................... 2,239,119 (466,424)
Interest expense............................................ (66,505) (35,695)
Equity in earnings (loss) of affiliate...................... 116,459 (1,087)
---------- ----------
Net income (loss)........................................... $2,289,073 $ (503,206)
========== ==========
Pro forma income data (unaudited):
Net income (loss) as reported............................. $2,289,073 $ (503,206)
Pro forma provision for income taxes...................... 892,783 --
---------- ----------
Pro forma net income (loss)............................... $1,396,290 $ (503,206)
========== ==========
</TABLE>
See accompanying notes.
F-20
<PAGE> 145
TELESITE SERVICES, LLC
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
<TABLE>
<S> <C>
Members' deficiency at January 1, 1996...................... $ (445,584)
Distributions to members.................................. (966,016)
Net income................................................ 2,289,073
----------
Members' equity at December 31, 1996........................ $ 877,473
Contribution to capital................................... 100
Distributions to members.................................. (211,256)
Net loss.................................................. (503,206)
----------
Members' equity at May 12, 1997............................. $ 163,111
==========
</TABLE>
See accompanying notes.
F-21
<PAGE> 146
TELESITE SERVICES, LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE JANUARY 1, 1997
YEAR ENDED TO
DECEMBER 31, 1996 MAY 12, 1997
----------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 2,289,073 $(503,206)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation.............................................. 91,133 55,870
Equity in (earnings) loss of affiliate.................... (116,459) 1,087
Changes in operating assets and liabilities:
Trade accounts receivable.............................. (1,314,087) 456,345
Other accounts receivable.............................. (34,072) (76,610)
Prepaid expenses and other............................. (35,827) (17,487)
Accounts payable....................................... 197,702 (42,534)
Accrued expenses....................................... 31,568 55,593
----------- ---------
Net cash provided by (used in) operating activities......... 1,109,031 (70,942)
INVESTING ACTIVITIES
Purchases of property and equipment......................... (837,808) (321,788)
Investment in affiliate..................................... (15,000) --
----------- ---------
Net cash used in investing activities....................... (852,808) (321,788)
FINANCING ACTIVITIES
Net proceeds from line of credit............................ 368,724 249,338
Net proceeds from long-term debt............................ 556,391 293,785
Repayment of long-term debt................................. (224,923) --
Proceeds from capital contribution.......................... -- 100
Distribution to members..................................... (966,016) (153,499)
----------- ---------
Net cash (used in) provided by financing activities......... (265,824) 389,724
----------- ---------
Net decrease in cash........................................ (9,601) (3,006)
Cash at beginning of period................................. 14,455 4,854
----------- ---------
Cash at end of period....................................... $ 4,854 $ 1,848
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest.................... $ 64,000 $ 30,695
=========== =========
</TABLE>
See accompanying notes.
F-22
<PAGE> 147
TELESITE SERVICES, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
TeleSite Services, LLC (the "Company") was formed on August 1, 1995, for
the purpose of providing site development services, as agent, to companies
operating in the telecommunications industry. TeleSite's clients are located
primarily in the southeastern and south central regions of the United States.
Metrosite Management, LLC ("Metrosite") was formed on February 28, 1997 by
the contribution of $99 by the Company and $1 by a member of the Company for the
99% and 1% ownership of Metrosite, respectively. Metrosite was formed for the
purpose of negotiating agreements with municipalities to lease certain locations
to PCS providers (e.g., water towers, etc.) in return for a percentage of the
monthly rental amounts charged by the municipalities to the PCS providers.
PRINCIPLES OF CONSOLIDATION
The accompanying 1997 consolidated financial statements include the
accounts of TeleSite, LLC and MetroSite Management, LLC from the date of
MetroSite's formation. All significant intercompany transactions and balances
have been eliminated in consolidation. Minority interest related to the
membership interest not owned by the Company is insignificant.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets ranging from three to seven years.
REVENUE RECOGNITION
Revenue from projects is recognized when site selection services are
rendered.
COST OF REVENUES
Cost of revenues consist of the direct costs incurred to provide the
related services.
SIGNIFICANT CONCENTRATIONS
The Company's customer base consists of companies operating in the
telecommunications industry. The Company's exposure to credit risk consists
primarily of unsecured accounts receivable from these
F-23
<PAGE> 148
TELESITE SERVICES, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
customers. Following is information concerning revenue and accounts receivable
concentrations of the Company's major customers:
<TABLE>
<CAPTION>
% OF REVENUES
--------------------------------------
PERIOD FROM
JANUARY 1, 1997
YEAR ENDED TO
DECEMBER 31, 1996 MAY 12, 1997
----------------- ------------------
<S> <C> <C>
Customer 1................................... 21% 34%
Customer 2................................... 63% 30%
Customer 3................................... -- 12%
</TABLE>
<TABLE>
<CAPTION>
% OF ACCOUNTS RECEIVABLE AT
--------------------------------------
DECEMBER 31, 1996 MAY 12, 1997
----------------- ------------
<S> <C> <C>
Customer 1................................... 11% 37%
Customer 2................................... 67% 24%
</TABLE>
INVESTMENT IN AFFILIATE
The Company's 33% ownership interest in Communication Management
Specialists, LLC, ("CMS") a company that provides construction management
services to telecommunications companies, is accounted for using the equity
method.
Summary financial information of CMS is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR
THE
PERIOD FROM
AS OF AND FOR THE JANUARY 1, 1997
YEAR ENDED TO
DECEMBER 31, 1996 MAY 12, 1997
----------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Current Assets................................ $1,110,500 $810,200
Non-current Assets............................ 16,300 17,800
Current Liabilities........................... 747,400 452,000
Non-current Liabilities....................... -- --
Members' equity............................... 379,400 376,000
Net Sales..................................... 2,404,866 650,000
Gross Profit.................................. 553,164 179,500
Net income.................................... 352,900 (3,300)
</TABLE>
INCOME TAXES
The Company is organized as a limited liability company and is therefore
not subject to income taxes. All taxable income or loss is reported by the
members on their respective income tax returns. Therefore the accompanying
Consolidated Statement of Operations and Members' Equity does not include any
provision for income tax expense.
F-24
<PAGE> 149
TELESITE SERVICES, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Land........................................................ $ 297,600
Equipment................................................... 304,148
Furniture and fixtures...................................... 143,199
Vehicles.................................................... 200,240
Leasehold improvements...................................... 53,448
Construction in progress.................................... 42,259
----------
Total....................................................... 1,040,894
Less accumulated depreciation............................... (109,603)
----------
Property and equipment, net................................. $ 931,291
==========
</TABLE>
3. LINE OF CREDIT AND LONG-TERM DEBT
The Company has a maximum $1,500,000 line of credit with a bank, with an
outstanding balance of $946,724 at December 31, 1996. The line of credit bears
interest at a variable rate, not to exceed 10%, with interest payable monthly
and principal due May 31, 1997. The rate of interest at December 31, 1996 was
8.5%. The line of credit is collateralized by substantially all assets of the
Company.
Long-term debt consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Note payable to a bank, bearing interest at 8.5%, maturing
April 4, 1997, monthly payments of interest of $1,780,
collateralized by land.................................... $ 250,000
Installment notes payable to a bank, bearing interest at
rates ranging from 8.75% to 10.2%, maturing from October
20, 1998 to December 9, 1999, monthly payments of
principal and interest of $4,614, collateralized by
vehicles.................................................. 126,817
---------
Total....................................................... 376,817
Less current maturities..................................... (295,711)
---------
Long-term debt.............................................. $ 81,106
=========
</TABLE>
Maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
1997........................................................ $295,711
1998........................................................ 46,815
1999........................................................ 34,291
--------
Total....................................................... $376,817
========
</TABLE>
The Company estimates that the fair value of notes payable approximates the
carrying value based upon its effective current borrowing rate for debt with
similar terms and remaining maturities. Disclosure about fair value of financial
instruments is based upon information available to management as of December 31,
1996.
F-25
<PAGE> 150
TELESITE SERVICES, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. RELATED PARTY TRANSACTIONS
The company is affiliated with other organizations by common ownership
and/or control. During the year ended December 31, 1996 and the period from
January 1, 1997 to May 12, 1997, the Company paid approximately $66,000 and
$22,000, respectively, to an affiliated organization for rent expense.
On May 9, 1997, a member of the Company assumed the Company's construction
line of credit with a bank of $562,135, in exchange for land and construction in
progress with carrying values of $297,600 and $322,292, respectively. The
Company recorded a non-cash shareholder's distribution of $57,757 associated
with this transaction.
5. LEASES
The Company leases office space and certain office equipment under
noncancelable operating leases. The future minimum lease payments under such
leases at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $164,597
1998........................................................ 136,409
1999........................................................ 93,696
2000........................................................ 66,429
2001........................................................ 27,500
--------
Total....................................................... $488,631
========
</TABLE>
Rent expense under operating leases was approximately $110,000 and $57,000
for the year ended December 31, 1996 and for the period from January 1, 1997 to
May 12, 1997, respectively.
6. EMPLOYEE BENEFIT PLAN
The Company provides a 401(k) plan for the benefit of its employees meeting
specified eligibility requirements. The Company's contributions to the plan are
discretionary and totaled $15,205 in 1996 and $12,342 for the period from
January 1, 1997 to May 12, 1997.
7. PRO FORMA INCOME DATA (UNAUDITED)
The pro forma provision for income taxes is based upon the statutory income
tax rates in effect during the year ended December 31, 1996. No provision was
provided in the period from January 1 to May 12, 1997 due to the net operating
loss.
8. SUBSEQUENT EVENT
On May 12, 1997, 100% of the members' interests of the Company and its
subsidiary, Metrosite, were acquired by SpectraSite Holdings, Inc., a Delaware
corporation.
F-26
<PAGE> 151
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell or to buy only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
------------------------------------
TABLE OF CONTENTS
------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 8
Use of Proceeds....................... 16
Capitalization........................ 17
Unaudited Pro Forma Financial Data.... 18
Selected Financial Data............... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 29
Industry Review....................... 33
Business.............................. 38
Management............................ 49
Certain Transactions.................. 55
Ownership of Capital Stock............ 59
Description of Capital Stock.......... 61
Description of New Credit Facility.... 64
The Exchange Offer.................... 66
Description of the Notes.............. 75
Certain U.S. Federal Tax
Considerations...................... 113
Plan of Distribution.................. 121
Legal Matters......................... 122
Experts............................... 122
Where You Can Find More Information... 122
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1999 (90TH DAY AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$225,238,000
SPECTRASITE HOLDINGS, INC.
EXCHANGE OFFER FOR
12% SENIOR DISCOUNT NOTES DUE 2008
-------------------------------------
PROSPECTUS
-------------------------------------
[SPECTRASITE LOGO]
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation (in its original certificate of
incorporation or amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise of perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provisions shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
the director derived an improper personal benefit. The Registrant's Certificate
of Incorporation, as amended, limits the liability of directors thereof to the
extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties to which they may be made parties by reason of their being or
having been directors, officers, employees or agents and shall so indemnify such
persons if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*3.1 Certificate of Incorporation of Integrated Site Development
("ISD"), dated and filed as of April 25, 1997
*3.2 Certificate of Amendment of the Certificate of Incorporation
of ISD, dated as of May 11, 1997 (authorizing Series A
Preferred Stock) and filed May 12, 1997
*3.3 Certificate of Amendment of the Certificate of Incorporation
of ISD, dated as of August 14, 1997 (changing name to
SpectraSite Communications, Inc. ("SCI")) and filed August
15, 1997
*3.4 Certificate of Amendment of the Certificate of Incorporation
of SCI, dated and filed as of October 29, 1997 (changing
name to SpectraSite Holdings, Inc. (the "Registrant"))
*3.5 Certificate of Amendment of the Certificate of Incorporation
of the Registrant, dated and filed as of March 23, 1998
(authorizing Series B Preferred Stock)
*3.6 Certificate of Amendment of the Certificate of Incorporation
of the Registrant, dated as of May 29, 1998 and filed June
2, 1998
*3.7 Certificate of Amendment of the Certificate of Incorporation
of the Registrant, dated as of August 18, 1998 and filed
August 19, 1998
*3.8 Bylaws of ISD, dated as of April 25, 1997
*4.1 Indenture, dated as of June 26, 1998, between the Registrant
and United States Trust Company of New York, as trustee
5.1 Opinion of Dow Lohnes & Albertson, PLLC
</TABLE>
II-1
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*10.1 Stock Purchase Agreement (Series A Preferred Stock), dated
as of May 12, 1997, by and among U.S. Towers, Inc. ("UST"),
TeleSite Services, LLC ("TeleSite"), Metrosite Management,
LLC ("Metrosite"), Whitney Equity Partners, L.P. ("Whitney
Equity"), Kitty Hawk Capital Limited Partnership, L.P., III
("Kitty Hawk III"), and ISD
*10.2 Stock Purchase Agreement (Series B Preferred Stock), dated
as of March 23, 1998, by and among the Registrant, Whitney
Equity, J. H. Whitney, III, L.P. ("Whitney III"), Whitney
Strategic Partners III, L.P. ("Whitney Strategic"),
Waller-Sutton Media Partners, L.P. ("Waller-Sutton"), Kitty
Hawk III, Kitty Hawk Capital Limited Partnership, IV ("Kitty
Hawk IV"), Eagle Creek Capital, L.L.C. ("Eagle Creek"), The
North Carolina Enterprise Fund, L.P. ("NCEF"), Finley Family
Limited Partnership ("Finley LP"), William R. Gupton
("Gupton"), Jack W. Jackman ("Jackman") and Alton D. Eckert
("Eckert")
*10.3 First Amendment to Stock Purchase Agreement (Series B
Preferred Stock), dated as of May 29, 1998
*10.4 Second Amendment to Stock Purchase Agreement (Series B
Preferred Stock), dated as of August 27, 1998
*10.5 Amended and Restated Registration Rights Agreement, dated as
of March 23, 1998, by and among the Registrant, Whitney
Equity, Whitney III, Whitney Strategic, Waller-Sutton, Kitty
Hawk III, Kitty Hawk IV, Eagle Creek, NCEF, Finley LP,
Gupton, Eckert, Stephen H. Clark ("Clark") and Robert M.
Long ("Long")
*10.6 Second Amended and Restated Stockholders' Agreement, dated
as of March 23, 1998, by and among the Registrant, Whitney
Equity, Whitney III, Whitney Strategic, Waller-Sutton, Kitty
Hawk III, Kitty Hawk IV, Eagle Creek, Clark, Long, Finely
LP, NCEF, Edward Lutkewich ("Lutkewich"), Jackman, Eckert,
and Gupton
*10.7 First Amendment to Second Amended and Restated Stockholders'
Agreement, dated as of May 29, 1998
*10.8 Executive Employment Agreement, dated as of May 12, 1997, by
ISD and Joe Finley, III ("Finley")
*10.9 Assignment and Amendment of Employment Agreement, dated as
of October 31, 1997, by and between the Registrant, SCI and
Finley
*10.10 Employment Agreement, dated as of May 12, 1997, by ISD and
Tracy Gill
*10.11 Confidentiality and Non-Competition Agreement, dated as of
May 12, 1997, by and between ISD and Clark
*10.12 Membership Interests Purchase Agreement, dated as of
December 31, 1997, by and among SCI, Jeffrey Hawkins, Edwin
Keuck and H&K Investments LLC
*10.13 First Amendment to the Membership Interests Purchase
Agreement, dated May 29, 1998
*10.14 Purchase and Sale Agreement, dated as of February 20, 1998,
by and among the Registrant, Metrosite and Apex Site
Management, L.P.
*10.15 Letter Agreement, dated as of February 6, 1998, by and
between SCI and Whalen
*10.16 Stock Option Plan of the Registrant, effective as of June
24, 1997
*10.17 Management Rights Letter Agreement, dated as of March 23,
1998, by and between the Registrant and Kitty Hawk IV
*10.18 Escrow Agreement, dated as of May 12, 1997, by and among
ISD, Finley LP, and Morrison Cohen Singer & Weinstein, LLP
("Morrison Cohen")
*10.19 Option Escrow Agreement, dated as of May 12, 1997, by and
among Whitney LP, Kitty Hawk III and Morrison Cohen
*10.20 Release and Settlement Agreement, dated as of May 12, 1997,
by and among PCX Corporation ("PCX"), NCEF, Kitty Hawk III,
Eckert, Gupton, Jackman, Lutkewich, UST, Long and Clark
</TABLE>
II-2
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*10.21 Stock Restriction Agreement, dated as of May 12, 1997, by
and between ISD and Finley LP
*10.22 Agreement, dated September 15, 1998, by and between Robert
M. Long and the Registrant
*10.23 Asset Purchase Agreement, dated as of August 14, 1998 by and
among Airadigm Communications, Inc. ("Airadigm") and SCI
*10.24 Form of Master Tower Attachment Lease Agreement by and
between Airadigm and SCI
*10.25 Asset Purchase, dated as of August 20, 1998, by and among
Amica Wireless PhoneService, Inc. ("Amica") and SCI
10.26 Form of Master Design Build Lease Agreement by and between
Amica and SCI
*10.27 Stock Contribution Agreement, dated as of May 12, 1997, by
and among ISD, Clark, Long and UST
*10.28 Membership Interests Contribution Agreement, dated as of May
12, 1997, by and among ISD, Finley, Caroline Finley, Finley
LP, the Central Arkansas Opportunity Foundation, TeleSite
and MetroSite
*10.29 Agreement and Plan of Merger, dated as of October 31, 1997,
by and between UST and SCI
*12.1 Computation of Ratio of Earnings to Fixed Charges
*21.1 Subsidiaries of the Registrant
23.1 Consent of Dow, Lohnes & Albertson, PLLC (contained in
Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
25.1 Form T-1 (Statement of Eligibility of Trustee)
*27.1 Financial Data Schedule
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules.
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
II-3
<PAGE> 155
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the provisions, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issues undertake that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
the reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
Every prospectus: (i) that is filed pursuant to the immediately preceding
paragraph or (ii) that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the Registration Statement and
will not be used until such amendment is effective, and that, for purposes of
determining any liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 156
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
SPECTRASITE HOLDINGS, INC. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF CARY, STATE OF NORTH CAROLINA, ON JANUARY 8,
1999.
SPECTRASITE HOLDINGS, INC.
By: /s/ STEPHEN H. CLARK
------------------------------------
Stephen H. Clark
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEPHEN H. CLARK Chief Executive Officer and Chairman of January 8, 1999
- ------------------------------------------ the Board of Directors (Principal
Stephen H. Clark Executive Officer)
/s/ DAVID P. TOMICK Chief Financial Officer and Secretary January 8, 1999
- ------------------------------------------ (Principal Financial Officer)
David P. Tomick
/s/ CATHY M. ANTEE Controller and Assistant Secretary January 8, 1999
- ------------------------------------------ (Principal Accounting Officer)
Cathy M. Antee
* Vice Chairman of the Board of Directors January 8, 1999
- ------------------------------------------
Joe L. Finley, III
* Director January 8, 1999
- ------------------------------------------
Michael R. Stone
* Director January 8, 1999
- ------------------------------------------
James R. Matthews
* Director January 8, 1999
- ------------------------------------------
W. Chris Hegele
* Director January 8, 1999
- ------------------------------------------
Andrew J. Armstrong
</TABLE>
* POWER OF ATTORNEY
David P. Tomick, by signing his name hereto, does sign this document on
behalf of each of the persons indicated above for whom he is attorney-in-fact
pursuant to a power of attorney duly executed by such person and filed with the
Securities and Exchange Commission.
By: /s/ DAVID P. TOMICK
------------------------------------
(David P. Tomick
Attorney-In-Fact)
II-5
<PAGE> 1
Exhibit 5.1
[LETTERHEAD OF DOW, LOHNES & ALBERTSON, PLLC APPEARS HERE]
January 8, 1999
SpectraSite Holdings, Inc.
8000 Regency Parkway, Suite 750
Cary, North Carolina 27511
Re: SpectraSite Holdings, Inc.
Registration Statement on Form S-4
(Registration No. 333-67043)
Ladies and Gentlemen:
We refer to the above-referenced Registration Statement (the "Registration
Statement") on Form S-4, filed on November 10, 1998, by SpectraSite Holdings,
Inc. (the "Issuer"), with the Securities and Exchange Commission (the
"Commission"), for the purpose of registering under the Securities Act of 1933,
as amended (the "Securities Act"), the Issuer's Series B 12% Senior Discount
Notes Due 2008 (the "Exchange Notes"), to be offered in exchange (the "Exchange
Offer") for the Issuer's outstanding 12% Senior Discount Notes Due 2008 (the
"Old Notes"). The Old Notes were issued under, and the Exchange Notes are to be
issued under, an Indenture, dated as of June 26, 1998, between the Issuer and
United States Trust Company of New York, as Trustee (the "Indenture").
In connection with the foregoing registration, we have acted as special
counsel for the Issuer and have examined originals or copies of (i) the
Indenture, (ii) the Registration Rights Agreement, dated as of June 26, 1998
(the "Registration Rights Agreement"), by and among the Issuer, Credit Suisse
First Boston Corporation, Lehman Brothers Inc. and CIBC Oppenheimer Corp., and
(iii) the Registration Statement. We have also examined all such records of the
Issuer and all such agreements, certificates of public officials, certificates
of officers or representatives of
<PAGE> 2
SpectraSite Holdings, Inc.
Page 2
the Issuer and others, and such other documents, certificates and corporate or
other records as we have deemed necessary or appropriate as a basis for the
opinion set forth herein. In our examination we have assumed the genuineness of
all signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts relevant
to the opinion expressed herein, we have relied upon statements and
representations of officers and other representatives of the Issuer and others
(all of which we assume to be true, complete and accurate in all respects).
We are members of the Bar of the District of Columbia and do not purport to
be experts on, or generally familiar with, or certified to express legal
conclusions based upon, the laws of any other jurisdiction, other than the
Delaware General Corporation Law and the laws of the United States to the extent
applicable hereto. Accordingly, as to matters of law set forth below, our
opinion is limited to matters of law under the laws of the District of Columbia,
the laws of the United States to the extent applicable hereto, and the Delaware
General Corporation Law, and we express no opinion as to conflicts of law rules,
or the laws of any states or jurisdictions other than as specified above.
Based upon the foregoing and subject to the other qualifications,
assumptions and limitations stated herein, we are of the opinion that the
Exchange Notes have been duly authorized and when executed by the proper
officers of the Issuer, duly authenticated by the Trustee, and issued by the
Issuer in accordance with the provisions of the Indenture, against surrender and
cancellation of a like aggregate principal amount at maturity of Old Notes
pursuant to the Exchange Offer as contemplated in the Registration Rights
Agreement, will constitute the legal, valid and binding obligations of the
Issuer enforceable against the Issuer in accordance with their terms, except to
the extent that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium
<PAGE> 3
SpectraSite Holdings, Inc.
Page 3
(whether general or specific), fraudulent conveyance or other laws now or
hereafter in effect affecting the enforcement of creditors' rights and remedies
generally, (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be limited by equitable defenses and the discretion of
the court before which any proceeding therefor may be brought (whether such
proceeding is at law or in equity or in a bankruptcy proceeding) or limited by
other equitable principles of general applicability, including without
limitation concepts of materiality, reasonableness ,good faith, and fair dealing
and (c) certain waivers, such as waivers of applicable usury, stay or extension
laws, may be unenforceable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the reference to this firm under the caption
"Legal Matters" contained in the prospectus filed as a part thereof. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
Dow, Lohnes & Albertson, PLLC
By: /s/ Timothy J. Kelley
---------------------------
Timothy J. Kelley
Member
<PAGE> 1
EXHIBIT 10.26
MASTER DESIGN BUILD LEASE AGREEMENT
THIS MASTER DESIGN BUILD LEASE AGREEMENT ("Agreement") is made and entered
into by and between Amica Wireless Phone Service, Inc., an Illinois corporation
("Amica") and SpectraSite Communications, Inc. ("SpectraSite").
WHEREAS, Amica is a wholly-owned subsidiary of BRK Wireless Company, Inc.,
an Illinois corporation, which corporation holds certain licenses granted by the
FCC to provide personal communications service ("PCS") pursuant to license
numbers CWB046F, CWB071F, CWB109F, and CWB426F License") in geographical areas
referred to in the License as BTAs Bloomington, Champaign-Urbana,
Decatur-Effingham, and Springfield which are located in the state of Illinois
WHEREAS, Amica requires that towers and related facilities be developed
for the installation by Amica of antennas, equipment cabinets, cabling and
related equipment;
WHEREAS, Amica has secured certain parcels of real estate within the BTAs
for the development of said towers and facilities, pursuant to various Site
Lease Agreements which have been made between Amica and the owners of the
various parcels of real estate and desires for SpectraSite to procure other
parcels of real estate for the development of towers and facilities ("Sites");
WHEREAS, Amica desires to assign the Sites to SpectraSite for construction
of towers and related facilities by SpectraSite, pursuant to this Agreement;
WHEREAS, Amica desires to lease space on the facilities from SpectraSite
for the installation and operation of tower facilities on the sites.
NOW THEREFORE, Amica and SpectraSite do hereby agree as follows:
I. SITE ACQUISITION
1.1 SEARCH AREAS. Amica may designate to SpectraSite during the Site
Acquisition Term, as that term is defined in section 1.2 of this Agreement, one
or more Search Areas for SpectraSite's performance pursuant to this Agreement of
Site Acquisition Services. A Search Area shall be deemed designated by
SpectraSite hereunder upon Amica's delivery to SpectraSite of a Search Area
package containing the following information: (i) a map, topographical drawing
or other rendering and general latitude and longitude information sufficiently
describing the geographic area constituting such Search Area; (ii) the
applicable number or other specified means of designation by which Amica
identifies such area (the "Search Area Number"); and (iii) the type and desired
number of Amica antennas intended to be installed, desired mounting height and
any other technical data necessary to the effective identification of Candidate
Sites therein.
1.2 TERM OF SITE ACQUISITION SERVICES AGREEMENT. The term of this
Agreement (the "Site Acquisition Term") shall commence on the date of this
Agreement and shall expire on the third (3rd) anniversary of the date of this
Agreement.
(a) This Agreement may be terminated upon written notice by either party
following the other party's breach of an obligation or covenant on such party's
part to be performed, which
1
<PAGE> 2
breach is not cured within thirty (30) days after the breaching party's receipt
of written notice thereof; and
(b) Neither a termination nor the expiration of this Agreement shall
affect:
(i) the term of any SLA, as that term is defined in section 3.3 of this
Agreement, which has been entered into by the parties prior to the date of
the termination of this Agreement, which shall continue in accordance with
its terms and conditions;
(ii) any duties or obligations for payment or performance that are or
become owing hereunder prior to the effective date of such termination; or
(iii) any other duties or obligations that expressly survive the
termination or expiration hereof.
1.3 SITE ACQUISITION SERVICES. SpectraSite shall provide the personnel and
facilities which are necessary to locate and acquire real estate ("Sites") and
to provide related services for the acquisition of sites to be used for the
construction and installation of a communications tower ("Tower") and related
facilities. The services are more particularly described in and shall be
performed by SpectraSite in accordance with the scope of work attached hereto as
Schedule "I" which is incorporated by reference herein ("Site Acquisition
Services").
1.4 PRIME LEASES. The acquisition of Sites by SpectraSite pursuant to this
Agreement shall be accomplished using a lease agreement in substantially the
same form as the Option and Lease Agreement which is attached hereto as Schedule
"II" subject to such revisions as SpectraSite may deem to be reasonable and
necessary ("Prime Lease"). SpectraSite and Amica acknowledge and agree that
privity of contract shall exist only between SpectraSite and the owner, lessor,
sublessor or licensor of a Site ("Prime Lessor").
1.5 DEFINITION OF DUE DILIGENCE ITEMS. As used herein, Due Diligence Items
shall include the Federal Aviation Administration application, responses,
approvals and registration numbers submitted or received by Amica; the zoning
permits and approvals, variances, building permits and such other federal, state
or local governmental approvals; the construction, engineering and architectural
drawings and related site plan and surveys pertaining to the construction of the
Tower Facilities; the geotechnical report; the title reports, commitments for
title insurance, ownership and encumbrance reports, title opinion letters,
copies of instruments in the chain of title or any other information which may
be produced regarding title to the Site; the environmental assessments including
phase I reports and any environmental reports involving contemporaneous or
subsequent intrusive testing, the "FCC Checklist" performed pursuant to NEPA
requirements and any other information which may have been produced regarding
the environmental condition of the Sites or neighboring real property; and any
other information written or otherwise regarding the due diligence investigation
to be made regarding the Site. The items described in this section 1.4 may
hereinafter be collectively referred to as "Due Diligence Items". SpectraSite
shall be responsible for all costs associated with the performance of the Due
Diligence Items. SpectraSite shall have no obligation to perform any Due
Diligence Items until such time as SpectraSite has received from Amica a written
notice to proceed ("Notice to Proceed") in the form attached hereto as Schedule
"III" which evidences Amica's approval and acceptance of the Site. The Notice to
Proceed or Amica's rejection of the Site shall be tendered to SpectraSite by
Amica not more than ten (10) business days after SpectraSite provides Amica
information relating to the Site. In the event that Amica tenders a Notice to
Proceed and SpectraSite determines from its due diligence investigation of the
Site that it is suitable for the
2
<PAGE> 3
construction of the Tower Facilities, SpectraSite shall construct the Tower
Facilities in accordance with this Agreement, the Site shall be governed by
Article III of this Agreement, and Amica shall execute an SLA for such Site as
provided in paragraph 3.1 hereof within ten (10) days following written notice
from SpectraSite that the Site is suitable for the construction of the Tower
Facilities and that it intends to construct the Tower Facilities. In the event
that Amica fails to execute an SLA for such Site, Amica will pay to SpectraSite
the sum of Thirty Thousand and No/100 Dollars ($30,000.00) as liquidated damages
for its failure to do so as reimbursement of the costs SpectraSite has incurred
during its site acquisition activities and due diligence investigation of the
Site.
1.6 INSURANCE. SpectraSite or contractors engaged by SpectraSite shall
procure and maintain the following types of insurance and coverage amounts in
conjunction with the Site Acquisition Services:
(a) Workers compensation insurance in accordance with the provisions
of the applicable workers compensation or similar law of the state applicable to
Contractor's personnel;
(b) Comprehensive general liability insurance with minimum limit of
liability coverage of $1,000,000, with a combined limit for bodily injury and/or
property damage for any one occurrence and excess/umbrella coverage of
$2,000,000;
(c) Automobile liability insurance insuring all owned, non-owned and
hired automotive equipment in minimum combined single limit amounts of $500,000;
(d) Umbrella coverage of not less than $2,000,000 combined single
limit in excess of the coverage required in subsections (b) and (c) above;
(e) Errors and omissions coverage of not less than $1,000,000 per
occurrence.
Amica shall be named as additional insured under the insurance required
under subsections (b), (c), (d) and (e). SpectraSite shall provide Amica with
certificates of insurance evidencing the coverage required above. Such insurance
will provide for 30 days prior written notice to Amica in event of cancellation,
non-renewal, or material changes in coverage.
1.7 COMPLIANCE WITH LAWS AND SAFETY STANDARDS. SpectraSite shall provide
Site Acquisition Services and otherwise discharge its duties under this
Agreement in accordance with all applicable local, state and federal laws,
rules, regulations, and ordinances, and in accordance with all applicable safety
standards.
1.8 CONFIDENTIALITY. SpectraSite shall not disclose Confidential
Information to others except as may be necessary to render the Site Acquisition
Services hereunder. The term "Confidential Information" means information,
except as may be in the public domain, about Amica's projects, processes,
management, operations, services, purchasing, accounting, marketing,
merchandising, selling, research and development, or any other information
designated by Amica in writing to SpectraSite to be of a proprietary or
competitively sensitive nature.
3
<PAGE> 4
1.9 INFORMATION AND COOPERATION. Amica shall provide such information,
assistance, cooperation and coordination as is necessary to enable SpectraSite
to timely perform the Site Acquisition Services hereunder.
1.10 ENVIRONMENTAL DISCLAIMER. Amica acknowledges and agrees that,
notwithstanding any other provision of this Agreement, in performing Services
hereunder SpectraSite shall have no liability or responsibility whatsoever to
Amica for, or arising from, any environmental audit, inspection or evaluation of
any property that is considered, proposed or accepted by Amica for the location
of antennas, towers, or any other facilities of Amica, nor shall SpectraSite
have any liability for any past, present, or future environmental condition at
any such property, specifically including but not limited to the presence of
hazardous wastes or hazardous substances, as those terms are defined by
applicable state and federal law except to the extent such environmental
condition is caused by SpectraSite.
II. DESIGN AND CONSTRUCTION OF TOWER FACILITIES
2.1 APPROVAL OF PLANS AND SPECIFICATIONS. SpectraSite shall be responsible
for the constructing the Tower, foundations, and related facilities including
concrete foundations, footings and slabs and fencing at SpectraSite's sole cost
and expense ("Tower Facilities"). SpectraSite shall prepare and deliver to Amica
for its approval by Amica three copies of prototype, standard plans ("Plans")
and construction specifications ("Specifications") for the construction of
prototype Tower Facilities. The Plans and Specifications shall be delivered to
Amica within thirty (30) days after the date of this Agreement. Within fifteen
(15) business days after receipt of the Plans and Specifications, Amica shall
approve such Plans and Specifications or deliver to SpectraSite detailed written
objections thereto. If Amica fails to either affirmatively approve or disapprove
the Plans and Specifications within said fifteen (15) day period, Amica shall be
deemed to have effectively approved the Plans and Specifications.
2.2 CONTRACTORS TO BE USED. SpectraSite acknowledges and agrees that Amica
has contracted with P&D Antenna (St. Anne, IL) for the construction of five (5)
sites. SpectraSite agrees to honor the existing contract between Amica and P&D
Antenna for the construction of site improvements on five (5) sites designated
by Amica.
2.3 CHANGE ORDERS. Amica shall have the right to issue reasonable change
orders to SpectraSite on any given Site provided that such changes are tendered
to SpectraSite in writing thirty (30) days prior to the construction of the
Tower Facilities which are affected by the change order.
2.4 DEFINITION OF CONSTRUCTION COSTS. As used herein, Construction Costs
shall include those costs which are the responsibility of SpectraSite under this
Agreement and which shall include the costs of materials and labor used in the
construction of the Tower Facilities, payments made to contractors and
subcontractors performing construction work in connection with the Tower
Facilities including but not limited to the cost of materials, labor, expenses
associated with the lease of equipment used in construction, the cost of any
tower lighting system, the cost of all site work required for the Property or
the Easement, the cost incurred in extending utilities to the Property including
the cost incurred in obtaining any grants of easements for ingress, egress or
utilities over real property owned by persons or entities other than the Prime
Lessor, supplies, reasonable travel expenses, cost of overhead incurred by
contractors in the performance of this Agreement, the reasonable cost of
reasonable change orders requested by
4
<PAGE> 5
Amica, fees for building permits, licenses and inspections, fees or assessments
imposed by local, state or federal governmental entities including but not
limited to the FCC and FAA, insurance premiums paid by SpectraSite during the
construction period, recording fees and filing fees, fees and payments on
construction, interim or permanent financing, mortgage brokerage fees, fees of
engineers, surveyors, architects, attorneys and others providing professional
services, brokerage commissions, and premiums for contractor's faithful
performance and or mechanic's lien bonds ("Construction Costs"). Construction
Costs shall not include the cost of Amica's Equipment or any costs associated
with the installation of Amica's Equipment. Amica shall be solely responsible
for purchasing Amica's Equipment, the installation of Amica's Equipment and the
costs associated with these goods and services.
2.5 COVENANT TO CONSTRUCT. SpectraSite shall act with due diligence to
construct the Tower Facilities in accordance with the Plans and Specifications.
SpectraSite shall use due diligence to obtain all necessary permits and approval
of the Plans from all applicable governmental agencies. Amica shall install
Amica's Equipment in accordance with the requirements of Article III of this
Agreement.
2.6 NO BOND REQUIRED. SpectraSite shall have no obligation to furnish a
performance bond or a labor and material payment bond in conjunction with the
work to be performed under this Agreement by SpectraSite.
2.7 COMMENCEMENT OF CONSTRUCTION. SpectraSite shall make reasonable and
diligent efforts to complete the construction of an individual Tower Facilities
within forty-five (45) days after Amica executes an SLA for the Site upon which
the Tower Facilities are to be constructed. SpectraSite shall have no obligation
to commence construction of the Tower Facilities at a Site unless and until a
SLA has been properly executed by Amica for that Site. The completion of
construction of each Tower Facilities shall be subject to delays from causes
beyond reasonable control of SpectraSite or SpectraSite's contractor or for time
needed to perform additional construction covered by any change order requested
by Amica.
2.8 MANNER OF CONSTRUCTION. SpectraSite represents, warrants and agrees
that the Tower Facilities shall be constructed in a good and workmanlike manner
and in accordance with the Plans and Specifications and all applicable federal,
state and local laws, ordinances, rules and regulations. SpectraSite warrants to
Amica that all materials furnished in connection with the construction of the
Tower Facilities will be new unless otherwise specified, and that such
construction will be of good quality in accordance with industry standards, free
from faults and patent defects.
2.9 NO LIENS. SpectraSite shall keep the Tower Facilities free of all
involuntary liens and claims arising out of or related to the performance of the
construction, all liens and claims of any contractor, subcontractor, laborer,
mechanic or materialman for labor performed or material furnished in connection
with the performance of the construction. Notwithstanding the foregoing,
SpectraSite may encumber the Tower Facilities with a lien or mortgage as surety
for construction or permanent financing.
2.10 NOTIFICATION OF COMPLETION. SpectraSite shall notify Amica of: (i)
the expected date for substantial completion of the Tower Facilities at least
fifteen (15) days before that date, and (ii) the date when the Tower Facilities
have been substantially completed by delivery of a notice in substantially the
same form attached hereto as Schedule "IV" ("Notice of Completion"). Within
fifteen (15) business days after the Notice of Completing, Amica shall deliver
to SpectraSite a list of items ("Punch List") that Amica reasonably deems
necessary that SpectraSite
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complete or correct in order for the Tower Facilities to be completed in
accordance with the Plans and Specifications. The Tower Facilities shall be
deemed accepted by Amica (i) if a Punch List is not received by SpectraSite
within fifteen (15) days of the date of Notice of Completion or (ii) upon the
commencement of the installation of Amica's Equipment, as that term is
hereinafter defined in paragraph 3.1, by Amica or by SpectraSite at the request
of Amica. SpectraSite shall complete the items on the Punch List within fifteen
(15) days from receipt of the Punch List from Amica.
III. LEASE OF THE PREMISES
3.1 PREMISES. SpectraSite hereby grants Amica the right to install,
maintain, operate and remove wireless communications equipment and appurtenances
on Tower Facilities owned by SpectraSite which are located on certain property
leased by SpectraSite (by virtue of the transfer of Prime Leases from Amica to
SpectraSite, pursuant to the Asset Purchase Agreement entered into between the
parties or by virtue of the site acquisition services performed by SpectraSite
on behalf of Amica pursuant to Article I of this Agreement) and to install
additional equipment on the ground in the vicinity of the Tower Facilities. Each
individual Tower upon which Amica has attached Equipment and each Property upon
which Amica has constructed installed equipment and other improvements pursuant
to this Master Lease between SpectraSite and Amica shall each be considered and
referred to as a separate site for purposes of this Master Lease ("Site"). Each
Site shall be identified by separate site lease agreements ("SLAs") which shall
be attached hereto when executed and incorporated by reference into the terms of
this Master Lease, a prototype of which is attached hereto as Schedule "V". Each
SLA shall include a legal description of the real property upon which the Tower
is situated (the real property described in the various SLAs as Property may
hereinafter be individually or collectively referred to as the "Property or
Properties"), a legal description of any easements for ingress, egress and
utilities (the real property described in the various SLAs as Easement may
hereinafter be individually or collectively referred to as the "Easement or
Easements"), and description of Amica's equipment which will be located on the
Site ("Equipment"). SpectraSite hereby grants to Amica the right to install,
maintain and operate Amica's wireless communications equipment and appurtenances
on a tower owned by SpectraSite ("Tower"), which is located on certain real
property leased by SpectraSite more particularly described in Exhibit "A"
attached hereto ("Property"); and to install, maintain, operate and remove
Amica's wireless communications equipment, antennas and related devices
(including, but not limited to emergency generators, equipment shelters,
equipment cabinets, all necessary test equipment and any temporary construction
materials) owned by Amica on a seven hundred (_700_) square foot portion of the
Property at a location to be agreed upon in writing between SpectraSite and
Amica (the space occupied by Amica on the Property and the Tower hereinafter
shall be referred to collectively as the "Premises"). SpectraSite also grants
Amica rights of ingress, egress and utilities to the Premises twenty-four (24)
hours per day, seven (7) days per week during the Initial Term and any Renewal
Term (as hereinafter defined in paragraphs 3 and 4) of this Master Lease over
that real property described in Exhibit "B" attached to the SLA ("Easement").
3.2 USE. Amica may use the Premises for the receipt and transmission of
wireless communications signals. The use granted Amica by this Master Lease
shall be non-exclusive and limited in strict accordance with the terms of this
Master Lease and the applicable SLA. SpectraSite shall have the right to
continue to occupy the Property and to enter into lease and license agreements
with others for the Property and the Tower in the sole discretion of
SpectraSite. Amica shall have no property rights or interest in the Premises or
the Easement by virtue of this Master Lease. This Master Lease shall also be
subject to the terms and continued
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existence of the various Prime Leases transferred by Amica to SpectraSite or
acquired by SpectraSite for the benefit of Amica pursuant to Article I of this
Agreement In the event that a Prime Lease expires or is terminated, the SLA for
that Site shall terminate as between SpectraSite and Amica on the effective date
of termination of the Prime Lease. SpectraSite shall give Amica written notice
of such termination or expiration of the Prime Lease as provided herein or as
soon as practicable but no later than sixty (60) days prior to the date of
anticipated termination or expiration.
3.3 INITIAL TERM. The Term of this Master Lease shall extend from the date
of this Agreement and extend until the expiration or earlier termination of the
last SLA governed hereby. The Initial Term of the SLA for each Site shall be for
a period of five (5) years commencing on the earlier of (i) the date that Amica
commences the installation of its Equipment on the Site or (ii) fifteen (15)
days after SpectraSite has forwarded to Amica the Notice of Completion for the
Site or, if a Punch List is forwarded to SpectraSite in accordance with
paragraph 2.10 hereof, fifteen (15) days after SpectraSite completes the items
on such Punch List ("Commencement Date") and expiring on the fifth (5th)
anniversary of the Commencement Date ("Initial Term"). In the event that Amica
reasonably disputes SpectraSite's assertion that all items on a Punch List have
been completed and the uncompleted item precludes Amica's installation or
operation of its equipment, the Commencement Date shall be the date on which
such item has been completed to the reasonable satisfaction of Amica. Prior to
installing the Equipment, Amica shall execute a letter agreement which shall be
attached to each SLA confirming the calendar date which the parties understand
to be the Commencement Date for each SLA.
3.4 RENEWAL TERMS. Each SLA shall be renewed, without the requirement of
notice, for four (4) additional five (5) year terms (each a "Renewal Term")
unless Amica shall serve written notice of non-renewal to SpectraSite which
notice shall be tendered by Amica not less than six (6) months prior to the end
of the then existing term of the SLA. Each Renewal Term shall be on the same
terms and conditions as set forth in this Master Lease except that consideration
for shall increase as provided in paragraph 3.5(b).
3.5 CONSIDERATION.
(a) Initial Term. During the Initial Term, Amica shall pay
monthly to SpectraSite as consideration for each SLA the sum of Five Hundred
Fifty and No/100 Dollars ($550.00) plus a share of SpectraSite's monthly rental
cost with respect to the Site, pursuant to the terms of respective Prime Leases
("Rent"). In addition, Rent shall include One Hundred Twenty-Five and No/100
Dollars ($125.00) per microwave dish installed and owned by Amica at a center
line height greater than 150 feet and One Hundred and No/100 Dollars ($100.00)
per microwave dish installed and owned by Amica at a center line height at or
below 150 feet. For the purpose of this Agreement, Amica's share of
SpectraSite's monthly rental cost for each SLA shall equal SpectraSite's monthly
rental cost divided by the total number of carriers at each site (including
Amica). In the event that the Commencement Date is other than the first day of
the calendar month, Rent shall be prorated for that month for the number of days
remaining in that month. The Rent shall be paid in advance. The first monthly
payment shall be due on the Commencement Date. In the event that the Rent paid
by Amica to SpectraSite shall be due without set-off notice or demand from
SpectraSite to Amica. Any Rent or other sum not received by SpectraSite within
ten (10) days of the date when due shall be subject to a late penalty of five
percent (5%) of the amount which is overdue.
(b) Renewal Term. In the event Amica exercises the option(s) to
renew this Master Lease as provided for in paragraph 3.4, the Rent applicable to
such Renewal Term shall be
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paid monthly in advance beginning on the first day of the respective Renewal
Term in accordance with the following schedule:
First Renewal Term Rent, plus 15%
Second Renewal Term First Renewal Term Rent, Plus 15%
Third Renewal Term Second Renewal Term Rent, Plus 15%
Fourth Renewal Term Third Renewal Term Rent, Plus 15%
3.6 WARRANTY OF TITLE AND QUIET ENJOYMENT. SpectraSite warrants that (i)
SpectraSite leases the Property and operates the Tower; and (ii) SpectraSite has
full right to make and perform this Master Lease subject to the terms, covenants
and conditions of the Master Lease. This Master Lease shall be subordinate and
inferior to the Prime Lease and any mortgage or lien which currently or
hereafter encumbers the Property or the Tower.
3.7 IMPROVEMENTS BY AMICA.
(a) Plans, Structural Analysis and RF Analysis. Prior to the
commencement of any construction or installation on the Premises by Amica, Amica
shall furnish, for review and approval by SpectraSite, which approval shall not
be unreasonably withheld, plans and specifications which may be required by
SpectraSite for such construction or installation of the improvements and the
Amica shall not commence the construction or installation on the Premises until
such time as Amica has received written approval of the plans and specifications
from SpectraSite; provided, however, that such approval shall be deemed given
unless denied, in writing, within thirty (30) days of the submission of Amica's
plans and specifications to SpectraSite. Amica shall use a construction firm
approved by SpectraSite, which approval shall not be unreasonably withheld, for
any construction activities to be conducted by Amica on the Property and the
Easement and the installation of Amica's equipment on the Tower. Amica shall
upon the written request of SpectraSite conduct at Amica's sole cost and expense
a structural analysis and wind load analysis of the Tower which includes any
existing loads and the load of Amica's antennas, cabling and appurtenances. Upon
the written request of SpectraSite, Amica shall conduct at Amica's sole cost and
expense a radio frequency interference analysis ("RF Analysis") of the Equipment
with all other equipment which is on the Tower as of the Commencement Date.
Amica shall use the company of SpectraSite's choice for structural analysis, RF
Analysis and the design and construction of platforms, antenna systems, cable
runs and any other modification of any type to the Premises and Amica shall be
solely responsible for and shall indemnify SpectraSite from all costs and
expenses associated with these materials and services. Amica shall be
responsible for securing all building permits from any and all applicable
governmental authorities prior to the commencement of any construction or
installation on the Premises. Copies of the construction permit issued to Amica
shall be provided to SpectraSite.
(b) Equipment. A description of the Equipment owned or operated by
Amica which Amica may locate on the Premises are attached to the SLA as Exhibit
"C". SpectraSite hereby grants Amica reasonable access to the Tower and the
Premises for the purpose of installing, upgrading, and maintaining the Equipment
and appurtenances. Amica shall be responsible for all site work to be done on
the Premises pursuant to this Master Lease. Amica shall provide all materials
and shall pay for all labor for the construction, installation, operation,
maintenance and repair of the Equipment. Amica shall not construct or install
any equipment or improvements on the Premises other than which are described in
Exhibit "C" or alter the radio frequency of operation of the Equipment without
first obtaining the prior consent of SpectraSite which consent shall not be
unreasonably withheld. In the event that the proposed installation does not
increase the area occupied on or in the Tower by the Equipment or increase the
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structural load or wind load of the Equipment on the Tower or cause Amica to
occupy any ground space outside its 700 square foot area, SpectraSite may not
condition such consent upon an increase in Rent. Otherwise, SpectraSite may
condition such consent upon an increase the Rent payable hereunder. The
Equipment shall remain Amica's exclusive personal property throughout the term
and upon termination of the the SLA for a particular Site. Amica shall have the
right to remove all Equipment at Amica's sole expense on or before the
expiration or earlier termination of the applicable SLA; provided, Amica repairs
any damage to the Property or the Tower caused by such removal. If Amica does
not remove the Equipment on or prior to the expiration or termination of the
applicable SLA, Amica shall remove such Equipment within a reasonable period
thereafter provided Amica pays to SpectraSite 150% of the Rent in effect during
such holdover period. In the event that Amica fails to remove the Equipment
within sixty (60) days following termination of the SLA attributable to the
particular Site, SpectraSite may remove such equipment at Amica's expense
without liability to Amica for any damage occasioned by such removal.
(c) Compliance with Governmental Rules. All work shall be performed
by Amica or Amica's employees, contractors or agents in a good and workmanlike
manner. SpectraSite shall be entitled to require strict compliance with the
plans and specifications approved by SpectraSite pursuant to paragraph 8(a),
including specifications for the grounding of Amica's equipment and antennas.
All construction, installations and operations in connection with this Master
Lease by Amica shall meet with all applicable Rules and Regulations of the FCC,
FAA and all applicable codes and regulations of the city, county, and state
concerned. SpectraSite assumes no responsibility for the licensing, operation
and maintenance of the Equipment. Amica has the responsibility of carrying out
the terms of Amica's FCC license with respect to tower light observation and
notification to the FAA if those requirements as imposed on Amica are in excess
of those required of SpectraSite. Amica covenants that the Equipment and the
construction, installation, maintenance and operation thereof shall not damage
the Tower or improvements or interfere with the use of the Tower by SpectraSite.
3.8 UTILITIES. All utility services installed on the Premises for the use
or benefit of Amica shall be made at the sole cost and expense of Amica and
shall be separately metered from SpectraSite's utilities. Amica shall be solely
responsible for the payment of utility charges including connection charges and
security deposits incurred by Amica.
3.9 TAXES. Except as provided immediately below, SpectraSite shall pay all
real property taxes SpectraSite is obligated to pay under the Master Lease.
Amica shall reimburse SpectraSite for any increases in real property taxes which
are paid by SpectraSite as a direct result of Amica's improvements to the
Premises within twenty (20) days after the receipt by Amica of a bill for such
taxes from SpectraSite. As a condition of Amica's obligation to pay such tax
increases, SpectraSite shall provide to Amica the documentation from the taxing
authority, reasonably acceptable to Amica, indicating the increase is due to
Amica's improvements.
3.10 INTERFERENCE.
(a) BY AMICA. Amica agrees to install equipment of types and radio
frequencies which will not cause interference which materially and adversely
affects communications operations being conducted from the Property or the Tower
or other occupants of the Property or the Tower which are in place as of the
Commencement Date. Amica further agrees to abide by any covenant regarding
interference which is contained in the Prime Lease. Amica also covenants that
the equipment installed by Amica shall comply with all applicable laws,
ordinances and regulations including but not limited to those regulations
promulgated by the
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FCC. In the event the Equipment causes such interference, Amica will take all
steps necessary to correct and eliminate such interference. If such interference
cannot be eliminated within forty-eight (48) hours after receipt by Amica of
notice from SpectraSite describing the existence of such interference, Amica
shall temporarily disconnect the electric power and shut down the Equipment
(except for intermittent operation for the purpose of testing, after performing
maintenance, repair, modification, replacement, or other action taken for the
purpose of correcting such interference) until such interference is corrected.
If such interference is not corrected to the satisfaction of SpectraSite and the
other occupant which has experienced such interference within fifteen (15) days
after receipt by Amica of such prior written notice from SpectraSite of the
existence of interference, that SLA shall at the option of SpectraSite then
terminate without further obligation on either part except as may be
specifically enumerated herein and Amica agrees to then remove the Equipment
from the Premises.
(b) BY OTHER CARRIERS. SpectraSite agrees that it will obtain a
non-interference covenant from any other carriers or tenants substantially
similar to the covenant set forth in Paragraph 3.10(a) above and will take all
steps reasonably necessary to enforce said covenant.
(c) SpectraSite warrants to Amica the use and quiet enjoyment of each Site
subject to the terms, covenants and conditions of this Agreement, the Prime
Lease and any matters which are filed of public record affecting the Property.
3.11 MAINTENANCE AND REPAIRS.
(a) Amica shall perform all repairs necessary or appropriate to
maintain the Equipment on or about the Premises or located on any appurtenant
rights-of-way or access to the Premises in good and tenantable condition,
reasonable wear and tear, damage by fire, the elements or other casualty
excepted. In the event that Amica fails to do so, upon reasonable advance notice
to Amica, SpectraSite may take whatever action it deems reasonable and necessary
to prevent damage to property or person including, but not limited to,
disconnecting electrical service to the Equipment and removing the Equipment
from the Premises at Amica's expense. Damage to the Equipment resulting from the
acts or omissions of SpectraSite shall be repaired by SpectraSite at
SpectraSite's cost and expense, or at the option of Amica, SpectraSite shall
reimburse Amica for the actual costs incurred as evidenced by adequate
documentation by Amica in repairing such damage or replacing such Equipment.
(b) SpectraSite, at SpectraSite's sole cost and expense, shall
maintain the Tower, and any other portions of the Property and improvements
thereto to the extent required to be maintained by SpectraSite pursuant to the
Master Lease, in good order and repair, wear and tear, damage by fire, the
elements or other casualty excepted. Damage to the Tower or the equipment or
improvements of SpectraSite or others located on the Property or the Tower,
which results from the acts or omissions of Amica shall be repaired by Amica at
Amica's cost and expense, or at the option of SpectraSite, Amica shall reimburse
SpectraSite for the actual costs incurred as evidenced by adequate documentation
by SpectraSite in repairing such damage or replacing such equipment or
improvements.
3.12 TOWER MARKING AND LIGHTING REQUIREMENTS. SpectraSite shall be
responsible for compliance with any applicable marking and lighting requirements
of the FAA and the FCC provided that if the requirement for compliance results
from the presence of the Equipment on the Tower, Amica shall pay the costs and
expenses therefor (including any lighting automated alarm system so required).
SpectraSite does hereby agree to indemnify and hold Amica harmless from any and
all losses, damages, fines, penalties or costs of any kind which may arise from
the improper design, maintenance or operation of the Tower or tower lighting
systems, or which may be imposed by the FAA, FCC or any other federal, state or
local agency arising from the
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improper design, maintenance or operation of the Tower or tower lighting systems
unless such obligations arise as a result of the installation of the Equipment
on the Tower. Should Amica be cited because the Premises are not in compliance
and, should Amica fail to cure the conditions of noncompliance, SpectraSite may
either terminate the applicable SLA or, with prior notice from SpectraSite to
Amica and allowing Amica a reasonable opportunity to cure, proceed to cure the
conditions of noncompliance at Amica's expense. Amounts of all expenses to cure
such conditions of non-compliance, together with any such fine or citation paid
by Amica, may be deducted by Amica from the Rent.
3.13 MECHANICS' LIENS. Amica shall not permit any mechanics',
materialmen's, contractors' or subcontractors' liens arising from any
construction work, repair, restoration or removal or any other claims or demands
to be enforced against the Premises or any part thereof. SpectraSite shall have
the right at any time to post and maintain upon the Premises such notices as may
be necessary to protect SpectraSite against liability for all such liens and
encumbrances. Amica shall give SpectraSite written notice prior to the
commencement of any work or the delivery of any materials connected with such
work or construction, repair, restoration, or removal of materials on the
Premises. SpectraSite shall assume no liability for the payment of materials or
labor which accrue in the installation of Amica's improvements upon the Premises
and no mechanics' or materialmen's liens for Amica's improvements shall attach
to the interest of SpectraSite in the Premises.
3.14 INDEMNIFICATION. Amica shall exonerate, hold harmless, indemnify, and
defend SpectraSite from any and all claims, obligations, liabilities, costs,
demands, damages, expenses, suits or causes of action, including costs and
reasonable attorneys' fees, which may arise out of (i) any injury to or the
death of any person; or (ii) any damage to property, if such injury, death or
damage arises out of or is attributable to or results from the negligent or
intentional acts or omissions of Amica or Amica's principals, employees, agents
or independent contractors relating to or arising from our out of Amica's use
and operation of the Premises.
3.15 FINANCING AGREEMENTS. Amica may, upon written notice to SpectraSite,
mortgage or grant a security interest in and to the Equipment to any such
mortgagees or holders of security interests including their successors and
assigns (hereinafter collectively referred to as "Secured Parties").
3.16 ENVIRONMENTAL INDEMNIFICATION.
(a) Amica, its heirs, grantees, successors, and assigns shall
indemnify, defend, reimburse and hold harmless SpectraSite from and against any
and all environmental damages, caused by activities conducted on the Premises by
Amica, and (i) arising from the presence of any substance, chemical or waste
identified as hazardous, toxic or dangerous in any applicable federal, state or
local law or regulation including petroleum or hydrocarbon based fuels such as
diesel, propane or natural gas (collectively, "Hazardous Materials") upon, about
or beneath the Premises or migrating to or from the Premises, or (ii) arising in
any manner whatsoever out of the violation of any environmental requirements
pertaining to the Premises and any activities thereon. Amica covenants that it
shall not nor shall Amica allow its employees, agents or independent contractors
to treat, store or dispose of any Hazardous Materials on the Premises or the
Property.
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(b) SpectraSite, its heirs, grantees, successors, and assigns shall
indemnify, defend, reimburse and hold harmless Amica from and against any and
all environmental damages arising from (i) the presence of Hazardous Materials
upon, about or beneath the Premises or migrating to or from the Premises, or
(ii) arising in any manner whatsoever out of the violation of any environmental
requirements pertaining to the Premises and any activities thereon, either of
which conditions are solely attributable to activities conducted on the Property
by SpectraSite.
3.17 LIABILITY INSURANCE.
(a) Amica and SpectraSite shall each carry during the term of this
Master Lease, at their own cost and expense, respectively, the following
insurance: (i) "All Risk" property insurance which insures their respective
property for such property's full replacement cost; and (ii) Comprehensive
general liability insurance with a commercial general liability endorsement
having a minimum limit of liability of $2,000,000, with a combined limit for
bodily injury and/or property damage for any one occurrence which contains an
endorsement providing for contractual liabilities coverage, and (iii)
excess/umbrella coverage of $2,000,000.
(b) SpectraSite and Amica shall each name the other as an additional
insured under each party's own liability policy, respectively, and require each
party's own insurance company, respectively, to endeavor to give at least thirty
(30) days' written notice of any reduction in coverage or termination or
cancellation of the policy to the additional insured. A certificate of such
insurance, together with such endorsement as to prior written notice of
termination or cancellation, shall be delivered to the additional insured within
thirty (30) days from the execution of this Master Lease and before the
expiration of any term of such insurance from an insurance company authorized to
do business in the state in which the Property is located.
3.18 SUBROGATION.
(a) In General. All insurance policies required under this Master
Lease shall contain a waiver of subrogation provision.
(b) Mutual Release. SpectraSite and Amica each release the other and
their respective representatives from any claims by them or any one claiming
through or under them by way of subrogation or otherwise for damage to any
person or to the Premises and to the fixtures, personal property, improvements
and alterations in or on the Premises that are caused by or result from risks
insured against under any insurance policy carried by them and required by this
Master Lease; provided that such releases shall be effective only if and to the
extent that the same do not diminish or adversely affect the coverage under such
insurance policies. SpectraSite shall be named as an additional insured on any
insurance policy procured by Amica pursuant to this Master Lease and Amica shall
be named as an additional insured on any insurance policy procured by
SpectraSite pursuant to this Master Lease.
3.19 DESTRUCTION OR CONDEMNATION. If the whole or any substantial part of
the Premises shall be taken by any public authority under the power of eminent
domain so as to interfere with Amica's use and occupancy thereof, then the
applicable SLA shall cease on the part so taken on the date of possession by
such authority of that part, and any unearned Rent paid in advance of such date
shall be refunded by SpectraSite to Amica within thirty (30) days of such
possession, and Amica shall have the right to terminate the applicable SLA upon
written notice to SpectraSite, which notice shall be delivered by Amica within
thirty (30) days following the date notice is received by Amica of such taking
or possession. If Amica chooses not to terminate the
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applicable SLA, the Rent shall be reduced or abated in proportion to the actual
reduction or abatement of Amica's use of the Premises.
3.20 DEFAULT BY AMICA. The occurrence of any of the following instances
shall be considered to be a default or a breach of this Master Lease by Amica:
(i) any failure of Amica to pay the Rent or any other charge
for which Amica has the responsibility of payment under this Master Lease, which
failure is not cured within fifteen (15) days of receipt by Amica of written
notice from SpectraSite of the existence of such default;
(ii) any failure of Amica to perform or observe any term,
covenant, provision or conditions of this Master Lease which failure is not
corrected or cured by Amica within thirty (30) days of receipt by Amica of
written notice from SpectraSite of the existence of such a default; except such
thirty (30) day cure period shall be extended as reasonably necessary to permit
Amica to complete a cure so long as Amica commences the cure within such thirty
(30) day cure period and thereafter continuously and diligently pursues and
completes such cure;
(iii) Amica shall become bankrupt, insolvent or file a
voluntary petition in bankruptcy, have an involuntary petition in bankruptcy
filed against Amica which cannot be dismissed by Amica within sixty (60) days of
the date of the filing of the involuntary petition, file for reorganization or
arrange for the appointment of a receiver or trustee in bankruptcy or
reorganization of all or a substantial portion of Amica's assets, or Amica makes
an assignment for such purposes for the benefit of creditors;
(iv) this Master Lease or Amica's interest herein or Amica's
interest in the Premises are executed upon or attached; or
(v) an attempt by Amica or anyone claiming through Amica to
encumber SpectraSite's interest in the Tower or the Property.
3.21 REMEDIES. In the event of a default by Amica under the terms of
paragraph 3.20 of this Master Lease and after Amica's failure to cure such
default within the time allowed Amica to cure such default, then SpectraSite
may, in addition to all other rights or remedies SpectraSite may have hereunder
at law or in equity, terminate this Master Lease by giving written notice to
Amica stating the date upon which such termination shall be effective,
accelerating and declaring to be immediately due and payable all Rents which
would have otherwise been due SpectraSite absent a breach of the Master Lease by
Amica, terminate electrical power to the Equipment, and remove the Equipment
without being deemed liable for trespass or conversion or damage to the
Equipment occasioned by such removal and store the same at Amica's sole cost and
expense.
3.22 ENTIRE AGREEMENT. This Master Lease contains the entire agreement
between the parties hereto and supersedes all previous negotiations leading
thereto. This Master Lease may be modified only by an agreement in writing
executed by SpectraSite and Amica.
3.23 SUCCESSORS AND ASSIGNS. This Master Lease shall be binding upon and
inure to the benefit of the legal representatives, heirs, successors, and
assigns of SpectraSite and Amica.
3.24 SUBORDINATION. This Agreement and any option or right of first
refusal granted hereunder, at SpectraSite's option, shall be subordinate to any
ground lease, mortgage, deed of
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trust or other encumbrance now or hereafter placed upon the Premises and to any
and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. If any
ground lessor, mortgagee, beneficiary or other lienholder shall elect to have
this Agreement and any such option or right of first refusal prior to the lien
of the ground lease, mortgage, deed of trust or other encumbrance, and shall
give written notice thereof to Amica, this lease and such option or right of
first refusal shall be deemed to be prior to such ground lease, mortgage, deed
of trust or other encumbrance, whether this Agreement or such option or right of
first refusal is dated prior or subsequent to the date of such ground Agreement,
mortgage, deed of trust or other encumbrance or the date of the recording
thereof. Amica agrees to execute any documents reasonably requested and required
to effect an attornment or subordination or to make this Agreement and such
option or right of first refusal prior to the lien of any ground Agreement,
mortgage, deed of trust or other encumbrance.
3.25 NOTICES. All notices or demands by or from SpectraSite to Amica, or
Amica to SpectraSite, shall be in writing. Such notices or demands shall be
mailed to the other party at the following address:
SpectraSite: SpectraSite Construction
8000 Regency Park, Suite 570
Cary, NC 27511
Attention: Steve Clark
with a copy to: Lewellen & Frazier, PLC
Plaza West Building
415 North McKinley, Suite 1240
Little Rock, Arkansas 72205
Attn: Todd A. Lewellen
Amica: Amica Wireless Phone Service, Inc.
Attn: Bob George
327 E. College Street, Suite 381
Iowa City, IA 52240
with a copy to: Timothy J. Krumm
Meardon, Sueppel, Downer & Hayes P.L.C.
122 South Linn Street
Iowa City, IA 52240
3.26 ASSIGNMENTS AND SLAS. Amica shall not voluntarily, involuntarily or
by operation of law assign, mortgage, sublet or otherwise transfer or encumber
all or any part of Amica's interest in this Agreement, any SLA, or in the
Premises without SpectraSite's prior written consent, which consent shall not be
unreasonably withheld. If Amica desires at any time to assign or otherwise
transfer this Agreement or to sublet the Premises or any portion thereof, it
shall first notify SpectraSite of its desire to do so and shall submit in
writing to SpectraSite (i) the name of the proposed sublessees or assignee; (ii)
the, terms and provisions of the proposed sublease or assignment; and (iii) such
financial and other information as SpectraSite may reasonably request concerning
the proposed sublessees or assignee. At any time within fifteen (15) days after
SpectraSite's receipt of the information specified, SpectraSite shall by written
notice to Amica consent or refuse to consent to the subletting or assignment
upon the terms and to the sublessees or assignee proposed by Amica: Amica may,
within ninety (90) days after the date
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of SpectraSite's consent, enter into a valid assignment or sublease of the
Premises or portion thereof upon the terms and conditions described in the
information required above to be furnished by Amica to SpectraSite, or upon
other terms not more favorable to Amica; provided, however, that any material
change in such terms shall be subject to SpectraSite's consent.
3.27 SALE OF TOWER FACILITIES BY SPECTRASITE. SpectraSite may sell,
transfer or assign its interest in this Agreement or all or part of the Tower
Facilities governed by this Agreement upon notice to Amica provided that such
sale, transfer or assignment shall be subject to the terms, covenants and
conditions of this Agreement.
IV. GENERAL PROVISIONS
4.1 REPRESENTATIONS AND WARRANTIES OF AMICA. Amica represents and warrants
to SpectraSite that:
(a) Organization, Good Standing and Authority. It is a corporation,
duly organized, validly existing and in good standing under the laws of and has
the requisite corporate power and authority to enter into and perform this
Agreement and Amica is duly qualified to do business in the state of Illinois.
(b) Authorization and Validity of Agreement. That Amica's execution
and delivery of this Agreement have been authorized by the Board of Directors of
Amica, and no further action on the part of Amica is necessary to authorize this
Agreement or the consummation of the transactions contemplated herein. This
Agreement constitutes the valid and binding obligation of Amica duly enforceable
in accordance with its terms.
(c) No Breach of Other Instruments. That there is no contract or
agreement or other instrument to which Amica is a party or by which Amica or its
assets are bound which prohibits the execution or delivery by Amica of this
Agreement or the performance or observance by Amica of any term or condition of
this Agreement and, subject to the fulfillment of all conditions set forth
therein, neither execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will violate any term or provision of
any such contract, agreement, or instrument.
(d) No Violation of Law or Order. That subject to the fulfillment of
all conditions set forth herein, neither the execution and delivery of this
Agreement nor transactions contemplated hereby, shall result in the violation by
Amica of any, law, regulation, judgment or order of any court or governmental
authority applicable to Amica or result in a breach of the terms of this or any
other agreement to which Amica is a party.
4.2 DELEGATION OF DUTIES BY SPECTRASITE. Amica agrees that any obligation
or duty required to be performed by SpectraSite by this Agreement may be
delegated by SpectraSite to independent contractors ("Subcontractor") and a
description of the services to be performed by the Subcontractor. SpectraSite
shall be responsible for the management of the various independent contractors
engaged by SpectraSite. Amica acknowledges that it has pre-approved certain
independent contractors to perform services under this Agreement including P & D
Antenna for the preparation of the Plans and Specifications, the management of
construction of the Tower Facilities, surveys, environmental assessment, and
geotechnical investigations and analyses.
4.3 MISCELLANEOUS.
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(a) Successors and Assigns. The terms, covenants and conditions
contained in this Agreement shall be binding upon and inure to the benefit of
the parties hereto, and also their respective heirs, executors, administrators,
personal representatives, successors and assigns subject to the provisions of
paragraph 3.26 of this Agreement relating to restrictions upon sale, assignment
or subletting of this Agreement.
(b) Integration. It is understood that there are no oral agreements
or representations between the parties hereto affecting this Agreement, and this
Agreement supersedes and cancels any and all previous negotiations,
arrangements, agreements or representations and understandings, if any, between
the parties hereto with respect to the subject matter thereof. There are no
other representations or warranties between the parties and all reliance with
respect to representations is solely upon the representations and agreements
contained in this document.
(c) Headings. The Headings and paragraph titles herein are for
convenience only and do not in any way define, limit or construe the contents of
such Paragraphs.
(d) Severability. It is agreed that if any provision of this
Agreement shall be determined to be void by any court of competent jurisdiction,
then such determination shall not affect any other provisions of this Agreement
and all such other provisions shall remain in full force and effect; and it is
the intention of the parties hereto that if any provision of this Agreement is
capable of two interpretations, one of which would render the provision void and
the other of which would render the provision valid then the provision shall
have the meaning which renders it valid.
(e) Force Majeure. Except as otherwise provided in this Agreement,
any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts
of God, inability to obtain labor or materials or reasonable substitutes
therefor governmental restrictions, governmental controls, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other causes
beyond the reasonable control of the party obligated to perform, shall excuse
the performance by such or a period equal to any such delay or stoppage.
(f) Holding Over. If Amica remains in possession of the Premises
after the termination of this Agreement without the execution of a new
Agreement, Amica shall be deemed to be occupying the Premises as a tenant from
month-to-month at the last applicable monthly rental provided for herein,
subject to all the other conditions, provisions and obligations of this
Agreement insofar as the same are applicable to a month-to-month tenancy.
(g) Cessation of SpectraSite's Liability Upon Transfer. In the event
of any transfer of the Premises by SpectraSite, SpectraSite shall be relieved
from and after the date of such transfer of all liability with respect to
SpectraSite's obligations thereafter to be performed, provided that any funds in
the hands of SpectraSite (or such grantor) at the time of such transfer in which
Amica has an interest, shall be delivered to the grantee. Subject to the
foregoing, the obligations contained in the Agreement to be performed by
SpectraSite shall be binding upon SpectraSite's successor and assigns only
during their respective periods of ownership.
(h) Successor Liability. The liability of the mortgagee, trustee or
purchaser at such foreclosure sale or the liability of a subsequent owner
designated as SpectraSite under this
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Agreement shall exist only so long as such trustee, mortgagee, purchaser or
owner is the owner of the Premises and such liability shall not continue or
survive after further transfer of ownership.
(i) Attornment. Upon reasonable request of the mortgagee, Amica will
attorn, as lessee under this Agreement, to the purchaser at any foreclosure sale
thereunder, or if any ground or underlying Agreement be terminated for any
reason, Amica will attorn, as Amica under this Agreement, to the ground lessor
under the ground Agreement and will execute such instruments as may be necessary
or appropriate to evidence such attornment.
(j) Right of Approval by Secured Party. This Agreement may not be
modified or amended so as to reduce the Base Rent, as adjusted, or shorten the
Term or so as to adversely affect in any other respect to any material extent
the rights or obligations of SpectraSite, nor shall this Agreement be canceled
or surrendered, without the prior written consent, in each instance, of any
mortgagee or secured party having an interest in the Tower Facilities.
(k) Right to Modify. Should the ground lessor or the mortgagee
require a modification or modifications of this Agreement which will not bring
about any increase in the financial obligations of Amica under this Agreement or
in any other way substantially change the rights and obligations of Amica
hereunder, then and in such event, Amica shall execute such documents or
agreements as may be necessary to so modify the Agreement.
(l) Certain Rules of Construction. Notwithstanding the fact that
certain references elsewhere in this Agreement to acts required to be performed
by Amica hereunder, or to breaches or defaults of this Agreement by Amica, omit
to state that such acts shall be performed at Amica's sole cost and expense, or
omit to state that such breaches or defaults by Amica are material, unless the
context implies to the contrary, each and every act to be performed or
obligation to he fulfilled by Amica pursuant to this Agreement shall be
performed or fulfilled at Amica's sole cost and expense, and all breaches or
defaults by Amica hereunder shall be deemed material. Amica shall be fully
responsible and liable for the observance and compliance by concessionaires of
and with all the terms and conditions of this Agreement, which terms and
conditions shall be applicable to concessionaires as if they were the Amica
hereunder and failure by a concessionaire fully to observe and comply with the
terms and conditions of this Agreement shall constitute a default hereunder by
Amica.
(m) Counterparts. This Agreement may be executed in counterparts
with the same effect as if both parties hereto had signed the same document.
Both counterparts shall be construed together and shall constitute one (1)
Agreement.
(n) Interpretation. The parties acknowledge that the draftsmanship
of this Agreement was a collective effort by both parties who were each
represented by counsel in the negotiation hereof. This Agreement shall not be
construed either for or against SpectraSite or Amica, but this Agreement shall
be interpreted in accordance with the general tenor of the language in an effort
to reach an equitable result.
(o) Governing Law and Venue. This Agreement is to be governed by
and construed in accordance with the laws of the state in which the property is
situated. Any suit brought hereon shall be brought in the state or federal
courts sitting in Illinois the parties hereto hereby waiving any claim or
defense that such forum is not convenient or proper. Each party
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hereby agrees that any such court shall have in personam jurisdiction over it
and consents to service of process in any manner authorized by Illinois law.
(p) JURY TRIAL. EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT
SHALL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE RELATIONSHIP OF
SPECTRASITE AND AMICA, AMICA'S USE OR OCCUPANCY OF THE PREMISES OR ANY EMERGENCY
OR STATUTORY REMEDY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR
WHETHER IN CONTRACT OR IN TORT OR OTHERWISE.
(q) No Partnership. Amica and SpectraSite agree that their
relationship under this Agreement shall be that of Landlord and Tenant and that
no other relationship including that of a partnership is intended or shall be
created by this Agreement.
(r) Consent. SpectraSite and Amica covenant that whenever their
consent or approval is required under this Agreement said consent shall not be
conditioned or unreasonably withheld or delayed.
(s) Conflict with SLA. In the event of any conflict or inconsistency
between the terms of this Master Agreement and any SLA governing a particular
Site, the terms of the SLA shall govern the relationship of the parties for that
particular Site.
(t) Non-Waiver. Failure of either party to insist on strict
performance of any of the conditions, covenants, terms or provisions of this
Agreement, or to exercise any of its rights hereunder, shall not waive such
rights, but both parties shall have the right to enforce such rights at any time
and take such action as may be lawful or authorized hereunder, either in law or
in equity. The receipt of any sum paid after a breach of this Agreement shall
not be deemed a waiver of such breach unless expressly set forth in writing. Any
waiver of any breach of this Agreement must be specifically set forth in
writing.
IN WITNESS WHEREOF, the SpectraSite and Amica have executed this Tower
Attachment Agreement as of the date and year first above written.
AMICA WIRELESS PHONE SERVICES, INC.:
Amica Wireless Phone Services, Inc.,
an Illinois corporation
By:
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Title:
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Date:
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SPECTRASITE:
SpectraSite Communications, Inc.,
a Delaware corporation
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By:
----------------------------------------------
Title:
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Date:
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SCHEDULE "I"
SITE ACQUISITION SERVICES
SCOPE OF WORK
Following is the proposed Scope of Services for the build-out in the selected
BTA's. These outlined procedures are designed to reflect site acquisition from
delivery of search area by RF Engineering through delivery by SpectraSite of an
approved site to the construction group.
I. INITIAL SEARCH
Receive search area from Project Director or equivalent. Review with RF engineer
if appropriate.
- Review and identify zoning categories and boundaries within the
search area. Identify critical dates for zoning application
filings and hearing dates.
- Drive search area. Look for existing towers or other structures
of appropriate height in or around search area limits.
- Identify appropriate property owners within the search area
through research of tax maps.
- Contact any appropriate existing tower owners, or building top
owners first. Then contact remaining property owners.
- Investigate all appropriate lease or purchase option. Provide
copies of sample lease or purchase documents where appropriate.
II. SITE OPTION REPORT
Provide a Site Option Report to ______________ director or equivalent. This Memo
should include the following information on a minimum of two sites:
(See attached sample document)
- Regarding Zoning
Identify potential opposition issues
Identify required approvals and associated application and hearing
dates, etc.
- Establish potential lease/purchase price and terms
- Contact name, phone number
- Topographic map representing each potential site, preliminary GPS
coordinates and approximate elevation
- proposed tower height and recommended type
- Site address and directions to site
- Site address and directions to site
- Property size
- Photographs of site and easements
- Utility location information
- Signed Option if possible at this time (assuming ________ is
using the Option/Lease or Purchase method of securing prospective
properties)
Arrange visits as necessary for team decision making
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III. SITE SELECTION
- Project Director will select a primary and an alternate site to
be purchased (or leased).
- Proceed with negotiations for first and second site choices.
Consult with approved attorneys regarding nay legal changes to
document. Consult Project Director regarding significant deviations
from approved business terms.
- Request preliminary title review for primary site.
- Coordinate with construction group to confirm necessary access
easements for primary site.
- Submit lease/purchase contract package to Project Director for
review and signature. This package should include the following:
Lease/purchase contracts, and access.
- Obtain final copy of title report and insurance for primary site.
Coordinate any curative measures as needed.
- Environmental Phase I
- FAA consultant study and FAA application (if necessary)
- FCC tower regulations (if necessary)
ZONING
- Coordinate the completion and submission of appropriate
applications for zoning, special use permits, etc. for primary site.
- Coordinate the organization of neighborhood meetings for addressing
public opposition as needed.
- Coordinate preparation of appropriate presentation materials.
- Coordinate other professional presentations as needed.
- Coordinate attendance of necessary individuals at all zoning
meetings.
MONITORING TIMELINE
- At least one weekly contact should be made with RF engineer to
discuss the options until site is approved. SpectraSite designed
timeline will be used to establish coordinated flow of project
progress.
- Close purchase or lease as necessary.
- Notify Project Director (in written and in verbal form) when
project is complete and construction may begin.
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SITE INFORMATION PACKAGE
Prior to construction, provide ___________ with one copy of a Project
Completion File Including:
- Original lease/purchase agreement
- Original easement agreements
- All correspondence
- Site Option Report/photos, etc.
- Survey
- Geotechnical report
- Environmental report
- Title report and insurance policy
- FAA consultant study
- FAA approval
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SCHEDULE II
OPTION AND GROUND LEASE AGREEMENT
THIS OPTION AND GROUND LEASE AGREEMENT ("Agreement") is made this ________
day of ____________, 199___, by and between _______________________ ("OPTIONOR")
and SPECTRASITE COMMUNICATIONS, INC. ("OPTIONEE").
I. OPTION TO LEASE
1. GRANT OF OPTION. For good and valuable consideration and the mutual
promises herein set forth Optionor hereby gives and grants unto Optionee and its
assigns, an exclusive and irrevocable option to lease a certain parcel or
parcels of real property more particularly described on Exhibit "A" attached
hereto ("Property") together with an easement twenty-four (24) hours per day
seven days per week for ingress, egress and utilities for the duration of the
lease on the property which is more particularly described on Exhibit "B"
attached hereto ("Easement"). Optionor agrees and acknowledges that Optionee may
at Optionee's sole cost and expense have a metes and bounds survey prepared of
the Property and the Easement and that the legal description of the Property and
the Easement as shown on the survey shall thereafter become the legal
description of the Property and the Easement.
2. OPTION INITIAL TERM. The initial term of this Option shall be for six
(6) months from the date this Option is executed by Optionee ("Option Initial
Term").
3. CONSIDERATION FOR OPTION. Consideration for the Initial Term of the
Option granted hereunder shall be _________ and ___/100 Dollars ($__________)
("Option Consideration"). This payment by Optionee to Optionor shall be credited
in full to the first year's rental payment due Optionor if this Option is
exercised by Optionee.
4. EXTENSION OF OPTION. This Option can be extended at the discretion of
Optionee for ________ (______) additional period(s) of six (6) months each
("Option Renewal Term(s)") by Optionee paying to Optionor the additional
consideration of ________ and _____ /100 Dollars ($_________) prior to the
expiration of the then existing term of this Option. Any consideration paid by
Optionee to extend the term of this Option shall be credited in full to the
first year's rental due Optionor if this Option is exercised by Optionee.
5. OPTIONOR'S REPRESENTATIONS AND WARRANTIES. As an inducement for
Optionee to enter into and be bound by the terms of this Option, Optionor
represents and warrants to Optionee and Optionee's successors and assigns that:
(a) Optionor has good and marketable title to the Property and the
Easement free and clear of all liens and encumbrances other than those liens and
encumbrances shown on Exhibit "C" attached hereto. Optionee may at Optionee's
sole cost and expense procure an abstract of title or a commitment to issue a
policy of title insurance on the Property. In the event that Optionee objects to
any defect or cloud on title to the Property, Optionee may declare this Option
and any obligation of Optionee to lease the Property or acquire the Easement to
be void and of no further force or effect whereupon this Option shall become
null and void and there shall be no further liability of Optionee to Optionor;
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(b) Optionor has the authority to enter into and be bound by the
terms of this Option;
(c) There are no pending or threatened administrative actions
including bankruptcy or insolvency proceedings under state or federal law,
suits, claims or causes of action against Optionor or which may otherwise affect
the Property; and
(d) The Property is not presently subject to an option, lease or
other contract which may adversely affect Optionor's ability to fulfill its
obligations under this Option and Optionor covenants that it shall not grant an
option or enter into any contract which will affect the Property or the Easement
until this Option expires or is terminated by Optionee.
These representations and warranties of Optionor shall survive the
exercise of the Option and the closing anticipated by the exercise of this
Option.
6. TAXES. Any ad valorem taxes or other special assessment taxes
attributable to the Property and the Easement during the Initial Term and any
Renewal Term of the Option shall be paid by Optionor.
7. LIQUIDATED DAMAGES. In the event the closing does not occur due to a
default or breach of this Option by Optionee, Optionor's damages shall be fixed
and liquidated to the sums paid by Optionee to Optionor as consideration for
this Option. Optionor hereby expressly waives any other remedies it may have for
a breach of this Option by Optionee including specific performance and damages
for breach of contract.
8. INSPECTIONS AND INVESTIGATIONS. Optionor hereby grants to Optionee, its
officers, agents, employees and independent contractors the right and privilege
to enter upon the Property and the Easement at any time after the date of this
Option, to perform or cause to be performed test borings of the soil,
environmental audits, engineering studies and to conduct a survey of the
Property and the Easement. Optionor shall provide Optionee with any necessary
keys or access codes to the Property if needed for ingress and egress, Optionee
shall not unreasonably interfere with Optionor's use of the Property or the
Easement in conducting these activities.
9. FURTHER ACTS. Optionor shall cooperate with Optionee in executing any
documents necessary to protect Optionee's rights under this Option or Optionee's
use of the Property and the Easements and to take such action as Optionee may
reasonably require to effect the intent of this Option. Optionor hereby
irrevocably appoints Optionee or Optionee's agent as Optionor's agent to file
applications on behalf of Optionor with federal, state and local governmental
authorities which applications relate to Optionee's intended use of the Property
including but not limited to land use and zoning applications.
LEASE AGREEMENT
10. EXERCISE OF OPTION. Upon the tender of written notice of Optionee's
intent to exercise the Option, the terms of this Agreement applying to the lease
of the Property and grant of the Easements shall govern the relationship of the
parties and Optionor shall thereafter be referred to as Lessor and Optionee
shall thereafter be referred to as Lessee. The date of the written notice to
exercise the Option shall constitute the commencement date of the Lease
("Commencement
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Date").
11. USE. The Property may be used by Lessee for the transmission and
receipt of wireless communication signals in any and all frequencies and the
construction and maintenance of towers, antennas, or buildings, and related
facilities and activities. Lessor agrees to cooperate with Lessee in obtaining,
at Lessee's expense, all licenses and permits required for Lessee's use of the
Property (the "Governmental Approvals"). Lessee may construct additional
improvements, demolish and reconstruct improvements, or restore replace and
reconfigure improvements at any time during the Initial Term or any Renewal Term
of this Lease.
12. INITIAL TERM. The term of this Lease shall be five (5) years
commencing on the Commencement Date, as that term is defined in paragraph 10,
and terminating on the fifth anniversary of the Commencement Date ("Initial
Term").
13. RENEWAL TERMS. Lessee shall have the right to extend this Lease for
four (4) additional five (5) year terms ("Renewal Terms"). Each Renewal Term
shall be on the same terms and conditions as set forth in this Lease except that
Rent shall increase as provided in paragraph 14(c). This Lease shall
automatically be renewed for each successive Renewal Term unless Lessee notifies
Lessor of Lessee's intention not to renew the Lease at least 30 days prior to
the expiration of the Initial Term or the Renewal Term which is then in effect.
14. CONSIDERATION.
(a) During the Initial Term, Lessee shall pay Lessor the sum of
___________________________ and ___ /100 Dollars ($_______) per annum to be paid
an equal monthly installments of _____________________ and ___/100 ($_______) as
rental ("Rent"). Rent shall be payable on the first day of each month in advance
to Lessor at Lessor's address as specified in Paragraph 27 below;
(b) If this Lease is terminated at a time other than on the
anniversary of the Commencement Date, Rent shall be prorated as of the date of
termination ("Termination Date"), and in the event of termination for any reason
other than nonpayment of Rent, all Rents paid in advance of the Termination Date
for that period after the Termination Date shall be refunded to Lessee; and
(c) In the event that Lessee elects to renew this Lease as provided
in paragraph 13, Rent shall accrue during the Renewal Terms in accordance with
the following schedule:
First Renewal Term ______ per annum
Second Renewal Term ______ per annum
Third Renewal Term ______ per annum
Fourth Renewal Term ______ per annum
15. LESSOR'S REPRESENTATIONS AND WARRANTIES. Lessor represents and
warrants that Lessee's intended use of the Property as a site for the
transmission and receipt of wireless communication signals; for the construction
and maintenance of towers, antennas or buildings; and related facilities
("Intended Use") is not prohibited by any covenants, restrictions, reciprocal
easements, servitudes, subdivision rules or regulations. Lessor further
represents and warrants that there are no easements, licenses, rights of use or
other encumbrances on the Property which will interfere with or constructively
prohibit Lessee's Intended Use of the Property. Lessor further
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represents and warrants that the execution of this Lease by Lessor will not
cause a breach or an event of default of any other agreement to which Lessor is
a party.
16. CONDITIONS SUBSEQUENT. In the event that Lessee's Intended Use of the
Property is actually or constructively prohibited through no fault of Lessee or
the Property is, in Lessee's opinion, unacceptable to Lessee then this Lease
shall terminate and be of no further force or effect and Lessee shall be
entitled to a refund from Lessor of any deposits or Rent paid in advance to
Lessor which sums were paid prior to the date upon which Lessee gives Lessor
notice of its intent to terminate this Lease pursuant to this paragraph.
17. INTERFERENCE. Lessor shall not use, nor shall Lessor permit its
lessees, licensees, invitees or agents to use any portion of adjacent real
property owned by Lessor in any way which interferes with the wireless
communications operations of Lessee. Such interference shall be deemed a
material breach of this Lease by Lessor and Lessor shall have the responsibility
to terminate said interference. In the event any such interference does not
cease or is not promptly rectified, Lessor acknowledges that continuing
interference will cause irreparable injury to Lessee, and Lessee shall have the
right, in addition to any other rights that it may have at law or in equity, to
bring action to enjoin such interference or to terminate this Lease immediately
upon notice to Lessor.
18. IMPROVEMENTS; UTILITIES; ACCESS.
(a) Lessee shall have the right, at Lessee's sole cost and expense,
to erect and maintain on the Property improvements, personal property and
facilities, including without limitation, towers, a structural tower base, radio
transmitting and receiving antennas, communications equipment, an equipment
cabinet or shelter and related facilities (collectively the "Tower Facilities").
The Tower Facilities shall remain the exclusive property of the Lessee
throughout the term and upon termination of this Lease. Lessee shall have the
obligation to remove all of the above ground portions of the Tower Facilities
following any termination of this Lease. Lessor grants Lessee the right to clear
all trees, undergrowth, or other obstructions and to trim, cut, and keep trimmed
and cut all tree limbs which may interfere with or fall upon Lessee's tower or
Lessee's other improvements, communications equipment or Easement rights. Lessor
grants Lessee a non-exclusive easement in, over, across and through other real
property owned by Lessor as reasonably required for construction, installation,
maintenance, and operation of the Tower Facilities. In the event that the tower
to be constructed by Lessee on the Property is a guyed tower, Lessor also grants
Lessee an easement over Lessor's real property during the Initial Term and any
Renewal Term of this Lease for any guy wires and guy wire anchors.
(b) Lessee shall have the right to install utilities, at Lessee's
expense, and to improve present utilities on the Property (including but not
limited to the installation of emergency power generators). Lessee shall have
the right to permanently place utilities on (or to bring utilities across or
under) the Easement to service the Property and the Tower Facilities. In the
event that utilities necessary to serve the equipment of Lessee or the equipment
of Lessee's licensee(s) or sublessee(s) cannot be located within the Easement
for ingress and egress, Lessor agrees to cooperate with Lessee and to act
reasonably in allowing the location of utilities on other real property owned by
Lessor without requiring additional compensation from Lessee or Lessee's
licensee(s) or sublessee(s). Lessor shall, upon Lessee's request, execute a
separate written easement to the utility company providing the service or Lessee
in a form which may be filed of record evidencing this right.
(c) Lessor represents and warrants to Lessee that Lessee shall at
all times
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during this Lease enjoy ingress, egress, and access from the Property to an open
and improved public road which presently exists and which Easement shall be
adequate to service the Property and the Tower Facilities. If no such public
road exists or ceases to exist in the future, Lessor will grant an appropriate
easement to Lessee, Lessee's sublessees and assigns so that Lessee may, at its
own expense, construct a suitable private access drive to the Property and the
Tower Facilities. To the degree such access is across other property owned by
Lessor, Lessor shall execute an easement evidencing this right and Lessor shall
maintain access to the Easement in a free and open condition so that no
interference is caused to Lessee by other lessees, licensees, invitees or agents
of the Lessor which may utilize the Easement.
19. TERMINATION. Except as otherwise provided herein, this Lease may be
terminated, without any penalty or further liability upon written notice as
follows:
(a) By either party upon a default of any covenant or term hereof by
the other party which default is not cured within 60 days of receipt of written
notice of default (without, however, limiting any other rights available to the
parties pursuant to any other provisions hereof); provided, that if the
defaulting party commences efforts to cure the default within such period the
non-defaulting party shall no longer be entitled to declare a default;
(b) Upon 30 days' written notice by Lessee to Lessor if Lessee is
unable to obtain or maintain through no fault of Lessee any license, permit or
other Governmental Approval necessary to the construction and operation of the
Tower Facilities or Lessee's business; or
(c) By Lessee for any reason or no reason at all upon six (6) months
advance written notice from Lessee to Lessor.
20. SUBLEASES. Lessee at its sole discretion shall have the right without
any need to obtain the consent of Lessor to license or sublease all or a portion
of the Property and the Tower Facilities to others whose business includes the
provision of wireless communication services. Lessee's licensee(s) and
sublessee(s) shall be entitled to modify the Tower and to erect additional
improvements on the Property including but not limited to antennas, dishes,
cabling, additional storage buildings or equipment shelters on the Property as
are reasonably required for the operation and maintenance of the communications
equipment to be installed on the Property by said licensee(s) and sublessee(s)
together with rights of ingress and egress to the Property and the right to
install utilities on the Property as if said licensee or sublessee were the
Lessee under this Lease.
21. TAXES. Lessee shall pay any personal property taxes assessed on, or
any portion of such taxes attributable to, the Tower Facilities. Lessor shall
pay when due all real property taxes and all other fees and assessments
attributable to the Property. Lessee shall pay as additional Rent any increase
in real property taxes levied against Property which are directly attributable
to Lessee's use of the Property and Lessor agrees to furnish proof of such
increase to Lessee. In the event that Lessor fails to pay when due any taxes
affecting the Property or the Easement, Lessee shall have the right but not the
obligation to pay such taxes and deduct the full amount of the taxes paid by
Lessee on Lessor's behalf from future installments of Rent.
22. DESTRUCTION OF PREMISES. If the Property or the Tower Facilities are
destroyed or damaged so as to hinder the effective use of the Tower Facilities
in Lessee's judgment, Lessee may elect to terminate this Lease as of the date of
the damage or destruction by so notifying the Lessor. In such event, all rights
and obligations of Lessee to Lessor shall cease as of the date of
27
<PAGE> 28
the damage or destruction and Lessee shall be entitled to the reimbursement of
any Rent prepaid by Lessee.
23. CONDEMNATION. If a condemning authority takes all of the Property, or
a portion sufficient in Lessee's determination, to render the Property in the
opinion of Lessee unsuitable for the use which Lessee was then making of the
Property, this Lease shall terminate as of the date the title vests in the
condemning authority. Lessor and Lessee shall share in the condemnation proceeds
in proportion to the values of their respective interests in the Property (which
for Lessee shall include, where applicable, the value of its Tower Facilities,
moving expenses, prepaid rent and business dislocation expenses). A sale of all
or part of the Property to a purchaser with the power of eminent domain in the
face of the exercise of eminent domain power shall be treated as a taking by
condemnation for the purposes of this paragraph.
24. INSURANCE. Lessee shall purchase and maintain in full force and effect
throughout the Initial Term and any Renewal Term such public liability and
property damage policies as Lessee may deem necessary. Said policy of general
liability insurance shall provide a combined single limit of $1,000,000.
25. ENVIRONMENTAL COMPLIANCE. Lessor warrants and represents that the
Property, the Easement and the improvements thereon are free of contaminants,
oils, asbestos, PCB's, hazardous substances or wastes as defined by federal,
state or local environmental laws, regulations or administrative orders or other
materials the removal of which is required or the maintenance of which is
prohibited, regulated or penalized by any federal, state or local government
authority ("Hazardous Materials"). This Lease shall at the option of Lessee
terminate be void and of no further force or effect if Hazardous Materials are
discovered to exist on the Property through no fault of Lessee after Lessee
takes possession of the Property and Lessee shall be entitled to a refund of all
the consideration given Lessor under this Lease.
26. ENVIRONMENTAL INDEMNITIES.
(a) Lessor, its heirs, grantees, successors, and assigns shall
indemnify, defend, reimburse and hold harmless Lessee from and against any and
all environmental damages arising from the presence of Hazardous Materials upon,
about or beneath the Property or migrating to or from the Property or arising in
any manner whatsoever out of the violation of any environmental requirements
pertaining to the Property and any activities thereon, which conditions exist or
existed prior to or at the time of the execution of this Lease or which may
occur at any time in the future through no fault of Lessee.
(b) Notwithstanding the obligation of Lessor to indemnify Lessee
pursuant to this agreement, Lessor shall, upon demand of Lessee, and at Lessor's
sole cost and expense, promptly take all actions to remediate the Property which
are required by any federal, state or local governmental agency or political
subdivision or which are reasonably necessary to mitigate environmental damages
or to allow full economic use of the Property, which remediation is necessitated
from the presence upon, about or beneath the Property of a Hazardous Material.
Such actions shall include but not be limited to the investigation of the
environmental condition of the Property, the preparation of any feasibility
studies, reports or remedial plans, and the performance of any cleanup,
remediation, containment, operation, maintenance, monitoring or actions
necessary to restore the Property to the condition existing prior to the
introduction of Hazardous Material upon, about or beneath the Property
notwithstanding any lesser standard of remediation allowable under applicable
law or governmental policies.
28
<PAGE> 29
27. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given if personally delivered
or mailed, certified mail, return receipt requested, to the following addresses
or to such other addresses as may be specified in writing at any time during the
term of this Agreement:
If to Lessor, to:
Name: ___________________
Address: ___________________
Attention: ___________________
Phone: (____) _____-_______
Federal I.D. or Social Security No.: ________________________
If to Lessee, to:
SpectraSite Communications, Inc.
8000 Regency Parkway, Suite 570
Cary, NC 27511
Attention: Contracts Manager
(919) 468-0112
With a copy to:
Lewellen & Frazier, PLC
415 North McKinley, Suite 1240
Little Rock, AR 72205
Attention: Todd A. Lewellen, Esq.
28. TITLE AND QUIET ENJOYMENT. Lessor warrants and represents that (i) it
has the full right, power, and authority to execute this Lease; (ii) it has good
and marketable fee simple title to the Property and the Easement free and clear
of any liens, encumbrances or mortgages except those liens and encumbrances
disclosed in Exhibit "C" attached hereto; and (iii) the Property constitutes a
legal lot that may be leased without the need for any subdivision or platting
approval. Lessor covenants that Lessee shall have the quiet enjoyment of the
Property during the term of this Lease. Lessor shall indemnify Lessee from and
against any loss, cost, expense or damage including attorneys fees associated
with a breach of the foregoing covenant of quiet enjoyment.
29. ASSIGNMENT. Lessee may assign this Lease without the consent of
Lessor. Any sublease, license or assignment of this Lease that is entered into
by Lessor or Lessee shall be subject to the provisions of this Lease.
Additionally, Lessee may, upon notice to Lessor, mortgage or grant a security
interest in this Lease and the Tower Facilities, and may assign this Lease and
the Tower Facilities to any such mortgagees or holders of security interests
including their successors and assigns (hereinafter collectively referred to as
"Secured Parties"). In such event, Lessor shall execute such consent to
leasehold financing as may reasonably be required by Secured Parties. Lessor
agrees to notify Lessee and Lessee's Secured Parties simultaneously of any
default by Lessee and to give Secured Parties the same right to cure any default
as Lessee except that the cure period for any Secured Party shall not be less
than 10 days after the receipt of the default notice. If a termination,
disaffirmance or rejection of the Lease pursuant to any laws
29
<PAGE> 30
(including any bankruptcy or insolvency laws) by Lessee shall occur, or if
Lessor shall terminate this Lease for any reason, Lessor will give to the
Secured Parties prompt notice thereof and Lessor will give the Secured Parties
the right to enter upon the Property during a 30-day period commencing upon the
Secured Party's receipt of such notice for the purpose of removing any Tower
Facilities. Lessor acknowledges that the Secured Parties shall be third-party
beneficiaries of this Lease.
30. SUCCESSORS AND ASSIGNS. This Lease shall run with the Property
described on Exhibit "A" and shall be binding upon and inure to the benefit of
the parties, their respective heirs, successors, personal representatives and
assigns.
31. WAIVER OF LESSOR'S LIEN. Lessor hereby waives any and all lien rights
it may have, statutory or otherwise, in and to the Tower Facilities or any
portion thereof, regardless of whether or not same is deemed real or personal
property under applicable laws.
32. WAIVER OF INCIDENTAL AND CONSEQUENTIAL DAMAGES. Lessor will not assert
any claim whatsoever against Lessee for loss of anticipatory profits or any
other indirect, special, incidental or consequential damages incurred by Lessor
as a result of the construction, maintenance, operation or use of the Property
or the Easement by Lessee.
33. MISCELLANEOUS.
(a) The substantially prevailing party in any litigation arising
hereunder shall be entitled to its reasonable attorney's fees and court costs,
including appeals, if any.
(b) Each party agrees to furnish to the other, within 10 days after
request, such truthful estoppel information as the other may reasonably request.
(c) This Lease constitutes the entire agreement and understanding of
Lessor and Lessee with respect to the subject matter of this Lease, and
supersedes all offers, negotiations and other agreements. There are no
representations or understandings of any kind not set forth herein. Any
amendments to said Lease must be in writing and executed by Lessor and Lessee.
(d) If either Lessor or Lessee is represented by a real estate
broker in this transaction, that party shall be fully responsible for any fees
due such broker and shall hold the other party harmless from any claims for
commission by such broker.
(e) Lessor agrees to cooperate with Lessee in executing any
documents necessary to protect Lessee's rights under this Lease or Lessee's use
of the Property and to take any further action which Lessee may reasonably
require as to effect the intent of this Lease.
(f) This Lease shall be construed in accordance with the laws of the
state in which the Property is situated.
(g) If any term of this Lease is found to be void or invalid, such
invalidity shall not affect the remaining terms of this Lease, which shall
continue in full force and effect.
(h) Lessee may file of record in the property records in the county
in which the Property and Easement(s) are located a Memorandum of Lease which
sets forth the names and addresses of Lessor and Lessee, the legal description
of the Property and the Easement(s), the duration of the Initial Term and the
quantity and duration of the Renewal Terms.
30
<PAGE> 31
(i) Lessor shall cooperate with Lessee in executing any documents
necessary to protect Lessee's rights under this Lease or Lessee's use of the
Property and the Easements and to take such action as Lessee may reasonably
require to effect the intent of this Lease. Lessor hereby irrevocably appoints
Lessee or Lessee's agent as Lessor's agent to file applications on behalf of
Lessor with federal, state and local governmental authorities which applications
relate to Lessee's intended use of the Property including but not limited to
land use and zoning applications.
(j) This Lease may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by the each of the parties, it
being understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, Optionor and Optionee have executed this Option and
Lease as of the date first written above.
OPTIONOR/LESSOR:
[CORPORATION, PARTNERSHIP, LLC OR LLP]
------------------------------,
A
-----------------------------
BY:
------------------------
TITLE:
------------------------
------------------------------
[INDIVIDUAL]
------------------------------
[INDIVIDUAL]
OPTIONEE/LESSEE:
SPECTRASITE COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
BY:
------------------------
TITLE:
------------------------
31
<PAGE> 32
ACKNOWLEDGMENTS
32
<PAGE> 33
EXHIBIT "A"
LEGAL DESCRIPTION OF
PROPERTY
33
<PAGE> 34
EXHIBIT "B"
LEGAL DESCRIPTION OF
EASEMENT(S)
34
<PAGE> 35
EXHIBIT "C"
LIENS AND ENCUMBRANCES
35
<PAGE> 36
SCHEDULE "III"
NOTICE TO PROCEED WITH CONSTRUCTION
SpectraSite Communications, Inc.
8000 Regency Park, Suite 570
Cary, NC 27511
Attention: Steve Clark
Re: Notice to Proceed with Construction of Site #_________;
("_____________ Site")
Dear Mr. ________________:
SpectraSite may commence due diligence procedures and if those
procedures are acceptable to SpectraSite may construct of the Tower Facilities
on the ___________ Site at the earliest possible time.
Sincerely,
Amica
36
<PAGE> 37
SCHEDULE "IV"
NOTICE OF COMPLETION OF ANTENNA FACILITIES
Amica
- --------------------------
- --------------------------
- -------------------------- -------------
Re: Notice of Completion of Tower Facilities ("Notice") for
Site #______ ("_________ Site")
Dear ___________:
On the _____ day of ______________, 199__ the Tower Facilities at the
________ Site were completed in accordance with paragraph 2.10 of the Master
Agreement between SpectraSite and Amica. Amica has a period of fifteen (15) days
after the date of this Notice to provide a Punch List of items to be completed
by SpectraSite in order to render the Tower Facilities completed in accordance
with the Plans and Specifications in the opinion of Amica.
Please contact us in writing upon receipt of the equipment owned by Amica
to be installed at the _______ Site so that SpectraSite may arrange for the
installation of this equipment.
Sincerely,
-------------------------
37
<PAGE> 38
SCHEDULE "V"
SITE LEASE AGREEMENT
THIS SITE LEASE AGREEMENT ("SLA") is executed this _____ day of
________________, 1998, by and between SPECTRASITE COMMUNICATIONS, INC.
("SpectraSite") and AMICA WIRELESS PHONE SERVICE, INC. ("Carrier").
WHEREAS, on the ____ day of ________________, 19__, SpectraSite and
Carrier entered into that certain Master Tower Attachment Master Lease Agreement
("Master Lease") which provides for the execution of individual SLAs for each
Site, as that term is defined in the Master Lease, owned by SpectraSite upon
which Amica desires to mount certain antenna, structures and other equipment.
1. SITE. Subject to the terms of the Master Lease, SpectraSite hereby
leases and grants to Carrier a License to install, maintain, operate, upgrade
and remove Carrier's wireless communications equipment and appurtenances on a
tower owned by SpectraSite ("Tower"), including antennas and microwave dishes
between the heights of _________________________________ above ground level on
the Tower, which is located on certain real property leased by SpectraSite more
particularly described in Exhibit "A" attached hereto ("Property"); and to
install, maintain, operate and remove Carrier's compound and related devices
(including, but not limited to emergency generators, equipment shelters,
equipment cabinets, all necessary test equipment and any temporary construction
materials) owned by Carrier on a seven hundred (700)square foot portion of the
Property at a location to be agreed upon in writing between SpectraSite and
Carrier (the space occupied by Carrier on the Property and the Tower hereinafter
shall be referred to collectively as the "Premises"). Subject to the terms of
the Master Lease SpectraSite has leased to Amica the use of a tower or other
structure owned by SpectraSite and space on certain real property in the
vicinity of the Tower which real property is described in Exhibit "A" attached
hereto ("Property"). SpectraSite has granted unto Amica for the Initial Term and
any Renewal Term an easement for ingress, egress and utilities during the term
of the Master Lease over the property described in Exhibit "B" attached hereto
("Easement"). (The Tower, Property and easement shall constitute and hereinafter
be referred to and known as the "Site"). The Site is more commonly known to
SpectraSite as the ____________ Site.
2. COMMENCEMENT DATE. The Commencement Date of this SLA shall be the
earlier of (i) the date that Amica commences the installation of its Equipment
on the Site or (ii) fifteen (15) days after SpectraSite has forwarded to Amica
the Notice of Completion for the Site or, if a Punch List is forwarded to
SpectraSite in accordance with paragraph 2.10 hereof, fifteen (15) days after
SpectraSite completes the items on such Punch List. Prior to installing the
Equipment, Amica shall execute a letter agreement which shall be attached to
each SLA confirming the calendar date which the parties understand to be the
Commencement Date for each SLA.
3. EQUIPMENT. A description of the equipment, antennae, mounting height of
the antenna and other personal property of Amica which Amica intends to locate
on the Site ("Equipment") is described in Exhibit "C" attached hereto. Amica
will not install any equipment on the Site which is not described in Exhibit "C"
without SpectraSite's prior, written consent.
38
<PAGE> 39
4. PRIME LEASE. A copy of the Prime Lease for this Site is attached hereto
as Exhibit "D" and is incorporated by reference herein. This SLA shall be
subject to the terms, covenants and conditions of the Prime Lease.
5. EFFECT OF AGREEMENT. SpectraSite and Amica acknowledge that the Master
Lease is the controlling agreement between the parties with regard to Amica's
lease of the Site. This SLA is intended to supplement the Master Lease and
fulfill the requirements of paragraph 1 of the Master Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
LESSOR:
SPECTRASITE COMMUNICATIONS, INC.
By:
--------------------------
Title:
--------------------------
LESSEE:
AMICA WIRELESS PHONE SERVICE, INC.
By:
--------------------------
Title:
--------------------------
39
<PAGE> 40
ACKNOWLEDGMENTS
40
<PAGE> 41
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
41
<PAGE> 42
EXHIBIT "B"
LEGAL DESCRIPTION OF EASEMENTS
42
<PAGE> 43
EXHIBIT "C"
EQUIPMENT LIST
43
<PAGE> 44
EXHIBIT "D"
PRIME LEASE
44
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated October 23, 1998 in Amendment 1 to the Registration
Statement (Form S-4; file no. 333-67043) of SpectraSite Holdings, Inc., for the
offer to exchange its 12% Senior Notes due 2008, with respect to the
consolidated financial statements of SpectraSite Holdings, Inc. as of December
31, 1997 and September 30, 1998 and for the period from inception (April 25,
1997) to December 31, 1997 and for the nine months ended September 30, 1998 and
our report dated March 27, 1998, with respect to the consolidated financial
statements of the Company's predecessor, TeleSite Services, LLC, as of December
31, 1996 and for the year ended December 31, 1996 and the period from January
1, 1997 to May 12, 1997.
/s/ Ernst & Young LLP
Raleigh, North Carolina
January 8, 1999
<PAGE> 1
EXHIBIT 25.1
FORM T-1
==============================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) _______
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
</TABLE>
------------------
SPECTRASITE HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 56-2027322
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
8000 Regency Parkway, Suite 570
Cary, North Carolina 27511
(Address of principal executive offices) (Zip Code)
</TABLE>
------------------
12% Senior Discount Notes due 2008
(Title of the indenture securities)
==============================================
<PAGE> 2
- 2 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
SpectraSite Holdings, Inc. currently is not in default under any of its
outstanding securities for which United States Trust Company of New York
is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General Instruction
B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
- 3 -
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of November 17, 1998 the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 17th day
of November, 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ MARGARET CIESMELEWSKI
-------------------------------
Margaret Ciesmelewski
Assistant Vice President
MC/pg
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
--------------------------------
/S/Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 339,287
Short-Term Investments 161,493
Securities, Available for Sale 563,176
Loans 1,954,456
Less: Allowance for Credit Losses 16,860
----------
Net Loans 1,937,596
Premises and Equipment 58,809
Other Assets 120,308
----------
TOTAL ASSETS $3,180,669
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 646,593
Interest Bearing 1,838,108
----------
Total Deposits 2,484,701
Short-Term Credit Facilities 375,849
Accounts Payable and Accrued Liabilities 142,513
----------
TOTAL LIABILITIES $3,003,063
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 109,648
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 3,422
----------
TOTAL STOCKHOLDER'S EQUITY 177,606
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,180,669
==========
</TABLE>
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
November 2, 1998
