<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
__________
COMMISSION FILE NUMBER 0-27217
SPECTRASITE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 56-2027322
<S> <C>
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
100 REGENCY FOREST DRIVE, SUITE 400 27511
CARY, NORTH CAROLINA (Zip Code)
(Address of principal executive offices)
</TABLE>
(919) 468-0112
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, $.001 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
As of February 29, 2000, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was $1,251,354,811 based on the closing price
on the Nasdaq National Market on such date.
There were 122,763,494 shares of Common Stock outstanding as of February 29,
2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2000 Annual Meeting of Stockholders are
incorporated by reference into Part III.
<PAGE> 2
<TABLE>
<CAPTION>
SPECTRASITE HOLDINGS, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
PART I
<S> <C> <C>
Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 10
Item 3. Legal Proceedings..................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................. 12
Item 6. Selected Consolidated Financial Data.................................................. 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................ 15
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................ 22
Item 8. Consolidated Financial Statements and Supplementary Data.............................. 23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................................ 23
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 23
Item 11. Executive Compensation................................................................ 24
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 25
Item 13. Certain Relationships and Related Transactions........................................ 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................... 25
</TABLE>
i
<PAGE> 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21C of the Securities
Exchange Act of 1934, including statements concerning possible or assumed
future results of operations of SpectraSite and those preceded by, followed by
or that include the words may, will, should, could, expects, plans,
anticipates, believes, estimates, predicts, potential or continue or the
negative of such terms and other comparable terminology. You should understand
that the factors described below, in addition to those discussed elsewhere in
this report, could affect our future results and could cause those results to
differ materially from those expressed in such forward-looking statements.
These factors include:
- material adverse changes in economic conditions in the markets we
serve;
- future regulatory actions and conditions in our operating areas;
- competition from others in the communications tower industry;
- the integration of our operations with those of businesses we have
acquired or may acquire in the future and the realization of the
expected benefits; and
- other risks and uncertainties as may be detailed from time to time
in our public announcements and SEC filings.
ii
<PAGE> 4
PART I
ITEM 1. BUSINESS
OVERVIEW
We are one of the leading providers of outsourced antennae site and network
services to the wireless communications and broadcast industries in the United
States and Canada. Our businesses include the ownership and leasing of antennae
sites on towers, managing rooftop and in-building telecommunications access on
commercial real estate, network planning and deployment and construction of
towers and related wireless facilities. Our customers are leading wireless
communications providers and broadcasters, including Nextel, Sprint PCS, AT&T
Wireless, VoiceStream Communications, Tritel Communications, Teligent, WinStar,
Cox Broadcasting, Clear Channel Communications and Paxson Communications. As of
December 31, 1999, and after giving effect to our acquisition of Apex Site
Management Holdings, Inc., we owned or managed over 15,000 sites, including
2,765 owned towers, in 98 of the top 100 markets in the United States. On
February 17, 2000, we agreed to acquire leasehold or subleasehold interests in
430 communications towers from AirTouch.
The wireless communications industry is growing rapidly and carriers are
making large capital investments to expand their networks. We believe that the
number of wireless communications sites, including towers, is likely to continue
to increase together with the growth in demand for wireless services. This
expected growth in communications sites is the result of several factors,
including:
-- the continuing build-out of higher frequency technologies, such as
personal communications services, which have a reduced cell range and
require a more concentrated network of towers than previous wireless
technologies;
-- the need to expand the capacity of existing networks;
-- the issuance of new wireless network licenses requiring the
construction of new wireless networks; and
-- the emergence of new wireless technologies.
As carriers deploy these networks, they are faced with a proliferation in
both the number and type of competitors. Because of this increasingly
competitive environment, carriers must also focus on satisfying customer demand
for enhanced services, seamless and comprehensive coverage, better call quality,
faster data transmission and lower prices.
We believe that as carriers face the increased challenges of expanding
their networks and improving their services, they must allocate their available
capital and resources in the most efficient manner. In particular, carriers are
increasingly outsourcing tower ownership, as well as network planning deployment
and management to independent tower owners like SpectraSite. This outsourcing
allows our customers to focus on their core competencies and to rely on us for
planning and deploying their networks. Our services are designed to improve our
customers' competitive positions through the efficient planning, deployment and
management of their networks.
GROWTH STRATEGY
Our objective is to be the leading independent provider of outsourced
antennae site and network services to the telecommunications and broadcast
industries. Our growth strategy involves the following key elements:
MAXIMIZING THE UTILIZATION OF OUR TOWERS AND MANAGED SITES
We intend to capitalize on the substantial opportunities for revenue and
cash flow growth by maximizing the number of tenants we have on each of our
towers and managed sites. We believe that our strategy of owning clustered
groups of towers and managed sites in major metropolitan markets and providing
our customers with a full range of products and services allows us to deliver
reliable, scalable network solutions and will result in increased co-location on
our towers and managed sites. Since most tower costs are fixed, leasing
available space on an existing tower results in minimal additional expenses
while generating a larger percentage increase in tower cash flow. In addition,
tenant turnover is low because of the relatively high cost of
1
<PAGE> 5
antenna relocation. We generally construct towers to accommodate at least three
broadband tenants and have a dedicated sales force which markets co-location
opportunities to wireless communications providers. Our objective is to use our
national tower presence to enable wireless service providers to more quickly
establish wireless coverage in individual and multiple markets.
EXPANDING OUR TOWER PORTFOLIO
We seek to expand our tower portfolio by building new towers for anchor
tenants and by making selective acquisitions of towers. We believe that Nextel's
agreement to lease space on an additional 1,422 towers we own, acquire or
construct for Nextel or other tenants will substantially increase the number of
towers we own and operate. We also continue to pursue attractive network
development opportunities with other wireless service providers. In addition, we
evaluate other tower development opportunities from time to time which we
believe have higher than average co-location opportunities. We intend to
continue to make selective acquisitions in the highly fragmented tower owner and
operator industry. Our strategy is to acquire towers that have some, or all, of
the following criteria:
-- underutilized with additional co-location potential;
-- favorably located, either individually or in clusters, in large urban
areas and along major transportation corridors; and
-- complementary to our existing coverage areas.
We believe there are tower acquisition opportunities currently available
from both wireless service providers and smaller independent tower operators.
Furthermore, we believe that the number of tower opportunities available in the
future is likely to grow as large wireless communications service providers and
smaller independent tower companies continue to divest their tower holdings. We
regularly evaluate acquisition opportunities, engage in negotiations and submit
bids with respect to acquisitions of individual towers, groups of towers and
entities that own or manage towers and related businesses. In addition to our
acquisition of 2,000 towers from Nextel in April 1999, we continue to seek
partnerships and other strategic arrangements with other major wireless
communications carriers in order to assume ownership of their towers.
EXPANDING THE SUITE OF SERVICES WE OFFER AND PURSUING CROSS-SELLING
OPPORTUNITIES
We believe our ability to provide a package of integrated services, which
have traditionally been offered by multiple subcontractors coordinated by a
carrier's deployment staff, will make us a preferred provider of all outsourced
antennae site and network services. For example, we believe that our leadership
in rooftop and in-building access will give us an advantage across all of our
product offerings as fixed wireless carriers expand their networks and as
wireless telephone and data companies increasingly focus on network deployment
and in-building service. In addition, our leadership in broadcast tower design,
fabrication and construction will give us a competitive advantage as
broadcasters increasingly outsource tower and facilities ownership and
management.
PRODUCTS AND SERVICES
WIRELESS TOWER OWNERSHIP AND LEASING
We are one of the largest independent owners and operators of wireless
communications towers in the United States and Canada. We provide antennae site
leasing services, which primarily involve the leasing of antennae space on our
communications towers to wireless carriers. Each of our towers has an anchor
tenant, and we seek to add several co-location tenants over time. In leasing
antennae space, we generally receive monthly lease payments from customers. Our
customer leases typically 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 communications site.
2
<PAGE> 6
The following chart shows the locations of our owned towers as of December
31, 1999:
<TABLE>
<CAPTION>
NUMBER
STATE OF TOWERS
- ----- ---------
<S> <C>
California........... 408
Florida.............. 186
Michigan............. 168
Ohio................. 166
Texas................ 165
Illinois............. 155
Georgia.............. 154
North Carolina....... 130
Louisiana............ 99
Alabama.............. 94
Washington........... 88
Wisconsin............ 85
Tennessee............ 81
Missouri............. 62
Indiana.............. 55
Mississippi.......... 54
Pennsylvania......... 52
South Carolina....... 52
Arizona.............. 48
Massachusetts........ 44
Oregon............... 43
Oklahoma............. 39
Nevada............... 38
Maryland............. 35
Colorado............. 33
New Mexico........... 30
Minnesota............ 25
Utah................. 23
New Jersey........... 19
Virginia............. 18
Kansas............... 17
New York............. 16
Iowa................. 14
Alberta.............. 13
Other................ 56
-----
Total................ 2,765
=====
</TABLE>
In addition to towers we build for Nextel under the master site commitment
agreement and towers we selectively build and acquire, we also expect to expand
our tower portfolio through build-to-suit programs. Under build-to-suit
programs, we utilize our network development capabilities to construct tower
networks 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 that tower network would not exceed a targeted multiple of tower
cash flow after a certain period of time.
In addition to leasing antenna space, we also provide maintenance and
management services at our communication sites. In providing these services to
our customers we use a combination of in-house personnel and independent
contractors. In-house personnel are responsible for 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. We hire local independent
contractors to perform routine maintenance functions, such as landscaping, pest
control, snow removal and site access.
WIRELESS ROOFTOP AND IN-BUILDING ACCESS
We are the largest independent provider of rooftop and in-building access
services in the United States. We are the exclusive site manager for
approximately 12,700 diverse real estate properties, with significant access
clusters in New York, Philadelphia, Baltimore/Washington, D.C., Atlanta, New
England, Florida, Western Pennsylvania/Ohio/Indiana, Chicago, Seattle, Southern
California, Texas and St. Louis. A principal attraction of this portion of our
business is the opportunity to develop new sources of revenue and value for
building owners by managing:
-- rooftops for transmitting and receiving installations; and
-- rooftops, risers and internal telecommunications equipment space for
competitive voice, data and Internet services offered to in-building
tenants.
3
<PAGE> 7
Wireless communications carriers utilize our managed sites as transmitting
locations, often where there are no existing towers for co-location or where new
towers are difficult to build. Our transmitting tenants encompass a broad array
of wireless communications providers, including personal communications service,
cellular, enhanced specialized mobile radio, specialized mobile radio, wireless
data, two-way radio, microwave, wireless cable and paging companies. As the
largest rooftop and in-building access manager in the United States, we provide
services to the facilities-based (wired and wireless) competitive local exchange
carrier and Internet service provider market. We have executed agreements
allowing these carriers access to over 3,000 properties, including agreements
with national providers such as Adelphia Business Solutions, AT&T Local
Services, Eureka Broadband, NEXTLINK, Site Line, Teligent and WinStar, as well
as numerous regional carriers. These access agreements are, to date,
predominantly for office and industrial properties.
Our managed portfolio contains over 3,300 office and industrial properties
encompassing over 375 million square feet. We are engaged by ten of the top
nineteen office real estate investment trusts, based on market capitalization,
in the United States, according to the National Association of Real Estate
Investment Trusts. In most cases, multiple carriers will access a single
property. Our management contracts are generally for a period of three to five
years, and contain renewal periods unless terminated by either party before
renewal or upon an uncured default. Under these contracts, we are engaged as the
exclusive site manager for rooftop management. In most cases, we are also
engaged as the exclusive manager for riser and telecommunications access
management. As the site manager, we are responsible for marketing the properties
as part of our portfolio of potential telecommunications sites, reviewing
existing license agreements, negotiating new license agreements, managing and
enforcing those agreements, supervising installation of equipment by carriers to
ensure, among other things, non-interference with other users, as well as site
billing, collections and contract administration. For these services, we receive
a percentage of occupancy fees, which is higher for the new carriers we add than
for existing carriers. Upon any termination of a contract, unless due to our
default, we are entitled to continue to receive our percentage with respect to
carriers added during the term of our management agreement for so long as they
remain tenants.
NETWORK DESIGN AND DEPLOYMENT SERVICES
We are a leading provider of design and deployment services for wireless
networks. These services include architectural and engineering design, tower
construction, line and antenna installation and site acquisition services. We
offer these services individually and as an integrated package. We believe that
we have a competitive advantage in our ability to provide comprehensive network
development services by eliminating our customers' need to seek services from
different providers.
In providing these network design and deployment services, we have
developed the capability to effectively manage multiple site acquisition and
tower development projects in various locations at the same time. Where
appropriate, we supplement our in-house expertise with a pre-qualified pool of
local contractors and advisors. In addition, we have developed detailed and
standardized site acquisition and construction specifications and procedures
that allow us 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.
Architectural and Engineering Design. Our architecture and engineering
team manages a complex array of electrical, structural and architectural
elements while interfacing with our clients and construction crews to ensure
that site-specific objectives are reflected in construction documents. Our
structural engineering and design abilities enable us to construct towers that
have maximum antenna site capacity based on the physical features of the land on
which the tower is constructed and the demand in the market in which the tower
is located. We seek to design aesthetically acceptable sites and construct
towers with minimal environmental impact. Our custom structure design abilities
combined with our engineering skills also allow us to build towers in
geographically difficult locations at competitive prices. We believe that this
specialty service will enable us to compete effectively in regions in which
other companies are not able to participate on a cost-efficient basis.
Tower Construction. Our engineering, general contracting, electrical,
structural steel and other specialty licenses allow us to perform services
required to design, develop and construct communications towers. Our ability to
perform civil and electrical engineering as well as tower construction enables
us to expedite and simplify this phase of development by minimizing the need to
subcontract.
During tower construction, a project team of five to seven people is
dispatched to the site. A temporary field office is established at the site. The
project team is typically composed of our permanent employees, but may be
supplemented with local hires.
4
<PAGE> 8
We use our information technology abilities to create construction models,
development budgets, critical path schedules and status reports covering
schedules and costs throughout the course of a project. Our civil engineering
capability allows us to prepare the construction site by leveling the land,
removing vegetation and installing access roads as needed. Based on the results
of soil tests that we conduct at each site, we design and build the tower
foundation. After the foundation is in place, we erect the tower. We utilize our
structural engineering capability by constructing a tower designed for maximum
antenna capacity.
Line and Antenna Installation. After erecting the tower and placing the
equipment shelter, we install the antennae and feed lines, including the sweep,
test and orientation. Depending on the project, electricity is installed either
during the erection process to conform with the FAA lighting requirements or
after the tower has been constructed. Our technical crews are regularly trained
in cellular, microwave, fiber optic and direct current power plant system
installation and testing methods. We are also a leader in designing and
implementing in-building wireless systems, as well as a broad range of cellular
and personal communications services repeater systems. Our test equipment and
dedicated radio frequency testing teams allow us to monitor and maintain system
integrity and quality control.
We also offer the ability to construct the switch facility that controls an
antenna's communications with other communications sites. Although switch
construction is not performed at every project site, it is an additional
specialty service we provide.
After constructing the tower, placing the equipment shelter and completing
the antenna work, we install grounding lines and protective fencing around the
site. We then perform final grounding and landscaping as necessary to complete
the project.
Site Acquisition Services. We offer a full range of site acquisition
services, including network pre-design, communication site selection,
communication site acquisition and local zoning and permitting. We offer these
services through local contractors who have knowledge and expertise in the
specific geographic area.
BROADCAST TOWER DEVELOPMENT AND LEASING
We are a leading provider of broadcast tower analysis, design, fabrication,
installation, and technical services. We have over 50 years of experience in the
broadcast tower industry and have worked on the development of more than 700
broadcast towers, which we believe represent approximately 50% of the existing
broadcast tower infrastructure in the United States. Our broadcast tower group
extends our core business of outsourced wireless antenna sites to broadcast
towers. We intend to capitalize on our broadcast tower development expertise to
create tower ownership and leasing opportunities.
In November 1999, Congress passed the Community Broadcasters Protection Act
of 1999, which directs the FCC to offer a new Class A status to qualifying low
power television stations. To qualify, Class A low power television stations,
which were required to notify the FCC of their eligibility by January 28, 2000,
will have to meet certain programming and operational criteria. Under the
statute, Class A low power television stations will not be protected from
interference from digital television stations proposing to maximize their DTV
service, provided the digital television stations notified the FCC of their
intent to maximize facilities no later than December 31, 1999, and the digital
television stations submit a maximization application by May 1, 2000. The FCC
must adopt rules to govern the new service by the end of March 2000, after which
qualifying Class A low power television stations will be required to file a
formal application. As part of a rulemaking which the FCC commenced earlier this
year, the agency will consider specific protection criteria to be applied in
evaluating Class A low power television station operations vis-a-vis full power
and other low power television stations. The standards that are adopted may
affect the ability of applicants for digital television facilities and
proponents of modified analog facilities to change their existing or future
proposals and may affect their current tower utilization plans.
In 1996, the FCC mandated the conversion of analog television signals to
digital. The mandate specifies that by May 1, 2003, each television station in
the United States must complete construction of new digital broadcasting
facilities and, beginning April 21, 2003, must be simulcasting at least 50% of
its programming on
5
<PAGE> 9
both its analog and digital facilities. This conversion creates significant
potential demand for co-location on broadcast towers.
Broadcast towers require a high level of technical design and erection
expertise, as they reach heights of up to 2,000 feet. Broadcast towers support
extremely powerful television and FM radio signals over entire metropolitan
areas. The existing domestic broadcast tower infrastructure was generally
developed to accommodate individual broadcast signals. This broadcast tower
infrastructure was built primarily in the 1940's and 1950's. Today, it is
considered to be at capacity and somewhat antiquated. The FCC mandate creates
significant infrastructure deployment requirements and burdens for the broadcast
community in the United States. In addition, the engineering and construction
expertise for broadcast towers is limited to a relatively small number of
fabrication and construction companies that specialize in broadcast towers.
Recognizing this opportunity to capitalize on the broadcast infrastructure
tower development and leasing requirement, we have developed a strategic plan
that is designed to position us as the leading tower resource in the broadcast
sector. We have identified the critical core competencies necessary to fulfill
broadcast industry requirements. We offer broadcast tower engineering,
fabrication and erection services. In addition, we have original tower design
specifications and considerable tower modification historical information on
approximately 50% of the existing broadcast tower infrastructure. We believe
that this intellectual property positions us as one of broadcasters' first
points of contact for any broadcast tower project.
CUSTOMERS
Our primary customer currently is Nextel. On a pro forma basis after giving
effect to the Nextel acquisition, the Westower merger and certain other
transactions, Nextel represented approximately 29% of our revenues for the year
ended December 31, 1999.
Nextel provides a wide array of digital wireless communications services
throughout the United States. Nextel offers a differentiated, integrated package
of digital wireless communications services under the Nextel brand name,
primarily to business users. Nextel's digital mobile network constitutes one of
the largest integrated wireless communications systems utilizing a single
transmission technology in the United States. Nextel has significant specialized
mobile radio spectrum holdings in and around every major business population
center in the country, including all of the top 50 metropolitan statistical
areas in the United States. Nextel files periodic reports and other information
with the SEC. For more information about Nextel, you should read Nextel's SEC
filings. However, we are not incorporating any of Nextel's SEC filings by
reference into this document.
In addition, our customers also include several of the largest wireless
service providers in the United States, including AT&T Wireless and Sprint PCS.
We also have provided services to enhanced specialized mobile radio, specialized
mobile radio and cellular wireless providers. 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 our revenues. For the
year ended December 31, 1998, Powertel and Tritel accounted for 46.6% and 24.3%,
respectively, of our revenues. For the year ended December 31, 1999, Nextel
accounted for 35.0% of our revenues. During this period, no other customer
accounted for more than 10% of SpectraSite's revenues.
SALES AND MARKETING
We believe that our ability to satisfy a wide range of our customer's
network deployment requirements will make us a preferred provider of all
outsourced antennae site and network services. Our sales and marketing goals are
to:
-- use existing relationships and develop new relationships with
wireless service providers to lease antenna space on our owned and
managed communication sites; and
6
<PAGE> 10
-- form affiliations with select communications system vendors who
utilize end-to-end services, including those provided by SpectraSite,
which will enable us to market our services and products through
additional channels of distribution.
Historically, we have capitalized on the strength of our experience,
performance and relationships with wireless service providers to obtain
build-to-suit projects, and we intend to continue to emphasize our capability in
these areas in selling our broad range of services.
Maintaining and cultivating relationships with wireless service providers
is a main focus of senior management. In addition, we have a dedicated group of
representatives focused on sales efforts and establishing relationships with
wireless service providers. The representatives are assigned specific accounts
based on historical experience with a provider and the quality of the
relationship between the SpectraSite representative and such provider. Most
wireless service providers have national corporate headquarters with regional
offices. We believe that most decisions for site acquisition and site leasing
services are made by providers at the regional level with input from their
corporate headquarters. Our sales representatives work with provider
representatives at the local level and, when appropriate, at the national level.
Our sales staff compensation is heavily weighted to incentive-based goals and
measurements. In addition to our dedicated marketing and sales staff, we rely
upon our executive and operations personnel at the national and field office
levels to identify sales opportunities within existing customer accounts, as
well as acquisition opportunities.
COMPETITION
Our principal competitors include American Tower Corporation, Crown Castle
International Corp., Pinnacle Holdings Inc. and SBA Communications Corporation.
Towers are not the only kind of platform for radio transmitters. The FCC
has authorized numerous entities and is considering applications from many
others to provide fixed and mobile satellite services using various frequency
bands in a manner that may compete with terrestrial service providers. Iridium
LLC, for example, has commenced space-borne provision of mobile satellite
service, although it is currently subject to bankruptcy proceedings. Teledesic
plans to provide high-speed fixed satellite 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. The FCC has
decided to auction this spectrum in 200 MHz blocks for the provision of
communications services. It is unclear whether these new technologies will be
commercially feasible, and to what extent they will offer significant
competitive alternatives to terrestrial structures.
EMPLOYEES
As of December 31, 1999, SpectraSite had 1,198 employees, none of whom are
represented by a collective bargaining agreement. We consider our employee
relations to be good. Due to the nature of the site construction business, we
may experience increases and decreases in employees as site construction
contracts are entered into or completed.
INTERNATIONAL
Our primary focus is on operations in the United States and Canada.
However, we evaluate possible international opportunities and may, in the
future, pursue opportunities we consider attractive.
REGULATORY AND ENVIRONMENTAL MATTERS
FEDERAL REGULATIONS
Both the FCC and the FAA regulate towers used for wireless communications
transmitters and receivers. Such regulations control the siting, marking and
lighting of towers and may, depending on the characteristics of particular
towers, require registration of tower facilities. Wireless communications
antennae operating on towers are separately regulated and independently licensed
by the FCC based upon the particular frequency
7
<PAGE> 11
being used and the service being provided. In addition to these regulations,
SpectraSite must comply with certain environmental laws and regulations.
Under 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 structures. These standards mandate that the FCC
and the FAA consider the height of the proposed antenna structure, the
relationship of the structure to existing natural or man-made obstructions and
the proximity of the structure to runways and airports. Proposals to construct
or modify existing structures above certain heights or within certain proximity
to airports are reviewed by the FAA to ensure they will not present a hazard to
aviation. The FAA may condition its issuance of no-hazard determinations upon
compliance with specified lighting and marking requirements. The FCC will not
license the operation of wireless telecommunications antennae 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 received all necessary clearances from the FAA. The FCC also enforces
special lighting and painting requirements. Owners of towers on which wireless
communications antennae are located 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 failures. SpectraSite
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 and tort liability.
In 1995, the FCC adopted regulations making the owners of towers, rather
than communications 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. Communications 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 required tower owners, like
SpectraSite, to register existing structures by state, in accordance with filing
windows, over a two-year period between July 1, 1996 and June 30, 1998.
Historically, tower locations were determined using area maps. The FCC has
recognized that, with the proliferation of inexpensive, satellite-based locating
devices, such as Global Positioning System receivers, structures can now be
easily located with a higher degree of accuracy. Accordingly, the FCC has told
owners who determined that tower registration information conflicted with
previously issued licenses for antennae on their towers to register their
structures using the new data and to seek new FAA determinations of no hazard as
necessary under the FAA's rules. The FCC also has instructed licensees or
permittees who discovered that the coordinates on their authorizations differed
from those determined by more accurate means to submit corrective construction
permit applications. In February 1999, the FCC's Wireless Telecommunications
Bureau announced a new policy under which defective applications for wireless
authorizations and antenna structure registrations will be summarily dismissed,
without giving the applicants an opportunity to amend but requiring them to
correct and retender their applications. As part of the new policy, the Bureau
said that effective May 1, 1999, it will return and not process tower
registration applications including data that do not agree with information
listed on previously issued FAA determinations. The FCC also announced that
applications for FCC communications authorizations would be dismissed if a tower
registration number is not listed on the FCC application. Although the FCC
initially said the rule affecting communications applications would apply
beginning May 1, 1999, for applicants proposing antennae on existing structures,
and July 1, 1999, for applicants proposing to utilize new towers, the FCC in
late April 1999 extended these deadlines. For services, such as cellular,
paging, and personal communications services, which have already had their
records converted to the FCC's new Uniform Licensing System database, the new
tougher dismissal rule applied effective July 1, 1999. For other communications
services that have not yet been converted to the Uniform Licensing System, the
FCC said the new processing rules would go into effect six months after each
service's incorporation into the Uniform Licensing System. This new policy means
that for towers to be of use to FCC applicants, it will be necessary for tower
owners to notify the FAA and obtain FCC tower registrations well in advance of
the date tenants will be filing FCC applications.
8
<PAGE> 12
In December 1998, the FCC announced that a recent audit of existing antenna
structures revealed that over one quarter of the audited structures had not been
registered as required by the FCC's rules. In light of this finding and several
reported near misses of towers by aircraft, the FCC in January 1999 announced a
no-tolerance policy, requiring all owners of existing unregistered structures to
register them immediately or face monetary forfeitures or civil fines.
SpectraSite has been working to review the registration of the towers it has
acquired and to confirm the accuracy of the information submitted to the FAA and
the FCC by the prior owners.
The Telecommunications Act of 1996 amended the Communications Act of 1934
by limiting state and local zoning authorities' jurisdiction over the
construction, modification and placement of wireless communications towers. The
new law preserves local zoning authority but prohibits any action that would
discriminate between different providers of wireless services or ban altogether
the construction, modification or placement of communications 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.
STATE AND LOCAL REGULATIONS
Most states regulate certain aspects of real estate acquisition and leasing
activities. Where required, SpectraSite conducts the site acquisition portions
of its site acquisition services business through licensed real estate brokers
or agents, who may be employees of SpectraSite 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 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 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.
ENVIRONMENTAL REGULATIONS
Owners and operators of communications towers are subject to, and,
therefore, must comply with environmental laws. The FCC's decision to register a
proposed tower may be subject to environmental review under the National
Environmental Policy Act of 1969, which requires federal agencies to evaluate
the environmental impacts of their decisions under certain circumstances. The
FCC has issued regulations implementing the National Environmental Policy Act.
These 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. In
addition, we are subject to environmental laws which may require investigation
and clean-up of any contamination at facilities we own or operate or at third-
party waste disposal sites. These laws could impose liability even if we did not
know of, or were not responsible for, the contamination. Although we believe
that we currently have no material liability under applicable environmental
laws, the costs of complying with existing or future environmental laws,
investigating and remediating any contaminated real property and resolving any
related liability could have a material adverse effect on our business,
financial condition or results of operations.
9
<PAGE> 13
ITEM 2. PROPERTIES
SpectraSite is headquartered in Cary, North Carolina, where it currently
leases 62,136 square feet of space. We have established regional offices in the
Atlanta, Chicago and San Francisco areas. We open and close project offices from
time to time in connection with our network design and development services,
which offices are generally leased for periods not exceeding 18 months.
We own a broadcast tower manufacturing facility located in Pine Forge,
Pennsylvania. We also own five acres of land in Surrey, British Columbia,
Canada, on which a 10,000 square foot wireless tower fabrication, assembly and
storage facility and a 5,000 square foot office building are located; four acres
of land near Montreal, Quebec, Canada, on which a 7,000 square foot facility is
located; a one acre lot in Houston, Texas, on which approximately 2,500 square
feet of office space and 5,000 square feet of warehouse space are located; 8.6
acres of land in Visalia, California, on which a 57,000 square foot broadcast
tower manufacturing facility is located; and 0.4 acres of land in Tucson,
Arizona, on which a 6,250 square foot office building is located. We also lease
office space in the following locations:
-- Phoenix and Tucson, Arizona;
-- Little Rock, Arkansas;
-- Burbank, Los Angeles, Newport Beach, Sacramento and San Jose,
California;
-- Ft. Lauderdale, Palm Beach Gardens, Tampa and Orlando, Florida;
-- Ridgeland, Mississippi;
-- Las Vegas, Nevada;
-- Syracuse, New York;
-- Charlotte and Greensboro, North Carolina;
-- Columbus, Ohio;
-- Portland and Roseburg, Oregon;
-- Conshohocken, Forty Fort and Upper Gwynedd Township, Pennsylvania;
-- Austin, Dallas and Houston, Texas;
-- Redmond and Seattle, Washington; and
-- Alberta, Nova Scotia and Ontario, Canada.
Our interests in communications sites are comprised of a variety of fee
interests, leasehold interests created by long-term lease agreements, private
easements, easements and licenses or rights-of-way granted by government
entities. In rural areas, a communications site typically consists of a
three-to-five acre tract which supports towers, equipment shelters and guy wires
to stabilize the structure. Less than 2,500 square feet are required for a
self-supporting tower structure of the kind typically used in metropolitan
areas. Land leases generally have an initial term of five years, with five
additional five-year renewal periods. You should read "--Products and
Services--Wireless Tower Ownership and Leasing" for a list of the locations of
our owned towers.
10
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
From time to time, SpectraSite is involved in various legal proceedings
relating to claims arising in the ordinary course of business. We are not
currently 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 our business, financial condition or results of operations.
11
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET PRICES
Prior to our acquisition of Westower Corporation in a merger transaction,
our common stock was privately held with no public trading market. On September
1, 1999, our common stock was approved for trading on the Nasdaq National
Market under the symbol "SITE", and public trading commenced on September 3,
1999. The following table sets forth on a per share basis the high and low
sales prices for consolidated trading in our common stock as reported on the
Nasdaq National Market for the period from September 3, 1999 through September
30, 1999 and the fourth quarter of 1999.
<TABLE>
<CAPTION>
COMMON STOCK
--------------
HIGH LOW
------ -----
<S> <C> <C>
1999
Third quarter (beginning September 3)................................ $14 7/8 $ 11
Fourth quarter....................................................... 12 1/8 7 3/8
2000
</TABLE>
As of February 29, 2000, there were approximately 239 holders of record of
our common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. For
the foreseeable future, we intend to retain any earnings to finance the
development and expansion of our business, and we do not anticipate paying any
cash dividends on our common stock. In addition, our credit facility and the
indentures governing our senior discount notes restrict our ability to pay
dividends. Any future determination to pay dividends will be at the discretion
of our board of directors and will be dependent upon then existing conditions,
including our financial condition and results of operations, capital
requirements, contractual restrictions, business prospects and other factors
that the board of directors consider relevant. Furthermore, because SpectraSite
Holdings is a holding company, it depends on the cash flow of its subsidiaries,
and SpectraSite Communications' credit facility imposes restrictions on
Holdings' subsidiaries ability to distribute cash to Holdings.
12
<PAGE> 16
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical financial data derived
from our consolidated 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 SpectraSite's inception on April 25, 1997 to
December 31, 1997;
-- the year ended December 31, 1998; and
-- the year ended December 31, 1999.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes.
<TABLE>
<CAPTION>
TELESITE (PREDECESSOR) SPECTRASITE SPECTRASITE
------------------------- ------------ ---------------------
JANUARY 1, APRIL 25, TELESITE & YEAR ENDED
YEAR ENDED 1997- 1997- SPECTRASITE DECEMBER 31,
DECEMBER 31, MAY 12, DECEMBER 31, COMBINED ---------------------
1996 1997 1997 1997 1998 1999
------------ ---------- ------------ ----------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Site leasing............................. $ -- $ -- $ -- $ -- $ 656 $ 46,515
Network services......................... 8,841 1,926 5,002 6,928 8,142 53,570
------ ------ ------- ------- -------- ----------
Total revenues............................. 8,841 1,926 5,002 6,928 8,798 100,085
------ ------ ------- ------- -------- ----------
Operating expenses:
Costs of operations (excluding
depreciation and amortization expense):
Site leasing........................... -- -- -- -- 299 17,825
Network services....................... 2,255 595 1,120 1,715 2,492 36,489
Selling, general and administrative
expenses............................... 4,256 1,742 7,390 9,132 9,690 38,182
Depreciation and amortization expense.... 91 56 489 545 1,268 37,976
Restructuring and non-recurring
charges................................ -- -- -- -- -- 7,727
------ ------ ------- ------- -------- ----------
Total operating expenses................... 6,602 2,393 8,999 11,392 13,749 138,199
------ ------ ------- ------- -------- ----------
Operating income (loss).................... $2,239 $ (467) $(3,997) $(4,464) $ (4,951) $ (38,114)
====== ====== ======= ======= ======== ==========
Net income(loss)........................... $2,289 $ (503) $(3,890) $(4,393) $ (9,079) $ (97,668)
Net income (loss) applicable to common
shareholders............................. 2,289 (503) (4,390) (4,893) (11,235) (98,428)
Net loss per share (basic
and diluted)............................. $ (5.21) $ (11.98) $ (12.48)
Weighted average common shares
outstanding (basic and diluted).......... 842 938 7.886
OTHER DATA:
Net cash provided by (used in) operating
activities............................... $1,109 $ (71) $ 223 $ 152 $ (2,347) $ 17,555
Net cash provided by (used in) investing
activities............................... (853) (322) (7,178) (7,500) (45,002) (813,225)
Net cash provided by (used in) financing
activities............................... (266) 390 9,189 9,579 144,663 733,900
EBITDA(a).................................. 2,330 (411) (3,508) (3,919) (3,683) 7,589
Capital expenditures(b).................... 498 64 850 914 26,598 644,778
SELECTED OPERATING DATA (AT END OF PERIOD):
Number of owned towers............................................................... 5 106 2,765
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short term investments.................................... $ 2,234 $114,962 $ 37,778
Total assets......................................................................... 13,642 161,946 1,219,953
Total long-term debt................................................................. 2,331 132,913 718,778
Total shareholders' (deficiency) equity.............................................. (1,898) (14,067) 457,756
</TABLE>
13
<PAGE> 17
- ---------------
(a) EBITDA consists of operating income (loss) before depreciation and
amortization expense and restructuring and non-recurring charges. EBITDA is
provided because it is a measure commonly used in the communications site
industry as a measure of a company's operating performance. 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. SpectraSite believes that EBITDA can assist in comparing company
performance on a consistent basis without regard to depreciation and
amortization expense, 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 indentures governing SpectraSite's 2008 notes
and its 2009 notes.
(b) 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.
14
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS OVERVIEW
SpectraSite's primary focus is on the ownership of multi-tenant towers and
leasing of antenna space on such towers. As of December 31, 1999, we had 2,765
towers in service, as compared to 106 towers at December 31, 1998. As a result
of our limited operating history and primary focus on tower ownership and
leasing, management believes that our results of operations for the period ended
December 31, 1997 and for the years ended December 31, 1998 and 1999 are not
indicative of our results of operations in the future. We previously operated in
one business segment. As a result of the Nextel tower acquisition and the
Westower merger, we now operate in two business segments, site leasing and
network services. For further details about our business segments, refer to Note
11 to our consolidated financial statements.
Historically, we have derived most of our revenues from network services
activities. As a result of recent acquisitions, principally the Nextel and
Westower transactions, we expect that network services and antenna site leasing
will generate most of our revenues. On a pro forma basis, after giving effect to
the Nextel tower acquisition, the Westower merger and certain other
transactions, site leasing and network services would have represented 36% and
64% of our revenues, respectively, for the year ended December 31, 1999. We
believe that our site leasing business will continue to represent a substantial
portion of our revenues and will continue to grow as we increase our network of
towers.
Our two largest expense line items have been depreciation and amortization
and selling, general and administrative expense. Depreciation expense primarily
relates to our towers, which we depreciate over 15 years. In 1999, amortization
expense is primarily due to goodwill associated with the Westower merger. On a
pro forma basis, after giving effect to the Nextel tower acquisition, the
Westower merger and certain other transactions, depreciation and amortization
expense would have represented 35% of revenues for the year ended December 31,
1999. We experienced a significant increase in selling, general and
administrative expense in 1999 as we integrated Westower's operations and
increased our employee base to market and manage the 2,000 Nextel towers and
build towers for Nextel under the master site commitment agreement.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Consolidated revenues for the year ended December 31, 1999 were $100.1
million, an increase of $91.3 million from the year ended December 31, 1998.
Revenues from site leasing increased to $46.5 million for the year ended
December 31, 1999 from $0.7 million for the year ended December 31, 1998,
primarily as a result of revenues derived from 2,000 communications towers which
we acquired from Nextel in April 1999. We owned 2,765 communications towers at
December 31, 1999 compared to 106 communications towers at December 31, 1998.
Revenues from network services increased to $53.6 million for the year
ended December 31, 1999 compared to $8.1 million for the year ended December 31,
1998, primarily as a result of the acquisition of Westower in September 1999. In
September 1999, we announced that we would no longer directly provide site
acquisition services. Revenues from site acquisition activities were $7.2
million and $8.1 million in the years ended December 31, 1999 and 1998,
respectively.
Costs of operations increased to $54.3 million for the year ended December
31, 1999 from $2.8 million for the year ended December 31, 1998. The increase in
costs was attributable to operating costs of the 2,000 communications towers
purchased from Nextel in April 1999 and the acquisition of Westower in September
1999. Costs of operations for site leasing as a percentage of site leasing
revenues decreased to 38.3% for the year ended December 31, 1999 from 45.6% for
the year ended December 31, 1998 primarily due to revenues generated from the
acquisition of towers from Nextel and co-location revenues on those towers. As
our site leasing operations mature, additional tenants on a tower will generate
decreases in costs of operations for site leasing as a percentage of site
leasing revenues and increases in cash flow because a significant
15
<PAGE> 19
proportion of tower operating costs are fixed and do not increase with
additional tenants. Costs of operations for network services as a percentage of
network services revenues increased to 68.1% for the year ended December 31,
1999 from 30.6% for the year ended December 31, 1998. This increase is due to
construction activities associated with Westower's operations which have higher
levels of direct costs than our historical site acquisition activities.
Selling, general and administrative expenses increased to $38.2 million for
the year ended December 31, 1999 from $9.7 million for the year ended December
31, 1998. The increase is a result of expenses related to additional corporate
overhead and field operations implemented to manage and operate the growth in
the ongoing activities of SpectraSite and the acquisition of Westower.
Depreciation and amortization expense increased to $38.0 million for the
year ended December 31, 1999 from $1.3 million for the year ended December 31,
1998, primarily as a result of the increased depreciation from the towers we
acquired or constructed and amortization of goodwill related to the Westower
acquisition.
For the year ended December 31, 1999, we recorded restructuring and
non-recurring charges of $7.7 million. In September 1999, we announced that we
would no longer directly provide site acquisition services. As a result, we
recorded restructuring charges of $7.1 million, of which $6.2 million related to
the write-off of goodwill associated with the purchase of Telesite Services, LLC
and $0.9 million related to costs of employee severance. In March 1999,
SpectraSite announced that it would relocate its marketing and administrative
operations from Little Rock, Arkansas and Birmingham, Alabama to its corporate
headquarters in Cary, North Carolina. As a result, we recorded a non-recurring
charge of $0.6 million for employee termination and other costs related to the
relocation of these activities.
As a result of the factors discussed above, our loss from operations was
$38.1 million for the year ended December 31, 1999 compared to $5.0 million for
the year ended December 31, 1998.
Net interest expense increased to $58.6 million during the year ended
December 31, 1999 from $4.6 million for the year ended December 31, 1998,
reflecting additional interest expense due to the issuance of our 12% senior
discount notes due 2008 in June 1998 and our 11 1/4% senior discount notes due
2009 in April 1999, as well as borrowings under our credit facility in April
1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE COMBINED RESULTS FOR THE YEAR
ENDED DECEMBER 31, 1997
The following is a discussion of the financial condition and results of
operations of SpectraSite for the year ended December 31, 1998 and the year
ended December 31, 1997, which consists of the period from April 25, 1997
through December 31, 1997 and Telesite's results of operations for the period
from January 1, 1997 through May 12, 1997.
Revenues increased to $8.8 million for the year ended December 31, 1998
from $6.9 million for the year ended December 31, 1997 due to the initiation of
site leasing activity and an increase in the number and size of site development
services projects.
Selling, general and administrative expenses, including depreciation
expense, increased to $11.0 million for the year ended December 31, 1998 from
$9.7 million for the year ended December 31, 1997. The increase is a result of
expenses related to additional corporate overhead to manage and operate the
ongoing activities of SpectraSite. 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, relying primarily on its reputation in the industry and customer
referrals to generate revenues. To support our entry into tower development and
leasing, we have established a dedicated marketing effort which promotes tower
development and leasing as well as site acquisition services. Amortization of
goodwill increased to approximately $0.6 million in the year ended December 31,
1998 compared to approximately $0.3 million in the year ended December 31, 1997
as a result of acquisitions.
As a result of the factors discussed above, our operating loss was $5.0
million for the year ended December 31, 1998, compared to $4.5 million for the
year ended December 31, 1997.
16
<PAGE> 20
Other income, which consists primarily of gain on sales of assets and
equity in earnings of affiliates, increased to approximately $0.5 million for
the year ended December 31, 1998 from approximately $0.1 million for the year
ended December 31, 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 approximately $0.5 million. During the year ended December 31, 1997, we
recognized approximately $0.2 million as equity earnings of Communication
Management Specialists. We disposed of our interest in Communication Management
Specialists during the second quarter of 1998 and did not recognize any equity
in the earnings of this affiliate during 1998.
COMBINED RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997 COMPARED TO
TELESITE'S RESULTS FOR THE YEAR ENDED DECEMBER 31, 1996
The following is a discussion of the financial condition and results of
operations of SpectraSite for the year ended December 31, 1997, which consists
of and for the period from April 25, 1997 through December 31, 1997 and
Telesite's results of operations for the period from January 1, 1997 through May
12, 1997, and of Telesite for the year ended December 31, 1996.
Total revenues decreased to $6.9 million for the year ended December 31,
1997 from $8.8 million for the year ended December 31, 1996 due primarily to the
decreased demand for site development services from more established personal
communications services 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 had not yet commenced construction of
tower networks in their respective markets.
Selling, general and administrative expenses increased to $9.1 million for
the year ended December 31, 1997 from $4.3 million for the year ended December
31, 1996. The increase is a result of the expenses related to management of the
ongoing activities of SpectraSite, expenses related to the implementation of
tower development and marketing activities, one-time non-cash charges of
approximately $2.6 million as a result of the formation of SpectraSite,
amortization of goodwill of approximately $0.3 million in connection with our
acquisition of Telesite and expenses incurred in connection with the operations
of Metrosite. We sold our interest in Metrosite during early 1998. We anticipate
that in the future costs related to tower development activities will be
capitalized as part of the cost of the towers.
Operating loss was $4.5 million for the year ended December 31, 1997
compared to $2.2 million of operating income for the year ended December 31,
1996. The change is primarily a result of the decline in revenues and the
increase in selling, general and administrative expenses attributable to the
commencement of operations of SpectraSite.
Other income, which consists primarily of equity in earnings of affiliates,
was approximately $0.1 million for the year ended December 31, 1997 and for the
year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
SpectraSite Holdings is a holding company whose only significant asset is
the outstanding capital stock of its subsidiary, SpectraSite Communications. Our
only source of cash to pay interest on and principal of our indebtedness is
distributions from SpectraSite Communications. Prior to July 15, 2003, interest
expense on the 2008 notes will consist solely of non-cash accretion of original
issue discount and the 2008 notes will not require annual cash interest
payments. After such time, the 2008 notes will have accreted to approximately
$225.2 million and will require semi-annual cash interest payments of $13.5
million. The 2008 notes mature on July 15, 2008. Similarly, prior to October 15,
2004, interest expense on the 2009 notes will consist solely of non-cash
accretion of original issue discount and the 2009 notes will not require annual
cash interest payments. After such time, the 2009 notes will have accreted to
approximately $586.8 million and will require semi-annual cash interest payments
of $33.0 million. The 2009 notes mature on April 15, 2009. Furthermore, our
credit facility provides for periodic principal and interest payments.
17
<PAGE> 21
Our ability to fund capital expenditures, make scheduled payments of
principal of, or pay interest on, our debt obligations, and our ability to
refinance any such debt obligations, including the 2008 notes and the 2009
notes, will depend on our future performance, which, to a certain extent is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Our business strategy contemplates
substantial capital expenditures, including an expected approximate amount of
$200 million during the first half of 2000, primarily to fund the construction
and acquisition of additional communications towers. Management believes that
cash flow from operations, available cash as of December 31, 1999, net proceeds
received from our public offering of common stock in February 2000 and
anticipated available borrowings under the credit facility will be sufficient to
fund our capital expenditures for the foreseeable future. However, if
acquisitions or other opportunities present themselves more rapidly than we
currently anticipate or if our estimates prove inaccurate, we may seek
additional sources of debt or equity capital prior to the end of 2000 or reduce
the scope of tower construction and acquisition activity. We cannot assure you
that we will generate sufficient cash flow from operations or that future
borrowings or equity or debt financings will be available on terms acceptable to
us, in amounts sufficient to service our indebtedness and make anticipated
capital expenditures.
CASH FLOWS
For the year ended December 31, 1999, cash flows provided by operating
activities were $17.6 million as compared to $2.3 million used in operating
activities in the year ended December 31, 1998. The change is primarily
attributable to the favorable cash flows generated from communications tower
acquisitions in 1999.
For the year ended December 31, 1999, cash flows used in investing
activities were $813.2 million compared to $45.0 million for the year ended
December 31, 1998. In the year ended December 31, 1999, SpectraSite invested
$692.8 million in purchases of property and equipment and deposits on future
acquisitions, primarily related to the acquisition of communication towers from
Nextel. In addition, we used $128.4 million to acquire Westower in September
1999 and Stainless and Doty-Moore in December 1999. These investments were
partially offset by $15.4 million in maturities of short-term investments.
In the year ended December 31, 1999, cash flows provided by financing
activities were $733.9 million as compared to $144.7 million in the year ended
December 31, 1998. The increase in cash provided by financing activities was
attributable to the proceeds from the sales of Series C preferred stock and the
2009 notes, as well as proceeds from borrowings under the credit facility.
Net cash used in operating activities during the year ended December 31,
1998 was $2.3 million compared to $0.2 million provided by operating activities
during the comparable period in 1997. The increase in cash used in operating
activities was primarily attributable to an increase in accounts receivable
resulting from the timing of billings related to site development services and
the net loss incurred during the year. Net cash used for investing for the year
ended December 31, 1998 was $45.0 million compared to $7.5 million for the year
ended December 31, 1997. The cash used for investing activities during the year
ended December 31, 1998 was primarily the result of the investment of unused
proceeds from the sale of the 2008 notes in short-term investments, costs
associated with tower construction, the acquisition of towers from Airadigm
Communications, Inc. and the acquisition of GlobalComm. The cash used for
investing activities during the year ended December 31, 1997 primarily related
to the acquisition of Telesite. Net cash provided by financing activities for
the year ended December 31, 1998 was $144.7 million compared to $9.6 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 2008 notes.
MERGERS AND ACQUISITIONS
We acquired 45 communications towers and certain related assets from
Airadigm for an aggregate purchase price of $11.25 million in 1998 and 1999.
Airadigm is the anchor tenant on 48 of our towers and has filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. We cannot predict the impact of
this proceeding on our future results of operations or financial condition.
18
<PAGE> 22
On April 20, 1999, we acquired 2,000 communications towers from Nextel in a
merger transaction. All the sites were then leased back to Nextel under a master
lease agreement. In addition, in connection with this transaction, Nextel and
its controlled affiliates agreed to offer SpectraSite certain exclusive
opportunities relating to the construction or purchase of an additional 1,700
sites. Some of these sites may in the future be leased to Nextel Partners
Operating Corp. instead of Nextel. Nextel Partners, Inc., the parent of Nextel
Partners Operating Corp., is an entity in which Nextel has a minority equity
interest. In connection with this acquisition, we paid $560.0 million in cash
and issued 14.0 million shares of Series C preferred stock, valued at $70.0
million, to Nextel.
The following table sets forth the sources and uses of funds for the Nextel
tower acquisition in thousands of dollars:
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Credit facility..................................... $150,000
11 1/4% senior discount notes due 2009.............. 340,004
Series C preferred stock issued to Nextel........... 70,000
Series C preferred stock sold to the Series C
investors......................................... 231,434
--------
Total sources..................................... $791,438
========
USES OF FUNDS:
Cash paid to Nextel................................. $560,000
Series C preferred stock issued to Nextel........... 70,000
Cash available for general corporate purposes....... 127,688
Estimated fees and expenses......................... 33,750
--------
Total uses........................................ $791,438
========
</TABLE>
On September 2, 1999, we acquired Westower Corporation, a Washington
corporation, in a stock-for-stock merger. In this transaction, Westower
stockholders received 1.81 shares of our common stock, plus cash for any
fractional Westower share, in exchange for each of their shares of Westower
common stock. In connection with the merger, SpectraSite repaid approximately
$70.0 million of Westower indebtedness with cash-on-hand. Westower Corporation
now operates as a wholly-owned subsidiary of SpectraSite Communications, which
in turn is a wholly-owned subsidiary of SpectraSite Holdings.
On September 8, 1999, we acquired a 33% interest in Concourse
Communications Group, LLC for an aggregate purchase price of $2.5 million.
Concourse was established to build certain wireless communications
infrastructures at facilities owned by the Port Authority of New York and New
Jersey, including the Holland and Lincoln Tunnels, World Trade Center Concourse
and New York's three major airports. As part of our investment, we agreed to
provide approximately $14.4 million of working capital and construction
financing to Concourse in the form of secured loans over the next three years.
At December 31, 1999, Concourse owed us $2.9 million under these loans. In
addition, after three years, we have an option to purchase an additional 33%
interest in Concourse, and after six years, we have an option to purchase the
remaining interest in Concourse.
In November 1999, we entered into an agreement to acquire 94 communications
towers from DigiPH PCS, Inc. for $36.0 million in cash. The towers span the
corridor connecting Jackson, Mississippi, Mobile, Alabama and Tallahassee,
Florida. We acquired 61 towers for approximately $23.9 million on December 29,
1999, and we expect to acquire the remaining towers during the first quarter of
2000.
On December 30, 1999, we acquired Stainless, Inc., formerly a wholly-owned
subsidiary of Northwest Broadcasting, L.P., for $40.0 million in cash. Stainless
provides engineering, fabrication and other services in connection with the
erection of towers used for television broadcast companies. Also on December 30,
1999, we acquired Doty-Moore Tower Services, Inc., Doty-Moore Equipment Company,
Inc. and Doty Moore RF Services, Inc. for $2.5 million in cash and 500,000
unregistered shares of our common stock. Doty-Moore is a leading source for
broadcast tower construction and technical services. In addition, on January 5,
2000, we acquired Vertical Properties, Inc. in a merger transaction under which
we issued 225,000 unregistered shares
19
<PAGE> 23
of our common stock and repaid outstanding indebtedness of approximately $2.0
million. Vertical Properties is a broadcast tower development company formed to
meet the needs of broadcasters in secondary broadcast markets faced with the
complexities of converting to digital technology through site acquisition, tower
placement and leasing of antenna space. On January 28, 2000, we acquired
substantially all of the assets of International Towers Inc. and its
subsidiaries, including S&W Communications Inc. International Towers owns a
modern broadcast tower manufacturing facility and, through S&W Communications,
provides integrated services for the erection of broadcast towers, foundations
and multi-tenant transmitter buildings. We paid $5.5 million and issued an
aggregate of 350,000 unregistered shares of our common stock in connection with
this acquisition. We borrowed an additional $50.0 million under our credit
facility in December 1999 to partially fund these mergers and acquisitions.
On January 5, 2000, we acquired Apex Site Management Holdings, Inc. in a
merger transaction. Apex provides rooftop and in-building access to wireless
carriers. We issued approximately 4.5 million unregistered shares of our common
stock to the stockholders of Apex and approximately 194,000 options to purchase
common stock at an exercise price of $3.58 per share to certain option holders
of Apex at the closing of the merger. In addition, we issued approximately 1.5
million additional shares of common stock into escrow, which shares may be
released to Apex's stockholders six months after this offering based on the
average trading price for our common stock for the 30-day period immediately
preceding the six-month anniversary of this offering. We also used approximately
$6.2 million in cash to repay outstanding indebtedness and other obligations of
Apex in connection with the merger.
On February 17, 2000, we entered into an agreement with AirTouch and
several of its affiliates, under which we agreed to lease or sublease
approximately 430 communications towers for $155.0 million, subject to
adjustment. Under the terms of the agreement and the master sublease which the
parties will enter into at closing, we will manage, maintain and lease the
available space on AirTouch towers covered by the agreement and located
throughout Southern California. AirTouch will pay us an average monthly fee per
site for its cellular, microwave and paging facilities. We also have the right
to lease available tower space to co-location tenants in specified situations.
We also entered into a site marketing agreement with AirTouch to provide
AirTouch with certain tower leasing and marketing services pending the closing
of the master sublease, and we have agreed to enter into a three-year exclusive
build-to-suit agreement with AirTouch in Southern California. Under the terms of
the build-to-suit agreement, we will develop and construct locations for
wireless communications towers on real property designated by AirTouch.
We expect the AirTouch transaction to close in stages, with the initial
closing to occur no later than November 15, 2000, if certain conditions are met.
The initial closing will involve at least 105 towers and each subsequent closing
will involve at least 45 towers, or a smaller number when fewer than 45 towers
remain to be transferred, and the final closing will occur no later than six
months after the initial closing. At each respective closing, we will pay for
the towers included in that closing according to a formula contained in the
master sublease. As partial security for our obligations under the master
sublease, we deposited $23.0 million into escrow.
FINANCING TRANSACTIONS
In connection with the Nextel tower acquisition, we privately placed
46,286,795 shares of Holdings' Series C preferred stock for an aggregate
purchase price of $231.4 million. On April 20, 1999, SpectraSite completed the
private offering of $586.8 million aggregate principal amount at maturity of
11 1/4% senior discount notes due 2009. We used a portion of the net proceeds
from these offerings to partially fund the Nextel tower acquisition and to pay
related fees and expenses. We used the remaining proceeds for general corporate
purposes, including the purchase and construction of new towers and selective
acquisitions.
Also on April 20, 1999, we entered into a $500.0 million seven-year credit
facility. We borrowed $150.0 million under this facility at the closing of the
Nextel tower acquisition. We also issued 2.0 million shares of common stock to
various parties as consideration for providing financing commitments related to
the Nextel tower acquisition. We did not utilize these commitments for the
Nextel acquisition primarily because of the success of the 2009 notes offering.
We currently have $300.0 million available under our credit facility
20
<PAGE> 24
to fund new tower construction or acquisition activity. In addition, as of
December 31, 1999, our cash and cash equivalents were $37.8 million.
On September 15, 1999, we completed registered exchange offers for our 2008
notes and our 2009 notes. Under a registration rights agreement with the initial
purchasers of the 2008 notes, we agreed to complete an exchange offer for the
privately placed 2008 notes prior to March 10, 1999. Since we did not complete
this exchange offer prior to March 10, 1999, the interest rate on the 2008 notes
increased by 0.50% per year. This additional interest accrued on the 2008 notes
until we completed the exchange offer, and we paid this interest in cash on
January 15, 2000. Similarly, under a registration rights agreement with the
initial purchasers of the 2009 notes, Holdings agreed to file a registration
statement with the SEC for an exchange offer of registered notes for the
privately placed 2009 notes before July 20, 1999. Since we did not file the 2009
notes exchange offer registration statement before July 20, 1999, the interest
rate on the 2009 notes increased by 0.50% per year. This additional interest
accrued on the 2009 notes until we filed the exchange offer registration
statement on August 12, 1999, and we paid this interest in cash on October 15,
1999.
On February 4, 2000, we completed a public offering of our common stock. We
offered 25,645,000 shares of common stock, including an over-allotment option
exercised by our underwriters. In addition, each share of our preferred stock
converted to a share of common stock upon the closing of the offering. The
number of shares of our common stock outstanding immediately after the offering,
including the 70,749,625 shares issued upon conversion of the preferred stock
and 6,007,996, 225,000 and 350,000 shares issued in connection with our
acquisitions of Apex and Vertical Properties in merger transactions and
substantially all of the assets of International Towers, Inc., was 123,169,225.
We received net proceeds of $411.3 million from the offering, which we intend to
use to fund costs related to the construction and acquisition of towers,
including under the AirTouch agreements, and for general corporate purposes.
INFLATION
Some of our expenses, such as those for marketing, wages and benefits,
generally increase with inflation. However, we do not believe that our financial
results have been, or will be, adversely affected by inflation in a material
way.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133
requires that derivative instruments be recognized as either assets or
liabilities in the consolidated balance sheet based on their fair values.
Changes in the fair values of such derivative instruments will be recorded
either in results of operations or in other comprehensive income, depending on
the intended use of the derivative instrument. The initial application of SFAS
133 will be reported as the effect of a change in accounting principle. SFAS 133
is effective for all fiscal years beginning after June 15, 2000. We have not yet
determined the effect that the adoption of SFAS 133 will have on our
consolidated financial statements.
YEAR 2000 COMPLIANCE
We have not experienced any immediate adverse impact from the transition to
the year 2000. However, we cannot assure you that we or our suppliers and
customers have not been affected in a manner that is not yet apparent. In
addition, certain computer programs which were date sensitive to the year 2000
may not process the year 2000 as a leap year, and any negative consequential
effects remain unknown. As a result, we continue to monitor our year 2000
compliance and the year 2000 compliance of our suppliers and customers.
21
<PAGE> 25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We use financial instruments, including fixed and variable rate debt, to
finance our operations. The information below summarizes our market risks
associated with debt obligations outstanding as of December 31, 1999. The
following table presents principal cash flow and related weighted average
interest rates by fiscal year of maturity. Variable interest rate obligations
under the credit facility are not included in the table. We have no long-term
variable interest obligations other than borrowings under the credit facility.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------------------------------------
1999 2000 2001 2002 2003 THEREAFTER TOTAL
-------- -------- -------- -------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term obligations:
Fixed rate............ $ -- $ -- $ -- $ -- $ -- $516,251 $516,251
Average interest
rate............. -- -- -- -- -- 11.5% 11.5%
</TABLE>
22
<PAGE> 26
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information required by
this Item are included in this report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of SpectraSite are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------- --- --------
<S> <C> <C>
Stephen H. Clark............................ 55 President and Chief Executive Officer
Timothy G. Biltz............................ 41 Chief Operating Officer
David P. Tomick............................. 48 Executive Vice President, Chief Financial Officer and
Secretary
Richard J. Byrne............................ 42 Executive Vice President--Business Development
Calvin J. Payne............................. 47 Executive Vice President--Design and Construction
Terry L. Armant............................. 51 Senior Vice President--Operations
John H. Lynch............................... 42 Vice President, General Counsel
Daniel I. Hunt.............................. 35 Vice President--Finance and Administration
Steven C. Lilly............................. 30 Vice President and Treasurer
Douglas A. Standley......................... 42 Vice President--Broadcast Group
Alexander L. Gellman........................ 38 Vice President--Site Management Group
</TABLE>
The remaining information required by this Item is incorporated by
reference to SpectraSite's Proxy Statement for the 2000 Annual Meeting of
Stockholders.
23
<PAGE> 27
ITEM 11. EXECUTIVE COMPENSATION
Other than as set forth below, the information required by this Item is
incorporated by reference to SpectraSite's Proxy Statement for the 2000 Annual
Meeting of Stockholders.
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation paid by
or incurred on behalf of SpectraSite to its Chief Executive Officer and four
other most highly compensated executive officers for the years ended December
31, 1997, 1998 and 1999. Amounts shown for 1997 include compensation paid by
Spectrasite Holdings to the named executive officers from April 25, 1997, the
date of Spectrasite Holdings' inception, through December 31, 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING ALL OTHER
NAME AND OTHER RESTRICTED OPTIONS/ COMPENSATION($)
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ANNUAL($) STOCK($) SARS(#) (e)
------------------ ---- --------- -------- --------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen H. Clark........ 1999 219,006 150,000 -- -- 775,000 2,535
Chief Executive
Officer 1998 168,000 68,000 -- -- 300,000 2,400
1997 107,046 -- -- -- 425,000 --
David P. Tomick......... 1999 187,921 77,360 -- -- 225,000 2,442
Chief Financial
Officer 1998 140,000 56,000 -- -- 50,000 2,178
1997 64,029 -- -- -- 225,000 --
Terry L. Armant(a)...... 1999 148,025 51,845 -- -- 25,000 2,316
1998 55,192 68,150 -- -- 125,000 --
Senior Vice
President-Operations
Richard J. Byrne(b)..... 1999 103,205 70,613 138,613 224,500(d) 200,000 22,172
Executive Vice
President-Business
Development
Timothy G. Biltz(c)..... 1999 89,000 50,000 17,609 -- 400,000 32,064
Chief Operating
Officer
</TABLE>
- ---------------
(a) Mr. Armant joined SpectraSite in August 1998.
(b) Mr. Byrne joined SpectraSite in April 1999.
(c) Mr. Biltz joined SpectraSite in August 1999.
(d) Mr. Byrne received 50,000 shares of restricted common stock in April 1999 in
connection with his employment by SpectraSite, and he is entitled to
dividends, if any, paid on his restricted stock. As of December 31, 1999,
Mr. Byrne held 50,000 shares of restricted common stock with a fair market
value of $544,000. No other named executive officer holds shares of
restricted stock.
(e) Amounts reported for 1999 include SpectraSite's contribution under its
401(k) plan of $2,535, $2,442, $2,316 and $707 for Messrs. Clark, Tomick,
Armant and Byrne, respectively, and relocation allowances of $21,465 and
$32,064 for Messrs. Byrne and Biltz, respectively.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of forms submitted to SpectraSite during and with
respect to 1999, all executive officers, directors and 10% beneficial owners
filed reports pursuant to Section 16 (a) of the Exchange Act on a timely basis,
except for the initial report of beneficial ownership on Form 3 by two
executive officers. In addition, one 10% beneficial owner did not file its Form
3 or a Form 4 reporting one transaction on a timely basis.
24
<PAGE> 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2000 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents incorporated by reference or filed with this Report
(1) The required financial statements are included in this report
beginning on page F-1.
(2) The required financial schedule information is provided in the
financial statements included in this report.
(3) Listed below are the exhibits which are filed or incorporated
by reference as part of this report (according to the number
assigned to them in Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of February 10, 1999,
among Nextel Communications, Inc., Tower Parent Corp., Tower
Merger Vehicle, Inc., Tower Asset Sub Inc., SpectraSite
Holdings, Inc. (the "Registrant"), SpectraSite
Communications, Inc. and SHI. Merger Sub, Inc. (the "Nextel
Merger Agreement"). Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.2 Amendment No. 1 to the Nextel Merger Agreement. Incorporated
by reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
2.3 Agreement and Plan of Merger among Westower Corporation,
SpectraSite Holdings, Inc. and W. Acquisition Corp., dated as
of May 15, 1999. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
2.4 Merger Agreement and Plan of Reorganization, dated as of
November 24, 1999, among SpectraSite Holdings, Inc. (the
"Apex Merger Agreement"), Apex Merger Sub, Inc. and Apex Site
Management Holdings, Inc. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-1, file no. 333-93873
2.5 Stock Purchase Agreement, dated as of December 30, 1999,
between Northwest Broadcasting, L.P. and SpectraSite
Holdings, Inc. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-1, file no. 333-93873
2.6 Stock Purchase Agreement, dated as of December 30, 1999,
among Donald Doty, John Patrick Moore and SpectraSite
Holdings, Inc. Incorporated by reference to the corresponding
exhibit to the Registrant's registration statement on Form
S-1, file no. 333-93873
2.7 Merger Agreement and Plan of Reorganization, dated as of
December 30, 1999, among SpectraSite Holdings, Inc., VPI
Merger Sub, Inc., Vertical Properties, Inc. and the
stockholders of Vertical Properties, Inc. Incorporated by
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-1, file no. 333-93873
2.8 Asset Purchase Agreement, dated as of January 5, 2000, among
International Towers, Inc., S&W Communications, Inc., Tri-Ex
Tower, Inc., International Tower Industries and SpectraSite
Holdings, Inc. Incorporated by reference to the
corresponding exhibit to the Registrant's report on Form
8-K filed on January 21, 2000
</TABLE>
26
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.9 Agreement to Sublease, dated as of February 16, 2000, by and
between AirTouch Communications, Inc. and the Other Parties
Named Therein as Sublessors and California Tower, Inc. and
SpectraSite Holdings, Inc.
3.1 Certificate of Incorporation of Integrated Site Development
("ISD"), dated and filed as of April 25, 1997. Incorporated
by reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
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. Incorporated by
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
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. Incorporated by reference to the corresponding
exhibit to the Registrant's registration statement on Form
S-4, file no. 333-67403
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.). Incorporated by reference to
the corresponding exhibit to the Registrant's registration
statement on Form S-4 , file no. 333-67403
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). Incorporated by
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
3.6 Certificate of Amendment of the Certificate of Incorporation
of the Registrant, dated as of May 29, 1998 and filed June 2,
1998. Incorporated by reference to the corresponding exhibit
to the Registrant's registration statement on Form S-4, file
no. 333-67403
3.7 Certificate of Amendment of the Certificate of Incorporation
of the Registrant, dated as of August 18, 1998 and filed
August 19, 1998. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
3.8 Amended Bylaws of SpectraSite Holdings, Inc. Incorporated by
reference to the
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-1, file no. 333-93873
3.9 Amended and Restated Certificate of Incorporation of the
Registrant. Incorporated by reference to the corresponding
exhibit to the Registrant's registration statement on Form
S-4, file no. 333-67403
3.10 Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Registrant, dated August
31, 1999. Incorporated by reference to the corresponding
exhibit to the Registrant's report on Form 8-K, dated
September 2, 1999 and filed September 17, 1999
4.1 Indenture, dated as of June 26, 1998, between the Registrant
and United States Trust Company of New York, as trustee.
Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-4 , file no.
333-67403
4.2 First Supplemental Indenture, dated as of March 25, 1999,
between the Registrant and United States Trust Company of New
York, as trustee. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4 , file no. 333-67403
4.3 Indenture, dated as of April 20, 1999, between the Registrant
and United States Trust Company of New York, as trustee.
Incorporated by reference to the corresponding exhibit to the
Registrant's registration statement on Form S-4, file no.
333-67403
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. Incorporated by reference to
the corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
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"). Incorporated by reference to the corresponding
exhibit to the Registrant's registration statement on Form
S-4, file no. 333-67403
10.3 First Amendment to Stock Purchase Agreement (Series B
Preferred Stock), dated as of May 29, 1998. Incorporated by
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
10.4 Second Amendment to Stock Purchase Agreement (Series B
Preferred Stock), dated as of August 27, 1998. Incorporated
by reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
10.5 Second Amended and Restated Registration Rights Agreement,
dated as of April 20, 1999, by and among the Registrant,
Whitney Equity, Whitney III, Whitney Strategic,
Waller-Sutton, Kitty Hawk III, Kitty Hawk IV, Eagle Creek,
NCEF, Finley LP, certain affiliates of CIBC Oppenheimer Corp.
(the "CIBC Purchasers"), certain affiliates and employees of
Welsh Carson Anderson & Stowe (the "WCAS Purchasers"), Tower
Parent Corp., Gupton, Eckert, Stephen H. Clark ("Clark") and
David P. Tomick ("Tomick"). Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.6 Third Amended and Restated Stockholders' Agreement, dated as
of April 20, 1999, by and among the Registrant, Whitney
Equity, Whitney III, Whitney Strategic, Waller-Sutton, Kitty
Hawk III, Kitty Hawk IV, Eagle Creek, Clark, Tomick, Finely
LP, NCEF, the CIBC Purchasers, the WCAS Purchasers, Tower
Parent Corp., Edward Lutkewich ("Lutkewich"), Jackman,
Eckert, and Gupton. Incorporated by reference to the
corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
10.7 Employment Agreement with Clark. Incorporated by reference
to the corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
10.8 Employment Agreement with Tomick. Incorporated by reference
to the corresponding exhibit to the Registrant's registration
statement on Form S-4, file no. 333-67403
10.9 Employment Agreement with Richard J. Byrne. Incorporated by
reference to the corresponding exhibit to the Registrant's
registration statement on Form S-4, file no. 333-67403
10.10 Credit Agreement, dated as of April 20, 1999, by and among
the Registrant, SCI, CIBC Oppenheimer Corp., Credit Suisse
First Boston Corporation and the other parties thereto (the
"Credit Agreement"). Incorporated by reference to exhibit no.
10.1 to the Registrant's registration statement on Form 8-A
filed on September 1, 1999
10.11 SpectraSite Holdings, Inc. Stock Incentive Plan.
Incorporated by reference to the exhibit no. 10.16 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.12 SpectraSite Holdings, Inc. Employee Stock Purchase Plan.
Incorporated by reference to the exhibit no. 10.17 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.13 Agreement, dated September 15, 1998, by and between Robert M.
Long and the Registrant. Incorporated by reference to
exhibit no. 10.22 to the Registrant's registration statement
on Form S-4, file no. 333-67403
10.14 Asset Purchase Agreement, dated as of August 14, 1998 by and
among Airadigm Communications, Inc. ("Airadigm") and SCI.
Incorporated by reference to exhibit no. 10.23 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.15 Form of Master Tower Attachment Lease Agreement by and
between Airadigm and SCI. Incorporated by reference to
exhibit no. 10.24 to the Registrant's registration statement
on Form S-4, file no. 333-67403
10.16 Asset Purchase, dated as of August 20, 1998, by and among
Amica Wireless Phone Service, Inc. ("Amica") and SCI.
Incorporated by reference to exhibit no. 10.25 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.17 Form of Master Design Build Lease Agreement by and between
Amica and SCI. Incorporated by reference to exhibit no. 10.26
to the Registrant's registration statement on Form S-4, file
no. 333-67403
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.18 Preferred Stock Purchase Agreement (Series C Preferred
Stock), dated as of February 10, 1999, by and among
SpectraSite Holdings, Inc., the WCAS Purchasers, the Whitney
Purchasers, the CIBC Purchasers and the Additional
Purchasers. Incorporated by reference to exhibit no. 10.30 to
the Registrant's registration statement on Form S-4, file no.
333-67403
10.19 First Amendment to Preferred Stock Purchase Agreement (Series
C Preferred Stock). Incorporated by reference to exhibit no.
10.31 to the Registrant's registration statement on Form S-4,
file no. 333-67403
10.20 Security & Subordination Agreement, dated as of April
20,1999. Incorporated by reference to exhibit no. 10.32 to
the Registrant's registration statement on Form S-4, file no.
333-67403
10.21 Master Site Commitment Agreement, dated as of April 20, 1999.
Incorporated by reference to exhibit no. 10.33 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.22 Master Site Lease Agreement, dated as of April 20, 1999.
Incorporated by reference to exhibit no. 10.34 to the
Registrant's registration statement on Form S-4, file no.
333-67403
10.23 Employment Agreement with Calvin J. Payne. Incorporated by
referenced to exhibit 10.1 to the Registrant's report on Form
8-K, dated September 2, 1999 and filed September 17, 1999
10.24 Joinder Agreement to SpectraSite Restated Registration Rights
Agreement. Incorporated by reference to exhibit no. 10.36 to
the Registrant's registration statement on Form S-1, file no.
333-93873
10.25 First Amendment to the Credit Agreement, dated as of August
23, 1999. Incorporated by reference to exhibit 10.2 to the
Registrant's report on Form 8-K, dated September 2, 1999 and
filed September 17, 1999
10.26 Second Amendment to the Credit Agreement, dated as of
December 22, 1999.
10.27 Third Amendment to the Credit Agreement, dated as of February
14, 2000.
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
99.1 Unaudited Pro Forma Financial Data
</TABLE>
(b) Reports on Form 8-K filed during the quarter ended December 31,
1999:
None.
30
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1998 and December 31, 1999........................... F-3
Consolidated Statements of Operations for the period from inception (April 25,
1997) to December 31, 1997 and for the years ended December 31, 1998 and 1999...................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and Shareholders'
Deficiency......................................................................................... F-5
Consolidated Statements of Cash Flows for the period from inception (April 25,
1997) to December 31, 1997 and for the years ended December 31, 1998 and 1999...................... F-6
Notes to Consolidated Financial Statements........................................................... F-7
TELESITE SERVICES, LLC
Report of Independent Auditors....................................................................... F-24
Consolidated Balance Sheet as of December 31, 1996................................................... F-25
Consolidated Statements of Operations for the year ended December 31, 1996 and
for the period from January 1, 1997 through May 12, 1997........................................... F-26
Consolidated Statements of Members' Equity........................................................... F-27
Consolidated Statements of Cash Flows for the year ended December 31, 1996 and for
the period from January 1, 1997 through May 12, 1997............................................... F-28
Notes to Consolidated Financial Statements........................................................... F-29
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SpectraSite Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of SpectraSite
Holdings, Inc. and subsidiaries as of December 31, 1998 and 1999 and the related
consolidated statements of operations, redeemable convertible preferred stock
and shareholders' equity (deficiency) and cash flows for the years ended
December 31, 1998 and 1999 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 auditing standards generally
accepted in the United States. 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 subsidiaries at December 31, 1998 and 1999 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1998 and 1999 and for the period from April 25, 1997 (inception) to
December 31, 1997 in conformity with accounting principles generally accepted in
the United States.
/s/ ERNST & YOUNG LLP
February 14, 2000
Raleigh, North Carolina
F-2
<PAGE> 36
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------
1998 1999
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 99,548 $ 37,778
Short-term investments.................................... 15,414 --
Accounts receivable, net of allowance of $0 and $1,530.... 3,353 31,785
Costs and estimated earnings in excess of billings........ -- 11,545
Inventories............................................... -- 4,083
Prepaid expenses and other................................ 253 4,353
-------- ----------
Total current assets........................................ 118,568 89,544
Property and equipment, net................................. 28,469 763,757
Goodwill and other intangible assets, net................... 12,757 307,197
Other assets................................................ 2,152 59,455
-------- ----------
Total assets................................................ $161,946 $1,219,953
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 1,635 $ 21,230
Accrued and other expenses................................ 809 16,942
Billings in excess of costs and estimated earnings........ -- 5,247
-------- ----------
Total current liabilities................................... 2,444 43,419
Long-term debt.............................................. -- 202,527
Other long-term liabilities................................. 224 --
Senior discount notes....................................... 132,689 516,251
-------- ----------
Total liabilities........................................... 135,357 762,197
-------- ----------
Series A redeemable convertible preferred stock, $0.001 par,
3,462,830 shares authorized, and 3,462,830 outstanding,
stated at liquidation value............................... 11,300 --
-------- ----------
Series B redeemable convertible preferred stock, $0.001 par,
7,000,000 shares authorized, and 7,000,000 outstanding,
stated at liquidation value............................... 29,356 --
-------- ----------
Shareholders' equity (deficiency):
Series A convertible preferred stock, $0.001 par,
3,462,830 shares authorized and outstanding, stated at
liquidation value...................................... -- 10,000
Series B convertible preferred stock, $0.001 par,
7,000,000 shares authorized and outstanding, stated at
liquidation value...................................... -- 28,000
Series C convertible preferred stock, $0.001 par,
60,286,795 shares authorized and outstanding, stated at
liquidation value...................................... -- 301,494
Common stock, $0.001 par, 20,000,000 and 300,000,000
authorized, respectively, 956,753 and 20,191,604 issued
and outstanding, respectively.......................... 1 20
Additional paid-in-capital................................ -- 230,546
Accumulated other comprehensive income.................... -- 192
Accumulated deficit....................................... (14,068) (112,496)
-------- ----------
Total shareholders' equity (deficiency)..................... (14,067) 457,756
-------- ----------
Total liabilities, redeemable preferred stock and
shareholders' equity (deficiency)......................... $161,946 $1,219,953
======== ==========
</TABLE>
F-3
<PAGE> 37
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR YEAR
(APRIL 25, 1997) TO ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Site leasing............................... $ -- $ 656 $ 46,515
Network services........................... 5,002 8,142 53,570
------- -------- --------
Total revenues............................... 5,002 8,798 100,085
------- -------- --------
Operating expenses:
Cost of operations, excluding depreciation
and amortization expense:
Site leasing.......................... -- 299 17,825
Network services...................... 1,120 2,492 36,489
Selling, general and administrative
expenses................................... 7,390 9,690 38,182
Depreciation and amortization expense........ 489 1,268 37,976
Restructuring and non-recurring charges...... -- -- 7,727
------- -------- --------
Total operating expenses..................... 8,999 13,749 138,199
------- -------- --------
Operating loss............................... (3,997) (4,951) (38,114)
------- -------- --------
Other income (expense):
Interest income............................ 122 3,569 8,951
Interest expense........................... (164) (8,170) (67,513)
Other income (expense)..................... 149 473 (424)
------- -------- --------
Total other income (expense)................. 107 (4,128) (58,986)
------- -------- --------
Loss before income taxes..................... (3,890) (9,079) (97,100)
Income tax expense........................... -- -- 568
------- -------- --------
Net loss..................................... $(3,890) $ (9,079) $(97,668)
======= ======== ========
Loss applicable to common shareholders:
Net loss..................................... $(3,890) $ (9,079) $(97,668)
Accretion of redemption value of preferred
stock...................................... (500) (2,156) (760)
------- -------- --------
Net loss applicable to common shareholders... $(4,390) $(11,235) $(98,428)
======= ======== ========
Net loss per common share:
Basic and diluted.......................... $ (5.21) $ (11.98) $ (12.48)
======= ======== ========
Weighted average common shares outstanding:
Basic and diluted.......................... 842 938 7,886
======= ======== ========
</TABLE>
F-4
<PAGE> 38
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK SHAREHOLDERS' EQUITY (DEFICIENCY)
--------------------------------------
REDEEMABLE REDEEMABLE
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES A SERIES B SERIES C
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at April 25, 1997
(inception).............. $ -- $ -- $ -- $ -- $ --
Issuance of common
stock.................... -- -- -- -- --
Issuance of warrants...... -- -- -- -- --
Issuance of preferred
stock.................... 10,000 -- -- -- --
Stock issuance costs...... -- -- -- -- --
Accretion of redemption
value.................... 500 -- -- -- --
Net loss.................. -- -- -- -- --
-------- -------- ------- ------- --------
Balance at December 31,
1997..................... 10,500 -- -- -- --
Exercise of warrants...... -- -- -- -- --
Issuance of preferred
stock.................... -- 28,000 -- -- --
Stock issuance costs...... -- -- -- -- --
Accretion of redemption
value.................... 800 1,356 -- -- --
Repurchase of common
stock.................... -- -- -- -- --
Net loss.................. -- -- -- -- --
-------- -------- ------- ------- --------
Balance at December 31,
1998..................... 11,300 29,356 -- -- --
Net loss.................. -- -- -- -- --
Foreign currency
translation adjustment... -- -- -- -- --
Total comprehensive
loss.....................
Issuance of common
stock.................... -- -- -- -- --
Stock issuance costs...... -- -- -- -- --
Issuance of Series C
preferred stock.......... -- -- -- -- 301,494
Accretion of redemption
value.................... 200 560 -- -- --
Cancellation of redemption
status of preferred
stock.................... (11,500) (29,916) 10,000 28,000 --
-------- -------- ------- ------- --------
Balance at December 31,
1999..................... $ -- $ -- $10,000 $28,000 $301,494
======== ======== ======= ======= ========
<CAPTION>
REDEEMABLE
CONVERTIBLE SHAREHOLDERS' EQUITY (DEFICIENCY)
--------------- ---------------------------------
ACCUMULATED
COMMON STOCK ADDITIONAL COMPREHENSIVE OTHER
------------------- PAID-IN INCOME COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL (LOSS) INCOME DEFICIT TOTAL
---------- ------ ---------- ------------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 25, 1997
(inception).............. -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock.................... 931,753 1 2,281 -- -- 2,282
Issuance of warrants...... -- -- 390 -- -- 390
Issuance of preferred
stock.................... -- -- -- -- -- --
Stock issuance costs...... -- -- (180) -- -- (180)
Accretion of redemption
value.................... -- -- (500) -- -- (500)
Net loss.................. -- -- -- $ (3,890) -- (3,890) (3,890)
---------- ---- -------- ======== ---- --------- --------
Balance at December 31,
1997..................... 931,753 1 1,991 -- (3,890) (1,898)
Exercise of warrants...... 150,000 -- -- -- -- --
Issuance of preferred
stock.................... -- -- -- -- -- --
Stock issuance costs...... -- -- (434) -- -- (434)
Accretion of redemption
value.................... -- -- (1,557) -- (599) (2,156)
Repurchase of common
stock.................... (125,000) -- -- -- (500) (500)
Net loss.................. -- -- -- $ (9,079) -- (9,079) (9,079)
---------- ---- -------- ======== ---- --------- --------
Balance at December 31,
1998..................... 956,753 1 -- (14,068) (14,067)
Net loss.................. -- -- -- $(97,668) -- (97,668) (97,668)
Foreign currency
translation adjustment... -- -- -- 192 192 -- 192
--------
Total comprehensive
loss..................... $(97,476)
========
Issuance of common
stock.................... 19,234,851 19 233,844 -- -- 233,863
Stock issuance costs...... -- -- (6,714) -- -- (6,714)
Issuance of Series C
preferred stock.......... -- -- -- -- -- 301,494
Accretion of redemption
value.................... -- -- -- -- (760) (760)
Cancellation of redemption
status of preferred
stock.................... -- -- 3,416 -- -- 41,416
---------- ---- -------- ---- --------- --------
Balance at December 31,
1999..................... 20,191,604 $ 20 $230,546 $192 $(112,496) $457,756
========== ==== ======== ==== ========= ========
</TABLE>
F-5
<PAGE> 39
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(APRIL 25, 1997) TO YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
--------------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $(3,890) $ (9,079) $ (97,668)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation..................................... 191 712 31,967
Amortization of goodwill and other intangibles... 298 556 6,009
Amortization of debt issuance costs.............. -- 244 3,086
Non-cash financing charge........................ -- -- 9,000
Loss (gain) on sale of assets.................... 60 (473) 95
Amortization of discount--senior discount
notes.......................................... -- 7,689 43,558
Non-cash compensation charges.................... 2,600 -- 350
Write-off of goodwill............................ -- -- 6,178
Equity in net loss of an affiliate............... -- -- 408
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.............................. (289) (1,451) (8,535)
Interest receivable on short-term investments.... -- (759) --
Costs and estimated earnings in excess of
billings....................................... -- -- (4,240)
Inventories...................................... -- -- 1,526
Prepaid expenses and other....................... 136 (164) (4,024)
Accounts payable................................. 317 591 11,457
Other current liabilities........................ 1,005 (213) 18,388
Other, net....................................... (205) -- --
------- -------- ---------
Net cash provided by (used in) operating
activities....................................... 223 (2,347) 17,555
------- -------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment................ (850) (26,598) (644,778)
Acquisitions, net of cash acquired................. (5,028) (1,989) (128,414)
Proceeds from note receivable...................... -- 41 142
Issuance of note receivable........................ -- -- (500)
Investment in affiliates........................... -- -- (4,167)
Loan to affiliate.................................. -- -- (2,875)
Distribution from affiliate........................ -- 150 --
Purchases of investments........................... -- (30,005) --
Maturities of short-term investments............... -- 15,350 15,414
Proceeds from sale of assets....................... -- 299 22
Repurchase of common stock......................... -- (500) --
Deposits on acquisitions........................... (1,300) (1,750) (48,069)
------- -------- ---------
Net cash used in investing activities.............. (7,178) (45,002) (813,225)
------- -------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock.......... 10,000 28,000 231,494
Proceeds from issuance of common stock............. -- -- 1,007
Stock issuance costs............................... (179) (434) (6,714)
Proceeds from issuance of long-term debt........... -- -- 200,000
Proceeds from issuance of senior discount notes.... -- 125,000 340,004
Debt issuance costs................................ -- (4,836) (29,307)
Net repayments on line of credit................... (568) (628) --
Repayment of note to shareholder and other debt.... (64) (2,439) (2,584)
------- -------- ---------
Net cash provided by financing activities.......... 9,189 144,663 733,900
------- -------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... 2,234 97,314 (61,770)
Cash and cash equivalents at beginning of period... -- 2,234 99,548
------- -------- ---------
Cash and cash equivalents at end of period......... $ 2,234 $ 99,548 $ 37,778
======= ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest........... $ 64 $ 216 $ 9,019
======= ======== =========
SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND
FINANCING ACTIVITIES
Common stock issued for acquisitions............... $ -- $ 224 $ 217,855
======= ======== =========
Series C preferred stock issued for purchase of
property and equipment........................... $ -- $ -- $ 70,000
======= ======== =========
</TABLE>
F-6
<PAGE> 40
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
FORMATION OF COMPANY
SpectraSite Holdings, Inc. ("SpectraSite") and its wholly owned
subsidiaries (collectively referred to as the "Company"), are principally
engaged in providing services to companies operating in the telecommunications
industry, including leasing antenna sites on multi-tenant towers, network
design, tower construction and antenna installation throughout the United States
and Canada.
SpectraSite, formerly known as Integrated Site Development, Inc. ("ISD"),
was incorporated in the State of Delaware on April 25, 1997. On May 12, 1997,
SpectraSite issued 850,000 shares of its common stock and warrants to purchase
150,000 shares of common stock in exchange for the 850,000 issued and
outstanding shares of common stock and warrants to purchase 150,000 shares of
common stock of US Towers, Inc. ("UST"). SpectraSite'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 minimal 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 $2.6 million based on the estimated fair value of the stock of $2.60
per share and the estimated fair value of the warrants of $2.60 per warrant at
the date of issuance. The warrants entitled the holder to the right to purchase
150,000 shares of SpectraSite common stock at a price of $0.001 per share,
through 2001. In September and October 1998, all of the warrants were exercised.
On May 12, 1997, SpectraSite acquired all of the outstanding membership
interests of TeleSite Services, LLC ("TeleSite") and its subsidiary, MetroSite
Management, LLC ("MetroSite"), for consideration including $4.9 million in cash,
81,753 shares of common stock valued at $0.2 million and a $2.3 million note
payable. Since SpectraSite had minimal operations prior to this acquisition,
TeleSite is considered SpectraSite'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 Company from the date of acquisition.
In connection with the TeleSite acquisition, SpectraSite was required to
provide additional consideration of 55,919 shares of its common stock based upon
TeleSite achieving certain operating goals through the end of December 31, 1998,
pursuant to a provision in the TeleSite acquisition agreement. The Company
accounted for the obligation as an additional cost of the acquisition, recording
approximately $0.2 million of goodwill and a related long-term liability based
upon the fair value of the Company's common stock at December 31, 1998. During
1999, this obligation was satisfied by the issuance of 55,919 shares of common
stock valued at $0.2 million.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
SpectraSite and its subsidiaries. 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> 41
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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.
SHORT-TERM INVESTMENTS
At December 31, 1998, the Company's short-term investments consisted of
commercial paper and certificates of deposit with maturities of less than one
year. The carrying amount of these investments approximated market value.
REVENUE RECOGNITION
Site leasing revenues are recognized when earned. Escalation clauses
present in the lease agreements with the Company's customers are recognized on a
straight-line basis over the term of the lease. Network service revenues from
site selection, construction and construction management activities are derived
under service contracts with customers which provide for billing on a time and
materials or fixed price basis. Revenues are recognized as services are
performed with respect to time and materials contracts. Revenues are recognized
using the percentage-of-completion method for fixed price contracts, measured by
the percentage of contract costs incurred to date compared to estimated total
contract costs. Costs and estimated earnings in excess of billings on
uncompleted contracts represent revenues recognized in excess of amounts billed.
Billings in excess of costs and estimated earnings on uncompleted contracts
represent billings in excess of revenues recognized. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
determined.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method and consist primarily of materials purchased for future
construction not associated with specific jobs.
INVESTMENTS
An investment in an entity in which the Company owns more than 20% but less
than 50% is accounted for using the equity method and is included in other
assets. Under the equity method, the investment is stated at cost plus the
Company's equity in net income (loss) of the entity since acquisition. The
equity in net income (loss) of such entity is recorded in "Other income
(expense)" in the accompanying consolidated statements of operations. An
investment in an entity in which the Company owns less than 20% is accounted for
using the cost method and is included in other assets.
PROPERTY AND EQUIPMENT
Property and equipment, including towers, are stated at cost. The Company
capitalizes 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. Approximately $0.1
million and $1.1 million of interest was capitalized for the years ended
December 31, 1998 and 1999, respectively. 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. On an on going basis, the
F-8
<PAGE> 42
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company assesses the recoverability of its goodwill by determining its ability
to generate future cash flows sufficient to recover the unamortized balance over
the remaining useful life. Goodwill determined to be unrecoverable based on
future cash flows would be written-off in the period in which such determination
is made.
DEBT ISSUANCE COSTS
The Company capitalized costs relating to the issuance of long-term debt
and senior discount notes. The costs are amortized using the straight-line
method over the term of the related debt.
INCOME TAXES
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, short-term investments
and the credit facility approximates fair value for these instruments. The
estimated fair value of the senior discount notes is based on the quoted market
price. The estimated fair values of the Company's financial instruments, along
with the carrying amounts of the related assets (liabilities), are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
------------------ ---------------------- ----------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- ------ --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents.......... $2,234 $2,234 $ 99,548 $ 99,548 $ 37,778 $ 37,778
Short-term
investments.......... -- -- 15,414 15,414 -- --
12% Senior Discount
Notes due 2008....... -- -- (132,689) (114,871) (149,137) (132,890)
11.25 % Senior Discount
Notes Due 2009....... -- -- -- -- (367,114) (312,471)
Credit Facility........ -- -- -- -- (200,000) (200,000)
</TABLE>
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated in accordance with
Statement of Financial Accounting Standards No. 128 "Earnings per Share." The
Company has potential common stock equivalents related to its convertible
preferred stock and outstanding stock options. These potential common stock
equivalents were not included in diluted earnings per share for all periods
because the effect would have been antidilutive. Accordingly, basic and diluted
net loss per share are the same for all periods presented.
COSTS OF OPERATIONS
Costs of operations for network services consist of direct costs incurred
to provide the related services excluding depreciation and amortization expense.
Costs of operations for site leasing consist of direct costs incurred to provide
the related services including ground lease cost, tower maintenance and related
real estate taxes. Costs of operations for site leasing do not include
depreciation expense of the related leased assets.
F-9
<PAGE> 43
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIGNIFICANT CUSTOMERS
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. Two customers
accounted for 70.9% of the Company's 1998 revenue. Following is a list of
significant customers:
<TABLE>
<CAPTION>
PERCENT OF
REVENUES
FOR THE PERIOD FROM PERCENT OF REVENUES PERCENT OF
APRIL 25, 1997 PERCENT OF ACCOUNTS FOR THE YEAR ACCOUNTS
(INCEPTION) TO RECEIVABLE AT ENDED RECEIVABLE AT
DECEMBER 31, 1997 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Customer 1........... 38.9% 75.0% 46.6% 15.6%
Customer 2........... 18.8% -- -- --
Customer 3........... 14.7% -- -- --
Customer 4........... 13.0% -- -- --
Customer 5........... 11.2% -- -- --
Customer 6........... -- -- 24.3% 45.0%
Customer 7........... -- -- -- 22.7%
</TABLE>
In the year ended December 31,1999, one customer, which is a significant
shareholder of the Company, accounted for 35.0% of the Company's revenues.
RESTRUCTURING AND NON-RECURRING CHARGES
In September 1999, the Company announced that it would no longer directly
provide site acquisition services. As a result, the Company recorded
restructuring charges of $7.1 million, of which $6.2 million related to the
write-off of goodwill related to the purchase of TeleSite and $0.9 million was
related to the cost of employee severance. In March 1999, the Company announced
that it would relocate its marketing and administrative operations from Little
Rock, Arkansas and Birmingham, Alabama to its corporate headquarters in Cary,
North Carolina. As a result, the Company recorded a non-recurring charge of $0.6
million for employee termination and other costs related to the relocation of
these activities.
STOCK OPTIONS
The Company has elected under the provisions of Statement of Financial
Accounting Standards 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.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. SFAS 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. During the period from
F-10
<PAGE> 44
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
inception (April 25, 1997) to December 31, 1997 and during the year ended
December 31, 1998, the Company had no items of other comprehensive income.
During the year ended December 31, 1999, the Company had other comprehensive
income related to foreign currency translation adjustments.
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 did not have a significant impact on the Company's financial
position at December 31, 1998 or its results of operations for the year ended
December 31, 1998 as the Company operated in only one segment. During 1999, the
Company commenced operations in a second business segment.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires that derivative instruments be recognized as either
assets or liabilities in the consolidated balance sheet based on their fair
values. Changes in the fair values of such derivative instruments will be
recorded either in results of operations or in other comprehensive income,
depending on the intended use of the derivative instrument. The initial
application of SFAS 133 will be reported as the effect of a change in accounting
principle. SFAS 133 is effective for all fiscal years beginning after June 15,
2000. We have not yet determined the effect that the adoption of SFAS 133 will
have on our consolidated financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1998 consolidated
financial statements to conform to the 1999 presentation. These
reclassifications had no effect on net loss or shareholders' deficiency as
previously reported.
2. LONG-LIVED ASSETS
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Towers.......................................... $24,780 $723,075
Equipment....................................... 823 9,884
Furniture and fixtures.......................... 288 2,256
Other........................................... 212 15,240
------- --------
26,103 750,455
Less accumulated depreciation................... (870) (32,837)
------- --------
25,233 717,618
Construction in progress........................ 3,236 46,139
------- --------
Property and equipment, net..................... $28,469 $763,757
======= ========
</TABLE>
F-11
<PAGE> 45
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill........................................ $ 8,963 $280,666
Debt issuance costs............................. 4,836 33,955
------- --------
13,799 314,621
Less accumulated amortization................... (1,042) (7,424)
------- --------
$12,757 $307,197
======= ========
</TABLE>
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deposits........................................ $1,750 $49,153
Other........................................... 402 10,302
------ -------
$2,152 $59,455
====== =======
</TABLE>
3. DEBT
11.25% SENIOR DISCOUNT NOTES DUE 2009
In April 1999, the Company issued $586.8 million aggregate principal amount
at maturity of senior discount notes due 2009 (the "2009 Notes") for gross
proceeds of $340.0 million. Interest on the 2009 Notes accretes daily at a rate
of 11.25% per annum, compounded semiannually, to an aggregate principal amount
of $586.8 million on April 15, 2004. Cash interest will not accrue on the 2009
Notes prior to April 15, 2004. Commencing April 15, 2004, cash interest will
accrue and be payable semiannually in arrears on each April 15 and October 15,
commencing October 15, 2004, at a rate of 11.25% per annum. After April 15,
2004, the Company may redeem all or a portion of the 2009 Notes at specified
redemption prices, plus accrued and unpaid interest, to the applicable
redemption date. On one or more occasions prior to April 15, 2002, the Company
may redeem up to 35% of the aggregate principal amount at maturity of the 2009
Notes with the net cash proceeds from one or more equity offerings. The
redemption price would be 111.25% of the accreted value on the redemption date.
The Company is required to comply with certain covenants under the terms of the
2009 Notes that restrict the Company's ability to incur additional indebtedness,
make certain payments and issue preferred stock, among other things.
12% SENIOR DISCOUNT NOTES DUE 2008
In June 1998, the Company issued $225.2 million aggregate principal amount
at maturity of senior discount notes due 2008 (the "2008 Notes") for gross
proceeds of $125.0 million. The 2008 Notes accrete daily at a rate of 12% per
annum, compounded semiannually, to an aggregate principal amount of $225.2
million on July 15, 2003. Cash interest will not accrue on the 2008 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 a rate of 12% per annum. After July 15, 2003, the Company
may redeem all or a portion of the 2008 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 2008 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
F-12
<PAGE> 46
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
date. The Company is required to comply with certain covenants under the terms
of the 2008 Notes that restrict the Company's ability to incur indebtedness,
make certain payments and issue preferred stock among other things.
During the years ended December 31, 1998 and 1999, the Company recorded
amortization of debt discount of approximately $7.7 million and $43.6 million
related to the 2008 Notes and 2009 Notes as additional interest expense. The
senior discount notes consist of the following:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Senior discount notes........................... $225,238 $ 812,038
Unamortized discount............................ (92,549) (295,787)
-------- ---------
$132,689 $ 516,251
======== =========
</TABLE>
CREDIT FACILITY
In April 1999 in connection with the acquisition of communications towers
from Nextel Communications, Inc. ("Nextel"), SpectraSite Communications, Inc.
("Communications"), a wholly-owned subsidiary of SpectraSite, entered into a
$500.0 million credit facility. The credit facility consists of a $50.0 million
revolving credit facility that subject to the satisfaction of certain financial
covenants, may be drawn at any time up to December 31, 2005, at which time all
amounts drawn under the revolving credit facility must be paid in full; a $300.0
million multiple draw term loan that may be drawn at any time through March 31,
2002, which requires that the amount drawn be repaid in quarterly installments
commencing on June 30, 2002 and ending on December 31, 2005; and a $150.0
million term loan that was drawn in full at the closing of the Nextel tower
acquisition and that amortizes at a rate of 1.0% annually, payable in quarterly
installments beginning on June 30, 2002 through December 31, 2005, $67.5 million
on March 31, 2006 and the balance due on June 30, 2006.
The revolving credit loans and the multiple draw term loans will bear
interest, at our option, at either Canadian Imperial Bank of Commerce's base
rate, plus an applicable margin of 1.5% per annum initially, which margin after
a period of time may decrease based on a leverage ratio, or the reserve adjusted
London interbank offered rate, plus an applicable margin of 3.0% per annum
initially, which margin after a period of time may decrease based on a leverage
ratio.
The term loan bears interest, at our option, at either Canadian Imperial
Bank of Commerce's base rate, plus 2.0% per annum, which margin after a period
of time may decrease based on a leverage ratio, or the reserve adjusted London
interbank offered rate, plus 3.5% per annum, which margin after a period of time
may decrease based on a leverage ratio.
Communications will be required to pay a commitment fee of between 1.25%
and 0.50% per annum in respect of the undrawn portion of the multiple draw term
loan, depending on the amount undrawn. We are required to pay a commitment fee
of 0.50% per annum in respect of the undrawn portion of the revolving credit
facility.
Communications may be required to prepay the 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 and the generation of
excess cash flow.
SpectraSite and each of Communications' subsidiaries has guaranteed the
obligations under the credit facility. The credit facility is further secured by
substantially all the tangible and intangible assets of
F-13
<PAGE> 47
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Communications and its subsidiaries and a pledge of all of the capital stock of
Communications and its subsidiaries.
The credit facility contains a number of covenants that, among other
things, restrict our ability to incur additional indebtedness; create liens on
assets; make investments, make acquisitions, or engage in mergers or
consolidations; dispose of assets; enter into new lines of business; engage in
certain transactions with affiliates; and pay dividends or make capital
distributions. SpectraSite, however, will be permitted to pay dividends after
July 15, 2003, for the purpose of paying interest on the 2008 Notes and the 2009
Notes so long as no default under the credit facility then exists or would exist
after giving effect to such payment.
In addition, the credit facility requires compliance with certain financial
covenants, including requiring Communications and its subsidiaries, on a
consolidated basis, to maintain a maximum ratio of total debt to annualized
EBITDA; a minimum interest coverage ratio; a minimum fixed charge coverage
ratio; and a minimum annualized EBITDA, for the first year only.
OTHER LONG-TERM DEBT
Long-term debt, other than the 2008 Notes and 2009 Notes, consists of the
following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
----------------
1998 1999
---- --------
(IN THOUSANDS)
<S> <C> <C>
Credit facility........................................... $ -- $200,000
Other obligations......................................... 18 3,128
Less current portion...................................... (18) (601)
---- --------
Long-term debt, less current portion...................... $ -- $202,527
==== ========
</TABLE>
In connection with the acquisition of Westower Corporation ("Westower"),
the Company assumed certain long-term obligations of the acquired entity.
Substantially all of Westower's outstanding long-term obligations were repaid
prior to the acquisition, with the remaining unpaid obligations payable in
monthly installments through 2004. Other obligations for the year ended December
31, 1998 consisted of installment notes payable to a bank, which were
subsequently paid during 1999.
BANK CREDIT AGREEMENT
In January 1998, the Company signed a letter of intent with a bank for a
$50.0 million revolving credit facility for the purpose of financing the
construction and/or the acquisition of telecommunication towers for personal
communications services or other wireless communication services and other
permitted acquisitions as defined by the agreement, contingent upon certain
events. In the year ended December 31, 1998 the Company incurred approximately
$0.3 million in commitment fees related to the agreement. The agreement expired
on December 31, 1998.
4. CONVERTIBLE VOTING PREFERRED STOCK AND SHAREHOLDERS' EQUITY
SERIES A AND B CONVERTIBLE VOTING PREFERRED STOCK
At December 31, 1998, Spectrasite had mandatorily redeemable convertible
preferred stock consisting of Series A and Series B cumulative redeemable
preferred stock, each with a $0.001 par value, 10,462,830 shares authorized in
the aggregate and 3,462,830 and 7,000,000 shares issued and outstanding,
respectively. In connection with closing the Nextel tower acquisition,
provisions for dividends and redemption were eliminated with respect to the
Series A and Series B preferred stock. Previously accrued dividends have been
eliminated,
F-14
<PAGE> 48
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and the outstanding balances have been reclassified as convertible preferred
stock in shareholders' equity in the balance sheet as of December 31, 1999. Each
share of Series A and Series B preferred stock is convertible into one share of
common stock and entitles the holder to vote on an as-converted basis with
holders of common stock. Contemporaneously with the closing of an underwritten
public offering of common stock, the outstanding shares of Series A and Series B
preferred stock automatically converted to common stock on February 4, 2000.
SERIES C CONVERTIBLE PREFERRED STOCK
In connection with closing the Nextel tower acquisition, SpectraSite sold
46,286,795 shares of Series C preferred stock at a price of $5.00 per share. In
addition, Nextel received 14 million shares of Series C preferred stock. At
December 31, 1999, SpectraSite had 60,286,795 of $0.001 par value Series C
shares authorized, issued and outstanding. Each share of Series C preferred
stock is convertible into one share of common stock and entitles the holder to
vote on an as-converted basis with holders of common stock. Contemporaneously
with the closing of an underwritten public offering of common stock, the
outstanding shares of Series C preferred stock automatically converted to common
stock on February 4, 2000.
COMMON STOCK
In connection with the Nextel tower acquisition, SpectraSite also restated
its certificate of incorporation. The amended and restated certificate
authorized 85 million shares of common stock, $0.001 par value per share. In
addition, the Company increased the maximum number of shares for which options
may be granted under its stock option plan to 4.1 million.
In August 1999, SpectraSite amended its restated certificate of
incorporation to increase the authorized shares of common stock to 300 million.
In addition, SpectraSite increased the maximum number of shares for which
options may be granted under its stock option plan to 10 million and authorized
one million shares to be issued under an Employee Stock Purchase Plan.
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.
On October 9, 1998, the Company paid a former employee $500,000 under an
agreement to buy 125,000 shares of SpectraSite common stock from the former
employee for an agreed upon price and to release the Company from any potential
claims. 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. The shares were subsequently
purchased by a shareholder of the Company on February 5, 1999 for an aggregate
purchase price of $150,000.
STOCK OPTIONS
During 1997, the Company adopted a stock option plan which provides for the
purchase of 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 plan shall not exceed 10 million 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 years ended December 31, 1998 and 1999, option grants were made
solely to employees.
The options without a performance acceleration feature, which were granted
under the terms of the incentive stock option agreement, and options granted
under the terms of the non-qualified stock option
F-15
<PAGE> 49
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement vest and become exercisable ratably over a four or five-year period,
commencing one year after date of grant.
The options with a performance acceleration feature, which were granted
under the terms of 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 period ended December 31, 1997, the years
ended December 31, 1998 and 1999: dividend yield of 0.0%; volatility of .70;
risk free interest rate of 6.0% to 5.0%; 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 and net loss per share would have been $4.0 million and
$5.37 for the period ended December 31, 1997, $9.5 million and $12.44 for the
year ended December 31, 1998 and $100.9 million and $12.80 for the year ended
December 31, 1999.
Option activity under the Company's plans is summarized below:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at April 25, 1997................. -- $ --
Options granted............................... 884,700 2.89
Options exercised............................. -- --
Options canceled.............................. -- --
---------
Outstanding at December 31, 1997.............. 884,700 2.89
Options granted............................... 842,000 3.33
Options exercised............................. -- --
Options canceled.............................. (158,800) 2.92
---------
Outstanding at December 31, 1998.............. 1,567,900 3.12
Options granted............................... 2,705,810 5.32
Options exercised............................. (200,006) 2.52
Options canceled.............................. (271,670) 3.41
Options assumed in Westower acquisition....... 1,921,757 8.62
---------
Outstanding at December 31, 1999.............. 5,723,791 6.02
=========
</TABLE>
At December 31, 1997, there were no options exercisable under the stock
option plan. There were 185,475 and 1,765,666 options exercisable under the
stock option plan at December 31, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------- ------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE EXERCISABLE
AS OF REMAINING WEIGHTED AVERAGE AS OF WEIGHTED AVERAGE
EXERCISE PRICES 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE 12/31/99 EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.01-$ 4.56 2,061,273 7.92 $ 3.75 1,113,320 $ 3.97
$5.00-$ 5.00 2,382,810 9.41 5.00 -- --
$6.35-$17.06 1,279,708 9.14 11.55 652,346 12.16
--------- ---------
$0.01-$17.06 5,723,791 8.81 6.02 1,765,666 7.00
========= =========
</TABLE>
F-16
<PAGE> 50
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average remaining contractual life of the stock options
outstanding was 8.76 years, 9.98 years and 8.81 years at December 31, 1997, 1998
and 1999, respectively.
EMPLOYEE STOCK PURCHASE PLAN
In August 1999, SpectraSite adopted the SpectraSite Holdings, Inc. Employee
Stock Purchase Plan. The board of directors has reserved and authorized one
million shares of common stock for issuance under the plan. Eligible employees
may purchase a number of shares of common stock equal to the total dollar amount
contributed by the employee to a payroll deduction account during each six-month
offering period divided by the purchase price per share. The price of the shares
offered to employees under the plan will be 85% of the lesser of the fair market
value at the beginning or end of each six-month offering period. As of December
31, 1999, SpectraSite had not initiated an offering period.
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
The Company has reserved shares of its authorized shares of common stock
for future issuance as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1999
-----------------
<S> <C>
Convertible preferred stock...................... 70,749,625
Outstanding stock options........................ 5,723,791
Possible future issuance under stock option
plans.......................................... 4,076,203
Employee stock purchase plan..................... 1,000,000
----------
Total............................................ 81,549,619
==========
</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 the option of the Company. Rent expense
was approximately $0.2 million, $0.6 million and $17.9 million for the period
from April 25, 1997 (inception) to December 31, 1997 and the years ended
December 31, 1998 and 1999, respectively. The future minimum lease payments for
these leases are as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
2000............................................. $ 24,686
2001............................................. 22,618
2002............................................. 19,055
2003............................................. 13,121
2004............................................. 8,139
Thereafter....................................... 22,725
--------
Total............................................ $110,344
========
</TABLE>
ANTENNA SPACE LEASED TO OTHERS
The Company currently leases antenna 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
F-17
<PAGE> 51
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
include options for renewal. 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>
AS OF
DECEMBER 31, 1999
-----------------
(IN THOUSANDS)
<S> <C>
2000............................................. $ 63,494
2001............................................. 63,872
2002............................................. 61,548
2003............................................. 58,403
2004............................................. 43,861
Thereafter....................................... 10,684
--------
Total............................................ $301,862
========
</TABLE>
6. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 25, 1997) TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
State...................... $ -- $ -- $ 40
Foreign.................... -- -- 528
---------- ---------- ----------
Total provision for income
taxes.................... $ -- $ -- $ 568
========== ========== ==========
</TABLE>
The reconciliation of income taxes computed at the U.S. federal statutory
rate to income tax provision (benefit) is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 25, 1997) TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------------- ------------ ------------
<S> <C> <C> <C>
Federal income tax benefit at statutory
rate..................................... (35.0)% (35.0)% (35.0)%
Foreign tax rate differential.............. -- -- 0.6%
Non-deductible goodwill amortization....... -- -- 2.0%
Non-deductible interest expense............ -- 5.8% 0.5%
Change in valuation allowance.............. 35.0% 29.2% 32.5%
---------- ---------- ----------
Effective income tax rate.................. --% --% 0.6%
========== ========== ==========
</TABLE>
F-18
<PAGE> 52
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net deferred taxes are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------
1997 1998 1999
----- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Tax loss carry forwards................................... $ 183 $1,038 $ 15,600
Accreted interest on senior discount notes................ -- 2,978 19,730
Accrued liabilities....................................... -- -- 1,920
Depreciation.............................................. -- 41 1,760
----- ------ --------
Total gross deferred tax assets........................ 183 4,057 39,010
Valuation allowance....................................... (183) (4,057) (39,010)
----- ------ --------
Total net deferred tax assets.......................... $ -- $ -- $ --
===== ====== ========
</TABLE>
The Company has a federal net operating loss carry forward of approximately
$40 million that begins to expire in 2012. Also, the Company has state tax
losses of $40 million that expire beginning in 2002. Based on the Company's
history of losses to date, management has provided a valuation allowance to
fully offset the deferred assets related to federal and state net operating loss
carry forwards.
7. RELATED PARTY TRANSACTIONS
In conjunction with the acquisition of TeleSite, the Company issued a $2.3
million note payable to a shareholder. In the period from April 25, 1997
(inception) to December 31, 1997 and during the year ended December 31, 1998,
the Company incurred approximately $100,000 and $81,000 of interest expense
related to the note payable to shareholder, respectively. In June 1998, the note
was repaid in full.
On April 20, 1999, in connection with the Nextel tower acquisition, four
directors purchased 50,000, 25,000, 262,973 and 100,000 shares of SpectraSite's
Series C preferred stock for $5.00 per share, respectively. In addition, one
director purchased 100,000 shares of common stock and executed promissory notes
as payment for the common stock. The promissory notes mature on April 20, 2009
and bear interest at 5.67% per year. Under the purchase agreement, 25% of the
shares of common stock vest each year, with the first installment vesting on
April 20, 2000. In addition, SpectraSite has the right to repurchase half of the
shares at their original cost to the director at any time prior to April 20,
2000 and upon the date the director ceases to perform services for SpectraSite.
Affiliates of three significant stockholders received an aggregate of two
million shares of SpectraSite's common stock valued at $9.0 million as
consideration for financing commitments made in connection with the Nextel tower
acquisition. Affiliates of each entity are members of the Company's board
directors.
To finance a portion of the cash consideration paid to Nextel, SpectraSite
issued and sold the 2009 Notes in a private offering and borrowed $150.0 million
under its credit facility. CIBC World Markets Corp. was an initial purchaser in
the 2009 notes offering, and an affiliate of CIBC World Markets is an agent and
a lender under the credit facility. CIBC World Markets was also an initial
purchaser of SpectraSite's 2008 Notes. CIBC World Markets and its affiliates
received customary fees for such services. One director of SpectraSite is a
Managing Director of CIBC World Markets.
In May 1997, an officer agreed to invest additional personal funds in
SpectraSite at the average per share price of Series A and Series B preferred
stock. In satisfaction of this commitment, the officer purchased 210,000 shares
of common stock for an aggregate purchase price of $0.8 million on April 20,
1999.
In August 1999, SpectraSite loaned an officer $325,000 in connection with
the exercise of certain stock options. The 112,500 shares the officer acquired
through the exercise of these options are pledged to
F-19
<PAGE> 53
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SpectraSite as security for this loan. The loan bears interest at the applicable
federal rate under the Internal Revenue Code, 5.36% per annum, and matures in
August 2002.
In September 1999, SpectraSite loaned an officer $500,000 to purchase a
home as a relocation incentive. This loan will be secured by any shares of
SpectraSite's common stock issued to the officer upon exercise of options, bears
interest at 5.82% per annum and matures in September 2004.
The Company has a revolving loan arrangement with an affiliate under which
the affiliate may borrow up to $14.4 million. The loan accrues interest at 12%
and is collateralized by property, equipment, investments, contracts and other
assets of the affiliate. At December 31, 1999, the affiliate owed $2.9 million
to the Company under the loan. In 1999, the Company had interest income of $0.1
million from amounts outstanding under the loan.
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 expenses related to
the plan are discretionary and totaled approximately $11,000, $31,000 and
$121,000 for the period from April 25, 1997 (inception) to December 31, 1997 and
for the years ended December 31, 1998 and 1999, respectively.
9. SALE OF AFFILIATES
In February 1998, the Company entered into an agreement under which it sold
a wholly-owned subsidiary, MetroSite, for $299,000. The Company recognized a
gain on the sale of $257,000.
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 total amount due to the Company at December 31, 1999 is $261,000 of
which the current portion, $73,000, is included in prepaid expenses and other
current assets in the accompanying balance sheet. 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 $1.4 million 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 $1.3 million in cash and recorded notes payable for $0.1 million in
conjunction with the acquisition. The outstanding note payable was subsequently
paid in December 1998.
In August 1998, the Company entered into an asset purchase agreement with
Airadigm Communications, Inc. ("Airadigm") for the purchase of 47 towers for
approximately $11.8 million. As of December 31, 1998, 40 towers had been placed
in service. During 1999, five additional towers were placed in service and
Airadigm refunded the Company's deposit for the remaining two towers. 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 related to 14 towers for approximately $474,000.
In September 1998, the Company acquired all of the outstanding common stock
of GlobalComm, Inc. for $2.0 million in cash in a transaction accounted for as a
purchase. The results of operations of GlobalComm are included in the Company's
operations from the date of acquisition. The Company recorded approximately $1.7
million of goodwill related to the transaction.
In April 1999, the Company purchased 2,000 communications towers from
Nextel for $560.0 million in cash and 14 million shares of Series C preferred
stock valued at $70.0 million, which represented approximately 18% of all the
Company's outstanding capital stock. As part of the transaction, Nextel agreed
to lease 1,700 additional sites on the Company's towers as part of Nextel's
national deployment. SpectraSite and certain of Nextel's subsidiaries entered
into a master site commitment agreement under which Nextel and its
F-20
<PAGE> 54
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
controlled affiliates will offer SpectraSite exclusive opportunities, under
specific terms and conditions, relating to the construction or purchase of, or
co-location on, additional communications sites. These sites will then be leased
by subsidiaries of Nextel under the terms of the master site lease agreement. If
the number of new sites leased is less than the agreed upon number as of
particular dates, Nextel has agreed to make payments to SpectraSite. The master
site commitment agreement also gives SpectraSite a right of first refusal to
acquire any towers that Nextel or certain affiliates desire to sell. Of the
total consideration paid to Nextel, $45.0 million has been allocated as a
deposit relating to this commitment. The Company used $150.0 million of
borrowings under a $500.0 million committed credit facility, $340.0 million from
the proceeds of the 2009 Notes and $231.4 million from the sale of new Series C
preferred stock to fund the cash purchase price and to pay related fees and
expenses.
In connection with the purchase, Nextel entered into a master site lease
agreement to become the anchor tenant on each of the acquired towers and also
conveyed to the Company certain third-party co-location site leases associated
with the acquired assets. Nextel also transferred to the Company certain
non-cancelable ground leases, and the Company assumed all operating and other
costs associated with the acquired assets.
In September 1999, the Company consummated the Agreement and Plan of
Merger, dated as of May 15, 1999 with Westower. Under the terms of the
agreement, Westower shareholders received 1.81 shares of SpectraSite common
stock for each share of Westower common stock. In the aggregate, SpectraSite
exchanged 15.5 million shares of its common stock valued at $205.6 million for
8.6 million shares of Westower common stock and assumed $81.5 million of debt.
The Company repaid $72.2 million of such assumed debt at closing. In addition,
the Company assumed the outstanding Westower employee stock options, which were
converted into options to purchase 1.7 million shares of SpectraSite's common
stock.
On December 30, 1999, SpectraSite acquired Stainless, Inc., formerly a
wholly-owned subsidiary of Northwest Broadcasting, L.P., for $40.0 million in
cash. Stainless provides engineering, fabrication and other services in
connection with the erection of towers used for television broadcast companies.
Also on December 30, 1999, SpectraSite acquired Doty-Moore Tower Services,
Inc., Doty-Moore Equipment Company, Inc. and Doty Moore RF Services, Inc. for
$2.5 million in cash and 500,000 shares of SpectraSite's common stock valued at
$5.4 million. Doty-Moore is a leading source for broadcast tower construction
and technical services.
The acquisitions of Westower, Stainless and Doty-Moore were accounted for
as purchases, and the excess of cost over fair value of the net assets acquired
is being amortized on a straight-line basis over fifteen years. The operations
of each are included in the consolidated statement of operations from the date
of acquisition.
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if the acquisitions of Westower, Doty-Moore and
Stainless had been consummated as of January 1, 1999. The pro forma information
does not necessarily reflect the actual results that would have been achieved,
nor is it necessarily indicative of future consolidated results for the Company.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
------------------------
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE DATA)
<S> <C>
Net revenues........................................ $ 187,082
Net loss............................................ (112,515)
Basic and diluted net loss per common share......... (5.11)
</TABLE>
11. BUSINESS SEGMENTS
The Company previously operated in one business segment. As a result of the
Nextel tower and Westower acquisitions, the Company now operates in two business
segments, site leasing and network services. Prior period information has been
restated to reflect the current business segments. The site leasing segment
provides for leasing and subleasing of antennae sites on multi-tenant towers for
a diverse range of
F-21
<PAGE> 55
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
wireless communication services, including personal communication services,
paging, cellular and microwave. The network services segment offers a broad
range of network development services, including network design, tower
construction and antenna installation.
In evaluating financial performance, management focuses on operating profit
(loss), excluding depreciation and amortization and restructuring charges. This
measure of operating profit (loss) is also before interest income, interest
expense, other income (expense) and income taxes. All reported segment revenues
are generated from external customers as intersegment revenues are not
significant.
Summarized financial information concerning each reportable segment is
shown in the following table. The "Other" column represents amounts excluded
from specific segments, such as income taxes, corporate general and
administrative expenses, depreciation and amortization, restructuring and other
non-recurring charges and interest. In addition, "Other" also includes corporate
assets such as cash and cash equivalents, tangible and intangible assets and
income tax accounts which have not been allocated to a specific segment.
<TABLE>
<CAPTION>
SITE NETWORK
LEASING SERVICES OTHER TOTAL
-------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues.......................................... $ 46,515 $53,570 $ -- $ 100,085
Income (loss) before income taxes................. 28,661 7,915 (133,676) (97,100)
Assets............................................ 756,442 60,149 403,362 1,219,953
YEAR ENDED DECEMBER 31, 1998
Revenues.......................................... $ 656 $ 8,142 $ -- $ 8,798
Income (loss) before income taxes................. 357 5,650 (15,086) (9,079)
Assets............................................ 25,865 -- 136,081 161,946
PERIOD FROM INCEPTION (APRIL 25, 1997) TO DECEMBER
31, 1997
Revenues.......................................... $ -- $ 5,002 $ -- $ 5,002
Income (loss) before income taxes................. -- (3,997) 107 (3,890)
Assets............................................ -- -- 13,642 13,642
</TABLE>
From inception (April 25, 1997) until the acquisition of Westower on
September 2, 1999, all of the Company's operations were located in the United
States.
Net revenues for the year ended December 31, 1999 were located in
geographic areas as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
United States........................................ $ 90,984
Canada............................................... 13,794
Eliminations......................................... (4,693)
--------
Consolidated net revenues............................ $100,085
========
</TABLE>
At December 31, 1999, assets were located in geographic areas as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
United States........................................ $1,065,256
Canada............................................... 65,153
----------
Consolidated long-lived assets....................... $1,130,409
==========
</TABLE>
F-22
<PAGE> 56
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. YEAR 2000 ISSUE (UNAUDITED)
The Company has not experienced any immediate adverse impact from the
transition to the Year 2000; however, management cannot provide assurance that
the company, it's suppliers or it's customers have not been affected in a manner
that is not yet apparent. In addition, certain computer programs which were date
sensitive to the Year 2000 may not process the Year 2000 as a leap year, and any
negative consequential effects remain unknown. As a result, the Company
continues to monitor Year 2000 compliance and the Year 2000 compliance of its
suppliers and customers.
13. SUBSEQUENT EVENTS (UNAUDITED)
On January 5, 2000, SpectraSite acquired Vertical Properties, Inc. in a
merger transaction under which SpectraSite issued 225,000 unregistered shares of
its common stock and repaid outstanding indebtedness of approximately $2.0
million. Vertical Properties is a broadcast tower development company formed to
meet the needs of broadcasters in secondary broadcast markets faced with the
complexities of converting to digital technology through site acquisition, tower
placement and leasing of antenna space.
On January 5, 2000, SpectraSite acquired Apex Site Management Holdings,
Inc. ("Apex") in a merger transaction. Apex provides rooftop and in-building
access to wireless carriers. SpectraSite issued approximately 4.5 million
unregistered shares of its common stock and approximately 194,000 options to
purchase common stock at an exercise price of $3.58 per share to the
shareholders of Apex at the closing of the merger. In addition, SpectraSite
issued approximately 1.5 million additional shares of common stock into escrow.
These shares may be released to Apex's shareholders six months after
SpectraSite's currently pending public offering is consummated based on the
average trading price for SpectraSite's common stock for the 30-day period
immediately preceding the six-month anniversary of the public offering.
SpectraSite also used approximately $6.2 million in cash to repay outstanding
indebtedness and other obligations of Apex in connection with the merger.
On January 28, 2000, SpectraSite acquired substantially all of the assets
of International Towers Inc. and its subsidiaries, including S&W Communications
Inc. International Towers owns a broadcast tower manufacturing facility and,
through S&W Communications, provides integrated services for the erection of
broadcast towers, foundations and multi-tenant transmitter buildings.
SpectraSite paid $5.5 million and issued an aggregate of 350,000 unregistered
shares of its common stock in connection with this acquisition.
On February 4, 2000, SpectraSite completed an underwritten public offering
of 25.6 million shares of common stock for net proceeds of approximately $411.3
million. As a result of the offering, all Series A, B, C preferred stock
automatically converted to common stock on a share-for-share basis.
On February 17, 2000, the company signed a definitive agreement with
AirTouch Communications, Inc. to obtain the rights to approximately 430 towers
through a master sublease for approximately $155 million. The transaction is
expected to close in stages with the initial closing to occur no later than
November 15, 2000, if certain conditions are met.
F-23
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
The Members
TeleSite Services, LLC
We have audited the accompanying consolidated balance sheet of TeleSite
Services, LLC 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 auditing standards generally
accepted in the United States. 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 accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Raleigh, North Carolina
March 27, 1998
F-24
<PAGE> 58
TELESITE SERVICES, LLC
CONSOLIDATED BALANCE SHEET
AS OF 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-25
<PAGE> 59
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
Costs of operations..................................... 2,254,777 594,683
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-26
<PAGE> 60
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-27
<PAGE> 61
TELESITE SERVICES, LLC
CONSOLIDATED STATEMENTS 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-28
<PAGE> 1
Exhibit 2.9
AGREEMENT TO SUBLEASE
Dated as of February 16, 2000
by and between
AIRTOUCH COMMUNICATIONS, INC.
and
THE OTHER PARTIES NAMED HEREIN AS SUBLESSORS,
as Sublessors
and
CALIFORNIA TOWER, INC.
and
SPECTRASITE HOLDINGS, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1 Definitions..........................................................1
1.1 Additional Tower.............................................1
1.2 Affiliate....................................................2
1.3 Agreement....................................................2
1.4 AirTouch Material Adverse Effect.............................2
1.5 Assets 2
1.6 Business Day.................................................3
1.7 Charter Documents............................................3
1.8 Code ......................................................3
1.9 Contracts....................................................3
1.10 Default......................................................3
1.11 Encumbrance..................................................3
1.12 Environmental Condition......................................3
1.13 Event 3
1.14 Excluded Assets..............................................3
1.15 FCC ......................................................4
1.16 GAAP 4
1.17 Governmental Authority.......................................4
1.18 Governmental Permits.........................................4
1.19 Included Towers..............................................5
1.20 Intellectual Property........................................5
1.21 Knowledge....................................................5
1.22 Laws ......................................................5
1.23 Liability....................................................5
1.24 Maximum Amount...............................................5
1.25 Other Entities...............................................5
1.26 Permitted Encumbrances.......................................6
1.27 Person 6
1.28 Prime Rate...................................................6
1.29 Real Property................................................6
1.30 Required Consents............................................6
1.31 Significant Transaction......................................6
1.32 Tax and Taxes................................................6
1.33 Threshold Amount.............................................7
1.34 Tower Related Assets.........................................7
1.35 Tower Sites..................................................7
1.36 Towers 7
1.37 TowerCo Material Adverse Effect..............................7
1.38 Transaction Documents........................................8
1.39 Other Definitions............................................8
-i-
<PAGE> 3
ARTICLE 2 Leasing of Assets....................................................9
2.1 Leasing or Subleasing of Assets..............................9
2.2 Restricted Items.............................................9
2.3 Exclusive Commitment Fee and Payment........................10
2.4 Completion of Transaction...................................11
2.5 References Applicable to Individual Closings................12
ARTICLE 3 Representations and Warranties of AirTouch..........................12
3.1 Organization and Qualification..............................12
3.2 Authority...................................................13
3.3 Enforceability..............................................13
3.4 Consents and Approvals......................................13
3.5 Title and Encumbrances......................................13
3.6 Governmental Permits........................................14
3.7 Contracts...................................................14
3.8 Environmental Laws..........................................15
3.9 Litigation..................................................16
3.10 Commissions.................................................16
3.11 Real Property...............................................17
3.12 Absence of Certain Changes or Events........................17
3.13 Availability of Documents...................................18
3.14 Compliance with Applicable Law..............................18
3.15 No Other Warranties.........................................18
ARTICLE 4 Representations and Warranties of Other Entities....................18
ARTICLE 5 Representations and Warranties of TowerCo and Parent................19
5.1 Organization and Qualification..............................19
5.2 Authority...................................................19
5.3 Enforceability..............................................19
5.4 Approvals...................................................19
5.5 Commissions.................................................19
5.6 SEC Reports.................................................20
5.7 Absence of Certain Changes..................................20
5.8 Threatened or Pending Litigation............................20
5.9 Funds Available for Exclusive Commitment Fee................20
5.10 Capitalization..............................................20
5.11 Interim Operations of TowerCo...............................21
5.12 No Undisclosed Liabilities..................................21
5.13 Pending Transactions........................................21
ARTICLE 6 Certain Covenants...................................................21
6.1 Agreements of Sublessors Pending the Closing................21
6.2 Agreements of TowerCo.......................................24
6.3 Additional Agreements of Sublessors and TowerCo Parties.....25
6.4 Confidentiality.............................................26
-ii-
<PAGE> 4
ARTICLE 7 Optional TowerCo Activities.........................................26
7.1 Preliminary Title Reports...................................26
7.2 Environmental Site Assessments..............................26
7.3 Structural Reports..........................................27
ARTICLE 8 Conditions Precedent to Obligations of TowerCo......................27
8.1 Conditions Precedent........................................27
8.2 Waiver 28
ARTICLE 9 Conditions Precedent to Obligations of Sublessors...................28
9.1 Conditions Precedent........................................28
9.2 Waiver 30
ARTICLE 10 Closing............................................................30
10.1 Closing.....................................................30
10.2 Closing Deliveries..........................................30
ARTICLE 11 Indemnification....................................................31
11.1 Indemnification by Sublessors...............................31
11.2 Indemnification by TowerCo..................................32
11.3 Notice and Right To Defend Third-Party Claims...............33
11.4 Notice and Right to Remediate...............................34
11.5 Mitigation..................................................34
11.6 Exclusive Remedy............................................34
11.7 Effect of Investigation or Knowledge........................35
11.8 Limitation of Liability.....................................35
ARTICLE 12 Termination........................................................35
12.1 Termination Events..........................................35
12.2 Manner of Exercise..........................................36
12.3 Effect of Termination.......................................36
ARTICLE 13 General............................................................37
13.1 Covenant Not To Sue and Nonrecourse to Partners.............37
13.2 Assignment..................................................37
13.3 Parties in Interest.........................................38
13.4 Time of Essence.............................................38
13.5 Severability................................................38
13.6 Amendment...................................................38
13.7 Force Majeure...............................................38
13.8 Terms 39
13.9 Headings....................................................39
13.10 Entire Understanding; Schedules.............................39
13.11 Counterparts................................................39
13.12 Governing Law...............................................39
13.13 Notices.....................................................39
-iii-
<PAGE> 5
13.14 Expenses....................................................40
13.15 Attorneys'Fees..............................................40
13.16 Dispute Resolution..........................................41
13.17 Power of Attorney...........................................42
13.18 Specific Performance; Other Rights and Remedies.............43
13.19 TowerCo Guaranty............................................43
EXHIBITS
Exhibit A Sublease
Exhibit B Escrow Agreement
Exhibit C Master Lease
Exhibit D Build-to-Suit Agreement
Exhibit E Form of Certificate of Sublessors
Exhibit F Form of Certificate of TowerCo and Parent
THE FOLLOWING EXHIBITS HAVE BEEN
OMITTED AND WILL BE FILED WITH
THE COMMISSION UPON REQUEST.
-iv-
<PAGE> 6
AGREEMENT TO SUBLEASE
THIS AGREEMENT TO SUBLEASE is made as of February 16, 2000, by and
between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation ("AirTouch"), LOS
ANGELES SMSA LIMITED PARTNERSHIP, a California limited partnership,
OXNARD-VENTURA-SIMI LIMITED PARTNERSHIP, a California limited partnership (each
of the foregoing entities being each referred to herein individually as a
"Sublessor," and collectively as "Sublessors"), SPECTRASITE HOLDINGS, INC., a
Delaware corporation ("Parent"), and CALIFORNIA TOWER, INC., a Delaware
corporation ("TowerCo" and, collectively with Parent, the "TowerCo Parties").
RECITALS
A. Sublessors are the owners of certain communications tower
structures, interests in real property related thereto, and related assets,
property rights, liabilities and obligations. Parent is engaged in the business
of owning, managing and operating assets similar to the foregoing assets; and
B. Sublessors desire, pursuant to a Sublease in the form attached
hereto as Exhibit A (the "Sublease"), to lease or sublease to TowerCo or confer
upon TowerCo the right to manage and operate, and TowerCo desires to lease or
sublease from Sublessors or obtain the right to manage and operate, subject to
the terms and conditions contained in this Agreement and the Sublease, certain
of Sublessors' communications tower structures, interests in real property
related thereto and related property rights (such assets and rights to be
leased, subleased or otherwise subjected to the Sublease, together with the
liabilities and obligations relating thereto, being referred to as the
"Business"); and
C. Contemporaneously with the execution of this Agreement, the
Sublessors and TowerCo are executing a Site Marketing Agreement pursuant to
which TowerCo will provide the Sublessors with certain tower leasing and
marketing services pending the closing of the transactions contemplated hereby
(the "Site Marketing Agreement"); and
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, Sublessors and the
TowerCo Parties agree as follows:
ARTICLE 1
Definitions
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Sublease. As used in this Agreement, the following terms
shall have the following meanings:
1.1 Additional Tower. Means any communications equipment and antenna support
tower structure owned or leased by any Sublessor as to which the construction is
completed after the date of this Agreement and which is included in Annex I
hereto as a Permitted Schedule
-1-
<PAGE> 7
Update (as defined herein); provided, however, that such term does not include
(i) any equipment, property or other assets placed upon such towers or the
related tower sites by third parties pursuant to Tower Collocation Leases or
other Contracts or (ii) any Excluded Assets (as defined herein).
1.2 Affiliate. With respect to any Person, any other Person controlling such
Person, or controlled by or under common control with such Person, where
"control" (and its corollaries) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the term "voting securities" means securities or interests
entitling the holder thereof to vote for or designate members of the Board of
Directors or individuals performing a similar function. Without limiting the
generality of the foregoing, the partnership contemplated by that certain
Alliance Agreement dated September 21, 1999 between AirTouch and Bell Atlantic
Corporation (including any subsidiaries or controlled Affiliates of such
partnership) shall be deemed an "Affiliate" of each Sublessor for purposes of
this Agreement.
1.3 Agreement. This Agreement to Sublease dated as of February 16, 2000 among
Sublessors, Parent and TowerCo, as the same may be amended from time to time.
1.4 AirTouch Material Adverse Effect. Means (i) an Event which has had or is
reasonably likely to have a material adverse effect on the financial condition
of the Business taken as a whole, except any such effect resulting from or
arising in connection with (a) this Agreement or the transactions contemplated
hereby, (b) changes or conditions (including without limitation changes in
technology, law, or regulatory or market environment) affecting the industry in
which the owners or users of communications tower structures operate, or (c)
changes in economic, regulatory or political conditions generally, or (ii) an
Event which has had or is reasonably likely to have a material adverse effect on
(x) the validity or enforceability against Sublessors of this Agreement or any
of the other Transaction Documents, or (y) the ability of Sublessors to perform
their obligations under this Agreement or any of the other Transaction
Documents; provided, however, that with respect to any individual Closing,
clause (i) of this definition shall be interpreted to refer only to the portion
of the Business which is the subject of the Closing at issue and all prior
Closings hereunder, taken as a whole, and not to the portions of the Business
which are to be the subject of Closings subsequent to the Closing at issue.
1.5 Assets. Means the following: (a) all Towers of the applicable Sublessor; (b)
all of the applicable Sublessor's rights to all Tower Sites; (c) all Tower
Related Assets of the applicable Sublessor; (d) all rights under any
Governmental Permits (excluding FCC licenses) held exclusively with respect to
the ownership or use of the Towers or Tower Sites of the applicable Sublessor
and not used or useful by the applicable Sublessor in any other part of its or
an Affiliate's business and operations, to the extent that such Governmental
Permits are necessary to confer upon TowerCo the benefits to be provided under
the Sublease (the "Applicable Governmental Permits"); and (e) plans and
specifications of the Towers and data (in electronic or machine-readable form)
relating to the Towers and third party tenants and lessors with respect to the
Towers, subject, however, to the exclusions set forth in Section 4(d) of the
Sublease, and to the exclusion of all Excluded Assets.
-2-
<PAGE> 8
1.6 Business Day. Any day other than Saturday, Sunday or a day on which banking
institutions in either San Francisco, California or New York, New York are
required or authorized to be closed.
1.7 Charter Documents. An entity's certificate or articles of incorporation,
bylaws, certificate defining the rights and preferences of securities, articles
of organization, general or limited partnership agreement, certificate of
limited partnership, limited liability company agreement, joint venture
agreement or similar document governing the entity.
1.8 Code. The Internal Revenue Code of 1986, as amended.
1.9 Contracts. Any and all contracts, authorizations, approvals, agreements,
licenses, permits, leases of real and personal property, deeds, private
easements, rights-of-way and rights of access, other than Governmental Permits.
1.10 Default. Means (a) a breach, default or violation, (b) the occurrence of an
event that with or without the passage of time or the giving of notice, or both,
would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
1.11 Encumbrance. Any lien, mortgage, security interest, pledge, restriction on
transferability, defect of title, option, easement, right of way, levy or other
claim, charge or encumbrance of any nature whatsoever on any property or
property interest, other than those relating to Governmental Permits.
1.12 Environmental Condition. Any condition or circumstance, including the
presence of Hazardous Substances, created by a Sublessor at any Tower Site that
did or does (a) require abatement or correction under an Environmental Law or
(b) give rise to any civil or criminal Liability on the part of any Sublessor
under any Environmental Law relating to the ownership, use or occupancy of the
Tower Sites.
1.13 Event. The existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
1.14 Excluded Assets. The following are collectively referred to as the
"Excluded Assets" and are not included in the Assets:
---------------
(a) all Communications Facilities (as defined in the Sublease), including but
not limited to AirTouch's Improvements and Communications Equipment (each as
defined in the Sublease);
(b) the Reserved Space as described in the Sublease, including without
limitation all space at a Tower Site occupied by AirTouch's Improvements and
Communications Equipment (each as defined in the Sublease) and non-exclusive use
of all real estate interests (including fee and leasehold interests, licenses,
rights-of-way and easements) on which switch equipment and
-3-
<PAGE> 9
associated loading docks, patios, offices and parking lots of Sublessors or
their Affiliates is located or necessary to such equipment's operation;
(c) any equipment or transmission systems used by AirTouch, any other Sublessor
or any of Sublessors' Affiliates for the remote monitoring of the Towers;
(d) all Intellectual Property of Sublessors or any Affiliate of Sublessors,
other than plans and specifications of the Towers and data (in electronic or
machine-readable form) relating to third party tenants and lessors with respect
to the Towers;
(e) any assets, properties or rights, including Contracts, that are not
exclusively Assets;
(f) all rights that accrue or will accrue to, and all rights retained by and/or
granted to, Sublessors under this Agreement, the Sublease or any of the other
Transaction Documents, including the consideration paid or to be paid to
Sublessors hereunder;
(g) any claims or rights against third parties except to the extent such claims
or rights relate to the Assets;
(h) assets of any Employee Plan or employee benefit arrangement;
(i) the assets specified in Schedule 1.14; and
(j) any Tower Sites (and all Towers, Tower Related Assets and other assets and
rights associated with such Tower Sites) excluded from the Assets or excluded
from becoming subject to the Sublease pursuant to Section 2.2 (Restricted Items)
hereof, or which are to remain the property of, or are to be for the benefit of,
any Sublessor pursuant to the Sublease.
1.15 FCC. The Federal Communications Commission or any successor agency.
1.16 GAAP. Generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination.
1.17 Governmental Authority. Any nation or government, any state, province or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
1.18 Governmental Permits. All franchises, approvals, authorizations, permits,
licenses, easements, leases, permits, concessions, franchises, registrations,
certificates of occupancy, qualifications and similar rights and approvals
obtained from any Governmental Authority.
-4-
<PAGE> 10
1.19 Included Towers. Means (i) all Towers listed on Annex I hereto (as such
Annex existed on the date of this Agreement) the construction of which is
completed on or prior to the applicable Closing Date and are made subject to the
Sublease at such Closing and (ii) all Additional Towers made subject to the
Sublease at such Closing.
1.20 Intellectual Property. Any patents, patent applications, reissue patents,
patents of addition, divisions, renewals, continuations, continuations-in-part,
substitutions, additions and extensions of any of the foregoing, fictitious
business names, trade names, logos, registered and unregistered copyrights,
copyright applications, registered and unregistered trademarks, trademark
applications, registered and unregistered service marks, service mark
applications, technology rights and licenses, trade secrets, franchises,
know-how, inventions and other intellectual property.
1.21 Knowledge. "AirTouch's knowledge," "knowledge of AirTouch," or references
to the "knowledge" of any Sublessor, or words of similar import, means the
actual knowledge after inquiry reasonable under the circumstances of any of the
following persons who are employees of AirTouch holding the position (as of the
date hereof) indicated after their name (and any person succeeding to any such
position prior to the Closing but only to the extent he or she acquired actual
knowledge after inquiry reasonable under the circumstances): Arun Sarin,
President and Chief Operating Officer; Nancy Hobbs, Executive Vice President
(AirTouch Cellular) and General Manager, Sierra Pacific Region; and Brian Shea,
Executive Vice President (AirTouch Cellular) and General Manager, Western
Region. "TowerCo's knowledge" or "knowledge of TowerCo" or words of similar
import means the actual knowledge after inquiry reasonable under the
circumstances of any of the following persons who are employees of TowerCo
holding the position (as of the date hereof) indicated after their name (and any
person succeeding to any such position prior to the Closing but only to the
extent he or she acquired actual knowledge after inquiry reasonable under the
circumstances): Stephen Clark, Chief Executive Officer; David Tomick, Chief
Financial Officer; Richard Byrne, Executive Vice President-Business Development;
Timothy Biltz, Chief Operating Officer; Terry Armant, Senior Vice
President-Operations; and Daniel Hunt, Vice President-Finance and
Administration.
1.22 Laws. All federal, state, county, municipal and other governmental
constitutions, statutes, ordinances, codes, regulations, resolutions, rules,
requirements and directives of any Governmental Authority or arbitrator and all
decisions, judgments, writs, injunctions, orders, decrees or demands of courts,
arbitrators, administrative bodies and other authorities construing any of the
foregoing.
1.23 Liability. Any direct or indirect liability, indebtedness, obligation,
cost, expense, claim, loss, damage, deficiency or guaranty of or by any Person.
1.24 Maximum Amount. For any Sublessor or TowerCo, the Maximum Amount means ten
percent (10%) of the Exclusive Commitment Fee actually paid by TowerCo to such
Sublessor under this Agreement.
1.25 Other Entities. Los Angeles SMSA Limited Partnership, a California
limited partnership, and Oxnard-Ventura-Simi Limited Partnership, a California
limited partnership. Each of the Other Entities is referred to individually
herein as an "Other Entity."
-5-
<PAGE> 11
1.26 Permitted Encumbrances. Means (i) Encumbrances for Taxes not yet due and
payable, (ii) Encumbrances or other rights of third parties disclosed in
Schedule 3.5, (iii) worker's, carrier's, warehouseman's, materialman's and other
similar liens, (iv) with respect to Leased Sites (as defined below in the
definition of Tower Sites), any Encumbrances placed upon such real property
other than in connection with obligations or liabilities of any Sublessor,
including any lien encumbering the fee interest in such property, (v) easements,
rights of way or similar grants of rights to a third party for access to or
across any real property, including, without limitation, rights of way or
similar rights granted to any utility or similar entity in connection with the
provision of electric, water, sewage, telephone, gas or similar services, (vi)
the Tower Collocation Leases and the terms and conditions of Ground Leases,
Tower Equipment Leases, Tower Service Contracts and other Tower Related Assets
affecting any Asset, and (vii) encumbrances that are immaterial in character,
amount, and extent, and that do not detract from the value or interfere in any
material respect with the present use of the properties they affect.
1.27 Person. Means any natural person or corporation, firm, association,
unincorporated organization, partnership, trust, estate, limited liability
company or other entity, or any Governmental Authority.
1.28 Prime Rate. The "Prime Rate" of interest, as published in the "Money Rates"
table of The Wall Street Journal, Eastern Edition, from time to time.
1.29 Real Property. All assets consisting of realty (including appurtenances,
improvements and fixtures located on such realty) and any other interests in
real property (including fee interests and leasehold interests and easements,
licenses, rights-of-way or other real property rights) used or held for use in
the operation of the Assets as of the date hereof, but excluding any and all
Excluded Assets.
1.30 Required Consents. Approvals and consents required pursuant to the terms of
any Tower Collocation Agreement or Ground Lease in order to subject them to the
terms of the Sublease.
1.31 Significant Transaction. Means any transaction or series of transactions in
which (i) Parent, TowerCo or any Affiliate of Parent or TowerCo issues or
guarantees debt (other than debt existing on the date hereof), whether through a
public or private placement or pursuant to any other facility, in an amount
equal to or in excess of $500,000,000; or (ii) (A) any Person purchases or
otherwise acquires, directly or indirectly, all or substantially all of the
assets used in the operation of the business of Parent and its subsidiaries
taken as a whole, or (B) any Change of Control (as defined in the Sublease)
occurs with respect to TowerCo or Parent.
1.32 Tax and Taxes. Any and all governmental or quasi-governmental fees
(including, without limitation, license, filing and registration fees), taxes
(including, without limitation, income, gross receipts, franchise, sales, use,
property, real or personal, tangible or intangible taxes), interest equalization
and stamp taxes, documentary and real property transfer taxes, assessments,
levies, imposts, duties, charges, required contributions or withholdings of any
kind or nature whatsoever, together with any and all penalties, fines, additions
to tax, or interest thereon. For purposes of determining any Tax cost or Tax
benefit to any person, such amount
-6-
<PAGE> 12
will be the actual cost or benefit recognized by such person at the time of
actual payment of the additional Tax or actual recognition of the Tax benefit.
In the event that any payment or other amount is required to be determined on an
after-Tax basis, such payment or other amount will initially be determined
without regard to any Tax cost or Tax benefit not actually recognized currently,
and appropriate adjustments will be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
1.33 Threshold Amount. Means, for any Sublessor or TowerCo, the greater of (i)
one percent (1%) of the Exclusive Commitment Fee payable to such Sublessor or
(ii) $100,000.
1.34 Tower Related Assets. Means (a) the leases of rights to use spaces on the
Towers that are identified in ANNEX III hereto and located on Tower Sites
(hereinafter defined) (the "Tower Collocation Leases") and security deposits (if
any) from tenants under the Tower Collocation Leases, (b) all Contracts with
respect to the management, operation, maintenance, servicing and construction
of, and the provision of utility services to, the Towers ("Tower Service
Contracts"), (c) any existing leases (or licenses or other Contracts) of
Sublessors for equipment or other personal property which are included within
the definition of Towers ("Tower Equipment Leases"), and (d) copies of, or
extracts from, all current files and records of Sublessors to the extent that
such files or records contain information related to the design, construction,
management, operation, maintenance, ownership, occupancy or leasing of the
Assets; provided, however, that such term does not include any Excluded Assets.
1.35 Tower Sites. The sites of the Towers that are owned or leased by Sublessors
and are identified in ANNEX I hereto, including all fee, ground leasehold
interests and easements pertaining to such tower sites owned by Sublessors and
including (i) a fee ownership in the real property associated with the Towers
designated as "Owned Sites" in ANNEX I hereto, and (ii) the leasehold interest,
leasehold estate or other possessory interest or use right in and to the real
property associated with the Towers designated as "Leased Sites" in ANNEX I
hereto pursuant to the ground leases or other documents related thereto
identified in ANNEX II (the "Ground Leases"); provided, however, that such term
does not include any Excluded Assets.
1.36 Towers. The communications equipment and antenna support tower structures
situated at the locations that are identified on ANNEX I and are owned or leased
by Sublessors; provided, however, that such term does not include (i) any
equipment, property or other assets placed upon the Towers or Tower Sites by
third parties pursuant to Tower Collocation Leases or other Contracts or (ii)
any Excluded Assets.
1.37 TowerCo Material Adverse Effect. An Event which has had or is reasonably
likely to have a material adverse effect on (i) the assets, liabilities,
business, prospects, condition (financial or otherwise) or results of operations
of Parent and its subsidiaries taken as a whole, except any such effect
resulting from or arising in connection with (a) this Agreement or the
transactions contemplated hereby, (b) changes or conditions (including without
limitation changes in technology, law, or regulatory or market environment)
affecting the industry in which the owners or users of communications tower
structures operate, or (c) changes in economic, regulatory or political
conditions generally, (ii) the validity or enforceability against TowerCo or
-7-
<PAGE> 13
Parent of this Agreement or any of the Transaction Documents, or (iii) the
ability of TowerCo or Parent to perform its respective obligations under this
Agreement or any of the Transaction Documents.
1.38 Transaction Documents. Collectively, this Agreement, the Sublease, the
Master Lease, the Build-to-Suit Agreement, the Site Marketing Agreement and the
escrow agreement referred to in Section 2.3(b) hereof.
1.39 Other Definitions. In addition, the following terms have the meanings
given them in the following sections:
-----------------
Term Section
AirTouch ......... Preamble
Applicable Governmental Permit...... 1.5
Business ......... Recitals
Claim ......... 11.3(a)
Closing ......... 2.4
Closing Date ......... 2.4
Commercially reasonable efforts of Sublessor 2.2(b)
Deposit ......... 2.3(b)
Environmental Law ......... 3.8(b)
Exclusive Commitment Fee ......... 2.3(a)
Final Closing Date ......... 2.4
Ground Leases ......... 1.35
Hazardous Substance ......... 3.8(c)
Indemnifiable Damages ......... 11.1
Indemnified Sublessor Parties....... 11.2(a)
Indemnified TowerCo Parties......... 11.1(a)
Indemnitee ......... 11.3(a)
Indemnitor ......... 11.3(a)
Initial Closing Date ......... 2.4
Initial Closing Expiration Date..... 2.4
Joinder ......... 1.25
Master Lease ......... 10.2(a)
Nonrecourse ......... 13.1(b)
Parent ......... Preamble
Parent SEC Reports ......... 5.6
Pending Transactions ......... 5.13
Permitted Schedule Updates ......... 6.1(b)
Permitted Subleasehold Mortgagee.... 13.2
Restricted Items ......... 2.2(a)
Site Marketing Agreement ......... Recitals
Solicit ......... 6.2
Sublease ......... Recitals
Sublessors ......... Preamble
Tower Collocation Leases ......... 1.34
Tower Equipment Leases ......... 1.34
-8-
<PAGE> 14
Tower Service Contracts ......... 1.34
TowerCo ......... Preamble
TowerCo Parties ......... Preamble
Transfer Taxes ......... 6.3(c)
ARTICLE 2
- ------------------
Leasing of Assets
2.1 Leasing or Subleasing of Assets. Subject to the terms and conditions
hereinafter set forth: (i) at the Initial Closing (as hereinafter defined),
TowerCo hereby agrees to execute and deliver to Sublessors, and each of the
Sublessors hereby severally agrees to execute and deliver to TowerCo, the
Sublease and the Site Designation Supplements (as defined in the Sublease)
relating to the Assets that are the subject of the Initial Closing, and (ii) at
each Subsequent Closing (as hereinafter defined), TowerCo hereby agrees to
execute and deliver, and each of the applicable Sublessors hereby severally
agrees to execute and deliver, the Site Designation Supplements relating to the
Assets that are the subject of such Subsequent Closing, all as provided herein
and in the Sublease.
2.2 Restricted Items.
(a) Nothing in this Agreement shall be construed as an attempt by any Sublessor
to lease or sublease to TowerCo pursuant to the Sublease, or otherwise make
subject to the Sublease, any Contract, Governmental Permit, franchise, claim or
asset included in the Assets which, in AirTouch's judgment, is unable by its
terms or by Law to be so leased, subleased or made subject without the consent
of any other Person (including any Governmental Authority), unless such consent
shall have been given (a "Restricted Item").
(b) The applicable Sublessor shall use commercially reasonable efforts (as
defined herein) until the Initial Closing Date to obtain the relevant consent to
subject a Restricted Item to the Sublease. If, despite such efforts, the
applicable Sublessor is unable to obtain such consent on or prior to the Initial
Closing Date, then TowerCo shall take the actions specified in Schedule 2.2(b)
until the earlier of the Final Closing Date or the date such consent is
obtained. If such consent is obtained prior to the Final Closing Date with
respect to any Restricted Item, such item and the related Tower and other
associated Assets shall be subjected to the Sublease at the next practicable
Subsequent Closing. Pending the subjection of any Restricted Item to the
Sublease pursuant to the applicable consent, such Restricted Item and the
related tower, tower site and other associated assets and liabilities shall not
be deemed part of the Assets or the subject of any representation or warranty
hereunder. Any Restricted Item(s) for which the consent required to subject such
item to the Sublease has not been obtained by the Final Closing Date, and the
tower(s), tower site(s), Contracts and other assets to which such Restricted
Item(s) relate, shall be deemed excluded from the Assets and deleted from the
Annexes hereto, and shall not be deemed to be the subject of any representation,
warranty or covenant of Sublessors herein. As used in this Agreement,
"commercially reasonable efforts" of a given Sublessor shall not include any
obligation of any Sublessor or its Affiliates to pay money or other
consideration, agree or commit to any obligation, Liability or condition, or
forego, surrender or waive any asset, right or privilege, unless Parent and
TowerCo agree to reimburse or indemnify such Sublessor for
-9-
<PAGE> 15
obligations and Liabilities and otherwise make Sublessor "whole," in each case
on an after-Tax basis and as determined by Sublessor in its reasonable
judgment, and, with respect to any given Restricted Item, shall not include
any requirement of action other than as set forth in Schedule 2.2(a).
2.3 Exclusive Commitment Fee and Payment.
(a) The aggregate consideration to be paid by TowerCo in return for Sublessors'
willingness to execute this Agreement and Sublessors' agreement herein to
execute the Sublease, Master Lease and Build-to-Suit Agreement on the terms and
conditions provided herein, shall be $155 million dollars ($155,000,000) in cash
for the Included Towers (as identified in Annex I hereto), subject to adjustment
as hereinafter provided the ("Exclusive Commitment Fee"). At any given Closing,
TowerCo shall pay to the Sublessors whose Included Towers are the subject of
such Closing the product of (i) the number of such Included Towers multiplied by
(ii) three hundred sixty thousand dollars ($360,000). If the total number of
Included Towers at all Closings exceeds 430, then for all purposes hereunder the
Exclusive Commitment Fee shall be deemed to be increased by the product of (x)
three hundred sixty thousand dollars ($360,000) and (y) the amount by which such
total number of Included Towers exceeds 430. If the total number of Included
Towers at all Closings is less than 430, then for all purposes hereunder the
Exclusive Commitment Fee shall be deemed to be reduced by the product of (x)
three hundred sixty thousand dollars ($360,000) and (y) the amount by which 430
exceeds such total number of Included Towers.
(b) As partial security for TowerCo's and Parent's obligations under this
Agreement (and to the extent provided in Section 12.3, as liquidated damages in
the event of termination of this Agreement under the circumstances specified in
such Section), by 5:00 p.m., California time, on the second Business Day
following the date of this Agreement, TowerCo shall deposit (as reduced in
accordance with the provisions of this Section, the "Deposit") the amount of
$23,000,000 into an escrow account, under an escrow agreement in substantially
the form attached hereto as Exhibit B, with only such changes thereto as are
required by the escrow agent thereunder (the "Escrow Agreement"). If TowerCo
fails to make such $23,000,000 Deposit by such time, then AirTouch may elect, in
its sole discretion, to terminate this Agreement in full. AirTouch and TowerCo
agree to negotiate in good faith to enable TowerCo, at its discretion, to
replace such escrow arrangement with an irrevocable letter of credit in favor of
AirTouch (it being understood that a pro rata portion, based on the respective
numbers of Included Towers attributable to each respective Sublessor, shall be
for the benefit of the other Sublessors) in the amount of $23,000,000 issued in
a form mutually agreeable to AirTouch and TowerCo and by a financial institution
reasonably acceptable to AirTouch, as promptly as reasonably practicable. Upon
any Closing, the Deposit shall be reduced (either by a distribution of a portion
of the escrowed funds or by a reduction in the letter of credit commitment
amount) to that amount as equals $23,000,000 times a fraction, (i) the numerator
of which is the excess of (x) 430 over (y) the number of Included Towers as to
which Closings have theretofore occurred, and (ii) the denominator of which is
430.
(c) The parties acknowledge and agree that the portion of the Exclusive
Commitment Fee paid at a Closing is intended as a one-time payment in
consideration of events occurring at
-10-
<PAGE> 16
or prior to such Closing, will have been fully earned as of such Closing, is not
dependent on events occurring subsequent thereto and is not for any reason
subject to apportionment or rebate.
(d) The portion of the Exclusive Commitment Fee applicable to a Closing shall be
allocated among the Assets for tax purposes in a manner consistent with the fair
market value set forth in an Allocation Schedule to be agreed to by AirTouch and
TowerCo as early as practicable prior to such Closing. The parties shall file
all Tax returns (including amended returns and claims for refund) and
information reports in a manner consistent with such values. The obligations in
this paragraph shall survive the Closing.
2.4 Completion of Transaction. The execution and delivery of the Sublease and of
Site Designation Supplements under the Sublease shall be completed in accordance
with Article 10 (each such closing being referred to as a "Closing"). The
initial Closing is referred to herein as the "Initial Closing" and each Closing
occurring after the Initial Closing is referred to as a "Subsequent Closing."
The Initial Closing shall involve no fewer than 105 Included Towers and shall
occur on such date, no later than August 15, 2000 (or such later date, not later
than three months after August 15, 2000, as AirTouch may elect upon written
notice to TowerCo provided that AirTouch is not in breach in any material
respect of its covenants hereunder (with August 15, 2000 or such later date, as
applicable, being referred to as the "Initial Closing Expiration Date")) upon at
least five (5) Business Days' prior written notice to TowerCo from AirTouch; the
date of such Initial Closing is referred to herein as the "Initial Closing
Date." Each Subsequent Closing shall involve no fewer than 45 Included Towers
(or, with respect to the last such Closing, such smaller number as represents
the remaining Towers) and shall occur on one or more month-ends after the end of
the month in which the Initial Closing Date falls (each, a "Subsequent Closing
Date") upon at least ten (10) Business Days' prior written notice to TowerCo
from AirTouch. References herein to the "Closing" and the "Closing Date" shall
mean the Initial Closing and the Initial Closing Date, one or more Subsequent
Closings and Subsequent Closing Dates or all of the foregoing closings and
closing dates collectively, as the context requires. The last of the Subsequent
Closings (the "Final Closing") is scheduled to occur on a date (the "Final
Closing Date") which shall not be later than six (6) months after the Initial
Closing Date. Each Closing shall take place in the offices of Pillsbury Madison
& Sutro LLP, 50 Fremont Street, San Francisco, California 94105, or such other
place as the parties may agree.
2.5 Additional Due Diligence For each Tower Site designated as a "Due
Diligence Site" on Schedule 3.8 hereof, TowerCo shall promptly commence
additional due diligence, at its sole cost and expense, as to the presence
of Hazardous Substances or an Environmental Condition on or under such site,
and within sixty (60) calendar days after the date hereof, TowerCo shall, for
each such site: (i) provide the applicable Sublessor with written notice
that TowerCo has satisfactorily completed such due diligence investigation
and is prepared to subject such Tower and Tower Site to the terms and
conditions of this Agreement (including without limitation TowerCo's
obligation to pay the Exclusive Commitment Fee upon the Closing for such
Tower), in which case such Tower and Tower Site shall be deemed to be subject
to the terms and conditions hereof upon the applicable Sublessor's receipt
of such notice; or (ii) provide the applicable Sublessor with written
notice (A) that states that TowerCo has determined that, in TowerCo's
good-faith judgment, the presence of Hazardous Substances or other
Environmental Condition on or under such site is reasonably likely to
materially impair TowerCo's operations at such site or to cause TowerCo to
become subject to a material Liability
-11-
<PAGE> 17
(including remediation costs) under any Environmental Law and (B) that
describes in reasonable detail the facts underlying the foregoing
determination, in which case such Tower and Tower Site and all Contracts and
Tower Related Assets relating to such Tower and Tower Site shall be deemed
Excluded Assets for all purposes hereunder, shall be deleted from the
Annexes hereto and shall not be deemed to be the subject of any representation,
warranty or covenant of Sublessors herein; provided, however, that AirTouch
(on behalf of the applicable Sublessor) shall have the right, within ten (10)
calendar days of receipt of TowerCo's written notice, to dispute in good faith
whether TowerCo's stated judgment is unreasonable by invoking the dispute
resolution procedures set forth in this Agreement. If TowerCo fails within
the foregoing 60-day period to provide the applicable Sublessor with the
notice contemplated by clause (i) or (ii) above, then TowerCo shall be deemed to
hvae satisfactorily completed such due diligence investigation and such Tower
and Tower Site shall, upon such 60th day, be subject to all of the terms and
conditions of this Agreement (including without limitation TowerCo's obligation
to pay the Exclusive Commitment Fee upon the Closing for such Tower).
2.6 References Applicable to Individual Closings. As used in this Agreement, the
defined term "Assets" and all related defined terms including "Included Towers,"
"Tower Sites," "Ground Leases," "Tower Service Contracts," "Tower Collocation
Leases," "Tower Equipment Leases" and "Applicable Governmental Permits," and all
references to Liabilities in respect of any of the foregoing, are understood to
refer to (i) the Assets (together with certain Liabilities as provided in the
Sublease) that are the subject of the Initial Closing only, with respect to
representations, warranties, covenants and conditions applicable to the Initial
Closing, and (ii) the Assets (together with certain Liabilities as provided in
the Sublease) that are the subject of a given Subsequent Closing only, with
respect to representations, warranties, covenants and conditions applicable to
such Subsequent Closing.
All representations, warranties and indemnification obligations of any
Sublessor and of TowerCo and Parent under this Agreement shall be deemed with
respect to a particular Closing to refer to those Assets (together with certain
Liabilities as provided in the Sublease) leased or subleased to TowerCo under
the Sublease or otherwise made subject to the Sublease at such Closing.
ARTICLE 3
Representations and Warranties of AirTouch
As a material inducement to TowerCo to enter this Agreement, except as
disclosed to TowerCo in the Schedules to this Agreement and the other
Transaction Documents to which they are a party (with each disclosure made in
the Schedules in response to any Section of these representations and warranties
being deemed to be disclosed in response to, and to qualify, each other Section
of these representations and warranties), AirTouch represents and warrants to
TowerCo as follows:
3.1 Organization and Qualification. AirTouch is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or
-12-
<PAGE> 18
formation and has all requisite corporate power and authority to own, lease and
use its Assets as they are currently owned, leased and used.
3.2 Authority. AirTouch has the corporate right, power, legal capacity and
authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to be executed and delivered by AirTouch
pursuant to this Agreement. The execution and delivery of, and performance of
the obligations contained in, this Agreement by AirTouch and the transactions
contemplated hereby have been, and all other Transaction Documents delivered by
AirTouch and all other documents, instruments and certificates delivered or to
be delivered by AirTouch pursuant to this Agreement have been, or as of the
Closing will be, duly authorized by all necessary corporate action on the part
of AirTouch.
3.3 Enforceability. The terms and provisions of this Agreement and all
Transaction Documents made or delivered from time to time by AirTouch hereunder
constitute valid and legally binding obligations of AirTouch, enforceable
against AirTouch in accordance with the terms hereof and thereof.
3.4 Consents and Approvals. Except for (x) filings, consents and approvals
required under Tower Collocation Leases and Ground Leases, and (y) the filings,
consents and approvals specified in Schedule 3.4, neither the execution and
delivery by AirTouch of this Agreement or the other Transaction Documents to
which it is a party, nor the performance of the transactions performed or to be
performed by AirTouch thereunder, will (i) require any filing, consent or
approval or constitute a Default under (A) any Law to which AirTouch or any of
the Assets owned by it is subject, (B) the Charter Documents of AirTouch or (C)
any Contract or Governmental Permit to which AirTouch is a party or by which any
of the Assets owned by it is bound, except with respect to clauses (A) and (C),
such failures to make or obtain such filing, consent or approval and such
Defaults that, individually or in the aggregate, would not have an AirTouch
Material Adverse Effect, or (ii) result in the creation or imposition of any
Encumbrance upon any of the Assets owned by AirTouch, other than Permitted
Encumbrances.
3.5 Title and Encumbrances. To AirTouch's knowledge, except as disclosed in
Schedule 3.5, AirTouch will at the applicable Closing have good and marketable
title to, or, with respect to Assets subject to a Ground Lease, a valid
leasehold or other possessory interest in or use right with respect to, all of
the Assets of AirTouch, free from any Encumbrances except Permitted
Encumbrances. To AirTouch's knowledge, the use of such Assets of AirTouch is not
subject to any Encumbrances, other than Permitted Encumbrances and the
Encumbrances described in Schedule 3.5, and such use does not materially
encroach on the property or rights of any other Person except as disclosed in
such Schedule. To AirTouch's knowledge, except as disclosed in Schedule 3.5, all
of the Towers of AirTouch are in good operating condition and repair, subject to
normal wear and maintenance, have been maintained in a manner consistent with
generally accepted standards of sound engineering practice, and are useable to
support the antennae of AirTouch and the other tenants on the existing Towers of
AirTouch as of the date hereof, except for such defects as are disclosed on
Schedule 3.5 or as would not cost more than $50,000 to correct with respect to
each such Tower or more than $2,500,000 for all such Towers. To AirTouch's
knowledge, except as disclosed in Schedule 3.5 or where the failure would not,
individually or in the aggregate, have an AirTouch Material Adverse Effect, all
of the transmitting towers, ground radials, guy anchors, transmitting buildings
and related
-13-
<PAGE> 19
improvements, if any, constituting Assets and located on real
property owned or leased by AirTouch are located entirely on real property
constituting a part of the Assets.
3.6 Governmental Permits. To AirTouch's knowledge, except as set forth on
Schedule 3.6, AirTouch has all Governmental Permits that are necessary to
operate its Towers as operated on the date hereof, except where the failure to
obtain such Governmental Permit would not, individually or in the aggregate,
have an AirTouch Material Adverse Effect. To AirTouch's knowledge, except as set
forth in Schedule 3.6, AirTouch is in compliance with such Governmental Permits,
except for such failures to comply as would not, individually or in the
aggregate, have an AirTouch Material Adverse Effect. Except as set forth in
Schedule 3.6, or where the failure would not, individually or in the aggregate,
have an AirTouch Material Adverse Effect, (i) none of the Governmental Permits
owned by AirTouch is, to AirTouch's knowledge, subject to any restriction or
condition that limits the ownership or operations of the Assets as currently
owned and operated, except for restrictions and conditions generally applicable
to Governmental Permits of such type, (ii) to AirTouch's knowledge, the
Governmental Permits owned by AirTouch are valid and in good standing, are in
full force and effect and are not impaired by any act or omission of AirTouch or
its officers, directors, partners, employees or agents, and the ownership and
operation of the Assets to AirTouch's knowledge are in accordance with the
Governmental Permits owned by AirTouch, (iii) no such Governmental Permit is the
subject of any pending or, to AirTouch's knowledge, threatened challenge or
proceeding to revoke or terminate any such Governmental Permit, and (iv)
AirTouch has no reason to believe that any such Governmental Permit will not be
renewed in its name by the granting Governmental Authority in the ordinary
course.
3.7 Contracts. Schedule 3.7 identifies all Contracts of the following types to
which AirTouch is a party, or by which it is bound, with respect to the Assets
(other than any Contract which is neither a Tower Collocation Lease nor a Ground
Lease and (i) is terminable by a party on not more than sixty (60) calendar
days' notice without any Liability, or (ii) under which the obligation of a
party (fulfilled and to be fulfilled under the current term thereof without
taking optional extensions into account) involves an amount of less than
$100,000 (a "Minor Contract"), or (iii) is specified in clauses (c) through (e)
below which is entered into after the date hereof in compliance with Section
6.1):
(a) Contracts which are Ground Leases for Tower Sites for which Tower
construction has been completed, disclosing for each the location of the related
Tower Site, the identity of the lessor, the expiration date of the current term
under the lease, and the aggregate amount of the rental (including revenue
sharing) paid to the lessor by AirTouch thereunder for the month ended December
31, 1999;
(b) Contracts in effect as of December 31, 1999 which are Tower Collocation
Leases, disclosing for each the location of the related Tower Site, the identity
of the lessee, the expiration date of the current term under the lease, and the
amount of the rental paid by the lessee to AirTouch thereunder (i) for the month
ended July 31, 1999, with respect to Tower Collocation Leases that were in
effect as of July 31, 1999, and (ii) for the month ended December 31, 1999, with
respect to Tower Collocation Leases that were entered into after July 31, 1999;
-14-
<PAGE> 20
(c) Contracts in effect as of December 31, 1999 which are Tower Equipment
Leases, disclosing for each the location of the related Tower Site, the type of
equipment leased, the identity of the lessor, the expiration date of the current
term under the lease and the amount of the rental paid to the lessor by AirTouch
thereunder for the month ended December 31, 1999;
(d) Contracts in effect as of December 31, 1999 which are Tower Service
Contracts, disclosing for each the location of the related Tower Site, the
identity of the service provider, the type of service provided, the expiration
date of the current term under the Contract and the amount of the fees paid by
AirTouch to the service provider thereunder for the month ended December 31,
1999;
(e) Contracts under which any Encumbrances, other than Permitted Encumbrances,
exist with respect to the Assets of AirTouch; and
(f) Contracts (other than those described in any of (a) through (e) above) (i)
which relate to the Towers or Tower Sites of AirTouch which were entered into
after December 31, 1999 and which were not made in the ordinary course of the
business of AirTouch or (ii) which were made in the ordinary course of business
and involve remaining payments under any such Contract of more than $100,000.
The Contracts listed in Schedule 3.7 are referred to herein as the
"AirTouch Contracts." To AirTouch's knowledge, and except as identified in
Schedule 3.7, AirTouch is not in Default under any AirTouch Contract, except for
Defaults that would not, individually or in the aggregate, have an AirTouch
Material Adverse Effect. To AirTouch's knowledge and except as disclosed in
Schedule 3.7, (i) AirTouch has not received any written communication from, or
given any written communication to, any other party indicating that AirTouch or
such other party, as the case may be, is in Default under any AirTouch Contract,
except for Defaults that would not, individually or in the aggregate, have an
AirTouch Material Adverse Effect, (ii) none of the other parties to any such
AirTouch Contract is in Default thereunder in any material respect, and (iii)
each such AirTouch Contract is in full force and effect and is enforceable
against the other parties thereto in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy,
reorganization, insolvency and other Laws of general application affecting
enforcement of creditors' rights generally or by general principles of equity,
and except to the extent that the failure to be in full force and effect and
enforceable would not, individually or in the aggregate, have an AirTouch
Material Adverse Effect.
3.8 Environmental Laws.
(a) Except as disclosed on Schedule 3.8, to AirTouch's knowledge: (i) none of
AirTouch's operations on the Real Property of AirTouch is currently subject to
any judicial or administrative proceeding alleging the violation of an
Environmental Law; (ii) none of the Real Property of AirTouch is the subject of
any investigation by any Governmental Authority concerning any release of any
Hazardous Substance on the Real Property of AirTouch; (iii) AirTouch has not
filed any written notice under any Environmental Law indicating past or present
treatment, storage or disposal of a hazardous waste on the Real Property or
reporting a spill or release of a Hazardous Substance into the environment from
its operations on the Real
-15-
<PAGE> 21
Property of AirTouch; (iv) no lien in favor of any Governmental Authority for
(A) any liability under Environmental Laws, or (B)damages arising from or
costs incurred in response to a release of any Hazardous Substance into the
environment has been filed or attached to any of the Real Property of AirTouch
(other than Permitted Encumbrances); (v) AirTouch has not been notified that
it is potentially liable (including as a "potentially responsible party"),
or has received any request for information or other correspondence
concerning its potential liability with respect to the Real Property, under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Resource Conservation Recovery Act, as amended, or any
similar state Law; (vi) AirTouch has not entered into or received any
consent decree, compliance order or administrative order issued pursuant to
any Environmental Law with respect to the Real Property, or is a party in
interest in any judgment, order, writ, injunction or decree issued
pursuant to any Environmental Law with respect to the Real Property; (vii)
AirTouch is in compliance with all Environmental Laws with respect to the Real
Property, except where the failure to be so in compliance, individually or in
the aggregate, would not have an AirTouch Material Adverse Effect; and (viii)
except for batteries, generators and associated above-ground fuel tanks and
other substances commonly used in the industry necessary for the operation and
maintenance of the Assets, AirTouch has not installed or used any underground
storage tanks or Hazardous Substances, and there are no underground storage
tanks or Hazardous Substances, on any Real Property constituting a part of the
Assets.
(b) "Environmental Law" means a law, regulation, statute or ordinance pertaining
to land use, air, soil, surface water or groundwater (including the protection,
cleanup, removal, remediation or damage thereof) including, without limitation,
the following laws: (i) Clean Air Act (42 U.S.C. ss. 7401 et seq.); (ii) Clean
Water Act (33 U.S.C. ss. 1251 et seq.); (iii) Resource Conservation and Recovery
Act (42 U.S.C. ss. 6901 et seq.); (iv) Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.); (v) Safe Drinking
Water Act (42 U.S.C. ss. 300f et seq.); and (vi) Toxic Substances Control Act
(15 U.S.C. ss. 2601 et seq.).
(c) "Hazardous Substance" means any matter that is designated or regulated as a
pollutant, contaminant or hazardous or toxic substance, constituent or waste
under any Environmental Law.
3.9 Litigation. Except as set forth on Schedule 3.9, (a) there is no material
claim, grievance, lawsuit, action, arbitration, administrative or other
proceeding or formal governmental investigation pending or, to AirTouch's
knowledge, threatened against AirTouch or any of the Assets, that would,
individually or in the aggregate, have an AirTouch Material Adverse Effect; and
(b) there is no material outstanding or unsatisfied judgment, order or decree to
which AirTouch is a party and which relates to the Assets, except such as would
not, individually or in the aggregate, have an AirTouch Material Adverse Effect.
3.10 Commissions. AirTouch has not entered into an agreement, commitment or
obligation with regard to any brokerage commission or finder's fee which would
be payable by or result in any Liability to TowerCo arising out of the
execution, delivery or performance of this Agreement or the other Transaction
Documents or the transactions contemplated hereby and thereby.
-16-
<PAGE> 22
3.11 Real Property.
(a) Zoning. To AirTouch's knowledge, except as set forth on Schedule 3.11, the
ownership, lease or use of the real property included in the Assets of AirTouch
or subject to AirTouch's Ground Leases is in compliance with all applicable
zoning, wetlands and other land use requirements where the failure to so comply
would materially limit AirTouch's ability to use such real property
substantially as heretofore used, including the addition of tenants to the
Towers.
(b) Utility Services. Except as set forth on Schedule 3.11, (i) the water,
electric, gas and sewer utility services and the septic tank and storm drainage
facilities currently available to the Tower Sites of AirTouch are adequate for
the present use of such Tower Sites by AirTouch and are not being
misappropriated by AirTouch but rather are being supplied to AirTouch by utility
companies or municipalities pursuant to contracts or tariffs which, to
AirTouch's knowledge, are valid and in full force and effect, and (ii) to
AirTouch's knowledge, there is no condition which will result in the termination
of the present access from such Tower Sites to such utility services and other
facilities.
(c) Access. To AirTouch's knowledge, and except as disclosed in Schedule 3.11,
AirTouch has obtained all Governmental Permits (where required), easements and
rights-of-way which are reasonably necessary to provide vehicular and pedestrian
ingress and egress to and from its Tower Sites for the purposes used by AirTouch
in the ordinary course. To AirTouch's knowledge, no action is pending or
threatened which would have the effect of terminating or materially limiting
such access.
(d) Eminent Domain. Except as set forth on Schedule 3.11, AirTouch has received
no written notice that any Governmental Authority having the power of eminent
domain over any of the real property included in the Assets of AirTouch has
commenced or intends to exercise the power of eminent domain or a similar power
with respect to all or any material part of such real property.
(e) Public Improvements. To AirTouch's knowledge, no work for municipal
improvements has been commenced on or in connection with the "Owned Sites"
included in the Assets that are owned by AirTouch. AirTouch has received no
written notice that any material assessment for public improvements has been
made against any such real property which remains unpaid.
3.12 Absence of Certain Changes or Events. Since December 31, 1999, AirTouch has
made reasonable efforts consistent with past practice to preserve relationships
with customers, suppliers, employees, lessors, licensors, tenants, licensees,
distributors and others with whom AirTouch has a material business or financial
relationship with respect to its Assets. Except as set forth on Schedule 3.12,
since December 31, 1999, AirTouch has conducted its operations regarding its
Assets in the ordinary course of business consistent with past practice
(including with respect to the collection of receivables, payment of payables
and other liabilities and capital expenditures).
-17-
<PAGE> 23
3.13 Availability of Documents. AirTouch has made available to TowerCo copies of
all Contracts specifically identified in the Schedules to this Article 3. To
AirTouch's knowledge, such copies are true and complete in all material respects
and include all material amendments, supplements and modifications thereto or
waivers currently in effect thereunder.
3.14 Compliance with Applicable Law. To AirTouch's knowledge, except as set
forth on Schedule 3.14, AirTouch has conducted its business relating to the
Assets and owned and operated the Assets in accordance with all applicable Laws
(excluding Environmental Laws), except for such failures as, individually or in
the aggregate, would not have an AirTouch Material Adverse Effect. Except as set
forth on Schedule 3.14, AirTouch is not charged by any Governmental Authority
with, and, to AirTouch's knowledge is not threatened or under investigation by
any Governmental Authority with respect to, any Default under any applicable Law
relating to the ownership and operation of the Assets or the conduct of the
Business that, individually or in the aggregate, would have an AirTouch Material
Adverse Effect.
3.15 No Other Warranties. Except for the representations and warranties
expressly set forth in this Article 3 and in Article 4, the Assets are being
leased or otherwise made subject to the terms of the Sublease by AirTouch and
the other Sublessors as is, where is, and with all faults, and there are no
other warranties being made by AirTouch or any other Sublessor (INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF HABITABILITY, MERCHANTABILITY, CONDITION,
DESIGN, WORKMANSHIP, OPERATION, STRUCTURAL INTEGRITY OR FITNESS OR SUITABILITY
FOR A PARTICULAR PURPOSE, OR ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE), express or implied, in connection with the leasing or subleasing
of the Assets, the subjection of the Assets to the terms of the Sublease, or the
other transactions contemplated by this Agreement, the Sublease and the other
Transaction Documents.
ARTICLE 4
Representations and Warranties of Other Entities
By and as of the time of its execution of this Agreement, and as a
material inducement to TowerCo to enter into this Agreement and the other
Transaction Documents to which it is a party, each Other Entity (severally and
not jointly and each solely with respect to itself) makes the representations
and warranties to TowerCo set forth in Article 3, subject to the disclosures in
the Schedules to this Agreement (with each disclosure made in the Schedules in
response to any Section of such representations and warranties being deemed to
be disclosed in response to, and to qualify, each other Section of such
representations and warranties); provided, however, that for purposes of such
representations and warranties, (i) all references in Article 3 to AirTouch or
its respective business, operations, assets, properties and liabilities shall be
deemed replaced with references to such Other Entity and its business,
operations, assets, properties and liabilities, and (ii) all references to
AirTouch's status as a corporation in Section 3.1, and to AirTouch's corporate
right, power, legal capacity and authority and corporate action in Section 3.2,
shall be deemed replaced with references to such Other Entity's status as a
partnership and its partnership right, power and legal capacity and authority
and partnership action, as applicable.
-18-
<PAGE> 24
ARTICLE 5
Representations and Warranties of TowerCo and Parent
As a material inducement to Sublessors to enter into this Agreement and the
other Transaction Documents to which they are parties, TowerCo and Parent
jointly and severally represent and warrant to Sublessors the following for the
benefit of Sublessors:
5.1 Organization and Qualification. Each of Parent and TowerCo is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and, prior to Closing, will be duly authorized to transact
business in all states in which the Towers which are the subject of such Closing
are located. Each of Parent and TowerCo has all necessary corporate power and
authority to own, lease and utilize its respective properties and assets and to
engage in the business or businesses in which it has been and is presently
engaged and in the places where its property and assets are now owned, leased or
utilized or as such business is now conducted. Each of Parent and TowerCo has
provided to AirTouch true, correct and complete copies of its respective Charter
Documents.
5.2 Authority. Each of Parent and TowerCo has the corporate right, power, legal
capacity and authority to execute, deliver and perform its obligations under
this Agreement, the other Transaction Documents, and the documents, instruments
and certificates to be executed and delivered by it pursuant to this Agreement.
The execution, delivery and performance of this Agreement by Parent and TowerCo
and the transactions contemplated hereby have been, and all documents,
instruments and certificates have been or as of the Closing will be, duly
authorized by all necessary corporate action on the part of Parent and TowerCo,
respectively.
5.3 Enforceability. The terms and provisions of this Agreement, and all other
Transaction Documents made or delivered from time to time by Parent or TowerCo
hereunder, constitute valid and legally binding obligations of Parent and
TowerCo, respectively, enforceable against Parent and TowerCo (as the case may
be) in accordance with the terms hereof and thereof.
5.4 Approvals. Neither the execution and delivery by Parent or TowerCo of the
Transaction Documents to which it is a party, nor the performance of the
transactions performed or to be performed by Parent or TowerCo thereunder, will
(i) require any filing, consent or approval or constitute a Default under (A)
any Law to which Parent, TowerCo, their subsidiaries or their respective
properties and assets are subject, (B) the Charter Documents of Parent or
TowerCo, or (C) any credit agreement or other Contract or Governmental Permit to
which Parent, TowerCo or any of their Affiliates is a party or by which any of
the properties and assets of Parent, TowerCo or any of their Affiliates is
bound, except with respect to clauses (A) and (C), such failures to make or
obtain such filing, consent or approval and such Defaults that, individually or
in the aggregate, would not have a TowerCo Material Adverse Effect, or (ii)
result in the creation or imposition of any Encumbrance upon any of the
properties or assets of Parent or TowerCo, other than Permitted Encumbrances.
5.5 Commissions. Neither Parent nor TowerCo has entered into any agreement,
commitment or obligation with regard to any brokerage commission or finder's fee
or similar
-19-
<PAGE> 25
payment which would be payable by or will result in any Liability to any
Sublessor, arising out of the execution, delivery or performance of this
Agreement or the other Transaction Documents or the transactions contemplated
hereby and thereby.
5.6 SEC Reports. Parent has filed all required forms, reports and documents with
the SEC since September 30, 1998 (collectively, the "Parent SEC Reports"). The
Parent SEC Reports complied, as of their respective dates, in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended. As of their
respective dates, none of the Parent SEC Reports, including, without limitation,
any financial statements or schedules included or incorporated by reference
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. There have been filed as exhibits
to, or incorporated by reference in, the Parent SEC Reports and Parent's
Registration Statement on Form S-1 as filed with the SEC and last amended on
January 31, 2000, all Contracts which, as of the date hereof, are material as
described in Item 601(b)(10) of Regulation S-K. Parent has heretofore delivered
to AirTouch, in the form filed with the SEC, all of the Parent SEC Reports. The
audited consolidated financial statements and the unaudited interim financial
statements of Parent, including in each case the notes thereto, included in the
Parent SEC Reports have been prepared in accordance with GAAP, and such balance
sheets, including the related notes, fairly present the consolidated financial
position, assets and liabilities (whether accrued, absolute, contingent or
otherwise) of Parent and its subsidiaries at the dates indicated and such
consolidated statements of income, changes in stockholders' equity and
statements of cash flow fairly present the consolidated results of operations,
changes in stockholders' equity and cash flow of Parent for the periods
indicated, subject, in the case of the unaudited interim financial statements,
to normal, recurring audit adjustments. The unaudited financial statements
included in the Parent SEC Reports contain all adjustments, which are solely of
a normal recurring nature, necessary to present fairly the results of operations
and changes in stockholders' equity and financial position for the periods then
ended.
5.7 Absence of Certain Changes. Since December 31, 1999, except as described in
Schedule 5.7 or the Parent SEC Reports filed after such date, each of Parent and
TowerCo has conducted its business solely in the ordinary course consistent with
past practice and neither Parent nor TowerCo has been subject to any Event that
would have a TowerCo Material Adverse Effect.
5.8 Threatened or Pending Litigation. There is no dispute, claim, grievance,
lawsuit, action, arbitration, administrative or other proceeding or formal
governmental investigation pending or, to Parent's or TowerCo's knowledge,
threatened against Parent, TowerCo, any Affiliate of TowerCo or any of their
respective properties, assets or operations that would have a TowerCo Material
Adverse Effect.
5.9 Funds Available for Exclusive Commitment Fee. TowerCo has sufficient cash or
cash equivalents to pay the Exclusive Commitment Fee when due hereunder.
5.10 Capitalization. Each of Parent and TowerCo has authorized capital stock,
and shares of capital stock outstanding and reserved for issuance pursuant to
options, warrants and
-20-
<PAGE> 26
convertible and exchangeable securities outstanding as of December 31, 1999, in
each case as identified in Schedule 5.10. All of such outstanding capital
stock has been duly authorized and validly issued, fully paid and
nonassessable and is not subject to any preemptive or similar rights. There are
no existing subscriptions, options, warrants, convertible securities, calls,
commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) that are binding on Parent or TowerCo
calling for or requiring the issuance, transfer, sale or other disposition of
any shares of the capital stock of Parent or TowerCo, or calling for or
requiring the issuance of any securities or rights convertible into or
exchangeable for shares of capital stock of Parent, in any case except as set
forth with respect to Parent in the Parent SEC Reports (as defined herein) or in
Schedule 5.10 hereto.
5.11 Interim Operations of TowerCo. TowerCo was formed solely for the purpose of
engaging in the transactions contemplated hereby and has not (i) engaged in any
business activities, (ii) conducted any operations other than in connection with
the transactions contemplated hereby or (iii) incurred any liabilities other
than in connection with the transactions contemplated hereby. TowerCo is a
wholly owned subsidiary of SpectraSite Communications, Inc., which is a wholly
owned subsidiary of Parent.
5.12 No Undisclosed Liabilities. Except as identified in Schedule 5.12 hereto,
TowerCo has no liabilities, outstanding debt, or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent or
otherwise) except for liabilities, outstanding debt or obligations reflected or
reserved against in the financial statements of TowerCo as set forth in the
Parent SEC Reports and current liabilities incurred in the ordinary course of
business since the respective dates thereof.
5.13 Pending Transactions. "Pending Transactions" means Contracts, agreements,
proposals, bids, and other transactions in effect as of the date hereof (but
excluding this Agreement) to which Parent or any of its direct or indirect
subsidiaries have entered into or agreed, as of the date hereof, to enter into
relating to the acquisition or disposition (by purchase, sale, merger, lease or
otherwise) of assets similar to the Assets. The consummation of the Pending
Transactions, either individually or in the aggregate, will not have a TowerCo
Material Adverse Effect.
ARTICLE 6
Certain Covenants
6.1 Agreements of Sublessors Pending the Closing. AirTouch and each other
Sublessor severally covenants and agrees that, pending the Final Closing (and
thereafter, in the case of paragraphs (f) and (g) of this Section), except as
otherwise agreed to in writing by TowerCo, and except in connection with the
performance of the transactions contemplated hereby:
(a) Business in the Ordinary Course. Except as to actions specifically permitted
or contemplated by this Agreement or required by any Law, such Sublessor shall
operate, maintain and service its Assets in the ordinary course consistent with
past practice (including extensions,
-21-
<PAGE> 27
renewals, terminations and amendments of Contracts) and in compliance in all
material respects with all applicable Laws and, to the extent consistent
therewith, use reasonable efforts to preserve the goodwill and relationships
with customers, suppliers and others having business dealings with it that are
material to the Assets.
(b) Update Schedules. AirTouch and the other Sublessors shall promptly disclose
to TowerCo any information contained in their respective representations and
warranties or any of the Schedules or Annexes hereto which, because of an event
occurring after the date hereof, is incomplete or is no longer correct as of all
times after the date hereof until the Final Closing Date; provided, however,
that none of such disclosures shall be deemed to modify, amend or supplement the
representations and warranties of the Sublessors or the Schedules or Annexes
hereto for the purposes of Article 8 hereof, unless TowerCo shall have consented
thereto in writing, except (i) to the extent that an update relates to the
addition to any Schedule or Annex of Towers or Tower Sites acquired or
constructed after the date of this Agreement in the ordinary course consistent
with past practice (and Ground Leases relating to the foregoing) and which meet
the criteria set forth in Schedule 6.1(b)(1), and matters related thereto, (ii)
to the extent that an update relates to the expiration or termination pursuant
to its terms of a Ground Lease or Tower Related Asset and matters related
thereto, in which event the applicable Tower, Tower Site and Ground Lease (in
the case of an expiring or terminating Ground Lease) or the applicable Tower
Related Asset (in the case of an expiring or terminating Tower Related Asset)
shall be deemed to be Excluded Assets for all purposes hereunder and shall not
be deemed to be the subject of any representation, warranty or covenant of
Sublessors hereunder, and all references thereto in the Annexes to this
Agreement shall be deemed deleted, (iii) to the extent that an update relates to
the renewal (pursuant to preexisting renewal options) of a Ground Lease or Tower
Related Asset, and matters related thereto, (iv) to the extent that an update
relates to the renewal (other than a renewal pursuant to preexisting renewal
options) or amendment of a Ground Lease or Tower Related Asset, and matters
related thereto, so long as the criteria set forth in Schedule 6.1(b)(2) are met
(collectively, the updates referred to in the foregoing clauses (i), (ii), (iii)
and (iv), together with any other disclosures consented to in writing by
TowerCo, the "Permitted Schedule Updates"). The Schedules and Annexes hereto
shall be deemed modified to include the information in the Permitted Schedule
Updates. Notwithstanding anything to the contrary herein, if any proposed
Permitted Schedule Update pursuant to subsection (i) of the foregoing proviso (a
"Subsection (i) Update") contains exceptions to the representations and
warranties contained in Articles 3 or 4 hereof such that the condition to
TowerCo's obligations to close under Section 8.1(b) would not be satisfied (it
being understood that, to the extent that a Subsection (i) Update revises the
lists of Towers, Tower Sites and certain Contracts called for by Section 3.7 and
the Annexes hereto, such revision shall not constitute an exception for this
purpose), TowerCo may, within seven days after the receipt thereof, refuse to
accept such proposed Subsection (i) Update insofar as the exceptions reflected
therein are unacceptable to TowerCo, notify AirTouch of TowerCo's objections,
and refuse to accept and pay for any such additional Towers or Tower Sites as
are subject to such unacceptable exceptions. Each such Tower and Tower Site
(including the Tower Related Assets relating thereto) shall not be subject to
this Agreement or any of the Transaction Documents for any purpose and shall
constitute Excluded Assets, and Sublessors may hold, further develop or dispose
of such Towers, Tower Sites and assets free and clear of any obligation or
Liability arising or imposed under or pursuant to this Agreement or the other
Transaction Documents.
-22-
<PAGE> 28
(c) Conduct of Business. Such Sublessor shall cooperate with TowerCo and use its
reasonable efforts to cause all of the conditions to the obligations of TowerCo
under this Agreement to be satisfied on or prior to the Closing Date.
(d) Sale of Assets; Negotiations. Except as permitted by Section 6.1(a) or in
connection with an assignment of this Agreement permitted by Section 13.2, such
Sublessor shall not sell or encumber all or any part of its Assets, other than
Permitted Encumbrances or in the ordinary course of its business consistent with
past practice or in connection with the sale or other divestiture of any
cellular system owned by any Sublessor, or initiate or participate in any
discussions or negotiations or enter into any agreement to do any of the
foregoing. Assets sold or otherwise disposed of in accordance with this Section
shall be deemed to be Excluded Assets for all purposes hereunder and shall not
be deemed to be the subject of any representation, warranty or covenant of
Sublessors hereunder, and all references thereto in the Annexes to this
Agreement shall be deemed deleted.
(e) Access. Each Sublessor shall give to TowerCo's officers, employees, counsel,
accountants and other representatives free and full access to and the right to
inspect, during normal business hours and with reasonable prior notice, all of
the premises, properties, assets, records, contracts and other documents
relating to the Assets and shall permit them to consult with the officers,
employees, accountants and agents of Sublessors for the purpose of making such
investigation of the Assets as TowerCo shall desire to make, provided that such
access, inspection and investigation shall not unreasonably interfere with the
business operations of Sublessors. Notwithstanding the foregoing provisions of
this Section , Sublessors shall not be required to provide any such information
to TowerCo if, in the reasonable determination of counsel for AirTouch or the
other applicable Sublessor, access to such information by TowerCo is prohibited
by the provisions of any confidentiality agreements binding upon AirTouch or any
of the other Sublessors or by applicable Law.
(f) Publicity. Except as required by applicable Law or in connection with
communications with the other partners of the Other Entities or the process of
obtaining consents contemplated by Section 2.2 hereof, no Sublessor shall give
any notice to third parties or otherwise make any public statement or
announcement (including statements to any member of the media) concerning this
Agreement or the transactions contemplated hereby, or otherwise make known to
any third party any information relating to this Agreement or the other
Transaction Documents, except for such written information as shall have been
approved in writing as to form and content by TowerCo, which approval shall not
be unreasonably withheld or delayed.
(g) Cooperation in Accounting Matters. If Parent is required by applicable Law
(including the staff of the Securities and Exchange Commission) to receive from
its independent public accountants an unqualified report (as to the scope of the
audit, access to the books and records and the cooperation of management) on the
Assets (consisting of a balance sheet as of the Final Closing Date and a
statement of revenue from third parties and expenses for the twelve months then
ended, prepared in conformity with GAAP and Regulation S-X under the Securities
Act of 1933, as amended, and which shall be at Parent's sole cost and expense),
then Sublessors shall cooperate reasonably and shall use reasonable efforts to
cause their independent public accountants to cooperate (provided that such
accountants' cooperation shall be at Parent's sole
-23-
<PAGE> 29
cost and expense) in responding to inquiries from Parent's independent
public accountants in connection with their production of such report for
Parent.
6.2 Agreements of TowerCo. Each of Parent and TowerCo covenants and agrees that,
pending the Final Closing (and thereafter, in the case of paragraphs (d) and (e)
of this Section 6.2) and except as otherwise agreed to in writing by AirTouch:
(a) Update Schedules. Parent and TowerCo shall promptly disclose to AirTouch (on
behalf of the Sublessors) any information contained in the representations and
warranties of Parent or TowerCo or any of the Schedules hereto which, because of
an event occurring after the date hereof, is incomplete or is no longer correct
as of all times after the date hereof until the Final Closing Date; provided,
however, that none of such disclosures shall be deemed to modify, amend or
supplement the representations and warranties of Parent or TowerCo or the
schedules hereto for the purposes of Article 9 hereof, unless AirTouch shall
have consented thereto in writing.
(b) Conduct of Business. Each of Parent and TowerCo shall cooperate with
Sublessors and use its reasonable efforts to cause all of the conditions to the
obligations of Sublessors and the TowerCo Parties under this Agreement (other
than the conditions in Section 9.1(f)(i) and 9.1(f)(v) hereof) to be satisfied
on or prior to each Closing Date.
(c) Access. Pending the Final Closing, each of Parent and TowerCo shall give to
Sublessors' officers, employees, counsel, accountants and other representatives
free and full access to and the right to inspect, during normal business hours,
all of the premises, properties, assets, records, contracts and other documents
relating to its business and shall permit them to consult with the officers,
employees, accountants, counsel and agents of Parent and TowerCo for the purpose
of making such investigation of their business and the properties and assets
used in connection therewith, as Sublessors shall desire to make, provided that
such investigation shall not unreasonably interfere with the business operations
of Parent and TowerCo. Notwithstanding the foregoing provisions of this Section
6.2(c), Parent and TowerCo shall not be required to provide any such information
to Sublessors if, in the reasonable determination of the general counsel of
Parent, access to such information by Sublessors is prohibited by the provisions
of any confidentiality agreement binding upon Parent and TowerCo or by
applicable Law.
(d) Publicity. Except as required by applicable Law, neither Parent nor TowerCo
shall give notice to third parties or otherwise make any public statement or
announcement (including statements to any member of the media) concerning this
Agreement or the transactions contemplated hereby or otherwise make known to any
third party any information relating to this Agreement or the other Transaction
Documents, except for such written information as shall have been approved in
writing as to form and content by AirTouch, which approval shall not be
unreasonably withheld or delayed.
(e) Other Covenants. From the date of this Agreement until the first anniversary
of the Final Closing, neither Parent nor TowerCo nor any of their respective
Affiliates will Solicit any employee of any Sublessor or any of its Affiliates
to leave his or her employment with such Sublessor or its Affiliates. For
purposes of this Agreement, "Solicit" means any recruitment specifically
directed at one or more individuals identified by name, title or Sublessor
affiliation
-24-
<PAGE> 30
(i.e., beyond generally advertising job openings), but the term "Solicit"
shall not include any activities that constitute follow-up to
individuals who respond to general job opening advertisements or who voluntarily
initiate employment inquiries.
6.3 Additional Agreements of Sublessors and TowerCo Parties.
(a) Regulatory Matters.
(i) Each party hereto agrees to use commercially reasonable efforts to
comply with all Laws which may be imposed on such party with respect to
the transactions contemplated by this Agreement and the other
Transaction Documents.
(ii) Notwithstanding anything else to the contrary contained in this
Agreement, none of AirTouch nor any other Sublessor shall have any
obligation to oppose, challenge or appeal any suit, action or
proceeding by any Governmental Authority before any court or other
Governmental Authority, domestic or foreign, or any order or ruling by
any such body (A) seeking to restrain or prohibit or restraining or
prohibiting the consummation of the transactions contemplated by the
Transaction Documents, (B) seeking to prohibit or limit or prohibiting
or limiting the leasing, subleasing, occupancy, operation or control by
any TowerCo Party of the Subleased Property or Managed Components (as
defined in the Sublease) or (C) seeking to compel or compelling any
TowerCo Party or any Sublessor or any of their respective Affiliates to
dispose of, grant rights in respect of, or hold separate any portion of
the business or assets of any TowerCo Party or any Sublessor or any of
their respective Affiliates.
(b) Cooperation in Tax Matters. Sublessors, on the one hand, and the TowerCo
Parties, on the other hand, shall cooperate fully as and to the extent
reasonably requested by the other party in connection with any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Sublessors and the TowerCo Parties agree (i) to retain all books and
records with respect to Tax matters pertinent to the Assets relating to all
taxable periods until the statute of limitations (including any extensions) as
to any taxable year that may be affected thereby shall have run, (ii) to abide
by all record retention agreements entered into with any Governmental Authority,
and (iii) to give the other party reasonable written notice prior to destroying
or discarding any such books and records and, if one party so requests, shall
allow the requesting party to take possession of such books and records proposed
for destruction or discard (at the requesting party's sole expense).
(c) Transfer Taxes. Each Sublessor shall pay and promptly discharge when due the
entire amount of any and all state and local sales and use, documentary, real
property transfer and other transfer taxes, similar taxes and related amounts
(including any penalties, interest and additions to Tax) (the "Transfer Taxes")
imposed or levied by reason of the execution and performance of this Agreement
and the Sublease, if any. TowerCo shall promptly reimburse each Sublessor for
50% of all such Transfer Taxes upon receipt of suitable evidence that such
Transfer Taxes have been paid by such Sublessor. The parties will cooperate
before and after
-25-
<PAGE> 31
each Closing to minimize Transfer Taxes. Such cooperation will include the
provision of resale certificates, other exemption certifications where
appropriate, or other documentation reasonably requested by AirTouch or
another Sublessor.
(d) Further Assurances. Each of the parties hereto will cooperate with the other
and execute and deliver to the other parties hereto such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by any other party hereto as necessary to carry out, evidence and
confirm the intended purposes of this Agreement.
(e) Tax Filings. TowerCo will be responsible for filing before and after each
Closing any forms, notices or other filings as required by each Governmental
Authority necessary to identify the change in ownership, use, control or
possession of the Assets.
(f) Specified Sites. The parties confirm the agreements stated in the last
two sentences of Item 1 of Schedule 3.9.
---------------
6.4 Confidentiality. All information obtained by any party in connection with
this Agreement shall be kept confidential in accordance with that certain letter
agreement dated December 1, 1999 between SpectraSite Communications, Inc. and
Lehman Brothers Inc. on behalf of AirTouch. TowerCo and Parent agree to observe
and abide by the covenants of SpectraSite Communications, Inc. in such letter
agreement. The obligations in this Section shall survive any termination or
expiration of this Agreement.
ARTICLE 7
Optional TowerCo Activities
7.1 Preliminary Title Reports. TowerCo may, but shall not be obligated to, at
its own cost or expense, obtain as promptly as practicable after the execution
of this Agreement either (i) a standard preliminary title report dated on or
after the date of this Agreement with respect to each parcel of real property
constituting a part of the Assets, or (ii) copies of title policies or marked up
commitments to issue title policies, with policies to be provided when issued.
7.2 Environmental Site Assessments. TowerCo may as promptly as practicable after
the execution of this Agreement, at its own cost and expense, obtain and deliver
to the applicable Sublessor full and complete copies of a Phase I Environmental
Report on each parcel of real property constituting a part of the Assets for
which a Phase I Environmental Report has not heretofore been delivered to
TowerCo (or as to which TowerCo has heretofore indicated that the existing Phase
I Environmental Report raises questions of potential liability that has had or
could be reasonably expected to materially impair the value or use of the
affected real property). Site assessments shall be conducted by such consultants
and professionals as TowerCo shall select and as shall be reasonably acceptable
to AirTouch and shall be arranged at times mutually convenient to the parties.
Each of the applicable Sublessor and TowerCo shall be entitled to have
representatives present at the time such site assessments are conducted and to
have copies of all correspondence with the entity preparing such Phase I
Environmental Reports.
-26-
<PAGE> 32
7.3 Structural Reports. TowerCo may, but shall not be obligated to, at its own
cost and expense, obtain as promptly as practicable after the execution of this
Agreement, a report with respect to each of the components of the Towers of such
structural engineers as are reasonably satisfactory to TowerCo with respect to
(i) the structural soundness and operating condition of the Towers, (ii)
compliance of the Towers with all applicable Laws, Governmental Permits and
Contracts, and (iii) any required structural or other material repairs.
ARTICLE 8
Conditions Precedent to Obligations of TowerCo
8.1 Conditions Precedent. The obligations of TowerCo to consummate the
transactions contemplated on each Closing Date are subject to the satisfaction,
on or before such Closing Date, of all the following conditions:
(a) Sublessors shall have performed and complied in all material respects with
all covenants and obligations required by this Agreement and the other
Transaction Documents to be performed or complied with by Sublessors on or
before such Closing Date.
(b) All representations and warranties of Sublessors in this Agreement shall be
true, correct and complete, in each case on and as though made on such Closing
Date (except for representations and warranties with respect to matters as of a
specified date or for a specified period, which shall be true, correct and
complete as of such date or with respect to such period), in each case without
regard to any schedule updates (other than Permitted Schedule Updates) furnished
by Sublessors after the date hereof, except to the extent that the failure of
such representations and warranties to be true and correct, individually or in
the aggregate, do not have an AirTouch Material Adverse Effect; provided,
however, that solely for the purpose of the foregoing, representations and
warranties that are qualified as to materiality (including by reference to an
AirTouch Material Adverse Effect) shall not be deemed to be so qualified;
provided, however, that for purposes of this Section 8.1 each representation or
warranty (other than those in Sections 3.1, 3.2, 3.3 or 3.10) of any Sublessor
that refers to or is made with respect to any or all of the Assets or
liabilities (including without limitation Contracts, Governmental Permits,
Encumbrances, Towers, Tower Sites and Real Property) of or affecting any or all
Sublessors or their properties shall be deemed to refer only to such Assets and
liabilities which are the subject of the Closing at issue, and not to any other
Assets or liabilities of or affecting any Sublessor or its properties.
(c) As of such Closing Date, no lawsuit, action or proceeding shall be
completed, pending or threatened against TowerCo or any Sublessor that has or is
likely to result in a judgment, decree or order that would prevent or make
unlawful the consummation of the transactions contemplated by this Agreement and
there shall be in effect no injunction or order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement to occur at such
Closing nor any proceedings pending with respect thereto.
(d) Sublessors shall have duly tendered to TowerCo all documents which
Sublessors are required by Section 10.2(b) to deliver to TowerCo for such
Closing.
-27-
<PAGE> 33
(e) Sublessors shall have been able to deliver to TowerCo at least the minimum
number of Included Towers applicable to such Closing, as provided in Section
2.4.
(f) All authorizations, consents, waivers, orders or approvals required to be
obtained from all Governmental Authorities, and all filings, submissions,
registrations, notices or declarations required to be made by any of the parties
with any Governmental Authority, in connection with and prior to the
consummation of the transactions contemplated hereby to occur at such Closing,
shall have been obtained from, and made with, all such Governmental Authorities,
except for such authorizations, consents, waivers, orders, approvals, filings,
registrations, notices or declarations the failure of which to obtain or make
would not have an AirTouch Material Adverse Effect.
(g) All agreements, certificates and other documents required to be delivered
pursuant to the provisions of this Agreement (other than the other Transaction
Documents to the extent substantially in the form attached hereto) shall be
reasonably satisfactory in form, scope and substance to TowerCo and its counsel,
and TowerCo and its counsel shall have received copies of all documents,
including records of corporate proceedings, which they may reasonably request in
connection therewith, such documents where appropriate to be certified by proper
Governmental Authorities or corporate officers.
(h) With respect to any Subsequent Closing, the Sublease shall not have been
terminated in accordance with its terms.
8.2 Waiver. TowerCo may waive any or all of the conditions set forth in Section
8.1 hereof in whole or in part; however, no such waiver of a condition shall
constitute a waiver by TowerCo of any of its other rights or remedies under this
Agreement or otherwise at law or in equity if Sublessors should be in default of
any of the covenants, agreements, representations or warranties of Sublessors
under this Agreement.
ARTICLE 9
Conditions Precedent to Obligations of Sublessors
9.1 Conditions Precedent. The obligations of Sublessors to consummate the
transactions contemplated on each Closing Date are subject to the satisfaction,
on or before such Closing Date, of all the following conditions:
(a) Each of the TowerCo Parties shall have performed and complied in all
material respects with all covenants and obligations required by this Agreement
and the other Transaction Documents to be performed or complied with by such
TowerCo Party on or before such Closing Date.
(b) All representations and warranties made by Parent and TowerCo in this
Agreement shall be true, correct and complete, in each case on and as though
made on such Closing Date (except for representations and warranties with
respect to matters as of a specified date or for a specified period, which shall
be true, correct and complete as of such date or with respect to such period),
in each case without regard to any schedule updates furnished by Parent
-28-
<PAGE> 34
or TowerCo after the date hereof, except to the extent that the failure of such
representations and warranties to be true and correct, individually or in the
aggregate, do not have a TowerCo Material Adverse Effect; provided, however,
that solely for the purpose of the foregoing, representations and warranties
that are qualified as to materiality (including by reference to a TowerCo
Material Adverse Effect) shall not be deemed to be so qualified.
(c) As of such Closing Date, no lawsuit, action or proceeding shall be
completed, pending or threatened against any Sublessor or any of the TowerCo
Parties that has or is likely to result in a judgment, decree or order that
would prevent or make unlawful the consummation of the transactions contemplated
by this Agreement and there shall be in effect no injunction or order
restraining or prohibiting the consummation of the transactions contemplated by
this Agreement to occur at such Closing nor any proceedings pending with respect
thereto.
(d) TowerCo shall have duly tendered to each Sublessor the applicable Exclusive
Commitment Fee for such Closing and all documents which TowerCo and Parent are
required by Section 10.2 to deliver to one or more Sublessors at such Closing.
(e) With respect to any Subsequent Closing, the Sublease shall not have been
terminated in accordance with its terms.
(f) Neither TowerCo nor Parent shall have (i) been a party to any merger,
consolidation or other business combination in which it was not the surviving
corporation or in which Parent's common stockholders (as in existence
immediately prior to such transaction) do not possess at least 50.1% of the
voting power of the Person controlling the surviving corporation, (ii) been
liquidated, wound up or dissolved, or made an assignment for the benefit of
creditors, or filed a bankruptcy petition, or petitioned or applied to any
Governmental Authority or other tribunal seeking a receiver, trustee or
custodian, or instituted or commenced any voluntary proceeding or become subject
to (or indicated its consent to, approval of or acquiescence in) any involuntary
proceeding contemplating or seeking any of the foregoing or any proceeding under
any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation
Law of any jurisdiction, (iii) become insolvent as defined in the Uniform
Commercial Code under the Laws applicable to this Agreement, (iv) sold,
assigned, leased or otherwise disposed of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereinafter acquired) unless it meets the voting power test described
in clause (i) with respect to the Person to which such assets were sold,
assigned, leased or otherwise disposed of, (v) effected or agreed to effect a
Significant Transaction, or (vi) entered into any Contract or arrangement to do
or permit any of the foregoing.
(g) All authorizations, consents, waivers, orders or approvals required to be
obtained from all Governmental Authorities, and all filings, submissions,
registrations, notices or declarations required to be made by any of the parties
with any Governmental Authority, prior to the consummation of the transactions
contemplated hereby to occur at such Closing, shall have been obtained from, and
made with, all such Governmental Authorities, except for such authorizations,
consents, waivers, orders, approvals, filings, registrations, notices or
declarations the failure of which to obtain or make would not have an AirTouch
Material Adverse Effect.
-29-
<PAGE> 35
(h) All agreements, certificates, opinions and other documents required to be
delivered pursuant to the provisions of this Agreement (other than the other
Transaction Documents to the extent substantially in the form attached hereto)
shall be reasonably satisfactory in form, scope and substance to Sublessors and
their counsel, and Sublessors and their counsel shall have received copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate to
be certified by proper Governmental Authorities or corporate officers.
(i) All authorizations, consents, waivers, orders or approvals required by the
provisions of this Agreement to be obtained from all Persons (other than
Governmental Authorities) prior to the consummation of the transactions
contemplated on such Closing Date shall have been obtained, without the
imposition, individually or in the aggregate, of any condition or requirement
that has had or would have an AirTouch Material Adverse Effect.
9.2 Waiver. Sublessors may waive any or all of such conditions set forth in
Section 9.1 hereof in whole or in part; however, no such waiver of a condition
shall constitute a waiver by Sublessors of any of their other rights or remedies
under this Agreement or otherwise at law or in equity if TowerCo or Parent
should be in default of any of the covenants, agreements, representations or
warranties made by TowerCo or Parent under this Agreement.
ARTICLE 10
Closing
10.1 Closing. Each Closing shall take place on the Closing Date and at the place
provided for in Section 2.4. At the applicable Closing, and subject to the terms
and conditions herein contained, each of the parties shall take all actions and
deliver all documents, instruments, certificates, agreements and other items as
required under this Agreement in order to perform, fulfill and observe all
covenants, conditions and agreements on its part to be performed, fulfilled and
observed at or prior to such Closing Date (and not theretofore accomplished).
10.2 Closing Deliveries.
(a) At the Initial Closing, and subject to the terms and conditions herein
contained:
(i) AirTouch (for itself and the other Sublessors), TowerCo and Parent
shall execute and deliver the Sublease;
(ii) AirTouch (for itself and the other Sublessors) shall execute and
deliver, and TowerCo and Parent shall execute and deliver, (A) the
Master Tower Site Lease Agreement in the form attached hereto as
Exhibit C (the "Master Lease") pursuant to which TowerCo shall lease to
Sublessors space on certain communications towers to be constructed
pursuant to the Build-to-Suit Agreement (as defined below); and (B) the
Site Development and Build-to-Suit Agreement in the form attached
hereto as Exhibit D (the "Build-to-Suit Agreement") pursuant to which
Sublessors shall offer to TowerCo from time to time the right to build
certain towers and related structures on the terms and conditions
described therein.
-30-
<PAGE> 36
(b) At each Closing (including the Initial Closing), and subject to the terms
and conditions herein contained, Sublessors shall deliver to TowerCo all of the
following:
(i) the Site Designation Supplements (as defined in the Sublease)
applicable to the Tower Sites which are the subject of such Closing, to
the extent and as provided in this Agreement;
(ii) a certificate of each Sublessor, substantially in the form of Exhibit E
(iii) a Certificate of Good Standing for each Sublessor certified to by the
Secretary of State of the jurisdiction of such Sublessor's
incorporation or formation; and
(iv) such other documents and certificates as TowerCo may reasonably request.
(c) At each Closing (including the Initial Closing), TowerCo and Parent shall
deliver to Sublessors the following:
(i) a wire transfer to each Sublessor of the portion of the Exclusive
Commitment Fee attributable (on a pro rata basis) to the Included
Towers of such Sublessor which are the subject of such Closing,
pursuant to instructions received from AirTouch;
(ii) a Certificate of Good Standing of TowerCo and Parent certified to by
the Secretary of State of each State in which any of the Towers and
Tower Sites that are the subject of such Closing are located;
(iii) an executed counterpart of each Site Designation Supplement delivered
by Sublessors pursuant to Section 10.2(b) hereof;
(iv) a certificate of each of Parent and TowerCo, each substantially in the form
of Exhibit F; and
(v) such other documents and certificates as Sublessors may reasonably request.
ARTICLE 11
Indemnification
11.1 Indemnification by Sublessors.
(a) Each Sublessor agrees severally, and for its own account only, to indemnify
TowerCo, its Affiliates, and the directors, partners, officers, agents and
employees of TowerCo and each of its Affiliates (collectively, the "Indemnified
TowerCo Parties") and hold it harmless on an after-Tax basis from any and all
losses, liabilities, claims, suits, proceedings, demands, judgments, damages,
expenses and costs, including, without limitation, counsel fees and
-31-
<PAGE> 37
disbursements, expert fees and costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity ("Indemnifiable
Damages") which any Indemnified TowerCo Party may suffer or incur by reason of
(i) the inaccuracy of any representation or warranty of such Sublessor contained
in this Agreement (but excluding any other Transaction Documents), or (ii) the
breach by such Sublessor of any covenant made by it in this Agreement (but
excluding any other Transaction Documents). The foregoing obligation of
Sublessors shall be subject to and limited by each of the qualifications set
forth in this Article 11.
(b) Except with respect to bona fide and valid claims for which notice has been
given within the Indemnity Period, each representation, warranty and covenant
made by Sublessors in this Agreement or pursuant hereto and the indemnity
obligations set forth in this Section 11.1 shall survive only until the
expiration of the Indemnity Period, and thereafter all such representations,
warranties and covenants and indemnity obligations and any liability thereunder
shall be extinguished and of no further force or effect. The term "Indemnity
Period" means a period of twelve (12) months after the applicable Closing Date
with respect to representations and warranties and the applicable statute of
limitations with respect to the covenants and agreements of the parties.
(c) The indemnity obligations of each Sublessor hereunder shall not apply (i) to
the extent that TowerCo is compensated for the same loss under TowerCo's
insurance policies in the absence of any indemnity hereunder if the insurers
under such policy waive their rights of subrogation with respect thereto; or
(ii) if the damages to TowerCo do not exceed the Threshold Amount applicable to
such Sublessor. If such damages exceed the Threshold Amount applicable to such
Sublessor, the indemnity obligations of such Sublessor hereunder shall only
apply to that portion of the Indemnifiable Damages that exceeds the Threshold
Amount for such Sublessor and thereafter Indemnifiable Damages shall be paid up
to the Maximum Amount calculated on a cumulative basis with respect to all
Sublessors taken in the aggregate. For purposes of determining whether the
Threshold Amount or Maximum Amount (as the case may be) for any Wholly Owned
Entity has been reached, all Sublessors that are Wholly Owned Entities shall be
treated as a single "Sublessor," and the Threshold Amount and Maximum Amount
shall be calculated on a cumulative basis with respect to all Wholly Owned
Entities.
11.2 Indemnification by TowerCo.
(a) TowerCo agrees to indemnify each Sublessor, its Affiliates, and the
directors, partners, agents and employees of each Sublessor and its Affiliates
(collectively, the "Indemnified Sublessor Parties") against and hold each of
them harmless on an after-Tax basis from any and all Indemnifiable Damages which
any such Indemnified Sublessor Party may suffer or incur by reason of or in
connection with (i) the inaccuracy of any representation or warranty of Parent
or TowerCo contained in this Agreement (but excluding any other Transaction
Document), or (ii) the breach by Parent or TowerCo of any covenant made by it in
this Agreement (but excluding any other Transaction Document). The foregoing
obligation of TowerCo shall be subject to and limited by each of the
qualifications set forth in this Article 11.
(b) Except with respect to bona fide and valid claims for which notice has been
given within six (6) months of the Closing Date, each representation, warranty
and covenant made by Parent or TowerCo in this Agreement or pursuant hereto
(other than those which by their terms
-32-
<PAGE> 38
survive for a longer period) and the indemnity obligations set forth in this
Section 11.2 shall survive only until the date which is six (6) months
following the Closing Date, and thereafter all such representations, warranties,
covenants and indemnity obligations and any liability thereunder shall be
extinguished and of no further force or effect.
(c) The indemnity obligations of TowerCo hereunder shall not apply (i) to the
extent that Sublessors are compensated for the same loss under Sublessors'
insurance policies in the absence of any indemnity hereunder if the insurers
under such policy waive their rights of subrogation with respect thereto; or
(ii) if the damages to Sublessors do not exceed the Threshold Amount applicable
to TowerCo. If such damages exceed the Threshold Amount applicable to TowerCo,
the indemnity obligations of TowerCo hereunder shall only apply to that portion
of the Indemnifiable Damages that exceeds the Threshold Amount for TowerCo and
thereafter Indemnifiable Damages shall be paid up to the Maximum Amount.
11.3 Notice and Right To Defend Third-Party Claims.
(a) Upon receipt of written notice of any claim, demand or assessment from or
the commencement of any suit, arbitration, action or proceeding by a third party
(a "Claim") in respect of which indemnity may be sought on account of an
indemnity agreement contained in this Article, the party seeking indemnification
(the "Indemnitee") shall promptly, but in no event later than fifteen (15)
Business Days prior to the date a response or answer thereto is due (unless a
response or answer is due within fewer than fifteen (15) Business Days from the
date of Indemnitee's receipt of notice thereof), inform the party against whom
indemnification is sought (the "Indemnitor") in writing thereof. The failure,
refusal or neglect of such Indemnitee to notify the Indemnitor within the time
period specified above of any such Claim shall relieve such Indemnitor from any
liability which it may have to such Indemnitee in connection therewith, if the
effect of such failure, refusal or neglect is to prejudice materially the rights
of the Indemnitor in defending against the Claim.
(b) In case any Claim shall be asserted or commenced against an Indemnitee, and
such Indemnitee shall have timely and properly notified the Indemnitor of the
commencement thereof, the Indemnitor shall assume the defense, conduct or
settlement thereof, with counsel selected by the Indemnitor. After assumption of
the defense, conduct or settlement thereof, the Indemnitor will not be liable to
the Indemnitee for expenses incurred by Indemnitee in connection with the
defense, conduct or settlement thereof, except for such expenses as may be
reasonably required to enable the Indemnitor to take over such defense, conduct
or settlement.
(c) The Indemnitee will at its own expense cooperate with the Indemnitor in
connection with any such Claim, make personnel, witnesses, books and records
relevant to the Claim available to the Indemnitor at no cost, and grant such
authorizations or powers of attorney to the agents, representatives and counsel
of the Indemnitor as the Indemnitor may reasonably request in connection with
the defense or settlement of any such Claim.
(d) Notwithstanding the foregoing in this Section 11.3, the Indemnitee shall
have the right to employ separate counsel in any such Claim and to participate
in the defense thereof, but the fees and expenses of such counsel shall be its
fees and expenses unless (i) the Indemnitor has agreed to pay such fees and
expenses, (ii) the Indemnitor has failed to assume the defense of
-33-
<PAGE> 39
such Claim or (iii) the named parties to any such Claim (including any
impleaded parties) include both the Indemnitor and the Indemnitee and the
Indemnitee has been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnitor (in which case, if the Indemnitee informs the
Indemnitor in writing that it elects to employ separate counsel at the expense
of the Indemnitor, the Indemnitor shall not have the right to assume the
defense of such Claim or proceeding on behalf of the Indemnitee, it being
understood, however, that the Indemnitor shall not, in connection with any one
such Claim or separate but substantially similar or related Claims in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnitee, which firm
shall be designated in writing by the Indemnitee).
11.4 Notice and Right to Remediate. Notwithstanding anything in this Agreement
to the contrary, Sublessors shall have no obligation to indemnify any
Indemnified TowerCo Party with respect to Indemnifiable Damages arising under
Environmental Laws or out of any Environmental Condition, including damages or
other Liabilities due to any necessary investigation, remediation or cleanup of
Hazardous Substances at the Real Property, unless TowerCo first gives Sublessors
an option to conduct any necessary response or perform any required work and
Sublessors refuse to do so. Such an option should be given to Sublessors with
the written notice required by Section 11.3(a), but in any case, shall be given
in writing prior to any expenditure or commitment by TowerCo or any of its
Affiliates or agents of or for what TowerCo considers to be Indemnifiable
Damages. Sublessors shall respond to the option in writing within thirty (30)
calendar days of receipt of TowerCo's notice of the option or such shorter
period as is required to enable TowerCo to comply with all Environmental Laws or
Governmental Permits or to meet the requirements of the appropriate Governmental
Authority. If Sublessors exercise their option, Sublessors shall perform all
work in a workmanlike manner in material compliance with all applicable
Environmental and other Laws and Governmental Permits to the satisfaction of the
appropriate Governmental Authority. In addition, Sublessors will afford TowerCo
a reasonable opportunity to comment (at TowerCo's sole expense) in advance of
Sublessors' proposed responses or submissions to Governmental Authorities or
third parties relating to activities on the Real Property, including reports and
workplans, provided that such comment period does not materially delay or
interfere with Sublessors' obligations to any third party. Sublessors shall
consider TowerCo's comments in good faith, but are under no obligation to accept
or incorporate TowerCo's comments. Except to the extent required by applicable
Law, TowerCo and its representatives and agents will not initiate any
communication or make comments or submissions to any Governmental Authority or
third parties with respect to environmental conditions as to which Sublessors
have exercised their option. Any conflicts between Section 11.3 and this Section
11.4 shall be resolved in favor of this Section 11.4.
11.5 Mitigation. Nothing herein contained shall affect a party's legal duty to
mitigate damages.
11.6 Exclusive Remedy. Notwithstanding anything to the contrary herein, except
as provided in Sections 12.3 and 13.18, this Article 11 shall be the sole and
exclusive basis of any remedy that each party may have against the other party
for an inaccuracy or breach of a representation, warranty or covenant in this
Agreement and each party hereby waives any claim (other than under this Article
11) that it may have against the other party with respect to the
-34-
<PAGE> 40
inaccuracy or breach of any such representation, warranty or covenant.
Notwithstanding anything to the contrary in the other Transaction Documents,
this Article 11 shall be the sole and exclusive basis of any remedy that Parent,
TowerCo and the Indemnified TowerCo Parties may have against Sublessors with
respect to any Excluded Claim (as defined in the Sublease).
11.7 Effect of Investigation or Knowledge. Except as otherwise provided herein,
all covenants, agreements, representations and warranties made herein or in any
agreement, instrument or certificate delivered pursuant to this Agreement shall
not be deemed to be waived or otherwise affected by any investigation at any
time made by or on behalf of any party hereto. No claim for a breach of
representation or warranty shall be made by any Indemnified TowerCo Party under
Section 11.1(a) or any Indemnified Sublessor Party under Section 11.2(a), if (i)
such claim is based on an Event occurring prior to the Closing (whether or not
also occurring prior to the date of this Agreement), (ii) either (a) such Event
was disclosed by Sublessors or TowerCo, as the case may be, prior to the Closing
in a writing which describes such Event in reasonable detail or (b) a TowerCo
Party or AirTouch, as the case may be, had actual knowledge of such Event or
such misrepresentation or breach of warranty prior to the Closing, and (iii) the
Closing occurs.
11.8 Limitation of Liability. Notwithstanding anything to the contrary herein,
in no event shall any Indemnified Sublessor Party on the one hand, or TowerCo on
the other hand, be liable to the other party hereto for any special, incidental,
punitive or consequential damages incurred by such party and caused by or
arising out of any breach of any representation, warranty, covenant or agreement
contained in this Agreement (including claims of lost profits, lost revenue or
loss of use of facilities or assets), regardless of whether such party has been
informed of the possibility of such damages.
ARTICLE 12
Termination
12.1 Termination Events. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of TowerCo and AirTouch; or
(b) by either TowerCo or AirTouch, upon written notice to the other, if all of
the conditions to TowerCo's or Sublessors' obligations (as the case may be) to
consummate the Initial Closing set forth in Sections 8.1 and 9.1, respectively,
shall not have been satisfied or waived on or before the Initial Closing
Expiration Date for any reason other than a breach or default by such
terminating party of its respective representations, warranties, covenants,
agreements or other obligations hereunder such that the conditions to the
non-terminating party's obligations to consummate the Initial Closing set forth
in Section 9.1(a) or 9.1(b), or in Section 8.1(a) or 8.1(b), as the case may be,
would not be satisfied; or
(c) by AirTouch at any time prior to any Closing if (i) it has not breached or
defaulted under any of its representations, warranties, covenants or other
obligations hereunder such that
-35-
<PAGE> 41
the conditions as to such Closing set forth either in Section 8.1(a) or
Section 8.1(b) would not be satisfied, and (ii) Parent or TowerCo shall have
breached or defaulted under any of its respective representations, warranties,
covenants or other obligations under this Agreement, such that the
conditions as to such Closing set forth either in Section 9.1(a) or Section
9.1(b) would not be satisfied, and such breach or default is either incapable
of cure or, if capable of cure, shall not have been cured within thirty (30)
calendar days (or such longer period not exceeding 60 calendar days so long as
the applicable TowerCo Party is proceeding diligently and in good faith to
cure) after written notice thereof; or
(d) by TowerCo at any time prior to any Closing if (i) it has not breached or
defaulted under any of its representations, warranties, covenants or other
obligations hereunder such that the conditions as to such Closing set forth
either in Section 9.1(a) or Section 9.1(b) would not be satisfied, and (ii)
Sublessors shall have breached or defaulted under any of their representations,
warranties, covenants or other obligations under this Agreement, such that the
conditions as to such Closing set forth in either Section 8.1(a) or Section
8.1(b) would not be satisfied, and such breach or default is either incapable of
cure or, if capable of cure, shall not have been cured within thirty (30)
calendar days (or such longer period not exceeding 60 calendar days so long as
Sublessors are proceeding diligently and in good faith to cure) after written
notice thereof; or
(e) by either TowerCo or AirTouch, in the event that all Closings have not
occurred on or before the date six months following the Initial Closing for any
reason other than a breach or default by such terminating party of its
respective representations, warranties, covenants, agreements or other
obligations hereunder, such that the conditions to the non-terminating party's
Closing obligations set forth in Section 9.1(a) or 9.1(b), or in Section 8.1(a)
or 8.1(b), as the case may be, would not be satisfied.
12.2 Manner of Exercise. In the event of the termination of this Agreement by
either TowerCo or AirTouch pursuant to this Article 12, notice thereof shall
forthwith be given to the other party and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without further action by
any TowerCo Party or any Sublessor.
12.3 Effect of Termination. In the event of the termination of this Agreement
pursuant to this Article 12 and prior to the Closing, all obligations of the
parties hereunder shall terminate, except for the respective obligations of the
parties under Section 6.1(f) (Publicity), Section 6.2(d) (Publicity), Section
6.4 (Confidentiality), Section 13.1 (Covenant Not to Sue), Section 13.14
(Expenses), Section 13.16 (Dispute Resolution) and Section 13.17 (Power of
Attorney); provided, however, that, except as otherwise expressly provided in
this Section 12.3, no termination of this Agreement shall (a) relieve a
defaulting or breaching party from any liability to the other party or parties
hereto for or in respect of such default or (b) result in the rescission of any
Closing theretofore consummated hereunder or affect or terminate the rights,
remedies and obligations of the parties with respect to such previously
consummated Closing. If this Agreement is terminated by AirTouch in accordance
with Section 12.1(c) (or Section 12.1(b) or (subject to the proviso set forth
below) Section 12.1(e), if any of the conditions set forth in Section 9.1(a) or
9.1(b) has not been fulfilled but all other conditions to closing shall be
fulfilled or capable of being fulfilled) or by TowerCo other than in accordance
with Section 12.1, Sublessors shall be entitled to retain the Deposit (as, and
it shall be and is intended to constitute, liquidated damages for other than
willful breaches of this Agreement).
-36-
<PAGE> 42
ARTICLE 13
General
13.1 Covenant Not To Sue and Nonrecourse to Partners.
(a) Each of Parent and TowerCo agrees that notwithstanding any other provision
in this Agreement, any agreement, instrument, certificate or document entered
into pursuant to or in connection with this Agreement or the transactions
contemplated herein or therein and any rule of law or equity to the contrary, to
the fullest extent permitted by law, Sublessors' obligations and liabilities
under this Agreement and all other Transaction Documents and in connection with
the transactions contemplated herein and therein shall be nonrecourse to all
direct and indirect general and limited partners of any Sublessor that is a
partnership.
(b) "Nonrecourse" means that the obligations and liabilities are limited in
recourse solely to the assets of Sublessors (for those purposes, any capital
contribution obligations of the general and limited partners of Sublessors or
any negative capital account balances of such partners shall not be deemed to be
assets of Sublessors) and are not guaranteed directly or indirectly by, or the
primary obligations of, any general or limited partner of any Sublessor, and
neither any Sublessor nor any general or limited partner or any officer,
director, partner, employee or agent of any Sublessor or any general or limited
partner of any successor partnership, either directly or indirectly, shall be
personally liable in any respect (except to the extent of their respective
interests in the assets of any Sublessor) for any obligation or liability of any
Sublessor under any Transaction Document or any transaction contemplated
therein.
(c) "Direct" partners include all general and limited partners of any Sublessor
that is a partnership, and "indirect" partners include all general and limited
partners of each direct partner and all general and limited partners of each
such indirect partner and all such further indirect partners and members thereof
and each such indirect partner.
(d) Each of Parent and TowerCo hereby covenants for itself, its successors and
assigns that it, its successors and assigns will not make, bring, claim,
commence, prosecute, maintain, cause or permit any action to be brought,
commenced, prosecuted, maintained, either at law or equity, in any court of the
United States or any state thereof or in any arbitration forum against any
direct or indirect member or general or limited partner of Sublessors or any
officer, director, partner, employee or agent of Sublessors or any direct or
indirect member or general or limited partner of Sublessors for (i) the payment
of any amount or the performance of any obligation under any Transaction
Document or (ii) the satisfaction of any liability arising in connection with
any such payment or obligation or otherwise, including without limitation,
liability arising in law for tort (including, without limitation, for active and
passive negligence, negligent misrepresentation and fraud), equity (including,
without limitation, for indemnification and contribution) and contract
(including, without limitation, monetary damages for the breach of
representation or warranty or performance of any of the covenants or obligations
contained in any Transaction Document or with the transactions contemplated
herein or therein).
13.2 Assignment. Neither Parent nor TowerCo nor any Sublessor may assign its
rights and obligations under, or grant a security interest in, this Agreement to
any Person without the
-37-
<PAGE> 43
consent of the other parties hereto; provided, however, that (a) TowerCo may,
upon prior written notice to AirTouch, collaterally assign, mortgage, pledge,
hypothecate or otherwise collaterally transfer TowerCo's interest in this
Agreement to any Permitted Subleasehold Mortgagee (as defined in the Sublease),
and any such Permitted Subleasehold Mortgagee shall have the right to
exercise remedies under any such mortgage, pledge, hypothecation or other
collateral transfer in a manner consistent with the provisions of this and
every other agreement between TowerCo and AirTouch made in connection with
this transaction; and (b) any Sublessor may assign its rights and obligations
hereunder, in whole or in part, to any Affiliate of such Sublessor to
which all or a part (as the case may be) of the Towers and Tower Sites of such
Sublessor are transferred without the consent of TowerCo. Upon the assignment by
any Sublessor of all of its rights and obligations hereunder in accordance
with clause (b) of the preceding proviso, the assigning Sublessor will
automatically be released from its obligations hereunder without any
requirement of notice or further action. A transfer by merger or consolidation
by AirTouch or any other Sublessor (whether or not AirTouch or any other
Sublessor is the surviving entity) or any direct or indirect parent corporation
of AirTouch or any other Sublessor shall not be deemed to be an assignment for
purposes of this Section. All references herein to any party shall be deemed to
include any successor (including a corporate successor) to such party.
13.3 Parties in Interest. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto; whether
herein so expressed or not. Except as provided in Sections 11.1, 11.2, 13.1,
and, as to Permitted Subleasehold Mortgagees, 13.2(a) to the extent provided in
such Section, no person other than Parent, TowerCo and Sublessors may rely upon
any provision of this Agreement or any agreement, instrument, certificate or
document executed pursuant to this Agreement.
13.4 Time of Essence. Time is of the essence in each and every provision in
this Agreement.
13.5 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
13.6 Amendment. Except as otherwise provided herein, this Agreement may be
amended, modified or supplemented only by a writing duly executed by all parties
hereto.
13.7 Force Majeure. Should any circumstance beyond the reasonable control of any
party occur which delays or renders impossible the performance of its
obligations (other than monetary obligations) under this Agreement on the date
herein provided for (such circumstance being referred to as an event of "force
majeure"), such obligation shall be postponed for such time as such performance
necessarily has had to be suspended or delayed on account thereof, but in no
event shall the foregoing be deemed to limit a party's right to terminate this
Agreement under Section 12.1(e). In either such event, all parties shall
promptly meet to determine an equitable solution to the effects of such event,
provided that any party that fails because of force majeure to perform its
obligations hereunder will upon the cessation of the force majeure take all
-38-
<PAGE> 44
reasonable steps within its power to resume with the least possible delay
compliance with its obligations. Events of force majeure shall include, without
limitation, war, revolution, invasion, insurrection, riots, mob violence,
sabotage or other civil disorders, acts of God, strikes or other labor disputes
and any other circumstances beyond the reasonable control of the party whose
obligations are affected thereby.
13.8 Terms. Defined terms used herein are equally applicable to the singular and
plural forms as appropriate. Unless otherwise expressly stated herein,
references to Articles and Sections are to articles and sections of this
Agreement and references to parties, Exhibits and Schedules are to the parties,
and the exhibits and schedules attached, to this Agreement. References to the
"transactions contemplated hereby" refer to the consummation of the Closings
hereunder and the execution and delivery of the Transaction Documents as
provided for herein, and shall not be deemed to refer to any contemplated or
potential operation, occupancy, use, leasing, management or servicing of any of
the Assets and related Liabilities (as provided in the Sublease), or the
exercise of control over the Assets, by TowerCo or its Affiliates.
13.9 Headings. The headings preceding the text of Sections of this Agreement are
for convenience only and shall not be deemed a part hereof.
13.10 Entire Understanding; Schedules. The terms set forth in this Agreement
including its Schedules and Exhibits, together with the nondisclosure letter
agreement referenced in Section 6.4 hereof, are intended by the parties as a
final, complete and exclusive expression of the terms of their agreement and may
not be contradicted, explained or supplemented by evidence of any prior
agreement, any contemporaneous oral agreement or any consistent additional
terms. The Schedules and Exhibits attached to this Agreement are made a part of
this Agreement. All documents or information disclosed in the Schedules are
intended to be disclosed for all purposes under this Agreement and will also be
deemed to be incorporated by reference in each Schedule to which they may be
relevant without further disclosure.
13.11 Counterparts. This Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.12 Governing Law. This Agreement and the performance hereof shall be
governed, interpreted, construed and regulated by the laws of the State of
Delaware.
13.13 Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and shall be personally delivered, sent by telecopier, sent
by overnight courier or sent by postage-prepaid certified or registered mail,
return receipt requested, and addressed as set forth below or to such other
address as either party shall have previously designated by such a notice. Any
notice so delivered personally or by telecopy shall be deemed to be received on
the date of delivery or transmission by telecopier; any notice so sent by
overnight courier shall be deemed to be received one (1) Business Day after the
date sent; and any notice so mailed shall be deemed to be received on the date
stamped on the receipt (rejection or other refusal to accept or inability to
deliver because of a change of address of which no notice was given shall be
deemed to be receipt of the notice).
-39-
<PAGE> 45
If to Sublessors:
c/o AirTouch Communications, Inc.
One California Street
San Francisco, CA 94111
Attention: General Counsel
Telephone: (415) 658-2000
Telecopier: (415) 658-2287
Copy to:
Pillsbury Madison & Sutro LLP
50 Fremont Street
San Francisco, CA 94105
Attention: Nathaniel M. Cartmell III, Esq.
Telephone: (415) 983-1000
Telecopier: (415) 983-1200
If to TowerCo or Parent:
c/o SpectraSite Holdings, Inc.
100 Regency Forest Drive, Suite 400
Cary, NC 27511
Attention: General Counsel
Telephone: (919) 468-0112
Telecopier: (919) 468-8522
Copy to:
Dow, Lohnes & Albertson, PLLC
One Ravinia Drive, Suite 1600
Atlanta, GA 30346-2108
Attention: John W. McNamara, Esq.
Telephone: (770) 901-8800
Telecopier: (770) 901-8874
13.14 Expenses. Except as set forth in Sections 6.2 and 6.3, Sublessors, Parent
and TowerCo shall each bear its own costs and expenses incurred in connection
with the negotiation, preparation or execution of this Agreement (including, but
not limited to, fees and expenses of attorneys, accountants, brokers,
consultants, finders and investment bankers), whether or not any Closing occurs.
In the event, however, that one of the parties hereto breaches this Agreement
and fails to consummate the transaction contemplated hereby, then, without
limiting in any way any other liability which such breaching party may have,
such breaching party shall be responsible for all costs and expenses incurred by
the non-breaching party in connection herewith.
13.15 Attorneys' Fees. Except as provided in Section 13.16 with respect to the
arbitration proceedings referenced therein, in any action between any or all
Sublessors and any
-40-
<PAGE> 46
TowerCo Party to enforce any of the provisions of this Agreement or any
right of any party under this Agreement, regardless of whether the action or
proceeding is prosecuted to judgment and in addition to any other remedy, the
unsuccessful party shall pay to the prevailing party all costs and expenses,
including reasonable attorneys' fees and legal costs, incurred in the action by
the prevailing party.
13.16 Dispute Resolution. If a dispute arises between the parties relating to
the interpretation, performance or breach of this Agreement, the parties agree
that upon written demand of either TowerCo or AirTouch, they will hold a meeting
within two weeks of such demand, attended by individuals with decision-making
authority regarding the dispute, to attempt in good faith to negotiate a
resolution of the dispute prior to pursuing other available remedies. If, ten
(10) days after the date set for such a meeting, the parties have not succeeded
in negotiating a resolution of the dispute, either TowerCo (on behalf of TowerCo
and/or Parent) or AirTouch (on behalf of the Sublessors) may request that such
dispute be resolved through non-binding arbitration. Such arbitration (the
"Arbitration") will be conducted in San Francisco, California, in accordance
with commercial arbitration rules of the American Arbitration Association
("AAA") in effect on the date of this Agreement, to the extent they do not
conflict with the terms of this Agreement. Absent any contrary agreement between
the parties, there shall be no review by any court of the final decision by the
arbitrators or of the law applied or the legal reasoning used in the arbitration
process except upon a trial de novo in a court of competent jurisdiction. With
the exception of actions for injunctive relief or which must be filed to
preserve a party's rights, the parties agree to submit any such dispute to
non-binding arbitration before either party may commence any action in any court
of law concerning such dispute. The parties agree to cooperate in dismissing,
without prejudice, any legal action filed before the conclusion of such
arbitration, except an action brought in whole or in part to compel such
arbitration or an action seeking injunctive relief, or which cannot be dismissed
without prejudice to a party's rights. The parties shall cooperate with each
other in causing the Arbitration to be held in as efficient and expeditious a
manner as practicable. The parties have selected arbitration in order to
expedite the resolution of disputes and to reduce the costs and burdens
associated with litigation. The parties agree that the arbitrators should take
these concerns into account when determining the scope of permissible discovery
and other hearing and pre-hearing procedures. Without limiting any other
remedies which may be available under applicable laws, the arbitrators shall
have no authority to award punitive damages. The arbitrators shall render their
decision within ninety (90) calendar days after the latest of the arbitrators'
acceptance of their respective appointments to serve as arbitrators, unless the
parties otherwise agree in writing or the arbitrators decide that a party to the
Arbitration has shown good cause for a longer period prior to the rendering of
the decision.
Notice: By causing an authorized representative to initial in the space
below you are agreeing to have any dispute arising out of the matters included
in the `dispute resolution' provision decided by neutral arbitration and you are
giving up any rights you might possess to have the dispute litigated in a court
of jury trial. By causing an authorized representative to initial in the space
below you are giving up your judicial rights to discovery and appeal unless such
rights are specifically included in the `dispute resolution' provision. If you
refuse to submit to arbitration after agreeing to this provision, you may be
compelled to arbitrate under the authority of applicable Law. Your agreement to
this arbitration provision is voluntary.
-41-
<PAGE> 47
We have read and understand the foregoing and agree to submit disputes
arising out of the matters included in the `dispute resolution' provision to
neutral arbitration.
TowerCo's Initials _______ AirTouch's Initials ______ Parent's Initials _______
(a) Unless TowerCo and AirTouch agree in writing upon the number and identity of
the arbitrators within five (5) business days after the initiation of
Arbitration, the following procedures shall govern the selection of the
arbitrators:
(i) Each of TowerCo and AirTouch shall (by a written notice to the other
party delivered within ten (10) business days after the initiation of
Arbitration) select a single arbitrator, who shall be selected from a
list of potential arbitrators from the National Panel of Commercial
Arbitrators supplied to the parties. If one party fails to deliver such
notice of selection within the foregoing ten-business-day period, then
such party shall have no right to select an arbitrator and the other
party shall select a second arbitrator from such list by written notice
to the first party.
(ii) The two arbitrators selected pursuant to the foregoing clause (i) shall
mutually agree within ten (10) calendar days upon a third arbitrator,
who shall have no substantial relationship to any party. If the two
arbitrators do not so select such third arbitrator within the foregoing
10-day period, the third arbitrator will be selected by the AAA.
(b) All proceedings and decisions of the arbitrators shall be maintained in
confidence, to the extent legally permissible, and shall not be made public by
any party or any arbitrator without the prior written consent of all parties to
the Arbitration, except as may be required by law.
(c) Each party to the Arbitration shall bear its own costs and attorneys' fees
in connection with any Arbitration, and TowerCo and AirTouch (on behalf of the
Sublessors) shall equally bear the fees, costs and expenses of the arbitrators
and the Arbitration proceedings; provided, however, that the arbitrators may
exercise discretion to award costs, but not attorneys' fees, to the prevailing
party.
(d) Each party consents to the jurisdiction over it of the courts of the State
of California in the City and County of San Francisco and of the United States
Courts in the Northern District of California, and agrees that personal service
of all process may be made by registered or certified mail pursuant to the
provisions of Section 13.13.
13.17 Power of Attorney. Each and every Sublessor other than AirTouch hereby
irrevocably constitutes and appoints AirTouch as its and their agent and
attorney-in-fact to modify, amend or otherwise change or waive any and all
terms, conditions and other provisions of this Agreement, to exercise on behalf
of Sublessors any options or elections granted to Sublessors hereunder, to take
all actions and execute all documents necessary or desirable to effect the terms
hereof and to take all actions and execute all documents which may be necessary
or desirable in connection therewith, to give and receive all consents and all
notices hereunder, to negotiate, settle and compromise claims for
indemnification hereunder, and to perform any other act arising out of or
pertaining to this Agreement. AirTouch hereby accepts the foregoing
-42-
<PAGE> 48
appointment. Nothing herein shall be deemed to make AirTouch liable to any
Sublessor because of service in the foregoing capacity as agent and
attorney-in-fact. In performing any of its duties under this Section,
AirTouch shall not incur any Liability whatsoever to any Sublessor or its
Affiliates. It is expressly understood and agreed that this power of attorney
and the agency created hereby is coupled with an interest of the respective
parties hereto and shall be binding and enforceable on and against the
respective successors and assigns of Sublessors, and each of them, and this
power of attorney shall not be revoked or terminated and shall continue to be
binding and enforceable in the manner provided herein.
13.18 Specific Performance; Other Rights and Remedies. Each party recognizes and
agrees that in the event the other party should refuse to perform any of its
obligations under this Agreement, the remedy at Law would be inadequate and
agrees that for breach of such provisions, each party shall, in addition to such
other remedies as may be available to it as provided in Article 11, be entitled
to injunctive relief and to enforce its rights by an action for specific
performance to the extent permitted by applicable Law. Each party hereby waives
any requirement for security or the posting of any bond or other surety in
connection with any temporary or permanent award of injunctive, mandatory or
other equitable relief.
13.19 TowerCo Guaranty. Parent hereby unconditionally guarantees the payment and
performance when due of all obligations of TowerCo now or hereafter existing
under this Agreement, including without limitation Article 11 (the "TowerCo
Obligations") subject to all defenses available to TowerCo except as provided
below. The liability of Parent under this Section 13.19 shall extend to all
TowerCo obligations which would be owed by TowerCo but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving TowerCo. The obligations of
Parent under this Section 13.19 are independent of TowerCo's obligations under
this Agreement, and a separate action or actions may be brought and prosecuted
against Parent to enforce its obligations under this Section 13.19, irrespective
of whether any action is brought against TowerCo or whether TowerCo is joined in
such action. This guarantee shall continue to be effective or be reinstated, as
the case may be, if at any time any payment or performance of TowerCo
Obligations is rescinded or must otherwise be returned by a recipient upon the
insolvency, bankruptcy or reorganization of TowerCo or for any other reason, all
as though such payment or performance had not been made. Parent unconditionally
waives (a) all notices which may be required by statute, rule of law or
otherwise, now or hereafter in effect, to preserve intact any rights of AirTouch
and any other Sublessor against Parent, including, without limitation, any
demand, presentment and protest, proof of notice of nonpayment or nonperformance
under agreement, and notice of default or any failure on the part of TowerCo to
perform and comply with any covenant, agreement, term or condition of any
agreement executed or to be executed by it, (b) any right to the enforcement,
assertion or exercise by AirTouch or any other Sublessor of any right, power,
privilege or remedy conferred herein or in any agreement or otherwise, (c) any
requirement of promptness or diligence on the part of AirTouch or any other
Sublessor hereunder, (d) any requirement on the part of AirTouch or any other
Sublessor to mitigate the damages resulting from any Default hereunder or under
any other agreement, (e) any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety, or which might otherwise limit recourse against Parent, or (f) any right
to require AirTouch or any other Sublessor to proceed against any security or to
enforce any right. The obligations of Parent set forth herein constitute the
full recourse
-43-
<PAGE> 49
obligations of Parent enforceable against it to the fullest extent of all of its
assets and properties, notwithstanding any provision in any other agreements
limiting the liability of Parent, TowerCo or any TowerCo Affiliate or any other
Person. Parent will not assert any right to which it may become entitled,
including in any bankruptcy, insolvency or similar proceeding relating to
TowerCo or a TowerCo Affiliate, whether by subrogation, contribution or
otherwise, against TowerCo or such TowerCo Affiliate or any of its properties,
by reason of the performance by Parent of its obligations under this Section,
until such time as all of the obligations of TowerCo or TowerCo Affiliate to
AirTouch or any other applicable Sublessor shall be duly and fully performed.
-44-
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have entered into and duly
executed this Agreement as of the date and year first above written.
"SUBLESSORS":
AIRTOUCH COMMUNICATIONS, INC.
By:/s/ Arun Sarin
------------------------
Print Name: Arun Sarin
Title: Chief Executive
Officer
LOS ANGELES SMSA LIMITED
PARTNERSHIP, a California
limited partnership
By AirTouch Cellular, a
California corporation,
as General Partner
By:/s/ Arun Sarin
------------------------
Print Name: Arun Sarin
Title: President
OXNARD-VENTURA-SIMI LIMITED
PARTNERSHIP, a California
limited partnership
By AirTouch Cellular, a
California corporation,
as General Partner
By: /s/ Arun Sarin
------------------------
Print Name: Arun Sarin
Title: President
S-1
<PAGE> 51
"TOWERCO":
CALIFORNIA TOWER, INC.
By:/s/ Stephen H. Clark
------------------------
Print Name: Stephen H. Clark
"PARENT":
SPECTRASITE HOLDINGS, INC.
By:/s/ Stephen H. Clark
------------------------
Print Name: Stephen H. Clark
Title: Chief Executive Officer
S-2
<PAGE> 1
Exhibit 10.26
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of December 22, 1999, by and among SpectraSite Communications, Inc., a
Delaware corporation (the "Borrower"), SpectraSite Holdings, Inc., a Delaware
corporation ("Holdco"), CIBC World Markets Corp. (f/k/a CIBC Oppenheimer Corp.)
and Credit Suisse First Boston, as arrangers (the "Arrangers"), Credit Suisse
First Boston, as syndication agent (the "Syndication Agent"), Canadian Imperial
Bank of Commerce, as administrative agent (the "Administrative Agent"), Canadian
Imperial Bank of Commerce, as collateral agent (the "Collateral Agent") and the
other Credit Parties signatory hereto (the "Credit Parties").
W I T N E S S E T H:
WHEREAS, the Borrower, Holdco, the Arrangers, the Syndication Agent,
the Administrative Agent, the Collateral Agent and the Credit Parties are
parties to that certain Credit Agreement dated as of April 20, 1999, as amended
by that certain First Amendment to Credit Agreement dated as of August 23, 1999
(as the same may be further amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and Holdco have requested, and the Arrangers, the
Syndication Agent, the Administrative Agent, the Collateral Agent and the Credit
Parties have agreed, to amend the Credit Agreement as and to the extent set
forth herein and to waive an Event of Default existing under the Credit
Agreement;
NOW THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree that all capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement, as amended hereby, except as otherwise defined
or limited herein, and further agree, subject to the conditions precedent to
this Amendment hereinafter set forth, as follows:
1. Amendments to Article 1.
(a)ab Article 1 of the Credit Agreement, Definitions, is hereby modified and
amended by adding the following new definitions to be placed in appropriate
alphabetical order:
"`Apex' shall mean Apex Site Management Holdings, Inc., a
Delaware corporation.
"`Apex Acquisition' shall mean the Acquisition of Apex by
Holdco pursuant to the terms and conditions of the Apex Acquisition
Documents and the subsequent
1
<PAGE> 2
transfer by Holdco to the Borrower of all of the issued and outstanding
Capital Stock of Apex.
"`Apex Acquisition Documents' shall mean that certain Merger
Agreement and Plan of Reorganization dated as of November 24, 1999, as
amended, between the Borrower and Apex, and all schedules and exhibits
thereto and documents executed in connection therewith.
"`Available Cash' shall mean, on any calculation date, the
greater of (a) the amount of cash and cash equivalents on hand of the
Borrower and its Subsidiaries minus $20,000,000, and (b) zero.
"`DigiPH' shall mean DigiPH PCS, Inc., an Alabama corporation.
"`DigiPH Acquisition' shall mean the Acquisition by the
Borrower of certain leases, towers and related facilities from DigiPH
in conjunction with up to ninety-four (94) sites, and the related lease
to DigiPH, under a master lease agreement, of space on such towers and
ground space on the land in the vicinity of such towers pursuant to the
terms and conditions of the DigiPH Purchase Documents.
"DigiPH Purchase Documents' shall mean that certain Asset
Purchase Agreement dated as of November 5, 1999, as amended, between
the Borrower and DigiPH, and all schedules and exhibits thereto and
documents executed in connection therewith.
"`Pre-Approved Transactions' shall mean, collectively, the
Apex Acquisition, the DigiPH Acquisition, the UbiquiTel Investment and
the Acquisitions described in Section 8.5(xiii) hereof.
"`Pre-Approved Transaction Documents' shall mean,
collectively, the Westower Merger Agreement, the NTA Investment
Documents, the Apex Acquisition Documents, DigiPH Purchase Documents,
the UbiquiTel Investment Documents and the documents relating to the
Acquisitions described in Section 8.5(xiii) hereof (including all
schedules and exhibits thereto).
"`Second Amendment Date' shall mean December 22, 1999.
"`UbiquiTel' shall mean UbiquiTel Holdings, Inc., a Delaware
corporation.
"`UbiquiTel Investment" shall mean the Investment by the
Borrower in UbequiTel pursuant to the terms and conditions of the
UbiquiTel Investment Documents in exchange for approximately twenty-six
percent (26%) of the issued and outstanding equity of UbiquiTel.
2
<PAGE> 3
"`UbiquiTel Investment Documents' shall mean that certain
Series A Preferred Stock Purchase Agreement dated as of November 23,
1999, as amended, among the Borrower, UbiquiTel and certain other
parties, and all schedules and exhibits thereto and documents executed
in connection therewith."
(b) Article 1 of the Credit Agreement, Definitions, is hereby further modified
and amended by deleting the existing definition of "Equity Offering".
(c) Article 1 of the Credit Agreement, Definitions, is hereby further modified
and amended by deleting the existing definition of "Leverage Ratio" and by
substituting the following in lieu thereof:
"`Leverage Ratio' shall mean, on any calculation date, the
ratio of (a) Borrower Debt, to (b) Annualized EBITDA; provided,
however, that at all times prior to the first anniversary of the Second
Amendment Date, for purposes of determining the Borrower's compliance
with Section 9.1 hereof (and not affecting the calculation of any other
Financial Covenant or the determination of the Applicable Margin
pursuant to Section 2.3(g) hereof), "Leverage Ratio" shall mean the
ratio of (i) the greater of (A) (I) Borrower Debt, minus (II) Available
Cash, and (B) zero, to (b) Annualized EBITDA."
2. Amendment to Section 2.1. Section 2.1 of the Credit Agreement, The Loans,
is hereby modified and amended by deleting the first sentence from subsection
(f) and by substituting the following in lieu thereof:
"The proceeds of the Loans shall be used (i) to finance the
Nextel Acquisition, (ii) to finance Permitted Acquisitions and
Permitted Investments, (iii) to provide funding for the acquisition,
construction/development, management and build-out of Towers and Tower
Sites, (iv) for general corporate purposes (including, without
limitation, fees and expenses relating to the Nextel Acquisition, any
Permitted Acquisitions and any Permitted Investments and the
transactions contemplated by this Agreement and the other Loan
Documents), and (v) for working capital and other general corporate
purposes."
3. Amendment to Section 2.7. Section 2.7 of the Credit Agreement, Mandatory
Repayments, is hereby modified and amended by deleting in its entirety existing
subsection (c) and by substituting the following in lieu thereof:
"(c) Debt Issuance. If, after the Agreement Date, Holdco shall
conduct any public or private issuance of any Funded Debt or any
Convertible Securities (other than the issuance of the Holdco 2009
Notes in an amount not to exceed $340,003,656) (each a "Debt
Offering"), and the Leverage Ratio on a pro forma basis after giving
effect to such Debt Offering shall be greater than 4.00 to 1.00, the
Borrower shall apply, on the date of receipt of the Net Proceeds of
such Debt Offering by Holdco, up to one hundred percent (100%) of the
Net Proceeds received by Holdco
3
<PAGE> 4
with respect to such Debt Offering, to prepay the Senior Loans as set
forth in Section 2.7(e) hereof, to the extent necessary to cause the
Leverage Ratio to be less than or equal to 4.00 to 1.00 after giving
effect to such Debt Offering."
4. Section 5.1(h) of the Credit Agreement, Title to Assets, is hereby modified
and amended by deleting the last sentence therefrom and by substituting the
following in lieu thereof:
"Tower Sub does not own any material Assets other than Tower Assets
comprising the Nextel Collateral and Tower Space Lease Agreements with
Co-Locators on Towers comprising the Nextel Collateral, and Holdco does
not own any material Assets other than (i) the Capital Stock of the
Borrower, (ii) the Capital Stock of any shell Subsidiary formed by
Holdco solely for the purpose of consummating any Permitted
Acquisition, and (iii) on the closing date of any Permitted
Acquisition, the Capital Stock of any target company acquired in
connection with such Permitted Acquisition immediately prior to the
contribution of such Capital Stock to the Borrower."
5. Amendment to Section 6.2. Section 6.2 of the Credit Agreement, Business;
Compliance with Applicable Law, is hereby amended by deleting the first sentence
therefrom and substituting the following in lieu thereof:
The Borrower will, and will cause each of its Subsidiaries
to, engage solely in the business of the Tower Operations, the Other
Operations and in related business activities. Holdco will engage
solely in the business of holding the Capital Stock of (a) the
Borrower, (b) any shell Subsidiary formed by Holdco solely for the
purpose of consummating any Permitted Acquisition, and (iii) on the
closing date of any Permitted Acquisition, any target company acquired
in connection with such Permitted Acquisition immediately prior to the
contribution of such Capital Stock to the Borrower."
6. Amendment to Section 6.9. Section 6.9 of the Credit Agreement, Use of
Proceeds, is hereby amended by deleting the first sentence therefrom and by
substituting the following in lieu thereof:
The Borrower will use the aggregate proceeds of all Advances
(a) to finance the Nextel Acquisition, (b) to finance Permitted
Acquisitions and Permitted Investments, (c) to provide funding for the
acquisition, construction/development and build-out of Towers as
permitted hereunder, (d) for general corporate purposes (including,
without limitation, fees and expenses relating to the Nextel
Acquisition, any Permitted Acquisitions and any Permitted Investments,
and the transactions contemplated by this Agreement and the other Loan
Documents), and (e) for working capital and other general corporate
purposes."
4
<PAGE> 5
7. Amendment to Section 7.1. Section 7.1 of the Credit Agreement, Monthly
Financial Statements and Information, is hereby amended by deleting the
reference to "thirty (30) days" contained therein and by replacing such
reference with "forty-five (45) days".
8. Amendment to Section 8.4. Section 8.4 of the Credit Agreement, Amendment
and Waiver, is hereby deleted in its entirety and the following substituted in
lieu thereof:
Section 8.4 Amendment and Waiver . Neither Holdco nor the
Borrower shall, and the Borrower shall cause each of its Subsidiaries
not to, without the prior written consent of the Arrangers, enter into
any amendment of, or agree to or accept any waiver of, which would
materially adversely affect the rights of the Borrower and the Credit
Parties, under any of them, of any of the provisions of, (a) its
organizational documents, including, without limitation, its
certificate or articles of incorporation (other than any increase in
the number of authorized shares) and by-laws, (b) the Nextel
Acquisition Documents, (c) the Indentures, (d) the Holdco Equity
Documents, and (f) the Pre-Approved Transaction Documents."
9. Amendments to Section 8.5.
(a) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby modified and amended by deleting existing
subsection (vii) and substituting the following in lieu thereof:
"(vii) subject to compliance with Section 6.10 and Section
6.16 hereof, the Borrower and its Subsidiaries (other than Tower Sub)
may make Acquisitions and Investments (including the acquisition of
Capital Stock or other equity interests in Persons engaged in
businesses similar to the Tower Operations) and form Subsidiaries with
respect thereto, subject to the following conditions:
"(A) no Default or Event of Default shall
then exist before or after giving effect to any such Acquisition or
Investment;
"(B) the Purchase Price with respect any such
Acquisition or Investment shall be (I) payable solely in
common stock of Holdco, or (II) payable in cash so long as (x)
the cash portion of the Purchase Price with respect to any
single Acquisition or Investment (with respect to a single
transaction or a series of related transactions) shall not
exceed $50,000,000, and (y) the aggregate cash portion of the
Purchase Price for Acquisitions and Investments consummated
pursuant to this clause (vii) (other than the Acquisition of
the Future Nextel Towers) during the period from the Second
Amendment Date through the Tranche B Maturity Date, shall not
exceed $200,000,000;
"(C) with respect to Acquisitions structured as Tower
Asset exchanges or swaps, the following restrictions shall
apply: (x) the cash outlay
5
<PAGE> 6
by the Borrower for such Acquisition must be within the
dollar limitations set forth in the preceding clause (B);
(y) the Annualized EBITDA attributable to the Tower
Assets being acquired must be substantially similar to or
greater than the Annualized EBITDA of the Tower Assets being
exchanged or swapped; and (z) if the exchange involves more
than twenty-five (25) Towers, the Towers acquired in
such transaction must have as an anchor tenant a Nextel
Tenant or another tenant reasonably acceptable to the Majority
Lenders.
"(D) the Borrower shall provide to the Arrangers and
the Lenders calculations demonstrating pro forma compliance
with the Financial Covenants after giving effect to such
Acquisition or Investment; and
"(E) with respect to any Acquisition having an
aggregate Purchase Price (with respect to a single transaction
or a series of related transactions) in excess of $20,000,000,
the Borrower shall provide to the Arrangers and the Lenders
revised Projections assuming consummation of the Acquisition
and demonstrating pro forma compliance with the Financial
Covenants through the Tranche B Maturity Date;"
(b) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by adding the
following new subsections (xii) and (xiii) at the end thereof:
"(xii) so long as no Default or Event of Default then exists
or would be caused thereby, the Borrower may consummate each of the
Pre-Approved Transactions (other than the transaction described in
clause (xiii) below); and
(xiii) so long as (A) no Default or Event of Default then
exists or would be caused thereby and (B) the Borrower shall provide
the Arrangers with evidence satisfactory to each of them that the
revenue and cash flow acquired by the Borrower in connection with each
such Acquisition shall have no material negative deviations from the
projected revenue and cash flow relating to broadcast tower
Acquisitions as set forth in the Borrower's Projections with respect to
such Acquisitions dated December 1999, the Borrower may make one or
more Acquisitions of broadcast towers, or of Persons engaged in the
broadcast tower business, on terms and conditions reasonably
satisfactory to the Arrangers and having an aggregate Purchase Price,
for all such Acquisitions, not to exceed $70,000,000 (inclusive of cash
and stock consideration)."
10. Amendment to Section 8.7. Section 8.7 of the Credit Agreement, Restricted
Payments and Purchases, is hereby amended by adding the following new subsection
(g) to the end thereof:
6
<PAGE> 7
(g) on the date on which the Apex Acquisition shall be
consummated, repayment of any existing Indebtedness of Apex in an
aggregate amount not to exceed $3,000,000."
11. Amendment to Section 8.9. Section 8.9 of the Credit Agreement, Corporate
Name; Corporate Structure; Business, is hereby amended by deleting subsection
(b) therefrom and by substituting the following in lieu thereof:
(b) with respect to the Borrower and its Subsidiaries, engage
in any businesses other than the Tower Operations and the Other
Operations and activities related or incident thereto, and with respect
to Holdco, engage in any business other than that of holding the
Capital Stock of (i) the Borrower, (ii) any shell Subsidiary formed by
Holdco solely for the purpose of consummating any Permitted
Acquisition, and (iii) on the closing date of any Permitted
Acquisition, any target company acquired in connection with such
Permitted Acquisition immediately prior to the contribution of such
Capital Stock to the Borrower"
12. Waiver. Pursuant to Section 4.5 of the Credit Agreement, the Borrower
agreed to deliver to the Arrangers a duly executed landlord waiver agreement, in
form and substance satisfactory to the Arrangers and their counsel, with respect
to the Borrower's principal place of business and the Borrower's premises
located at One Chase Corporate Drive, Hoover, Alabama, on or before September
30, 1999 (such landlord waiver agreements being hereinafter referred to as the
"Required Landlord Waivers"). As of the date hereof, the Borrower has not
delivered the required landlord waiver agreements to the Arrangers (the
"Landlord Waiver Default"). The Arrangers, the Syndication Agent, the
Administrative Agent, the Collateral Agent and the Credit Parties hereby waive
the Landlord Waiver Default existing as of the date hereof and hereby waive the
requirement of Section 4.5 that the Borrower deliver to the Arrangers the
Required Landlord Waivers. The waivers set forth in the immediately preceding
sentence shall not waive any other requirement or hinder, restrict or otherwise
modify the rights and remedies of the Arrangers, the Syndication Agent, the
Administrative Agent, the Collateral Agent and the Credit Parties following the
occurrence of any Default or Event of Default under the Credit Agreement.
13. No Other Amendments, Waivers or Consents. Except for the amendments,
waivers and consents set forth above, the text of the Credit Agreement and the
other Loan Documents shall remain unchanged and in full force and effect, and
the Arrangers, the Syndication Agent, the Administrative Agent, the Collateral
Agent and the Credit Parties hereby reserve the right to require strict
compliance with the terms of the Credit Agreement and the other Loan Documents,
including, without limitation, all terms applicable to Subsidiaries of the
Borrower, in the future.
14. Conditions Subsequent. As a condition subsequent to the amendments,
waivers and consents set forth in this Amendment, the Borrower shall perform or
cause to be performed the following (the failure by the Borrower to so perform
or cause to be performed for
7
<PAGE> 8
any reason (other than the fact that the Pre-Approved Transaction to
which such condition relates was not ever consummated) constituting an
Event of Default under the Credit Agreement):
(a) Collateral. On the closing date for each of the Pre-Approved
Transactions, the Borrower shall execute and deliver, or as applicable,
cause its Subsidiaries to execute and deliver, to the Collateral Agent
all agreements, instruments and other items required to be so delivered
pursuant to Section 6.16 of the Credit Agreement.
(b) Definitive Documentation. Promptly upon the closing of each of the
Pre-Approved Transactions, the Borrower shall deliver to the Arrangers
a full set of copies of the documents executed in connection with such
Pre-Approved Transaction.
15. Conditions to Effectiveness. This Amendment shall be effective as of the
date first written above (the "Effective Date") upon the following:
(a) the Administrative Agent's receipt of a counterpart hereof
duly executed by the Borrower and Holdco, and by the Majority Lenders;
(b) with respect to each of the Pre-Approved Transactions, the
Arrangers' receipt of (i) updated Projections for the Borrower
demonstrating the Borrower's pro forma compliance with the Financial
Covenants after giving effect thereto, and (ii) copies of any material
agreements relating to such Pre-Approved Transaction in the possession
of the Borrower; and
(c) the representations and warranties of Holdco and the
Borrower set forth in the Credit Agreement and this Amendment, other
than those that are expressly made as of a specific date, are true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the Effective
Date.
16. Representations and Warranties. Each of the Borrower and Holdco, for
itself and on behalf of each of its Subsidiaries, agrees, represents and
warrants in favor of the Arrangers, the Syndication Agent, the Administrative
Agent, the Collateral Agent and the Credit Parties that:
(a) This Amendment has been executed and delivered by duly authorized
representatives of the Borrower and Holdco, and the Credit Agreement,
as modified and amended by this Amendment, constitutes a legal, valid
and binding obligation of the Borrower and Holdco and is enforceable
against the Borrower and Holdco in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by the
application of general equitable principles;
8
<PAGE> 9
(b) Before and after giving effect to this Amendment, no Default or Event
of Default with respect to the Borrower or Holdco (other than the
Defaults and Events of Default described in Section 12 hereof) has
occurred and is continuing;
(c) As of the date hereof and after giving effect to each of the
Pre-Approved Transactions, (i) the property of the Borrower, at a fair
valuation on a going concern basis, will exceed its debt; (ii) the
capital of the Borrower will not be unreasonably small to conduct its
business; and (iii) the Borrower will not have incurred debts, or have
intended to incur debts, beyond its ability to pay such debts as they
mature;
(d) No event contemplated in connection with any of the Pre-Approved
Transactions shall occur, which has not been consented to or waived,
the occurrence of which constitutes, or with the passage of time or
giving of notice or both would constitute, a material default by
Holdco, the Borrower or any of their respective Subsidiaries under any
material indenture, agreement or other instrument, including, without
limitation, the material Necessary Authorizations and the Indentures,
or any judgment, decree or order, to which Holdco, the Borrower or any
of their respective Subsidiaries is a party or by which Holdco, the
Borrower or any of their respective Subsidiaries or any of their
respective properties may be bound or affected; and
(e) All of the representations and warranties of Holdco and the Borrower
contained in the Credit Agreement (other than representations and
warranties that relate solely to a specified date) continue to be true
and correct in all material respects as of the date hereof as though
made on and as of such date.
17. Effect on the Credit Agreement. Except as specifically provided herein,
the Credit Agreement shall remain in full force and effect, and is hereby
ratified, reaffirmed and confirmed. This Amendment shall be deemed to be a Loan
Document for all purposes.
18. Counterparts. This Amendment may be executed in any number of separate
counterparts and by the different parties hereto on separate counterparts, each
of which shall be deemed an original and all of which, taken together, shall be
deemed to constitute one and the same instrument. In proving this Amendment in
any judicial proceedings, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom such enforcement
is sought. Any signatures delivered by a party by facsimile transmission shall
be deemed an original signature hereto.
9
<PAGE> 10
19. Law of Contract. THIS CONSENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE> 11
SECOND AMENDMENT (SPECTRASITE COMMUNICATIONS, INC.)
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
BORROWER: SPECTRASITE COMMUNICATIONS, INC.
By: /s/ David P. Tomick
---------------------------
Name: David P. Tomick
Title: Executive Vice President
Attest:
Name:
Title:
HOLDCO: SPECTRASITE HOLDINGS, INC.
By: /s/ David P. Tomick
---------------------------
Name: David P. Tomick
Title: Executive Vice President
Attest:
Name:
Title:
<PAGE> 12
ADMINISTRATIVE
AGENT: CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Colleen Risorto
---------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. As Agent
<PAGE> 13
ARRANGERS: CIBC WORLD MARKETS CORP.
(f/k/a CIBC Oppenheimer Corp.)
By: /s/ Colleen Risorto
---------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. As Agent
CREDIT SUISSE FIRST BOSTON
By: /s/ Jeffrey B. Ulmer
---------------------------
Name: Jeffrey B. Ulmer
Title: Vice President
By: /s/ Douglas E. Maher
---------------------------
Name: Douglas E. Maher
Title: Vice President
<PAGE> 14
COLLATERAL AGENT: CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Colleen Risorto
---------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. As Agent
<PAGE> 15
SYNDICATION AGENT: CREDIT SUISSE FIRST BOSTON
By: /s/ Jeffrey B. Ulmer
---------------------------
Name: Jeffrey B. Ulmer
Title: Vice President
By: /s/ Douglas E. Maher
---------------------------
Name: Douglas E. Maher
Title: Vice President
<PAGE> 16
MANAGING AGENTS: BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
----------------------------
Name: Karen Klapper
Title: Director
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitzgerald, Jr.
--------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.)
By: /s/ Shepard D. Rainie
---------------------------
Name: Shepard D. Rainie
Title: Managing Director
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Patrick A. Keleher
----------------------------
Name: Patrick A. Keleher
Title: Vice President
By: /s/ Brian E. Haughney
----------------------------
Name: Brian E. Haughney
Title: Assistant Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ Sheila M. Conley
----------------------------
Name: Sheila M. Conley
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Peter C. Connoy
----------------------------
Name: Peter C. Connoy
Title: Vice President
<PAGE> 17
CO-AGENT: CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mark A. Campellone
----------------------------
Name: Mark A. Campellone
Title: First Vice President
<PAGE> 18
LENDERS: CIBC INC.
By: /s/ Colleen Risorto
---------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. As Agent
<PAGE> 19
CREDIT SUISSE FIRST BOSTON
By: /s/ Jeffrey B. Ulmer
---------------------------
Name: Jeffrey B. Ulmer
Title: Vice President
By: /s/ Douglas E. Maher
---------------------------
Name: Douglas E. Maher
Title: Vice President
<PAGE> 20
BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
----------------------------
Name: Karen Klapper
Title: Director
<PAGE> 21
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitzgerald, Jr.
-------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
<PAGE> 22
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.)
By: /s/ Shepard D. Rainie
---------------------------
Name: Shepard D. Rainie
Title: Managing Director
<PAGE> 23
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Patrick A. Keleher
---------------------------
Name: Patrick A. Keleher
Title: Vice President
By: /s/ Brian E. Haughney
---------------------------
Name: Brian E. Haughney
Title: Assistant Vice President
<PAGE> 24
TORONTO DOMINION (TEXAS), INC.
By: /s/ Sheila M. Conley
---------------------------
Name: Sheila M. Conley
Title: Vice President
<PAGE> 25
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Peter C. Connoy
---------------------------
Name: Peter C. Connoy
Title: Vice President
<PAGE> 26
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mark A. Campellone
---------------------------
Name: Mark A. Campellone
Title: First Vice President
<PAGE> 27
THE BANK OF NEW YORK
By: /s/ Gerry Granovsky
---------------------------
Name: Gerry Granovsky
Title: Vice President
<PAGE> 28
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
By: /s/ Louis Lavoie
---------------------------
Name: Louis Lavoie
Title: Manager
By: /s/ Lucie Rousseau
---------------------------
Name: Lucie Rousseau
Title: Vice President
<PAGE> 29
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Colleen Risorto
---------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. As Agent
<PAGE> 30
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ Daniel E. A. Nichols
----------------------------
Name: Daniel E. A. Nichols
Title: Assistant Vice President
<PAGE> 31
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management Company, Inc.,
its Managing Member
By:
Name:
Title:
<PAGE> 32
NORTHAMERICAN SENIOR FLOATING RATE FUND
By: CypressTree Investment Management Company, Inc.,
its Managing Member
By:
Name:
Title:
<PAGE> 33
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.
As: Attorney-in-Fact and on behalf of First Allmerica
Financial Life Insurance Company as Portfolio
Manager
By:
Name:
Title:
<PAGE> 34
KZH CYPRESSTREE-1 LLC
By: /s/ Peter Chin
---------------------------
Name: Peter Chin
Title: Authorized Agent
<PAGE> 35
FREMONT INVESTMENT & LOAN
By:
Name:
Title:
<PAGE> 36
HELLER FINANCIAL, INC.
By: /s/ Scott Ziemke
---------------------------
Name: Scott Ziemke
Title: Assistant Vice President
<PAGE> 37
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:
Name:
Title:
<PAGE> 38
PPM AMERICA, INC., as attorney in fact, on behalf of Jackson
National Life Insurance Company
By:
Name:
Title:
<PAGE> 39
Fleet National Bank (f/k/a BankBoston, N.A.), as Trust
Administrator for LONGLANE MASTER TRUST IV
By:
Name:
Title:
<PAGE> 40
GALAXY CLO 1999-1, LTD.
By: SAI Investment Advisor, Inc., its Collateral Manager
By:
Name:
Title:
<PAGE> 41
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as Investment Advisor
By: /s/ Scott H. Page
---------------------------
Name: Scott H. Page
Title: Vice President
<PAGE> 42
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By: /s/ Scott H. Page
---------------------------
Name: Scott H. Page
Title: Vice President
<PAGE> 43
J.H. WHITNEY MARKET VALUE FUND, L.P.
By: J.H. Whitney Value GP, Ltd., its General Partner
By:
Name:
Title:
<PAGE> 44
J.H. WHITNEY MEZZANINE FUND, L.P.
By: Whitney GP, Ltd. - General Partner
-----------------------------------
By: /s/ Daniel J. O'Brien
---------------------------
Name: Daniel J. O'Brien
Title: Managing Member
<PAGE> 45
BANK OF AMERICA, N.A.
By:
Name:
Title:
<PAGE> 46
DEBT STRATEGIES FUND II, INC.
By:
Name:
Title:
<PAGE> 47
DEBT STRATEGIES FUND III, INC.
By:
Name:
Title:
<PAGE> 48
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By:
Name:
Title:
<PAGE> 49
VAN KAMPEN SENIOR INCOME TRUST
By: /s/ Darvin D. Pierce
-----------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE> 50
PROSPECT INTERNATIONAL DEBT
STRATEGY FUND
By:
Name:
Title:
<PAGE> 51
CARAVELLE INVESTMENT FUND L.L.C.
By: /s/ Dean T. Criares
---------------------------
Name: Dean T. Criares
Title: Managing Director
<PAGE> 52
EATON VANCE SENIOR INCOME TRUST
By: /s/ Scott H. Page
---------------------------
Name: Scott H. Page
Title: Vice Presisdent
<PAGE> 53
MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
By:
Name:
Title:
<PAGE> 54
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST
By:
Name:
Title:
<PAGE> 55
ELC "Cayman" Ltd. 1999-III
By: /s/ Thomas M.Finke
---------------------------
Name: Thomas M. Finke
Title: Managing Director
<PAGE> 1
Exhibit 10.27
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of February 14, 2000, by and among SpectraSite Communications,
Inc., a Delaware corporation (the "Borrower"), SpectraSite Holdings, Inc., a
Delaware corporation ("Holdco"), CIBC World Markets Corp. and Credit Suisse
First Boston, as arrangers (the "Arrangers"), Credit Suisse First Boston, as
syndication agent (the "Syndication Agent"), Canadian Imperial Bank of Commerce,
as administrative agent (the "Administrative Agent"), Canadian Imperial Bank of
Commerce, as collateral agent (the "Collateral Agent"), and the other Credit
Parties signatory hereto (the "Credit Parties").
W I T N E S S E T H:
WHEREAS, the Borrower, Holdco, the Arrangers, the Syndication
Agent, the Administrative Agent, the Collateral Agent and the Credit Parties are
parties to that certain Credit Agreement dated as of April 20, 1999, as amended
by that certain First Amendment to Credit Agreement dated as of August 23, 1999
and that certain Second Amendment to Credit Agreement dated as of December 22,
1999 (as the same may be further amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and Holdco have requested, and the
Arrangers, the Syndication Agent, the Administrative Agent, the Collateral Agent
and the Credit Parties have agreed, to amend the Credit Agreement as and to the
extent set forth herein;
NOW THEREFORE, in consideration of the premises set forth above,
the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree that all capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement, as amended hereby, except as
otherwise defined or limited herein, and further agree, subject to the
conditions precedent to this Amendment hereinafter set forth, as follows:
1. Amendment to Article 1.
(a)ab Article 1 of the Credit Agreement, Definitions, is hereby modified and
amended by adding the following new definitions to be placed in appropriate
alphabetical order:
"Additional Nextel Towers" shall mean those Towers
acquired in connection with the Nextel 2 Purchase Documents and
any additional Towers acquired from Nextel.
"`AirTouch' shall mean AirTouch Communications, Inc., a
Delaware corporation."
1
<PAGE> 2
"`AirTouch Acquisition' shall mean the Acquisition by
California Tower of certain Tower Assets from AirTouch in
conjunction with up to 550 Tower Sites pursuant to the terms and
conditions of the AirTouch Purchase Documents for an aggregate
purchase price not to exceed $198,000,000.
"`AirTouch Purchase Documents' shall mean those certain
documents set forth on Schedule 1.1 attached hereto and
-----------------------------
made a part hereof.
"`AirTouch Tenants' shall mean AirTouch and any of its
subsidiaries or controlled Affiliates.
"`California Tower' shall mean California Tower, Inc., a
Delaware corporation and a wholly owned Subsidiary of the
Borrower.
"`Nextel 2 Acquisition' shall mean the Acquisition by
Tower Sub of certain Tower Assets from Nextel in conjunction with
up to twenty-six (26) sites pursuant to the terms and conditions
of the Nextel 2 Purchase Documents.
"Nextel 2 Purchase Documents' shall mean the purchase
agreement and related documents pursuant to which Tower Sub
acquires certain Additional Nextel Towers from Nextel West Corp.,
a Delaware Corporation, Nextel of California, Inc., a Delaware
corporation, each d/b/a Nextel Communications, and Nextel
Communications, Inc., a Delaware corporation.
(b) Article 1 of the Credit Agreement, Definitions, is hereby further modified
and amended by deleting the existing definitions of "Future Nextel Towers,"
"Pre-Approved Transactions" and "Pre-Approved Transaction Documents" and by
substituting the following in lieu thereof:
"`Future Nextel Towers' shall mean (i) those Towers, the
construction of which is completed after the Agreement Date by or
for any of the Nextel Tenants, or to which any of the Nextel
Tenants otherwise acquires rights after the Agreement Date, which
are sold, transferred or assigned to Tower Sub pursuant to the
terms of the Master Site Commitment Agreement, and (ii) the
Additional Nextel Towers."
"`Pre-Approved Transactions' shall mean, collectively, the
Apex Acquisition, the DigiPH Acquisition, the UbiquiTel
Investment, the AirTouch Acquisition, the Nextel 2 Acquisition and
the Acquisitions described in Section 8.5(xiii) hereof.
"`Pre-Approved Transaction Documents' shall mean,
collectively, the Westower Merger Agreement, the NTA Investment
Documents, the Apex Acquisition Documents, DigiPH Purchase
Documents, the UbiquiTel Investment Documents, the AirTouch
Purchase Documents, the Nextel 2 Purchase Documents, the documents
relating to the acquisition of Additional Nextel Towers and the
documents relating to
2
<PAGE> 3
the Acquisitions described in Section 8.5(xiii) hereof
(including all schedules and exhibits thereto).
2. Amendment to Article 5. Section 5.1(h) of the Credit Agreement, Title to
Assets, is hereby modified and amended by deleting the last sentence therefrom
and by substituting the following in lieu thereof:
"Tower Sub does not own any material Assets other than Tower
Assets comprising the Nextel Collateral, Tower Space Lease
Agreements with Co-Locators on Towers comprising the Nextel
Collateral and the Additional Nextel Towers. California Tower does
not own any material Assets other than Tower Assets acquired
pursuant to the AirTouch Acquisition Documents and additional
Tower Assets acquired in accordance with Section 8.5(iii) of this
Agreement. Holdco does not own any material Assets other than (i)
the Capital Stock of the Borrower, (ii) the Capital Stock of any
shell Subsidiary formed by Holdco solely for the purpose of
consummating any Permitted Acquisition, and (iii) on the closing
date of any Permitted Acquisition, the Capital Stock of any target
company acquired in connection with such Permitted Acquisition
immediately prior to the contribution of such Capital Stock to the
Borrower."
3. Amendment to Section 8.2.
(a)ab Section 8.2 of the Credit Agreement, Investments, is hereby modified and
amended by adding "and California Tower" after the reference to Tower Sub in the
parenthetical in line 4 thereof, such that after giving effect thereto such
Section 8.2 shall begin as follows:
"Section 8.2 Investments. Neither Holdco nor the Borrower
shall, and the Borrower shall not permit any of its Subsidiaries
to, make any loan or advance, or make any Investment or otherwise
acquire any evidences of Funded Debt, Capital Stock or other
securities of any Person, except that the Borrower and its
Subsidiaries (other than Tower Sub and California Tower) may . ."
(b) Section 8.2 of the Credit Agreement, Investments, is hereby further
modified and amended by deleting existing clause (e) thereof and substituting
the following therefor:
"(e) make loans or advances to employees in the ordinary
course of business in an aggregate amount not to exceed $2,000,000
at any time outstanding;"
3
<PAGE> 4
4. Amendment to Section 8.5.
(a)ab Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby modified and amended by adding "and California
Tower" after the reference to Tower Sub in the parenthetical in line 1 of
subsection (ii) (A) thereof, such that after giving effect thereto, the text of
such Section 8.5(ii)(A) prior to the proviso therein shall read as follows:
"(A) a merger among Holdco, the Borrower or one or more
Subsidiaries (other than Tower Sub and California Tower) with or
into any other Person, or, subject to Section 8.5(vii) below, an
Acquisition permitted hereunder effected by a merger;"
(b) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing subsections (ii) (B) and (C) thereof and substituting the following
therefor:
"(B) a merger between or among two or more Subsidiaries
(other than Tower Sub and California Tower); and
(C) a liquidation or dissolution of one or more
Subsidiaries (other Tower Sub and California Tower) into its or
their parent entity (provided the Borrower or one of its
Subsidiaries (other than Tower Sub and California Tower) is such
parent entity);"
(c) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing subsection (iii) thereof and substituting the following therefor:
"(iii) subject to compliance with Sections 6.10, 6.16 and
8.5(vii) hereof, (A) Tower Sub may acquire the Future Nextel
Towers and the Additional Nextel Towers and (B) California Tower
may acquire additional Tower Assets from AirTouch with respect to
which an AirTouch Tenant is the anchor tenant;"
(d) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing subsection (v) thereof and substituting the following therefor:
"(v) the Borrower and its Subsidiaries (other than Tower
Sub and California Tower) may (A) make Investments as permitted
under Section 8.2(a) and (b) hereof, and (B) transfer Assets
amongst themselves;"
(e) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting the
opening paragraph of existing subsection (vii) thereof and substituting the
following therefor:
4
<PAGE> 5
"(vii) subject to compliance with Section 6.10 and Section
6.16 hereof, the Borrower and its Subsidiaries (other than Tower
Sub and California Tower) may make Acquisitions, and Investments
(including the acquisition of Capital Stock or the equity
interests in persons engaged in businesses similar to the Tower
Operations) and form Subsidiaries with respect thereto, and Tower
Sub and California Tower may make acquisitions of the type
permitted under Section 8.5(iii) hereof, in each case subject to
the following conditions:"
(f) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing part (B) of subsection (vii) thereof and substituting the following
therefor:
"(B) the Purchase Price with respect any such
Acquisition or Investment shall be (I) payable solely in
common stock of Holdco, or (II) payable in cash so long as
(x) the cash portion of the Purchase Price with respect to
any single Acquisition or Investment (with respect to a
single transaction or a series of related transactions)
shall not exceed $50,000,000, and (y) the aggregate cash
portion of the Purchase Price for Acquisitions and
Investments consummated pursuant to this clause (vii)
(other than Tower Assets acquired pursuant to subsection
8.5(iii)) during the period from the Second Amendment Date
through the Tranche B Maturity Date, shall not exceed
$200,000,000;
(g) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing subsection (viii) thereof and substituting the following therefor:
"(viii) the Borrower and its Subsidiaries (other than
Tower Sub and California Tower) may acquire and construct Towers
and Tower Sites without an anchor tenant reasonably acceptable to
the Arrangers (with any Nextel Tenant or AirTouch Tenant being
deemed acceptable) under contract, so long as the aggregate
Investment for such Towers and Tower Sites is at all times less
than $10,000,000, provided, however, that if the Borrower or the
applicable Subsidiary shall enter into a binding contract with any
anchor tenant reasonably acceptable to the Arrangers (with any
Nextel Tenant or AirTouch Tenant being deemed acceptable) with
respect to any such Tower or Tower Site, the book value of the
Investment of the Borrower or the applicable Subsidiary in such
Tower or Tower Site shall be thereafter excluded from the
investments subject to the $10,000,000 limitation provided for
herein;"
(h) Section 8.5 of the Credit Agreement, Liquidation; Merger; Acquisition or
Disposition of Assets, is hereby further modified and amended by deleting
existing subsection (xii) thereof and substituting the following therefor:
"(xii) so long as no Default or Event of Default then
exists or would be caused thereby, subject to compliance with
Sections 6.10 and 6.16 hereof, the
5
<PAGE> 6
Borrower and its Subsidiaries (other than Tower Sub and
California Tower) may consummate each of the Pre-Approved
Transactions (other than the Nextel 2 Acquisition
and the transaction described in clause (xiii) below);"
5. Amendment to Section 8.6. Section 8.6 Limitation on Guaranties is hereby
amended by adding the words "and California Tower" to the parenthetical set
forth in item (d) thereof, such that after giving effect thereto, item (d) of
Section 8.6 shall read as follows:
"(d) a guaranty by Holdco, the Borrower or any of its
Subsidiaries (other than Tower Sub and California Tower) of the
performance obligations of the Borrower or any of its
Subsidiaries."
6. Amendment to Article 10. Section 10.1 of the Credit Agreement, Events of
Default (Senior Obligations), is hereby modified and amended by deleting the
world "or" after item (r) thereof, deleting the period after item (s) thereof
and inserting "; or" therefor, and adding the following new subsection (t)
thereafter:
"(t) (i) An event of default shall occur under the
Sublease (as defined in the Schedule of AirTouch Purchase
Documents appended to the Third Amendment to this Agreement)
entitling the sublessor thereunder to (x) terminate such Sublease
with respect to Material Towers, or (y) terminate the Sublease
with respect to all sites subject thereto, or (ii) an event of
default shall occur under the Master Tower Site Lease (as defined
in the schedule of AirTouch Purchase Documents attached to the
Third Amendment to this Agreement) entitling AirTouch to terminate
such Master Tower Site Lease with respect to Material Towers."
7. No Other Amendments. Except for the amendments set forth above, the text of
the Credit Agreement and the other Loan Documents shall remain unchanged and in
full force and effect, and the Arrangers, the Syndication Agent, the
Administrative Agent, the Collateral Agent and the Credit Parties hereby reserve
the right to require strict compliance with the terms of the Credit Agreement
and the other Loan Documents, including, without limitation, all terms
applicable to Subsidiaries of the Borrower, in the future.
8. Conditions Subsequent. As a condition subsequent to the amendments set
forth in this Amendment, the Borrower shall perform or cause to be performed the
following (the failure by the Borrower to so perform or cause to be performed
for any reason constituting an Event of Default under the Credit Agreement):
(a) Collateral. On each of the closing dates for the AirTouch
Acquisition, the Borrower shall execute and deliver, or as
applicable, cause its Subsidiaries to execute and deliver, to the
Collateral Agent all agreements, instruments and other items
required to be so delivered pursuant to Section 6.16 of the Credit
Agreement, including, without limitation, a collateral assignment
of the AirTouch Purchase Documents in favor of the Administrative
Agent.
6
<PAGE> 7
(b) Definitive Documentation. Promptly upon the closing of each
AirTouch Acquisition, the Borrower shall deliver to the Arrangers
a full set of copies of the documents executed in connection with
such Acquisition, which documents shall not differ materially from
the drafts thereof furnished to the Administrative Agent prior to
the Effective Date (as defined below).
9. Conditions to Effectiveness. This Amendment shall be effective as of the
date first written above (the "Effective Date") upon the following:
(a) the Administrative Agent's receipt of a counterpart
hereof duly executed by the Borrower and Holdco, and by the Majority Lenders;
(b) the Arrangers' receipt of, with respect to the
AirTouch Acquisition, updated Projections for the Borrower
demonstrating the Borrower's pro forma compliance with the
Financial Covenants after giving effect thereto; and
(c) the representations and warranties of Holdco and the
Borrower set forth in the Credit Agreement and this Amendment,
other than those that are expressly made as of a specific date,
are true and correct in all material respects with the same effect
as though such representations and warranties had been made on and
as of the Effective Date.
10. Representations and Warranties. Each of the Borrower and Holdco, for
itself and on behalf of each of its Subsidiaries, agrees, represents and
warrants in favor of the Arrangers, the Syndication Agent, the Administrative
Agent, the Collateral Agent and the Credit Parties that:
(a) This Amendment has been executed and delivered by duly authorized
representatives of the Borrower and Holdco, and the Credit
Agreement, as modified and amended by this Amendment, constitutes
a legal, valid and binding obligation of the Borrower and Holdco
and is enforceable against the Borrower and Holdco in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by the application of general
equitable principles;
(b) Before and after giving effect to this Amendment, no Default or
Event of Default with respect to the Borrower or Holdco has
occurred and is continuing;
(c) As of the date hereof and after giving effect to each of the
AirTouch Acquisition and the Nextel 2 Acquisition, (i) the
property of the Borrower, at a fair valuation on a going concern
basis, will exceed its debt; (ii) the capital of the Borrower will
not be unreasonably small to conduct its business; and (iii) the
Borrower will not have incurred debts, or have intended to incur
debts, beyond its ability to pay such debts as they mature;
7
<PAGE> 8
(d) No event contemplated in connection with either the AirTouch
Acquisition or the Nextel 2 Acquisition shall occur, which has not
been consented to or waived, the occurrence of which constitutes,
or with the passage of time or giving of notice or both would
constitute, a material default by Holdco, the Borrower or any of
their respective Subsidiaries under any material indenture,
agreement or other instrument, including, without limitation, the
material Necessary Authorizations and the Indentures, or any
judgment, decree or order, to which Holdco, the Borrower or any of
their respective Subsidiaries is a party or by which Holdco, the
Borrower or any of their respective Subsidiaries or any of their
respective properties may be bound or affected; and
(e) All of the representations and warranties of Holdco and the
Borrower contained in the Credit Agreement (other than
representations and warranties that relate solely to a specified
date) continue to be true and correct in all material respects as
of the date hereof as though made on and as of such date.
11. Counterparts. This Amendment may be executed in any number of separate
counterparts and by the different parties hereto on separate counterparts, each
of which shall be deemed an original and all of which, taken together, shall be
deemed to constitute one and the same instrument. In proving this Amendment in
any judicial proceedings, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom such enforcement
is sought. Any signatures delivered by a party by facsimile transmission shall
be deemed an original signature hereto.
12. Law of Contract. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
SCHEDULE 1.1
The AirTouch Purchase Documents shall include the following documents, as
amended, and all schedules and exhibits thereto and documents executed in
connection therewith:
1. AGREEMENT TO SUBLEASE dated as of February 16, 2000 by and between
AirTouch Communications, Inc., a Delaware corporation, Los Angeles SMSA
Limited Partnership, a California limited partnership,
Oxnard-Ventura-Simi Limited Partnership, a California limited
partnership, as Sublessors, Holdco, and California Tower.
2. SUBLEASE dated as of ____________, 2000, between AirTouch
Communications, Inc., a Delaware corporation, The Other Parties Named
Therein as Sublessors, and California Tower, and for purposes of the
guaranty set forth in Section 26(e) thereof and the covenant set forth
in Section 26(h) thereof, Holdco (the "Sublease").
3. SITE DEVELOPMENT AND BUILD-TO-SUIT AGREEMENT dated as of __________,
2000 by and between AirTouch Communications, Inc., a Delaware
corporation, ("AirTouch") and California Tower for purposes of the
Guaranty set forth in Section 10.2(c) thereof, Holdco (the
"Build-To-Suit Agreement").
4. MASTER TOWER SITE LEASE AGREEMENT dated as of ____________, 2000, by
and between AirTouch Communications, Inc. and California Tower, and for
purposes of the guaranty set forth in Section 19.D. thereof Holdco (the
"Master Tower Site Lease").
5. SITE MARKETING AGREEMENT dated as of February 16, 2000, between (i)
AirTouch Communications, Inc. and the other entities listed under the
heading "Owner" on the signature pages thereto, and (ii) California
Tower, and (iii) solely for purpose of Section 24 thereof Holdco (the
"Site Marketing Agreement").
6. ESCROW AGREEMENT dated as of February 16, 2000, by and among Airtouch
Communications, Inc., a Delaware corporation, the entities other than
Air Touch which are listed under the heading "Sublessors" on the
signature pages thereto, California Tower and First Union National
Bank, as escrow agent (the "Escrow Agreement")
<PAGE> 10
THIRD AMENDMENT (SPECTRASITE COMMUNICATIONS, INC.)
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
BORROWER: SPECTRASITE COMMUNICATIONS, INC.
By: /s/ David P. Tomick
-----------------------
Name: David P. Tomick
Title: Executive Vice President
Attest:
Name:
Title:
HOLDCO: SPECTRASITE HOLDINGS, INC.
By: /s/ David P. Tomick
------------------------
Name: David P. Tomick
Title: Executive Vice President
Attest:
Name:
Title:
<PAGE> 11
ADMINISTRATIVE CANADIAN IMPERIAL BANK OF
AGENT: COMMERCE
By: /s/ Colleen Risorto
------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. as Agent
<PAGE> 12
ARRANGERS: CIBC WORLD MARKETS CORP.
(f/k/a CIBC Oppenheimer Corp.)
By: /s/ Colleen Risorto
------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. as Agent
CREDIT SUISSE FIRST BOSTON
By: /s/ Bill O'Daly
-------------------------
Name: Bill O'Daly
Title: Vice President
By: /s/ Robert Hetu
-------------------------
Name: Robert Hetu
Title: Vice President
<PAGE> 13
COLLATERAL AGENT: CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Colleen Risorto
-------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. as Agent
<PAGE> 14
SYNDICATION AGENT: CREDIT SUISSE FIRST BOSTON
By: /s/ Bill O'Daly
-------------------------
Name: Bill O'Daly
Title: Vice President
By: /s/ Robert Hetu
-------------------------
Name: Robert Hetu
Title: Vice President
<PAGE> 15
MANAGING AGENTS: BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
-------------------------
Name: Karen Klapper
Title: Director
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitzgerald, Jr.
------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.)
By: /s/ Shepard D. Rainie
--------------------------
Name: Shephard D. Rainie
Title: Managing Director
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Patrick A. Keleher
--------------------------
Name: Patrick A. Keleher
Title: Vice President
By: /s/ Brian E. Haughney
--------------------------
Name: Brian E. Haughney
Title: Assistant Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ Ann S. Slanis
--------------------------
Name: Ann S. Slanis
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By:
Name:
Title:
<PAGE> 16
CO-AGENT: CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mark A. Campellone
--------------------------
Name: Mark A. Campellone
Title: First Vice President
<PAGE> 17
LENDERS: CIBC INC.
By: /s/ Colleen Risorto
--------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. as Agent
<PAGE> 18
CREDIT SUISSE FIRST BOSTON
By: /s/ Bill O'Daly
--------------------------
Name: Bill O'Daly
Title: Vice President
By: /s/ Robert Hetu
--------------------------
Name: Robert Hetu
Title: Vice President
<PAGE> 19
BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Karen Klapper
---------------------------
Name: Karen Klapper
Title: Director
<PAGE> 20
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitzgerald, Jr.
------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
<PAGE> 21
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.)
By: /s/ Shepard D. Rainie
---------------------------
Name: Shepard D. Rainie
Title: Managing Director
<PAGE> 22
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By: /s/ Patrick A. Keleher
----------------------------
Name: Patrick A. Keleher
Title: Vice President
By: /s/ Brian E. Haughney
----------------------------
Name: Brian E. Haughney
Title: Assistant Vice President
<PAGE> 23
TORONTO DOMINION (TEXAS), INC.
By: /s/ Ann S. Slanis
----------------------------
Name: Ann S. Slanis
Title: Vice President
<PAGE> 24
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Peter C. Connoy
----------------------------
Name: Peter C. Connoy
Title: Vice President
<PAGE> 25
CREDIT LYONNAIS NEW YORK BRANCH
By: /s./ Mark A. Campellone
----------------------------
Name: Mark A. Campellone
Title: First Vice President
<PAGE> 26
THE BANK OF NEW YORK
By: /s/ Gerry Granovsky
----------------------------
Name: Gerry Granovsky
Title: Vice President
<PAGE> 27
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
By: /s/ Louis Lavoie
----------------------------
Name: Louis Lavoie
Title: Manager
By: /s/ Lucie Rousseau
----------------------------
Name: Lucie Rousseau
Title: Vice President
<PAGE> 28
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Colleen Risorto
----------------------------
Name: Colleen Risorto
Title: Executive Director
CIBC World Markets Corp. as Agent
<PAGE> 29
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ J. E. Palmer
--------------------------
Name: J. E. Palmer
Title: Assistant Vice President
<PAGE> 30
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment
Management Company, Inc., its
Managing Member
By: /s/ Susan Lee
---------------------------
Name: Susan Lee
Title: Authorized Agent
<PAGE> 31
NORTHAMERICAN SENIOR FLOATING RATE FUND
By: CypressTree Investment
Management Company, Inc.,
its Managing Member
By:
Name:
Title:
<PAGE> 32
CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC.
As: Attorney-in-Fact and on behalf of First
Allmerica Financial Life Insurance
Company as Portfolio Manager
By:
Name:
Title:
<PAGE> 33
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
<PAGE> 34
FREMONT INVESTMENT & LOAN
By:
Name:
Title:
<PAGE> 35
HELLER FINANCIAL, INC.
By:
Name:
Title:
<PAGE> 36
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC
By: /s/ Joseph Matteo
-----------------------------
Name: Joseph Matteo
Title: Authorized Signatory
<PAGE> 37
PPM AMERICA, INC., as attorney in fact, on behalf of
Jackson National Life Insurance Company
By:
Name:
Title:
<PAGE> 38
Fleet National Bank (f/k/a BankBoston, N.A.), as Trust
Administrator for LONGLANE MASTER TRUST IV
By:
Name:
Title:
<PAGE> 39
GALAXY CLO 1999-1, LTD.
By: SAI Investment Advisor, Inc.,
its Collateral Manager
By:
Name:
Title:
<PAGE> 40
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as
Investment Advisor
By: /s/ Payson F. Swaffield
----------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 41
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By: /s/ Payson F. Swaffield
----------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 42
J.H. WHITNEY MARKET VALUE FUND, L.P.
By: J.H. Whitney Value GP, Ltd., its General Partner
By:
Name:
Title:
<PAGE> 43
J.H. WHITNEY MEZZANINE FUND, L.P.
By: Whitney GP, Ltd. - General Partner
----------------------------------
By:
Name:
Title:
<PAGE> 44
BANK OF AMERICA, N.A.
By:
Name:
Title:
<PAGE> 45
DEBT STRATEGIES FUND II, INC.
By: /s/ Joseph Matteo
----------------------------
Name: Joseph Matteo
Title: Authorized Signatory
<PAGE> 46
DEBT STRATEGIES FUND III, INC.
By: /s/ Joseph Matteo
----------------------------
Name: Joseph Matteo
Title: Authorized Signatory
<PAGE> 47
THE FUJI BANK, LIMITED, NEW YORK BRANCH
By:
Name:
Title:
<PAGE> 48
VAN KAMPEN SENIOR INCOME TRUST
By:
Name:
Title:
<PAGE> 49
PROSPECT INTERNATIONAL DEBT
STRATEGY FUND
By:
Name:
Title:
<PAGE> 50
CARAVELLE INVESTMENT FUND L.L.C.
By:
Name:
Title:
<PAGE> 51
EATON VANCE SENIOR INCOME TRUST
By: /s/ Payson F. Swaffield
----------------------------
Name: Payson F. Swaffield
Title: Vice President
<PAGE> 52
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
By: /s/ Joseph Matteo
----------------------------
Name: Joseph Matteo
Title: Authorized Signatory
<PAGE> 53
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By:
Name:
Title:
<PAGE> 54
ELC "Cayman" Ltd. 1999-III
By:
Name:
Title:
<PAGE> 55
SAWGRASS TRADING LLC
By: /s/ Kelly C. Walker
----------------------------
Name: Kelly C. Walker
Title: Vice President
<PAGE> 56
BANC OF AMERICA SECURITIES LLC
By:
Name:
Title:
<PAGE> 57
FIRST DOMINION FUNDING III
By:
Name:
Title:
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. SpectraSite Communications, Inc. ("SCI"), a Delaware corporation and wholly
owned subsidiary of the Registrant.
2. Tower Merger Vehicle, Inc. ("TMV"), a Delaware corporation and wholly owned
subsidiary of SCI.
3. Tower Asset Sub, Inc., a Delaware corporation and wholly owned subsidiary
of TMV.
4. Vertical Properties, Inc., a New York corporation and wholly owned
subsidiary of SCI.
5. Stainless, Inc., a Pennsylvania corporation and wholly owned subsidiary of
SCI.
6. Doty-Moore Tower Services, Inc., a Texas corporation and wholly owned
subsidiary of SCI.
7. Doty-Moore Equipment, Inc., a Texas corporation and wholly owned subsidiary
of SCI.
8. Doty Moore RF Services, Inc., a Texas corporation and wholly owned
subsidiary of SCI.
9. SpectraSite Broadcast Technical Services, Inc., a Delaware corporation and
wholly owned subsidiary of SCI.
10. SpectraSite Broadcast Fabrication, Inc., a Delaware corporation and wholly
owned subsidiary of SCI.
11. SpectraSite Broadcast Towers, Inc., a Delaware corporation and wholly owned
subsidiary of SCI.
12. SpectraSite Communications Limited, a corporation and wholly owned
subsidiary of SCI.
13. California Tower, Inc., a Delaware corporation and wholly owned subsidiary
of SCI.
14. Apex Site Management Holdings, Inc. ("Apex Holdings"), a Delaware
corporation and wholly owned subsidiary of SCI.
15. Apex Site Management, Inc. ("Apex"), a Delaware corporation and wholly
owned subsidiary of Apex Holdings.
16. Metrosite Management, LLC, an Arkansas limited liability company and wholly
owned subsidiary of Apex.
17. Vertical Realty, LLC, a Delaware limited liability company and wholly owned
subsidiary of Apex.
18. Apex Construction Services LLC, a Delaware limited liability company and
wholly owned subsidiary of Apex Holdings.
<PAGE> 2
19. Apex Site Management - Canada, Inc., a Delaware corporation and wholly
owned subsidiary of Apex.
20. Westower Corporation ("Westower"), a Washington corporation and wholly
owned subsidiary of SCI.
21. SpectraSite Construction, Inc., a Delaware corporation and wholly owned
subsidiary of Westower.
22. CNG Communications, Inc., a Delaware corporation and wholly owned
subsidiary of Westower.
23. Westower Communications, Inc., a Texas Coroporation and a wholly owned
subsidiary of Westower.
24. Teletronics Management Services, Inc., a Washington corporation and wholly
owned subsidiary of Westower.
25. Teletronics Realty Services, Inc., a Washington corporation and wholly
owned subsidiary of Westower.
26. Westower Design, Inc., a Florida corporation and wholly owned subsidiary of
Westower.
27. Westower Leasing, Inc., a Wyoming corporation and wholly owned subsidiary
of Westower.
28. Westower Communications Ltd., a Canadian Federal corporation and wholly
owned subsidiary of Westower.
29. Westower Leasing Canada Inc., a Canadian Federal corporation and wholly
owned subsidiary of Westower.
30. Westower Acquisitions Canada, Inc. ("Acquisitions"), a Canadian Federal
corporation and wholly owned subsidiary of Westower.
31. Acier Filteau Inc., a Province Quebec corporation and wholly owned
subsidiary of Acquisitions.
32. Jovin Telecommunications, Inc., a Canadian Federal corporation and wholly
owned subsidiary of Acquisitions.
33. Telecommunication R. David Inc., a Province Quebec corporation and wholly
owned subsidiary of Acquisitions.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-86291) pertaining to the Stock Incentive Plan of SpectraSite
Holdings, Inc. of our report dated February 14, 2000, with respect to the
consolidated financial statements of SpectraSite Holdings, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Raleigh, North Carolina
March 2, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 37,778
<SECURITIES> 0
<RECEIVABLES> 33,315
<ALLOWANCES> 1,530
<INVENTORY> 4,083
<CURRENT-ASSETS> 89,544
<PP&E> 796,594
<DEPRECIATION> 32,837
<TOTAL-ASSETS> 1,219,953
<CURRENT-LIABILITIES> 43,419
<BONDS> 718,778
0
339,494
<COMMON> 20
<OTHER-SE> 118,242
<TOTAL-LIABILITY-AND-EQUITY> 1,219,953
<SALES> 0
<TOTAL-REVENUES> 100,085
<CGS> 0
<TOTAL-COSTS> 54,314
<OTHER-EXPENSES> 83,885
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,513
<INCOME-PRETAX> (97,100)
<INCOME-TAX> 568
<INCOME-CONTINUING> (97,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97,668)
<EPS-BASIC> (12.48)
<EPS-DILUTED> (12.48)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
UNAUDITED PRO FORMA FINANCIAL DATA
GENERAL
The unaudited pro forma financial data are based on the historical
financial statements of SpectraSite and Westower Corporation and the adjustments
described in the accompanying notes. The unaudited pro forma financial data do
not purport to represent what SpectraSite's, Westower's or the combined entity's
financial position or results of operations would actually have been if the
transactions had in fact occurred on the dates indicated and are not necessarily
representative of SpectraSite's financial position or results of operations at
any future date or for any future period. The unaudited pro forma consolidated
financial data should be read in conjunction with "Selected Historical Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and the consolidated financial statements and related notes
thereto included in SpectraSite's Form 10-K for the year ended December 31,
1999.
SPECTRASITE
The following unaudited pro forma consolidated financial data present both
the pre-merger and post-merger unaudited pro forma consolidated statements of
operations of SpectraSite for the year ended December 31, 1999. The SpectraSite
pro forma column and the Westower pro forma column presented in the post-merger
SpectraSite unaudited pro forma consolidated statement of operations for the
year ended December 31, 1999 are derived from the pre-merger SpectraSite and
Westower pro forma consolidated statements of operations for the corresponding
periods. The unaudited pro forma consolidated statement of operations data give
effect to the following transactions as if they had occurred on January 1, 1999:
-- the acquisition of 2,000 communications towers from Nextel, the
leaseback of antenna space by Nextel and SpectraSite's exclusive
agreement to acquire or construct 1,700 additional sites for Nextel;
-- the issuance and sale of SpectraSite Holdings' 11 1/4% senior
discount notes due 2009;
-- initial borrowings under SpectraSite's credit facility; and
-- the consummation of the Westower merger.
Certain of the data presented in the "Nextel" column to the unaudited pro
forma statement of operations of SpectraSite are estimates provided by Nextel.
None of SpectraSite's independent accountants, Nextel's independent accountants
or Westower's independent accountants have audited or otherwise tested this
data.
The acquisition of tower assets from Nextel and the leaseback of antenna
space by Nextel are presented as if the purchase of assets had occurred on
January 1, 1999. Adjustments for revenues are based on the terms of the master
site lease agreement and on historical co-location revenues. Adjustments for
costs of operations consist of direct operating expenses, which include ground
lease payments, historical routine maintenance costs and property taxes
associated with the towers. Depreciation expense is straight-line depreciation
of the aggregate cost of the towers. Ground leases are non-cancelable operating
leases, generally for terms of five years and include options for renewal, and
pro forma ground lease expense is based on executed ground leases. Nextel has
leased space on each of the 2,000 towers we acquired, primarily for five-year
terms with options for renewal.
E-1
<PAGE> 2
The pro forma minimum ground lease expenses and minimum rental income for
these leases assuming the Nextel transaction occurred and the related leases
commenced January 1, 1999 are as follows:
<TABLE>
<CAPTION>
GROUND LEASE RENTAL
EXPENSE INCOME
------------ --------
(IN THOUSANDS)
<S> <C> <C>
1999............................... $17,648 $ 40,766
2000............................... 17,648 40,766
2001............................... 17,648 40,766
2002............................... 17,648 40,766
2003............................... 17,648 40,766
------- --------
Total............................ $88,240 $203,830
======= ========
</TABLE>
WESTOWER
The following unaudited pro forma consolidated financial data of Westower
present the unaudited pro forma consolidated statement of operations of Westower
for the period from January 1, 1999 through September 2, 1999, the date on which
SpectraSite acquired Westower.
This statement gives effect to the acquisition of communications towers
from Koch Industries, Inc. and its affiliates, which occurred in February 1999,
as if this acquisition occurred on January 1, 1999. In addition to the above
acquisition, from January 1 through September 2, 1999, Westower acquired Cypress
Real Estate Services, Inc. and Telecommunications R. David. These acquisitions,
which are included in the historical financial statements of Westower, were not
considered significant transactions, individually or in the aggregate, and
therefore, were not included in the unaudited pro forma consolidated statement
of operations of Westower.
Adjustments for revenues are based on the executed tenant lease terms for
the Koch towers. Adjustments for costs of operations consist of direct operating
expenses, which include ground lease payments, estimated routine maintenance
costs, property taxes and insurance associated with the towers. Depreciation
expense is straight-line depreciation of the aggregate cost of $17.0 million.
The Koch ground leases are non-cancelable operating leases for a term of 49
years, and pro forma ground lease expense is based on executed ground leases.
Koch has leased space on these towers for a ten-year term with options for
renewal. The pro forma minimum ground lease expense and minimum rental income
for these leases assuming the transaction occurred and the related leases
commenced January 1, 1999 are as follows:
<TABLE>
<CAPTION>
GROUND LEASE RENTAL
EXPENSE INCOME
------------ -------
(IN THOUSANDS)
<S> <C> <C>
1999................................ $ 439 $ 1,364
2000................................ 439 1,364
2001................................ 439 1,364
2002................................ 439 1,364
2003................................ 439 1,364
Thereafter.......................... 19,322 6,824
------- -------
Total............................. $21,517 $13,644
======= =======
</TABLE>
E-2
<PAGE> 3
PRE-MERGER SPECTRASITE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRE-MERGER
SPECTRASITE
HISTORICAL NEXTEL PRO FORMA
---------- -------- -----------
<S> <C> <C> <C>
Revenues:
Site leasing........................................ $ 46,515 $ 14,954(a) $ 61,469
Network services.................................... 53,570 -- 53,570
-------- -------- ---------
Total revenues........................................ 100,085 14,954 115,039
-------- -------- ---------
Operating expenses:
Costs of operations:
Site leasing..................................... 17,825 6,913(b) 24,738
Network services................................. 36,489 -- 36,489
Selling, general and administrative expenses........ 38,182 --(c) 38,182
Depreciation and amortization....................... 37,976 11,808(d) 49,784
Restructuring and non-recurring charges............. 7,727 -- 7,727
-------- -------- ---------
Total operating expenses.............................. 138,199 18,721 156,920
-------- -------- ---------
Operating loss........................................ (38,114) (3,767) (41,881)
-------- -------- ---------
Other income (expense):
Interest income..................................... 8,951 -- 8,951
Interest expense.................................... (67,513) (20,554)(e) (88,067)
Other income (expense).............................. (424) -- (424)
-------- -------- ---------
Total other income (expense)..................... (58,986) (20,554) (79,540)
-------- -------- ---------
Loss before income taxes.............................. (97,100) (24,321) (121,421)
Income tax expense.................................... 568 -- 568
-------- -------- ---------
Net loss.............................................. $(97,668) $(24,321) $(121,989)
======== ======== =========
Net loss.............................................. $(97,668)
Accretion of redemption value of preferred stock...... (760)
--------
Net loss applicable to common shareholders............ $(98,428)
========
Net loss per share:
Basic and diluted................................ $ (12.48)
========
Weighted average number of shares of common stock
outstanding:
Basic and diluted................................ 7,886
========
</TABLE>
See accompanying notes to unaudited pro forma consolidated statement of
operations.
E-3
<PAGE> 4
PRE-MERGER SPECTRASITE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
(a) Consists of $2,611 of historical co-location revenues received by
Nextel prior to the acquisition, which are based on fixed payment lease
terms. This information was provided to us by Nextel. Also consists of
$12,343 of additional revenues to be recognized by SpectraSite under the
terms of the Nextel master site lease agreement.
(b) Reflects certain direct operating expenses, primarily the cost of
executed ground leases, historical routine maintenance and property taxes
associated with the towers, paid by Nextel prior to the acquisition.
(c) SpectraSite has incurred incremental operating expenses as a
result of the Nextel tower acquisition. Such incremental expenses are
estimated to have been approximately $1,500 per month. These incremental
operating expenses are based upon management's estimates rather than on any
contractual obligation; as such, these amounts have not been presented as
adjustments in the accompanying pro forma financial statements.
(d) Reflects the depreciation of the acquired towers calculated on a
straight-line basis over 15 years.
(e) Reflects adjustment to interest expense as if SpectraSite had
issued its 11 1/4% senior discount notes due 2009 and had entered into the
credit facility on January 1, 1999 as follows:
<TABLE>
<S> <C>
PRO FORMA INTEREST EXPENSE:
Interest on 2009 notes at 11 1/4%................... $13,794
Interest on $150,000 term loan...................... 3,964
Amortization of debt issuance costs................. 1,626
Commitment fees on unused portion of credit
facility.......................................... 1,170
-------
Total adjustment.................................... $20,554
=======
</TABLE>
E-4
<PAGE> 5
WESTOWER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH SEPTEMBER 2, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL KOCH WESTOWER
WESTOWER ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Site leasing..................................... $ 1,649 $ 227(a) $ 1,876
Network services................................. 62,002 -- 62,002
------- ----- -------
Total revenues................................... 63,651 227 63,878
------- ----- -------
Operating expenses:
Costs of operations:
Site leasing.................................. 928 123(b) 1,051
Network services.............................. 43,943 -- 43,943
Selling, general and administrative expenses..... 18,439 -- 18,439
Depreciation and amortization.................... 2,920 142(c) 3,062
Restructuring and non-recurring charges.......... 4,629 -- 4,629
------- ----- -------
Total operating expenses........................... 70,859 265 71,124
------- ----- -------
Operating loss..................................... (7,208) (38) (7,246)
------- ----- -------
Other income (expense):
Interest income.................................. 151 -- 151
Interest expense................................. (2,317) (213)(d) (2,530)
Other income (expense)........................... 154 -- 154
------- ----- -------
Total other income (expense).................. (2,012) (213) (2,225)
------- ----- -------
Loss before income taxes........................... (9,220) (251) (9,471)
Income tax expense................................. 223 (100)(e) 123
------- ----- -------
Net loss........................................... $(9,443) $(151) $(9,594)
======= ===== =======
Net loss per share:
Basic and diluted................................ $ (1.10)
=======
Weighted average number of shares of common stock
outstanding:
Basic and diluted................................ 8,562
=======
</TABLE>
See accompanying notes to unaudited pro forma consolidated statement of
operations.
E-5
<PAGE> 6
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1999 THROUGH SEPTEMBER 2, 1999
(a) Consists of additional revenues to be recognized by Westower in
connection with site lease agreements with Koch.
(b) Reflects certain direct operating expenses, primarily the cost of
executed ground leases, estimated routine maintenance, property taxes and
insurance associated with the towers.
(c) Reflects the depreciation of the acquired towers from Koch calculated
on a straight-line basis over 20 years.
(d) Reflects adjustment to interest expense related to additional
borrowings under Westower's credit facility to acquire the Koch towers, based on
the credit facility's approximate interest rate of 7.5%.
(e) Reflects income tax benefit for the Koch tower operating results at
Westower's estimated tax rate of 40%.
E-6
<PAGE> 7
POST-MERGER SPECTRASITE HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
POST-MERGER
SPECTRASITE WESTOWER MERGER SPECTRASITE
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Site leasing..................... $ 61,469 $ 1,876 $ -- $ 63,345
Network services................. 53,570 62,002 (1,449)(a) 114,123
--------- ------- ------- ---------
Total revenues..................... 115,039 63,878 (1,449) 177,468
--------- ------- ------- ---------
Operating expenses:
Costs of operations:
Site leasing.................. 24,738 1,051 -- 25,789
Network services.............. 36,489 43,943 (1,014)(a) 79,418
Selling, general and
administrative expenses....... 38,182 18,439 -- 56,621
Depreciation and amortization.... 49,784 3,062 9,577(b) 61,972
(451)(c)
Restructuring and non-recurring
charges....................... 7,727 4,629 (4,629)(d) 7,727
--------- ------- ------- ---------
Total operating expenses........... 156,920 71,124 3,483 231,527
--------- ------- ------- ---------
Operating loss..................... (41,881) (7,246) (4,932) (54,059)
--------- ------- ------- ---------
Other income (expense):
Interest income.................. 8,951 151 (1,466)(e) 7,636
Interest expense................. (88,067) (2,530) 2,052(f) (88,545)
Other income (expense)........... (424) 154 -- (270)
--------- ------- ------- ---------
Total other income
(expense)................... (79,540) (2,225) 586 (81,179)
--------- ------- ------- ---------
Loss before income taxes........... (121,421) (9,471) (4,346) (135,238)
Income tax expense................. 568 123 -- 691
--------- ------- ------- ---------
Net loss........................... $(121,989) $(9,594) $(4,346) $(135,929)
========= ======= ======= =========
Net loss per share:
Basic and diluted................ $ 6.73(g)
=========
Weighted average number of shares
of common stock outstanding:
Basic and diluted................ 20,192
=========
</TABLE>
See accompanying notes to unaudited pro forma consolidated statement of
operations.
E-7
<PAGE> 8
POST-MERGER SPECTRASITE HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
(a) Reflects the elimination of intercompany site construction revenues
and costs of site construction for towers built by Westower for SpectraSite
during the period from January 1 through September 2, 1999.
(b) Reflects amortization of goodwill as if the merger of Westower and
SpectraSite had occurred on January 1, 1999. Goodwill is amortized over 15
years.
(c) Reflects adjustments to eliminate amortization of historical goodwill
of Westower of $1,062 and to convert Westower tower depreciation from 20 years
to 15 years, increasing expense by $611.
(d) Reflects the elimination of certain non-recurring charges resulting
directly from the transaction which were incurred by Westower prior to its
acquisition by Spectrasite.
(e) Reflects an adjustment to eliminate interest income as if SpectraSite
had used cash-on-hand to repay Westower's outstanding indebtedness.
(f) Reflects adjustments to eliminate interest expense as if Westower's
credit facility and its $15,000 convertible note from BET Associates were paid
in full on January 1, 1999.
(g) SpectraSite's earnings per share for the year ended December 31, 1999
reflects the adoption of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", which requires companies to compute earnings per share
under two different methods, basic and diluted. The weighted average common
shares outstanding at December 31, 1999 reflects the issuance of 15.5 million
shares of SpectraSite common stock in exchange for all of the outstanding shares
of Westower common stock.
If SpectraSite had net income during this period, diluted earnings per
share would have included potential common shares related to its convertible
preferred stock and outstanding options. These potential common shares were not
included in the diluted earnings per share calculation for the year ended
December 31, 1999 because the effect would have been antidilutive. In connection
with the Nextel tower acquisition, provisions for dividends and redemption were
eliminated with respect to SpectraSite Holdings' Series A and Series B preferred
stock.
E-8
