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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the Fiscal Year ended December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to
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COMMISSION FILE NUMBER: 0-23012
POWERTEL, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 58-1944750
(State of incorporation) (I.R.S. Employer Identification No.)
1233 O.G. Skinner Drive, West Point, Georgia 31833
(Address of principal executive office) (Zip Code)
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(Registrant's telephone number including area code): (706) 645-2000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of each class)
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 into Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of $14.563 on March 25, 1999, as
reported on the Nasdaq Stock Market's National Market, was approximately
$162,011,409. As of March 25, 1999, the Registrant had outstanding 27,434,933
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Definitive Proxy Statement for the 1999 Annual Meeting
of Stockholders are incorporated by reference into Part III of this Report.
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INDEX TO FORM 10-K
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Page
PART I
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Item 1. Business................................................................................................... 2
Item 2. Properties................................................................................................. 10
Item 3. Legal Proceedings.......................................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders........................................................ 11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters................................................... 11
Item 6. Selected Financial Data.................................................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risks................................................ 23
Item 8. Financial Statements and Supplementary Data................................................................ 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures...................... 24
PART III
Item 10. Directors and Executive Officers of the Registrant......................................................... 24
Item 11. Executive Compensation..................................................................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management............................................. 24
Item 13. Certain Relationships and Related Transactions............................................................. 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................ 24
Signatures ........................................................................................................... 31
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PART I
ITEM 1. BUSINESS
Unless otherwise indicated, all population data set forth herein is
based on the 1998 Paul Kagan Associates, Inc. Cellular/PCS POP Book, and all
industry data set forth herein is based upon information compiled by the
Cellular Telecommunications Industry Association and/or Paul Kagan & Associates,
Inc. This Report contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Disclosure
Regarding Forward Looking Statements."
We provide personal communications services ("PCS") in the
southeastern United States under the name "Powertel" and cellular telephone
service in contiguous portions of western Georgia and eastern Alabama under the
name "InterCel." Our PCS licenses encompass a territory of approximately 246,000
contiguous square miles with a population of approximately 24.4 million people.
We hold PCS licenses to serve the Major Trading Areas ("MTAs") of Atlanta,
Georgia; Jacksonville, Florida; Memphis, Tennessee/Jackson, Mississippi; and
Birmingham, Alabama (the "MTA Markets") as well as 13 Basic Trading Areas
("BTAs") in Kentucky and Tennessee. We hold 30 MHz of spectrum licensed for PCS
in the MTA Markets, and we hold 20 MHz of spectrum licensed for PCS in all of
the BTA Markets except for the Knoxville, Tennessee BTA, where we hold a license
for 10 MHz of spectrum. We have one of the largest contiguous licensed PCS
footprints in the southeastern United States.
We introduced our PCS services in October 1996 in Jacksonville,
Florida and Montgomery, Alabama, and we have, to date, launched our PCS services
in a total of 34 markets in the Southeast. In most of these markets, we were the
first to offer PCS services commercially. As of December 31, 1998, we had
approximately 253,000 postpaid PCS subscribers and 42,000 prepaid PCS
subscribers.
We also provide cellular telephone service under the "InterCel" brand
name in contiguous portions of four Rural Service Areas in western Georgia and
eastern Alabama. Our cellular market encompasses approximately 2,900 square
miles with a population of approximately 296,000 people. On January 5, 1999, we
agreed to sell substantially all of our cellular assets to Public Service
Cellular, Inc. for $89 million in cash. We expect to close this transaction in
the second quarter of 1999. See "-- Cellular Operations -- InterCel
Disposition." As of December 31, 1998, we had approximately 29,000 cellular
subscribers.
On March 15, 1999, we agreed, subject to certain conditions, to sell
approximately 650 of our communications towers to a subsidiary of Crown Castle
International Corp. for an aggregate of $275 million in cash. The purchase price
is subject to adjustment based on the actual number of towers tendered at the
closing. In connection with this sale, we agreed to lease space on the towers
that we are selling for a period of ten years, with three five year renewal
periods that we may exercise at our option. We expect to close this transaction
in the second quarter of 1999. See "-- PCS Operations -- Tower Transaction."
Our principal executive offices are located at 1233 O.G. Skinner Drive,
West Point, Georgia 31833, and our telephone number is (706) 645-2000.
THE WIRELESS TELECOMMUNICATIONS INDUSTRY
Since 1983, the demand for wireless telecommunications services has
grown dramatically as cellular, paging and other emerging wireless
communications services have become widely available and increasingly
affordable. Service revenues for the wireless telephone industry reached
approximately $29.6 billion for the year ending June 30, 1998, as compared to
approximately $364.3 million for the year ending June 30, 1985. The number of
wireless telephone subscribers nationwide has grown from approximately 680,000
in 1986 to an estimated 60 million at the end of 1998.
Analog cellular services are the most widely deployed two-way wireless
services available today. However, analog cellular transmits voice and data
signals over analog-based systems, which use one continuous
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electronic signal that varies in amplitude or frequency over a single radio
channel. In contrast, digital systems, such as the systems used to provide PCS,
transmit signals as a stream of digits that is compressed before transmission,
enabling a single radio channel to carry multiple simultaneous signal
transmissions. This increased capacity, along with other enhancements in digital
protocols, allows digital-based wireless technologies to offer new and enhanced
services, such as greater call privacy and single number (or "find me") service,
and more robust data transmission features, such as "mobile office" applications
(including facsimile and e-mail).
PCS systems in the United States operate under one of three digital
transmission protocols: the Global System for Mobile Communications ("GSM");
Code Division Multiple Access ("CDMA"); or IS-136 ("IS-136"). These protocols
are incompatible with each other. Our network uses GSM, which is the leading
digital wireless technology in the world with over 150 million subscribers
worldwide. We are also a member of the GSM Alliance L.L.C., a consortium of 17
PCS carriers which offer PCS service using the GSM protocol in over 2,500 cities
and towns throughout North America. Through the GSM Alliance, we allow our
customers to roam in many major metropolitan areas in the United States and
Canada. GSM Alliance members include us, Aerial Communications, Inc., Airadigm
Communications, Inc., BellSouth Mobility DCS, the PCS subsidiary of BellSouth,
Conestoga Wireless Company, Cook Inlet PCS, DIGIPH PCS, Iowa Wireless Services,
LP, Microcell Connexions Inc., NPI Wireless, Omnipoint Communications, Inc.,
Pacific Bell Mobile Services Corp., Western Wireless Corporation and Wireless
2000 PCS, among others. We offer a single roaming rate to our customers when
roaming on any GSM network throughout the United States and Canada.
While various incompatible PCS protocols have emerged because of the
absence of a required universal digital signaling protocol, there is an ongoing
debate that is focused on the next generation of worldwide wireless standards.
There is controversy over whether world standards organizations, such as the
European Telecommunications Standards Institute and the International
Telecommunications Union, should dictate a single standard for third generation
("3G") wireless services. The leading protocols under consideration include
W-CDMA, which is a GSM-based version of next generation wideband CDMA technology
supported by the GSM Alliance, and CDMA2000, which is a CDMA-based 3G technology
supported by certain U.S. manufacturers. This debate has become highly visible
in international politics. ETSI, which has advocated W-CDMA as the European 3G
standard, is being challenged by other standards bodies and the United States as
being isolationist and precluding non-European manufacturers from a significant
marketplace in the future. The GSM Alliance is actively lobbying for the
adoption of multiple standards for 3G wireless, much like the co-existing
standards for second generation wireless today. However, these international
standards debates could have a significant impact upon the future of GSM
carriers in the event that a non-GSM protocol is designated as the single
standard for 3G wireless worldwide.
Although PCS and cellular networks use similar technologies and
hardware, they are incompatible because they operate on different frequencies
and utilize different signaling protocols. We began marketing dual-mode handsets
capable of receiving and transmitting over both analog cellular and GSM-based
PCS networks in December 1998. Our dual-mode service offering allows for
automatic delivery of calls over analog cellular systems to our PCS subscribers
roaming in areas where GSM-based PCS service is not available and where we have
a roaming agreement with the analog cellular provider.
PCS OPERATIONS
Markets
Our PCS licenses cover approximately 246,000 contiguous square miles in
portions of the following 12 states: Alabama; Arkansas; Florida; Georgia;
Illinois; Indiana; Kentucky; Louisiana; Mississippi; Missouri; South Carolina;
and Tennessee. Our PCS markets include approximately 24.4 million people. We
currently provide PCS services in the 34 markets where we have completed our
initial buildout. Generally, our "initial buildout" of a licensed territory
includes the construction of cell sites: (a) in metropolitan areas with a
population greater than
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100,000 people; (b) in certain smaller cities that, due to location or
demographics, we consider to be strategically important; and (c) along the major
highway corridors connecting these areas. We have completed the initial buildout
of our PCS system in the following cities:
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GEORGIA TENNESSEE ALABAMA
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Athens Chattanooga Anniston
Atlanta Jackson Auburn-Opelika
Augusta Memphis Birmingham
Brunswick Nashville Decatur
Columbus Dothan
LaGrange Florence
Macon MISSISSIPPI Gadsen
Savannah Huntsville
West Point Jackson Montgomery
Tupelo Tuscaloosa
FLORIDA
SOUTH CAROLINA KENTUCKY
Gainesville
Jacksonville Aiken Louisville
Panama City Hilton Head Lexington
St. Augustine
Tallahassee
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We also offer service along the major highway corridors connecting all of our
markets. Based on customer demand and competitive factors, we intend to continue
the buildout of our PCS system to enhance and expand our coverage. We continue
building on our experience and reputation in the southeastern telecommunications
market, benefiting from the region's positive demographics and capitalizing on
our relationships with other telecommunications providers in the Southeast. As
of December 31, 1998, we had approximately 295,000 PCS subscribers.
Tower Transaction
On March 15, 1999, we and five of our wholly-owned subsidiaries entered
into an agreement with Crown Castle International Corp. and its wholly-owned
subsidiary, CCP Inc. (collectively, "Crown Castle"), to sell 650 towers, related
assets and certain liabilities (the "Proposed Tower Disposition") for $275.0
million in cash (the "Purchase Price"). At the closing, the Purchase Price is
subject to adjustment based on the actual number of sites tendered. The asset
purchase agreement provides that sites considered defective or incomplete
("Rejected Sites") will not be tendered at closing, and consequently, the
Purchase Price will be reduced by an amount equal to $423,077 for each Rejected
Site (the "Rejected Site Credit"). At closing, Crown Castle would also receive a
credit against the Purchase Price in an aggregate amount of $383,000 (the
"Purchase Price Credit") as consideration for its acceptance of certain towers
with site leases which may require revenue received from us or our affiliates to
be shared with the site lessors. The Purchase Price less the Rejected Site
Credit and the Purchase Price Credit is referred to as the "Closing Price." In
addition, pursuant to the asset purchase agreement and a related escrow
agreement, Crown Castle has deposited $50.0 million in cash (the "Escrow
Deposit") with SunTrust Bank Atlanta. At closing, the Escrow Deposit will be
delivered to us and credited against the Closing Price. However, Crown Castle
has also agreed that the Escrow Deposit will be forfeited to us under certain
specified conditions in the event that Crown Castle is unable to receive
adequate financing to consummate the transaction and thus is unable to close the
transaction in a timely manner.
At closing, we and our subsidiaries will assign, and Crown Castle will
assume, five master site agreements pursuant to which we and our affiliates will
agree to pay Crown Castle monthly rent of $1,800 per tower for the continued use
of the space that we or our affiliates currently occupy on the towers. The
master site agreements provide that space not occupied by us or our affiliates
on the acquired towers can be leased to third parties at Crown Castle's sole
option. Monthly payments under the individual site leases are subject to
increase based on an agreed
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upon schedule if and when we or our affiliates add equipment to a site. In any
event, the monthly rent, including additional rents related to the addition of
certain equipment, will be increased on each fifth anniversary of each site
lease up to an amount that is 115% of the rent paid during the preceding five
year period. The term of each site lease will be ten years. We have the right to
extend any site lease for up to three additional five year periods. Each site
lease will automatically renew for an option term unless we or our affiliates
notify Crown Castle of our intent not to renew at least 180 days prior to the
end of the then current term.
The operative agreements governing the Proposed Tower Disposition are
subject to a number of significant conditions. We cannot guarantee that this
transaction will be consummated on the terms described herein or at all. In
connection with the Proposed Tower Disposition, we, our subsidiaries and Crown
Castle are making certain representations and warranties which must be true on
the closing date in order for the Proposed Tower Disposition to be consummated.
Other conditions which must be satisfied on the closing date include: (i)
compliance by us, our subsidiaries and Crown Castle with the terms of the asset
purchase agreement; (ii) absence of litigation; (iii) receipt of regulatory
approvals; and (iv) absence of any material adverse effect with respect to our
and our subsidiaries' assets and assumed liabilities.
Strategy
Our strategy is to:
- continue to build out a high-quality PCS system;
- offer a broad range of services, including enhanced
services;
- expand our subscriber base by providing wireless services of
the highest quality, functionality and value;
- expand our regional market presence by managing and
affiliating with other PCS licensees, as well as potentially
acquiring additional strategic PCS licenses and other PCS
providers; and
- provide our customers with the ability to receive service in
areas outside of our service area by entering into
additional roaming agreements.
We intend to achieve significant market penetration by aggressively marketing
competitively-priced PCS services, including enhanced services not currently
provided by analog or digital cellular operators, and by providing superior
customer service. We intend to remain a low-cost provider of PCS services by
generating economies of scale by operating in contiguous market areas and
focusing on customer acquisition and retention.
Services
Our PCS service offerings consist primarily of wireline enhancement
products in which PCS supplements a customer's landline communications. We
currently offer a full range of wireless telecommunications services, including
certain enhanced features and services not generally provided by analog or
digital cellular operators. These enhanced features and services include secure
communications, sophisticated call management (incorporating services such as
caller I.D. and call forwarding), enhanced battery life and a short message
service which allows subscribers to send and receive alphanumeric and text
messages on their handsets. In December 1998, we announced a new long-distance
plan, the 50-State Rate, which allows Powertel customers who subscribe to a
calling plan with a $50 or higher monthly access fee to call anywhere in the
United States with no additional long distance charges. Regular airtime rates
apply. In December 1998, we also launched a dual-mode service offering for an
additional charge of $5 per month, and in September 1998, we launched our new
prepaid product, which is based on an advanced intelligent network platform that
allows real-time declination of a customer's account. Customers on the prepaid
plan are not required to apply for credit and may purchase prepaid vouchers in
denominations of $30, $45 or $90 to increase their "account balance" at any
time. In addition, we have expanded our current offerings of wireless
telecommunications services to include international roaming and certain data
and information services. In the future, we intend to offer single number
service, alternative line service, wireless e-mail, home zone billing,
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virtual private network services and fixed wireless services that could serve as
the customer's primary mode of telecommunication.
Roaming
Our PCS subscribers may roam outside their "home" markets anywhere
within our PCS coverage area without being assessed daily access fees or
increased airtime usage rates. Certain of our roaming partners own licenses in
MTAs and BTAs that are contiguous to our PCS markets, which increases the size
of the contiguous geographic area where our customers can roam. We provide GSM
roaming services outside of our service area at a single roaming rate which is
lower than rates traditionally offered by most cellular providers. GSM service
is currently available in more than 2,500 cities and towns in the United States
and Canada. We have also entered into roaming agreements with international GSM
providers (primarily through our membership in the GSM Alliance) which allow
subscribers to roam internationally through the use of subscriber identity
module (SIM) cards. We have just begun to commercially offer the international
roaming service.
System Buildout
Although we have completed the initial buildout of our PCS system,
we continue to build out our existing markets for increased coverage and
capacity needs, and we are also building out certain secondary cities within our
licensed footprint. Generally, we select sites on the basis of their coverage of
targeted customers, the cost to construct the site and on frequency propagation
characteristics. In many cases, we must obtain zoning approval prior to
constructing a site. For new sites, our experience indicates that the site
acquisition process can take three to twelve months. Once we acquire a site and
obtain the requisite governmental approval, preparation of the site, including
grounding, ventilation and air conditioning, equipment installation, testing and
optimization, generally requires an additional two to four months.
Customer Service
We recognize that superior customer service is vital to minimizing
customer churn and to contributing to the long-term success of our business.
Accordingly, we strive to ensure that our PCS customers are fully introduced to
our service offerings, that they understand how to use their handset and its
features and that they receive prompt and reliable service from our customer
service representatives. We provide PCS subscribers with toll-free access to our
customer service representatives 24 hours a day, seven days a week. In addition,
PCS subscribers can reach a customer service representative from their handsets
(with no airtime charge) by dialing 611. In 1998, we consolidated our inbound
customer service organization into two call centers located in Atlanta, Georgia
and Jacksonville, Florida.
Sales, Marketing and Distribution
We market our PCS services primarily through: (i) our direct sales
force; (ii) 65 retail stores and kiosks which we operate; (iii) a network of
independent agents, each of which has a retail store presence; (iv) mass
merchandisers, such as Radio Shack, Office Depot and Circuit City; and (v) a
limited amount of direct mail advertising. In addition to traditional
distribution channels, we are considering marketing our PCS services through
non-traditional distribution channels, including the internet and telemarketing.
We support our marketing activities with local and regional radio, television
and print advertising.
Our direct and retail store PCS sales force currently consists of
approximately 600 employees. Our sales employees are trained to understand our
products and services, so that they can provide extensive information to
prospective customers. Sales commissions generally are linked both to subscriber
revenue and subscriber retention. We expect that we will increase our PCS sales
force to approximately 710 employees by the end of 1999.
We also negotiate volume discounts from vendors of PCS telephone
equipment and pass a substantial portion of the discount on, and further
subsidize the cost of, such telephone equipment to our subscribers, sales agents
and distributors. Although we subsidize a portion of most PCS handset purchases,
even after such subsidy, our PCS handsets are generally more expensive to
subscribers than cellular handsets. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview." We offer
over-the-air activation whereby a
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customer can initiate service by purchasing a handset from any of our
distribution channels and pressing any key on the handset to reach Powertel
customer service. During this call, the customer service representative can
obtain all necessary customer information and conduct a credit scoring
assessment or, if the customer has chosen the prepaid plan, the customer service
representative can activate the customer immediately. At this time, we do not
require our PCS customers to sign long-term service contracts.
In marketing our PCS services, we emphasize the enhanced features
and favorable pricing of our services. We also promote the improved call
security of our PCS system, which we believe encourages users to make
confidential calls that they might not otherwise make on an analog cellular
telephone. We also expect that the services offered by PCS operators will
eventually be capable of replacing some traditional landline telephone services.
The potential for increased PCS penetration of the landline market was enhanced
by the 1996 Telecommunications Act, which requires local exchange carriers to
interconnect with other telecommunications providers such as Powertel at just
and reasonable rates that are based on costs of providing the interconnection.
CELLULAR OPERATIONS
InterCel Disposition
On January 5, 1999, we entered into an asset purchase agreement with
Public Service Cellular for the sale of substantially all of our cellular
assets. The purchase price is approximately $89,000,000. The closing of the
transaction is subject to certain conditions, including: (i) our receipt of
various consents from third parties; (ii) receipt of various regulatory
approvals, including the approval of the FCC; and (iii) Public Service Cellular
maintaining its financing commitment through the time of the closing. We expect
to close the transaction in the second quarter of 1999. This sale does not
include any towers used in our cellular business. We will lease space to Public
Service Cellular on these towers, and we will sell these towers to Crown Castle
as part of the Proposed Tower Disposition. See "-- PCS Operations -- Tower
Transaction."
Cellular System
Our cellular market has a population of approximately 296,000 people
and encompasses approximately 2,900 square miles. Since we began offering
cellular service in late 1990, our number of cellular subscribers has grown to
29,000 at December 31, 1998 (a penetration of approximately 9.8% of the total
population of the cellular market). Our cellular system consists of 26 cell
sites. We use our own microwave transmission system, in conjunction with leased
capacity on fiber optic systems and traditional landline facilities, to connect
the cells to the main switching office in Huguley, Alabama. We have completed
the initial upgrade of our analog cellular system to provide digital service.
Our cellular system is now a dual-mode analog/TDMA digital system.
COMPETITION; OTHER TELECOMMUNICATIONS TECHNOLOGIES
Competition in the wireless communications business is intense, and
we expect it to continue to increase as a result of the entrance of new
competitors and the development of new technologies, products and services. Each
of the markets in which we compete is or will be served by multiple other
wireless service providers, including cellular, PCS and enhanced specialized
mobile radio ("ESMR") operators and resellers.
We compete directly with several other PCS providers, including
PrimeCo Personal Communications, L.P., Sprint Spectrum, L.P. and AT&T Wireless,
in our PCS markets. The FCC continues to auction additional licenses for
wireless services, which may allow more new competitors to enter the
marketplace. We expect that existing wireless service providers in our PCS
markets will continue to upgrade their systems. Some of these providers have
been operational for a number of years and have significantly greater financial
and technical resources than those available to us. Our wireless competitors
include AT&T Wireless, AirTouch Communications, Inc., BellSouth Mobility, GTE
Mobilnet Incorporated, Alltel Communications, Inc. and Price Communications
Wireless, Inc. Two of our PCS competitors, AT&T Wireless and Sprint PCS, claim a
national digital network which certain customers may view as an advantage. We,
however, continue to believe that the majority of wireless consumers are still
primarily interested in regional service, and that relatively few consumers use
a national roaming feature.
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Continuing technological advances in telecommunications, and FCC
policies that encourage the development of new spectrum-based technologies, make
it impossible to predict the extent of future competition. The 1996
Telecommunications Act alters regulatory and industry barriers which for years
deterred easy competition within and between telecommunications markets. The
amended statute and related FCC rulemakings are expected to continue to open new
avenues for competitive offerings of wireless, wireline and hybrid services.
Since the introduction of PCS and ESMR, the two-way wireless
services industry has experienced a downward trend in market prices. We
anticipate that this trend will continue in the future due to increased
competition. We compete to attract and retain customers principally on the basis
of our service offerings and pricing, our customer service and our large
contiguous footprint. Our ability to compete successfully will also depend, in
part, on our ability to anticipate and respond to various competitive factors
affecting the industry, including new services that may be introduced, changes
in consumer preferences, demographic trends, economic conditions and discount
pricing strategies by competitors, which could adversely affect our operating
margins.
Beginning March 23, 1999, the FCC is scheduled to re-auction certain
additional PCS licenses (including licenses reserved for small businesses)
which, for various reasons, have been returned to the FCC. These licenses are
for varying amounts of spectrum, ranging from 10 MHz to 30 MHz. While we are not
participating directly in this auction, we have provided certain financing,
subject to restrictions, to a qualified small business, Eliska Wireless, Inc.,
that may acquire licenses in that auction.
REGULATION OF WIRELESS TELECOMMUNICATIONS SYSTEMS
The FCC regulates the licensing, construction, operation and
acquisition of wireless telecommunications systems in the United States pursuant
to the Communications Act of 1934, as amended, and the rules, regulations and
policies promulgated by the FCC thereunder. Additional regulatory authority over
PCS providers is granted to the FCC by the Budget Act and the 1996
Telecommunications Act.
Under the Communications Act, the FCC is authorized to establish
regulations governing the interconnection of PCS and cellular systems with
wireline and other wireless carriers, allocate channels and frequencies, grant
or deny license renewals and applications for transfer of control or assignment
of PCS and cellular licenses, and impose fines and forfeitures for any
violations of FCC regulations. The 1996 Telecommunications Act and ongoing FCC
rulemakings have led to new regulations concerning interconnection of networks.
See "-- Competition; Other Telecommunications Technologies." The 1996
Telecommunications Act also permits the FCC to lift regulations where they are
no longer necessary in the public interest.
Licensing of PCS. The FCC has divided the United States and its
possessions and territories into PCS markets made up of 493 BTAs and 51 MTAs.
Each MTA consists of at least two BTAs. Numerous licensees may compete in each
PCS service area. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz
band for licensed broadband PCS services. The FCC divided the 120 MHz of
spectrum into six individual blocks, each of which is allocated to serve either
MTAs or BTAs. The spectrum allocation includes two 30 MHz blocks ("A" and "B"
blocks) licensed for each of the 51 MTAs, one 30 MHz block ("C" block) licensed
for each of the 493 BTAs, and three 10 MHz blocks ("D", "E" and "F" blocks)
licensed for each of the 493 BTAs. A PCS license has been or will be awarded for
each MTA and BTA in every block, for a total of more than 2,000 licenses. Under
the FCC's rules, a broadband PCS licensee may own combinations of licenses
(e.g., one MTA (30 MHz) and one BTA (10 MHz)) with total aggregate spectrum
coverage of up to 45 MHz in a single geographic area. The FCC has also relaxed
its limitation on cellular cross-ownership of PCS licenses in the same area,
permitting existing cellular licensees to acquire up to 20 MHz of broadband PCS
spectrum in overlapping markets. Thus, no entity may hold licenses for more than
45 MHz of commercial mobile radio spectrum ("CMRS") in a single geographic area,
unless, in the case of overlapping cellular licenses, such overlapping licenses
cover less than 10% of the population of the PCS territory.
The FCC's rules allow broadband PCS licensees in the "A," "B," "D"
and "E" blocks the flexibility to divide and sell portions of any size of their
licenses at any time. Under these rules, any of such licensees may divide their
licenses through geographic partitioning (dividing spectrum by geographic area)
or through spectrum
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disaggregation (dividing license by amount of spectrum) to any entity that
otherwise is qualified to hold a common carrier license. The rules apply special
restrictions to license holders in the "C" and "F" blocks, which are restricted
to entrepreneurs and small businesses, by limiting partitioning or
disaggregation for five years.
All PCS licenses are granted for a 10-year period, at the end of
which they must be renewed. Licenses may be revoked at any time for cause. All
30 MHz broadband PCS licensees, including us, must construct facilities that
offer coverage to one-third of the population of their service area within five
years of their initial license grants and to two-thirds of the population within
10 years. For the 10 MHz broadband PCS licenses (i.e., the BTA licenses),
licensees, including us, must provide PCS service with a signal level sufficient
to provide adequate service to at least one-quarter of the population in their
licensed area within five years of being licensed, or make a showing of
substantial service in their licensed area within the same time frame. Licensees
that fail to meet the coverage requirements may be subject to forfeiture of
their licenses. The FCC will conduct random audits to ensure that licensees are
in compliance with the FCC's holding period and attribution rules, violations of
which could result in license revocations, forfeitures or fines. We have
satisfied the FCC's five-year buildout requirements for each of the licenses we
hold.
Character and Citizenship Requirements. Applications for FCC
authority may be denied, and in extreme cases licenses may be revoked, if the
FCC finds that an entity lacks the requisite "character" qualification to be a
licensee. In making that determination, the FCC considers whether an applicant
or licensee has been the subject of adverse findings in a judicial or
administrative proceeding involving, among other things, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition.
Under the Communications Act, non-U.S. citizens or their
representatives, foreign governments or their representatives, or corporations
organized under the laws of a foreign country may not own, in the aggregate,
more than 20% of a common carrier licensee, or more than 25% of the parent of a
common carrier licensee if the FCC determines that the public interest would be
served by prohibiting such ownership. However, the FCC has recently adopted an
open entry standard that includes a presumption in favor of foreign ownership by
applicants of the World Treaty Organization Member Countries ("WTO Members").
The new standard sets forth a rebuttable presumption that will permit foreign
investment in U.S. wireless carriers by entities from WTO Members. Specifically,
the FCC stated that applications for indirect foreign ownership of common
carrier licenses do not pose competitive concerns that would justify denial of
an application on such grounds. While the FCC retained its requirement that
licensees seek approval prior to acceptance of indirect foreign ownership that
would exceed the 25% benchmark, its adoption of a rebuttable presumption in
favor of entry will streamline the application process.
Transfers and Assignments of PCS Licenses. The Communications Act
requires prior FCC approval of the assignment or transfer of control of a PCS
license. In addition, the FCC has established transfer disclosure requirements
that require licensees who transfer control of or assign a PCS license within
the first three years to file associated contracts for sale, option agreements,
management agreements or other documents disclosing the total consideration that
the applicant would receive in return for the transfer or assignment of its
license. Non-controlling interests in an entity that holds a PCS license or PCS
system generally may be bought or sold without prior FCC approval.
Other FCC Requirements. The FCC also imposes certain requirements on
our operations with respect to interconnection to other telecommunications, the
provision of 911 and enhanced 911 services, mandatory contributions to the FCC's
universal service fund, obligations to allow resale of our services, and other
technical and reporting matters.
Other Federal Regulations. Wireless systems are subject to certain
Federal Aviation Administration regulations relating to the location, lighting
and construction of wireless transmitter towers and antennas and may be subject
to regulation under the National Environmental Policy Act and the environmental
regulations of the FCC. We use common carrier point-to-point microwave and
traditional landline facilities to connect our cell sites and to link them to
our main switching offices. These facilities are separately licensed by the FCC
and are subject to regulation as to technical parameters and service.
9
<PAGE> 11
State and Local Regulation. In 1993, Congress amended the
Communications Act to preempt state or local regulation of the entry of, or the
rates charged by, any commercial or private mobile radio service provider.
Notwithstanding such preemption, a state may petition the FCC for authority to
begin regulating or to continue regulating CMRS rates. Petitioners must
demonstrate that existing market conditions cannot protect consumers from
unreasonable and unjust rates or that the service is a replacement for
traditional wireline telephone service for a substantial portion of the wireline
service within the state. So far, the states in which we currently provide or
plan to provide service (Alabama, Arkansas, Florida, Georgia, Illinois, Indiana,
Kentucky, Louisiana, Mississippi, Missouri, South Carolina and Tennessee) either
have not sought to regulate these matters or, in the case of Louisiana, have had
their petition to regulate denied by the FCC.
States are not, however, prohibited from regulating other terms and
conditions of CMRS, such as service quality, billing procedures and consumer
protection standards. In addition, the siting and construction of transmitter
towers, antennas and equipment shelters are often subject to state or local
zoning, land use and other regulations.
EMPLOYEES AND AGENTS
As of February 28, 1999, we had approximately 1,800 employees. We
anticipate that the continued development of our PCS system will require us to
continue to hire a substantial number of new employees. None of our employees is
represented by a labor organization, and we consider our employee relations to
be good.
ITEM 2. PROPERTIES
We maintain our 28,000 square foot corporate headquarters and
network operations center in West Point, Georgia and lease an additional 10,000
square feet of office space from KNOLOGY Holdings, Inc., an affiliate of ITC
Holding Company, Inc. Additionally, our information technology center is located
in leased space in Atlanta, Georgia, and we recently completed construction of a
new call center in Jacksonville, Florida. In connection with our PCS system, we
lease space for regional headquarters and switch facilities in the following
cities: Birmingham, Alabama; Memphis, Tennessee; Jacksonville, Florida; Atlanta,
Georgia; Nashville, Tennessee; and Louisville, Kentucky. The Atlanta MTA leases
two separate switching facilities, both of which are located in the city of
Atlanta but in separate locations. The Birmingham MTA leases additional space in
Jackson, Mississippi to accommodate its sales and operations personnel. The
Birmingham, Memphis, Jacksonville and Atlanta MTAs currently lease warehouse
space for network equipment and cell site equipment related to the buildout of
our PCS system in each respective MTA.
We also currently lease retail space for eleven Powertel retail
stores in the Birmingham markets, seven in the Memphis markets, fourteen in the
Jacksonville markets, six in the Nashville BTA, seven in the BTA Markets and
twenty in the Atlanta markets. We lease a 55,500 square foot building in
LaGrange, Georgia with warehouse and office space for our inventory and
distribution activities. We also lease land, rooftop space or tower space for a
significant number of our approximately 1,400 PCS cell sites.
In connection with our cellular system, we maintain sales and
administrative offices for our cellular market in Lanett, Alabama. In our
cellular market, we operate four retail stores (located in Lanett and Opelika,
Alabama and Newnan and LaGrange, Georgia), and two sales kiosks (located in
shopping malls in LaGrange, Georgia and Auburn, Alabama). All of our cellular
retail sites are leased. As part of our cellular system, we lease space for our
switch facility in Huguley, Alabama from Interstate Telephone Company, an
affiliate of ITC Holding Company, Inc., and maintain 26 tower sites.
We believe that all of our properties are well maintained.
ITEM 3. LEGAL PROCEEDINGS
We are subject from time to time to legal proceedings that arise out
of our business operations, including service, billing and collection matters.
Although the actual damages sought in such legal proceedings are
10
<PAGE> 12
generally small, certain of these legal proceedings may seek punitive damages
and/or attempt to be certified as class actions. While we do not expect such
legal proceedings to have a material adverse affect on our business operations,
no assurance can be given that the resolution of any or all of such legal
proceedings will not have a material adverse effect on our business, financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During 1998, we only submitted matters to a vote of our stockholders
at our 1998 annual meeting of stockholders held on May 21, 1998. We previously
reported on such matters.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock. Our common stock is currently traded on
the Nasdaq Stock Market's National Market System (the "Nasdaq National Market")
under the symbol "PTEL." As of March 25, 1999, there were approximately 479
holders of record of our common stock.
The high and low sales prices for each full quarterly period of 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 HIGH LOW
-------- ------------- ------------
<S> <C> <C>
First quarter $ 25.06 $ 16.75
Second quarter 24.13 15.75
Third quarter 21.25 9.63
Fourth quarter 16.25 9.31
1997 HIGH LOW
-------- ------------- ------------
First quarter $ 17.00 $ 9.75
Second quarter 14.63 9.50
Third quarter 20.00 12.50
Fourth quarter 22.88 16.63
</TABLE>
Dividend Policy. We have never declared or paid any cash dividends
on our capital stock, and we do not anticipate paying cash dividends in the
foreseeable future. We intend to retain earnings to finance the expansion of our
operations. Our Series E 6.5% Cumulative Convertible Preferred Stock (the
"Series E Preferred") and Series F 6.5% Cumulative Convertible Preferred Stock
(the "Series F Preferred") pay a 6.5% annual dividend quarterly in common stock
or cash. However, we are prohibited from paying cash dividends for the
foreseeable future because of restrictions contained in our indentures relating
to our public bonds and our credit agreement covering certain equipment
purchases from Ericsson Inc. To date, we have issued an aggregate of 430,952
shares of common stock as dividends on the Series E Preferred and Series F
Preferred.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial
information for Powertel as of and for each of the years in the five-year period
ended December 31, 1998. Arthur Andersen LLP has audited our consolidated
financial statements. Our stockholders should read the selected historical
financial information in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial
statements and notes thereto and other financial and operating information
included elsewhere in this Report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues .......................... $ 152,275 $ 62,745 $ 31,875 $ 25,384 $ 18,903
Equipment sales ........................... 23,161 16,171 7,250 3,928 2,859
------------ ------------ ------------ --------- ---------
Total revenues and sales ............... 175,436 78,916 39,125 29,312 21,762
------------ ------------ ------------ --------- ---------
Cost of services .......................... 42,777 28,277 5,811 2,394 1,921
Cost of equipment sales ................... 79,144 45,318 11,653 3,127 2,391
Operations expenses ....................... 56,522 23,989 9,927 3,596 2,722
Selling and marketing expenses ............ 63,936 41,409 13,301 4,280 3,405
General and administrative expenses ....... 37,639 25,742 16,963 4,218 3,651
Depreciation .............................. 57,938 42,747 5,887 2,741 2,130
Amortization .............................. 9,716 6,535 4,214 2,360 1,543
------------ ------------ ------------ --------- ---------
Total operating expenses ............... 347,672 214,017 67,756 22,716 17,763
------------ ------------ ------------ --------- ---------
Operating (loss) income ............. (172,236) (135,101) (28,631) 6,596 3,999
Interest expense (income), net(a) ......... 93,656 42,564 (3,175) 1,657 635
Gain on sale of subsidiary ................ -- (41,912) -- -- --
Miscellaneous (income) expense ............ (62) (585) 1,226 (295) (48)
------------ ------------ ------------ --------- ---------
(Loss) income before income taxes
and cumulative effect ............... (265,830) (135,168) (26,682) 5,234 3,412
Income tax (benefit) provision ............ -- -- (1,654) 2,230 1,535
------------ ------------ ------------ --------- ---------
(Loss) income before cumulative effect . (265,830) (135,168) (25,028) 3,004 1,877
Dividends on cumulative convertible,
redeemable preferred stock ............. (5,010) -- -- -- --
------------ ------------ ------------ --------- ---------
Net (loss) income available to common
stockholders before cumulative effect (270,840) (135,168) (25,028) 3,004 1,877
Cumulative effect of change in accounting
principle, net of tax(b) ............... -- -- (2,583) -- --
============ ============ ============ ========= =========
Net (loss) income available to
common stockholders .............. $ (270,840) $ (135,168) $ (27,611) $ 3,004 $ 1,877
============ ============ ============ ========= =========
Earnings (loss) per share:
Net (loss) income available to common
stockholders before cumulative effect
of change in accounting principle ...... $ (10.02) $ (5.04) $ (1.00) $ 0.30 $ 0.20
Cumulative effect of change in
accounting principle ................... -- -- (0.10) -- --
------------ ============ ============ ========= =========
Basic and diluted (loss) income ...........
per common share ....................... $ (10.02) $ (5.04) $ (1.10) $ 0.30 $ 0.20
============ ============ ============ ========= =========
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(c) ................................. $ (85,006) $ (22,282) $ (2,466) $ 11,992 $ 7,720
Ratio of earnings to fixed charges(d) ..... -- -- -- 3.9x 5.5x
Capital expenditures ...................... $ 207,292 $ 291,849 $ 233,551 $ 7,661 $ 2,866
Cellular subscribers at end of period(e) .. 28,989 25,848 47,617 38,582 28,624
Net cellular population equivalents(f) .... 295,600 295,600 737,800 732,900 728,200
PCS subscribers at end of period .......... 295,295 118,757 14,892 -- --
Net PCS population equivalents(f) ......... 24,425,913 24,292,400 17,460,000 -- --
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- --------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital ............................. $ 226,861 $ 313,722 $ 256,349 $ 977 $ 2,710
Property and equipment, net ................. 642,404 491,750 251,269 18,066 13,262
Licenses, goodwill and other intangibles, net 407,998 416,252 388,634 24,904 23,903
Total assets ................................ 1,380,578 1,378,592 947,117 74,330 50,812
Long-term obligations ....................... 1,108,070 969,014 504,065 29,411 11,030
Retained earnings (accumulated deficit) ..... (428,774 (157,934) (22,766) 4,845 1,841
Stockholders' equity ........................ 50,331 317,816 407,007 36,674 33,374
</TABLE>
- -------------
(a) For the years ended December 31, 1998, 1997 and 1996, interest income was
$19.5 million, $21.0 million and $17.3 million, respectively. We had no
interest income for the years ended December 31, 1995 and 1994. This
excludes capitalized interest of $1.9 million and $22.1 million for the
years ended December 31, 1998 and 1997, respectively. During the
construction of the PCS system, the cost of the PCS licenses and the costs
related to the construction expenditures are considered to be assets
qualifying for interest capitalization under FASB Statement No. 34
"Capitalization of Interest Cost."
(b) During 1996, we changed our method of accounting for costs incurred in
connection with certain promotional programs under which customers receive
discounted cellular equipment or airtime usage credits. Under our previous
accounting method, all such costs were deferred and amortized over the
life of the related non-cancelable cellular telephone service agreement.
Under the new accounting method, the costs are expensed as incurred.
(c) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA is provided because it is a measure
commonly used in the industry. EBITDA is not a measurement of financial
performance under generally accepted accounting principles and should not
be considered an alternative to net income as a measure of performance or
to cash flow as a measure of liquidity.
(d) For the years ended December 31, 1998, 1997 and 1996, earnings were
insufficient to cover fixed charges by $267.7 million, $157.4 million and
$56.2 million, respectively. Earnings consist of income before income
taxes, plus fixed charges, except where capitalized. Fixed charges consist
of interest charges and amortization of debt issuance costs, in each case
whether expensed or capitalized, and the portion of rent expense under
operating leases representing interest.
(e) Cellular subscribers at end of period include 14,216, 20,288 and 25,456
subscribers of Unicel in the State of Maine for the periods ended December
31, 1994, 1995 and 1996, respectively.
(f) Net population equivalents means the estimated population of the license
market area multiplied by the percentage ownership of the license. For the
periods ended December 31, 1994, 1995 and 1996, net cellular population
equivalents include 441,900, 442,000 and 442,200 population equivalents,
respectively, from Unicel's license market areas (including Maine RSA 2).
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We provide PCS services in the southeastern United States under the
name "Powertel" and cellular telephone service in contiguous portions of eastern
Alabama and western Georgia under the name "InterCel." Our PCS licenses
encompass a territory of approximately 246,000 contiguous square miles with a
population of approximately 24.4 million people. We hold licenses to serve the
Atlanta, Georgia MTA, the Jacksonville, Florida MTA, the Memphis,
Tennessee/Jackson, Mississippi MTA and the Birmingham, Alabama MTA and 13 BTAs
in Kentucky and Tennessee. We hold 30 MHz of spectrum licensed for PCS in the
MTA Markets, and we hold 20 MHz of spectrum licensed for PCS in all of the BTA
Markets except for the Knoxville, Tennessee BTA, where we hold a license for 10
MHz of spectrum. We have one of the largest contiguous licensed PCS footprints
in the southeastern United States. We introduced our PCS services in October
1996 in Jacksonville, Florida and Montgomery, Alabama and, to date, have
launched our PCS services in a total of 34 markets in the Southeast. As of
December 31, 1998, we had approximately 253,000 postpaid PCS subscribers and
42,000 prepaid PCS subscribers.
On March 15, 1999, we agreed, subject to certain conditions, to sell
650 of our communications towers to a subsidiary of Crown Castle International
Corp. for an aggregate of $275 million in cash. The purchase price is subject to
adjustment based on the actual number of towers tendered at the closing. In
connection with this sale, we agreed to lease space on the towers that we are
selling for a period of ten years, with three five year renewal periods that we
may exercise at our option. We expect to close this transaction in the second
quarter of 1999. In addition, on January 5, 1999, we agreed to sell
substantially all of our cellular assets to Public Service Cellular, Inc. for
$89 million in cash. We expect to close this transaction in the second quarter
of 1999 as well. As of December 31, 1998, we had approximately 29,000 cellular
subscribers.
Average revenues per subscriber in the wireless industry have
declined during recent quarters and are expected to continue to gradually
decline in the future. We believe this downward trend is the result of the
addition of lower usage customers who utilize wireless service for personal
convenience, security or as backup for their traditional landline telephones. In
addition, we expect that revenue per minute will continue to decline as
competition within the wireless industry intensifies. We believe the effect of
this trend on our earnings will be mitigated by corresponding increases in the
number of wireless subscribers and the use of enhanced services that are offered
to PCS subscribers.
We incurred a net loss of $265.8 million for the year ended December
31, 1998, as a result of the significant costs required to build out and
maintain our PCS system, the hiring and management of required personnel to
operate our PCS business and market our services, the subsidization of PCS
handsets to our customers and the depreciation of PCS equipment and amortization
of the PCS licenses. We expect to continue incurring significant operating
losses during 1999 and thereafter as we continue to build out our PCS system,
develop our PCS customer base and subsidize the cost of PCS handsets to our
customers.
Minimizing customer attrition, or "churn," becomes a greater
challenge as the subscriber base grows and the wireless marketplace becomes more
competitive. We generated an average monthly churn rate of 1.9% and 4.1% for our
cellular and PCS businesses, respectively, for the year ended December 31, 1998.
We remain committed to reducing our PCS churn rate in the future through more
focused collections efforts, stricter credit evaluation policies, implementation
of fraud prevention tools, a proactive customer retention program and
alternative methods of payment. In September 1998, we also introduced an
intelligent, network-based prepaid service for credit-challenged customers.
Despite these efforts, we expect that ongoing PCS churn rates could be higher
than historical churn rates for cellular carriers as more competitors and
competitive services continue to enter the marketplace. Additionally, the
ability of PCS subscribers to activate service via the phone ("over the air
activation") without any face-to-face contact with our representatives increases
our susceptibility to subscription fraud, which ultimately results in churn.
The Company is a member of the GSM Alliance, a consortium of 17 PCS
carriers which offer GSM-based PCS service throughout North America. All members
of the Alliance have executed roaming agreements with each other, which allows
GSM customers to roam throughout many major metropolitan areas in the United
States and
14
<PAGE> 16
Canada. Additionally, we have signed several international roaming agreements
and expect to sign numerous others with international GSM carriers to facilitate
international roaming.
RESULTS OF OPERATIONS
The following table reflects the composition of Powertel's cellular
and PCS service revenue and equipment sales and related gross margins, as well
as overall operating and other costs and margins. Powertel's historical results
of operations, particularly in view of the start-up costs associated with our
PCS business, will not be comparable with future periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------- ------------------------------ ------------------------------
COMBINED COMBINED COMBINED
CELLULAR CELLULAR CELLULAR
AND AND AND
CELLULAR PCS PCS CELLULAR PCS PCS CELLULAR PCS(A) PCS
--------- --------- --------- -------- --------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES & COST
ANALYSIS:
Service revenues:
Postpaid revenues ......... $ 11,385 $ 121,324 $ 132,709 $15,695 $ 36,256 $ 51,951 $21,565 $ 541 $ 22,106
Roaming revenues .......... 6,685 3,559 10,244 5,669 189 5,858 8,501 -- 8,501
Prepaid revenues .......... -- 2,579 2,579 -- -- -- -- -- --
Other revenues ............ 712 6,031 6,743 781 4,155 4,936 783 485 1,268
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Total service revenues .. 18,782 133,493 152,275 22,145 40,600 62,745 30,849 1,026 31,875
Cost of services ............. 1,825 40,952 42,777 2,992 25,285 28,277 3,535 2,276 5,811
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Gross margin .............. $ 16,957 $ 92,541 $ 109,498 $19,153 $ 15,315 $ 34,468 $27,314 $ (1,250) $ 26,064
========= ========= ========= ======= ========= ========= ======= ========= =========
EQUIPMENT SALES & COST
ANALYSIS:
Equipment sales .............. $ 828 $ 22,333 $ 23,161 $ 773 $ 15,398 $ 16,171 $ 3,803 $ 3,447 $ 7,250
Cost of equipment sales ...... 1,735 77,409 79,144 2,241 43,077 45,318 2,890 8,763 11,653
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Gross margin .............. $ (907) $ (55,076) $ (55,983) $(1,468) $ (27,679) $ (29,147) $ 913 $ (5,316) $ (4,403)
========= ========= ========= ======= ========= ========= ======= ========= =========
OPERATING MARGIN ANALYSIS:
Total revenues and sales ..... $ 19,610 $ 155,826 $ 175,436 $22,918 $ 55,998 $ 78,916 $34,652 $ 4,473 $ 39,125
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Operating expense --
Cost of services and
equipment sales ......... 3,560 118,361 121,921 5,233 68,362 73,595 6,425 11,039 17,464
Operations ................ 1,957 54,565 56,522 2,700 21,289 23,989 4,189 5,738 9,927
Selling and marketing ..... 2,259 61,677 63,936 3,269 38,140 41,409 4,637 8,664 13,301
General and administrative 1,815 35,824 37,639 2,282 23,460 25,742 2,940 14,023 16,963
Depreciation .............. 1,886 56,052 57,938 2,331 40,416 42,747 2,722 3,165 5,887
Amortization .............. -- 9,716 9,716 262 6,273 6,535 3,380 834 4,214
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Total operating expenses 11,477 336,195 347,672 16,077 197,940 214,017 24,293 43,463 67,756
--------- --------- --------- ------- --------- --------- ------- --------- ---------
Operating income (loss) ...... $ 8,133 $(180,369) (172,236) $ 6,841 $(141,942) (135,101) $10,359 $ (38,990) (28,631)
========= ========= ======= ========= ======= =========
Interest expense (income), net 93,656 42,564 (3,175)
Gain on sale of subsidiary ... -- (41,912) --
Miscellaneous (income)
expense, net .............. (62) (585) 1,226
--------- --------- ---------
Loss before income taxes ..... (265,830) (135,168) (26,682)
Income tax benefit .......... -- -- (1,654)
--------- --------- ---------
Loss before cumulative
effect .................... (265,830) (135,168) (25,028)
Dividends on cumulative
convertible, redeemable
preferred stock ........... (5,010) -- --
--------- --------- ---------
Net loss before cumulative
effect .................... (270,840) (135,168) (25,028)
Cumulative effect of change
in accounting principle ... -- -- (2,583)
--------- --------- ---------
Net loss ..................... $(270,840) $(135,168) $ (27,611)
========= ========= =========
OTHER SUPPLEMENTAL DATA:
Subscribers at end of period . 28,989 295,295 324,284 25,848 118,757 144,605 47,617 14,892 62,509
Capital expenditures ......... $ 2,302 $ 204,990 $ 207,292 $ 2,255 $ 289,594 $ 291,849 $ 8,904 $ 224,647 $ 233,551
</TABLE>
- -----------------
(a) We did not commence PCS operations until fourth quarter 1996.
15
<PAGE> 17
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following discussion reflects the results of operations for our
PCS and cellular lines of business. All general corporate costs have been
allocated to those lines of business based on management's estimates of actual
expenses incurred related to such lines of business.
Postpaid service revenues increased $80.8 million, or 155.5%, for
1998 as compared to 1997. PCS postpaid service revenues increased $85.1 million
in 1998, or 234.6%, primarily as a result of our continued subscriber growth and
our launch of seven new PCS markets, including Atlanta, Georgia, since the
fourth quarter of 1997. Our postpaid PCS subscribers grew to approximately
253,000 at December 31, 1998, from approximately 119,000 at December 31, 1997.
Cellular postpaid service revenues decreased $4.3 million, or 27.5%, primarily
as a result of the sale of our cellular operations in the State of Maine during
the second quarter of 1997 and the corresponding disposition of approximately
27,000 customers.
The average monthly service revenue ("RPU") per PCS postpaid
subscriber decreased to $54.27 in 1998, as compared to $57.81 in 1997. This
decrease is attributable primarily to changes in our rate plan offerings from
1997 to 1998. In 1997, a substantial portion of our PCS subscribers were
participants in a promotional plan under which they received unlimited monthly
airtime for local calling for a fixed monthly fee of $50. In 1998, we offered
multiple rate plans with fixed monthly access charges ranging from $20 to $90.
These rate plans have contributed to an overall reduction in RPU per PCS
postpaid subscriber as customers gravitate toward lower fixed-rate plans, a
trend consistent with a general trend in the wireless industry of declining RPU.
We anticipate some decline in our RPU per PCS postpaid subscriber in future
periods due primarily to lower minute usage by new wireless subscribers and
continued price competition among wireless carriers.
The RPU per cellular postpaid subscriber decreased to $35.58 in 1998
from $38.33 for 1997. This decrease reflects increased price competition among
wireless carriers, which has prompted us to offer cellular rate plans with more
bundled airtime minutes.
PCS roaming revenues (including roaming long distance) were $3.6
million in 1998, as compared to $.2 million in 1997, which reflects the success
of our roaming agreements with GSM Alliance partners that became effective
during the last few months of 1997. Cellular roaming revenues increased $1.0
million, or 17.9%, in 1998, as compared to 1997. This increase is due primarily
to an increase in the number of roamers and the increased usage per roamer in
1998.
We generated $2.6 million in PCS prepaid service revenues in 1998,
as compared to $0 in 1997, which is attributable to the introduction of our
intelligent network-based prepaid service alternative in September 1998. RPU per
PCS prepaid subscriber was $40.05 since the launch of this service.
Other service revenues, which include activation fees, fees from
enhanced services, co-location revenue and interconnection fees billed to local
exchange carriers for connections to our PCS and cellular networks, increased
$1.8 million, or 36.6%, for 1998 as compared to 1997. This increase is due
primarily to our concentrated efforts to secure tenants for co-location on our
towers and the increase in interconnection fees as a result of increased traffic
originating on the local exchange carriers networks and terminating on our PCS
and cellular networks. We waived all activation fees for new PCS subscribers in
the third and fourth quarters of 1998.
Cost of services includes the cost of interconnection with local
exchange carrier facilities, direct cell site costs (e.g., property taxes and
insurance, site lease costs and electric utilities), PCS and cellular roaming
validation (provided by a third-party clearinghouse), long distance toll costs
and supplementary services (such as voice mail). PCS cost of services increased
$15.7 million, or 62.0%, in 1998 as compared to 1997. This increase primarily
reflects costs related to the approximately 500 additional cell sites we placed
in service in 1998, as well as increased interconnection and toll costs related
to increased traffic on our expanding PCS network. Cellular cost of services
decreased $1.2 million, or 39.0%, in 1998 as compared to 1997, primarily as a
result of the sale of our cellular operations in the State of Maine.
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We generated a negative PCS equipment margin of 246.6% on $22.3
million of sales in 1998, as compared to 179.8% on $15.4 million of sales in
1997. The increase in negative PCS equipment margin is primarily the result of
special promotional prices that we offered on several handsets during the third
and fourth quarters of 1998. We generated a negative cellular equipment margin
of 109.5% on $.8 million of sales in 1998, as compared to 189.9% on $.8 million
of sales in 1997. This improvement in negative margin is attributable to a
decrease in the cost of cellular handsets in 1998. We expect to continue
subsidizing the cost of PCS and cellular handsets to consumers for the
foreseeable future.
Operations costs, which include the costs of managing and
maintaining our cellular and PCS systems, customer service, credit and
collections (including bad debt) and inventory management increased $32.5
million, or 135.6%, for 1998 as compared to 1997. PCS operations costs increased
$33.2 million, or 156.3%, which is attributable to costs incurred to provide
customer service to the growing PCS customer base, to maintain the expanding PCS
network and to a significant increase in the bad debt provision resulting from
the disconnection of non-paying PCS customers. Cellular operations costs
decreased $.7 million, or 27.5%, which is attributable primarily to the sale of
our cellular operations in the State of Maine.
Selling and marketing costs increased $22.5 million, or 54.4%, for
1998 as compared to 1997. PCS selling and marketing costs increased $23.5
million, or 61.7%, which is attributable to continued increases in PCS
advertising and marketing costs and the expansion of our sales distribution
channels, including increases in headcount, commissions and retail location
costs. Cellular selling and marketing costs decreased $1.0 million, or 30.9%,
which is attributable primarily to the sale of our cellular operations in the
State of Maine.
General and administrative costs increased $11.9 million, or 46.2%,
for 1998 as compared to 1997. Substantially all of this increase is attributable
to PCS general and administrative costs, which increased due to increased
headcount and the related facilities costs at our corporate and regional
administrative offices and information technology center.
Depreciation and amortization increased $18.4 million, or 37.3%, for
1998 as compared to 1997 and consists principally of the depreciation of the PCS
and cellular network and the amortization of PCS licenses. Substantially all of
the increase is attributable to depreciation associated with the approximately
500 additional PCS cell sites that we placed in service in 1998 and amortization
associated with our launch of seven new PCS markets since the fourth quarter of
1997.
Net consolidated interest expense increased $51.1 million, or
120.0%, for 1998 as compared to 1997. This increase resulted primarily from
interest expense incurred on our $300 million 11.125% Senior Notes Due 2007,
lower funds available for investment due to the buildout of the PCS network and
a reduction in capitalized interest ($1.9 million in 1998 compared to $22.1
million in 1997), which is attributable to the completion and placing in service
of substantial portions of the PCS system.
The effective income tax rate for 1998 and 1997 was 0%. We generated
a $265.8 million net loss for 1998 and expect to continue to incur significant
operating losses in 1999 and beyond. We will not recognize the tax benefit of
these operating losses until management determines that it is more likely than
not that such benefit is realizable.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The following discussion reflects the results of operations for our
PCS and cellular lines of business. All general corporate costs have been
allocated to those lines of business based on management's estimates of actual
expenses incurred related to such lines of business.
Postpaid service revenues increased $29.8 million or 135.0% for
1997, as compared to 1996. PCS postpaid service revenues, which were $36.3
million in 1997, were the result of our continued subscriber growth. Our PCS
subscribers grew from approximately 119,000 subscribers at December 31, 1997
from approximately 15,000 at December 31, 1996. Cellular postpaid service
revenues decreased $5.9 million, or 27.2%, primarily as
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a result of the sale of our cellular operations in the State of Maine during the
second quarter of 1997 and the corresponding reduction in 22,000 customers.
The RPU per local PCS subscriber was $57.81, which is substantially
higher than cellular due mainly to the higher monthly access fees paid by the
majority of our PCS subscribers for bundled airtime minutes and the long
distance revenue generated by those subscribers. The RPU per local cellular
subscriber (excluding roaming revenue and equipment sales) decreased to $38.33
in 1997 from $41.70 for 1996. This decrease reflects lower usage patterns of new
cellular customers, as well as price competition from competing wireless
carriers.
We generated $.2 million in PCS roaming revenues under our roaming
agreements with GSM Alliance partners that became effective during the last five
months of 1997. Cellular roaming revenues (including roamer long distance)
decreased $2.8 million, or 33.3%, in 1997 as compared to 1996. This decrease was
attributable to the sale of our cellular operations in the State of Maine, as
well as our amended agreement with BellSouth Cellular Corp., operating as
BellSouth Mobility, effective January 16, 1997, under which we agreed to
per-minute reductions to the rates charged to BellSouth Mobility for roaming
incurred by its customers in our service territory.
Other revenues, which include activation and installation fees, fees
from optional features and interconnection fees billed to local exchange
carriers for connections to our PCS network, increased $3.7 million, or 289.3%,
for 1997 as compared to 1996. This increase was due to the activation fees
associated with the addition of PCS subscribers noted above and interconnection
fees, which previously had not been reciprocal between local exchange carriers
and wireless carriers.
Cost of services includes the cost of interconnection with local
exchange carrier facilities, direct cell site costs, PCS and cellular roaming
validation, long distance toll costs, cellular cloning and fraud and
supplementary services. PCS cost of services, which was $25.3 million in 1997,
primarily reflects interconnection and tower lease costs associated with the
approximately 500 cell sites that we placed in service during 1997 in our
expanding PCS system. Cellular cost of services decreased $.5 million, or 14.1%,
in 1997 as compared to 1996. This decrease was attributable to the sale of our
cellular operations in the State of Maine, but was partially offset by an
increase in costs associated with cloning and subscription fraud during the
first six months of 1997. The cost of cellular fraud was significantly reduced
during the third and fourth quarters.
For our PCS operations, we generated a negative equipment margin of
179.8% on $15.4 million of sales in 1997, as compared to 154.2% on $3.4 million
of sales in 1996. The increase in negative PCS equipment margin was the result
of our continued subsidization of the cost of PCS handsets.
We generated a negative cellular equipment margin of 189.9% on $.8
million of sales in 1997, as compared to a positive margin of 24.0% on $3.8
million of sales in 1996. This decrease in margin was due to our change in our
method of accounting for certain promotional costs (primarily equipment
credits). Under the new method of accounting, we expense all cellular equipment
subsidies as incurred. In prior periods, we deferred and amortized those
subsidies over the life of the related cellular contract.
Operations costs, which include the costs of maintaining our
cellular and PCS systems, customer service, credit and collections and inventory
management totaled $24.0 million for 1997, which represented an increase of
$14.1 million, or 141.7%, from 1996. PCS operations costs totaled $21.3 million
in 1997, which represented a 271.0% increase from 1996 and were comprised
primarily of salaries and benefits, bad debt provisions, credit and collection
costs and ongoing maintenance of existing sites. Cellular operations costs
totaled $2.7 million in 1997, a 35.5% decrease from 1996, which is attributable
primarily to the sale of our cellular operations in the State of Maine.
Selling and marketing costs totaled $41.4 million for 1997, an
increase of $28.1 million, or 211.3%, from 1996. Substantially all of this
increase was attributable to PCS advertising costs, as well as the costs of all
direct and indirect sales channels, including commissions incurred as a result
of the continued rapid growth in the number of PCS subscribers.
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General and administrative costs were $25.7 million for 1997, an
increase of $8.8 million, or 51.8%, from 1996. This increase was attributable to
PCS general and administrative costs, which totaled $23.5 million in 1997 and
were comprised primarily of costs (excluding depreciation) associated with our
corporate and regional facilities, such as salaries and benefits, data
processing costs, rent and communications costs.
Depreciation and amortization for 1997 totaled $49.3 million, as
compared to $10.1 million for 1996, and consists principally of the depreciation
of the cellular and PCS network and the amortization of PCS licenses.
Substantially all of the increase of $39.2 million in depreciation and
amortization for 1997 was due to depreciation of the PCS system and amortization
of PCS licenses, substantial portions of which were first placed in service in
late fourth quarter 1996 and continuing throughout 1997.
Net consolidated interest expense totaled $42.6 million for 1997, as
compared to $3.2 million of net consolidated interest income for 1996. The
change in interest resulted primarily from interest expense incurred on our $300
million Senior Notes issued June 5, 1997, lower funds available for investment
due to the buildout of the PCS network and a reduction in capitalized interest
($22.1 million in 1997 compared to $29.0 million in 1996), which is attributable
to the completion and placing in service of substantial portions of the PCS
system.
The effective income tax rates for 1997 and 1996 were 0% and 6.2%
(tax benefit), respectively. The tax benefit recognized in 1996 reflects the
expected realization of certain net operating loss carrybacks. We generated a
$135.2 million net loss for 1997 and expect to continue to incur significant
operating losses in 1998 and beyond. We will not recognize the tax benefit of
these operating losses until management determines that it is more likely than
not that such benefit is realizable.
LIQUIDITY AND CAPITAL RESOURCES
We require significant amounts of capital for funding the operations
and expansion of our PCS business. Total capital expenditures, including capital
expenditures for information technology and the support of the PCS business,
totaled approximately $207 million for 1998. Costs associated with the PCS
system buildout include tower sites, leasehold improvements, base station and
switch equipment and labor expenses related to construction of sites. We
currently estimate that capital expenditures will total approximately $150
million in 1999, primarily relating to the continued expansion of our PCS
network to satisfy customer needs and competitive requirements, maintenance of
our network service quality and billing system functionality and completion of
customer service enhancement projects.
On March 15, 1999, we and five of our wholly-owned subsidiaries
entered into an agreement with Crown Castle to sell 650 towers, related assets
and certain liabilities for $275 million in cash. At the closing, the Purchase
Price is subject to adjustment based on the actual number of sites tendered at
closing. Pursuant to the asset purchase agreement and a related escrow
agreement, Crown Castle has deposited $50 million in cash with the Escrow Agent.
At closing, the Escrow Deposit will be delivered to us and credited against the
Closing Price. However, Crown Castle has also agreed that the Escrow Deposit
will be forfeited to us under certain specified conditions in the event that
Crown Castle is unable to receive adequate financing to consummate the
transaction and thus is unable to close the transaction in a timely manner. At
closing we and our subsidiaries will assign, and Crown Castle will assume, five
master site agreements, pursuant to which we and our affiliates will agree to
pay Crown Castle monthly rent of $1,800 per tower for the continued use of the
space that we or our affiliates currently occupy on the towers. The monthly
rent, including additional rents related to the addition of certain equipment,
will be increased on each fifth anniversary of each site lease up to an amount
that is 115% of the rent paid during the preceding five year period. The term of
each site lease will be ten years. We have the right to extend any site lease
for up to three additional five year periods. The Proposed Tower Disposition is
subject to a number of significant conditions, including: (i) compliance by us,
our subsidiaries and Crown Castle with the terms of the asset purchase
agreement; (ii) absence of litigation; (iii) receipt of regulatory approvals;
and (iv) absence of any material adverse effect with respect to our and our
subsidiaries' assets and assumed liabilities.
On January 5, 1999, we entered into an asset purchase agreement with
Public Service Cellular for the sale of substantially all of our cellular
assets. The purchase price is approximately $89 million. The closing of the
transaction is subject to certain conditions, including: (i) our receipt of
various consents from third parties;
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(ii) receipt of various regulatory approvals, including the approval of the FCC;
and (iii) Public Service Cellular maintaining its financing commitment through
the time of the closing. We expect to close this transaction in the second
quarter of 1999. This sale does not include any towers used in our cellular
business. We will lease space to Public Service Cellular on these towers, and we
will sell these towers to Crown Castle as part of the Proposed Tower
Disposition.
On June 22, 1998, pursuant to a stock purchase agreement between us
and SCANA Communications, Inc., a wholly-owned subsidiary of SCANA Corporation,
we sold to SCANA 50,000 shares of our nonvoting Series E 6.5% Cumulative
Convertible Preferred Stock (the "Series E Preferred") in a private placement
for an aggregate purchase price of $75 million. Also, on June 22, 1998, pursuant
to a stock purchase agreement between us and ITC Wireless, Inc., a wholly-owned
subsidiary of ITC Holding Company, Inc., we sold to ITC Wireless 50,000 shares
of our nonvoting Series F 6.5% Cumulative Convertible Preferred Stock (the
"Series F Preferred") in a private placement for an aggregate purchase price of
$75 million. The Series E Preferred and Series F Preferred become convertible on
June 22, 2003, at the option of the holder, into common stock at an initial
conversion price of $22.01, subject to adjustment. The Series E Preferred and
Series F Preferred are redeemable at our option any time after June 22, 2003,
but no later than June 1, 2010. The Series E Preferred and Series F Preferred
have a liquidation preference over the common stock of $1,500 per share, subject
to adjustment, plus accrued and unpaid dividends in the event of our
liquidation, dissolution or winding up. The 6.5% annual dividend on each of the
Series E Preferred and Series F Preferred is payable quarterly in common stock
or, under certain circumstances, cash. We intend to pay such quarterly dividends
in common stock for the foreseeable future.
On June 10, 1997, we issued $300 million principal amount of our
11.125% Senior Notes due June 2007 (the "1997 Notes" and together with the
previously issued Senior Discount Notes due February 2006 and the Senior
Discount Notes due May 2006, the "Notes") in a private offering. In September
1997, we exchanged substantially all of the private 1997 Notes for substantially
identical notes, except that the new notes were registered under the Securities
Act. We used $89.6 million of the proceeds from the 1997 Notes to purchase and
pledge, for the benefit of the holders of the 1997 Notes, certain U.S.
government securities to provide for the payment of the first six scheduled
interest payments on the 1997 Notes.
On June 5, 1997, we sold 50,000 shares of our nonvoting Series C
Convertible Preferred Stock (the "Series C Preferred") for an aggregate purchase
price of $22.5 million to The Huff Alternative Income Fund, L.P. Also, on June
5, 1997, we sold 50,000 shares of our nonvoting Series D Convertible Preferred
Stock (the "Series D Preferred") for an aggregate purchase price of $22.5
million to SCANA Communications. The Series C Preferred and Series D Preferred
are convertible, at the option of the holder, into common stock at a conversion
price subject to periodic adjustment. The Series C Preferred is convertible any
time after December 5, 1998, and the Series D Preferred is convertible any time
after March 14, 2002. The Series C Preferred and Series D Preferred are
redeemable at our option, in whole or in part, on a pro rata basis, at a
redemption price of $450 per share plus declared and unpaid dividends, any time
after June 5, 2002. The Series C Preferred and Series D Preferred have a
liquidation preference over the common stock of $450 per share plus declared and
unpaid dividends in the event of our liquidation, dissolution or winding up.
In May 1997, we sold our cellular operations in the State of Maine
to a subsidiary of Rural Cellular Corporation. On the closing date, Rural
Cellular paid us $71.8 million in cash and paid $5.4 million into escrow. On
November 3, 1997, we received the $5.4 million from escrow. In addition, Rural
Cellular reimbursed us for approximately $250,000 in capital expenditures made
on its behalf prior to the closing of the transaction.
On March 4, 1996, we entered into a $125 million credit agreement
with Ericsson Inc. regarding the purchase of and vendor financing for PCS
equipment and services. On October 31, 1996, March 31, 1997, June 26, 1997, and
November 18, 1997, we and Ericsson entered into amendments to the credit
facility, which increased the equipment financing commitment to $165 million and
amended certain other provisions of the credit facility. During the fourth
quarter of 1997, the $165 million commitment under the credit facility was
syndicated to a group of lenders. On December 23, 1997, the credit facility was
amended to increase the financing commitment to $265 million. On February 6,
1998, we and Ericsson entered into an Amended and Restated Credit Facility to
incorporate the terms and conditions of the original agreement and the
subsequent amendments.
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Although we currently are unable to predict with certainty the
amount of expenditures that may be made beyond 1999, we expect that we will
require additional capital. Sources of additional capital may include vendor
financing, cash flow from operations, public and private equity and debt
financing and asset dispositions. We may also require additional financing in
the event we decide to make acquisitions of additional licenses or businesses.
The extent of additional financing required will partially depend on the success
of our businesses. We currently have no other sources of income or cash flows
other than our cellular and PCS operations and the interest income earned from
investing our cash and the proceeds of the public and private debt and equity
offerings and the sale of our cellular operations and certain assets. We cannot
guarantee that additional financing will be available to us or, if available,
that it can be obtained on terms acceptable to us and within the limitations
contained in our indentures, the credit facility or any future financing
arrangements. The restrictions on additional indebtedness under our indentures
require us to satisfy specified leverage ratios in order to incur indebtedness;
however, they permit us and our subsidiaries to incur an unlimited amount of
additional indebtedness to finance the acquisition of inventory or equipment.
We expect to incur significant operating losses and to generate
significant negative cash flow from operating activities in the future while we
continue to develop and construct our PCS system and build a PCS customer base.
Cash interest will not be payable on our Senior Discount Notes prior to 2001.
Our management believes that cash flow from operations may be insufficient to
repay the Notes or any additional financing that we may obtain in full at
maturity and that the Notes may need to be refinanced. We cannot guarantee that
any such refinancing could be effected successfully or on terms acceptable to
us.
During 1998, we used net cash of $165.8 million for operating
activities, as compared to $57.0 million for 1997. Operating activities for 1998
consisted primarily of $265.8 million of net loss and $29.8 million of changes
in operating assets and liabilities, which were partially offset by $67.7
million of depreciation and amortization and $59.2 million of bond accretion on
the senior discount notes.
Cash used in investing activities was $184.1 million for 1998, as
compared to $248.7 million for 1997. Investing activities for 1998 consisted
primarily of capital expenditures totaling $207.3 million and a decrease in
accrued construction costs of $5.3 million (both primarily related to the
buildout of the PCS system and support systems). These activities were partially
offset by funds from the liquidation of $29.4 million of short-term investments,
which were used for the payment of interest related to the 1997 Notes.
Cash provided from financing activities was $227.7 million for 1998,
as compared to $447.2 million for 1997. Financing activities for 1998 consisted
primarily of net proceeds of $149.8 million from the sale of the Series E
Preferred and Series F Preferred and borrowings of $78.6 million under the
credit facility.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective in 1998, we 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 financial statements. SFAS 130 had no impact on our financial
statements as we have no comprehensive income elements.
Effective in 1998, we adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), which requires us to report financial and descriptive
information about our reportable operating segments. SFAS 131 requires the
reporting of a measure of segment profit or loss, certain specific revenue and
expense items and segment assets, as well as a reconciliation of total segment
revenues, total segment profit or loss, total segment assets and other amounts
disclosed for segments to corresponding amounts in our general-purpose financial
statements. See Note 10 to our consolidated financial statements.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), which is effective for fiscal years beginning after
June 15, 1999. SFAS 133 establishes accounting and reporting standards for
derivative instruments and
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transactions involving hedge accounting. We do not anticipate this statement
will have a material impact on our financial statements.
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"), which is
effective for fiscal years beginning after December 15, 1998. SOP 98-1 requires
capitalization of certain costs of internal-use software. We adopted SOP 98-1 in
January 1999 and do not anticipate this statement will have a material impact on
our financial statements.
OTHER
The Year 2000 issue is the result of potential problems with
computer systems or any equipment with computer chips that use or store dates
representing the year as just two digits (e.g., "99" for 1999). On January 1,
2000, any clock or date recording mechanism, including date sensitive software,
which uses only two digits to represent the year may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruptions of operations, including among
other things, a temporary inability to process transactions, send invoices or
engage in similar activities.
In 1998, we established a Year 2000 Task Force consisting of
representatives from our network operations, information technology, finance and
legal departments to address internal and external Year 2000 issues. The Task
Force reports regularly to an executive-level Steering Committee. To assist the
Task Force in its functions, we also engaged an outside consulting firm with
expertise in Year 2000 issues relating to the telecommunications industry. With
the support of this outside consulting firm, we completed Phase 1 of our Year
2000 compliance program in December 1998, which consisted of assessing internal
hardware and software we use for Year 2000 readiness as well as the state of
readiness of outside third parties with whom we have significant relationships
(e.g., vendors and suppliers).
Our assessment of internal systems included our IT systems as well
as non-IT systems (which systems contain embedded technology, such as network
equipment, HVAC systems and security systems containing microprocessors or other
similar circuitry). Throughout Phase 1, we also requested assurances from our
major suppliers, including suppliers of network hardware and software and of PCS
and cellular telephones, that they are addressing the Year 2000 issue and that
the suppliers' products will function properly in the year 2000. In many cases,
we are relying on such assurances that new and upgraded software and hardware
will be Year 2000 compliant. During Phase 2, we plan to test such third-party
products, but cannot be sure that our tests will be adequate or that, if
problems are identified, they will be addressed by the supplier in a timely and
satisfactory manner. We also contacted PCS and cellular roaming partners and
local exchange carriers that carry and terminate calls on our PCS and cellular
networks to determine the extent to which their interfaces with our networks are
vulnerable to Year 2000 issues. These actions are intended to help identify and
mitigate the possible external impacts of the Year 2000 problem. However, it is
impossible to fully assess the potential external consequences on our operations
in the event service interruptions occur from suppliers, roaming partners, local
exchange carriers and other third parties. We may also be at risk if certain
critical infrastructure services providers, such as electricity, water or
telephone service providers, experience difficulties that result in disruption
of service supplied to us.
Phase 2 of the Year 2000 compliance program includes development of
testing plans and remediation plans, as well as the implementation of those
plans. Once Phase 2 is completed, we should be able to predict the potential
impacts of Year 2000 noncompliance with respect to our internal systems as well
as external third parties with whom we have significant relationships (e.g.,
vendors and suppliers). Phase 2 of the program is anticipated to be completed in
mid-1999.
We do not expect that the amount of remediation work required to
address Year 2000 problems will be extensive. Many of our financial and network
systems have been implemented in the last few years, and our management believes
that this newer equipment and software is generally Year 2000 compliant.
However, we expect that we will be required to conduct limited Year 2000
readiness testing and to continue to modify some of our existing hardware and
software in order for our systems to function properly in the year 2000 and
thereafter.
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At this time, we have not calculated the total estimated cost of addressing Year
2000 issues. Our management believes, however, that such cost will not be
material and will be able to be funded through cash on hand. To date, we have
incurred and expensed only a nominal amount for Phase 1 and Phase 2 activities
under our Year 2000 plan, primarily for retainer of outside consultants and
assessment activities under the plan.
We are optimistic that we will not experience a material disruption
in our business as a result of Year 2000 problems in our network operations,
information processing or interfacing with local exchange carriers or roaming
partners. However, following Phase 2 of our Year 2000 plan we will develop a
contingency plan to provide for continuity of our business operations in the
event of unforeseen internal and external Year 2000 problems. Further, as the
Year 2000 project continues, we may discover additional Year 2000 problems. For
example, we may not be able to develop, implement, or test remediation or
contingency plans and may find that the costs of these activities exceed current
expectations. If we fail to satisfactorily resolve Year 2000 issues related to
our business in a timely manner, we could be exposed to liability from third
parties which could have a material adverse effect on our business, financial
condition or results of operations.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and the
Exchange Act. These statements appear in a number of places in this Report and
include all statements which are not historical facts and which relate to our
intent, belief or current expectations, or that of our directors or officers,
with respect to, among other things: (i) our financing plans, including our
ability to obtain financing in the future; (ii) trends affecting our financial
condition or results of operations; (iii) our growth strategy (including our
anticipated network buildout) and operating strategy; (iv) our anticipated
capital needs and anticipated capital expenditures; and (v) projected outcomes
and effects of litigation and investigations concerning us. Investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in forward-looking statements as a result
of : (i) factors affecting the availability, terms and cost of capital, risks
associated with the selection of our PCS digital protocol and PCS system
implementation, competitive factors and pricing pressures, general economic
conditions, the failure of the market demand for our products and services to be
commensurate with our management's expectations or past experience, the impact
of present or future laws and regulations on our business, changes in operating
expenses or the failure of operating and buildout expenses to be consistent with
our management's expectations and the difficulty of accurately predicting the
outcome and effect of certain matters, such as matters involving litigation and
investigations; (ii) various factors discussed herein; and (iii) those factors
discussed in detail in our previous filings with the Securities and Exchange
Commission, including the "Risk Factors" section of our Registration Statement
on Form S-4 (Registration number (333-31399), as declared effective by the
Securities and Exchange Commission on July 31, 1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our management believes our exposure to market rate fluctuations on
our investments is nominal due to the short-term nature of those investments. We
have market risk to the extent of our borrowings under the credit facility
because of the variable interest rate on the credit facility. However, our
management does not foresee any material prolonged changes in interest rates in
the near future. At present, we have no plans to enter into any hedging
arrangements with respect to our borrowings.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements, including our consolidated balance sheets
as of December 31, 1998 and 1997 and consolidated statements of income,
consolidated statements of cash flows and consolidated statements of changes in
stockholders' equity for the years ended December 31, 1998, 1997 and 1996,
together with the report of Arthur Andersen L.L.P. dated February 5, 1999, and
the schedule containing certain supporting information are attached to this
report as pages F-1 through F-21.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND
FINANCIAL DISCLOSURES
We had no disagreements on accounting or financial disclosure
matters with our accountants, nor did we change accountants, during the two
fiscal years ended December 31, 1998.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We incorporate by reference the information contained under the
caption "ELECTION OF DIRECTORS" in the Definitive Proxy Statement for the 1999
Annual Meeting of Stockholders of Powertel (the "1999 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
We incorporate by reference the information contained under the
caption "EXECUTIVE COMPENSATION" in the 1999 Proxy Statement except for those
portions entitled "Compensation/Stock Option Committee Report on Executive
Compensation" and "Comparative Company Performance."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We incorporate by reference the information contained under the
caption "EXECUTIVE COMPENSATION-- Beneficial Ownership of Capital Stock" in the
1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We incorporate by reference the information contained under the
caption "ELECTION OF DIRECTORS -- Certain Relationships and Related
Transactions" in the 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
The following financial statements of Powertel, Inc. are filed as a
part of this Report and are attached as pages F-1 through F-21:
Report of Independent Public Accountants on Financial
Statements
24
<PAGE> 26
Consolidated Balance Sheet as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended December
31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of Powertel, Inc.
are filed as a part of this report and are attached as pages
S-1 through S-2:
Report of Independent Public Accountants on Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997 and 1996
All other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
(a)(3) EXHIBITS
Exhibit
Number Exhibit Description
- ------- -------------------
2(a) * Asset Purchase Agreement dated December 23, 1996, by
and among Rural Cellular Corporation, Unity Cellular
Systems, Inc., InterCel Licenses, Inc. and InterCel,
Inc. (Filed as Exhibit 99.1 to the Company's Form 8-K
dated December 23, 1996 and incorporated herein by
reference.)
2(b) * Closing Memorandum dated May 1, 1997 by and between
Rural Cellular Corporation, MRCC, Inc., Unity Cellular
Systems, Inc., InterCel Licenses, Inc. and InterCel,
Inc. (Filed as Exhibit 2.2 to the Company's Form 8-K
dated May 12, 1997 and incorporated herein by
reference.) **
2(c) * Asset Purchase Agreement dated January 5, 1999, by and
among Public Service Cellular, Inc., Powertel, Inc.,
ICEL, Inc. and InterCel Licenses, Inc. (Filed as Exhibit
99.1 to the Company's Form 8-K dated January 5, 1999 and
incorporated herein by reference.) **
2(d) Asset Purchase Agreement dated March 15, 1999 by and
among Crown Castle International Corp., CCP Inc.,
Powertel Atlanta Towers, LLC, Powertel Birmingham
Towers, LLC, Powertel Jacksonville Towers, LLC, Powertel
Kentucky Towers, LLC, Powertel Memphis Towers, LLC and
Powertel, Inc. **
2(e) Escrow Agreement dated March 15, 1999 by and among Crown
Castle International Corp., CCP Inc., Powertel Atlanta
Towers, LLC, Powertel Birmingham Towers, LLC, Powertel
Jacksonville Towers, LLC, Powertel Kentucky Towers, LLC,
Powertel Memphis Towers, LLC, Powertel, Inc. and
SunTrust Bank.
3(a) * Third Restated Certificate of Incorporation of
InterCel, Inc. dated June 6, 1996. (Filed as Exhibit
10(yy) to the Company's Form 10-Q filed for the quarter
ended September 30, 1996 (the "1996 Third Quarter
10-Q"), and incorporated herein by reference.)
25
<PAGE> 27
3(b) * Certificate of Amendment of Restated Certificate of
Incorporation of InterCel, Inc. dated June 23, 1997.
(Filed as Exhibit 10(b) to the Company's Form 8-K filed
July 1, 1997, and incorporated herein by reference.)
3(c) * Restated By-Laws of InterCel, Inc. (Filed as Exhibit
3(b) to Registration Statement on Form S-1, File No.
33-72734 (the "1993 Form S-1"), and incorporated herein
by reference.)
4(a) * Indenture dated as of February 7, 1996 between InterCel,
Inc. and Bankers Trust Company, as Trustee, relating to
the 12% Senior Discount Notes Due 2006 of InterCel, Inc.
(Filed as Exhibit 4(a) to Registration Statement on Form
S-1, File No. 33-96218 ("February 1996 Form S-1"), and
incorporated herein by reference.)
4(b) * Warrant Agreement dated as of February 7, 1996 between
InterCel, Inc. and Bankers Trust Company, as Warrant
Agent. (Filed as Exhibit 4(b) to the February 1996 Form
S-1, and incorporated herein by reference.)
4(c) * Form of Indenture (including form of Note) between
InterCel, Inc. and Bankers Trust Company, as Trustee,
relating to the 12% Senior Discount Notes Due 2006 of
InterCel, Inc. (Filed as Exhibit 4(c) to Registration
Statement on Form S-1, File No. 333-2748 (the "April
1996 Form S-1"), and incorporated herein by reference.)
4(d) * Indenture (including form of Note) dated June 10, 1997
between InterCel, Inc. and Bankers Trust Company, as
Trustee, relating to the 11-1/8% Senior Notes Due 2007
of InterCel, Inc. (Filed as Exhibit 4(h) to Registration
Statement on Form S-4, File No. 333-31399 (the "1997
Form S-4"), and incorporated herein by reference.)
4(e) * Collateral Pledge and Security Agreement dated June 10,
1997 between InterCel, Inc. and Bankers Trust Company,
as Trustee. (Filed as Exhibit 4(j) to the 1997 Form S-4,
and incorporated herein by reference.) **
4(f) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series A Convertible Preferred Stock of InterCel, Inc.
(Filed as Exhibit 10(tt) to the 1996 Third Quarter 10-Q,
and incorporated herein by reference.)
4(g) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series B Convertible Preferred Stock of InterCel, Inc.
(Filed as Exhibit 10(uu) to the 1996 Third Quarter 10-Q,
and incorporated herein by reference.)
4(h) * Certificate of Amendment to the Certificate of
Designations, Powers, Preferences and Relative,
Participating or Other Rights, and the Qualifications,
Limitations or Restrictions Thereof, of Series B
Convertible Preferred Stock of InterCel, Inc. (Filed as
Exhibit 4(k) to the 1997 Form S-4, and incorporated
herein by reference.)
4(i) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series C Convertible Preferred Stock of InterCel, Inc.
(Filed as Exhibit 4(f) to the Company's Form 10-K filed
for the year ended December 31, 1996 (the "1996 Form
10-K"), and incorporated herein by reference.)
4(j) * Amended Certificate of Designations, Powers, Preferences
and Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series C Convertible Preferred Stock of InterCel, Inc.
(Filed as Exhibit 4(l) to the 1997 Form S-4, and
incorporated herein by reference.)
26
<PAGE> 28
4(k) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series D Convertible Preferred Stock of InterCel, Inc.
(Filed as Exhibit 4(g) to the 1996 Form 10-K, and
incorporated herein by reference.)
4(l) * Amended Certificate of Designations, Powers,
Preferences and Relative, Participating or Other Rights,
and the Qualifications, Limitations or Restrictions
Thereof, of Series D Convertible Preferred Stock of
InterCel, Inc. (Filed as Exhibit 4(m) to the 1997 Form
S-4, and incorporated herein by reference.)
4(m) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series E 6.5% Cumulative Convertible Preferred Stock of
Powertel, Inc. (Filed as Exhibit 4(a) to the Company's
Form 10-Q filed for the quarter ended June 30, 1998 (the
"1998 Second Quarter 0-Q"), and incorporated herein by
reference.)
4(n) * Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of
Series F 6.5% Cumulative Convertible Preferred Stock of
Powertel, Inc. (Filed as Exhibit 4(b) to the 1998 Second
Quarter 10-Q, and incorporated herein by reference.)
4(o) * First Supplemental Indenture dated as of June 16, 1998
to the following Indentures: Indenture dated as of
February 7, 1996 for the 12% Senior Discount Notes Due
2006; Indenture dated as of April 19, 1996 for the 12%
Senior Discount Notes Due 2006; Indenture dated as of
June 10, 1997 for the 11 1/8% Senior Notes Due 2007.
(Filed as Exhibit 4(c) to the 1998 Second Quarter 10-Q,
and incorporated herein by reference.)
10(a) * Software License Agreement between InterCel, Inc. and
Systematics Telecommunications Services, Inc. dated July
24, 1992. (Filed as Exhibit 10(aa) to the Company's Form
10-KSB filed for the year ended December 31, 1992,
and incorporated herein by reference.)
10(b) * Directors and Officers Insurance and Company
Reimbursement Policy. (Filed as Exhibit 10(ii) to the
1993 Form S-1, and incorporated herein by reference.)
10(c) * Form of Indemnity Agreement. (Filed as Exhibit 10(jj) to
the 1993 Form S-1, and incorporated herein by
reference.)
10(d) * InterCel, Inc. 1995 Employee Restricted Stock Plan (as
amended on November 17, 1995). (Filed as Exhibit 10(e)
to the February 1996 Form S-1, and incorporated herein
by reference.)
10(e) * InterCel, Inc. Amended and Restated 1991 Stock Option
Plan. (Filed as Appendix C to the Company's Definitive
Proxy Statement for the 1999 Annual Meeting of
Stockholders, and incorporated herein by reference.)
10(f) * InterCel, Inc. Amended Nonemployee Stock Option Plan.
(Filed as Exhibit 10(q) to the Company's Form 10-K filed
for the year ended December 31, 1994 (the "1994 Form
10-K"), and incorporated herein by reference.)
10(g) * Directed Employee Benefit Trust Agreement between The
Charles Schwab Trust Company and InterCel, Inc. (Filed
as Exhibit 10(jjjj) to the 1994 Form 10-K, and
incorporated herein by reference.)
10(h) * Second Amendment to InterCel, Inc. Pension Plan dated as
of August 2, 1996. (Filed as Exhibit 10(ss) to the 1996
Third Quarter 10-Q, and incorporated herein by
reference.)
27
<PAGE> 29
10(i) * InterCel, Inc. 401(k) Profit Sharing Plan. (Filed as
Exhibit 10(j) to the February 1996 Form S-1, and
incorporated herein by reference.)
10(j) * Defined Benefit Pension Plan and Trust Adoption
Agreement (Unity Telephone Company) dated as of January
15, 1984. (Filed as Exhibit 10(ss) to the 1993 Form S-1,
and incorporated herein by reference.)
10(k) * Defined Benefit Pension Plan (Unity Telephone Company).
(Filed as Exhibit 10(tt) to the 1993 Form S-1, and
incorporated herein by reference.)
10(l) * Amendment to Unity Telephone Pension Plan dated June 29,
1992. (Filed as Exhibit 10(uu) to the 1993 Form S-1, and
incorporated herein by reference.)
10(m) * ITC Holding Company Inc. Employees Pension Plan and
Trust (as amended on December 15, 1994). (Filed as
Exhibit 10(zz) to the February 1996 Form S-1, and
incorporated herein by reference.)
10(n) * DMS-MTX Cellular Supply Agreement dated March 29, 1995
between InterCel, Inc. and Northern Telecom Inc. (Filed
as Exhibit 10(pp) to the February 1996 Form S-1, and
incorporated herein by reference.)
10(o) * Amendment No. 1 to DMS-MTX Cellular Supply Agreement
between InterCel, Inc. and Northern Telecom Inc. dated
August 9, 1995. (Filed as Exhibit 10(qq) to the February
1996 Form S-1, and incorporated herein by reference.)
10(p) * Information and Network Products and Services Agreement
dated June 16, 1994 between InterCel, Inc. and GTE
Telecommunications Service Incorporated. (Filed as
Exhibit 10(uu) to the February 1996 Form S-1, and
incorporated herein by reference.)
10(q) * Credit Agreement dated as of March 4, 1996 among
InterCel PCS Services, Inc., as Borrower, Ericsson Inc.,
as Initial Lender, and Ericsson Inc. as Agent. (Filed as
Exhibit 10(nn) to the April 1996 Form S-1, and
incorporated herein by reference.)
10(r) * Amendment No. 1 to the Credit Agreement by and among
Powertel, Inc., as Borrower, Ericsson Inc., as Initial
Lender, and Ericsson Inc., as Agent, dated as of October
31, 1996. (Filed as Exhibit 10(ww) to the 1996 Third
Quarter 10-Q and incorporated herein by reference.)
10(s) * Amendment No. 2 to the Credit Agreement by and among
Powertel, Inc., as Borrower, Ericsson Project Finance
A.B., as Lender, and Ericsson Inc., as Agent, dated as
of March 31, 1997. (Filed as Exhibit 10(e) to the 1997
Form S-4, and incorporated herein by reference.)
10(t) * Amendment No. 3 to the Credit Agreement by and among
Powertel PCS, Inc., as Borrower, Goldman Sachs Credit
Partners L.P., as Lender, and Ericsson Inc., as Agent,
dated as of June 26, 1997. (Filed as Exhibit 10(f) to
the 1997 Form S-4, and incorporated herein by
reference.)
10(u) * Amendment No. 4 to the Credit Agreement by and among
Powertel PCS, Inc., as Borrower, Goldman Sachs Credit
Partners L.P., as Lender, and Ericsson Inc., as Agent,
dated as of November 18, 1997. (Filed as Exhibit 10(u)
to the Company's Form 10-K for the year ended December
31, 1997 (the "1997 Form 10-K") and incorporated herein
by reference.)
10(v) * Amendment No. 5 to the Credit Agreement by and among
Powertel PCS, Inc., as Borrower, Goldman Sachs Credit
Partners L.P., as Lender, and Ericsson Inc., as Agent,
dated as of December 23, 1997. (Filed as Exhibit 10(v)
to the 1997 Form 10-K, and incorporated herein by
reference.)
28
<PAGE> 30
10(w) * Acquisition Agreement dated as of March 4, 1996 between
InterCel PCS Services, Inc. and Ericsson Inc. (Filed as
Exhibit 10(rr) to the April 1996 Form S-1, and
incorporated herein by reference.)
10(x) * Amendment No. 1 to the Acquisition Agreement for
Ericsson CMS 40 Personal Communications Systems dated as
of September 2, 1997 between Powertel PCS, Inc. and
Ericsson Inc. (Filed as Exhibit 10(j) to the Company's
Form 10-Q filed for the quarter ended September 30,
1997, and incorporated herein by reference.)
10(y) * License Agreement between LHS Communications, Inc. and
Powertel, Inc. dated August 2, 1996. (Filed as Exhibit
10(vv) to the 1996 Third Quarter 10-Q, and incorporated
herein by reference.)
10(z) * Agreement between BellSouth Telecommunications, Inc. and
InterCel, Inc. effective as of April 1, 1997. (Filed as
Exhibit 10(pp) to the Company's Form 10-Q filed for the
quarter ended March 31, 1997 (the "1997 First Quarter
10-Q"), and incorporated herein by reference.) **
10(aa) * Agreement between BellSouth Telecommunications, Inc. and
Powertel, Inc. effective as of April 1, 1997. (Filed as
Exhibit 10(qq) to the 1997 First Quarter 10-Q, and
incorporated herein by reference.) **
10(bb) * Stock Purchase Agreement dated as of March 14, 1997
between InterCel, Inc. and SCANA Communications, Inc.
(Filed as Exhibit 10(pp) to the 1996 Form 10-K, and
incorporated herein by reference.)
10(cc) * Escrow Agreement dated as of March 14, 1997 between
InterCel, Inc., SCANA Communications, Inc. and Bankers
Trust Company, as Escrow Agent. (Filed as Exhibit 10(qq)
to the 1996 Form 10-K, and incorporated herein by
reference.)
10(dd) * Stock Purchase Agreement dated as of March 14, 1997
between InterCel, Inc. and The Huff Alternative Income
Fund, L.P. (Filed as Exhibit 10(rr) to the 1996 Form
10-K, and incorporated herein by reference.)
10(ee) * Escrow Agreement dated as of March 14, 1997 between
InterCel, Inc., The Huff Alternative Income Fund, L.P.
and Bankers Trust Company, as Escrow Agent. (Filed as
Exhibit 10(ss) to the 1996 Form 10-K, and incorporated
herein by reference.)
10(ff) * Termination of Stock Purchase Agreement dated as of
April 30, 1997 between InterCel, Inc. and The Huff
Alternative Income Fund, L.P. (Filed as Exhibit 10(nn)
to the 1997 First Quarter 10-Q, and incorporated herein
by reference.)
10(gg) * Termination of Stock Purchase Agreement dated as of
April 30, 1997 between InterCel, Inc. and SCANA
Communications, Inc. (Filed as Exhibit 10(oo) to the
1997 First Quarter 10-Q, and incorporated herein by
reference.)
10(hh) * Stock Purchase Agreement dated as of May 23, 1997
between InterCel, Inc. and SCANA Communications, Inc.
(Filed as Exhibit 10(c) to the 1997 Form S-4, and
incorporated herein by reference.)
10(ii) * Escrow Agreement dated as of June 5, 1997 between
InterCel, Inc., SCANA Communications, Inc. and Bankers
Trust Company, as Escrow Agent. (Filed as Exhibit 10(d)
to the 1997 Form S-4, and incorporated herein by
reference.)
10(jj) * Stock Purchase Agreement dated as of May 23, 1997
between InterCel, Inc. and The Huff Alternative Income
Fund, L.P. (Filed as Exhibit 10(a) to the 1997 Form S-4,
and incorporated herein by reference.)
29
<PAGE> 31
10(kk) * Escrow Agreement dated as of June 5, 1997 between
InterCel, Inc., The Huff Alternative Income Fund, L.P.
and Bankers Trust Company, as Escrow Agent. (Filed as
Exhibit 10(b) to the 1997 Form S-4, and incorporated
herein by reference.)
10(ll) * First Amendment to Interconnection Agreement between
InterCel, Inc. and BellSouth Telecommunications, Inc.
effective as of April 1, 1997. (Filed as Exhibit 10(ll)
to the 1997 Form 10-K, and incorporated herein by
reference.)
10(mm) * First Amendment to Interconnection Agreement between
Powertel, Inc. and BellSouth Telecommunications, Inc.
effective as of April 1, 1997. (Filed as Exhibit 10(mm)
to the 1997 Form 10-K, and incorporated herein by
reference.)
10(nn) * Powertel 401(k) Profit Sharing Plan (as amended and
restated effective January 1, 1997, and as renamed
effective July 1, 1997). (Filed as Exhibit 10(nn) to the
1997 Form 10-K, and incorporated herein by reference.)
10(oo) * Stock Purchase Agreement dated June 22, 1998, by and
between Powertel, Inc. and SCANA Communications, Inc.
(Filed as Exhibit 10(a) to the 1998 Second Quarter 10-Q,
and incorporated herein by reference.)
10(pp) * Stock Purchase Agreement dated June 22, 1998, by and
between Powertel, Inc. and ITC Wireless, Inc. (Filed as
Exhibit 10(b) to the 1998 Second Quarter 10-Q, and
incorporated herein by reference.)
10(qq) * Amended and Restated Credit Agreement dated as of
February 6, 1998, among Powertel PCS, Inc., the Banks
and Other Financial Institutions Listed on the Signature
Pages thereof, Ericsson Inc., as Agent, and National
Westminster Bank PLC, as Administrative Agent for the
Lenders. (Filed as Exhibit (10(a) to the Company's Form
10-Q filed for the quarter ended March 31, 1998, and
incorporated herein by reference.) **+
10(rr) * Letter Agreement dated April 22, 1998 by and among
Powertel PCS, Inc., Ericsson Inc., National Westminster
Bank plc., GE Capital and the lenders consenting thereto
relating to the Credit Facility. (Filed as Exhibit 10(c)
to the 1998 Second Quarter 10-Q, and incorporated herein
by reference.)
12 Statements regarding Computation of Ratios
21 Subsidiaries of Powertel, Inc.
23 Consent of Arthur Andersen LLP
24 Powers of Attorney for the following individuals:
Campbell B. Lanier, III, Allen E. Smith, Fred G. Astor,
Jr., Donald W. Burton, O. Gene Gabbard, Ann Milligan,
Maurice P. O'Connor, William H. Scott, III, William B.
Timmerman and Donald W. Weber (included on signature
page hereto)
27 Financial Data Schedule (for SEC use only)
- ---------------------------
* Previously filed.
** The Registrant agrees to furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon
request, as provided in Item 601(b)(2) of Regulation S-K.
+ Confidential treatment has been granted for certain confidential portions
of this exhibit pursuant to Rule 24(b)(2) under the Exchange Act. In
accordance with Rule 24(b)(2), these confidential portions have been
omitted from this exhibit and filed separately with the Commission.
(b) REPORTS ON FORM 8-K
None.
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereto duly authorized.
POWERTEL, INC.
March 29, 1999 By: /s/ Allen E. Smith
---------------------------------------------
Allen E. Smith
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints jointly and severally, Allen E.
Smith and Fred G. Astor, Jr., and each one of them, his attorneys-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
and all amendments to this Annual Report (Form 10-K) and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchanges Act of
1934, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
March 29, 1999 /s/ Campbell B. Lanier, III
------------------------------------------------
Campbell B. Lanier, III
Chairman of the Board of Directors
March 29, 1999 /s/ Allen E. Smith
------------------------------------------------
Allen E. Smith
Chief Executive Officer, President and Director
(principal executive officer)
March 29, 1999 /s/ Fred G. Astor, Jr.
------------------------------------------------
Fred G. Astor, Jr.
Chief Financial Officer and Executive
Vice President (principal financial and
accounting officer)
March 29, 1999 /s/ Donald W. Burton
------------------------------------------------
Donald W. Burton
Director
March 29, 1999 /s/ O. Gene Gabbard
------------------------------------------------
O. Gene Gabbard
Director
31
<PAGE> 33
March 29, 1999 /s/ Ann Milligan
------------------------------------------------
Ann Milligan
Director
March , 1999
------------------------------------------------
Maurice P. O'Connor
Director
March 29, 1999 /s/ William H. Scott, III
------------------------------------------------
William H. Scott, III
Director
March , 1999
------------------------------------------------
William B. Timmerman
Director
March 29, 1999 /s/ Donald W. Weber
------------------------------------------------
Donald W. Weber
Director
32
<PAGE> 34
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants...................................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997.................................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996.................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1998,
1997 and 1996.............................................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996.................... F-6
Notes to Consolidated Financial Statements.................................................................... F-7
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Powertel, Inc.:
We have audited the accompanying consolidated balance sheets of
POWERTEL, INC. (a Delaware corporation) as of December 31, 1998 and 1997 and the
related statements of operations, changes in stockholders' equity, and cash
flows for each of the three years ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Powertel, Inc. and
its subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years ended December 31,
1998, in conformity with generally accepted accounting principles.
As more fully discussed in Note 2 of Notes to Consolidated Financial
Statements, effective January 1, 1996, the Company changed its method of
accounting for promotional costs.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 5, 1999
F-2
<PAGE> 36
POWERTEL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................................................... $ 204,787 $ 326,954
Restricted cash for payment of interest (Note 2) .................................... 33,375 33,375
Accounts receivable, net of allowance for doubtful accounts
of $4,895 and $1,768 at December 31, 1998 and 1997, respectively ................. 28,726 34,549
Inventories (Note 2) ................................................................ 20,683 3,975
Prepaid expenses and other .......................................................... 9,248 6,631
----------- -----------
296,819 405,484
----------- -----------
PROPERTY AND EQUIPMENT, AT COST (Note 2):
Land ................................................................................ 932 907
Building and towers ................................................................. 311,723 244,095
Equipment ........................................................................... 329,993 247,432
Furniture and fixtures .............................................................. 8,616 5,296
Assets under construction ........................................................... 98,350 43,719
----------- -----------
749,614 541,449
Less: accumulated depreciation .................................................. (107,210) (49,699)
----------- -----------
642,404 491,750
----------- -----------
OTHER ASSETS (Note 2):
Licenses, net of accumulated amortization of $16,748 and $7,032 at
December 31, 1998 and 1997, respectively ......................................... 407,998 416,252
Restricted cash for payment of interest ............................................. 14,343 43,710
Deferred charges and other, net of accumulated amortization of $5,749
and $3,294 at December 31, 1998 and 1997, respectively ........................... 19,014 21,396
----------- -----------
441,355 481,358
----------- -----------
Total assets ................................................................... $ 1,380,578 $ 1,378,592
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade ............................................................ $ 14,633 $ 46,133
Accrued construction costs .......................................................... 17,807 23,092
Accrued other ....................................................................... 20,529 11,015
Advance billings and customer deposits .............................................. 7,898 2,429
Accrued taxes other than income ..................................................... 6,261 6,056
Accrued interest .................................................................... 2,781 2,781
Current portion of long-term obligations (Note 4) ................................... 49 256
----------- -----------
69,958 91,762
----------- -----------
LONG-TERM OBLIGATIONS (Note 4):
12% Senior Discount Notes due February 2006 ......................................... 275,069 244,014
12% Senior Discount Notes due May 2006 .............................................. 274,393 244,344
11.125% Senior Notes due June 2007 .................................................. 300,000 300,000
Credit facility ..................................................................... 258,532 179,961
Other ............................................................................... 76 695
----------- -----------
1,108,070 969,014
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8):
CUMULATIVE CONVERTIBLE, REDEEMABLE
PREFERRED STOCK (Note 5) ............................................................. 152,219 --
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock (Note 5) ............................................................ 3 3
Common Stock: $.01 par value; 100,000,000 shares authorized,
27,265,924 and 27,017,143 issued and outstanding at December 31, 1998
and 1997, respectively ........................................................... 273 270
Paid-in capital ..................................................................... 479,876 477,110
Accumulated deficit ................................................................. (428,774) (157,934)
Deferred compensation ............................................................... (702) (1,288)
Treasury stock, at cost - 52,483 shares at December 31, 1998 and 1997, respectively . (345) (345)
----------- -----------
50,331 317,816
----------- -----------
Total liabilities and stockholders' equity ..................................... $ 1,380,578 $ 1,378,592
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-3
<PAGE> 37
POWERTEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
--------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C>
REVENUES AND SALES (Note 2):
Postpaid revenues ....................... $ 132,709 $ 51,951 $ 22,106
Roaming revenues ........................ 10,244 5,858 8,501
Prepaid revenues ........................ 2,579 -- --
Other revenues .......................... 6,743 4,936 1,268
--------- --------- --------
Total service revenues ............... 152,275 62,745 31,875
Equipment sales ......................... 23,161 16,171 7,250
--------- --------- --------
Total revenues and sales ........... 175,436 78,916 39,125
--------- --------- --------
OPERATING EXPENSES:
Cost of services ........................ 42,777 28,277 5,811
Cost of equipment sold .................. 79,144 45,318 11,653
Operations .............................. 56,522 23,989 9,927
Selling and marketing ................... 63,936 41,409 13,301
General and administrative .............. 37,639 25,742 16,963
Depreciation ............................ 57,938 42,747 5,887
Amortization ............................ 9,716 6,535 4,214
--------- --------- --------
Total operating expenses ........... 347,672 214,017 67,756
--------- --------- --------
OPERATING LOSS ............................. (172,236) (135,101) (28,631)
--------- --------- --------
OTHER EXPENSE (INCOME):
Interest expense (income), net .......... 93,656 42,564 (3,175)
Gain on sale of subsidiary .............. -- (41,912) --
Miscellaneous (income) expense .......... (62) (585) 1,226
--------- --------- --------
Total other expense (income) ....... 93,594 67 (1,949)
--------- --------- --------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (265,830) (135,168) (26,682)
INCOME TAX BENEFIT ......................... -- -- (1,654)
--------- --------- --------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE ................ (265,830) (135,168) (25,028)
DIVIDENDS ON CUMULATIVE CONVERTIBLE,
REDEEMABLE PREFERRED STOCK ............. (5,010) -- --
--------- --------- --------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... (270,840) (135,168) (25,028)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... -- -- (2,583)
--------- --------- --------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS .. $(270,840) $(135,168) $(27,611)
========= ========= ========
LOSS PER SHARE (Note 2):
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... $ (10.02) $ (5.04) $ (1.00)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ................... -- -- (0.10)
--------- --------- --------
BASIC AND DILUTED LOSS PER COMMON SHARE .... $ (10.02) $ (5.04) $ (1.10)
========= ========= ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .......... 27,019 26,834 25,087
========= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-4
<PAGE> 38
POWERTEL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
COMMON CONVERTIBLE PAID-IN (ACCUMULATED DEFERRED TREASURY STOCKHOLDERS'
STOCK PREFERRED CAPITAL DEFICIT) COMPENSATION STOCK EQUITY
----------- ------------ ----------- ------------- ------------ -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995......... $ 100 $ -- $ 32,440 $ 4,845 $ (371) $ (340) $ 36,674
Issuance of common stock under
stock options (Note 6).......... 1 -- 181 -- -- -- 182
Issuance of common stock, in
connection with Powertel
business combination............ 97 -- 129,943 -- -- -- 130,040
Issuance of common stock, net
of issuance expenses............ 71 -- 109,919 -- -- -- 109,990
Issuance of warrants............... -- -- 6,092 -- -- -- 6,092
Issuance of Series A Convertible
Preferred Stock, net of issuance
expenses (Note 5)............... -- 1 75,739 -- -- -- 75,740
Issuance of Series B Convertible
Preferred Stock, net of issuance
expenses (Note 5)............... -- 1 75,739 -- -- -- 75,740
Purchase of treasury shares........ -- -- -- -- -- (5) (5)
Amortization of deferred
compensation.................... -- -- -- -- 165 -- 165
Net loss available to common
stockholders.................... -- -- -- (27,611) -- -- (27,611)
---------- ----------- ----------- ------------- ------------ ------- ------------
BALANCE, DECEMBER 31, 1996......... 269 2 430,053 (22,766) (206) (345) 407,007
Issuance of common stock under
stock options................... 1 -- 711 -- -- -- 712
Issuance of common stock under
restricted stock agreement (Note 6) -- -- 1,455 -- (1,455) -- --
Issuance of Series C Convertible
Preferred Stock, net of issuance
expenses (Note 5)............... -- .5 22,445.5 -- -- -- 22,446
Issuance of Series D Convertible
Preferred Stock, net of issuance
expenses (Note 5)............... -- .5 22,445.5 -- -- -- 22,446
Amortization of deferred
compensation.................... -- -- -- -- 373 -- 373
Net loss available to common
stockholders.................... -- -- -- (135,168) -- -- (135,168)
---------- ----------- ----------- ------------- ------------ ------- ------------
BALANCE, DECEMBER 31, 1997......... 270 3 477,110 (157,934) (1,288) (345) 317,816
Issuance of common stock under
stock options.................. 1 -- 195 -- -- -- 196
6.5% stock dividend on Cumulative
Convertible, Redeemable
Preferred Stock (Note 5)........ 2 -- 2,571 -- -- -- 2,573
Amortization of deferred
compensation.................... -- -- -- -- 586 -- 586
Net loss available to common
stockholders.................... -- -- -- (270,840) -- -- (270,840)
---------- ----------- ----------- ------------- ------------ ------- ------------
BALANCE, DECEMBER 31, 1998......... $ 273 $ 3 $ 479,876 $ (428,774) $ (702) $ (345) $ 50,331
========== =========== =========== ============= ============ ======= ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-5
<PAGE> 39
POWERTEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Loss before cumulative effect of change in accounting principle ........ $(265,830) $(135,168) $ (25,028)
Adjustments to reconcile loss to net cash used in
operating activities --
Gain on sale of subsidiary, net ................................... -- (41,912) --
Bond accretion .................................................... 59,204 34,061 12,089
Amortization of offering costs of notes ........................... 2,455 2,039 1,251
Depreciation and amortization ..................................... 67,654 49,282 10,101
Other, net ........................................................ 586 526 (275)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ..................... 5,823 (28,596) (3,975)
(Increase) decrease in inventories ............................. (16,708) 3,393 (6,974)
(Increase) decrease in other assets ............................ (2,690) 8,613 (14,077)
(Decrease) increase in accounts payable, accrued expenses
and other current liabilities .............................. (16,312) 50,732 11,633
--------- --------- ---------
Net cash used in operating activities ......................... (165,818) (57,030) (15,255)
--------- --------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures ................................................... (207,292) (291,849) (233,551)
Liquidation (purchase) of investments, net ............................. 29,367 (1,426) (75,659)
Proceeds from sale of subsidiary ....................................... -- 77,204 --
Payment for FCC licenses ............................................... -- (31,251) (195,242)
Microwave relocation ................................................... (862) (9,266) (15,199)
(Decrease) increase in accrued construction costs ...................... (5,285) 7,878 15,214
Cash acquired in Powertel business combination ......................... -- -- 15,353
--------- --------- ---------
Net cash used in investing activities ......................... (184,072) (248,710) (489,084)
--------- --------- ---------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES:
Proceeds from sale of cumulative convertible, redeemable preferred
stock, net ............................................................. 149,782 -- --
Borrowings under credit facility ....................................... 78,571 110,447 69,514
Proceeds from sale of common stock, net ................................ 196 712 109,990
Proceeds from issuance of 11.125%senior notes due June 2007 ............ -- 290,637 --
Proceeds from sale of preferred stock, net ............................. -- 44,892 151,480
Proceeds from issuance of 12% senior discount notes due February 2006 .. -- -- 192,150
Proceeds from issuance of 12% senior discount notes due May 2006 ....... -- -- 193,152
Other, net ............................................................. (826) 481 (27,052)
--------- --------- ---------
Net cash provided from financing activities ................... 227,723 447,169 689,234
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...................... (122,167) 141,429 184,895
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................ 326,954 185,525 630
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................................. $ 204,787 $ 326,954 $ 185,525
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized ..................... $ 52,913 $ 24,453 $ 2,005
Cash paid for income taxes ............................................. -- 213 103
Net book value of assets sold in Unicel disposition .................... -- 35,292 --
Noncash investing and financing activities:
Total capitalized interest .......................................... 1,900 22,093 29,039
Dividend on cumulative convertible, redeemable preferred stock paid
in stock........................................................... 2,573 -- --
Fair value of assets acquired in Powertel business combination ...... -- -- 130,041
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-6
<PAGE> 40
POWERTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, and 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Powertel, Inc. (the "Company") was incorporated in Delaware in April
1991 under the name Intercel, Inc. In June 1997, the Company changed its name to
Powertel, Inc. The Company provides personal communication services ("PCS") in
the southeastern United States under the name "Powertel" and cellular telephone
service in contiguous portions of eastern Alabama and western Georgia under the
name "Intercel". On January 5, 1999, the Company entered into an agreement to
sell substantially all the assets related to its cellular operations (Note 12).
Prior to May 1, 1997, the Company also provided cellular telephone
service in the State of Maine under the name "Unicel" (Note 3).
The Company's PCS licenses encompass a territory of approximately
246,000 contiguous square miles with a population of approximately 24.4 million
people (according to industry publications) in the Major Trading Areas ("MTAs")
of Atlanta, Georgia; Jacksonville, Florida; Memphis, Tennessee/Jackson,
Mississippi; and Birmingham, Alabama; and in 13 Basic Trading Areas ("BTAs") in
Kentucky and Tennessee. The Company first introduced its PCS services in October
1996 in Jacksonville, Florida and Montgomery, Alabama and, to date, has launched
its PCS services in a total of 34 markets in the Southeast. The Company's
cellular telephone service area has a population of approximately 296,000 people
(according to the 1990 U.S. Census) and covers approximately 100 miles of
Interstate Highway 85 and 40 miles of Interstate Highway 185 in the
Alabama/Georgia market.
While there are numerous wireless telephone systems operating in the
United States and other countries, the wireless telecommunications industry has
only limited operating history. Achieving profitable PCS operations will require
the Company to successfully compete with other PCS providers in all of its
markets, as well as with both existing and future wireless providers. In
addition, successful PCS operations will require the development of products
that are at least as commercially effective as its wireless competitors. Any
failure to anticipate and respond to changes to technology and customer desires
could have an adverse effect on the PCS business.
Management expects to incur significant operating losses and to
generate significant negative cash flows in future periods while it continues to
develop and expand its PCS system and builds a PCS customer base. Management
believes it has adequate resources to fund these losses and negative cash flows
during the initial years of the PCS system buildout and operation or that
additional sources of funds are available via public and private debt and equity
placements, additional lines of credit or potential asset sales. If such sources
are needed but not available, management will have to alter its current buildout
and operating plans.
2. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements are prepared on the accrual basis
of accounting and include the accounts of the Company and all majority-owned
subsidiaries. All significant intercompany balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
F-7
<PAGE> 41
and disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Source of Supplies
The Company relies on local telephone companies and other companies to
provide certain communications services. Although management feels alternative
telecommunications facilities could be found in a timely manner, any disruption
of these services could have an adverse effect on operating results.
Although the Company attempts to maintain multiple vendors for each
required product, its inventory and equipment, which are important components of
its operations, are each currently acquired primarily from less than five
sources. In addition, some of the Company's suppliers have limited resources and
production capacity. If the suppliers are unable to meet the Company's needs as
it builds out its network infrastructure and sells services and equipment, then
delays and increased costs in the expansion of the Company's network
infrastructure or losses of potential customers could result, which would affect
operating results adversely.
Presentation
Certain prior year amounts have been reclassified to conform to the
current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, and
short-term investments with original maturities of three months or less.
Restricted Cash for Payment of Interest
Restricted cash consists of certain U.S. government securities with
varying maturities which have been purchased and pledged, for the benefit of the
holders of the 11.125% Senior Notes due June 2007, to provide for the payment of
the first six scheduled interest payments on such Notes (Note 4).
Credit Risk
The Company's accounts receivable subject the Company to credit risk.
The Company extends credit to its customers based upon an evaluation of the
customer's financial condition and credit history and generally does not require
collateral. The Company maintains an allowance for doubtful accounts based upon
the expected collectibility of customers' accounts receivable. The Company bills
certain services to customers in advance and has the ability to terminate access
on delinquent accounts. The Company also introduced an intelligent-network-based
prepaid service alternative during September 1998. Management believes these
factors, as well as the large and geographically diverse number of customers
comprising the customer base, mitigate the risk of loss and the concentration of
credit risk.
The carrying amount of the Company's receivables approximates their
fair value.
Inventories
The Company maintains inventories for resale of wireless handsets and
accessory parts (i.e., antennae, batteries, cable, etc.). Inventory is valued at
the lower of average cost (which approximates first-in, first-out) or market and
is recorded net of a reserve for obsolescence of $1.8 million and $1.2 million
at December 31, 1998 and 1997, respectively.
F-8
<PAGE> 42
Property and Depreciation
Property and equipment are recorded at cost, including certain
engineering costs. The Company records depreciation using the straight-line
method over the estimated useful lives of the assets, which are 10 to 20 years
for towers, buildings and improvements and 3 to 10 years for equipment,
furniture and fixtures. The Company's policy is to remove the cost and
accumulated depreciation of retirements from the accounts and recognize the
related gain or loss upon the disposition of assets. Such gains and losses were
not material for any period presented.
Assets Under Construction
Expenditures to construct the Company's cellular network and PCS system
are recorded as assets under construction until the assets are placed in
service. When the assets are placed in service, they are transferred to the
appropriate property and equipment category and depreciated.
The Company capitalizes interest incurred on borrowings related to
assets under construction. Of the cumulative aggregate capitalized interest of
$53.0 million, $12.6 was attributed to property, plant and equipment at December
31, 1998.
Licenses
Licenses consist of costs incurred to acquire PCS licenses, including
cumulative capitalized interest of $40.4 million at December 31, 1998, and
certain microwave relocation costs. Licenses are stated at cost less accumulated
amortization and are being amortized using the straight-line method over 40
years.
Deferred Charges and Other
Deferred Charges and Other, which consist primarily of costs related to
the offerings of the Company's senior notes and senior discount notes (Note 4),
are being amortized over the 10-year lives of the related notes.
Prior to January 1, 1996, the Company's cellular operations offered
certain promotional programs under which customers were eligible to receive
either a free cellular telephone, a substantial discount toward a cellular
telephone, or a credit toward future monthly service in return for signing a
noncancelable cellular telephone service agreement for a term of one to three
years. If a customer canceled service prior to expiration of the service
agreement or was disconnected for nonpayment, the customer became liable to the
Company for the full original credit issued under this program. The Company
established a full reserve for receivables that were a result of such
cancellations. The deferred costs associated with these programs were amortized
over the specific terms of the contracts. Effective January 1, 1996, the Company
changed its method of accounting for these deferred promotional costs to
immediate expensing as incurred to better align itself with industry practice
and to correspond with its treatment of similar promotional costs for PCS. The
cumulative effect of this change in accounting principle was to increase the net
loss for the year ended December 31, 1996 by $2.6 million, or $(0.10) per share.
Impairment of Long-Lived Assets
The Company periodically reviews the value assigned to long-lived
assets, including property and equipment, licenses and deferred charges, to
determine if any possible impairment has occurred and is other than temporary.
Management believes the long-lived assets in the accompanying consolidated
balance sheets are appropriately valued.
Stock-Based Compensation Plans
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Effective in 1996, the Company
F-9
<PAGE> 43
adopted the disclosure option of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123") (Note 6) for all
options granted subsequent to January 1, 1995.
Revenue Recognition
The Company earns revenues by providing PCS and cellular service to
both its subscribers and subscribers of other PCS and cellular carriers
traveling ("roaming") through the Company's service area, as well as from sales
of PCS and cellular equipment. Postpaid service revenues consist of base monthly
service fees ("access"), airtime revenues and long-distance revenues ("toll
revenues"). Generally, access fees are billed one month in advance, but
recognized when earned, while airtime and toll revenues are recognized when
service is provided.
The Company introduced a prepaid service alternative in September 1998.
Prepaid service revenues are collected in advance, but recognized as service is
provided.
Roaming revenues consist of the airtime and toll fees charged to the
subscribers of other PCS and cellular carriers for use of the Company's PCS and
cellular network while traveling in the Company's service area and are
recognized when the service is rendered.
Other revenues consist of installation charges and connection fees,
optional vertical service features and interconnection fees charged to local
exchange carriers and are recognized when earned.
Equipment sales are recognized upon delivery of the equipment to the
customer.
Loss Per Share
Basic loss per share (EPS) was computed by dividing net loss available
to common stockholders by the weighted average number of shares of Common Stock
outstanding during the year. Diluted EPS is the same as basic EPS for all
periods presented as all common stock equivalents would have an antidilutive
effect.
Recent Accounting Pronouncements
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 financial statements. SFAS 130 had no impact on the Company's
financial statements as the Company has no comprehensive income elements. The
Company will continue to review this statement over time to determine if any
additional disclosures are necessary based on evolving circumstances.
See Note 10 for discussion of Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information".
3. ASSET DISPOSITION
On May 1, 1997, pursuant to an Asset Purchase Agreement, dated as of
December 23, 1996, Unity Cellular Systems, Inc. (the "Seller") and Intercel
Licenses, Inc. (the "Licensee"), each a wholly owned subsidiary of the Company,
sold and assigned (the "Unicel Disposition") to MRCC, Inc., a wholly owned
subsidiary of Rural Cellular Corporation ("Rural Cellular"), (i) substantially
all the assets and rights of the Seller, including Seller's 51% general
partnership interest in the Northern Maine Cellular Partnership; and (ii) the
FCC licenses held by Licensee to provide cellular and microwave service in the
Bangor, Maine MSA and Maine RSA3 and to provide microwave service in Maine RSA2.
On the closing date, MRCC, Inc. paid the Seller $71.8 million in cash and paid
$5.4 million into escrow. This transaction resulted in a $41.9 million gain to
the Company. On November 3, 1997, the $5.4 million was released from escrow to
the Company. The following unaudited pro forma condensed consolidated statements
of operations (in millions, except per share data) assume the sale
F-10
<PAGE> 44
occurred at the beginning of each period presented. In the opinion of
management, all adjustments necessary to present fairly such unaudited pro forma
condensed statements of operations have been made.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Revenues and sales ................. $ 74.0 $ 23.0
Net loss (excluding gain on sale)... (177.6) (27.4)
Basic loss per common share ........ $ (6.63) $ (1.09)
Diluted loss per common share ...... (6.63) (1.06)
</TABLE>
4. LONG-TERM OBLIGATIONS
On June 10, 1997, the Company issued $300 million principal amount of
11.125% Senior Notes due June 2007 in a private offering. In September 1997, the
Company exchanged substantially all of the private notes for 11.125% Senior
Notes due June 2007 which were identical in terms to the Private Notes except
that the new notes were registered under the Securities Act of 1933, as amended
(the private notes and the registered notes are collectively referred to as the
"June Notes"). The net proceeds were used to partially finance the development,
construction and operating costs associated with the Company's PCS system and
the completion of the digital upgrade of the Company's cellular system. The June
Notes may be redeemed at any time on or after June 1, 2002, at the option of the
Company, at 105.5626% of their principal amount, plus accrued interest,
declining to 100% of their principal amount, plus accrued interest, on and after
June 1, 2004. In addition, at any time prior to June 1, 2000, up to 35% of the
aggregate principal amount of the June Notes may be redeemed from the proceeds
of one or more public equity offerings at 111.125% of their principal amount,
provided that after any such redemption at least $195.0 million aggregate
principal amount of the June Notes remains outstanding.
Interest on the June Notes is payable semiannually in cash on June 1
and December 1 of each year.
The Company used $89.6 million of the proceeds from the June Notes to
purchase and pledge, for the benefit of the holders of the June Notes, certain
U.S. government securities to provide for the payment of the first six scheduled
interest payments on the June Notes. The remaining unpaid portion of such
amounts is classified as "Restricted Cash for Payment of Interest" in the
accompanying consolidated balance sheets (Note 2).
During 1996, the Company issued $360 million principal amount at
maturity of the Company's 12% Senior Discount Notes due April 2006 (the "April
Notes") and $357 million aggregate principal amount at maturity of the Company's
12% Senior Discount Notes due February 2006 (the "February Notes"). The April
Notes may be redeemed at any time on or after May 1, 2001, at the option of the
Company, at 106% of their principal amount at maturity, plus accrued interest,
declining to 100% of their principal amount at maturity, plus accrued interest,
on and after May 1, 2003. In addition, at any time prior to May 1, 1999, up to
25% of the aggregate principal amount at maturity of the April Notes may be
redeemed from the proceeds of one or more public equity offerings at 112% of
their accreted value on the redemption date, provided that after any such
redemption at least $270 million aggregate principal amount at maturity of the
April Notes remain outstanding.
The April Notes will fully accrete to face value on May 1, 2001, at
which time they will bear interest, payable in cash, at a rate of 12% per annum
on each May 1 and November 1, commencing November 1, 2001.
The February Notes may be redeemed at any time on or after February 1,
2001, at the option of the Company, at 106% of their principal amount at
maturity, plus accrued interest, declining to 100% of their principal amount at
maturity, plus accrued interest on and after February 1, 2003. In addition, at
any time prior to February 1, 1999, up to 25% of the aggregate principal amount
at maturity of the February Notes may be redeemed from the proceeds of one or
more public equity offerings at 112% of their accreted value on the redemption
date, provided that after any such redemption at least $268.1 million aggregate
principal amount at maturity of the February Notes remain outstanding.
F-11
<PAGE> 45
The February Notes will fully accrete to face value on February 1,
2001, at which time they will bear interest, payable in cash, at a rate of 12%
per annum on each February 1 and August 1, commencing August 1, 2001.
Unamortized original issue discount on the April Notes and February
Notes is being amortized using effective interest rates of 12% and 12.35%,
respectively. For the years ended December 31, 1998, 1997 and 1996, total
accretion of the original issue discount was $61.1 million, $54.5 million and
$39.6 million, respectively, of which $1.9 million, $20.4 million and $27.5
million was capitalized and $59.2 million, $34.1 and $12.1 million,
respectively, is included in interest expense in the accompanying consolidated
statements of operations.
On March 4, 1996, the Company entered into a $125 million credit
agreement (the " Credit Facility") with Ericsson, Inc. regarding the purchase of
and vendor financing for PCS network equipment and services. On October 31,
1996, March 31, 1997, June 26, 1997, and November 18, 1997, Powertel and
Ericsson entered into amendments to the Credit Facility, which increased the
equipment financing commitment to $165 million and amended certain other
provisions of the Credit Facility. During the fourth quarter of 1997, the $165
million commitment under the Credit Facility was syndicated to a group of
lendors. On December 23, 1997, Powertel and Ericsson amended the Credit Facility
to increase the financing commitment to $265 million. On February 6, 1998,
Powertel and Ericsson entered into an amended and restated Credit Facility to
incorporate the terms and conditions of the original agreement and the
subsequent amendments.
Under the terms of the Credit Facility, advances are made as requested
by the Company to finance purchases from Ericsson pursuant to the terms of the
related Equipment Purchase Agreement (Note 8). The aggregate amount of the
advances made in each calendar year will be repaid in twenty equal quarterly
installments, commencing on the last day of the first calendar quarter to occur
three years after the end of the calendar year in which the advances were made
and continuing for a period of five years thereafter, with the last installment
in an amount necessary to repay in full the remaining unpaid principal amount of
all the cumulative advances.
The interest rate under the Credit Facility is based on the applicable
Eurodollar Rate plus 3% (8.3125% at December 31, 1998) but can be converted to a
fluctuating interest rate per annum based on the higher of Citibank N.A.'s base
rate or .5% above the Federal Funds Rate, plus 1%, at the discretion of the
lender. Interest on the unpaid principal amount of each advance is payable in
arrears on the last day of each calendar quarter.
The Credit Facility is secured by all the equipment purchased with the
proceeds therefrom, subject to the terms of the Equipment Purchase Agreement, as
well as a pledge of the stock of the Company's subsidiaries that hold the PCS
licenses.
Scheduled maturities of long-term obligations are as follows (in
millions):
<TABLE>
<S> <C>
1999 $ 0.1
2000 12.9
2001 33.0
2002 51.7
2003 51.7
Thereafter 958.7
----------
Total $ 1,108.1
==========
</TABLE>
The indentures relating to the June Notes, February Notes and April
Notes (the "Indentures") and Credit Facility contain certain restrictive
covenants, and any additional financing agreements may contain additional
restrictive covenants. The restrictions contained in the Indentures and the
Credit Facility will affect, and in some cases will significantly limit or
prohibit, among other things, the ability of the Company to incur indebtedness,
make prepayments of certain indebtedness, pay dividends, make investments,
engage in transactions with stockholders and affiliates, issue capital stock,
create liens, sell assets and engage in mergers and consolidations. If the
Company fails to comply with the restrictive covenants in the Indentures, the
Company's obligation to repay
F-12
<PAGE> 46
the Notes may be accelerated. However, the limitations set forth in the
Indentures are subject to a number of important qualifications and exceptions.
In particular, while the Indentures restrict the Company's ability to incur
additional indebtedness by requiring compliance with specified leverage ratios,
they permit the Company and its subsidiaries to incur an unlimited amount of
additional indebtedness to finance the acquisition of inventory or equipment and
up to $25 million of additional indebtedness under one or more revolving credit
or working capital facilities and in each case to secure such indebtedness. In
addition to the restrictive covenants described above, the Credit Facility
requires the Company to maintain certain financial ratios. The failure of the
Company and its subsidiaries to maintain such ratios would constitute events of
default under the Credit Facility, notwithstanding the ability of the Company to
meet its debt service obligations. An event of default under the Credit Facility
would allow the lender thereunder to accelerate the maturity of such
indebtedness. In such event, a significant portion of the Company's other
indebtedness (including the June Notes, April Notes and February Notes) may
become immediately due and payable. At December 31, 1998, the Company was in
compliance with all covenants and financial ratios under the Indentures and
Credit Facility.
5. PREFERRED STOCK
The Preferred Stock reflected in the accompanying consolidated balance
sheets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
----------- ------
(In thousands)
<S> <C> <C>
Preferred Stock; $.01 Par Value; 1,000,000 shares authorized:
Series E Cumulative Convertible, Redeemable Preferred, 50,000 shares
issued and outstanding at December 31, 1998 ................... $ 76,109.5 $ --
Series F Cumulative Convertible, Redeemable Preferred, 50,000 shares
issued and outstanding at December 31, 1998 ................... 76,109.5 --
------------ ------
Total Cumulative Convertible, Redeemable Preferred .... $ 152,219.0 $ --
============ ======
Series A Convertible Preferred, 100,000 shares issued and
outstanding in 1998 and 1997 .................................. $ 1.0 $ 1.0
Series B Convertible Preferred, 100,000 shares issued and
outstanding in 1998 and 1997 .................................. 1.0 1.0
Series C Convertible Preferred, 50,000 shares issued and
outstanding in 1998 and 1997 .................................. .5 .5
Series D Convertible Preferred, 50,000 shares issued and
outstanding in 1998 and 1997 .................................. .5 .5
------------ ------
Total Preferred Stock in Stockholders' Equity ......... $ 3.0 $ 3.0
============ ======
</TABLE>
On June 22, 1998, pursuant to a Stock Purchase Agreement between the
Company and SCANA Communications, Inc., a wholly-owned subsidiary of SCANA
Corporation ("SCANA"), the Company issued to SCANA 50,000 shares of non-voting
Series E 6.5% Cumulative Convertible, Redeemable Preferred Stock (the "Series E
Preferred") in a private placement for an aggregate purchase price of $75
million. Also, on June 22, 1998, pursuant to a Stock Purchase Agreement between
the Company and ITC Wireless, Inc., a wholly-owned subsidiary of ITC Holding
Company, Inc. ("ITC Wireless"), the Company issued to ITC Wireless 50,000 shares
of non-voting Series F 6.5% Cumulative Convertible, Redeemable Preferred Stock
(the "Series F Preferred") in a private placement for an aggregate purchase
price of $75 million. The Series E Preferred and Series F Preferred become
convertible on June 22, 2003, at the option of the holder, into Common Stock at
an initial conversion price of $22.01, subject to adjustment. The Series E
Preferred and Series F Preferred are redeemable at the option of the Company at
a redemption price of $1,500 per share plus declared and unpaid dividends,
anytime subsequent to June 22, 2003, but no later than June 1, 2010. The Series
E Preferred and Series F Preferred have a liquidation preference over the Common
Stock of $1,500 per share, subject to adjustment, plus accrued and unpaid
dividends in the event of a liquidation, dissolution or winding up of the
Company.
F-13
<PAGE> 47
Due to the mandatory redemption feature included in the Series E
Preferred and Series F Preferred, the Series E Preferred and Series F Preferred
have been classified in the mezzanine of the accompanying consolidated balance
sheets at redemption value, net of issuance costs.
The 6.5% annual dividend on each of the Series E Preferred and Series F
Preferred is payable quarterly in Common Stock or, under certain circumstances,
cash. The Company intends to pay such quarterly dividend in Common Stock for the
foreseeable future.
On June 5, 1997, pursuant to a Stock Purchase Agreement, dated as of
May 23, 1997, between the Company and The Huff Alternative Income Fund, L.P.
("Huff"), the Company issued to Huff 50,000 shares of non-voting Series C
Convertible Preferred Stock for an aggregate purchase price of $22.5 million.
Also, on June 5, 1997, pursuant to a Stock Purchase Agreement, dated as of May
23, 1997, between the Company and SCANA, the Company issued to SCANA 50,000
shares of non-voting Series D Convertible Preferred Stock for an aggregate
purchase price of $22.5 million. Both series are convertible, at the option of
the holder, at a rate of 35.29 shares of the Company's Common Stock per share of
Preferred Stock. The Series C Convertible Preferred Stock is convertible any
time subsequent to December 5, 1998 and the Series D Convertible Preferred Stock
is convertible any time subsequent to March 14, 2002. Both series are
redeemable, at the option of the Company, in whole or in part, on a pro rata
basis, at a redemption price of $450 per share plus declared and unpaid
dividends, anytime subsequent to June 5, 2002. Both series have a liquidation
preference of $450 per share plus unpaid dividends in the event of a
liquidation, dissolution or winding up of the Company.
During 1996, the Company issued 100,000 shares of non-voting Series A
Convertible Preferred Stock to Ericsson, Inc. and 100,000 shares of non-voting
Series B Convertible Preferred Stock to SCANA, each for an aggregate purchase
price of $75 million. The Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock are convertible, at the option of the holder, at a
rate of 45.45 shares of the Company's Common Stock per share of Preferred Stock.
The Series A Convertible Preferred Stock is convertible any time subsequent to
June 28, 1998 and the Series B Convertible Preferred Stock is convertible any
time subsequent to March 14, 2002. Both series are redeemable, at the option of
the Company, in whole or in part, on a pro rata basis, at a redemption price of
$750 per share plus declared and unpaid dividends, anytime subsequent to June
28, 2001. Both series have a liquidation preference of $750 per share plus
unpaid dividends in the event of a liquidation, dissolution or winding up of the
Company.
The Company's certificate of incorporation empowers the Board of
Directors of the Company to redeem any of the Company's outstanding capital
stock at the lesser of fair market value or such holder's purchase price (if the
stock was purchased within a year of such redemption) to the extent necessary to
prevent the loss or secure the reinstatement of any license or franchise from
any governmental agency.
The Company's certificate of incorporation authorizes the Board of
Directors to issue, from time to time and without further stockholder action,
one or more series of preferred stock and to fix the relative rights and
preferences of the shares, including voting powers, dividend rights, liquidation
preferences, redemption rights, and conversion privileges.
6. STOCK OPTION PLANS
Under the Powertel, Inc. 1991 Stock Option Plan, as amended (the "Stock
Plan"), 3 million shares of Common Stock are reserved for issuance upon exercise
of options. Substantially all of the employees of the Company are eligible to
receive options under the Stock Plan. Management recommends to the
Compensation/Stock Option Committee the number of options to grant based on
management's analysis of the employee's performance and level of responsibility.
The Board of Directors also may include in each option granted under the Stock
Plan certain additional limitations on the recipient's right to exercise the
option. Options under the Stock Plan may be either "incentive stock options," as
defined under Section 422 of the Internal Revenue Code, or nonqualified options.
F-14
<PAGE> 48
Under the Company's Nonemployee Stock Option Plan (the "Nonemployee
Plan"), 400,000 shares of Common Stock are reserved for issuance upon exercise
of options. All nonemployee directors of the Company and all employees of
affiliates of the Company are eligible to receive options under the Nonemployee
Plan. Options to purchase 10,000 shares of common stock are granted to each
nonemployee director upon his or her election or appointment to the Board of
Directors. The Nonemployee Plan does not provide for discretionary option
grants.
Options granted under the Stock Plan and Nonemployee Plan generally
become exercisable as to 50% two years after the date of grant, 25% three years
after the date of grant, and 25% four years after the date of grant, but no
option may be exercised more than ten years after the date of grant. Options
generally are exercisable at a price established by the Compensation/Stock
Option Committee equal to at least 100% of the fair market value of the Common
Stock on the options' grant date, except that the exercise price with respect to
options granted to an individual who owns more than 10% of the combined voting
power of all classes of stock of the Company must be at least 110% of the fair
market value of the common stock on the date of grant. The full exercise price
for shares being purchased must be paid at the time of exercise in cash or, if
permitted by the particular option agreement, in whole or in part by delivery of
shares of Common Stock having a fair market value (on the delivery date) of not
less than the exercise price.
Statement of Financial Accounting Standards No. 123
The Company accounts for its stock-based compensation related to the
Stock Plan and Nonemployee Plan under APB 25; accordingly, no compensation
expense has been recognized, as all options have been granted with an exercise
price equal to the fair value of the Company's stock on the date of grant. For
SFAS 123 pro forma purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black-Scholes option pricing model
with the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate... 4.65% 5.92% 6.29%
Expected dividend yield... -- -- --
Expected lives ........... 8.2Yrs. 8.2Yrs. 8.2Yrs.
Expected volatility ...... 50% 55% 51%
</TABLE>
Using these assumptions, the fair value of the stock options granted in
1998, 1997 and 1996 is $4.1 million, $6.7 million and $4.3 million,
respectively, which would be amortized as compensation expense over the vesting
period of the options. Had compensation cost been determined consistent with the
provisions of SFAS 123, the Company's net loss and pro forma net loss per common
share for 1998, 1997 and 1996 would have been as follows (in millions, except
per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss:
As reported ......... $ (270.8) $ (135.2) $ (25.0)
Pro forma ........... (274.6) (139.6) (27.0)
Net loss per common share:
As reported ......... $ (10.02) $ (5.04) $ (1.00)
Pro forma ........... (10.12) (5.21) (1.08)
</TABLE>
Because SFAS 123 has not been applied to options granted prior to
January 1, 1995, the resulting pro forma compensation cost may not be
representative of that expected in future years.
F-15
<PAGE> 49
A summary of the combined status of the Company's Stock and Nonemployee
Plans at December 31, 1998, 1997, and 1996 is presented in the following table:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Price per Share
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995 994,770 $ 9.89
Granted 788,398 18.63
Forfeited (49,707) 16.91
Exercised (41,308) 6.29
---------
Outstanding at December 31, 1996 1,692,153 13.78
Granted 921,344 13.27
Forfeited (175,926) 17.15
Exercised (67,293) 14.17
---------
Outstanding at December 31, 1997 2,370,278 13.39
Granted 541,192 17.71
Forfeited (293,401) 16.80
Exercised (28,119) 10.98
---------
Outstanding at December 31, 1998 2,589,950 13.93
=========
</TABLE>
The following table summarizes, as of December 31, 1998, for the number
of options outstanding, the exercise price range, weighted average exercise
price, and remaining contractual lives by year of grant:
<TABLE>
<CAPTION>
Weighted Average
Year of Number Exercise Weighted Remaining
Grant of Shares Price Range Average Price Contractual Life
- ------- --------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
1998 490,242 $ 9.88 - $24.88 $ 17.62 9.3 Years
1997 739,517 10.00 - 20.75 13.06 8.2 Years
1996 530,897 12.38 - 24.50 18.51 7.3 Years
Pre-1996 829,294 3.33 - 17.63 9.60 5.7 Years
</TABLE>
Total stock options exercisable at December 31, 1998 were 1,011,310 at
a weighted average exercise price of $11.54.
Under the Company's 1995 Employee Restricted Stock Plan (the
"Restricted Stock Plan"), 200,000 shares of Common Stock are reserved for
issuance, of which 121,207 shares were issued and outstanding as of December 31,
1998. These restricted stock awards vest in three equal installments on the
first, second and third anniversaries of the date of grant. The compensation
associated with the restricted grants (i.e., the difference between the market
price of the Company's Common Stock on the date of grant and the exercise price)
is being amortized ratably over the three-year vesting period. Such compensation
expense totaled $0.6 million, $0.4 million and $0.2 million for the years ended
December 31, 1998, 1997 and 1996, respectively. Any unamortized deferred
compensation is reflected as a reduction to stockholders' equity in the
accompanying consolidated balance sheets. The Restricted Stock Plan is
administered by the Compensation/Stock Option Committee of the Board of
Directors.
F-16
<PAGE> 50
7. INCOME TAXES
The income tax benefit reflected in the accompanying consolidated
financial statements consists of the following (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal ........... $ 0.0 $ 0.0 $ 0.0
State ............. 0.0 0.0 0.0
------ ------ ------
0.0 0.0 0.0
Deferred:
Federal ........... 0.0 0.0 1.4
State ............. 0.0 0.0 0.3
------ ------ ------
0.0 0.0 1.7
------ ------ ------
Total income tax benefit $ 0.0 $ 0.0 $ 1.7
====== ====== ======
</TABLE>
The reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate ...... (35)% (35)% (34)%
Increase (decrease) in income tax rate
resulting from:
Goodwill amortization ............ 0 0 1
Excess original issue discount ... 0 0 1
State income taxes, net of federal
benefit ........................ (6) (7) (10)
Valuation allowance .............. 41 42 36
--- --- ---
Effective income tax rate .............. 0% 0% (6)%
=== === ===
</TABLE>
The significant components that gave rise to the net deferred tax asset
are as follows (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred Assets:
Net operating loss carryforwards ................... $ 136.5 $ 49.0 $ 7.1
Start up costs capitalized ......................... 19.7 15.9 9.9
Bond accretion capitalized ......................... 46.3 20.2 4.9
Other .............................................. 8.4 1.5 0.4
-------- ------- -------
210.9 86.6 22.3
-------- ------- -------
Deferred Liabilities:
Depreciation ....................................... (25.6) (11.3) (3.6)
Other .............................................. (1.5) (0.5) (0.1)
-------- ------- -------
(27.1) (11.8) (3.7)
-------- ------- -------
Net deferred tax asset before valuation allowance... 183.8 74.8 18.6
Valuation allowance ................................ (182.5) (73.5) (16.4)
-------- ------- -------
Net deferred tax asset ............................. 1.3 1.3 2.2
Less: current portion .............................. 1.3 1.3 0.0
-------- ------- -------
Deferred tax asset-- non-current portion ........... $ 0.0 $ 0.0 $ 2.2
======== ======= =======
</TABLE>
At December 31, 1998, the Company had available net operating loss
carryforwards for regular tax purposes of approximately $318.0 million, which
will expire at varying dates between 2005 and 2018, and alternative minimum tax
credit carryforwards of $0.2 million, which have no expiration. The utilization
of a portion of these carryforwards is subject to limitations under the Internal
Revenue Code. Since management is currently unable to determine whether it is
more likely than not that some portion of the net deferred tax asset will
F-17
<PAGE> 51
be realized, a valuation allowance of $182.5 million has been provided in the
accompanying consolidated financial statements. The valuation allowance
increased $109.0 million and $57.1 million in 1998 and 1997,
respectively.
8. COMMITMENTS AND CONTINGENCIES
Leases
Lease expenses relate to the lease of office and warehouse space, land
for cell sites, cell sites, dedicated lines and trunk access facilities,
computer equipment, and billboards and include leases with affiliates (Note 9).
Rents charged to expense were approximately $20.6 million, $10.5 million and
$3.2 million for the years ended December 31, 1998, 1997 and 1996.
At December 31, 1998, future minimum lease payments under noncancelable
operating leases with initial remaining terms of more than one year are as
follows (in millions):
<TABLE>
<S> <C>
1999 $ 25.4
2000 25.2
2001 22.0
2002 18.0
2003 8.8
Subsequent years 10.7
========
$ 110.1
========
</TABLE>
Equipment Purchase Commitments
On March 4, 1996, the Company entered into a five-year equipment
purchase agreement and related vendor financing agreement (Note 4) with
Ericsson, Inc. for the purchase of certain network equipment and services
required for the initial buildout and operation of the Company's PCS system.
Under the terms of the agreement and a subsequent amendment relating to the
purchase of network equipment for the Company's BTA markets in Kentucky and
Tennessee, the Company is required to purchase its first $75 million worth of
PCS network equipment and services for the Atlanta MTA and certain network
equipment for the Company's BTA markets in Kentucky and Tennessee from Ericsson
and utilize Ericsson as the exclusive provider of certain PCS network equipment
until December 31, 2001 for all of its markets. The Company's grant of
exclusivity is conditioned upon Ericsson's ability to provide sufficient
quantities of PCS network equipment to meet the Company's needs in the PCS
markets, provide commercial service for each PCS market by pre-defined dates,
and continue to provide "state of the art" equipment. The Company's cumulative
total purchases under the agreement were approximately $258.5 million at
December 31, 1998.
Litigation
The Company is subject to litigation related to matters arising in the
normal course of business. As of December 31, 1998 management is not aware of
any asserted or pending material litigation or claims against the Company.
9. TRANSACTIONS WITH AFFILIATES
The Company leases certain dedicated and trunk telephone access lines,
as well as certain local and long-distance services, through its former parent,
ITC Holding Company, Inc., and certain of its other subsidiaries and related
parties. The total expense recorded by the Company for these services was
approximately $10.1 million, $5.8 million and $2.5 million for the years ended
December 31, 1998, 1997 and 1996, respectively.
F-18
<PAGE> 52
The Company purchases certain equipment, inventory and services related
to the buildout and operation of its PCS line of business from preferred
stockholders and certain of their subsidiaries. The Company's total purchases
for equipment, inventory and services were $138.3 million, $106.8 million and
$74.5 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
10. BUSINESS SEGMENT DATA
Effective with the year ended December 31, 1998, the Company adopted
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"), which requires the
Company to report financial and descriptive information about its reportable
operating segments. SFAS 131 requires the reporting of a measure of segment
profit or loss, certain specific revenue and expense items and segment assets,
as well as a reconciliation of total segment revenues, total segment profit or
loss, total segment assets and other amounts disclosed for segments to
corresponding amounts in the company's general-purpose financial statements.
The Company classifies its operations into two business segments: PCS
and cellular. Certain corporate administrative expenses have been allocated to
the segments based upon the nature of the expense. Intersegment revenues are not
material. Summarized financial information by business segment for the years
ended December 31, 1998, 1997 and 1996 is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------
1998 1997 1996
------------------------- ----------------------------- ------------------------
PCS CELLULAR TOTALS PCS CELLULAR(A) TOTALS PCS CELLULAR(B) TOTALS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales............... $ 155.8 $ 19.6 $ 175.4 $ 55.9 $ 23.0 $ 78.9 $ 4.4 $ 34.7 $ 39.1
Depreciation and amortization.... 65.8 1.9 67.7 46.7 2.6 49.3 4.0 6.1 10.1
Operating (loss) income.......... (180.3) 8.1 (172.2) (141.9) 6.8 (135.1) (39.0) 10.4 (28.6)
Interest expense (income), net.. 93.7 -- 93.7 42.6 -- 42.6 (3.2 ) -- (3.2)
Net (loss) income................ (273.9) 8.1 (265.8) (183.9) 48.7 (135.2) (35.8) 8.2 (27.6)
Total assets..................... 1,365.6 15.0 1,380.6 1,364.5 14.1 1,378.6 893.4 53.7 947.1
Capital expenditures............. 205.0 2.3 207.3 289.6 2.2 291.8 224.6 8.9 233.5
</TABLE>
- ----------------------
(a) Includes gain on sale of subsidiary of $41.9 million.
(b) Includes cumulative effect of change in accounting principle of $2.6
million.
F-19
<PAGE> 53
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
----- ------ ----- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1998 QUARTERS:
Revenues and sales......................................... $ 36.7 $ 40.8 $ 44.6 $ 53.3
Operating loss............................................. (36.0) (34.2) (41.1) (60.9)
Net loss available to common shareholders.................. (57.7) (57.8) (66.7) (88.6)
Basic and diluted loss per common share.................... $(2.14) $(2.15) $(2.47) $(3.26)
1997 QUARTERS:
Revenues and sales......................................... $ 19.1 $ 16.6 $ 18.5 $ 24.7
Operating loss............................................. (24.6) (23.3) (32.7) (54.5)
Net (loss) income available to common shareholders......... (29.6) 12.1 (45.9) (71.8)
Basic (loss) earnings per common share..................... $(1.10) $ 0.45 $(1.71) $(2.66)
Diluted (loss) earnings per common share................... (1.10) 0.42 (1.71) (2.66)
1996 QUARTERS:
Revenues and sales......................................... $ 7.8 $ 8.5 $ 9.1 $ 13.7
Operating income (loss).................................... 0.6 (1.2) (4.3) (23.7)
Net income (loss) before cumulative effect of
change in accounting principle........................ 0.5 (1.4) 0.1 (24.2)
Cumulative effect of change in accounting principle........ (2.6) 0.0 0.0 0.0
Net (loss) income available to common shareholders......... (2.1) (1.4) 0.1 (24.2)
Basic earnings (loss) per common share before
cumulative effect of change in accounting principle.... $ 0.03 $(0.05) $ 0.00 $(0.90)
Cumulative effect of change in accounting principle........ (0.13) -- -- --
Basic and diluted loss per common share.................... (0.10) (0.05) 0.00 (0.90)
</TABLE>
12. SUBSEQUENT EVENTS
Disposal of Cellular Operations
Pursuant to an Asset Purchase Agreement, dated January 5, 1999, by and
among the Company, ICEL, Inc. ("ICEL") (together with the Company, the
"Sellers") and InterCel Licenses, Inc. ("Licensee"), both wholly owned
subsidiaries of the Company, and Public Service Cellular, Inc. (the
"Purchaser"), the Purchaser agreed to acquire substantially all of the assets
and FCC licenses of the Sellers, constituting the Seller's cellular telephone
operations in eastern Alabama and western Georgia, for approximately $89 million
(the "Sale"). The Sale, if consummated, will constitute a sale by Powertel of
all of its remaining cellular telephone operations.
Closing of the Sale is subject to certain conditions, including: (i)
receipt by Sellers of various consents from third parties, including landlords
and other parties to contracts with Sellers; (ii) receipt of various regulatory
approvals, including the approval of the Federal Communications Commission; and
(iii) Purchaser maintaining its financing commitment through the time of the
closing. The closing of the Sale is expected to occur in the second quarter of
1999.
The following unaudited pro forma condensed consolidated statements of
operations (in millions, except per share data) assume the sale occurred at the
beginning of each period presented. In the opinion of management, all
adjustments necessary to present fairly such unaudited pro forma condensed
statements of operations have been made.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Revenues and sales $ 155.8 $ 60.7 $ 20.8
Net loss (excluding gain on sale) (278.7) (183.4) (34.4)
Basic and diluted loss per common share $ (10.31) $ (5.27) $ (1.37)
</TABLE>
F-20
<PAGE> 54
Tower Asset Sale
Pursuant to an Asset Purchase Agreement, dated March 15, 1999, by and
among the Company, (the "Seller") and Crown Castle International Corp (the
"Purchaser"), the Purchaser agreed to acquire approximately 650 of Sellers'
wireless transmission towers for approximately $275 million (the "Sale"). The
Sale, which is subject to certain conditions, is expected to close in the second
quarter of 1999.
Stock Plan
On March 10, 1999, the Board of Directors approved an increase in the
number of shares of common stock authorized under the Stock Plan to 5 million
shares. The Board of Directors has submitted this increase to the stockholders
for their approval at the 1999 Annual Meeting of Stockholders.
F-21
<PAGE> 55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
We have audited in accordance with generally accepted auditing standards, the
financial statements of POWERTEL INC. included in this Form 10-K and have issued
our report thereon dated February 5, 1999. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the index is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 5, 1999
S-1
<PAGE> 56
POWERTEL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------- ---------- --------- --------------- ---------------
BALANCE AT ADDITIONS WRITEOFFS, BALANCE AT
BEGINNING CHARGED NET OF END OF
CLASSIFICATION OF PERIOD TO INCOME RECOVERIES PERIOD
- ------------------------------------------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
Allowance for Doubtful Accounts $ 1,768,194 $ 21,206,041 $ (18,079,547) $ 4,894,688
Allowance for Obsolete Inventory 1,178,699 1,876,220 (1,241,525) 1,813,394
------------- -------------- ---------------- ---------------
$ 2,946,893 $ 23,082,261 $ (19,321,072) $ 6,708,082
============= ============== ================ ===============
FOR THE YEAR ENDED DECEMBER 31, 1997
Allowance for Doubtful Accounts $ 217,000 $ 7,610,741 $ (6,059,547) $ 1,768,194
Allowance for Obsolete Inventory 53,470 1,197,121 (71,892) 1,178,699
------------- -------------- ---------------- ---------------
$ 270,470 $ 8,807,862 $ (6,131,439) $ 2,946,893
============= ============== ================ ===============
FOR THE YEAR ENDED DECEMBER 31, 1996
Allowance for Doubtful Accounts $ 249,454 $ 997,372 $ (1,029,826) $ 217,000
Allowance for Obsolete Inventory 127,694 252,662 (326,886) 53,470
------------- -------------- ---------------- ---------------
$ 377,148 $ 1,250,034 $ (1,356,712) $ 270,470
============= ============== ================ ===============
</TABLE>
S-2
<PAGE> 1
EXHIBIT 2(D)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
by and among
CROWN CASTLE INTERNATIONAL CORP.,
CCP INC.,
POWERTEL ATLANTA TOWERS, LLC,
POWERTEL BIRMINGHAM TOWERS, LLC,
POWERTEL JACKSONVILLE TOWERS, LLC,
POWERTEL KENTUCKY TOWERS, LLC,
POWERTEL MEMPHIS TOWERS, LLC
and POWERTEL, INC.
Dated: March 15, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ASSET PURCHASE AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 - DEFINITIONS...........................................................................................1
ARTICLE 2 - PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES...............................................10
2.1 Assets..............................................................................................10
2.2 Excluded Assets.....................................................................................11
2.3 Assumption of Certain Liabilities; Retained Liabilities.............................................12
2.4 Assignment or Subcontracting of Purchased Contracts.................................................13
2.5 Consent of Third Parties............................................................................14
2.6 Bulk Transfer Laws..................................................................................14
2.7 Certain Apportionments..............................................................................14
2.8 Master Site Agreement...............................................................................15
2.9 [intentionally deleted].............................................................................15
2.10 Due Diligence.......................................................................................15
2.11 Rejected Sites......................................................................................17
2.12 Additional Sites....................................................................................18
ARTICLE 3 - PURCHASE PRICE, ESCROW DEPOSIT AND PURCHASE PRICE ADJUSTMENTS........................................20
3.1 Purchase Price......................................................................................20
3.2 Pre-Closing Adjustments to Purchase Price...........................................................21
3.3 Post-Closing Adjustments............................................................................22
3.4 Purchase Price Allocation...........................................................................22
3.5 Escrow Agreement....................................................................................22
ARTICLE 4 - AGREEMENTS PENDING CLOSING...........................................................................22
4.1 Agreements of Powertel and Sellers Pending the Closing..............................................22
4.2 Agreements of CCIC and Buyer Pending the Closing....................................................25
4.3 Agreements of the Parties Pending Closing...........................................................27
ARTICLE 5 - CONDITIONS PRECEDENT TO THE CLOSING..................................................................29
5.1 Conditions Precedent to the Obligations of CCIC and Buyer...........................................29
5.2 Conditions Precedent to the Obligations of Powertel and Sellers.....................................30
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES.......................................................................31
6.1 Representations and Warranties of Powertel and Sellers..............................................31
6.2 Representations and Warranties of Powertel and Sellers as of the Closing Date.......................35
6.3 Representations and Warranties of CCIC and Buyer....................................................37
6.4 Assets in "As Is" Condition.........................................................................38
6.5 Survival............................................................................................39
6.6 Definitions of "Knowledge" and "Belief".............................................................39
6.7 Reliance and Notification...........................................................................39
ARTICLE 7 - CLOSING; DELIVERIES OF THE PARTIES AT CLOSING........................................................40
7.1 The Closing.........................................................................................40
7.2 Deliveries at the Closing by Powertel and Sellers...................................................40
7.3 Deliveries at the Closing by CCIC and Buyer.........................................................41
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.4 Pre-Closing Deliveries..............................................................................41
7.5 Post-Closing Covenant...............................................................................41
7.6 Time is of the Essence..............................................................................42
ARTICLE 8 - INDEMNIFICATION......................................................................................42
8.1 Indemnification.....................................................................................42
8.2 Mitigation..........................................................................................44
8.3 Effect of Investigation or Knowledge................................................................44
8.4 Duration of Indemnification.........................................................................45
ARTICLE 9 - POST-CLOSING COVENANTS...............................................................................45
9.1 Post-Closing Covenants Related to Buyer.............................................................45
ARTICLE 10 - MISCELLANEOUS........................................................................................45
10.1 Remedies............................................................................................45
10.2 Dispute Resolution..................................................................................46
10.3 Transfer Taxes......................................................................................47
10.4 Termination.........................................................................................47
10.5 Expenses............................................................................................48
10.6 Entire Agreement....................................................................................49
10.7 Amendments..........................................................................................49
10.8 Waiver..............................................................................................49
10.9 Assignment and Binding Effect.......................................................................49
10.10 Notices.............................................................................................49
10.11 Georgia Law to Govern...............................................................................50
10.12 No Benefit to Others................................................................................50
10.13 Table of Contents; Headings.........................................................................50
10.14 Schedules and Exhibits..............................................................................50
10.15 Severability........................................................................................50
10.16 Counterparts and Facsimile Execution................................................................51
10.17 Confidentiality.....................................................................................51
10.18 Directly or Indirectly..............................................................................51
10.19 Interpretation......................................................................................51
10.20 Further Assurances..................................................................................51
</TABLE>
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<PAGE> 4
LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1......................................................................................................1
Schedule 1.2......................................................................................................3
Schedule 1.3......................................................................................................5
Schedule 1.4......................................................................................................6
Schedule 1.5......................................................................................................7
Schedule 1.6......................................................................................................8
Schedule 1.7......................................................................................................9
Schedule 1.8.....................................................................................................10
Schedule 2.4.....................................................................................................13
Schedule 2.11....................................................................................................18
Schedule 3.3.....................................................................................................22
Schedule 3.4.....................................................................................................22
Schedule 6.1(d)..................................................................................................32
Schedule 6.1(e)..................................................................................................32
Schedule 6.1(k)..................................................................................................34
Schedule 6.2(d)..................................................................................................36
Schedule 6.2(e)..................................................................................................36
Schedule 6.2(f)..................................................................................................37
Schedule 6.2(h)..................................................................................................37
</TABLE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit "A" - Master Site Agreement
Exhibit "B" - CCIC Guaranty
Exhibit "C" - Powertel Guaranty
Exhibit "D" - Escrow Agreement
Exhibit "E" - FIRPTA Affidavit
</TABLE>
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<PAGE> 5
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is dated effective as
of the 15th day of March, 1999, by and among Crown Castle International Corp., a
Delaware corporation ("CCIC"), CCP Inc., a Delaware corporation (the "Buyer"),
Powertel Atlanta Towers, LLC, Powertel Birmingham Towers, LLC, Powertel
Jacksonville Towers, LLC, Powertel Kentucky Towers, LLC, and Powertel Memphis
Towers, LLC, each a Delaware limited liability company (collectively the
"Sellers" and each individually a "Seller"), and Powertel, Inc., a Delaware
corporation ("Powertel").
RECITALS:
Buyer is a wholly owned subsidiary of Crown Communication Inc., a
Delaware corporation. Crown Communication Inc. is a wholly owned subsidiary of
CCIC. Buyer is a special purpose entity. Sellers are wholly owned subsidiaries
of Powertel. Powertel and Sellers are the owners of certain tower structures,
interests in real property related thereto, and related assets, property rights,
liabilities and obligations, as more particularly described herein. Buyer is
engaged in the business of owning, managing and operating assets similar to the
Assets (as hereinafter defined). Powertel and Sellers desire to sell, convey,
assign and transfer to Buyer, and Buyer desires to purchase and assume from
Powertel and Sellers, the Assets and certain liabilities, as more particularly
described herein, on the terms and subject to the conditions described in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For convenience, certain terms used in this Agreement and the Exhibits
and Schedules attached hereto are listed in alphabetical order and defined or
referred to below (such terms as well as any other terms defined elsewhere in
this Agreement shall be equally applicable to both the singular and plural forms
of the terms defined). The term "parties" shall refer to Powertel, Sellers, CCIC
and Buyer, collectively. The term "either party" shall, unless the context
otherwise requires, refer to Powertel and Sellers on the one hand, and CCIC and
Buyer on the other hand.
"AAA" is defined in Section 10.2(b).
"Acceptance" is defined in Section 4.2(a).
"Accepted Sites" means those Tower Sites set forth on Schedule 1.1, as
such Schedule may be modified or supplemented pursuant to the terms and
conditions of this Agreement.
"Accounting Firm" is defined in Section 2.7.
"Additional Sites" shall exclude any Rejected Sites, but shall have the
meaning contemplated by Section 2.10(a) and shall refer to sites, including
In-Progress Sites, which are
<PAGE> 6
generally comparable to Tower Sites to be conveyed pursuant to this Agreement in
the following respects: (i) type, height and structural capacity of the tower,
(ii) type and size of the site, (iii) third party revenues derived from the
lease of space to tenants, and (iv) available space for lease to third party
tenants, and as to which Powertel or the Sellers (or their Affiliates) propose
to lease tower and ground space pursuant to the Master Lease and the terms and
conditions contained therein, and on which telecommunications tower structures
are either (A) constructed and fully complete, or (B) in the case of In-Progress
Sites, being constructed and fully completed.
"Affiliates" means, when used with reference to a specific Person, any
Entity that, directly or indirectly, or through one or more intermediaries, owns
or controls, is owned or controlled by, or is under common ownership or common
control with, such specific Person. As used herein, "control" means the power to
direct the management or affairs of a Person, and "ownership" means the
ownership of more than 50% of the voting equity interests of the Person.
"Agreement" means this Agreement and the Exhibits and Schedules hereto,
as any of the foregoing may, from time to time, be amended, modified or restated
in accordance with the provisions hereof.
"Assets" is defined in Section 2.1.
"Assumed Liabilities" is defined in Section 2.3(a).
"CCIC" is defined above in the preamble.
"CCIC Guaranty" is defined in Section 2.8.
"Charter Documents" means an Entity's certificate or articles of
incorporation, 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.
"Circumstance" is defined in Section 2.11(c).
"Closing" is defined in Section 3.1(b).
"Closing Certificate" is defined in Section 6.2.
"Closing Date" is defined in Section 3.1(b).
"Completion Notice" is defined in Section 2.10(b).
"Construction Activities" shall include (i) all site engineering,
architectural and engineering drawings (as necessary) and geotechnical
investigations (if necessary); (ii) if necessary, construction of an access road
suitable for pedestrian and vehicular ingress and egress; (iii) the construction
of a communications tower complete with grounding systems and tower lighting (as
-2-
<PAGE> 7
necessary); (iv) all other reasonable and customary installations to complete
construction of the Tower Structures (along with ancillary tower equipment and
parts); (v) all customary installations to bring electrical power to the Tower
Site; (vi) all installations necessary to accommodate under the Master Lease
Powertel's and/or Sellers' (or their respective Affiliates') facilities and
equipment; and (vii) obtaining a certificate of occupancy or the equivalent
thereof, if required by applicable Laws.
"Contract" means any written contract, agreement, lease, license for
tower space, instrument or other commitment that is related to the Assets and is
binding on any Person or its property under applicable Law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court, Governmental Authority or any
arbitrator that is binding on any Person or its property under applicable Law.
"Cure Notice" is defined in Section 2.10(d).
"Default" means, with respect to this Agreement and any Contracts,
Court Orders, Governmental Permits or Laws related to the Assets, (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.
"Defect" means the items identified as Defects on Schedule 1.2 and,
subject to the limitations set forth in this Agreement and Powertel's and
Sellers' right to dispute in good faith items identified as "Defects" with
respect to Missing Information furnished regarding Incomplete Sites and due
diligence materials furnished regarding Additional Sites, problems or defects
which CCIC and Buyer reasonably believe would or could be expected to adversely
affect Buyer's use, ownership or operation of a Tower Site in a material way.
"Defective Sites" means those sites set forth on Schedule 1.2, as such
Schedule may be modified or supplemented pursuant to the terms and conditions of
this Agreement.
"Early Termination Payment" is defined in Section 4.2(a).
"Encumbrance" means any lien, mortgage, security interest, pledge,
restriction on use or transferability, defect of title, option or other claim,
charge or encumbrance of any nature whatsoever on any property or property
interest.
"Entity" means any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting on its own behalf or in a fiduciary or other capacity,
or any Governmental Authority.
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<PAGE> 8
"Environmental Condition" means any condition or circumstance,
including the presence of Hazardous Substances, at any Tower Site that Powertel
or Sellers reasonably except to (a) require abatement or correction under an
Environmental Law in excess of $75,000, or (b) give rise to any civil or
criminal Liability in excess of $75,000 on the part of Powertel or Sellers under
any Environmental Law relating to the use or occupancy of the Tower Sites.
"Environmental Law" means all Laws and Court Orders relating to
Hazardous Substances, pollution or protection of the environment.
"Escrow Agent" is defined in Section 3.1(c).
"Escrow Agreement" is defined in Section 3.5.
"Escrow Deposit" is defined in Section 3.1(c).
"Event" means the occurrence of any act, action, activity, event,
failure to act, omission, incident or practice, or any set or combination of any
of the foregoing.
"Excluded Assets" is defined in Section 2.2.
"FAA" means the Federal Aviation Administration, or any successor
Governmental Authority.
"FCC" means the Federal Communications Commission, or any successor
Governmental Authority.
"Financing Assurance" is defined in Section 4.2(a).
"FIRPTA Affidavit" is defined in Section 7.2(j).
"Gap Period" means the period of time between (i) the time a Site Lease
was executed by the parties thereto and (ii) the time such Site Lease or a
memorandum thereof was filed of record in the county where the applicable Leased
Site is located.
"Governmental Authority" means any federal, state, territorial, county,
municipal, local or other government or governmental agency or body or any other
type of regulatory body, whether domestic or foreign, including without
limitation, the FCC and the FAA.
"Governmental Permits" means all governmental approvals, permits,
licenses, registrations, certifications, agreements and other governmental
authorizations required in connection with the use and operation of the Assets.
"Hazardous Substances" means all explosive or radioactive substances or
wastes, petroleum or petroleum distillates, asbestos or asbestos-containing
materials, polychlorinated biphenyls, and any of the following: (i) any
'hazardous substances,' as defined under the Comprehensive Environmental
-4-
<PAGE> 9
Response, Compensation, and Liability Act, 42 U.S.C. ss.ss. 9601 et seq.; (ii)
any 'extremely hazardous substance,' 'hazardous chemical' or 'toxic chemical,'
each as defined under the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. ss.ss. 11001 et seq.; (iii) any 'hazardous waste,' as defined under the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act, 42 U.S.C. ss.ss. 6901 et seq.; (iv) any 'pollutant,' as defined under the
Clean Water Act, 33 U.S.C. ss.ss. 1251 et seq.; and (v) any regulated substance
or waste under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all regulations promulgated thereunder, as in effect from
time to time, and any reference to any such statutory or regulatory provision
shall be deemed to be a reference to any successor statutory or regulatory
provision.
"In-Progress Sites" shall exclude any Rejected Sites, but shall mean
and refer to Tower Sites on which telecommunications tower structures are in the
process of being constructed by Powertel and/or Sellers, and as to which at
least 15 days prior to Closing, Powertel and/or Sellers shall have obtained (and
delivered copies thereof to CCIC and Buyer) (i) a Site Lease which is reasonably
acceptable to CCIC and Buyer, (ii) all necessary zoning approvals and building
permits, (iii) all necessary FAA approvals or certifications, (iv) a phase I
environmental assessment, (v) a site survey, and (vi) a title commitment, search
or report.
"Incomplete Sites" means those sites set forth on Schedule 1.3, as such
Schedule may be modified or supplemented pursuant to the terms and conditions of
this Agreement.
"Indemnified Party" means the Person to whom an indemnity may be or is
provided pursuant to Sections 8.1(a) or 8.1(b), as the case may be.
"Indemnitor" is defined in Section 8.1.
"Intervening Encumbrance" shall mean, with respect to a Leased Site, an
Encumbrance which is filed, created or suffered and is filed of record or
otherwise obtains priority against a Leased Site during the Gap Period. An
Intervening Encumbrance shall not include an Encumbrance which by law would have
lien priority over a previously recorded Site Lease or memorandum thereof or an
Encumbrance which is created or suffered by CCIC or Buyer (or their Affiliates),
or which is filed of record or otherwise obtains priority against a Leased Site
prior to the time the applicable Site Lease was executed by the parties thereto
or after the time such Site Lease or memorandum thereof was filed of record in
the county where the Leased Site is located but shall include, without
limitation, such an Encumbrance (including an Encumbrance which is a Permitted
Encumbrance), created or suffered during such Gap Period by the lessor or
landlord who executed the applicable Site Lease, any subsequent or other owner
of the land which is the subject of the Leased Site, Powertel or Sellers (or
their Affiliates).
"Law" means any administrative, judicial, legislative or other statute,
law, ordinance, regulation, rule, order, decree, writ, award or decision
(including without limitation the common law
-5-
<PAGE> 10
and those of the FAA and FCC), including those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning, and antitrust
matters.
"Leased Sites" means the sites indicated as Leased Sites in Schedule
1.4 hereto (excluding any Rejected Sites) for which Powertel or the Sellers hold
a leasehold interest in and to the real property associated therewith.
"Liability" means any direct or indirect liability, indebtedness,
obligation, cost, expense, claim, loss, damage, deficiency, guaranty or
endorsement of (other than endorsements for collection or deposits in the
ordinary course of business) or by any Person.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution, formal governmental investigation or
inquiry, or counterclaim, whether at law or in equity, in connection with the
ownership, use or operation of the Assets.
"Loss" means a loss, liability, claim, demand, cause of action,
judgment, damage or expense (including, with respect thereto, reasonable
attorneys', consultants' and other professional fees and disbursements of every
kind, nature and description).
"Master Lease" is defined in Section 2.8.
"Material Adverse Effect" means an adverse effect on (i) the Assets or
an increase in the Assumed Liabilities, in each case by more than $75,000 taken
on a per Tower Site basis, 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 of this Agreement or any of the Transaction Documents, or (iii)
the ability of a party to this Agreement or the Transaction Documents to perform
its obligations under this Agreement or any of the Transaction Documents.
Notwithstanding the foregoing, when the phrase "Material Adverse Effect taken as
a whole" is used in this Agreement, it shall have the meaning set forth above,
but shall mean an adverse effect on the aggregate Assets or aggregate Assumed
Liabilities, taken as a whole (without considering any calculation derived from
the per Tower Site dollar amount referred to above), rather than on a per Tower
Site basis.
"Minor Contract" is defined in Section 6.1(e).
"Missing Information" is defined in Section 2.10(a).
"MOA" is defined in Section 4.1(h).
"Non-Assignable Contract" is defined in Section 2.5.
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<PAGE> 11
"Ordinary course" or "ordinary course of business" means the ordinary
course of conducting the ownership, operation, use and leasing of the Tower
Structures by Powertel, Sellers and/or their respective Affiliates consistent
with past practice.
"Owned Sites" means the Tower Sites designated as Owned Sites in
Schedule 1.5 hereto (excluding any Rejected Sites) for which a fee ownership is
held by Powertel and/or the Sellers.
"Permitted Encumbrances" means, except as provided in the last sentence
of this definition, (i) liens for current real or personal property taxes not
yet due and payable, (ii) as to the Assets described in Schedule 1.1 and
Schedule 1.2, liens, encumbrances or other matters disclosed in the title
policies, commitments, searches and reports delivered by Powertel to Buyer in
CD-ROM format or any other format prior to the effective date of this Agreement,
(iii) as to the Assets described in Schedule 1.3, liens, encumbrances or other
matters disclosed in the title commitments, searches and reports obtained after
the effective date of this Agreement but prior to the Closing Date, (iv)
worker's, carrier's and materialman's liens not yet due and payable, (v) with
respect to Leased Sites, any liens, encumbrances or other matters placed upon
such real property by the owners thereof, other than to secure obligations or
liabilities of Powertel or Sellers, (vi) easements, rights of way or similar
grants of rights to a third party for access to or across any real property or
granted to any utility or similar entity in connection with the provision of
electric, water, sewage, telephone, gas or similar services, (vii) the Tower
Leases, (viii) any failure by Powertel, the Sellers, CCIC or Buyer to identify
or obtain any consents (other than Required Consents) from third parties as may
be deemed necessary or desirable in connection with the transfer and assignment
of Contracts, Site Leases, Tower Equipment Leases, Tower Leases and Tower
Service Contracts, (ix) terms and conditions of Site Leases, Tower Equipment
Leases, Tower Service Contracts, Swap Lease Agreements and Revenue Sharing Site
Leases affecting any of the Assets, (x) any other liens, encumbrances or other
matters affecting title to the Assets, or any of them, which with the exercise
by CCIC and Buyer of reasonable diligence would be disclosed by: (A) the
examination of the public records germane to the certification, abstracting or
issuance of opinions regarding record title to any Asset constituting an
interest in real property, including any fee simple, leasehold, easement,
license or other appurtenance, or (B) a current, accurate as-built boundary
survey of any Assets constituting an interest in real property including any
fee, leasehold, easement, license or other appurtenance, and (xi) any other
liens, encumbrances or other imperfections 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 or which do
not otherwise result in a Material Adverse Effect. Notwithstanding the
foregoing, except for the Site Leases, Tower Leases, Tower Equipment Leases,
Tower Service Contracts, Swap Lease Agreements and Revenue Sharing Site Leases
constituting a portion of the Assets, Permitted Encumbrances shall not otherwise
include (1) any Encumbrance which results in or evidences that the record owner
of an Owned Site is not Powertel, or any of the Sellers, or that the owner of
the leasehold interest in the Leased Sites is not Powertel or any of the
Sellers, or that the lessor or landlord who executed a Site Lease or memorandum
thereof was not, at the time such Site Lease or memorandum was executed, the
record owner of the land described in such Site Lease or memorandum, (2) any
Encumbrance created or incurred by Powertel or Sellers (or their Affiliates) and
not disclosed in the documents furnished or otherwise made available to CCIC and
Buyer, including, without limitation, the title policies, commitments, searches
and reports made available in CD-ROM format or otherwise, or (3) any Defect
identified in Schedule 1.2.
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<PAGE> 12
"Person" means any individual, corporation, partnership, limited
liability company or other legal entity.
"Powertel" is defined above in the preamble.
"Powertel Guaranty" is defined in Section 2.8.
"Powertel PCS Credit Agreement" is defined in Section 2.2(b).
"Prepaid Expenses" means all prepaid items, unbilled costs and fees,
and accounts, notes and other receivables under the Tower Service Contracts,
Site Leases, Tower Leases and Tower Equipment Leases as of the Closing Date.
"Prime Rate" means the "Prime Rate" of interest, as published in the
"Money Rates" table of The Wall Street Journal, Eastern Edition, from time to
time.
"Proposed Offering" is defined in Section 4.2(a).
"Registration Statement" is defined in Section 4.2(a).
"Rejected Sites" is defined in Section 2.11(b).
"Rejection" is defined in Section 4.2(a).
"Required Consent" is defined in Section 2.4.
"Retained Liability" is defined in Section 2.3(b).
"Revenue Sharing Site Leases" is defined in Section 3.2(b).
"SEC" is defined in Section 4.2(a).
"Sellers" is defined above in the preamble.
"Site Leases" means the ground leases, licenses, easements, or other
agreements for use or occupancy of a Tower Site identified in Schedule 1.6
(except for ground leases, licenses, easements or other agreements with respect
to Rejected Sites) pursuant to which the leasehold interests of Powertel and/or
Sellers in the Leased Sites are derived.
"Swap Lease Agreement" is defined in Section 3.3.
"Taxes" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority, whether domestic or foreign,
including, without limitation, income (net, gross or other including recapture
of any tax items such as investment tax credits), capital gains, gross receipts,
value-added, excise, withholding, personal property, real estate, sale, use, ad
valorem,
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<PAGE> 13
license, lease, service, severance, documentary, stamp, transfer, payroll,
employment, customs, duties, alternative, add-on minimum, estimated and
franchise taxes (including any interest, levies, charges, penalties or additions
attributable to or imposed on or with respect to any such assessment).
"10 Day Period" is defined in Section 8.1(d).
"Termination Notice" is defined in Section 4.2(a).
"Third Party Claim" is defined in Section 8.1(d).
"Tower Equipment Leases" means any existing leases (or licenses or
other Contracts) of Powertel or the Sellers for equipment or other personal
property which are Tower Structures.
"Tower Leases" means the leases or other Contracts or rights to use
spaces on the Tower Structures located on Tower Sites that are identified in
Schedule 1.7 (except for leases or other Contracts or rights with respect to
Rejected Sites).
"Tower Related Assets" shall mean (i) the Tower Leases and security
deposits (if any) from tenants under the Tower Leases, (ii) the Site Leases,
(iii) all Tower Service Contracts, (iv) any Tower Equipment Leases, (v) all
rights to any casualty insurance proceeds payable after the effective date of
this Agreement with regard to the Assets (but only to the extent the casualty to
which the proceeds relate has not been repaired or restored by Powertel and
Sellers at their cost prior to the Closing), and all rights to any warranties
held by Powertel or the Sellers with respect to the Tower Structures or Tower
Related Assets to the extent such rights are assignable, including those
assignable with consent to the extent such consents are received, or, to the
extent not so received, all amounts received by Powertel or the Sellers with
respect to claims made after the Closing Date with respect to such unassigned
rights to any warranties, (vi) copies of, or extracts from, all current files
and records of Powertel or the Sellers 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, and (vii) the
originals of the Tower Leases, Site Leases, Tower Service Contracts and Tower
Equipment Leases, and the originals of any files and records referred to in the
preceding subparagraph which relate solely to the information described in such
subparagraph, provided the originals of such information are in the possession
of Powertel or the Sellers or are under any of their control and are not needed
by Powertel or the Sellers in the operation of their businesses after the
Closing. To the extent the files and records described in subparagraph (vi) do
not relate solely to the design, construction, management, operation,
maintenance, ownership, occupancy or leasing of the Assets, Powertel and the
Sellers may retain the originals or copies of such files and records.
"Tower Service Contracts" means all Contracts with respect to the
management, operation, maintenance and servicing of the Tower Structures.
"Tower Sites" shall mean all real property interests of Powertel and/or
the Sellers in the up to 650 sites on or appurtenant to which the Tower
Structures (excluding any Rejected Sites) are located, including all fee, ground
leasehold interests, rights-of-way and easements (to the extent owned by
Powertel or the Sellers) pertaining to such tower sites, and shall include a fee
ownership in the
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Owned Sites, and the leasehold interest in and to the real
property associated with the Leased Sites pursuant to the terms of the Site
Leases.
"Tower Structures" shall mean communications tower structures situated
at the locations that are identified in Schedule 1.8 (excluding any Rejected
Sites), and owned by Powertel or the Sellers, and all of Powertel's and the
Sellers' right, title and interest therein or appurtenant thereto, including
rights to all power poles; equipment or other foundations (if any) that are not
used or occupied by Powertel or the Sellers; equipment platforms (if any) that
are not in use and that are located on towers at heights other than the heights
at which Powertel's and the Sellers' antennae or other equipment are located;
attached tower lighting equipment; alarm systems; grounding systems; and
physical improvements on each Tower Site, including without limitation fencing;
along with any tenant leases, easement rights necessary for access to the Tower
Structure and for location of the Tower Structure and guy wires, if any,
associated therewith; provided however, such term does not include any Excluded
Assets or any equipment, property or other assets placed upon the Tower
Structures or Tower Sites by third parties pursuant to Tower Leases or other
Contracts.
"Transaction Documents" means, collectively, this Agreement, the Master
Lease, the CCIC Guaranty, the Powertel Guaranty and the Escrow Agreement.
"Unavoidable Delay" means an act of God, fire, earthquake, flood,
explosion, action of the elements, war, invasion, insurrection, riot, mob
violence, sabotage, inability to procure or a general shortage of labor,
equipment, facilities, materials, or supplies in the open market, failure of
transportation, strike, lockout, action of labor unions, a taking by eminent
domain, requisition, laws, orders of government or courts, or civil or military
or naval authorities, or any other cause whether similar or dissimilar to the
foregoing, not within the reasonable control of Powertel or Sellers, including
delays caused by CCIC or Buyer and reasonable delays for adjustments of
insurance.
ARTICLE 2
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 ASSETS. Subject to the terms and conditions of this Agreement,
Powertel and each of the Sellers shall grant, convey, sell, assign, transfer and
deliver to Buyer on the Closing Date, and Buyer shall purchase on the Closing
Date from Powertel and each of the Sellers, all right, title and interest of
Powertel or the respective Seller in and to all of the assets, properties and
rights of Powertel or the respective Seller specifically set forth below in this
Section 2.1 (collectively the "Assets"), subject to the Permitted Encumbrances:
(a) all Tower Structures;
(b) all of Powertel's and the respective Seller's rights to all
Tower Sites;
(c) all Tower Related Assets; and
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(d) all rights under any Governmental Permits (excluding FCC
licenses) held with respect to the ownership or use of the Tower Structures or
Tower Sites, except to the extent such Governmental Permits are not
transferrable to the Buyer and to the extent (and only to the extent) any such
Governmental Permits are needed by Powertel or the Sellers in the operation of
their businesses.
2.2 EXCLUDED ASSETS. All assets of Powertel, Sellers and their
respective Affiliates not set forth in Section 2.1 shall be excluded from the
Assets and retained by Powertel, Sellers and their respective Affiliates,
including, without limitation, the following (collectively, "Excluded Assets"):
(a) all equipment foundations used or occupied by Powertel or the
Sellers; existing equipment cabinets, shelters and buildings used or occupied by
Powertel or the Sellers; mounting platforms used or occupied by Powertel or the
Sellers; wiring; coaxial cabling; conduits; microwave dishes and other transport
related equipment and housings; cable; equipment generators; fuel tanks;
electrical panels; the single power pole at each Tower Site that serves as the
point of demarcation between Powertel and/or Sellers and the utility service
provider; the utility service entrance equipment (including conduits and wiring)
connecting such power pole to any of Powertel's and/or the Sellers' equipment;
power protection and connection boxes; antennas and antenna connection boxes;
communications and other radio equipment and amplifiers; waveguides and ice
bridges;
(b) all of Powertel's, the Sellers' and their respective
Affiliates' right, title and interest, whether now owned or hereafter acquired,
in and to all equipment purchased with advances under the Amended and Restated
Credit Agreement dated as of February 6, 1998 among Powertel PCS, Inc., as
borrower, the banks and other financial institutions listed on the signature
pages thereof as initial lenders, and GE Capital, as agent (the "Powertel PCS
Credit Agreement"), in all of its forms, wherever located, now or hereafter
existing, and all fixtures and all parts thereof and all accessions thereto and
all proceeds thereof (including, without limitation, proceeds that constitute
property of the types described in the foregoing) and, to the extent not
otherwise included, all payments under insurance, or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing;
(c) the rights that accrue or will accrue to Powertel and the
Sellers under this Agreement or any of the other Transaction Documents,
including the consideration paid or to be paid to Powertel and the Sellers
hereunder and all accounts receivable, including rents and other amounts under
the Tower Leases, which accrue or are prorated prior to the Closing Date;
(d) any claims or rights against third parties except to the extent
that such claims or rights relate to Assumed Liabilities; and
(e) all assets, properties and rights related to Rejected Sites.
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2.3 ASSUMPTION OF CERTAIN LIABILITIES; RETAINED LIABILITIES.
(a) ASSUMPTION OF ASSUMED LIABILITIES. Subject to Section 2.3(b),
as of the Closing Date, Buyer shall acquire the Assets subject only to, and
Buyer and CCIC shall undertake, assume, perform and otherwise pay, satisfy and
discharge, and on the terms set forth in Article 8 hold Powertel and the Sellers
harmless from, the following Liabilities (collectively, the "Assumed
Liabilities"):
(i) all Liabilities of Powertel or the Sellers under all
Contracts included within the Assets (including the Site Leases, Tower
Leases, Tower Equipment Leases and Tower Service Contracts), but only
to the extent such Liabilities accrue or relate to the period from and
after the Closing Date;
(ii) the rents, revenues, Taxes, charges and payments that are
apportioned for the account of Buyer pursuant to Section 2.7 hereof;
and
(iii) all Liabilities of Powertel or the Sellers, whenever and
however incurred or accrued, which arise in connection with the
ownership, lease, use or occupancy of or under the Assets from and
after the Closing, except for the Retained Liabilities and except as
may be limited pursuant to the foregoing provisions of this Section
2.3(a).
Notwithstanding the assumption of the Assumed Liabilities as set forth above,
nothing herein shall be deemed or construed to relieve Powertel or the Sellers,
or to be an assumption by CCIC and Buyer, of any Liability arising from any
event, condition, occurrence or other matter which is the subject of a breach or
Default by Powertel or the Sellers of a representation, warranty or covenant
contained in this Agreement or in any Contract.
(b) LIMITATIONS ON ASSUMPTION OF LIABILITIES. Notwithstanding
Section 2.3(a), CCIC and Buyer are not assuming under this Agreement or any
Transaction Document any Liabilities that are not specifically described in
Section 2.3(a) as an Assumed Liability (each, a "Retained Liability"). On the
terms set forth in Article 8, Powertel and Sellers shall hold CCIC and Buyer
harmless from the Retained Liabilities. By way of example and not limitation,
each of the following represents a Retained Liability: (i) any Liabilities
arising out of any actual or alleged breach or nonperformance by Powertel or any
of the Sellers (or their respective Affiliates) prior to the Closing of any
provision of any Contract; (ii) any product liability or similar claim for
injury to any Person or property, regardless of when made or asserted, that
arises out of or is based upon any express or implied representation, warranty,
agreement or guarantee made by Powertel or any of the Sellers (or their
respective Affiliates), or alleged to have been made by Powertel or any of the
Sellers (or their respective Affiliates), or which is imposed or asserted to be
imposed by operation of Law in connection with any service performed or product
sold or leased by or on behalf of Powertel or any of the Sellers (or their
respective Affiliates) prior to the Closing; (iii) any federal, state, local or
foreign income or other Tax payable with respect to the Assets or other
properties or operations of Powertel or Sellers or any member of any affiliated
group of which Powertel or Sellers are a member for any period, in each case
prior to the Closing; (iv) any Liabilities arising prior to, after or as a
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result of the Closing to or with respect to any employees, agents or independent
contractors of Powertel or any of the Sellers or their respective Affiliates or
commitments to any of their respective Affiliates; (v) any Liabilities of
Powertel or any of the Sellers arising from or incurred in connection with the
preparation, negotiation, execution and performance of this Agreement or the
other Transaction Documents except as otherwise provided herein and therein;
(vi) any Liabilities, whether known or unknown, arising from or related to (A)
any violation by Powertel, the Sellers or their respective Affiliates prior to
the Closing of any Environmental Laws relating to the ownership, use or
occupancy of the Assets, or (B) any Environmental Condition existing prior to
the Closing which Powertel, the Sellers or their respective Affiliates caused,
(vii) any Liabilities caused by or attributable to the ownership, possession,
occupancy, use or operation of the Assets by Powertel or any of the Sellers (or
their respective Affiliates) prior to the Closing, (viii) the rents, revenues,
Taxes, charges and payments that are apportioned for the account of Powertel or
Sellers pursuant to Section 2.7 hereof, (ix) any free or below market wireless
or related phone services required by any Contracts to be provided to any
Person, including the lessors under any Site Leases, whether such obligation
accrues before or after the Closing, (x) any Liability arising out of the
matters disclosed on Schedule 6.1(d) or any Liability of Powertel or the Sellers
(or their respective Affiliates) arising out of any Litigation that is pending
or threatened in writing to Powertel or the Sellers as of the Closing Date or
any actual or alleged violation by Powertel or any of the Sellers (or their
respective Affiliates) of any applicable Law prior to the Closing, (xi) any
Liability of Powertel or the Sellers (or their respective Affiliates) that
relates primarily to, or that arises primarily out of, any Excluded Asset, or
that arises out of the ownership by Powertel, the Sellers or their respective
Affiliates of the Excluded Assets or realization of the benefits of any Excluded
Asset, and (xii) all other obligations or liabilities of Powertel or any of the
Sellers, or any of their respective Affiliates, of any nature whatsoever
(whether express or implied, fixed or contingent, known or unknown) other than
the Assumed Liabilities.
2.4 ASSIGNMENT OR SUBCONTRACTING OF PURCHASED CONTRACTS. Buyer has
undertaken to furnish Powertel and Sellers with a listing, attached to this
Agreement as Schedule 2.4 and made a part hereof by this reference, of all of
the third party consents it reasonably believes are necessary and desirable in
connection with the transfer and assignment of Contracts, including Site Leases,
Tower Equipment Leases, Tower Leases and Tower Service Contracts (each a
"Required Consent"). Nothing herein shall be deemed to constitute a warranty or
representation on the part of Powertel or Sellers that other third party
consents are not necessary or desirable in connection with the transfer and
assignment of such Assets, and failure to obtain a Required Consent (or other
third party consent) shall not constitute a Default under this Agreement or a
failure of a condition precedent to the Closing. Powertel and Sellers will use
commercially reasonable efforts to obtain the Required Consents prior to the
Closing Date. To the extent that any such Required Consent is not obtained,
Powertel and Sellers will subcontract to Buyer the performance of all
obligations and the right to receive all benefits thereunder. To the extent the
consent of the counterparty to such subcontracting is required under the terms
of any such Contract, Powertel and Sellers will use commercially reasonable
efforts to obtain such consent; and Powertel and Sellers will only subcontract
as described in the immediately preceding sentence in those cases, if any, in
which subcontracting is permitted by the Contract or applicable Law. If (and
only if) such Contract is a Site Lease or Tower Lease, then the failure to
obtain a Required Consent with respect to such Contract prior to May 15, 1999
shall be deemed to be a Defect and the Tower Site in question shall be deemed to
be a Defective Site, and
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such Defect and Defective Site shall be governed by the applicable provisions of
Sections 2.10 and 2.11.
2.5 CONSENT OF THIRD PARTIES. Nothing in this Agreement shall be
construed as an attempt by Powertel and Sellers to assign to Buyer pursuant to
this Agreement any Contract, Governmental Permit, franchise, claim or asset
included in the Assets that is by its terms or by Law nonassignable without the
consent of any other party or parties, unless such consent or approval shall
have been given, or as to which all the remedies for the enforcement thereof
available to Powertel and Sellers would not by Law pass to Buyer as an incident
of the assignments provided for by this Agreement (a "Non-Assignable Contract").
To the extent that any consent in respect of, or a novation of, a Non-Assignable
Contract has not been obtained, Powertel and Sellers shall continue to use
commercially reasonable efforts to obtain any such consent or novation until
such time as it shall have been obtained (but in no event longer than 180 days
following the Closing), and Powertel and Sellers shall use commercially
reasonable efforts to cooperate with Buyer to provide that Buyer shall receive
the interest of Powertel and Sellers in the benefits under such Non-Assignable
Contract, including performance by Powertel and Sellers as agent if commercially
reasonable, provided that Buyer shall undertake to pay or satisfy the
corresponding Liabilities under the terms of such Non-Assignable Contract to the
extent that Buyer would have been responsible therefor if such consent or
approval had been obtained.
2.6 BULK TRANSFER LAWS. CCIC and Buyer hereby waive compliance by
Powertel and the Sellers with the provisions of any and all Laws relating to
bulk transfer in connection with the sale of the Assets. Powertel and Sellers
shall indemnify CCIC and Buyer from and against any and all Liabilities
(including reasonable attorneys' fees) arising out of noncompliance with such
bulk transfer Laws.
2.7 CERTAIN APPORTIONMENTS. Notwithstanding any provision to the
contrary in this Section 2.7 or elsewhere in this Agreement, at the Closing the
following items shall be apportioned between Powertel and the Sellers, on the
one hand, and CCIC and Buyer, on the other hand, with such adjustments to be
made as of the Closing Date by the party that on a net basis owes money to the
other party under this Section 2.7 by wire transfer of immediately available
funds to such accounts as such other party shall specify in writing: (a) rents
and revenues under all Contracts included in the Assets; (b) Prepaid Expenses;
(c) federal, state, local or foreign Taxes (other than income taxes) paid or
payable with respect to the Assets; and (d) charges and payments under all
Contracts included in the Assets. Such apportionments shall be made pro rata on
a per diem basis as of the Closing Date so that all such rents, revenues, Taxes,
charges and payments attributable to the period prior to the Closing Date are
for the account of Powertel and Sellers; and all such rents, revenues, Taxes,
charges and payments attributable to the period from and after the Closing Date
are for the account of Buyer. If any of the aforesaid apportionments cannot be
calculated accurately on the Closing Date, then the same shall be calculated and
adjusted once by Powertel, Sellers, CCIC and Buyer after the Closing Date in
accordance with the following procedures. Within five business days after the
last day of the third full calendar month following the Closing Date, Powertel,
Sellers, CCIC and Buyer shall exchange their respective post-Closing
calculations of such apportionments. Powertel, Sellers, CCIC and Buyer shall in
good faith attempt to agree upon the post-Closing
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apportionments on or before the last day of the fourth full calendar month
following the Closing Date. If at the end of such period, Powertel, Sellers,
CCIC and Buyer cannot agree on the post-Closing apportionments, Powertel,
Sellers, CCIC and Buyer shall submit to an independent accounting firm (the
"Accounting Firm") for review and resolution any and all matters which remain in
dispute. The Accounting Firm shall be Ernst & Young LLP or, if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Powertel, Sellers, CCIC and Buyer in
writing. The Accounting Firm shall be instructed to, within thirty (30) days
after the submission of any disputed matters, review and resolve all such
disputed matters and to report its resolution thereof to Powertel, Sellers, CCIC
and Buyer, and such report shall be final, binding and conclusive on Powertel,
Sellers, CCIC and Buyer with respect to all such disputed matters. The fees and
expenses of the Accounting Firm incurred pursuant to this Section 2.7 shall be
borne fifty percent (50%) by Powertel and Sellers on the one hand, and fifty
percent (50%) by CCIC and Buyer, on the other hand. No other post-Closing
apportionments shall be made by the parties. Either party owing the other party
a sum of money based on the agreed-upon post-Closing apportionments shall pay
said sum to the other party on or before the last day of the fifth full calendar
month following the Closing Date. If payment of any such amount is not paid when
due, interest shall accrue on the past due amount at a rate equal to the Prime
Rate plus two percent (2%) per annum from the due date to the date of payment.
The aforesaid post-Closing adjustment shall be the only post-Closing adjustment
of the items to be apportioned under this Section 2.7. The provisions of this
Section 2.7 shall not affect the obligations of Powertel, Sellers, CCIC and
Buyer under this Agreement with respect to the Retained Liabilities and the
Assumed Liabilities, respectively.
2.8 MASTER SITE AGREEMENT. At the Closing, Powertel and Sellers shall
assign and Buyer shall assume the Master Site Agreements in the form attached
hereto as Exhibit "A" (collectively, the "Master Lease") pursuant to which Buyer
shall lease to certain Affiliates of Powertel and the Sellers space on the Tower
Structures, with the exception of the Gray Hill, Lafayette and Senoia Tower
Sites, and at the Tower Sites. CCIC shall guarantee the payment and performance
of all of Buyer's obligations under the Master Lease including, without
limitation, all of Buyer's obligations in respect of the Site Leases, and shall
execute upon the Closing, a Guaranty (the "CCIC Guaranty") in the form of
Exhibit "B." Powertel shall guaranty the payment and performance of all of the
obligations of such Affiliates of Powertel and the Sellers under the Master
Lease, and shall execute upon the Closing, a Guaranty (the "Powertel Guaranty")
in the form of Exhibit "C."
2.9 [intentionally deleted]
2.10 DUE DILIGENCE.
(a) Set forth on Schedule 1.1 to this Agreement is a list of
Accepted Sites. As of the effective date of this Agreement, CCIC and Buyer have
completed their due diligence review with respect to the Assets included in and
related to the Accepted Sites and are prepared, subject to the terms and
conditions of this Agreement, to acquire such Assets at Closing subject to the
Permitted Encumbrances. Set forth on Schedule 1.3 to this Agreement is a list of
Incomplete Sites. CCIC and Buyer have completed their due diligence review of
such sites in all respects, except that, as indicated on Schedule 1.3, certain
information regarding title and environmental matters has not yet been
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provided to or reviewed by Buyer or CCIC (the "Missing Information"). Set forth
on Schedule 1.2 is a list of Defective Sites. CCIC and Buyer have completed
their due diligence review of such sites in all respects except as indicated on
Schedule 1.2. Described in reasonable detail on Schedule 1.2 are certain Defects
which CCIC and Buyer have identified with respect to such Defective Sites. As of
the effective date of this Agreement, such Defects do not include the failure to
obtain Required Consents, but such failure shall be deemed to be a Defect
pursuant to Section 2.4 to the extent Required Consents are not obtained prior
to May 15, 1999. Schedule 1.2 also includes, with respect to each such Defect, a
description in reasonable detail of the curative action that CCIC and Buyer
recommend Powertel and/or Sellers to take with respect to such Defect.
(b) From and after the effective date of this Agreement, Powertel
and Sellers shall use their commercially reasonable efforts to locate all
Missing Information and to provide all Missing Information to CCIC and Buyer.
With respect to each Incomplete Site, Powertel and Sellers shall provide CCIC
and Buyer with written notice when, in Powertel's and Sellers' good faith
belief, Powertel and Sellers have provided all Missing Information to CCIC and
Buyer with respect to each such Incomplete Site (a "Completion Notice"). CCIC
and Buyer shall use commercially reasonable efforts to complete their due
diligence investigation with respect to Missing Information as soon as
reasonably practicable following the receipt of such information.
(c) Following the receipt and review by CCIC and Buyer of Missing
Information with respect to each Incomplete Site, but in all events within 15
days of receipt of a Completion Notice with respect to an Incomplete Site, CCIC
and Buyer shall: (i) provide Powertel and Sellers with written notice that CCIC
and Buyer have satisfactorily completed their due diligence investigation with
respect to such Incomplete Site and are prepared, subject to the terms and
conditions of this Agreement, to acquire such Assets at Closing subject to the
Permitted Encumbrances, in which case such Incomplete Site shall be and become
an Accepted Site, and such site shall be deemed to be removed from Schedule 1.3
and placed on Schedule 1.1; (ii) provide Powertel and Sellers with written
notice (A) that states that CCIC and Buyer have determined in good faith that
the Missing Information is incomplete in a material way for the purpose of CCIC
and Buyer satisfactorily completing their due diligence investigation and (B)
that describes in reasonable detail the manner in which the Missing Information
remains incomplete, in which event the incomplete information shall continue to
constitute Missing Information; or (iii) if, and only if, such Missing
Information reveals a Defect in the reasonable opinion of CCIC and Buyer, such
Incomplete Site shall be a Defective Site, and such site shall be deemed to be
removed from Schedule 1.3 and added to Schedule 1.2 and the provisions of
Section 2.10(d) shall apply; provided, however, that Powertel and Sellers shall
have the right to dispute in good faith whether a problem or defect constitutes
a Defect (as defined herein) and to invoke the procedures described in Section
10.2 of this Agreement. (For purposes of this subparagraph (c), a Defect may
only include (1) a Defect of the nature and type set out in Schedule 1.2, or (2)
an Encumbrance which is not a Permitted Encumbrance and (x) would not reasonably
be expected to result in a Material Adverse Effect or (y) was not created or
incurred by Powertel, any of the Sellers or their respective Affiliates.) CCIC
and Buyer shall be precluded from designating any Accepted Site as either an
Incomplete Site or Defective Site, except pursuant to Section 2.4 and Section
2.11(c) and may only designate any Incomplete Site as a Defective Site based
upon their review of Missing Information or upon notice from Powertel and
Sellers that such Missing Information does not exist or is not in the possession
or custody of Powertel or the Sellers and, therefore, cannot be delivered.
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(d) Powertel and Sellers shall have the right, prior to the date
of Closing, to cure Defects that exist with respect to the Defective Sites.
Powertel and Sellers shall provide CCIC and Buyer with notice of any cure
effected with respect to a Defective Site (a "Cure Notice"), and shall request
CCIC's and Buyer's consent to remove such Defective Site from Schedule 1.2 to
Schedule 1.1. The Cure Notice shall describe in reasonable detail the cure which
Powertel and the Sellers reasonably believe in good faith should cause the
Defective Site to be removed from Schedule 1.2, and shall include a copy of any
instrument, document or other writing which evidences the curative action taken.
Within 15 days of receipt of a Cure Notice with respect to a Defective Site,
CCIC and Buyer shall: (i) provide Powertel with written notice that CCIC and
Buyer have satisfactorily completed their due diligence investigation of the
curative action taken with respect to such Defective Site and are prepared,
subject to the terms and conditions of this Agreement, to acquire such Assets at
Closing subject to the Permitted Encumbrances, in which case such Defective Site
shall be and become an Accepted Site, and such site shall be deemed to be
removed from Schedule 1.2 and placed on Schedule 1.1; or (ii) provide Powertel
with written notice (A) that states that CCIC and Buyer have determined in good
faith that the curative action taken is incomplete in a material way for the
purpose of curing the Defect in question and (B) that describes in reasonable
detail the manner in which the Defect remains uncured and describes the curative
action that would cure such Defect, in which event the Defect shall continue as
such and the site in question shall remain a Defective Site. A Defect that
exists solely by reason of a Required Consent that needs to be obtained shall be
deemed to have been cured by Powertel or Sellers obtaining such Required Consent
prior to Closing or by entering into a subcontracting or similar arrangement
pursuant to Section 2.4. Other Defects set forth on Schedule 1.2 shall be deemed
to have been cured by Powertel or Sellers completing the curative actions set
forth on Schedule 1.2; provided, however, that CCIC and Buyer shall not
unreasonably withhold their consent to removing a Defective Site from Schedule
1.2 upon Powertel or Sellers effecting any other reasonable cure to or of such
Defect.
2.11 REJECTED SITES.
(a) At least 15 days prior to Closing, CCIC and Buyer shall
provide notice to Powertel and Sellers as to whether Buyer desires to purchase
any Assets that are Defective Sites or Incomplete Sites; any such sites which
Buyer desires to purchase shall be deemed to be Accepted Sites and shall be
deemed to be removed from Schedule 1.2 or 1.3, as the case may be, and added to
Schedule 1.1, and the Closing Certificate may be modified by Powertel and
Sellers to qualify or omit the representations and warranties of Powertel and
the Sellers with respect to the applicable Defect with no adjustment to the
Purchase Price. Such sites shall be transferred and conveyed at the Closing
subject to both the Defect and the Permitted Encumbrances. (Notwithstanding any
notice to Powertel and Sellers that Buyer desires to purchase any Assets that
are Defective Sites or Incomplete Sites, for a period of five days after its
receipt of such notice, Powertel and Sellers shall have the right to notify CCIC
and Buyer that they have elected to not sell a site (i) which contains, or which
Powertel and Sellers reasonably believe may contain, an Environmental Condition
that Powertel and Sellers desire to correct at their cost, or (ii) in the case
of a failure to obtain a Required Consent or other material consent or otherwise
if in Powertel's and Sellers' reasonable judgment such Defect would adversely
affect under the Master Lease Powertel's or Sellers' use, occupancy or operation
of the Defective Site in any material way; any such site not sold shall be
deemed to be a Rejected Site. CCIC and Buyer
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shall have the right to dispute in good faith an election by Powertel and
Sellers to not sell a site for one of such reasons and to invoke the procedures
described in Section 10.2 of this Agreement.)
(b) Immediately prior to Closing, all Defective Sites and
Incomplete Sites which are not being sold to Buyer pursuant to Section 2.11(a)
shall be designated as rejected sites (the "Rejected Sites") and shall be
removed from Schedules 1.2 and 1.3 and placed on Schedule 2.11, and the Purchase
Price shall be adjusted as provided in Section 3.2.
(c) At least 15 days prior to the Closing Date, Powertel and
Sellers shall deliver to CCIC and Buyer, a list of those Assets (identified by
Tower Site) set forth on Schedules 1.1, 1.2 or 1.3 with respect to which
Powertel and Sellers are unable to make one or more of the representations and
warranties set forth in Section 6.2 or are unable to obtain a Required Consent.
Such notice shall identify (i) such Assets, (ii) the representations and
warranties which cannot be given (identified by reference to the appropriate
subsection of this Agreement) or that a Required Consent cannot be obtained, and
(iii) the specific circumstance ("Circumstance") which, in the opinion of
Powertel and Sellers, prevents them from making such representations and
warranties. With respect to the Assets (identified by Tower Site) identified in
such notice, CCIC and Buyer shall have the right to either (A) designate each
such Asset (identified by Tower Site) to be a Rejected Site and adjust the
Purchase Price as provided in Section 3.2, or (B) acquire such Asset at the
Closing without an adjustment to the Purchase Price, in which event all such
sites shall be deemed to be Accepted Sites and shall be deemed to be removed
from Schedule 1.2 or 1.3, if applicable, and added to Schedule 1.1, and the
Closing Certificate may be modified by Powertel and Sellers to qualify or omit
the representations and warranties with respect to such Assets based upon the
Circumstance applicable to such Asset. (Notwithstanding any notice to Powertel
and Sellers that Buyer desires to purchase any Assets for which a Circumstance
prevents Powertel and Sellers from making certain representations and
warranties, for a period of five days after its receipt of such notice, Powertel
and Sellers shall have the right to notify CCIC and Buyer that they have elected
to not sell a site which is the subject of one of the following Circumstances,
in the event (i) the site contains, or Powertel and Sellers reasonably believe
it may contain, an Environmental Condition that Powertel and Sellers desire to
correct at their cost, or (ii) in the case of a failure to obtain a Required
Consent or other material consent or otherwise if in Powertel's and Sellers'
reasonable judgment such Defect would adversely affect under the Master Lease
Powertel's or Sellers' use, occupancy or operation of the site in any material
way; any such site not sold shall be deemed to be a Rejected Site. CCIC and
Buyer shall have the right to dispute in good faith an election by Powertel and
Sellers to not sell a site for one of such reasons and to invoke the procedures
described in Section 10.2 of this Agreement.) Other than as set forth in this
Section 2.11(c), no Accepted Site may become a Rejected Site pursuant to this
Agreement.
2.12 ADDITIONAL SITES.
(a) From time to time prior to Closing, but in all events at
least 15 days prior to Closing, Powertel and Sellers shall provide notice to
CCIC and Buyer as to whether they desire to sell any Additional Sites. Such
notice shall identify the Additional Sites and shall include due diligence
materials with respect to such site. Within 5 business days of receipt of such
notice and due diligence materials, CCIC and Buyer shall inform Powertel and
Sellers in writing as to whether in
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their reasonable judgment there are any Defects or Missing Information which may
affect adversely the value, ownership, operation or use of the Additional Sites
by CCIC and Buyer in a material way. Missing Information as to the Additional
Sites shall generally be consistent with, and conform to, the kinds and
materiality of the Missing Information otherwise contained on Schedule 1.3;
Defects as to the Additional Sites shall generally be consistent with, and
conform to, the kinds and materiality of the Defects described in the
penultimate sentence of Section 2.10(c). If CCIC and Buyer fail to provide
written notice of any Defects or Missing Information as to any Additional Site
within such 5 business day period, then such Additional Site shall be deemed to
be an Accepted Site and shall accordingly be added to Schedule 1.1; and the
Purchase Price shall be increased by $423,077 for each of such additional
Accepted Sites. In the event that CCIC and Buyer furnish written notice of a
Defect or Missing Information as to any of the Additional Sites, then such
Additional Sites shall be deemed a Defective Site (as to any Site for which a
Defect(s) is identified) or an Incomplete Site (as to any Site for which Missing
Information is indicated) and handled in accordance with Sections 2.10 and 2.11
hereof; provided, however, that Powertel and Sellers shall have the right to
dispute in good faith whether a problem or defect constitutes a Defect (as
defined herein) and to invoke the procedures described in Section 10.2 of this
Agreement. (Such Additional Sites may become Rejected Sites pursuant to the
provisions of Section 2.11(b).) CCIC and Buyer acknowledge that Powertel and
Sellers shall have the right, but not the obligation, to include such Additional
Sites for purchase by CCIC and Buyer, but only up to and until the total number
of Tower Sites to be purchased hereunder by CCIC and Buyer shall equal 650 Tower
Sites. (All In-Progress Sites are also Additional Sites under this Agreement;
accordingly, the provisions of this Agreement (including this Section 2.12(a))
that apply to Additional Sites shall also apply to In-Progress Sites.)
(b) In the event CCIC and Buyer become obligated as set forth
above to purchase Additional Sites which are In-Progress Sites, CCIC and Buyer
shall have the right at Closing to elect from among the following modes of
purchase: (i) to accept a conveyance of the In-Progress Sites at Closing subject
to the provisions of this Agreement, including Section 2.12(c), but subject also
to the execution of a mutually acceptable form of construction or other
agreement between and among the parties, which agreement includes insurance,
indemnification and other customary provisions which adequately protect CCIC and
Buyer during the completion of construction; (ii) to escrow the portion of the
Purchase Price allocable to the In-Progress Sites with an escrow agent and
pursuant to an escrow agreement mutually acceptable to Powertel and Sellers, on
the one hand, and CCIC and Buyer, on the other hand, with disbursement of such
escrowed amounts to be conditioned upon timely completion of the Construction
Activities and the conveyance, free and clear of any Encumbrance other than
Permitted Encumbrances, of the In-Progress Sites with completed Tower Structures
built thereon; or (iii) to enter into an agreement mutually acceptable to
Powertel and Sellers, on the one hand, and CCIC and Buyer, on the other hand,
providing for a separate Closing to occur upon timely completion of the
Construction Activities. (For purposes of this Section 2.12(b), the term
"Permitted Encumbrances" shall not include liens, encumbrances or other matters
affecting title to the In-Progress Sites, which with the exercise by CCIC and
Buyer of reasonable diligence would be disclosed by: (1) an examination of a
current title commitment, search or report or the examination of public records,
or (2) a current, accurate as-built boundary survey, but with regard to the
foregoing matters shall only refer to those matters disclosed by: (x) the title
commitment, search or report actually delivered by Powertel and Sellers to CCIC
and Buyer for review, and (y) the actual survey delivered by Powertel and
Sellers to CCIC and Buyer for review.)
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(c) In the event (and only in the event) that CCIC and Buyer
elect to accept a conveyance of an In-Progress Site at Closing and thereby
forego the escrow and deferred closing alternatives described above, then
beginning on the Closing Date and until such time as both the In-Progress Site
is completed and delivered to CCIC and Buyer as completed and the Initial SLA
Term (as defined in the Master Lease) commences, Powertel and/or Sellers shall
be obligated pursuant to the Master Lease to pay to CCIC and Buyer monthly rent
at a rate of $1800.00 per month or the appropriate pro-rated portion thereof for
any partial months.
(d) Powertel and/or Sellers shall perform or cause to be
performed all Construction Activities for such In-Progress Sites and shall use
commercially reasonable efforts to deliver a completed Tower Structure no later
than 120 days after the Closing Date subject to Unavoidable Delays; provided,
however, that Unavoidable Delays shall not cause delivery of such Tower
Structure to be delayed beyond 180 days after the Closing Date. Upon completion
of the Construction Activities, Powertel or Sellers shall obtain and deliver to
CCIC or Buyer all Governmental Permits necessary for the ownership, use or
occupancy of the Tower Structure (except FCC licenses, and except to the extent
and only to the extent such Governmental Permits are needed by Powertel or the
Sellers in the operation of their businesses). In addition, upon completion of
the Construction Activities, the parties shall enter into a Site Lease Agreement
(as defined in the Master Lease) but which shall provide that the Initial SLA
Term shall commence upon the 31st day following the last to occur of the
following: conveyance of the In-Progress Site to Buyer and the completion and
delivery of the Tower Structure to Buyer. Upon the commencement of the Initial
SLA Term, the parties shall enter into a written commencement of term agreement
in recordable form which shall incorporate and refer to the Master Lease and the
Site Lease Agreement and which either party may file of record as an
acknowledgment of the date on which the Initial SLA Term shall be deemed or
stipulated to have commenced and the date on which it (and renewal terms) shall
expire.
(e) In the event Powertel and/or Sellers fail to complete
construction of an In-Progress Site within the 120-day period set forth above in
Section 2.12(d), as such period may be extended for any Unavoidable Delays, then
CCIC and Buyer's sole and exclusive remedy shall be to recover from Powertel
and/or Sellers the sum per diem of $500.00 (not to exceed $423,077 in the
aggregate) for each In-Progress Site that is not completed on or before the
required completion date. Notwithstanding the foregoing, Powertel and/or Sellers
shall be obligated to complete such site and deliver to CCIC and Buyers as soon
as commercially practicable the applicable Assets with respect thereto not
previously conveyed and delivered.
ARTICLE 3
PURCHASE PRICE, ESCROW DEPOSIT AND PURCHASE PRICE ADJUSTMENTS
3.1 PURCHASE PRICE.
(a) The Purchase Price for the Assets shall be an amount equal to
$423,077 multiplied by the number of sites listed on Schedule 1.8 (exclusive of
the Gray Hill site,
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identified on such Schedule by identification number I-GA-000-1000), as adjusted
pursuant to the provisions of Section 3.2.
(b) The Purchase Price shall be paid to Powertel and Sellers at
Closing in immediately available funds by wire transfer pursuant to instructions
provided by Powertel and Sellers. For purposes of this Agreement, "Closing"
shall mean the closing of the transactions contemplated hereby. "Closing Date"
shall mean the earlier of: (i) June 4, 1999; or (ii) such earlier date, if any,
as shall be mutually agreeable to the parties after CCIC has completed the sale
of certain securities pursuant to the Proposed Offering (or has otherwise
secured adequate financing) and all other conditions precedent to Closing have
been satisfied. Notwithstanding the foregoing, with respect to In-Progress
Sites, for purposes of this Agreement, "Closing Date" shall mean the date
Powertel and Sellers' fee or leasehold interest in the In-Progress Sites (and
Assets related thereto) is transferred, assigned, and/or conveyed (whether
directly or out of escrow) by Powertel and Sellers to Buyer; and "Closing" shall
mean the closing with respect thereto, and the closing procedures shall be
governed by the terms and provisions of Article 7.
(c) As of the effective date of this Agreement, CCIC and Buyer
shall deposit with SunTrust Bank, Atlanta ("Escrow Agent"), in Atlanta Georgia,
the sum of Fifty Million Dollars ($50,000,000) (such sum, together with interest
to accrue thereon and any additional amounts which may be deposited by CCIC and
Buyer pursuant to Section 4.2(a), being the "Escrow Deposit") in cash to be held
in escrow by the Escrow Agent in accordance with this Agreement and the Escrow
Agreement. The Escrow Agent shall hold and invest the Escrow Deposit as provided
in the Escrow Agreement. Upon the Closing, the Escrow Deposit shall be delivered
by the Escrow Agent to Powertel and Sellers and shall be credited against the
Purchase Price, with any balance thereof delivered to CCIC and Buyer. If the
Closing contemplated by this Agreement does not occur, the Escrow Deposit shall
be delivered by the Escrow Agent as provided in this Agreement and the Escrow
Agreement.
3.2 PRE-CLOSING ADJUSTMENTS TO PURCHASE PRICE.
(a) At the Closing, for each Rejected Site, the Purchase Price
for the Assets shall be reduced by an amount equal to $423,077, and for each
Additional Site (that does not become a Rejected Site), the Purchase Price shall
be increased by an amount equal to $423,077.
(b) CCIC and Buyer acknowledge that a number of the Site Leases
contain provisions whereby the lessors thereunder may have a right to share in
certain revenues received by the lessees thereunder in connection with Tower
Leases ("Revenue Sharing Site Leases"). With respect to such Revenue Sharing
Site Leases, Powertel and Sellers shall pay to CCIC and Buyer, at Closing, as a
credit against the Purchase Price the sum of Three Hundred Eighty-Three Thousand
and No/100 Dollars ($383,000.00). Such payment shall constitute additional
consideration and compensation for the acceptance by CCIC and Buyer of the sites
affected by such Revenue Sharing Site Leases without requiring additional
reimbursement in any amount from Powertel and Sellers for any revenue sharing
payments by CCIC or Buyer to the lessors thereunder.
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3.3 POST-CLOSING ADJUSTMENTS. Schedule 3.3 contains a list of certain
third party leases or licenses covering the Tower Structures which were entered
into by Powertel or Sellers (or their respective Affiliates) as lessors pursuant
to a swap or other arrangement where the monthly rental rate for such agreement
is less than $1,500 per month (each, a "Swap Lease Agreement"). With respect to
each Swap Lease Agreement covering any of the Tower Structures, on or before the
tenth day of each calendar month from and after the Closing Date until the time
specified in the last sentence of this Section 3.3, Sellers and Powertel shall
pay to Buyer an amount equal to the difference, if any, between (i) the monthly
rent that Buyer would have received under the Swap Lease Agreement if the rents
payable by the third party lessee thereunder were set at rental rates which
would result in an average of $1,500 per month under all of the Tower Leases
existing immediately prior to Closing for no more than a 12-panel antenna array,
and (ii) the monthly rent receivable by Buyer under the Swap Lease Agreement. To
the extent that it is determined that a payment shall be due from Powertel or
Sellers to Buyer under this Section 3.3, the parties shall prepare an amended
Schedule 3.3 as of the Closing Date which shall allocate to each such Swap Lease
Agreement included thereon an equitable portion of the total amount due under
this Section 3.3. Such amended Schedule 3.3 shall be mutually agreed upon by the
parties hereto. The payment obligation of Powertel or the applicable Seller
under the preceding sentence with respect to a particular Swap Lease Agreement
shall terminate on the date that the third party lessee no longer has lease
rights under the Swap Lease Agreement with respect to the subject Tower
Structure.
3.4 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
among the Assets in accordance with Schedule 3.4. Such allocation shall be used
for federal income tax reporting purposes pursuant to Section 1060 of the
Internal Revenue Code of 1986, as amended.
3.5 ESCROW AGREEMENT. On or before March 16, 1999, the parties
hereto, together with the Escrow Agent, shall execute and deliver the Escrow
Agreement in the form attached hereto as Exhibit "D" (the "Escrow Agreement")
pursuant to which the Escrow Deposit or portions thereof shall be held, invested
and disbursed.
ARTICLE 4
AGREEMENTS PENDING CLOSING
4.1 AGREEMENTS OF POWERTEL AND SELLERS PENDING THE CLOSING. Powertel
and Sellers covenant and agree that, pending the Closing, except as otherwise
agreed to in writing by CCIC and Buyer, and except in connection with the
performance of the transactions contemplated hereby:
(a) BUSINESS IN THE ORDINARY COURSE. Powertel and Sellers shall
operate, repair, maintain and service the Assets and the Assumed Liabilities in
the ordinary course consistent with past practice and in compliance in all
material respects with all applicable Laws and Governmental Permits and, to the
extent consistent therewith, use all reasonable efforts to preserve the
relationships with lessors, lessees and others having business dealings with the
business of the Assets, provided that Powertel and Sellers may enter into
amendments and modifications of Site Leases and Tower Leases to the extent
authorized by this Agreement and may enter into new Tower Leases (and term
sheets and binding and non-binding letters of intent
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regarding Tower Leases) with respect to the Tower Structures in the ordinary
course consistent with past practice, subject, however, to the provisions of
Section 4.1(g). Powertel and Sellers will insure the Assets and their operations
from casualty consistent with past practice.
(b) UPDATE SCHEDULES. Subject to the right set out in this
Section 4.1(b) to update Schedules, on or before April 30, 1999, Powertel and
Sellers shall deliver to CCIC and Buyer the Schedules which are contemplated by
Section 6.2, using commercially reasonable efforts to provide as complete
information on such Schedules as is available to Powertel and Sellers at the
time the Schedules are prepared. Until the Closing Date, Powertel and Sellers
shall from time to time, as necessary, disclose in writing to CCIC and Buyer any
information contained in their representations and warranties or any of the
Schedules hereto which is incomplete or is no longer correct after the date
hereof. To the extent any such disclosure necessitates a modification to any
Schedule hereto to make the information provided in such Schedule true and
correct, the parties shall execute an amendment or other writing which evidences
the necessary modification to such Schedule; provided, however, that if such
disclosure constitutes an Encumbrance that does not constitute a Permitted
Encumbrance or, in the reasonable opinion of CCIC and Buyer has or is reasonably
likely to have a Material Adverse Effect, CCIC and Buyer shall have the right to
designate in a modified Schedule, at the time of such modification, that the
Tower Site in question is a Defective Site and such new disclosure which has or
is reasonably likely to have a Material Adverse Effect or which constitutes an
Encumbrance that does not constitute a Permitted Encumbrance is a Defect (but
only if and to the extent such Defect would qualify as such based on the
standards required by the penultimate sentence of Section 2.10(c)), and such
Defective Site and Defect shall be governed by the applicable provisions of
Sections 2.10 and 2.11. Any disclosures made by Powertel and Sellers in
accordance with the provisions of this Section 4.1(b) shall be deemed to modify,
amend or supplement the representations and warranties of Powertel and Sellers
and the Schedules hereto for the purposes of this Agreement, including without
limitation, Article 8 hereof.
(c) CONDUCT OF BUSINESS. Powertel and Sellers shall cooperate
with CCIC and Buyer and use their reasonable efforts to cause all of the
conditions to the obligations of CCIC, Buyer, Powertel and Sellers under this
Agreement to be satisfied on or prior to the Closing Date.
(d) SALE OF ASSETS. Without limiting the generality of Section
4.1(c) and except for conveyances to Buyer contemplated hereby or interim
conveyances from any Affiliates of Powertel or the Sellers to Powertel or the
Sellers, Powertel and the Sellers shall not, directly or indirectly, sell or
encumber all or any part of the Assets or initiate or participate in any
discussions or negotiations or enter into any agreement to do any of the
foregoing. Notwithstanding the foregoing, but subject to the provisions of
Section 4.1(f), Powertel and Sellers shall have the right to enter into Site
Leases, Tower Leases, term sheets and binding and non-binding letters of intent
(or terminations, modifications, amendments, renewals or extensions of any of
the foregoing) in the ordinary course of business prior to the Closing, subject
to the terms and provisions of this Agreement, including Section 4.1(g).
(e) ACCESS. Powertel and Sellers shall give to CCIC's and Buyer's
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
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and other documents relating to the Assets or the Assumed Liabilities and shall
permit them to consult with the officers, employees, accountants, counsel and
agents of Powertel and Sellers for the purpose of making such investigation of
the Assets or the Assumed Liabilities, as CCIC and Buyer shall desire to make,
provided that such investigation shall not unreasonably interfere with the
business operations of Powertel and Sellers. Furthermore, Powertel and Sellers
shall furnish to CCIC and Buyer or provide CCIC and Buyer access to all such
documents and copies of documents and records and information with respect to
the Assets or the Assumed Liabilities and copies of any working papers relating
thereto as CCIC and Buyer shall from time to time reasonably request and shall
permit CCIC and Buyer and their agents to make such physical inventories and
inspections of the Assets or of Powertel and the Sellers as CCIC and Buyer may
reasonably request from time to time. Notwithstanding the foregoing provisions
of this Section 4.1(e), Powertel and Sellers shall not be required to provide
any such information to CCIC and Buyer if, in the reasonable determination of
the general counsel of Powertel, access to such information by CCIC and Buyer is
prohibited by the provisions of any confidentiality agreements binding upon
Powertel or any of the Sellers or by applicable Law.
(f) NO SOLICITATION. With respect to the Assets, Powertel and
Sellers shall not, nor shall any of them authorize or permit any officer,
director or employee of or any investment banker, attorney, accountant or other
representative retained by any of them to: (i) solicit, initiate or encourage
the submission of any "other bid," (ii) enter into any agreement (including,
without limitation, any term sheet or binding or non-binding letter of intent)
with respect to any other bid or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
other bid. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by any executive officer
of Powertel or Sellers or any investment banker, attorney or other advisor or
representative of Powertel or Sellers shall be deemed to be a breach of this
Section 4.1(f) by Powertel and Sellers. Powertel and Sellers promptly shall
advise CCIC and Buyer orally and in writing of any other bid or any inquiry with
respect to or which could lead to any other bid and the identity of the person
making any such other bid or inquiry. As used in this Section, "other bid" shall
mean any proposal to acquire in any manner any of the Assets, other than (A) the
transactions with CCIC and Buyer contemplated by this Agreement and (B) any
Excluded Asset.
(g) MARKETING AGREEMENT. Powertel and Sellers shall allow CCIC
and/or Buyer to act as Powertel's and Sellers' sole third party agent for
purposes of marketing for rental to others available space on the Tower Sites
and Tower Structures for the installation, operation and maintenance of wireless
communications antennas and equipment on terms and conditions as may be mutually
agreed upon by all parties, including CCIC and Buyer. Notwithstanding the
foregoing, Powertel and/or Sellers shall have the right to continue to market
all such Tower Sites and Tower Structures on its or their own behalf, provided
that Powertel and Sellers shall provide CCIC and Buyer the right to review and
approve any prospective Tower Lease (or term sheets or binding or non-binding
letters of intent regarding the same); provided, however, such approval by CCIC
and Buyer shall not be unreasonably withheld or delayed. Failure by CCIC and
Buyer to approve any Tower Lease (or term sheets or binding or non-binding
letters of intent regarding the same) proposed by Powertel and/or Sellers within
5 business days after submittal of the terms thereof to CCIC and Buyer shall be
deemed approval. Any Tower Lease entered into by
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Powertel and/or Sellers in accordance with this Section 4.1(g) shall, upon such
execution, be included in Schedule 1.7 hereto. Powertel and/or Sellers shall
have the right to terminate, modify, amend, renew or extend Site Leases and
Tower Leases in the ordinary course of business prior to the Closing, provided
that Powertel and Sellers shall provide CCIC and Buyer the right to review and
approve any such prospective action; provided, however, such approval by CCIC
and Buyer shall not be unreasonably withheld or delayed; and provided further
that approval by CCIC and Buyer shall not be required for renewal or extension
of any Site Leases or Tower Leases to the extent deemed reasonably necessary by
Powertel or Sellers to avoid expiration or termination thereof. Failure by CCIC
and Buyer to approve any such prospective action proposed by Powertel and/or
Sellers within 5 business days after submittal of the terms thereof to CCIC and
Buyer shall be deemed approval.
(h) MEMORANDA OF AGREEMENT. From and after the effective date of
this Agreement, Powertel and Sellers shall use commercially reasonable efforts
to obtain and record a memorandum of lease or memorandum of agreement with
respect to each Leased Site for which a Site Lease or memorandum thereof is not
already recorded; such efforts shall continue until the earlier of (i) one year
after the Closing Date or (ii) when all but 30 or fewer Site Leases or memoranda
thereof have been duly recorded. Each such memorandum (a "MOA") shall be
executed by each of the parties to the Site Lease and recorded in the
appropriate records of the county where the Leased Site is located. A Site Lease
executed in recordable form may be recorded in lieu of recording a MOA. At the
Closing, Powertel, Sellers and Buyer shall execute and record forms of memoranda
of assignment and other mutually acceptable documents evidencing the assignment,
transfer and conveyance of Powertel's and Sellers' interests in the Site Leases
to Buyer; upon the request of Buyer, such memoranda and instruments may also or
alternatively be executed and recorded at the time any MOA may be recorded
subsequent to the Closing Date.
Powertel and Sellers jointly and severally shall indemnify, defend and
hold and save CCIC and Buyer and their respective officers, directors, employees
and agents harmless from and against any, Loss arising from a Third Party Claim
seeking or threatening judicial or non-judicial foreclosure of an Intervening
Encumbrance; provided, however, that (i) any claim for indemnification hereunder
must be made by the indemnified party (evidenced by written notice to Powertel
and Sellers) within two years of (A) the Closing Date in the case of each Site
Lease or MOA recorded prior thereto, or (B) the date the Site Lease or MOA is
recorded in the case of recordation taking place after the Closing Date (but in
no event later than three years after the Closing Date), and (ii) Powertel and
Sellers shall only be liable under the provisions of this Section 4.1(h) for an
aggregate amount up to $1,000,000. The provisions of Article 8 of this Agreement
shall otherwise apply and govern claims for indemnification under this Section
4.1(h).
4.2 AGREEMENTS OF CCIC AND BUYER PENDING THE CLOSING.
(a) COMMENCEMENT OF SECURITIES OFFERING; EVIDENCE OF FINANCING
ALTERNATIVE. On or before March 19, 1999, CCIC shall file a registration
statement (the "Registration Statement") with the Securities and Exchange
Commission ("SEC") seeking to register at least $225,000,000 of debt and/or
equity securities (such amount to be determined by
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reference to the "Proceeds to Company" column on the first page of the
prospectus that is part of the Registration Statement). The registration
statement for the offering (the "Proposed Offering") shall indicate that the
Proposed Offering is to be firmly underwritten by the managing underwriter (or
one of the co-managing underwriters) of CCIC's initial public offering of common
stock, or by another investment banking firm of national stature and reputation.
The Registration Statement shall indicate that at least $225,000,000 of the
proceeds from such Proposed Offering shall be dedicated to the payment of the
Purchase Price. CCIC shall use its reasonable best efforts to cause such
Registration Statement to be declared effective by the SEC as expeditiously as
possible following filing of the Registration Statement.
CCIC shall be required to provide Powertel with a Financing Assurance
(as defined below) within five days (but in no event later than June 4, 1999) of
the occurrence of any of the following: (i) on March 19, 1999, if CCIC has not
previously filed its Registration Statement on or before such date; (ii) the
Registration Statement, as filed or amended, indicates that less than
$225,000,000 of the proceeds from the Proposed Offering shall be dedicated to
the payment of the Purchase Price; (iii) the date that CCIC withdraws or
abandons the Registration Statement or otherwise determines not to proceed with
the offering contemplated by the Registration Statement; or (iv) on May 15, 1999
if CCIC has not commenced presentations to institutional investors using the
preliminary prospectus that is part of the Registration Statement by such date
or, after commencement of such presentations, the date that either CCIC or the
managing underwriters of the Proposed Offering terminates or abandons such
presentations and does not proceed to the pricing of the Proposed Offering. CCIC
shall promptly provide Powertel with written notice upon the occurrence of any
of the events set out in the preceding sentence. The term "Financing Assurance"
shall mean adequate written assurance, as determined by Powertel and the Sellers
in their sole but reasonable discretion acting in good faith, of the existence
of at least one alternative financing source which in Powertel's reasonable
judgment provides it adequate assurance that CCIC will have on hand a minimum of
$225,000,000 (not including amounts held in escrow pursuant to this Agreement)
in cash in the aggregate to apply to the Purchase Price at the Closing.
Powertel and Sellers shall have five days after delivery of such
Financing Assurance to, in writing, accept (an "Acceptance") or reject (a
"Rejection") such Financing Assurance (with such Acceptance or Rejection to be
determined in Powertel and Sellers' sole and reasonable discretion). Failure by
Powertel and Sellers to timely deliver an Acceptance or Rejection shall be
deemed to constitute their Acceptance of such Financing Assurance. In the event
Powertel and Sellers timely deliver to CCIC a Rejection of such Financing
Assurance, CCIC shall have ten days from the date of its receipt of the
Rejection (but in no event beyond June 4, 1999) to deliver the additional sum of
$225,000,000 to the Escrow Agent to be held in escrow pursuant to the terms of
the Escrow Agreement; at the Closing, the Escrow Agent shall deliver the
Purchase Price (as adjusted pursuant to the terms of this Agreement) to Powertel
and the Sellers, provided CCIC and Buyer close the transaction contemplated by
this Agreement. In the event CCIC fails to deliver such additional sum into
escrow as provided in the preceding sentence, Powertel and Sellers shall have
the right, by delivery of a written notice ("Termination Notice") delivered to
CCIC and Buyer upon the earlier of (i) June 4, 1999 (or the Closing Date, if
later); or (ii) within 5 business days following the last day of the ten day
period referred to in the preceding sentence, to terminate this Agreement with
no liability to Powertel or the Sellers. In the event Powertel and Sellers
terminate this Agreement pursuant to the preceding sentence: (i) on or prior to
May
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15, 1999, the Escrow Agent shall pay $10,000,000 to Powertel and Sellers as
liquidated damages hereunder and not as a penalty; (ii) after May 15, 1999 but
before June 4, 1999, the Escrow Agent shall pay $25,000,000 to Powertel and
Sellers as liquidated damages hereunder and not as a penalty (either payment, an
"Early Termination Payment"); and the balance of the Escrow Deposit shall be
delivered by the Escrow Agent to CCIC and Buyer. Any such termination of this
Agreement and the right to receive such applicable liquidated damages amount
described in the preceding sentence shall constitute the sole and exclusive
remedies of Powertel and Sellers under this Agreement, notwithstanding any other
provision of this Agreement (including Section 10.1(c)) to the contrary. If, on
June 4, 1999, or if later, the Closing Date, Powertel and Sellers have fulfilled
all of their obligations and conditions precedent to Closing in all material
respects and have not defaulted or breached their obligations hereunder, and
CCIC and Buyer are unable or unwilling to acquire the Assets upon the terms set
forth in this Agreement, including, without limitation, to make the deliveries
set forth in Section 7.3 and to deliver the Purchase Price (as adjusted pursuant
to the terms of this Agreement), then the Escrow Agent shall pay $50,000,000 of
the Escrow Deposit as liquidated damages to Powertel and Sellers (as provided in
Section 10.1(c)).
Notwithstanding Section 10.10 hereof, all notices to be delivered
pursuant to this Section 4.2(a) shall be in writing and must be given (and shall
be effective upon the date transmitted when given) by facsimile if confirmed
within twenty-four (24) hours thereafter by a signed original sent by nationally
recognized express courier service for next day delivery.
(b) CONDUCT OF BUSINESS. CCIC and Buyer shall cooperate with
Powertel and Sellers and use their reasonable efforts to cause all conditions to
the obligations of CCIC and Buyer under this Agreement to be satisfied on or
prior to the Closing Date.
(c) QUALIFICATION TO DO BUSINESS. Prior to the Closing Date,
Buyer shall qualify to do business in any jurisdiction where the ownership, use
or occupancy of the Assets would require Buyer to be so qualified, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect taken as a whole.
4.3 AGREEMENTS OF THE PARTIES PENDING CLOSING.
(a) APPROVALS AND CONSENTS AND REGULATORY FILINGS.
(i) Each party hereto agrees to use commercially reasonable
efforts to comply with all legal requirements which may be imposed on
such party with respect to the transactions contemplated by this
Agreement and the Transaction Documents and to obtain all consents,
orders and approvals of Governmental Authorities that may be or become
necessary for the consummation of the transactions contemplated by this
Agreement and the Transaction Documents, and each party will cooperate
fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Without limitation, if
required by applicable Law, CCIC, Buyer, Powertel and Sellers shall
each use commercially reasonable efforts to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act no later than
twenty (20) days after the date hereof and shall promptly respond to
any request for additional information with respect thereto. Each such
filing shall request early termination of the waiting
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period imposed by the HSR Act. Each of the parties shall furnish to the
others such necessary information and reasonable assistance as such
other party may request in connection with its preparation of any
filing or submission required under the HSR Act. The parties shall keep
each other apprised of the status of any communications with, and any
inquires or requests for additional information from, the Federal Trade
Commission and the Department of Justice and shall comply with any such
inquiry or request. The parties hereto shall use their reasonable
efforts to obtain any clearance required under the HSR Act for the
consummation of the transactions contemplated by this Agreement. For
purposes of this Section 4.3(a)(i) reasonable efforts shall not include
CCIC's or Buyer's agreement to hold separate and divest any of the
Assets or CCIC's or Buyer's other properties or operations or those of
its Affiliates. In the event approval under the HSR Act is conditioned
upon CCIC or Buyer or their respective Affiliates divesting all or any
part of the Assets or other properties or operations, CCIC and Buyer
shall have the right to terminate this Agreement (and receive the
return of the Escrow Deposit) by providing written notice of such
election to Powertel and Sellers. Should CCIC and Buyer terminate the
Agreement pursuant to this Section, no party shall have any further
obligations or commitments under this Agreement.
(ii) Notwithstanding anything else to the contrary contained
in this Agreement, none of the parties to this Agreement shall have any
obligation to oppose, challenge or appeal any suit, action or
proceeding by any Governmental Authority before any court or
Governmental Authority, agency or tribunal, 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 this Agreement and the Transaction Documents, or (B)
seeking to compel or compelling CCIC, Buyer, Powertel or Sellers, 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
CCIC, Buyer, Powertel or Sellers or any of their respective Affiliates.
(b) SEC RULES. In connection with CCIC's Proposed Offering of
securities referred to in Section 4.2, the parties acknowledge that CCIC and/or
Buyer will need to comply with certain SEC rules, including Rule S-X.
Accordingly, Powertel and Sellers agree to provide CCIC's and Buyer's auditors
access to books and records related to such historical operations, and to
provide assistance to such auditors in the completion at CCIC's or Buyer's
expense of their examination and audit, including customary representation
letters as prescribed by the American Institute of Certified Public Accountants
related to the financial statements. Notwithstanding any provision of this
Agreement to the contrary (including Section 10.17), each party to this
Agreement shall have the right to disclose such information regarding this
Agreement and the transactions contemplated hereby as may be required by
applicable Law, including federal securities law and stock exchange rules;
provided, however, that Powertel shall have the right to review and approve of
any disclosure regarding Powertel or the transaction contemplated hereby at
least one business day prior to the filing of any documents with the SEC or the
distribution of offering materials to private investors (such approval not to be
unreasonably withheld).
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(c) PRESS RELEASES. At the time this Agreement is executed by
the parties, or immediately thereafter, notice to third parties of the
transactions contemplated by this Agreement shall be given to the public
pursuant to a mutually agreeable form of press release.
ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCIC AND BUYER. All
obligations of CCIC and Buyer under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE.
The representations and warranties of Powertel and/or Sellers contained in this
Agreement or in any Schedule, certificate or document delivered by Powertel or
Sellers to Buyer pursuant to the provisions hereof shall have been true in all
material respects on the date hereof to the extent required by the terms hereof
and shall be true in all material respects on the Closing Date with the same
effect as though such representations and warranties were made as of such date,
in each case taking into account any Schedule updates after the date hereof
contemplated by Section 4.1(b).
(b) COMPLIANCE WITH THIS AGREEMENT. Powertel and Sellers shall
have performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing, except for non-performances or non-compliances which
result in an adjustment pursuant to Section 3.2 hereof.
(c) CLOSING CERTIFICATES. CCIC and Buyer shall have received the
Closing Certificate, and other certificates from Powertel and Sellers dated the
Closing Date certifying in such detail as CCIC and Buyer may reasonably request
that the conditions specified in Sections 5.1(a) and (b) hereof have been
fulfilled.
(d) NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened in writing or be pending before any court or
governmental or regulatory official, body or authority in which a Person (other
than a party hereto or their respective Affiliates) seeks to restrain, enjoin or
prohibit the closing of the transactions contemplated hereby or otherwise seeks
to obtain damages or other relief as a result of or in respect of the
transactions contemplated hereby.
(e) CONSENTS AND APPROVALS. The waiting period required under the
HSR Act for the transactions contemplated hereby shall have expired or been
terminated; and each governmental, judicial or regulatory official, body or
authority having jurisdiction over the parties hereto to the extent that their
consent or approval is required or necessary under applicable Court Orders or
Laws for the consummation of the transactions contemplated hereby in the manner
herein provided, shall have granted such consent or approval.
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(f) MATERIAL ADVERSE CHANGES. No Event shall have occurred which
has or had a Material Adverse Effect taken as a whole on the Assets or the
Assumed Liabilities.
If one or more of the foregoing conditions precedent is not fulfilled or
satisfied prior to or at the Closing, provided CCIC and Buyer have not otherwise
defaulted in or breached their obligations under this Agreement and have
fulfilled their obligations and conditions precedent to Closing in all material
respects, then CCIC and Buyer shall have the right to (i) proceed to Closing, in
which case the unfulfilled or unsatisfied condition precedent shall be waived or
deemed waived by CCIC and Buyer, (ii) terminate this Agreement, in which event
(except as provided in the next subparagraph) this Agreement shall be null and
void and of no further force or effect (except for Sections 6.1(i), 6.3(d),
4.3(c), 10.5 and 10.17 which shall continue) and the Escrow Deposit shall be
returned to CCIC and Buyer, or (iii) exercise any other rights or remedies
otherwise set out in this Agreement.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF POWERTEL AND SELLERS.
All obligations of Powertel and Sellers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE.
The representations and warranties of CCIC and Buyer contained in this Agreement
or in any Schedule, certificate or document delivered by CCIC or Buyer to
Powertel and Sellers pursuant to the provisions hereof shall have been true in
all material respects on the date hereof and shall be true in all material
respects on the Closing Date with the same effect as though such representations
and warranties were made as of such date.
(b) COMPLIANCE WITH THIS AGREEMENT. CCIC and Buyer shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
(c) CLOSING CERTIFICATES. Powertel and Sellers shall have received
certificates from CCIC and Buyer, dated the Closing Date, certifying in such
detail as Powertel and Sellers may reasonably request that the conditions
specified in Sections 5.2(a) and (b) hereof have been fulfilled.
(d) NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened in writing or be pending before any court or
governmental or regulatory official, body or authority in which a Person (other
than a party hereto or their respective Affiliates) seeks to restrain, enjoin or
prohibit the closing of the transactions contemplated hereby or otherwise seeks
to obtain damages or other relief as a result of or in respect of the
transactions contemplated hereby.
(e) CONSENTS AND APPROVALS. The waiting period required under the
HSR Act for the transactions contemplated hereby shall have expired or been
terminated; and each governmental, judicial or regulatory official, body or
authority having jurisdiction over the parties hereto to the extent that their
consent or approval is required or necessary under applicable Court Orders or
Laws for the consummation of the transactions contemplated hereby in the manner
herein provided, shall have granted such consent or approval.
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If notwithstanding the fact that one or more of the foregoing conditions
precedent may not have been fulfilled or satisfied prior to or at the Closing,
and CCIC and Buyer are nevertheless ready, willing and able at the Closing to
acquire the Assets upon the terms set forth in this Agreement, to make the
deliveries set forth in Section 7.3 and to pay the Purchase Price (as adjusted
as provided in this Agreement), then at the option of Powertel and Sellers
either (i) the Closing shall occur and the unfulfilled or unsatisfied conditions
precedent shall be waived or deemed waived by Powertel and Sellers, or (ii)
Powertel and Sellers may elect to terminate this Agreement, in which event this
Agreement shall be null and void and of no further force or effect and the
Escrow Deposit shall be refunded to CCIC and Buyer. If, however, CCIC and Buyer
are unable or unwilling to deliver the Purchase Price (as adjusted in this
Agreement) on the Closing Date, and (i) prior to such date Powertel and Sellers
have failed to exercise any remedy available to them pursuant to Section
10.1(b), and (ii) Powertel and Sellers have fulfilled all of their obligations
and conditions precedent to Closing in all material respects and have not
defaulted or breached their obligations hereunder, then, as provided in Section
10.1(c), the Escrow Agent shall pay Powertel and Sellers $50,000,000 from the
Escrow Deposit as liquidated damages and not as a penalty.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF POWERTEL AND SELLERS. Except as
disclosed to CCIC and Buyer in (i) the Schedules to this Agreement (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), (ii)
the documents and other materials furnished or otherwise made available to CCIC
and Buyer prior to the effective date of this Agreement, including, without
limitation, the title policies, commitments, searches, reports, environmental
assessments, NEPA checklists and inspection reports, made available in CD-ROM
format or otherwise, and (iii) the Missing Information or executed agreements,
documents, reports or instruments enclosed for review by CCIC and Buyer in Cure
Notices delivered to CCIC and Buyer prior to the Closing Date, and subject in
all respects to any rights or obligations under this Agreement of Powertel and
Sellers to update and supplement any such Schedules prior to Closing, Powertel
and Sellers jointly and severally hereby represent and warrant to CCIC and Buyer
as of both the effective date of this Agreement and the Closing Date, as
follows:
(a) CORPORATE. Powertel is a corporation, and the Sellers are
limited liability companies, duly organized, validly existing and in good
standing under the laws of the State of Delaware. Powertel and Sellers are duly
qualified to do business in any jurisdiction where the ownership, use or
occupancy of the Assets would require them to be so qualified, except where the
failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect taken as a whole. Powertel and Sellers have the requisite
corporate and limited liability company, as the case may be, power and authority
to own, lease, use and occupy the Assets as they are now being owned, leased,
used and occupied.
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(b) AUTHORIZATION. Powertel and Sellers have the requisite
corporate and limited liability company, as the case may be, power and authority
to execute and deliver this Agreement and the Transaction Documents to which
they are a party and to perform the transactions performed or to be performed by
them hereunder and thereunder. Such execution, delivery and performance by
Powertel and Sellers have been duly authorized by all necessary corporate and
limited liability company action, as the case may be. This Agreement, and the
Transaction Documents (when entered into), constitute valid and binding
obligations of Powertel and Sellers, enforceable against Powertel and Sellers in
accordance with their respective terms.
(c) CONSENTS AND APPROVALS. Except for compliance with the HSR
Act, neither the execution and delivery by Powertel and Sellers of this
Agreement and the Transaction Documents to which they are a party, nor the
performance of the transactions performed or to be performed by Powertel and/or
Sellers, will require any filing, consent or approval or constitute a Default
under (i) any Law or Court Order to which Powertel and/or Sellers or any of the
Assets is subject, or (ii) the Charter Documents or bylaws of Powertel or
Sellers.
(d) LEGAL PROCEEDINGS AND COMPLIANCE WITH LAWS. Except as set
forth in Schedule 6.1(d), there is no Litigation that is pending or, to the
knowledge of Powertel and Sellers threatened, against Powertel or Sellers (or
any of their Affiliates), with respect to, or involving, any of the Assets that
has had, or could reasonably be expected to have, a Material Adverse Effect.
Except as set forth in Schedule 6.1(d), neither Powertel nor Sellers (nor any of
their Affiliates who have previously owned any of the Assets), with respect to
the Assets, are presently subject to the provisions of any Court Order and, to
the knowledge of Powertel and Sellers, there has been no Default with respect to
any Court Order applicable to Powertel and Sellers with respect to the Assets,
except for any such Default that has not had, or could not reasonably be
expected to have, a Material Adverse Effect. Except as set forth in Schedule
6.1(d), neither Powertel nor Sellers (nor any of their Affiliates who have
previously owned any of the Assets) have received any notices from any
Governmental Authority regarding any alleged Defaults relating to the ownership,
use or occupancy of the Assets under any applicable Laws, and, to the knowledge
of Powertel and Sellers, their ownership, use and occupancy of the Assets are in
material compliance with applicable Laws, except for such failure of compliance
that has not resulted in, or could not reasonably be expected to result in, a
Material Adverse Effect.
(e) CONTRACTS. Schedule 6.1(e) identifies all Contracts of the
following types to which Powertel and/or Sellers are a party, or by which any of
them are bound, with respect to the Assets (other than any Contract that is
terminable by a party on not more than sixty (60) days' notice without any
Liability or any Contract under which the obligation of a party (fulfilled and
to be fulfilled) involves an amount of less than $50,000 (a "Minor Contract")):
(i) Contracts which are Site Leases, disclosing for each the
location of the related Tower Site, the identity of the lessor,
identification of the related Tower Site by name and number, and the
amount of the rental paid to the lessor by Powertel or the Sellers
thereunder for the month ended not more than forty-five (45) days prior
to the date of this Agreement;
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(ii) Contracts which are Tower Leases, disclosing for each
the location of the related Tower Site, the identity of the lessee,
identification of the related Tower Site by name and number, and the
amount of the rental paid by the lessee to Powertel or the Sellers
thereunder for the month ended not more than forty-five (45) days prior
to the date of this Agreement;
(iii) To the knowledge of Powertel and Sellers, all Contracts
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, and the amount of the rental paid to the lessor by Powertel
or the Sellers thereunder for the month ended not more than forty-five
(45) days prior to the date of this Agreement; and
(iv) To the knowledge of Powertel and Sellers, all Contracts
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, and the amount of the fees paid by Powertel or the
Sellers to the service provider thereunder for the month ended not more
than forty-five (45) days prior to the date of this Agreement.
Except for interim assignments from Powertel or its Affiliates to Sellers and
except as identified in Schedule 6.1(e), and subject to any rights of Powertel
and Sellers to amend, modify, renew and extend Site Leases and Tower Leases
pursuant to this Agreement prior to Closing, the Contracts (including the Sites
Leases and Tower Leases) have not been assigned, modified or amended.
(f) AVAILABILITY OF DOCUMENTS. To the knowledge of Powertel
and Sellers, and except for the Missing Information with respect to the
Incomplete Sites (but including any such Missing Information which after the
effective date of this Agreement is delivered to CCIC and Buyer), Powertel and
Sellers have made available to CCIC and Buyer copies of all documents relating
to the Assets to the extent in the possession or under the custody or control of
Powertel or the Sellers, including without limitation all of the Contracts
identified in the Schedules to this Section 6.1. To the knowledge of Powertel
and Sellers, such copies are true and complete in all material respects and
include all amendments, supplements and modifications thereto or waivers
currently in effect thereunder.
(g) NO UNDISCLOSED LIABILITIES. There have been no liabilities
or obligations (whether pursuant to Contracts or otherwise) of any kind
whatsoever (whether accrued, contingent, absolute, determined, determinable or
otherwise) incurred by Powertel or Sellers with respect to the Assets since
December 31, 1998 and which have had or could reasonably be expected to have a
Material Adverse Effect taken as a whole, other than (i) liabilities or
obligations disclosed or provided for in Powertel's or Sellers' balance sheets
or in the notes thereto delivered to CCIC and Buyer, (ii) non-material
liabilities or obligations incurred or that have arisen in the ordinary course
of business consistent with past practice, or (iii) liabilities or obligations
under this Agreement or incurred in connection with the transactions
contemplated hereby.
(h) TAXES. Powertel and Sellers have paid, or will pay as of the
Closing, any and all Taxes which may be due, or which may have been assessed but
are not yet due (subject to
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provision and apportionment in accordance with Section 2.7 hereof), with respect
to the Assets. All returns have been filed and there does not exist, and to the
knowledge of Powertel or Sellers will not exist as of the Closing, any tax
Liability (except for sales or transfer taxes which may be due as a result of
the transactions contemplated by this Agreement) which may be asserted by any
Governmental Authority against CCIC and Buyer or the Assets.
(i) BROKER OR FINDER. No Person assisted in or brought about
the negotiation of this Agreement in the capacity of investment banker, broker,
agent or finder or in any similar capacity on behalf of Powertel or Sellers.
(j) BOOKS AND RECORDS. Copies of the books and records of
Powertel and Sellers provided to CCIC and Buyer prior to the effective date of
this Agreement, including those in CD-ROM format, are true and correct copies of
Powertel's and Sellers' books and records as regards the Assets, including all
environmental and title (and title exception) information in the possession, or
under the custody and control, of Powertel and Sellers. Although Powertel and
Sellers have used commercially reasonable efforts to locate and furnish to CCIC
and Buyer for inspection all of their books and records relating to the Assets,
Powertel and Sellers make no warranty or representation that the books and
records made available to CCIC and Buyer constitute all of such books and
records relating to the Assets. Powertel and Sellers agree to continue using
commercially reasonable efforts to locate any Missing Information and other
books and records of Powertel and Sellers and deliver the foregoing to CCIC and
Buyer for review prior to Closing. Powertel and Sellers agree to supplement the
books and records of Powertel and Sellers prior to Closing with any additional
documents relating to the Assets which may come into the possession or under the
custody or control of Powertel or Sellers, or of which Powertel or Sellers have
knowledge.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998, Powertel and Sellers have made reasonable efforts consistent with past
practice to preserve relationships with lessors, licensors, tenants, licensees,
lessees and others with whom Powertel and/or Sellers have a business or
financial relationship with respect to the Assets. Except as set forth on
Schedule 6.1(k), Powertel and Sellers have conducted their operations regarding
the 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).
(l) POWERTEL CREDIT FACILITY. None of the Assets were purchased
with advances under the Powertel PCS Credit Agreement, and none of the Assets
are subject to any Encumbrance created by or arising out of the Powertel PCS
Credit Agreement.
(m) IN-PROGRESS SITES. As of the effective date of this
Agreement, none of the Tower Sites set forth in Schedules 1.1, 1.2 or 1.3 are
In-Progress Sites.
References made in Section 6.1 to various specific Schedules are for the purpose
of reference only and are not in limitation of the other qualifications set
forth in Section 6.1, including the right of Powertel and Sellers to update and
supplement the Schedules as provided in Section 4.1(b).
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6.2 REPRESENTATIONS AND WARRANTIES OF POWERTEL AND SELLERS AS OF THE
CLOSING DATE. Subject to the terms of Section 2.11(b), at the Closing, Powertel
and Sellers shall execute and deliver to CCIC and Buyer a closing certificate
(the "Closing Certificate"), whereby Powertel and Sellers make certain
representations and warranties to CCIC and Buyer as of the Closing Date. Except
as disclosed to CCIC and Buyer in (i) the Schedules to this Agreement (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), as such
Schedules have been updated and supplemented prior to Closing pursuant to the
terms of this Agreement, and (ii) the documents furnished or otherwise made
available to CCIC and Buyer prior to the Closing, including, without limitation,
the title policies, commitments, searches, reports, environmental assessments,
NEPA checklists and inspection reports, made available in CD-ROM format or
otherwise, in the Closing Certificate Powertel and Sellers shall jointly and
severally represent and warrant to CCIC and Buyer as of the Closing Date as
follows:
(a) REAFFIRMATION. Powertel and Sellers shall reaffirm and
restate each of their representations and warranties set forth in Section 6.1.
(b) TITLE TO ASSETS; CONDITION OF ASSETS. Powertel and Sellers
own and will transfer to Buyer at the Closing good and marketable title to the
Owned Sites, subject to the Permitted Encumbrances. Powertel and Sellers own and
will transfer to Buyer at the Closing a valid leasehold interest in the Leased
Sites, subject to the Permitted Encumbrances. Powertel and Sellers own and shall
also transfer at Closing (with special warranty) the other Assets described in
this Agreement. Except as may be provided in the Site Leases and other Permitted
Encumbrances, Powertel's and Sellers' ownership of the Assets includes the right
to lease or sublease to third parties space on the Tower Sites and Tower
Structures. Powertel and Sellers make no representation or warranty as to the
effect of the Permitted Encumbrances on Buyer's use, ownership or operation of
the Assets; provided, however, that absent a default by Buyer or CCIC in the
payment or performance of any Assumed Liabilities which arise from Permitted
Encumbrances adversely affecting any of the Assets, neither Powertel nor Sellers
(or their respective Affiliates) shall have any claim against CCIC or Buyer for
breach of any warranty or representation contained in the Master Lease regarding
CCIC's or Buyer's ownership and right to lease any of the Assets, or for breach
of any covenant of quiet enjoyment contained in the Master Lease, to the extent
such breach arises from the existence or exercise of Permitted Encumbrances as
of the Closing adversely affecting the use or occupancy of the subject Assets
pursuant to the terms of the Master Lease. The structural integrity, operating
condition and repair of the Tower Structures as of the Closing Date will be
satisfactory to Powertel and Sellers in all respects for the purpose of
supporting and operating their antennae equipment and facilities pursuant to the
terms of the Master Lease; provided, however, the foregoing is not intended to
limit any subsequent repair and maintenance obligations of CCIC or Buyer
pursuant to the terms of the Master Lease.
(c) REAL PROPERTY.
(i) ZONING. None of Powertel, Sellers or their respective
Affiliates who may have previously owned any of the Assets has received
any written notice of non-compliance with any applicable zoning or
other land use requirements.
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(ii) UTILITY SERVICES. The water, electric, gas and sewer
utility services and the septic tank and storm drainage facilities
currently available to the Tower Sites are adequate for the present use
of such Tower Sites by Powertel and Sellers, are not being
misappropriated by Powertel or Sellers but rather are being supplied to
Powertel and Sellers by utility companies or municipalities pursuant to
valid and enforceable contracts or tariffs. To the knowledge of
Powertel and Sellers, there is no current condition which will result
in the termination of the present access from the Tower Sites to such
utility services and other facilities.
(iii) ACCESS. To the knowledge of Powertel and Sellers, no
action is pending or threatened which would have the effect of
terminating or limiting Governmental Permits (where required),
easements and rights-of-way which are necessary to provide vehicular
and pedestrian ingress and egress to and from the Tower Sites for the
purposes used by Powertel and Sellers in the ordinary course. None of
Powertel, Sellers or their respective Affiliates who may have
previously owned the Assets has received written notice from any
Governmental Authority or any other Person of any such pending or
threatened action.
(iv) EMINENT DOMAIN. None of Powertel, Sellers or their
respective Affiliates who may have previously owned any of the Assets
has received written notice that any Governmental Authority having the
power of eminent domain over any of the real property included in the
Assets has commenced or intends to exercise the power of eminent domain
or a similar power with respect to all or any part of such real
property.
(v) PUBLIC IMPROVEMENTS. To the knowledge of Powertel and
Sellers, no work for municipal improvements has been commenced on or in
connection with the Owned Sites included in the Assets (for which
general, special or other assessments will be made). None of Powertel,
Sellers or their respective Affiliates who may have previously owned
any of the Assets has received any written notice that any assessment
for public improvements has been made against any such real property
which remains unpaid.
(d) GOVERNMENTAL PERMITS. To the knowledge of Powertel and
Sellers, except as set forth on Schedule 6.2(d), Powertel and Sellers have
obtained all Governmental Permits that are required for the ownership, use or
occupancy of the Assets as now being conducted, all of which are in full force
and effect; Powertel and Sellers have complied with all such Governmental
Permits and applicable Laws; and the Governmental Permits do not restrict or
preclude use of the Tower Sites (and related Assets) for purposes of co-location
or subleasing to third party tenants. None of Powertel, Sellers or any of their
respective Affiliates who may have previously owned any of the Assets has
received any written notice from any Governmental Authority or any other Person
that there exists any Default with respect to any Governmental Permits.
(e) DEFAULTS UNDER CONTRACTS. Except as identified in Schedule
6.2(e), neither Powertel nor Sellers (nor any of their Affiliates who may be a
party to any Contract) have received any written communication from, or given
any written communication to, any other
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party, indicating that Powertel or Sellers (or such Affiliates) or such other
party, as the case may be, is in Default under any Contract. Except as
identified in Schedule 6.2(e), to the knowledge of Powertel and Sellers, neither
Powertel nor Sellers (nor any of their Affiliates who may be a party to any
Contract) nor any of the other parties to any such Contract is in Default
thereunder. Except as identified in Schedule 6.2(e), each such Contract,
including, without limitation, each Site Lease, 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. No written communication
has been received from or given to Powertel, Sellers or any party to or assignee
of the Site Leases, indicating that Powertel or Sellers or any other party to or
assignee of the Site Leases is in Default thereunder, and to the knowledge of
Powertel and Sellers, no Default exists thereunder except as identified in such
Schedule.
(f) ENVIRONMENTAL MATTERS. Except as set forth on Schedule
6.2(f), there is no pending Litigation, or to the knowledge of Powertel or the
Sellers, threatened Litigation against Powertel, Sellers or their respective
Affiliates, relating to the ownership, use or occupancy of the Assets under any
Environmental Law. Except as set forth on Schedule 6.2(f) and except as may be
reasonably necessary to remedy any Defective Sites or supply any Missing
Information, none of Powertel, the Sellers or their respective Affiliates is
currently investigating or remediating any Environmental Condition in connection
with any of the Assets.
(g) CONSTRUCTION COMPLETED. Except with respect to In-Progress
Sites, all Tower Structures have been delivered to the Tower Sites, and all
installation and construction with respect thereto is complete and, to the
knowledge of Powertel and Sellers, performed in accordance with applicable Laws
and Governmental Permits. As of any Closing of the In-Progress Sites, unless
CCIC and Buyer elect to close prior to completion, all Tower Structures will
have been delivered to the Tower Sites and all installation and construction
with respect thereto will be complete and, to the knowledge of Powertel and
Sellers, performed in accordance with applicable Laws and Governmental Permits.
(h) WETLANDS AND FLOOD PLAIN. Except as identified in Schedule
6.2(h), to the knowledge of Powertel and Sellers, no Tower Structures are
located in wetlands or flood plain areas except in conformity with applicable
Laws and Governmental Permits.
References made in Section 6.2 to various specific Schedules are for the purpose
of reference only and are not in limitation of the other qualifications set
forth in Section 6.2, including the right of Powertel and Sellers to update and
supplement the Schedules as provided in Section 4.1(b).
6.3 REPRESENTATIONS AND WARRANTIES OF CCIC AND BUYER. CCIC and Buyer
hereby jointly and severally represent and warrant to Powertel and Sellers as
follows:
(a) CORPORATE. CCIC and Buyer are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware.
CCIC and Buyer have all requisite corporate power and authority to carry on
their respective businesses as they have been and are now being conducted and to
own, lease and operate the properties and assets used in
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connection therewith. Buyer is a wholly owned subsidiary of Crown Communication
Inc. Buyer is a single purpose entity being used for the purpose of owning,
maintaining and operating the Assets, and other purposes contemplated by this
Agreement or ancillary thereto.
(b) AUTHORIZATION. As of the effective date of this Agreement,
Buyer is only qualified to do business in the state of Delaware. Subject to the
qualification in the preceding sentence, CCIC and Buyer have the requisite
corporate power and authority to execute and deliver this Agreement and the
Transaction Documents to which they are a party and to perform the transactions
performed or to be performed by them hereunder and thereunder. Such execution,
delivery and performance by CCIC and Buyer have been duly authorized by all
necessary corporate action. This Agreement, and the Transaction Documents (when
entered into), constitute valid and binding obligations of CCIC and Buyer,
enforceable against CCIC and Buyer in accordance with their respective terms.
(c) CONSENTS AND APPROVALS. Except for compliance with the HSR
Act and qualification of the Buyer in the States of Georgia, Alabama, Florida,
Kentucky and Tennessee by the Closing Date, neither the execution and delivery
by CCIC and Buyer of this Agreement and the Transaction Documents to which they
are a party, nor the performance of the transactions performed or to be
performed by CCIC and/or Buyer, will require any filing, consent or approval or
constitute a Default under (i) any Law or Court Order to which CCIC and/or Buyer
or any of their respective properties and assets are subject, or (ii) the
Charter Documents or bylaws of CCIC or Buyer.
(d) BROKER OR FINDER. No Person assisted in or brought about the
negotiation of this Agreement in the capacity of investment banker, broker,
agent or finder or in any similar capacity on behalf of Buyer.
(e) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties expressly set forth in Section 6.3, the Master
Lease, the CCIC Guaranty and the Escrow Agreement, neither CCIC nor Buyer is
making any representations or warranties to Powertel or Sellers, express or
implied, in connection with the transactions contemplated by this Agreement.
6.4 ASSETS IN "AS IS" CONDITION. SUBJECT TO THE REPRESENTATIONS AND
WARRANTIES OF POWERTEL AND THE SELLERS SET FORTH IN THIS AGREEMENT, CCIC AND
BUYER JOINTLY AND SEVERALLY ACKNOWLEDGE AND AGREE THAT THE ASSETS ARE BEING
SOLD, ASSIGNED AND CONVEYED HEREUNDER ON AN "AS IS" AND "WHERE IS" BASIS AS OF
THE CLOSING DATE. WITHOUT LIMITING THE FOREGOING, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES OF POWERTEL AND THE SELLERS SET FORTH IN THIS AGREEMENT, CCIC AND
BUYER EACH ACKNOWLEDGE AND AGREE THAT NEITHER POWERTEL NOR ANY SELLER HAS MADE,
IS MAKING OR IS DEEMED TO HAVE MADE OR BE MAKING ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO THE ASSETS (EXCEPT WITH RESPECT TO THE LIMITED TITLE WARRANTY TO
BE GIVEN BY POWERTEL AND SELLERS AS REGARDS THE ASSETS), INCLUDING, WORKMANSHIP,
CONDITION, DESIGN, STRUCTURAL INTEGRITY, OPERATION OR FITNESS FOR USE OR A
PARTICULAR PURPOSE OF THE ASSETS OR ANY PORTION THEREOF, AS TO
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THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY CONDITION OR OTHER CHARACTERISTIC RELATING TO ENVIRONMENTAL OR
SAFETY MATTERS, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK,
COPYRIGHT OR OTHER PROPERTY RIGHT, WHETHER TANGIBLE OR INTANGIBLE OR REAL OR
PERSONAL, AS TO ANY EASEMENTS, COVENANTS, CONDITIONS OR RESTRICTIONS AFFECTING
THE ASSETS, AS TO ANY AUTHORIZATIONS OR CONSENTS OF THIRD PARTIES TO ANY
TRANSFER OR ASSIGNMENTS OF ANY OF THE ASSETS, INCLUDING, WITHOUT LIMITATION, ANY
CONTRACTS, SITE LEASES, TOWER LEASES, TOWER EQUIPMENT LEASES, AND TOWER SERVICE
CONTRACTS INCLUDED IN THE ASSETS, OR AS TO THE ABSENCE OF OBLIGATIONS BASED ON
STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATIONS AND WARRANTIES.
6.5 SURVIVAL. All representations and warranties contained in this
Agreement or in any Schedule, Exhibit, certificate, agreement, document or
statement delivered pursuant hereto shall survive the Closing Date for a period
of two years.
6.6 DEFINITIONS OF "KNOWLEDGE" AND "BELIEF". When reference is made
in this Agreement to Powertel's or Sellers' or any one of their "knowledge" or
"belief," such terms mean the actual knowledge of a fact or constructive
knowledge, if a reasonably prudent person in a like position would have known or
should have known the fact, of Allen Smith, President and CEO of Powertel; Rick
Astor, Executive Vice President and Chief Financial Officer of Powertel; Jill
Dorsey, Vice President and General Counsel of Powertel; Harold Gwin, Vice
President Operations, Powertel/Birmingham, Inc.; Tim Chandler, Vice President
Operations, Powertel/Jacksonville, Inc.; Jim Coovert, former Vice President
Operations, Powertel/Atlanta, Inc.; Dave Allen, Vice President Operations,
Powertel/Memphis, Inc.; and Paul Anuschewiecz, Vice President Operations,
Powertel/Atlanta, Inc.; provided, however, that neither Powertel nor Sellers
shall have any greater duty to investigate or acquire knowledge because of the
existence of this Agreement than would apply if this Agreement had never been
executed and delivered, except that when such term is used to qualify the
matters set forth on the Schedules to this Agreement, Powertel and Sellers must
make such investigation in preparing or modifying such Schedules as is
reasonable under the circumstances, giving due consideration to the size and
nature of the transaction contemplated herein. Powertel and Sellers represent
that the officers named above are the officers which they believe in good faith
to be the officers who are most likely, in the performance of their duties, to
have knowledge.
6.7 RELIANCE AND NOTIFICATION. Each party to this Agreement
acknowledges that the other parties have relied and will rely on the
representations and warranties set forth in this Agreement in executing this
Agreement and in closing the transactions contemplated by this Agreement, and
during the term of this Agreement agree to notify the other parties promptly in
the event of any change affecting any of such representations and warranties.
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ARTICLE 7
CLOSING; DELIVERIES OF THE PARTIES AT CLOSING
7.1 THE CLOSING. The consummation of the transactions provided for in
this Agreement shall occur on the Closing Date, or any other date upon which all
parties may agree in writing, at a mutually agreeable time at the offices of
Nelson Mullins Riley & Scarborough, L.L.P. in Atlanta, Georgia.
7.2 DELIVERIES AT THE CLOSING BY POWERTEL AND SELLERS. At the
Closing, Powertel and Sellers shall deliver to CCIC and Buyer the following:
(a) the Assets;
(b) the Required Consents to the extent actually received by
Powertel and/or the Sellers as of the Closing Date;
(c) special warranty deeds and assignments, bills of sale,
endorsements, and other good and sufficient instruments of sale, conveyance,
transfer and assignment in form and substance reasonably satisfactory to CCIC
and Buyer and their counsel sufficient to sell, convey, transfer and assign to
Buyer title to the Assets, subject only to the Permitted Encumbrances;
(d) the Master Lease, in the form attached hereto as Exhibit "A";
(e) the Powertel Guaranty, in the form attached hereto as Exhibit
"C";
(f) the Closing Certificate;
(g) certified copies of resolutions, duly adopted by the Board of
Directors of Powertel and the Boards of Managers and Members of each of the
Sellers, which shall be in full force and effect at the time of the Closing,
authorizing the execution, delivery and performance by Powertel and Sellers of
this Agreement and the consummation of the transactions contemplated hereby and
any other authorization required to transfer the Assets;
(h) a certificate from Powertel and Sellers signed by the
respective executive officers of Powertel and Sellers, as applicable, to the
effect set forth in clauses (a) and (b) of Section 5.1;
(i) an opinion dated as of the Closing Date of Nelson Mullins
Riley & Scarborough, L.L.P., counsel to Powertel and Sellers, with respect to
such matters as CCIC and Buyer may reasonably request, in form and substance
reasonably satisfactory to CCIC and Buyer;
(j) a FIRPTA Affidavit ("FIRPTA Affidavit") in the form of
Exhibit "E" attached hereto and made a part hereof for all purposes; and
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(k) such other documents or instruments as CCIC and Buyer or
their counsel may reasonably request to demonstrate satisfaction of the
conditions to Closing set forth in Article 5 and compliance by Powertel and
Sellers with the agreements set forth in this Agreement.
7.3 DELIVERIES AT THE CLOSING BY CCIC AND BUYER. At the Closing, CCIC
and Buyer, as applicable, shall deliver to Powertel and Sellers the following:
(a) the Purchase Price for the Assets, as described in Section
3.1 hereof;
(b) an instrument or instruments of assumption of the Assumed
Liabilities, in form and substance reasonably satisfactory to Powertel, Sellers
and their counsel;
(c) the Master Lease, in the form attached hereto as Exhibit "A";
(d) the CCIC Guaranty, in the form attached hereto as Exhibit "B";
(e) certified copies of resolutions, duly adopted by the Boards of
Directors of CCIC and Buyer which shall be in full force and effect at the time
of the Closing, authorizing the execution, delivery and performance by CCIC and
Buyer of this Agreement and the consummation of the transactions contemplated
hereby;
(f) a certificate from CCIC and Buyer signed by the respective
executive officers of CCIC and Buyer, as applicable, to the effect set forth in
clauses (a) and (b) of Section 5.2;
(g) an opinion dated as of the Closing Date of Brown Parker &
Leahy, LLP, counsel to CCIC and Buyer, or other outside counsel to CCIC and
Buyer acceptable to Powertel and Sellers, with respect to such matters as
Powertel and Sellers may reasonably request, in form and substance reasonably
satisfactory to Powertel and Sellers; and
(h) such other documents, instruments and other writings as
Powertel and the Sellers or their counsel may reasonably request to demonstrate
satisfaction of the conditions to Closing as set forth in Article 5 and
compliance by CCIC and Buyer with the agreements set forth in this Agreement.
7.4 PRE-CLOSING DELIVERIES. As stated in Section 4.1(b) and subject to
the provisions thereof, on or before April 30, 1999, Powertel and Sellers shall
deliver to CCIC and Buyer the Schedules which are contemplated by Section 6.2.
Prior to the Closing Date, Powertel and Sellers shall have furnished to CCIC and
Buyer draft forms of all documents to be delivered by Powertel or Sellers in
accordance with Section 7.2, and CCIC and Buyer shall have furnished to Powertel
and Sellers draft forms of all documents to be delivered by CCIC or Buyer in
accordance with Section 7.3, in each case with a view to providing a reasonable
period of time for reviewing, approving and completing all such documents and
instruments prior to the scheduled Closing Date.
7.5 POST-CLOSING COVENANT. The parties hereto acknowledge that the
time between the execution of this Agreement and the Closing Date will likely
not permit assignments,
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consents and other agreements and arrangements for the transfer of the Assets to
be completed, including, but not limited to, to the extent contemplated by this
Agreement, transfer of operating agreements and other associated contracts and
arrangements for operation of the Assets. Accordingly, Powertel and Sellers
agree for a reasonable period of time after the Closing to attempt to complete
all such closing related matters not completed at Closing. Powertel, Sellers,
CCIC and Buyer covenant and agree to reasonably cooperate with each other after
Closing to attempt to complete such matters within a reasonable period of time.
7.6 TIME IS OF THE ESSENCE. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION. From and after the Closing Date, for the periods
of time described in Section 8.4, the parties hereto shall provide the
indemnities as hereinafter set forth. (The party paying an indemnity as provided
herein or against which a claim for indemnity is made hereunder is hereafter
referred to as "Indemnitor.")
(a) INDEMNIFICATION BY POWERTEL AND SELLERS. Powertel and Sellers
jointly and severally shall indemnify, defend and hold and save CCIC and Buyer
and their respective officers, directors, employees, agents and Affiliates
harmless from and against any Loss suffered or incurred by or that are the legal
responsibility of any such Indemnified Party, arising from, relating to or
otherwise in respect of, (i) any breach of any representation, warranty,
covenant or agreement of Powertel or Sellers contained in this Agreement or any
Transaction Document to which they are a party, (ii) all Retained Liabilities,
or (iii) the Litigation described in Schedule 6.1(d).
(b) INDEMNIFICATION BY CCIC AND BUYER. CCIC and Buyer jointly and
severally shall indemnify, defend and hold and save Powertel, Sellers and their
respective officers, directors, employees, agents and Affiliates harmless from
and against any Loss suffered or incurred by or that are the legal
responsibility of any such Indemnified Party, arising from, relating to or
otherwise in respect of, (i) any breach of any representation, warranty,
covenant or agreement of CCIC or Buyer contained in this Agreement or any
Transaction Document to which they are a party, or (ii) all Assumed Liabilities.
(c) LOSSES NET OF INSURANCE, ETC. The amount of any Loss for which
indemnification is provided under this Agreement shall be net of (i) any tax
benefit (such as a deduction, credit or deferral) actually realized from any
such Loss, (ii) any amounts recovered by the Indemnified Party pursuant to any
indemnification by or indemnification agreement with any third party, and (iii)
any insurance proceeds or other cash receipts or sources of reimbursements
received as an offset against such Loss. Each party to this Agreement shall make
any claims for indemnification from a third party or insurance proceeds
available to offset against such Loss for which an indemnity is provided
hereunder, and will pursue such claims in good faith. If the amount to be netted
hereunder from any Loss is determined after payment by Indemnitor of any amount
otherwise required to be paid to an Indemnified Party pursuant to this Section
8.1, the
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Indemnified Party shall repay to Indemnitor, promptly after such determination,
any amount that would not have been paid had such determination been made at the
time of such payment.
(d) PROCEDURES RELATING TO INDEMNIFICATION. In order for the
Indemnified Party to be entitled to any indemnity provided for under this
Agreement in respect of, arising out of or involving a claim or demand made by
any Person (other than Indemnitor) against the Indemnified Party (a "Third Party
Claim"), such Indemnified Party must notify Indemnitor in writing, and in
reasonable detail, of the Third Party Claim within ten (10) business days after
receipt by such Indemnified Party of written notice of the Third Party Claim
(the "10 Day Period"); provided, however, that failure to give such notification
shall not affect the indemnity provided hereunder except to the extent
Indemnitor shall have been actually prejudiced as a result of such failure
(except that Indemnitor shall not be liable for any expenses incurred during the
period subsequent to the 10 Day Period in which the Indemnified Party failed to
give such notice). Thereafter, the Indemnified Party shall deliver to
Indemnitor, within five (5) business days after the Indemnified Party's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Party relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnified Party,
Indemnitor shall be entitled to participate in the defense thereof and, if it so
chooses and acknowledges its obligation to indemnify the Indemnified Party
therefor, to assume the defense thereof with counsel selected by Indemnitor;
provided that such counsel is not reasonably objected to by the Indemnified
Party. Should Indemnitor so elect to assume the defense of a Third Party Claim,
Indemnitor shall not be liable to the Indemnified Party for legal expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof. If Indemnitor assumes such defense, the Indemnified Party shall have
the right to separate counsel (not reasonably objected to by Indemnitor), at its
own expense, separate from the counsel employed by Indemnitor, it being
understood that Indemnitor shall control such defense. Indemnitor shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which Indemnitor has failed to assume the defense of the
Third Party Claim (other than during the period prior to the time the
Indemnified Party shall have given notice of the Third Party Claim as provided
above).
If Indemnitor so elects to assume the defense of any Third
Party Claim, each Indemnified Party shall cooperate with Indemnitor in the
defense or prosecution thereof. Such cooperation shall include the retention and
(upon Indemnitor's request) the provision to Indemnitor of records and
information which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
Indemnitor shall have assumed the defense of a Third Party Claim, Indemnified
Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnitor's prior written consent
(which consent shall not be unreasonably withheld). If Indemnitor shall have
assumed the defense of a Third Party Claim, Indemnified Party shall agree to any
settlement, compromise or discharge of such Third Party Claim which Indemnitor
may recommend and which by its terms obligates Indemnitor to pay the full amount
of the liability in connection with such Third Party Claim, and which releases
such Indemnified Party completely
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in connection with such Third Party Claim and which does not otherwise adversely
affect such Indemnified Party.
Notwithstanding the foregoing, Indemnitor shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the reasonable fees and expenses of counsel incurred by Indemnified Party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against an Indemnified Party which such Indemnified Party reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other relief portion of the
Third Party Claim can be so separated from that for money damages, Indemnitor
shall be entitled to assume the defense of the portion relating to money
damages.
(e) OTHER CLAIMS. In the event any Indemnified Party should have
a claim against any Indemnitor under Section 8.1(a) or 8.1(b) that does not
involve a Third Party Claim being asserted against or sought to be collected
from such Indemnified Party, Indemnified Party shall deliver notice of such
claim with reasonable promptness to Indemnitor. The failure by any Indemnified
Party so to notify Indemnitor shall not relieve Indemnitor from any liability
which it may have to such Indemnified Party under Section 8.1(a) or 8.1(b),
except to the extent that Indemnitor demonstrates that it has been materially
prejudiced by such failure. If Indemnitor disputes its liability with respect to
such claim, as provided above, Indemnitor and Indemnified Party shall proceed in
good faith to negotiate a resolution of such Dispute (as defined in Section
10.2), and, if not resolved through negotiations, such Dispute shall be settled
by arbitration in accordance with the provisions of Section 10.2.
8.2 MITIGATION. The parties hereto shall cooperate with each other
with respect to resolving any claim or liability with respect to which one or
more party or parties are obligated to indemnify a party hereunder, including by
making commercially reasonable efforts to mitigate or resolve any such claim or
liability; provided that such party shall not be required to make such efforts
if they would be detrimental in any material respect to such party. In the event
that CCIC, Buyer, Powertel or Sellers shall fail to make such commercially
reasonable efforts to mitigate or resolve any claim or liability, then (unless
the proviso to the foregoing covenant shall be applicable) notwithstanding
anything else to the contrary contained herein, the other party shall not be
required to indemnify any Person for any loss, liability, claim, damage or
expense that could reasonably be expected to have been avoided if CCIC, Buyer,
Powertel or Sellers, as the case may be, had made such efforts.
8.3 EFFECT OF INVESTIGATION OR KNOWLEDGE. No claim for a breach of
representation or warranty shall be made by an Indemnified Party if such claim
is based on an event occurring prior to the Closing Date and such event was
either (i) disclosed by Powertel, Sellers, CCIC or Buyer, as the case may be,
prior to the Closing Date in a writing which describes such event or facts
giving rise to such event in reasonable detail or (ii) the Indemnified Party had
actual knowledge of such event or such misrepresentation or breach of warranty
prior to the Closing Date, and (iii) the Closing thereafter occurs.
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8.4 DURATION OF INDEMNIFICATION. The indemnities provided by the
parties hereto in Section 8.1 shall, except as provided below, be provided for a
period of two years after the Closing Date. Notwithstanding the foregoing, the
indemnities provided by Powertel and Sellers with respect to (i) the Retained
Liabilities and (ii) the Litigation described in Schedule 6.1(d), shall not be
limited in duration and shall continue to be provided to CCIC and Buyer from and
after the Closing Date.
ARTICLE 9
POST-CLOSING COVENANTS
9.1 POST-CLOSING COVENANTS RELATED TO BUYER. From and after the
Closing Date, Buyer shall, and CCIC will cause Buyer to, comply with each of the
following covenants:
(a) Buyer shall not voluntarily dissolve or liquidate, shall not
make a voluntary assignment for the benefit of creditors, shall not file a
petition in bankruptcy, shall not petition or apply to any tribunal for any
receiver or trustee, shall not commence any proceeding relating to itself under
any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, shall not indicate its consent to, approval
of or acquiescence in any such proceeding and shall use its best efforts to have
discharged the appointment of any receiver of or trustee for Buyer or any
substantial part of its property.
(b) From time to time upon the reasonable request of Powertel,
Buyer shall cause its senior credit facility lender in favor of whom an
Encumbrance has been created against any of the Assets which are the subject of
the Master Lease to enter into a subordination, non-disturbance and attornment
agreement with Powertel, in form and substance reasonably satisfactory to all
parties to such agreement, whereby such lender will agree to provide Powertel
with notices of Buyer defaults under the credit facility, give Powertel a
reasonable opportunity to cure such defaults, and agree not to disturb
Powertel's or Sellers' tenancy under the Master Lease provided they are not in
default thereunder.
ARTICLE 10
MISCELLANEOUS
10.1 REMEDIES.
(a) In the event Powertel or Sellers fail to close the
transactions contemplated by this Agreement, or otherwise default in or breach
its or their obligations hereunder, and CCIC and Buyer have fulfilled all of
their obligations and conditions precedent to Closing in all material respects
and have not defaulted or breached their obligations hereunder, then CCIC and
Buyer (acting jointly) shall be entitled to seek specific performance of this
Agreement or such obligations, and/or pursue such other remedies as may be
available hereunder or otherwise at law or in equity; provided, however, that in
no event shall Powertel be liable for an amount that exceeds the Purchase Price,
as adjusted pursuant to this Agreement.
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(b) In the event of CCIC's breach of and failure to perform its
obligations under Section 4.2(a) of this Agreement, Powertel and Sellers may
terminate this Agreement and be paid by the Escrow Agent out of the Escrow
Deposit an Early Termination Payment as provided in the Escrow Agreement and in
such Section 4.2(a), and such remedy, if exercised by Powertel or any Seller,
shall constitute the sole remedy of Powertel and Sellers under this Agreement
and Powertel and Sellers shall have no further rights or remedies against CCIC
or Buyer.
(c) In the event Powertel and Sellers have fulfilled all of their
obligations and conditions precedent to Closing in all material respects and
have not defaulted or breached their obligations hereunder, and Buyer is
unwilling or unable to acquire the Assets upon the terms set forth in this
Agreement, including, without limitation, to make the deliveries set forth in
Section 7.3 and to deliver the Purchase Price (as adjusted pursuant to the terms
of this Agreement) at the Closing to Powertel and Sellers, and provided further
that Powertel and Sellers have not terminated this Agreement pursuant to a
Termination Notice under Section 4.2(a), Powertel and Sellers shall be entitled
to terminate this Agreement pursuant to this Section 10.1(c) and the Escrow
Agent shall pay to Powertel and Sellers the sum of $50,000,000 out of the Escrow
Deposit as liquidated damages hereunder and not as a penalty. Such remedy, if
exercised by Powertel or any Seller, shall constitute the sole remedy of
Powertel and Sellers under this Agreement and Powertel and Sellers shall have no
further rights or remedies against CCIC or Buyer. Upon delivery of such
liquidated damages amount to Powertel and Sellers, the remainder of the Escrow
Deposit shall be delivered by the Escrow Agent to CCIC and Buyer.
(d) CCIC, Buyer, Powertel and Sellers each acknowledge that it is
otherwise difficult or impossible to determine Powertel's and Sellers' actual
damages because of CCIC's and Buyer's failure to consummate the transaction
contemplated hereby, but that the liquidated damages provided in Section 10.1(c)
(and in the alternative an Early Termination Payment described in Section
4.2(a)) represent a reasonable pre-estimate of such damages, taking into
consideration that Powertel and Sellers have received other offers to purchase
the Assets which are the subject of this Agreement. CCIC and Buyer and Powertel
and Sellers therefore intend that such agreed upon liquidated damages are not
punitive or penalties, and are just, fair and reasonable, all in accordance with
O.C.G.A. ss. 13-6-7.
(e) The prevailing party in any legal proceeding involving this
Agreement or the exercise of the remedies set forth in this Agreement shall be
entitled to recover its court costs and reasonable attorneys' fees.
10.2 DISPUTE RESOLUTION.
(a) In the case of any dispute, controversy or claim between or
among the parties hereto related to this Agreement or the transactions
contemplated hereby or the other documents referred to herein, except for
disputes related to obtaining the equitable remedies of specific performance, an
injunction or a restraining order (a "Dispute"), the parties will use the
procedures set forth in this Section 10.2, in lieu of any party pursuing other
available remedies and as the sole remedy, to resolve the Dispute.
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(b) Any Dispute will be settled by arbitration before three
arbitrators in accordance with the Rules of the American Arbitration Association
("AAA") then in effect and as modified by this Section 10.2 or by further
agreement of the parties. In addition to what is allowed by the Rules of the
AAA, discovery may be conducted according to the Federal Rules of Civil
Procedure, to be enforced by the AAA, and if necessary, by a court having
jurisdiction. Any such arbitration will be conducted in Chicago, Illinois,
unless otherwise agreed by CCIC and Powertel. The arbitrators will be selected
from a panel of persons (such as retired jurists, distinguished legal or
business professionals, and similar persons) knowledgeable in the specific areas
which may be relevant to the claim, who have had more than ten (10) years of
relevant experience in such areas, who have previously acted as arbitrators, and
who are generally held in the highest regard among professionals in fields or
businesses related or pertinent to such area. Judgment upon the award rendered
by the arbitrators may be entered pursuant to applicable arbitration statutes.
(c) The arbitrators will have no authority to award punitive
damages nor any other damages not measured by the prevailing party's actual
damages, and may not, in any event, make any ruling, finding or award that does
not conform to the terms and conditions of this Agreement.
(d) Neither the parties hereto nor the arbitrators may disclose
the existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of the parties, other than by entry of a judgment upon any arbitration award.
(e) The arbitrators will have the authority to award to the
prevailing party its attorneys' fees and costs incurred in any arbitration.
Absent any such award, each party will bear its own costs incurred in the
arbitration. If any party hereto refuses to submit to arbitration any Dispute
required to be submitted to arbitration pursuant to this Section 10.2, and
instead commences any other proceeding, including, without limitation,
litigation (except to the extent otherwise expressly provided in this
Agreement), then the party who seeks enforcement of the obligation to arbitrate
will be entitled to its attorneys' fees and costs incurred in any such
proceeding.
10.3 TRANSFER TAXES. Sellers and Buyer shall each pay one-half of all
state and local sales, documentary and other transfer Taxes, if any, due as a
result of the sale of Assets hereunder.
10.4 TERMINATION.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at any time
before the Closing Date only as follows:
(i) by unanimous consent of the parties hereto;
(ii) on June 4, 1999, or if later, the Closing Date, by CCIC
and Buyer, upon written notice to Powertel and Sellers if all of the
conditions precedent set forth in Section 5.1 hereof have not been met
as of such date;
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(iii) by CCIC and Buyer as of the Closing Date if Powertel or
Sellers shall have breached any of their covenants, agreements,
representations, warranties or other obligations under this Agreement
in any respect which would have a Material Adverse Effect taken as a
whole on any of (A) the Assets, (B) the Assumed Liabilities, or (C) the
ability of Powertel and Sellers to consummate the transactions
contemplated hereby and such breach will not have been cured prior to
the earlier to occur of (1) thirty days after notice of such breach, or
(2) June 4, 1999, or if later, the Closing Date;
(iv) on June 4, 1999, or if later, the Closing Date, by
Powertel and Sellers, upon written notice to CCIC and Buyer if all of
the conditions precedent set forth in Section 5.2 hereof have not been
met as of such date;
(v) by Powertel and Sellers in connection with a Termination
Notice pursuant to Section 4.2(a) or a termination pursuant to Section
10.1(c); and
(vi) by Powertel and Sellers at any time prior to the Closing
if CCIC and Buyer shall have breached any of their covenants,
agreements, representations, warranties or other obligations under this
Agreement (other than any breach pursuant to which Powertel and Sellers
deliver a Termination Notice pursuant to Section 4.2(a)) in any
material respect and such breach shall not have been cured and such
breach will not have been cured prior to the earlier to occur of (1)
thirty days after notice of such breach, or (2) June 4, 1999, or if
later, the Closing Date.
(b) In the event of the termination of this Agreement pursuant to
the provisions of this Section 10.4, this Agreement (except for Sections 6.1(i),
6.3(d), 4.3(c), 10.5 and 10.17 which shall continue) shall become void and have
no effect, without any liability on the part of any of the parties or their
directors, officers, stockholders, partners or representatives in respect of
this Agreement, unless the termination was the result of the representations and
warranties of a party being materially incorrect when made or the material
breach by such party of an agreement or covenant hereunder in which event the
party whose representations and warranties were incorrect or who breached such
agreement or covenant shall be liable to the other party for all costs and
expenses of the other party in connection with the preparation, negotiation,
execution and performance of this Agreement; provided, however, in the event
Powertel and Sellers receive an Early Termination Payment pursuant to Section
4.2(a) or liquidated damages pursuant to Section 10.1(c), they shall not be
entitled to receive any such costs and expenses.
(c) In the event of the termination of this Agreement, the Escrow
Deposit shall be delivered to CCIC and Buyer, except as expressly provided in
Sections 4.2(a) and 10.1(c), upon the terms set forth in the Escrow Agreement.
10.5 EXPENSES. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
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10.6 ENTIRE AGREEMENT. This Agreement and the Transaction Documents set
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. Any and all previous agreements and
understandings between or among the parties regarding the subject matter hereof,
whether written or oral, are superseded by this Agreement and the Transaction
Documents.
10.7 AMENDMENTS. This Agreement shall not be amended or modified
except by a written instrument duly executed by each of the parties hereto.
10.8 WAIVER. Any term or provision of this Agreement, or any breach
thereof, may be waived at any time by the party entitled to the benefit thereof
by a written instrument duly executed by such party; provided, however, that any
waiver by any party of a breach of any term or provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach, whether or not
similar, unless such waiver specifically states that it is to be construed as a
continuing waiver.
10.9 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be assigned
by any party hereto without the prior written consent of the other parties,
provided that Buyer may assign any of its rights hereunder to any wholly-owned
(direct or indirect) subsidiary of Buyer. Subject to the foregoing, all of the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the permitted successors and assigns of the
parties. All references herein to any party shall be deemed to include any
successor to such party, including any corporate successor.
10.10 NOTICES. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, delivery charges
prepaid, or three (3) business days after being sent by registered or certified
mail (return receipt requested), postage prepaid, or one (1) business day after
being sent by a nationally recognized express courier service for next day
delivery, postage or delivery charges prepaid, to the parties at their
respective addresses stated below. Notices may also be given by prepaid telegram
or facsimile and shall be effective on the date transmitted if confirmed within
twenty-four (24) hours thereafter by a signed original sent in the manner
provided in the preceding sentence. Any party may change its address for notice
and the address to which copies must be sent by giving notice of the new address
to the other parties in accordance with this Section 10.10, except that any
notice of such change of address shall not be effective unless and until
received.
(a) If to CCIC or Buyer:
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, Texas 77057
Attention: Chief Executive Officer and General Counsel
Fax No.: (713) 570-3150
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with required copies to:
Singleton & Cooksey
1600 Smith Street, Suite 4500
Houston, Texas 77002
Attention: Taylor V. Cooksey
Fax No.: (713) 651-0251
(b) If to Powertel or Sellers:
Powertel, Inc.
1233 O. G. Skinner Drive
West Point, Georgia 31833
Attention: Allen E. Smith and Jill F. Dorsey, Esq.
Fax No.: (706) 645-9523
with required copies to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree St., N.E., Suite 1400
First Union Plaza
Atlanta, Georgia 30309
Attention: James Walker IV, Esq.
Fax. No.: (404) 817-6050
10.11 GEORGIA LAW TO GOVERN. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Georgia,
without regard to the principles of conflict of law thereof.
10.12 NO BENEFIT TO OTHERS. Except as expressly provided herein, the
representations, warranties, covenants and agreements contained in this
Agreement are for the sole benefit of the parties hereto and they shall not be
construed as conferring any rights or benefits on any other persons.
10.13 TABLE OF CONTENTS; HEADINGS. The table of contents and all
Section headings contained in this Agreement are for convenience of reference
only, do not form a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
10.14 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
10.15 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity
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or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.16 COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and any party hereto may execute any such
counterpart, each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts. Any
party to this Agreement may evidence its execution of this Agreement by
facsimile transmission. This Agreement shall become binding on all parties when
it has become executed by all parties, whether evidenced by original or
facsimile signatures, or by a combination thereof. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for all original signatures.
10.17 CONFIDENTIALITY. The parties acknowledge the continuing
applicability of the terms and provisions of that certain Agreement for Use and
Non-Disclosure of Proprietary Information dated October 23, 1998.
10.18 DIRECTLY OR INDIRECTLY. Any provision in this Agreement referring
to action to be taken by any Person, or that such Person is prohibited from
taking, shall be applicable whether such action is taken directly or indirectly
by such Person.
10.19 INTERPRETATION. When a reference is made in this Agreement to an
Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
10.20 FURTHER ASSURANCES. Each of the parties hereto, from time to time
after the Closing, will execute, acknowledge and deliver such other instruments
of conveyance and transfer and will take such other actions and execute and
deliver such other documents, certifications and further assurances as any party
hereto may reasonably require to carry out, evidence and confirm the intended
purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
CCIC:
CROWN CASTLE INTERNATIONAL CORP.
By: /s/ John L. Gwyn
-------------------------------------------
Name: John L. Gwyn
------------------------------------------
Title: Executive Vice President
-----------------------------------------
BUYER:
CCP INC.
By: /s/ John L. Gwyn
-------------------------------------------
Name: John L. Gwyn
------------------------------------------
Title: Executive Vice President
-----------------------------------------
SELLERS:
POWERTEL ATLANTA TOWERS, LLC
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
POWERTEL BIRMINGHAM TOWERS, LLC
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
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POWERTEL JACKSONVILLE TOWERS, LLC
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
POWERTEL KENTUCKY TOWERS, LLC
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
POWERTEL MEMPHIS TOWERS, LLC
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
POWERTEL:
POWERTEL, INC.
By: /s/ Fred G. Astor, Jr.
-------------------------------------------
Name: Fred G. Astor, Jr.
------------------------------------------
Title: Vice President, Treasurer & Secretary
-----------------------------------------
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EXHIBIT 2(E)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
the 15th day of March, 1999, by and among CROWN CASTLE INTERNATIONAL CORP., a
Delaware corporation ("CCIC"), CCP INC., a Delaware corporation ("Buyer"),
POWERTEL ATLANTA TOWERS, LLC, POWERTEL BIRMINGHAM TOWERS, LLC, POWERTEL
JACKSONVILLE, LLC, POWERTEL KENTUCKY TOWERS, LLC, and POWERTEL MEMPHIS TOWERS,
LLC, each a Delaware limited liability company (collectively the "Sellers" and
each a "Seller"), POWERTEL, INC., a Delaware corporation ("Powertel"), and
SUNTRUST BANK, Atlanta, a Georgia banking corporation, as escrow agent ("Escrow
Agent").
WHEREAS, CCIC, Buyer, Powertel and Sellers have entered into an Asset
Purchase Agreement dated March 15, 1999 (the "Purchase Agreement") pursuant to
which Powertel and Sellers have agreed to sell, and CCIC and Buyer have agreed
to purchase, subject to the terms of the Purchase Agreement, certain tower
structures, interests in real property related thereto, and related assets,
property rights, liabilities and obligations owned or held by Powertel and
Sellers (the "Transaction");
WHEREAS, Sections 3.1(c) and 4.2(a) of the Purchase Agreement provide
for the escrow of certain funds to protect Powertel and Sellers with respect to
the willingness or ability of CCIC and Buyer to consummate the Transaction; and
WHEREAS, CCIC, Buyer, Powertel and Sellers desire to appoint the Escrow
Agent as escrow agent for the purpose of receiving, holding, investing and
distributing the Escrow Deposit (as defined below), and the Escrow Agent is
willing to act as escrow agent subject to and in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the purchase and sale of assets
contemplated by the Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINED TERMS. As used herein, all defined terms not otherwise
defined herein have the meanings ascribed to them in the Purchase Agreement.
2. APPOINTMENT AND AGREEMENT OF ESCROW AGENT. Each of CCIC,
Buyer, Powertel and Sellers hereby appoints the Escrow Agent to serve as, and
the Escrow Agent hereby agrees to act as, escrow agent upon the terms and
conditions of this Agreement.
3. DEPOSIT OF FUNDS. CCIC and Buyer represent and warrant that
pursuant to the Purchase Agreement they have deposited with the Escrow Agent, on
the date hereof, the sum of Fifty Million and 00/100 Dollars ($50,000,000.00) in
immediately available funds pursuant to Section 3.1(c) of the Purchase
<PAGE> 2
Agreement. Pursuant to Section 4.2(a) of the Purchase Agreement, CCIC and Buyer
may deposit with the Escrow Agent the additional sum of Two Hundred Twenty-Five
Million and 00/100 Dollars ($225,000,000) (the $50,000,000 being deposited on
the date hereof, together with all additional amounts deposited by CCIC and
Buyer, are referred to as the "Principal"). Each of CCIC and Buyer confirms to
the Escrow Agent and to Powertel and Sellers that the Principal is and will be,
when deposited, free and clear of all encumbrances, except as may be created by
this Agreement and the Purchase Agreement.
4. PURPOSE OF ESCROW. The Principal and any accrued interest
thereon (collectively the "Escrow Deposit") shall be held by the Escrow Agent
for the purposes contemplated by the Purchase Agreement, including to protect
Powertel and Sellers with respect to the willingness or ability of CCIC and
Buyer to consummate the Transaction contemplated by the Purchase Agreement and
to deliver the Purchase Price pursuant to the Purchase Agreement.
5. INVESTMENT OF FUNDS. So long as the Principal, or any portion
thereof, shall continue to be held by the Escrow Agent, the Escrow Agent shall
hold the Principal in an account, invested, at the written direction of CCIC
(or, if no such written instruction is given, at the Escrow Agent's discretion),
in: (a) direct obligations of the United States of America or any agency thereof
or obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, in each case maturing not more than 30 days after
the date of acquisition, (b) time deposit accounts, certificates of deposit or
money market deposits maturing within 30 days of the date of acquisition thereof
issued by a bank or trust company (including the Escrow Agent) which is
organized under the laws of the United States of America or any state thereof
and which bank or trust company has capital surplus and undivided profits
aggregating in excess of $500 million and has outstanding debt which is rated
"A" (or similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act of 1933) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor (including the Escrow Agent); (c)
commercial paper, maturing not more than 30 days after the date of acquisition,
issued by a corporation (other than an affiliate of CCIC) organized and in
existence under the laws of the United States of America or any state thereof
with a rating at the time as of which any investment therein is made of "P-1" or
higher according to Moody's Investors Service, Inc. or "A-1" or higher according
to Standard & Poor's Ratings Group; or (d) other investments consented to by
Powertel and CCIC in writing; provided, in each case that no such investment
shall have a maturity after June 4, 1999. The Escrow Agent shall have the power
to sell or liquidate any of the foregoing investments and withdraw funds from
the Escrow Deposit in each case only in order to make such disbursements as
authorized herein. The Escrow Agent shall not invest the proceeds except as
provided in this Section 5. The Escrow Agent shall not have any liability for
any loss suffered as a result of any investment made as provided above, any
liquidation of any such investment prior to its maturity, or the failure of CCIC
to give the Escrow Agent any written instruction to invest or reinvest the
Principal or any interest or income thereon.
6. RELEASE OF FUNDS.
(a) UPON CLOSING. Powertel shall provide the Escrow Agent
with at least three days prior written notice of the date of the proposed
closing of the Transaction (the
2
<PAGE> 3
"Closing"). Such notice shall set forth the time, place, Purchase Price
Difference (as defined below) and date of the Closing. The Escrow Agent shall
cause a certified check or a wire transfer for the Purchase Price Difference
drawn on the Escrow Deposit, to be paid to the order of Powertel, Inc., or such
other party or parties which Powertel may designate, and to be delivered and
paid to Powertel at the Closing, if the Closing actually occurs. For purposes of
this Agreement, "Purchase Price Difference" shall mean, subject to Section 6(d)
of this Agreement: (i) $50,000,000, if no additional funds have been delivered
to the Escrow Agent pursuant to Section 6(b) of this Agreement; or (ii) if
additional funds have been delivered to the Escrow Agent pursuant to Section
6(b), $275,000,000; provided, however, that if the Purchase Price has been
reduced pursuant to the Purchase Agreement, Powertel and CCIC shall provide the
Escrow Agent with a joint notice of such reduction prior to Closing, and the
amount to be distributed to Powertel or its designees by the Escrow Agent at
Closing pursuant to this Section 6(a) shall be equal to such reduced Purchase
Price set forth in such joint notice. The remainder of the Escrow Deposit shall
be paid to the order of Crown Castle International Corp., or such other party or
parties which CCIC may designate, at the Closing.
(b) UPON FAILURE OF CCIC AND BUYER TO PROCURE ADEQUATE
FINANCING. In the event Powertel provides CCIC with a Rejection of a Financing
Assurance pursuant to Section 4.2(a) of the Purchase Agreement, Powertel shall
simultaneously deliver written notice of such Rejection to the Escrow Agent,
which notice shall include a copy of such Rejection and a certification to the
Escrow Agent of the date upon which the Rejection is being received by CCIC (the
"Rejection Delivery Date"). CCIC shall be allowed ten days from the Rejection
Delivery Date to deliver an additional $225,000,000 to the Escrow Agent to be
held in escrow pursuant to this Agreement. If such amount is not received by
Escrow Agent within such ten day period, and Powertel elects to terminate the
Purchase Agreement pursuant to Section 4.2(a) of the Purchase Agreement,
Powertel shall provide written notice of such termination, including the date of
such termination (the "Termination Date"), to the Escrow Agent, and the Escrow
Agent shall, as soon as practicable, distribute to Powertel:
(i) $10,000,000, if the Termination Date is on
or prior to May 15, 1999;
(ii) $25,000,000, if the Termination Date is
after May 15, 1999 but before June 4, 1999;
and
(iii) $50,000,000, if the Termination Date is on
or after June 4, 1999.
The remainder of the Escrow Deposit, including any earned interest, shall be
paid to the order of Crown Castle International Corp., or such other party or
parties which CCIC may designate in writing to the Escrow Agent.
(c) UPON FAILURE OF CCIC AND BUYER TO CLOSE TRANSACTION.
If at the proposed Closing under the Purchase Agreement, Powertel and Sellers
have fulfilled all of their obligations under the Purchase Agreement in all
material respects and have not defaulted or breached their obligations
thereunder, and CCIC and Buyer are unable or unwilling to acquire the
3
<PAGE> 4
Assets upon the terms set forth in the Purchase Agreement, including, without
limitation, to make the deliveries set forth in Section 7.3 of the Purchase
Agreement or to deliver the Purchase Price pursuant to the terms of the Purchase
Agreement, and if Powertel has not requested that any funds be distributed by
the Escrow Agent pursuant to Section 6(b) above, Powertel shall provide written
notice of such fact to the Escrow Agent, with a simultaneous copy to CCIC and
Buyer, and the Escrow Agent shall promptly distribute $50,000,000 of the Escrow
Deposit to Powertel. The remainder of the Escrow Deposit shall be paid to the
order of Crown Castle International Corp., or such other party or parties which
CCIC may designate.
(d) UPON FAILURE OF POWERTEL AND SELLERS TO CLOSE
TRANSACTION. If at the Closing, Powertel and Sellers fail to close the
transactions contemplated by the Purchase Agreement, or otherwise default in or
breach its or their obligations thereunder, and CCIC and Buyer have fulfilled
all of their obligations and conditions precedent to Closing in all material
respects and have not defaulted or breached their obligations thereunder and are
willing and able to acquire the Assets upon the terms set forth in the Purchase
Agreement, including, without limitation, to make the deliveries set forth in
Section 7.3 of the Purchase Agreement and to deliver the Purchase Price pursuant
to the terms of the Purchase Agreement, CCIC shall provide written notice of
such fact to the Escrow Agent (with a simultaneous copy to Powertel and
Sellers), and the Escrow Agent shall promptly distribute the Escrow Deposit to
CCIC.
(e) DISTRIBUTION OF LESSER AMOUNT. If this Agreement
requires the distribution of a specific amount and, at the time such
distribution is to be made, the Escrow Deposit is less than such specific
amount, the Escrow Agent shall distribute the entire Escrow Deposit in lieu of
such specific amount.
(f) UPON TERMINATION OF PURCHASE AGREEMENT. If either
party elects to terminate the Purchase Agreement in accordance with its terms,
except for a termination pursuant to Section 4.2(a) of the Purchase Agreement
and Section 6.2(b) of this Agreement, the parties shall provide written notice
of such fact to the Escrow Agent, and the Escrow Agent shall promptly pay to
CCIC all amounts held by it hereunder.
7. NOTICES. All notices, instructions and other communications
provided for herein shall be in writing and shall be deemed validly given, made
or served, on the date of delivery in the case of personal delivery, forty-eight
(48) hours after deposit (taking into account only business days) with the U.S.
Postal Services if sent by certified mail, return receipt requested, or upon
facsimile confirmation of receipt on a business day addressed as follows:
4
<PAGE> 5
if to CCIC or Buyer: Tax ID#: 76-0470458
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, Texas 77057
Attention: Chief Executive Officer
and General Counsel
Phone No.: (713) 570-3000
Fax No: (713) 570-3150
with required copies
(which shall not constitute notice) to:
Singleton & Cooksey
1600 Smith, Suite 4500
Houston, Texas 77002
Attention: Taylor V. Cooksey
Phone No.: (713) 651-0175
Fax No.: (713) 651-0251
if to Powertel or Sellers: Tax ID#: 58-1944750
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Attn: Allen E. Smith and Jill F. Dorsey, Esq.
Phone No.: (706) 645-2000
Fax No.: (706) 645-9523
with required copies
(which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
First Union Plaza
Atlanta, Georgia 30309
Attn: James Walker IV, Esq.
Phone No.: (404) 817-6000
Fax No.: (404) 817-6050
5
<PAGE> 6
if to Escrow Agent:
SunTrust Bank, Atlanta
Corporate Trust Division
3495 Piedmont Road
Bldg. 10, Suite 810
Atlanta, Georgia 30305
Attn: Rebecca Fischer
Phone No.: (404) 240-1954
Fax No.: (404) 240-2030
or to such other addresses as the parties may designate to each other
party in accordance with this Section 7.
8. FEES. All compensation payable to the Escrow Agent for holding
the Escrow Deposit in escrow, investing the Principal, disbursing the Escrow
Deposit and acting as Escrow Agent hereunder shall be paid by CCIC and Buyer in
accordance with the Compensation Schedule attached hereto as Schedule A. The
first annual fee payment of $5,000 shall be paid by CCIC and the Buyer to the
Escrow Agent on the date hereof. Escrow Agent shall send all requests for
payment at the address for CCIC and Buyer set forth in Section 7 hereof.
9. DUTIES OF ESCROW AGENT. The Escrow Agent's duties and
responsibilities shall be limited to those expressly set forth in this
Agreement, and the Escrow Agent shall not be subject to, nor obliged to
recognize, any other agreement between, or direction or instruction of, any or
all of the parties hereto even though reference thereto may be made herein;
provided, however, with the Escrow Agent's written consent, this Agreement may
be amended at any time or times by an instrument in writing signed by all of the
then parties hereto, including the Escrow Agent. The duties and obligations of
the Escrow Agent hereunder shall be determined solely by the express provisions
of this Agreement, and no implied duties or obligations shall be read into this
Agreement against the Escrow Agent. The Escrow Agent shall be under no
obligation to refer to the Purchase Agreement or any other documents between or
among the parties related in any way to this Agreement. The Escrow Agent shall
have no duty as to the collection or protection of the Escrow Deposit, nor as to
the preservation of any rights pertaining thereto, beyond the safe custody of
any such property actually in its possession.
10. LIMITATION ON LIABILITY. The Escrow Agent shall not be liable
to anyone by reason of any error of judgment, or for any act done or step taken
or omitted by it in good faith, or for any mistake of fact or law, or for
anything which it may do or refrain from doing in connection herewith, unless
caused by or arising out of its own gross negligence or willful misconduct. The
Escrow Agent hereby executes this Agreement in and only in its capacity as
Escrow Agent and not in any other capacity whatsoever.
11. RELIANCE. The Escrow Agent shall be entitled to rely and shall
be protected in acting in reliance upon any writing furnished to it by any party
hereto in accordance with the terms hereof, and shall be entitled to treat as
genuine, and as the document it purports to be, any
6
<PAGE> 7
letter, paper or other document furnished to it by any party and believed by the
Escrow Agent in good faith to be genuine and to have been signed by the proper
party. The Escrow Agent may consult with counsel with respect to any question
relating to its duties or responsibilities hereunder and shall not be liable for
any action taken or omitted in good faith on advice of such counsel.
12. CONFLICTING CLAIMS. In the event of any disagreement between
the parties hereto resulting in conflicting claims and demands being made in
connection with or against the Escrow Deposit, the Escrow Agent shall be
entitled, at its option, to refuse to comply with the claims or demands of any
party until such disagreement is finally resolved in the manner provided below,
but shall continue to comply with the other terms and conditions of this
Agreement, and in so doing the Escrow Agent shall not be or become liable to any
party. If, prior to the termination of this Agreement, CCIC or Powertel have
given notice of any claims by either party against the Escrow Deposit, the
Escrow Agent shall retain Principal in the amount equal to the aggregate of all
such claims (collectively, the "Retained Portion"). The Escrow Agent shall
retain the Retained Portion together with any interest or income thereon, in
escrow, and the term of this Agreement shall be extended with respect thereto
until the earlier of: (i) five business days following the delivery to the
Escrow Agent of written instructions signed by CCIC and Powertel directing the
Escrow Agent as to whom all or any part of the Retained Portion and any and all
interest or income thereon is to be distributed; or (ii) ten business days after
a copy of an arbitrator's final decision with respect to any claims has been
delivered to the Escrow Agent to the extent said arbitrator's final decision
contains instructions as to when to disburse all or part of the Retained Portion
together with interest or income thereon; provided, however, the Escrow Agent
shall have notified CCIC and Powertel and provided them with copies of said
arbitrator's final decision at least four business days before the Escrow Agent
proposes to release all or any part of the Retained Portion pursuant to the
arbitrator's final decision.
13. ATTACHMENT, GARNISHMENT, ETC. If all or any part of the Escrow
Deposit is at any time attached, garnished or levied upon, or in case the
payment, assignment, transfer, conveyance or delivery of all or any part of the
Escrow Deposit shall be stayed or enjoined by any court order, or in case any
order or judgment shall be made or entered by any court affecting all or any
part of the Escrow Deposit, then in any of such events, the Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any such order,
writ, judgment or decree, which it believes in good faith is binding upon it,
and if it complies with any such order, writ, judgment or decree, it shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, even though such order, writ, judgment
or decree may be subsequently reversed, modified, annulled, set aside or
vacated.
14. TAXES. To the extent that the Escrow Agent becomes responsible
for the payment of taxes, including withholding taxes, in respect of income
derived from the investment of funds held hereunder or any payment made
hereunder, the Escrow Agent may pay such taxes. The Escrow Agent may withhold
from any payment of monies held by it hereunder such amount, as directed by
CCIC, Buyer, Powertel and Sellers in writing, to be sufficient to provide for
the payment of such taxes not yet paid, and may use the sum withheld for that
purpose. The Escrow Agent shall be indemnified by CCIC and held harmless against
any liability for taxes and for any penalties or interest in respect of taxes on
such investment income or payments recognized or
7
<PAGE> 8
reportable by CCIC or Buyer relating to the Escrow Deposit in the manner
provided in Section 15. Each of CCIC, Buyer, Powertel and Sellers shall furnish
to Escrow Agent such information as may be reasonably requested by the Escrow
Agent so that the Escrow Agent may prepare and file with the Internal Revenue
Service any required tax reports.
15. INDEMNIFICATION. Powertel, Sellers, CCIC and Buyer shall
reimburse and jointly and severally indemnify the Escrow Agent, its employees,
directors, officers and agents for, and hold each harmless against, any loss,
liability or expense, including, without limitation, reasonable attorneys' fees,
incurred without gross negligence or willful misconduct on the part of the
Escrow Agent arising out of, or in connection with the acceptance of, or the
performance of, its duties and obligations under this Agreement. Promptly after
the receipt by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall notify
the other parties hereto in writing. For the purposes hereof, the term "expense
or loss" shall include all amounts paid or payable to satisfy any claim, demand
or liability, or in settlement of any claim, demand, action, suit or proceeding
settled with the express written consent of the indemnifying party, and all
reasonable costs and expenses, including, but not limited to, counsel fees and
disbursements paid or incurred in investigating or defending against any such
claim, demand, action, suit or proceeding. The Escrow Agent shall have no right
of setoff under this Agreement or otherwise against amounts in the Escrow
Deposit.
16. RESIGNATION OR REMOVAL OF ESCROW AGENT. The Escrow Agent may
at any time resign by written notice of such resignation to CCIC and Powertel,
in which event Powertel and CCIC shall designate a successor escrow agent within
thirty (30) days following the receipt by Powertel and CCIC of such notice. CCIC
and Powertel shall have the right at any time by mutual written agreement to
remove the Escrow Agent and appoint a successor. If the Escrow Agent shall
resign or be removed, a successor escrow agent, which shall be a bank or trust
company having assets in excess of $2 billion, shall be appointed by CCIC and
Powertel by written instrument executed by CCIC and Powertel and delivered to
the Escrow Agent and to such successor escrow agent and, thereupon, the
resignation or removal of the predecessor Escrow Agent shall become effective
and such successor escrow agent, without any further act, deed or conveyance,
shall become vested with all right, title and interest to all cash and property
held hereunder of such predecessor Escrow Agent, and such predecessor Escrow
Agent shall, on the written request of CCIC, Powertel or the successor escrow
agent, execute and deliver to such successor escrow agent all the right, title
and interest hereunder in and to the Escrow Deposit of such predecessor Escrow
Agent and all other rights hereunder of such predecessor Escrow Agent. If no
successor escrow agent shall have been appointed within 30 business days of a
notice of resignation by the Escrow Agent, the Escrow Agent shall be entitled to
apply to a court of competent jurisdiction for the appointment of a successor
and to tender into the registry or custody of any court of competent
jurisdiction any part or all of the Escrow Deposit. Upon its resignation and
delivery of the Escrow Deposit as set forth above, the Escrow Agent shall be
discharged from any and all further obligations arising in connection with the
escrow contemplated by this Agreement. The Escrow Agent shall be entitled to its
compensation earned prior to any removal or resignation.
8
<PAGE> 9
17. TERMINATION. This Agreement shall terminate on the date on
which there is no property remaining in the Escrow Deposit; provided that the
rights of the Escrow Agent under paragraphs 10 and 15 hereunder and the other
parties hereto under paragraph 6 hereunder shall survive the termination hereof
and the resignation or removal of the Escrow Agent; provided further that
nothing herein shall relieve any party other than the Escrow Agent from
liability for any breach of this Agreement.
18. FURTHER ASSURANCES. From time to time on and after the date
hereof, the other parties hereto shall deliver or cause to be delivered to the
Escrow Agent such further documents and instruments and shall do and cause to be
done such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected in acting hereunder.
19. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Georgia without regard to the principles of conflicts of laws. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any Georgia state or federal court sitting in Fulton
County, Atlanta, Georgia, and the parties hereto irrevocably submit to the
jurisdiction of such courts and waive any defense of an inconvenient forum to
the maintenance of any such action or proceeding.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
[INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day, month and year first above written.
CCIC:
CROWN CASTLE INTERNATIONAL CORP.
By: /s/ John L. Gwyn
-----------------------------------------
Name: John L. Gwyn
---------------------------------------
Title: Executive Vice President
--------------------------------------
BUYER:
CCP INC.
By: /s/ John L. Gwyn
-----------------------------------------
Name: John L. Gwyn
---------------------------------------
Title: Executive Vice President
--------------------------------------
SELLERS:
POWERTEL ATLANTA TOWERS, LLC
By: /s/ Jill F. Dorsey
-----------------------------------------
Name: Jill F. Dorsey
---------------------------------------
Title: Vice President, General Counsel &
--------------------------------------
Asst. Secretary
--------------------------------------
POWERTEL BIRMINGHAM TOWERS, LLC
By: /s/ Jill F. Dorsey
-----------------------------------------
Name: Jill F. Dorsey
---------------------------------------
Title: Vice President, General Counsel &
--------------------------------------
Asst. Secretary
--------------------------------------
10
<PAGE> 11
POWERTEL JACKSONVILLE TOWERS, LLC
By: /s/ Jill F. Dorsey
-----------------------------------------
Name: Jill F. Dorsey
---------------------------------------
Title: Vice President, General Counsel &
--------------------------------------
Asst. Secretary
--------------------------------------
POWERTEL KENTUCKY TOWERS, LLC
By: /s/ Jill F. Dorsey
-----------------------------------------
Name: Jill F. Dorsey
---------------------------------------
Title: Vice President, General Counsel &
--------------------------------------
Asst. Secretary
--------------------------------------
POWERTEL MEMPHIS TOWERS, LLC
By: /s/ Jill F. Dorsey
-----------------------------------------
Name: Jill F. Dorsey
---------------------------------------
Title: Vice President, General Counsel &
--------------------------------------
Asst. Secretary
--------------------------------------
POWERTEL:
POWERTEL, INC.
By: /s/ Fred G. Astor, Jr.
-----------------------------------------
Name: Fred G. Astor, Jr.
---------------------------------------
Title: Executive Vice President &
--------------------------------------
Chief Financial Officer
--------------------------------------
ESCROW AGENT:
SUNTRUST BANK, ATLANTA
By: /s/ Rebecca Fischer
-----------------------------------------
Name: Rebecca Fischer
---------------------------------------
Title: Trust Officer
--------------------------------------
11
<PAGE> 12
SCHEDULE A TO
ESCROW AGREEMENT
The annual fee of $5,000.00 for administering this Escrow Agreement is
payable in advance at the time of execution of the Escrow Agreement and, if
applicable, will be invoiced each year to the appropriate party on the
anniversary date of the execution of the Escrow Agreement.
Out of pocket expenses such as, but not limited to, postage, courier,
overnight mail, insurance, money wire transfer, long distance telephone charges,
facsimile, stationery, travel, legal or accounting, etc., will be billed at
cost.
These fees do not include extraordinary services which will be priced
according to time and scope of duties. The fees shall be deemed earned in full
upon receipt by the Escrow Agent, and no portion shall be refundable for any
reason, including without limitation, termination of the Escrow Agreement.
It is acknowledged that the schedule of fees shown above are acceptable
for the services mutually agreed upon and the parties to the Escrow Agreement
authorize SunTrust Bank, Atlanta to perform services upon the terms set forth in
the Escrow Agreement.
12
<PAGE> 1
EXHIBIT 12
POWERTEL, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
--------- ---------- --------- ------- -------
(IN THOUSANDS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and
cumulative effect of change
in accounting principle................ $(265,830) $ (135,168) $ (26,682) $ 5,234 $ 3,412
Add (deduct):
Fixed charges...................... 124,392 89,203 44,125 1,809 753
Interest capitalized............... (1,900) (22,093) (29,039) -- --
Minority Interest.................. -- (153) (474) -- --
--------- ---------- --------- ------- -------
Earnings as adjusted................... $(143,338) $ (68,211) $ (12,070) $ 7,043 $ 4,165
========= ========== ========= ======= =======
Fixed Charges:
Interest expense................... $ 113,170 $ 61,565 $ 12,864 $ 1,657 $ 635
Capitalized interest............... 1,900 22,093 29,039 -- --
Debt issuance costs................ 2,455 2,039 1,251 -- --
Capitalized debt issuance costs.... -- -- -- -- --
Rent expense (1/3 of total)........ 6,867 3,506 971 152 118
--------- ---------- --------- ------- -------
$ 124,392 $ 89,203 $ 44,125 $ 1,809 $ 753
========= ========== ========= ======= =======
Ratio of earnings to fixed charges..... -- (a) -- (a) -- 3.9 5.5
========= ========== ========= ======= =======
</TABLE>
(a) For the years ended December 31, 1997, and 1996, earnings were
insufficient to cover fixed charges by $157,414 and $56,195,
respectively.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
InterCel Licenses, Inc.
ICEL, Inc.
Powertel PCS, Inc.
Powertel/Atlanta, Inc.
Powertel/Birmingham, Inc.
Powertel/Jacksonville, Inc.
Powertel/Kentucky, Inc.
Powertel/Memphis, Inc.
Powertel Atlanta Licenses, Inc.
Powertel Birmingham Licenses, Inc.
Powertel Jacksonville Licenses, Inc.
Powertel Kentucky Licenses, Inc.
Powertel Memphis Licenses, Inc.
Powertel Nashville Licenses, Inc.
Powertel Knoxville Licenses, Inc.
Powertel Atlanta Towers, LLC
Powertel Birmingham Towers, LLC
Powertel Jacksonville Towers, LLC
Powertel Kentucky Towers, LLC
Powertel Memphis Towers, LLC
<PAGE> 1
EXHIBIT 23
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
reports dated February 5, 1999 included in Powertel, Inc.'s Annual Report on
Form 10-K for the year ending December 31, 1998 as well as the incorporation by
reference of such reports into the Company's previously filed Registration
Statement File No. 33-52550, 33-91734, 33-52552, 33-81842, and 333-09769.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POWERTEL, INC. FOR THE YEAR ENDED DECEMBER 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 204,787
<SECURITIES> 33,375
<RECEIVABLES> 28,726
<ALLOWANCES> 4,895
<INVENTORY> 20,683
<CURRENT-ASSETS> 296,819
<PP&E> 749,614
<DEPRECIATION> (107,210)
<TOTAL-ASSETS> 1,380,578
<CURRENT-LIABILITIES> 69,958
<BONDS> 849,462
152,219
3
<COMMON> 273
<OTHER-SE> 50,054
<TOTAL-LIABILITY-AND-EQUITY> 1,380,578
<SALES> 23,161
<TOTAL-REVENUES> 175,436
<CGS> 79,144
<TOTAL-COSTS> 347,672
<OTHER-EXPENSES> (62)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,656
<INCOME-PRETAX> (265,830)
<INCOME-TAX> 0
<INCOME-CONTINUING> (265,830)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (265,830)
<EPS-PRIMARY> (10.02)
<EPS-DILUTED> (10.02)
</TABLE>
