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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 14, 1999
CROWN CASTLE INTERNATIONAL CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-24737 76-0470458
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) Number)
510 Bering Drive
Suite 500
Houston, TX 77057
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (713) 570-3000
This document includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Other than statements of historical fact, all statements
regarding industry prospects, the consummation of the transactions described in
this document and the Company's expectations regarding the future performance of
its businesses and its financial position are forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties.
Capitalized terms used but not defined herein shall have the meaning
assigned thereto in the Company's Registration Statement on Form S-3 (Reg. No.
333-83395), as amended and as supplemented by a prospectus supplement dated
August 5, 1999.
ITEM 5. OTHER EVENTS
On September 15, 1999, Crown Castle International Corp. ("CCIC") and GE
Capital Structured Finance Group ("SFG") jointly announced that SFG has agreed
to make a $200,000,000 strategic investment in CCIC. In exchange for this
$200,000,000 investment, CCIC will issue to SFG (i) 200,000 shares of CCIC
8 1/4% Mandatorily Redeemable, Convertible Preferred Stock, each of which is
convertible into shares of CCIC common stock at a conversion price of $26.88 per
share and (ii) warrants to purchase one million shares of CCIC common stock at
an exercise price of $26.88 per share.
The convertible preferred stock will have an aggregate liquidation
preference of $200,000,000 and will have a term of 12 1/2 years. The warrants
will have a term of five years. Dividends on the convertible preferred stock
will be payable quarterly in cash, common stock or a combination of cash and
common stock, at CCIC's option. SFG will be prohibited from reselling the
convertible preferred stock, the warrants and the common stock issued upon their
conversion or exercise, as applicable, for a period of two years from the date
of closing of the transaction, subject to certain exceptions. SFG will have the
right to nominate one CCIC director and will have full voting rights on an "as
converted" basis as applicable to the common stock.
A copy of the press release announcing this transaction is attached hereto
as Exhibit 99.1 and is hereby incorporated by reference herein.
A copy of the summary of terms and conditions relating to this transaction
is attached hereto as Exhibit 99.2 and is hereby incorporated by reference
herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
- Not applicable.
(b) Pro forma financial information.
The following unaudited pro forma condensed consolidated financial
statements, together with the introductory language thereto, are included herein
as Exhibit 2.1:
1
(1) Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1998 and the six months ended
June 30, 1999
(2) Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
(3) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1999
(4) Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
2.1 Unaudited Pro Forma Condensed Consolidated Financial
Statements of Crown Castle International Corp.
99.1 Press Release dated September 15, 1999
99.2 Summary of Terms and Conditions of 8 1/4% Mandatorily
Redeemable, Convertible Preferred Stock, dated September 14,
1999
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CROWN CASTLE INTERNATIONAL CORP.,
By: /s/ Wesley D. Cunningham
---------------------------------
Name: Wesley D. Cunningham
Title: Senior Vice President,
Corporate Controller and
Chief Accounting Officer
Date: October 12, 1999
3
EXHIBIT INDEX
Exhibit No. Description
- ----------- -------------
2.1 Unaudited Pro Forma Condensed Consolidated Financial
Statements of Crown Castle International Corp.
99.1 Press Release dated September 15, 1999
99.2 Summary of Terms and Conditions of 8 1/4% Mandatorily
Redeemable, Convertible Preferred Stock, dated September 14,
1999
4
EXHIBIT 2.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of CCIC and the
historical financial statements of the entities acquired by CCIC during the
periods presented, adjusted to give effect to the following transactions:
(1) the roll-up of our U.K. subsidiary to an 80% ownership interest in
August 1998;
(2) CCIC's initial public offering in August 1998;
(3) the conversion of CCIC's then-outstanding senior convertible
preferred stock into common stock, all of which had been converted
as of July 17, 1998;
(4) the issuance of CCIC's exchangeable preferred stock in December
1998;
(5) the recent debt and equity offerings and the proposed issuance of
the convertible preferred stock and warrants in the GE Capital
transaction;
(6) the Bell Atlantic joint venture;
(7) the BellSouth transaction; and
(8) the Powertel acquisition.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1998 gives effect to these transactions as if they
had occurred as of January 1, 1998. The Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the six months ended June 30, 1999
gives effect to the (1) recent debt and equity offerings and the proposed
issuance of the convertible preferred stock and warrants in the GE Capital
transaction and (2) the transactions described in clauses (6), (7) and (8)
above as if they had occurred as of January 1, 1999. The Unaudited Pro Forma
Condensed Consolidated Balance Sheet gives effect to the (1) recent debt and
equity offerings and the proposed issuance of the convertible preferred stock
and warrants in the GE Capital transaction and (2) the transactions described
in clauses (7) and (8) above as if they had been completed as of June 30, 1999.
The pro forma adjustments are described in the accompanying notes and are based
upon available information and certain assumptions that management believes are
reasonable.
Included in the notes accompanying the pro forma financial statements are
tables summarizing the unaudited pro forma results of operations and balance
sheet for CCIC and its subsidiaries that are restricted by covenants in our
high yield debt instruments. These subsidiaries exclude our U.K. subsidiaries
and the Bell Atlantic joint venture, both of which are designated as
unrestricted subsidiaries under our high yield debt instruments.
The pro forma financial statements do not purport to represent what CCIC's
results of operations or financial condition would actually have been had these
transactions in fact occurred on such dates or to project CCIC's results of
operations or financial condition for any future date or period. The pro forma
financial statements should be read in conjunction with the consolidated
financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in CCIC's
most recent annual report on Form 10-K and quarterly reports on Form 10-Q.
The roll-up, the Bell Atlantic joint venture and the Powertel acquisition
are accounted for under the purchase method of accounting. The total purchase
price for the roll-up, the Bell Atlantic joint venture and the Powertel
acquisition has been allocated to the identifiable tangible and intangible
assets and liabilities of the applicable acquired business based upon CCIC's
preliminary estimate of their fair values with the remainder allocated to
goodwill and other intangible assets. The allocations of the purchase prices
may be revised when additional information concerning asset and liability
valuations is obtained; however, we do not expect that any such revisions will
have a material effect on our consolidated financial position or results of
operations. We have recorded the purchase price for the roll-up based on (1)
the number of shares of our common stock and Class A common stock exchanged for
shares of CTSH's capital stock and (2) the price per share received by us in
our initial public offering.
1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(Dollars in thousands, except per share amounts)
Pro Forma Historical
for 1998 Bell
Adjustments Pro Forma Adjustments Transactions Atlantic Adjustments
Historical Historical for 1998 for 1998 for and Joint for Joint
CCIC(a) CTSH(b) Transactions Transactions Offerings Offerings Venture(k) Venture
---------- ---------- ------------ ------------ ----------- ------------ ---------- -----------
Net revenues:
Site rental and
broadcast
transmission.... $ 75,028 $84,714 $ -- $159,742 $ -- $ 159,742 $ 11,183 $31,009(l)
Network services
and other....... 38,050 12,514 (265)(c) 50,299 -- 50,299 -- --
-------- ------- -------- -------- -------- --------- -------- -------
Total net
revenues........ 113,078 97,228 (265) 210,041 -- 210,041 11,183 31,009
-------- ------- -------- -------- -------- --------- -------- -------
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 26,254 35,901 -- 62,155 -- 62,155 14,941 -- (m)
Network services
and other....... 21,564 7,916 -- 29,480 -- 29,480 -- --
General and
administrative.. 23,571 5,265 (265)(c) 28,571 -- 28,571 -- -- (m)
Corporate
development..... 4,625 8 -- 4,633 -- 4,633 -- --
Non-cash
compensation
charges......... 12,758 3,831 -- 16,589 -- 16,589 -- --
Depreciation and
amortization.... 37,239 25,684 11,463 (d) 74,386 -- 74,386 6,278 23,346 (n)
-------- ------- -------- -------- -------- --------- -------- -------
126,011 78,605 11,198 215,814 -- 215,814 21,219 23,346
-------- ------- -------- -------- -------- --------- -------- -------
Operating income
(loss).......... (12,933) 18,623 (11,463) (5,773) -- (5,773) (10,036) 7,663
Other income
(expense):
Equity in
earnings of
unconsolidated
affiliate....... 2,055 -- (2,055)(e) -- -- -- -- --
Interest and
other income
(expense)....... 4,220 725 -- 4,945 -- 4,945 -- --
Interest expense
and amortization
of deferred
financing
costs........... (29,089) (13,378) 3,689 (f) (38,778) (82,468)(i) (121,246) -- (17,711)(o)
-------- ------- -------- -------- -------- --------- -------- -------
Income (loss)
before income
taxes and
minority
interests....... (35,747) 5,970 (9,829) (39,606) (82,468) (122,074) (10,036) (10,048)
Provision for
income taxes.... (374) -- -- (374) -- (374) -- --
Minority
interests....... (1,654) -- (1,194)(g) (2,848) -- (2,848) -- 4,155 (p)
-------- ------- -------- -------- -------- --------- -------- -------
Net income
(loss).......... (37,775) 5,970 (11,023) (42,828) (82,468) (125,296) (10,036) (5,893)
Dividends on
preferred
stock........... (5,411) -- (21,334)(h) (26,745) (16,910)(j) (43,655) -- --
-------- ------- -------- -------- -------- --------- -------- -------
Net income (loss)
after deduction
of dividends on
preferred
stock........... $(43,186) $ 5,970 $(32,357) $(69,573) $(99,378) $(168,951) $(10,036) $(5,893)
======== ======= ======== ======== ======== ========= ======== =======
Loss per common
share--basic and
diluted ........ $ (1.02) $ (0.74) $ (1.33)
======== ======== =========
Common shares
outstanding--
basic and
diluted (in
thousands)...... 42,518 94,064 126,878
======== ======== =========
Pro Forma
for 1998 Adjustments
Transactions, for Adjustments
Offerings Proposed for Pro Forma
and Joint BellSouth Historical Powertel for the
Venture Transaction Powertel(t) Acquisition Transactions
------------- --------------- ----------- ------------- ------------
Net revenues:
Site rental and
broadcast
transmission.... $ 201,934 $33,840(q) $ 1,865 $14,040(u) $ 251,679
Network services
and other....... 50,299 -- -- -- 50,299
------------- --------------- ----------- ------------- ------------
Total net
revenues........ 252,233 33,840 1,865 14,040 301,978
------------- --------------- ----------- ------------- ------------
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 77,096 11,400(m)(r) 6,167 -- (m) 94,663
Network services
and other....... 29,480 -- -- -- 29,480
General and
administrative.. 28,571 -- (m) -- -- (m) 28,571
Corporate
development..... 4,633 -- -- -- 4,633
Non-cash
compensation
charges......... 16,589 -- -- -- 16,589
Depreciation and
amortization.... 104,010 30,500 (s) 7,534 6,111 (v) 148,155
------------- --------------- ----------- ------------- ------------
260,379 41,900 13,701 6,111 322,091
------------- --------------- ----------- ------------- ------------
Operating income
(loss).......... (8,146) (8,060) (11,836) 7,929 (20,113)
Other income
(expense):
Equity in
earnings of
unconsolidated
affiliate....... -- -- -- -- --
Interest and
other income
(expense)....... 4,945 -- -- -- 4,945
Interest expense
and amortization
of deferred
financing
costs........... (138,957) -- -- -- (138,957)
------------- --------------- ----------- ------------- ------------
Income (loss)
before income
taxes and
minority
interests....... (142,158) (8,060) (11,836) 7,929 (154,125)
Provision for
income taxes.... (374) -- -- -- (374)
Minority
interests....... 1,307 -- -- -- 1,307
------------- --------------- ----------- ------------- ------------
Net income
(loss).......... (141,225) (8,060) (11,836) 7,929 (153,192)
Dividends on
preferred
stock........... (43,655) -- -- -- (43,655)
------------- --------------- ----------- ------------- ------------
Net income (loss)
after deduction
of dividends on
preferred
stock........... $(184,880) $(8,060) $(11,836) $ 7,929 $(196,847)
============= =============== =========== ============= ============
Loss per common
share--basic and
diluted ........ $ (1.25) $ (1.25)
============= ============
Common shares
outstanding--
basic and
diluted (in
thousands)...... 147,871 156,955
============= ============
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999
(Dollars in thousands, except per share amounts)
Historical Pro Forma Adjustments
Bell for for
Adjustments Pro Forma Atlantic Adjustments Offerings Proposed
Historical for for Joint for Joint and Joint BellSouth Historical
CCIC(a) Offerings Offerings Venture(k) Venture Venture Transaction Powertel(t)
---------- ----------- --------- ---------- ----------- --------- ----------- -----------
Net revenues:
Site rental and
broadcast
transmission...... $107,503 $ -- $107,503 $ 3,705 $ 8,092(l) $119,300 $16,504(q) $ 1,864
Network services
and other......... 25,133 -- 25,133 -- -- 25,133 -- --
-------- -------- -------- ------- ------- -------- ------- -------
Total net
revenues........ 132,636 -- 132,636 3,705 8,092 144,433 16,504 1,864
-------- -------- -------- ------- ------- -------- ------- -------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 45,084 -- 45,084 5,359 --(m) 50,443 5,560(m)(r) 2,589
Network services
and other....... 15,157 -- 15,157 -- -- 15,157 -- --
General and
administrative.... 17,542 -- 17,542 -- --(m) 17,542 --(m) --
Corporate
development....... 2,940 -- 2,940 -- -- 2,940 -- --
Restructuring
charges........... 1,814 -- 1,814 -- -- 1,814 -- --
Non-cash
compensation
charges........... 1,171 -- 1,171 -- -- 1,171 -- --
Depreciation and
amortization...... 49,519 -- 49,519 1,899 6,222(n) 57,640 14,875(s) 3,633
-------- -------- -------- ------- ------- -------- ------- -------
133,227 -- 133,227 7,258 6,222 146,707 20,435 6,222
-------- -------- -------- ------- ------- -------- ------- -------
Operating income
(loss)............. (591) -- (591) (3,553) 1,870 (2,274) (3,931) (4,358)
Other income
(expense):
Interest and
other income
(expense)......... 4,879 -- 4,879 -- -- 4,879 -- --
Interest expense
and amortization
of deferred
financing costs... (37,842) (33,251)(i) (71,093) -- (4,428)(o) (75,521) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Income (loss)
before income
taxes, minority
interests and
cumulative effect
of change in
accounting
principle.......... (33,554) (33,251) (66,805) (3,553) (2,558) (72,916) (3,931) (4,358)
Provision for
income taxes....... (197) -- (197) -- -- (197) -- --
Minority
interests.......... (572) -- (572) -- 1,224(p) 652 -- --
-------- -------- -------- ------- ------- -------- ------- -------
Income (loss)
before cumulative
effect of change in
accounting
principle.......... (34,323) (33,251) (66,574) (3,553) (1,334) (72,461) (3,931) (4,358)
Cumulative effect
of change in
accounting
principle for costs
of start-up
activities......... (2,414) -- (2,414) -- -- (2,414) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Net income (loss).. (36,737) (33,251) (69,988) (3,553) (1,334) (74,875) (3,931) (4,358)
Dividends on
preferred stock.... (13,022) (8,455)(j) (21,477) -- -- (21,477) -- --
-------- -------- -------- ------- ------- -------- ------- -------
Net income (loss)
after deduction of
dividends on
preferred stock.... $(49,759) $(41,706) $(91,465) $(3,553) $(1,334) $(96,352) $(3,931) $(4,358)
======== ======== ======== ======= ======= ======== ======= =======
Per common share--
basic and diluted:
Loss before
cumulative effect
of change in
accounting
principle......... $ (0.43) $ (0.65) $ (0.63)
Cumulative effect
of change in
accounting
principle......... (0.02) (0.02) (0.02)
-------- -------- --------
Net loss.......... $ (0.45) $ (0.67) $ (.0.65)
======== ======== ========
Common shares
outstanding--basic
and diluted (in
thousands)......... 109,791 135,912 148,662
======== ======== ========
Adjustments
for Pro Forma
Powertel for the
Acquisition Transactions
------------ ------------
Net revenues:
Site rental and
broadcast
transmission...... $5,906(u) $ 143,574
Network services
and other......... -- 25,133
------------ ------------
Total net
revenues........ 5,906 168,707
------------ ------------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... --(m) 58,592
Network services
and other....... -- 15,157
General and
administrative.... --(m) 17,542
Corporate
development....... -- 2,940
Restructuring
charges........... -- 1,814
Non-cash
compensation
charges........... -- 1,171
Depreciation and
amortization...... 2,111(v) 78,259
------------ ------------
2,111 175,475
------------ ------------
Operating income
(loss)............. 3,795 (6,768)
Other income
(expense):
Interest and
other income
(expense)......... -- 4,879
Interest expense
and amortization
of deferred
financing costs... -- (75,521)
------------ ------------
Income (loss)
before income
taxes, minority
interests and
cumulative effect
of change in
accounting
principle.......... 3,795 (77,410)
Provision for
income taxes....... -- (197)
Minority
interests.......... -- 652
------------ ------------
Income (loss)
before cumulative
effect of change in
accounting
principle.......... 3,795 (76,955)
Cumulative effect
of change in
accounting
principle for costs
of start-up
activities......... -- (2,414)
------------ ------------
Net income (loss).. 3,795 (79,369)
Dividends on
preferred stock.... -- (21,477)
------------ ------------
Net income (loss)
after deduction of
dividends on
preferred stock.... $3,795 $(100,846)
============ ============
Per common share--
basic and diluted:
Loss before
cumulative effect
of change in
accounting
principle......... $ (0.62)
Cumulative effect
of change in
accounting
principle......... (0.02)
------------
Net loss.......... $ (0.64)
============
Common shares
outstanding--basic
and diluted (in
thousands)......... 157,552
============
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
3
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands)
(a) The historical results of operations for our U.K. business are included in
CCIC's historical results of operations for the period from the date of the
roll-up, August 21, 1998, through December 31, 1998.
(b) Reflects the historical results of operations of our U.K. business (under
U.S. GAAP) for the periods prior to the completion of the roll-up on August
21, 1998. Such results have been translated from pounds sterling to U.S.
dollars at the average noon buying rate for the period.
(c) Reflects the elimination of management fees payable to CCIC from Castle
Transmission.
(d) Reflects the incremental amortization of goodwill as a result of the roll-
up. Goodwill is being amortized over twenty years.
(e) Reflects the elimination of equity accounting adjustments to include CCIC's
percentage in our U.K. business' earnings and losses.
(f) Reflects decrease in interest expense attributable to the repayment of
borrowings under CCIC's senior credit facility from a portion of the net
proceeds from the issuance of our exchangeable preferred stock.
(g) Reflects the minority interest in dividends accrued on CTSH's redeemable
preference shares.
(h) Reflects (1) decrease in dividends of $4,348 attributable to the conversion
of the outstanding shares of senior convertible preferred stock into shares
of common stock and (2) increase in dividends of $25,682 attributable to
the exchangeable preferred stock.
(i) Reflects:
(1) increase in interest expense as a result of the issuance of the notes
in the recent debt offerings of $77,596 for the year ended December 31,
1998 and $32,481 for the six months ended June 30, 1999;
(2) amortization of deferred financing costs related to the notes issued in
the recent debt offerings of $1,872 for the year ended December 31,
1998 and $770 for the six months ended June 30, 1999; and
(3) nonrecurring financing fees of $3,000 for the year ended December 31,
1998 related to the term loans incurred to fund the escrow payments in
connection with the BellSouth transaction and the Powertel acquisition.
(j) Reflects the increase in dividends attributable to the proposed issuance of
the convertible preferred stock.
(k) Reflects the historical results of operations of the tower operations
contributed to the Bell Atlantic joint venture.
(l) Reflects additional revenues to be recognized by the Bell Atlantic joint
venture under the global lease and the formation agreement.
(m) We expect that the Bell Atlantic joint venture will incur incremental
operating expenses as a stand-alone entity. Such incremental expenses are
currently estimated to amount to approximately $5,137 per year. In
addition, we expect that we will incur incremental operating expenses as a
result of the BellSouth transaction and the Powertel acquisition. Such
incremental expenses are currently estimated to amount to approximately
$15,917 per year. These incremental operating expenses are based on
management's best estimates rather than any contractual obligations; as
such, these amounts have not been presented as adjustments in the
accompanying pro forma financial statement.
(n) Reflects the incremental depreciation of property and equipment as a result
of the Bell Atlantic joint venture. Property and equipment is being
depreciated over twenty years.
(o) Reflects additional interest expense attributable to borrowings under the
credit facility entered into by the Bell Atlantic joint venture. Such
borrowings are initially estimated to incur interest at a rate of 9.25% per
annum.
(p) Reflects the minority partner's 38.5% interest in the joint venture's
operations.
(q) Reflects additional revenues to be recognized by CCIC in connection with
the BellSouth transaction for the sublease of tower space by BellSouth.
This amount includes: $26,640 in revenues to be received from
4
BellSouth and $7,200 in revenues to be received from other tenants for the
year ended December 31, 1998; and $12,992 in revenues to be received from
BellSouth and $3,512 in revenues to be received from other tenants for the
six months ended June 30, 1999.
(r) Reflects additional costs to be incurred for ground rents in connection
with the preliminary BellSouth agreement.
(s) Reflects the incremental depreciation of property and equipment as a result
of the BellSouth transaction. Property and equipment is being depreciated
over twenty years.
(t) Reflects the historical results of operations of the tower operations
acquired in the Powertel acquisition.
(u) Reflects additional revenues to be recognized by CCIC in connection with
the Powertel acquisition under the master site agreements.
(v) Reflects the incremental depreciation of property and equipment as a result
of the Powertel acquisition. Property and equipment is being depreciated
over twenty years.
5
The following tables summarize the unaudited pro forma results of operations
for the restricted group under our high yield debt instruments. Such
information is not intended as an alternative measure of the operating results
as would be determined in accordance with generally accepted accounting
principles.
Year Ended December 31, 1998
------------------------------------------------------------------------------------------------
Restricted Adjustments Restricted
Exclusion of Group for Adjustments Group Pro
Pro Forma Exclusion of Certain Pro Forma Proposed for Forma for
for Unrestricted Adjustments for BellSouth Historical Powertel the
Offerings Subsidiaries for Roll-Up Offerings Transaction Powertel Acquisition Transactions
--------- ------------ ------------ ---------- ----------- ---------- ----------- ------------
Net revenues:
Site rental and
broadcast
transmission.......... $ 159,742 $(137,201) $ -- $ 22,541 $33,840 $ 1,865 $14,040 $ 72,286
Network services and
other................. 50,299 (18,082) -- 32,217 -- -- -- 32,217
--------- --------- ------- --------- ------- -------- ------- ---------
Total net revenues.... 210,041 (155,283) -- 54,758 33,840 1,865 14,040 104,503
--------- --------- ------- --------- ------- -------- ------- ---------
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission......... 62,155 (56,038) -- 6,117 11,400 6,167 -- 23,684
Network services and
other................ 29,480 (12,151) -- 17,329 -- -- -- 17,329
General and
administrative........ 28,571 (7,683) 265 21,153 -- -- -- 21,153
Corporate development.. 4,633 (8) -- 4,625 -- -- -- 4,625
Non-cash compensation
charges............... 16,589 (6,682) -- 9,907 -- -- -- 9,907
Depreciation and
amortization.......... 74,386 (46,002) (11,463) 16,921 30,500 7,534 6,111 61,066
--------- --------- ------- --------- ------- -------- ------- ---------
215,814 (128,564) (11,198) 76,052 41,900 13,701 6,111 137,764
--------- --------- ------- --------- ------- -------- ------- ---------
Operating income
(loss)................ (5,773) (26,719) 11,198 (21,294) (8,060) (11,836) 7,929 (33,261)
Other income (expense):
Interest and other
income (expense)...... 4,945 (3,844) -- 1,101 -- -- -- 1,101
Interest expense and
amortization of
deferred financing
costs................. (121,246) 20,740 -- (100,506) -- -- -- (100,506)
--------- --------- ------- --------- ------- -------- ------- ---------
Income (loss) before
income taxes and
minority interests.... (122,074) (9,823) 11,198 (120,699) (8,060) (11,836) 7,929 (132,666)
Provision for income
taxes................. (374) -- -- (374) -- -- -- (374)
Minority interests..... (2,848) 1,654 1,194 -- -- -- -- --
--------- --------- ------- --------- ------- -------- ------- ---------
Net income (loss)...... (125,296) (8,169) 12,392 (121,073) (8,060) (11,836) 7,929 (133,040)
Dividends on preferred
stock................. (43,655) -- -- (43,655) -- -- -- (43,655)
--------- --------- ------- --------- ------- -------- ------- ---------
Net income (loss) after
deduction of dividends
on preferred stock.... $(168,951) $ (8,169) $12,392 $(164,728) $(8,060) $(11,836) $ 7,929 $(176,695)
========= ========= ======= ========= ======= ======== ======= =========
6
Six Months Ended June 30, 1999
-----------------------------------------------------------------------------------
Restricted Adjustments Restricted
Group for Adjustments Group Pro
Pro Forma Exclusion of Pro Forma Proposed for Forma for
for Unrestricted for BellSouth Historical Powertel the
Offerings Subsidiaries Offerings Transaction Powertel Acquisition Transactions
--------- ------------ ---------- ----------- ---------- ----------- ------------
Net revenues:
Site rental and
broadcast
transmission.......... $107,503 $(92,624) $ 14,879 $16,504 $ 1,864 $5,906 $ 39,153
Network services and
other................. 25,133 (9,965) 15,168 -- -- -- 15,168
-------- -------- --------- ------- ------- ------ --------
Total net revenues... 132,636 (102,589) 30,047 16,504 1,864 5,906 54,321
-------- -------- --------- ------- ------- ------ --------
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission........ 45,084 (41,008) 4,076 5,560 2,589 -- 12,225
Network services and
other............... 15,157 (7,891) 7,266 -- -- -- 7,266
General and
administrative........ 17,542 (4,128) 13,414 -- -- -- 13,414
Corporate
development........... 2,940 (688) 2,252 -- -- -- 2,252
Restructuring
charges............... 1,814 -- 1,814 -- -- -- 1,814
Non-cash compensation
charges............... 1,171 (447) 724 -- -- -- 724
Depreciation and
amortization.......... 49,519 (38,910) 10,609 14,875 3,633 2,111 31,228
-------- -------- --------- ------- ------- ------ --------
133,227 (93,072) 40,155 20,435 6,222 2,111 68,923
-------- -------- --------- ------- ------- ------ --------
Operating income
(loss)................ (591) (9,517) (10,108) (3,931) (4,358) 3,795 (14,602)
Other income (expense):
Interest and other
income (expense)...... 4,879 (6,258) (1,379) -- -- -- (1,379)
Interest expense and
amortization of
deferred financing
costs................. (71,093) 16,452 (54,641) -- -- -- (54,641)
-------- -------- --------- ------- ------- ------ --------
Income (loss) before
income taxes,
minority interests
and cumulative effect
of change in
accounting
principle............. (66,805) 677 (66,128) (3,931) (4,358) 3,795 (70,622)
Provision for income
taxes................. (197) -- (197) -- -- -- (197)
Minority interests..... (572) 572 -- -- -- -- --
-------- -------- --------- ------- ------- ------ --------
Income (loss) before
cumulative effect of
change in accounting
principle............. (67,574) 1,249 (66,325) (3,931) (4,358) 3,795 (70,819)
Cumulative effect of
change in accounting
principle for costs
of start-up
activities............ (2,414) -- (2,414) -- -- -- (2,414)
-------- -------- --------- ------- ------- ------ --------
Net income (loss)...... (69,988) 1,249 (68,739) (3,931) (4,358) 3,795 (73,233)
Dividends on preferred
stock................. (21,477) -- (21,477) -- -- -- (21,477)
-------- -------- --------- ------- ------- ------ --------
Net income (loss)
after deduction of
dividends on
preferred stock....... $(91,465) $ 1,249 $(90,216) $(3,931) $(4,358) $3,795 $(94,710)
======== ======== ========= ======= ======= ====== ========
7
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(Dollars in thousands)
Adjustments
for Adjustments
Adjustments Pro Forma Proposed for Pro Forma
Historical for for BellSouth Powertel for the
CCIC Offerings Offerings Transaction Acquisition Transactions
---------- ----------- ---------- ----------- ----------- ------------
Assets:
Current assets:
Cash and cash
equivalents.......... $ 705,924 $600,511(a) $1,306,435 $(358,021)(f) $(13,115)(i) $ 935,299
Receivables........... 41,009 -- 41,009 -- -- 41,009
Inventories........... 12,591 -- 12,591 -- -- 12,591
Prepaid expenses and
other current
assets............... 7,951 -- 7,951 -- -- 7,951
---------- -------- ---------- --------- -------- ----------
Total current
assets.............. 767,475 600,511 1,367,986 (358,021) (13,115) 996,850
Property and equipment,
net.................... 1,615,646 -- 1,615,646 511,459(g) 13,115(j) 2,140,220
Goodwill and other
intangible assets,
net.................... 608,800 -- 608,800 -- -- 608,800
Deferred financing costs
and other assets, net.. 37,173 6,510(b) 43,683 -- -- 43,683
---------- -------- ---------- --------- -------- ----------
$3,029,094 $607,021 $3,636,115 $ 153,438 $ -- $3,789,553
========== ======== ========== ========= ======== ==========
Liabilities and
Stockholders' Equity:
Current liabilities:
Accounts payable...... $ 22,690 $ -- $ 22,690 $ -- $ -- $ 22,690
Other current
liabilities.......... 63,149 -- 63,149 -- -- 63,149
Long-term debt,
current maturities... -- -- -- -- -- --
---------- -------- ---------- --------- -------- ----------
Total current
liabilities......... 85,839 -- 85,839 -- -- 85,839
Long-term debt, less
current maturities..... 1,194,681 275,511(c) 1,470,192 -- -- 1,470,192
Other liabilities....... 45,991 -- 45,991 -- -- 45,991
---------- -------- ---------- --------- -------- ----------
Total liabilities.... 1,326,511 275,511 1,602,022 -- -- 1,602,022
---------- -------- ---------- --------- -------- ----------
Minority interests...... 52,100 -- 52,100 -- -- 52,100
Redeemable preferred
stock.................. 214,085 194,904(d) 408,989 -- -- 408,989
Stockholders' equity.... 1,436,398 136,606(e) 1,573,004 153,438(h) -- 1,726,442
---------- -------- ---------- --------- -------- ----------
$3,029,094 $607,021 $3,636,115 $ 153,438 $ -- $3,789,553
========== ======== ========== ========= ======== ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
8
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Dollars in thousands)
(a) Reflects the following adjustments to cash and cash
equivalents:
(1) Increase resulting from the receipt of proceeds from
the most recent debt offerings....................... $ 275,511
(2) Decrease resulting from the payment of underwriting
discounts and commissions and other fees and expenses
related to the most recent debt offerings............ (6,510)
(3) Increase resulting from sale of common stock to TdF
under its preemptive rights from the recent equity
offering............................................. 140,310
(4) Increase resulting from the receipt of proceeds from
the proposed issuance of the convertible preferred
stock and warrants in the GE Capital transaction..... 200,000
(5) Decrease resulting from the payment of fees and
expenses related to the proposed issuance of the
convertible preferred stock and warrants in the GE
Capital transaction.................................. (8,800)
---------
Total adjustments to cash and cash equivalents....... $ 600,511
=========
(b) Reflects deferred financing costs resulting from the
payment of underwriting discounts and commissions and
other fees and expenses related to the most recent debt
offerings.
(c) Reflects the increase resulting from the receipt of
proceeds from the most recent debt offerings.
(d) Reflects the increase resulting from the receipt of
proceeds from the proposed issuance of the convertible
preferred stock in the GE Capital transaction, net of the
value attributed to the accompanying warrants to purchase
shares of CCIC common stock.
(e) Reflects the following adjustments to stockholders'
equity:
(1) Increase resulting from sale of common stock to TdF
under its preemptive rights from the recent equity
offering............................................. $ 140,310
(2) Decrease resulting from the payment of fees and
expenses related to the proposed issuance of the
convertible preferred stock and warrants in the GE
Capital transaction.................................. (8,800)
(3) Increase resulting from the value attributed to the
warrants to purchase shares of CCIC common stock in
the GE Capital transaction........................... 5,096
---------
Total adjustments to stockholders' equity................ $ 136,606
=========
(f) Reflects the payment of the remaining cash portion of the purchase
price for the BellSouth transaction.
(g) Reflects the basis of property and equipment recorded in connection
with the BellSouth transaction.
(h) Reflects the increase resulting from the issuance of common stock
for a portion of the remaining purchase price for the BellSouth
transaction.
(i) Reflects the payment of the remaining portion of the closing price
for the Powertel acquisition.
(j) Reflects the increase in basis of property and equipment acquired
in the remaining portion of the Powertel acquisition.
9
The following table summarizes the adjustments for the recent and proposed
offerings, with increases to liabilities and stockholders' equity balances
shown as negative amounts:
Adjustment Reference
-------------------------------------------------------------------
(a)(1),(a)(3),(c),(e)(1) (a)(2),(a)(5),(b),(e)(2) (a)(4),(d),(e)(3) Totals
------------------------ ------------------------ ----------------- ---------
Cash and cash
equivalents............ $415,821 $(15,310) $200,000 $ 600,511
Deferred financing cost
and other assets, net.. -- 6,510 -- 6,510
Long-term debt, less
current maturities..... (275,511) -- -- (275,511)
Redeemable preferred
stock.................. -- -- (194,904) (194,904)
Stockholders' equity.... (140,310) 8,800 (5,096) (136,606)
-------- -------- -------- ---------
$ -- $ -- $ -- $ --
======== ======== ======== =========
The following table summarizes the adjustments for the BellSouth
transaction, with increases to liabilities and stockholders' equity balances
shown as negative amounts:
Adjustment Reference
--------------------
(f),(g),(h)
--------------------
Cash and cash equivalents............................... $(358,021)
Property and equpment, net.............................. 511,459
Stockholders' equity.................................... (153,438)
---------
$ --
=========
The following table summarizes the adjustments for the Powertel
acquisition, with increases to liabilities and stockholders' equity balances
shown as negative amounts:
Adjustment Reference
--------------------
(i),(j)
--------------------
Cash and cash equivalents............................... $(13,115)
Property and equipment, net............................. 13,115
--------
$ --
========
10
The following table summarizes the unaudited pro forma balance sheet for the
restricted group under our high yield debt instruments. Such information is not
intended as an alternative measure of financial position as determined in
accordance with generally accepted accounting principles.
As of June 30, 1999
-------------------------------------------------------------------------
Restricted Adjustments Restricted
Group for Group
Pro Exclusion of Pro Proposed Adjustments Pro Forma
Forma for Unrestricted Forma for BellSouth for Powertel for the
Offerings Subsidiaries Offerings Transaction Acquisition Transactions
---------- ------------ ---------- ----------- ------------ ------------
Assets:
Current assets:
Cash and cash
equivalents........... $1,306,435 $ (64,441) $1,241,994 $(358,021) $(13,115) $ 870,858
Receivables............ 41,009 (19,330) 21,679 -- -- 21,679
Inventories............ 12,591 (6,921) 5,670 -- -- 5,670
Prepaid expenses and
other current
assets................ 7,951 (5,975) 1,976 -- -- 1,976
---------- ----------- ---------- --------- -------- ----------
Total current
assets.............. 1,367,986 (96,667) 1,271,319 (358,021) (13,115) 900,183
Property and equipment,
net.................... 1,615,646 (1,051,307) 564,339 511,459 13,115 1,088,913
Investments in
Unrestricted
Subsidiaries........... -- 989,506 989,506 -- -- 989,506
Goodwill and other
intangible assets,
net.................... 608,800 (469,643) 139,157 -- -- 139,157
Deferred financing costs
and other assets, net.. 43,683 (4,396) 39,287 -- -- 39,287
---------- ----------- ---------- --------- -------- ----------
$3,636,115 $ (632,507) $3,003,608 $ 153,438 $ -- $3,157,046
========== =========== ========== ========= ======== ==========
Liabilities and
Stockholders' Equity:
Current liabilities:
Accounts payable....... $ 22,690 $ (18,571) $ 4,119 $ -- $ -- $ 4,119
Other current
liabilities........... 63,149 (56,551) 6,598 -- -- 6,598
Long-term debt,
current maturities.... -- -- -- -- -- --
---------- ----------- ---------- --------- -------- ----------
Total current
liabilities......... 85,839 (75,122) 10,717 -- -- 10,717
Long-term debt, less
current maturities..... 1,470,192 (461,219) 1,008,973 -- -- 1,008,973
Other liabilities....... 45,991 (44,066) 1,925 -- -- 1,925
---------- ----------- ---------- --------- -------- ----------
Total liabilities.... 1,602,022 (580,407) 1,021,615 -- -- 1,021,615
---------- ----------- ---------- --------- -------- ----------
Minority interests...... 52,100 (52,100) -- -- -- --
Redeemable preferred
stock.................. 408,989 -- 408,989 -- -- 408,989
Stockholders' equity.... 1,573,004 -- 1,573,004 153,438 -- 1,726,442
---------- ----------- ---------- --------- -------- ----------
$3,636,115 $ (632,507) $3,003,608 $ 153,438 $ -- $3,157,046
========== =========== ========== ========= ======== ==========
11
EXHIBIT 99.1
- --------------------------------------------------------------------------------
NEWS RELEASE EASTERLY
INVESTOR RELATIONS
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
Contacts for Crown Castle: Charles C. Green, III, CFO
Crown Castle International
713-570-3000
Ken Dennard /kdennard@easterly.com
Easterly Investor Relations
713-529-6600
Contacts for GE: Marcy Brucellaria
GE Capital
203-961-2281
Ken Koprowski
GE Capital Structured Finance
203-961-5743
GE CAPITAL MAKES STRATEGIC INVESTMENT IN CROWN CASTLE
Companies To Pursue Strategic Alliances within the GE Family
HOUSTON and STAMFORD, CT - SEPTEMBER 15, 1999 - Crown Castle International Corp.
(NASDAQ: TWRS) and GE Capital Structured Finance Group (SFG) announced today
that SFG has agreed to make a $200 million strategic investment in Crown Castle.
The strategic investment is anticipated to be the first step in the development
of additional opportunities for Crown Castle and companies within the GE family
of businesses such as NBC and satellite communications company, GE Americom.
"This substantial investment by GE Capital Structured Finance Group sets
the stage for additional opportunities with other synergistic businesses in the
GE family," said Ted B. Miller, Jr., Crown Castle Chairman and CEO. "Forming
this partnership provides us with additional capital and alternative acquisition
financing for future transactions on a global basis. Equally important, Crown
Castle's status as a major communications infrastructure player has again been
confirmed by a globally recognized strategic investor. GE Capital joins Bell
Atlantic, BellSouth and France Telecom in wireless infrastructure and the BBC
and OnDigital in broadcast infrastructure in supporting Crown Castle.
"This investment and strategic relationship help us to continue the
expansion of our domestic and international communications infrastructure
platforms in a number of significant ways," continued Mr. Miller. "Contemplated
expansion opportunities include acquisition financing, equipment financing and
the ability to offer to the wireless community turnkey capacity in the form of
fully equipped cell sites, expanding the model that has been successful for
-2-
us in the broadcast arena. In addition, we look forward to immediately pursuing
potential communication infrastructure opportunities between our two companies.
We continue to differentiate Crown Castle by providing more value for wireless
and broadcast service providers."
"We are delighted to be making this strategic investment in Crown Castle as
part of our increasing presence in the rapidly growing global tower and wireless
communications industry," said Robert L. Lewis, President of GE Capital
Structured Finance Group. "Crown Castle has a winning combination of attributes
- -- a strong management team, promising business strategy and excellent
fundamentals. We look forward to working with Crown Castle to accomplish mutual
near term and long term strategic goals as voice, video and data continue to
converge in the new world of e-commerce."
"Crown Castle has been experiencing strong growth," said Nicole Cawley,
Managing Director for Global Communications Finance within SFG. "We anticipate
its growth can be furthered by in a number of ways through this new partnership
with SFG and by exploring additional strategic alliances with affiliated GE and
GE Capital companies."
John Eck, President of NBC's Broadcast and Network Operations, added: "We
perceive Crown Castle to be a key player in the consolidation of
telecommunications infrastructure that will ultimately integrate broadcast and
e-business activities. Relationships with companies like Crown will contribute
to NBC's future growth."
At closing of the transaction which is expected by early October, Crown
Castle will receive $200 million of proceeds in exchange for 8 1/4% Convertible
Preferred Stock with a conversion price of $26.88 and warrants to purchase one
million Crown Castle shares at $26.88 per share. The Convertible Preferred
Stock will have a term of 12 1/2 years and the warrants will have a term of five
years. Dividends on the Convertible Preferred Stock will be payable quarterly
in cash and/or common stock. The Convertible Preferred Stock, the warrants and
the shares of common stock issuable upon their conversion or exercise,
respectively, are subject to a prohibition on resale for two years from the date
of closing of the transaction. GE Capital will also have the right to nominate
one Crown Castle director.
The transaction was structured by SFG's Global Communications team in
conjunction with SFG's affiliate, GE Capital Markets Services. Lehman Brothers
advised Crown Castle in this transaction.
-3-
[LOGO OF CROWN CASTLE INTERNATIONAL]
Crown Castle International Corp. is a leading provider of communication sites
and wireless network services and provides an array of related infrastructure
and network support services to the wireless communications and radio and
television broadcasting industries in the United States and United Kingdom. Pro
forma for all closed and previously announced transactions, Crown Castle
International owns, operates and manages over 7,000 wireless communication
towers internationally. For more information on Crown Castle International,
visit: www.crowncastle.com.
--------------------
GE Capital Structured Finance Group provides financial solutions for
clients in the global communications, energy, transportation, and commercial and
industrial sectors. A rapidly growing financier in the communications sector,
SFG meets the varied needs of its clients by combining industry and technical
expertise with significant financial capabilities, delivering a full range of
sophisticated financial services and products.
NBC is a global media company with broadly diversified holdings, including
NBC Television Network and thirteen television stations. The Company has
historically been at the forefront of new communications technologies. With its
growing presence in the broadband arena, NBC is committed to exploring
alternative content distribution strategies.
GE Capital, with assets of over US$300 billion, is a global, financial
services company with 28 specialized businesses. It is a wholly owned subsidiary
of General Electric Company, a diversified manufacturing, technology, and
services company with operations worldwide. Its operations include the NBC
television network. GE's website is located at http://www.ge.com.
-----------------
This press release contains various forward-looking statements and
information that are based on management's belief as well as assumptions made by
and information currently available to management. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those expected.
# # #
EXHIBIT 99.2
September 14, 1999
Summary of Terms and Conditions of
8.25 % Mandatorily Redeemable, Convertible Preferred Stock
ISSUER: The Company ("Signal").
SECURITIES: 200,000 shares of Mandatorily Redeemable Convertible
Preferred Stock ("Preferred Stock "). The Preferred
Stock will consist of Series A Preferred Stock or, as
provided below under "Permitted Transferees," Series
B Preferred Stock. The Series A and Series B
Preferred Stock are collectively referred to herein
as "Preferred Stock".
PRICE: $1,000 per share of Preferred Stock.
PROJECTED CLOSING DATE: October 31, 1999 (the "Closing Date").
ARRANGER: GE Capital Services structured Finance Group, Inc.
STRUCTURING FEE: The Company will pay Arranger a Structuring Fee of
$6.0 million. $500,000 (which shall be non-
refundable) of the Structuring Fee will be earned and
payable at the signing of the Commitment Letter with
the remainder earned and payable upon closing of the
Transaction.
INVESTOR(S): General Electric Capital Corporation ("GECC") or its
affiliated designee or assignee(s). Also designated
as the "Investor" or the "Holder."
RANKING: The Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and
dissolution, rank (i) senior to all classes of common
stock and to each other class of capital stock or
series of preferred stock established hereafter by
the Company's Board of Directors the terms of which
do not expressly provide that it ranks senior to, or
on a parity with, the Preferred Stock as to dividend
rights and rights on liquidation, winding-up and
dissolution of the Company (collectively referred to,
together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with
each class of capital stock or series of preferred
stock established hereafter by the Company's Board of
Directors, the terms of which expressly provide that
such class or series will rank on a parity with the
1
Preferred Stock as to dividend rights and rights of
liquidation, winding-up and dissolution of the
Company (collectively referred to as "Parity Stock");
and (iii) junior to each class of capital stock or
series of preferred stock established hereafter by
the Company's Board of Directors, the terms of which
expressly provide that such class or series will rank
senior to the Preferred Stock as to dividend rights
and rights upon liquidation, winding-up and
dissolution of the Company (collectively referred to
as "Senior Stock"), including (a) up to an aggregate
of $400.0 million in aggregate liquidation preference
including additional amounts paid as dividends of
Senior Stock (the "Permitted Senior Stock"); and (b)
up to $200.0 million in aggregate liquidation
preference of preferred stock established hereafter
by the Company's Board of Directors to replace the
Company's outstanding 12-3/4% Senior Exchangeable
Preferred Stock due 2010 (and any Replacement Senior
Stock (as defined below) issued hereunder) once
retired (through exchange or otherwise), the terms of
which expressly provide that such class or series
will rank senior to the Preferred Stock as to
dividend rights and rights upon liquidation, winding
up and dissolution of the Company (the "Replacement
Senior Stock"); provided, however, that the Company
may not issue any Senior Stock, other than Permitted
Senior Stock and Replacement Senior Stock, without
the consent of the holders of at least 66-2/3% of the
outstanding shares of Preferred Stock.
PERMITTED TRANSFEREES: Each share of Series A Preferred Stock (the "Series A
Preferred Stock") will automatically convert to one
share of Series B Preferred Stock (the "Series B
Preferred Stock") upon a transfer of Series A
Preferred Stock to a party other than GECC or its
affiliates controlled by GECC (a "Permitted
Transferee").
DIVIDENDS: The Holder of shares of the Preferred Stock will be
paid dividends, when, as and if declared by the Board
of Directors, cumulative preferential dividends from
the issue date of the Series A Preferred Stock
accruing at the rate of $20.625 per share per quarter
(equivalent to a rate of 8.25% per annum per share),
payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year or, if any
such date is not a Business Day (as defined in the
Certificate of Designations), on the next succeeding
Business Day (each, a "Dividend Payment Date"), to
the
2
Holder of record as of the immediately preceding
March 15, June 15, September 15 and December 15
(each, a "Record Date"). Accrued but unpaid
dividends, if any, may be paid on such dates as
determined by the Board of Directors.
The cash necessary to pay dividends on the Series A
Preferred Stock will come from the Company's dividend
payments on the Series A Preferred Stock which, at
its option, may be paid in cash, Common Stock of
Signal (the "Common Stock" or "Common Shares") or a
combination of cash and Common Stock; provided,
however, that the Company will be obligated to make
its dividend payments in cash if the Common Stock
paid as a dividend would not, at the time such
dividend payment is made, be freely transferable
(including pursuant to an effective shelf
registration statement) under the Exchange Act. If
the Company pays all or any part of a dividend in
Common Stock, the Company must deliver to the
Depositary a sufficient number of shares of Common
Stock that, upon resale by the Depositary or its
nominee, will result in net cash proceeds to allow
the Depositary to make the quarterly dividend
payments in cash to the Holder of the Series A
Preferred Stock. All shares of Common Stock received
by the Depositary from the Company as dividends on
the Series A Preferred Stock will be promptly resold
by the Depositary or its nominee on behalf of the
Holder of the Series A Preferred Stock and the Holder
of the Series A Preferred Stock will not receive any
such shares. If the proceeds from such resale do not
result in a sufficient amount of cash to pay a
dividend, the Company will promptly provide cash (or
additional shares of Common Stock to be resold as
provided above, and subject to this sentence) to the
Depositary in an amount equal to the difference
between the amount of the dividend and the proceeds
received from such resale. If the proceeds from such
resale exceed the required dividend payment (the
"Excess Proceeds"), the Depositary shall retain such
Excess Proceeds and apply such Excess Proceeds to the
next succeeding dividend payment.
Dividends payable on the Preferred Stock will be
computed on the basis of a 360-day year of twelve 30-
day months and will be deemed to accrue on a daily
basis.
The holder of shares of the Series B Preferred Stock,
if any, will be paid dividends, at the option of the
Company (i) in
3
cash or (ii) through the issuance of a number of
shares (rounded up or down to the nearest whole
share) of the Company's Common Stock equal to the
dividend amount divided by the Discounted Current
Market Value (as defined) of the Common Stock.
The "Discounted Current Market Value" of the Common
Stock with respect to a dividend payment date means
the product of (x) 97% and (y) the closing bid price
for the Common Stock as reported by the Nasdaq
National Market, or the principal securities exchange
or other securities market on which the Common Stock
is then being traded, on the fourth Trading Day (as
defined) preceding such dividend payment date.
"Trading Day" means any day on which the Common Stock
is traded for any period on the Nasdaq National
Market (or on the principal securities exchange or
other securities market on which the Common Stock is
then being traded).
Dividends on the Preferred Stock will accrue whether
or not the Company has earnings or profits, whether
or not there are funds legally available for the
payment of such dividends and whether or not
dividends are declared. Dividends will accumulate to
the extent they are not paid on the Dividend Payment
Date for the quarter to which they relate.
Accumulated unpaid dividends will accrue and cumulate
dividends at the rate per annum set forth on the
first page of this Term Sheet. The Certificate of
Designations will provide that the Company will take
all corporate actions permitted under the General
Corporation Law of the State of Delaware to permit
the payment of dividends on the Preferred Stock.
No dividend whatsoever shall be declared or paid
upon, or any sum set apart for the payment of
dividends upon, any outstanding share of the
Preferred Stock with respect to any dividend period
unless all dividends for all preceding dividend
periods have been declared and paid upon, or declared
and a sufficient sum set apart for the payment of
such dividend upon, all outstanding shares of
Preferred Stock. Unless full cumulative dividends on
all outstanding shares of Preferred Stock due for all
past dividend periods shall have been declared and
paid, or declared and a sufficient sum for the
payment thereof set apart, then: (1) no dividend
(other than a dividend payable solely in shares of
4
Junior or Parity Stock or options, warrants or rights
to purchase Junior or Parity Stock) shall be declared
or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior or Parity Stock;
(2) no other distribution shall be declared or made
upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior or Parity
Stock; (3) no shares of Junior or Parity Stock or any
warrants, rights, calls or options exercisable for or
convertible into any Junior or Parity shall be
purchased, redeemed or otherwise acquired or retired
for value (excluding an exchange for shares of other
Junior or Parity Stock or a purchase, redemption or
other acquisition from the proceeds of a
substantially concurrent sale of Junior or Parity
Stock) by the Company or any of its subsidiaries; and
(4) no monies shall be paid into or set apart or made
available for a sinking or other like fund for the
purchase, redemption or other acquisition or
retirement for value of any shares of Junior or
Parity Stock or any warrants, rights, calls or
options exercisable for or convertible into any
Junior or Parity Stock by the Company or any of its
subsidiaries. Holders of the Preferred Stock will not
be entitled to any dividends, whether payable in
cash, property or stock, in excess of the full
cumulative dividends as herein described.
LIQUIDATION PREFERENCE: The Preferred Stock will have a liquidation
preference (the "Liquidation Preference") of $1,000
per share plus accrued and unpaid dividends and
Additional Dividends (as defined).
MANDATORY REDEMPTION: March 31, 2012
OPTIONAL REDEMPTION: The Preferred Stock may not be redeemed at the option
of the Company prior to October 1, 2002. The
Preferred Stock may be redeemed, in whole or in part,
at the option of the Company on or after October 1,
2002, at the redemption prices specified below
(expressed as percentages of the Liquidation
Preference thereof), in each case, together with
accrued and unpaid dividends and Additional Dividends
(if any), to the date of redemption, upon not less
than 15 nor more than 60 days prior written notice,
during the 12-month period commencing on October 1 of
each of the years set forth below:
5
Year Percentage
---- ----------
2002 104.125%
2003 102.750%
2004 101.375%
2005 and thereafter 100.000%
On and after any Redemption Date, provided that the
Company has made available at the office of the
Transfer Agent a sufficient amount of cash to effect
the redemption, dividends will cease to accrue on the
Preferred Stock called for redemption (except that,
in the case of a Redemption Date after a Record Date
and prior to the related Dividend Payment Date,
holders of Preferred Stock on the Record Date will be
entitled on such Dividend Payment Date to receive the
dividend payable on such shares, as described above),
such shares shall no longer be deemed to be
outstanding and all right of the holders of such
shares as holders of Preferred Stock shall cease
except the right to receive the cash deliverable upon
such redemption, without interest from the Redemption
Date.
LIQUIDATION RIGHTS: Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
Company after payment in full of the outstanding debt
obligations of the Company and the liquidation
preference (and any accrued and unpaid dividends) on
any Senior Stock, each holder of shares of the
Preferred Stock will be entitled to payment, out of
the assets of the Company available for distribution,
of an amount equal to the Liquidation Preference per
share of the Preferred Stock held by such holder,
plus accrued and unpaid dividends and Additional
Dividends (if any) to the date fixed for liquidation,
dissolution or winding up before any distribution is
made on any Junior Stock, including, without
limitation, Common Stock of the Company. If, upon any
voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with
respect to the Preferred Stock and all other Parity
Stock are not paid in full, the holders of Preferred
Stock and the Parity Stock will share equally and
ratably in any distribution of assets of the Company
in proportion to the full liquidation preference and
accumulated and unpaid dividends to which they are
entitled. However, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or
substantially all of the property or assets of the
Company nor the consolidation
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or merger of the Company with or into one or more
corporations will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of
the Company, unless such sale, conveyance, exchange,
transfer, consolidation or merger shall be in
connection with a liquidation, dissolution or winding
up of the business of the Company.
The Certificate of Designations will not contain any
provision requiring funds to be set aside to protect
the Liquidation Preference of the Preferred Stock,
although such Liquidation Preference will be
substantially in excess of the par value of the
shares of the Preferred Stock.
COVENANTS: Customary merger and reporting covenants.
CONVERSION RIGHTS: Each Preferred Share will be convertible at the
option of the Investor(s) at any time into shares of
the Company's Common Stock which would have the same
liquidation and voting rights and economics as the
other shares of the Company's Common Stock. Preferred
Stock may be converted into such number of Common
Shares (the "Conversion Rate") as is obtained by (i)
multiplying (a) the number of shares of Preferred
Stock to be converted, by (b) the Liquidation Value
per share of Preferred Stock plus all accrued and
unpaid dividends thereon to the date of conversion;
and (ii) dividing the result by the Conversion Price.
The Conversion Price will be $26.875. The Conversion
Price would be subject to adjustment as described
below.
ANTIDILUTION RIGHTS: The Conversion Rate is subject to adjustment in
certain events, including, without duplication: (1)
the issuance of shares of Common Stock as a dividend
or distribution on the Common Stock, (2) the
subdivision or combination of the outstanding Common
Stock, (3) the issuance to all or substantially all
holders of Common Stock of rights or warrants to
subscribe for or purchase Common Stock (or securities
convertible into Common Stock) at a price per share
less than the then current market price per share,
(other than issuances to satisfy the Company's
obligations to TdF in connection with the pre-emptive
rights of TdF and issuances to non-affiliates to
acquire assets with below market Common Stock); (4)
the distribution to all or substantially all holders
of Common Stock of shares of
7
capital stock of the Company (other than Common
Stock), evidences of indebtedness or other assets
(including cash or securities), subject to customary
exceptions, and (5) the distribution to all or
substantially all holders of Common Stock of rights
or warrants to subscribe for its securities (other
than those referred to in (3) above). The Company may
from time to time reduce the Conversion Price by any
amount for any period of time if the period is at
least 20 days or such longer period as may be
required by law and if the reduction is irrevocable
during the period; provided, however, that in no
event may the Conversion Price be less than the par
value of a share of Common Stock. No adjustment of
the Conversion Price or the corresponding Conversion
Rate will be required to be made until the cumulative
adjustments amount to 1.0% or more of the Conversion
Price or the corresponding Conversion Rate.
The Company will provide to holders of the Preferred
Stock reasonable notice of any event that would
result in an adjustment to the Conversion Rate
pursuant to the foregoing paragraph so as to permit
the holders to effect a conversion of Preferred Stock
into shares of Common Stock prior to the occurrence
of such event.
REGISTRATION RIGHTS: The Company, the Investor and the Depositary will
enter into the Registration Rights Agreement on or
prior to the Closing Date. Pursuant to the
Registration Rights Agreement, the Company will agree
to file a Shelf Registration Statement with the
Securities and Exchange Commission (the "Commission")
on the appropriate form under the Securities Act with
respect to the Preferred Stock and Common Stock
issuable upon conversion thereof or paid as dividends
thereon, to cover resales of the Preferred Stock or
such Common Stock by the holders thereof (or the
Depositary in the case of dividends paid in Common
Stock) who satisfy certain conditions relating to the
provision of information in connection with the Shelf
Registration Statement. The registration rights will
not conflict with the terms of the Company's existing
registration rights with other stockholders.
The Company will use all commercially reasonable
efforts to cause the Shelf Registration Statement to
be declared effective as promptly as possible by the
Commission. For purposes thereof, "Transfer
Restricted Securities" means
8
each share of the Preferred Stock or Common Stock
issuable upon conversion thereof or paid as dividends
thereon until the earlier of (1) the date on which
such share of Preferred Stock or Common Stock has
been effectively registered under the Securities Act
and disposed of in accordance with the Shelf
Registration Statement or (2) the date on which such
share of Preferred Stock or Common Stock is
distributed to the public pursuant to Rule 144(k)
under the Securities Act.
The Registration Rights Agreement will provide that
the Company will (i) file the Shelf Registration
Statement with the Commission on or prior to 45 days
after the Closing Date, (ii) use all commercially
reasonable best efforts to cause the Shelf
Registration to be declared effective by the
Commission on or prior to 150 days after the Closing
Date and (iii) use all commercially reasonable
efforts to maintain the effectiveness of the Shelf
Registration Statement until all shares of Preferred
Stock and shares of Common Stock issued upon
conversion thereof or as dividends thereon are no
longer Transfer Restricted Securities (subject to the
Company's right to notify holders that the prospectus
contained therein ceases to be accurate and complete
as a result of material business developments for up
to 150 days during any two-year period, provided that
(A) no single period may exceed 45 days and (B) such
periods in the aggregate may not exceed 75 days in
any calendar year). If (a) the Company fails to file
the Shelf Registration Statement required by the
Registration Rights Agreement on or before the date
specified for such filing, (b) such Registration
Statement is not declared effective by the Commission
on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date") or
(c) the Shelf Registration Statement is declared
effective but thereafter ceases to be effective or
usable in connection with resales of Transfer
Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event
referred to in clauses (a) through (c) above a
"Registration Default"), then the Company will pay to
each holder of the Preferred Stock which are Transfer
Restricted Securities with respect to the first 90-
day period immediately following the occurrence of
such Registration Default an amount equal to $5.00
per year per $1,000 in Liquidation Preference of the
Preferred Stock held by such holder, increasing by an
additional $5.00 per year per
9
$1,000 in Liquidation Preference of the Preferred
Stock for each subsequent 90-day period (the
"Additional Dividends") until all Registration
Defaults have been cured, up to a maximum amount of
Additional Dividends for all Registration Defaults of
$50.00 per year per $1,000 in Liquidation Preference
of Preferred Stock. All accrued Additional Dividends
will be paid by the Company on each Dividend Payment
Date. The Additional Dividends shall be paid by the
Company in cash or Common Stock pursuant to the
provisions for the payment of dividends on the
applicable Series of Preferred Stock described under
"Dividends".
Following the cure of all Registration Defaults, the
accrual of Additional Dividends will cease.
Notwithstanding anything to the contrary herein
contained, during any period, the Company will not be
required to pay Additional Dividends with respect to
more than one Registration Default.
Holders of Transfer Restricted Securities will be
required to deliver information to be used in
connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration
Statement within the time periods set forth in the
Registration Rights Agreement in order to have their
shares of the Preferred Stock or Common Stock
included in the Shelf Registration Statement and
benefit from the provisions regarding Additional
Dividends set forth above.
CHANGE OF CONTROL: In the event of a Change of Control (as defined),
each holder will, if the market value of the
Company's Common Stock at such time is less than the
Conversion Price, have a one time option, upon not
less than 30 days' notice nor more than 60 days'
notice, to convert all of their outstanding shares of
Preferred Stock into shares of the Company's Common
Stock at an adjusted Conversion Price equal to the
greater of (1) the market value of the Company's
Common Stock as of the date of the change of control
and (2) 66-2/3% of the closing price per share of the
Company's Common Stock as of the date hereof. In lieu
of issuing the shares of the Company's Common Stock
issuable upon conversion pursuant to adjustment
described above in the event of a Change of Control,
the Company may, at its option, make a cash payment
equal to the market value of such Common Stock
otherwise issuable.
10
A "Change of Control" means the occurrence of any of
the following:
(1) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or
consolidation), in one or a series of related
transactions, of all or substantially all of the
assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any "person" (as
such term is used in Section 13(d)(3) of the Exchange
Act) other than a Principal or a Related Party of a
Principal;
(2) the adoption of a plan relating to the
liquidation or dissolution of the Company;
(3) the consummation of any transaction (including,
without limitation, any merger or consolidation) the
result of which is that any "person" (as defined
above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that
such person has the right to acquire, whether such
right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition),
directly or indirectly, of more than 50% of the
Voting Stock of the Company (measured by voting power
rather than number of shares); provided that
transfers of Equity Interests in the Company between
or among the beneficial owners of the Company's
Equity Interests and/or Equity Interests in CTSH, in
each case as of the date of the Certificate of
Designations governing the Preferred Stock, shall not
be deemed to cause a Change of Control under this
clause (3) so long as no single Person together with
its Affiliates acquires a beneficial interest in more
of the Voting Stock of the Company than is at the
time collectively beneficially owned by the
Principals and their Related Parties;
(4) the first day on which a majority of the members
of the Board of Directors of the Company are not
Continuing Directors; or
11
(5) the Company consolidates with, or merges with or
into, any Person, or any Person consolidates with, or
merges with or into, the Company, in any such event
pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other
property, other than any such transaction where (x)
the Voting Stock of the Company outstanding
immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to
such issuance) or (y) the Principals and their
Related Parties own a majority of such outstanding
shares after such transaction.
"Principals" means Berkshire Group, Centennial Group,
Nassau Group, TdF and any Related Party of the
foregoing.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, 80% (or more) owned
Subsidiary of such Principal; or
(2) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, members,
partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to
in the immediately preceding clause (1).
"Continuing Directors" means, as of any date of
determination, any member of the Board of Directors
of the Company who:
(1) was a member of such Board of Directors on the
Closing Date;
(2) was nominated for election or elected to such
Board of Directors with the approval of a majority of
the Continuing Directors who were members of such
Board at the time of such nomination or election; or
(3) is a designee of a Principal or was nominated by
a Principal
12
BOARD REPRESENTATION/
OBSERVER: So long as GECC or a Permitted Transferee holds in
the aggregate at least 50% of the outstanding
Preferred Stock, GECC will have the right to (1)
designate one (1) nominee to be a member of the Board
of Directors, and (2) GECC will be entitled to
receive information provided to any other Board
members, including but not limited to all quarterly
financial, operating, performance, and budgetary
reports and data. GECC will not have the right to
transfer its nomination right on the Board of
Directors to any holders of the Series B Preferred
Stock.
VOTING RIGHTS: So long as GECC or its Permitted Transferees hold the
Series A Preferred Stock, the Series A Preferred
Stock will have full voting rights on an "as
converted" basis as applicable to the Common Shares.
The Series B Preferred Stock will have no voting
rights, except as required by law and as provided
below.
TRANSFER RESTRICTIONS: Investor will be subject to a prohibition on resale
for two years from date of issuance of the Series A
Preferred Stock subject to the following exceptions:
(i) sales to affiliates controlled by GECC, (ii) if
the Company or any of its subsidiaries defaults on
any indebtedness which default results in an
acceleration of such indebtedness, (iii) in the event
of a Change of Control, and (iv) with the consent of
the Company.
REMEDIES: Ability of the Holders of the Preferred Stock (voting
as a single class) to elect two directors if a
dividend payment is missed (after 9-month grace
period). If the holders exercise their right to elect
such directors, GECC shall not, during such period
that such holders are exercising such right, have its
independent right to nominate a director and GECC
shall cause any nominee of GECC serving on the Board
of Directors (if not elected by the Holders of Series
A Preferred Stock) to resign upon the election of
such two directors.
DETACHABLE WARRANTS: Investor receives Warrants to purchase 1 million
shares of Common Stock of Signal at an exercise price
equal to the Conversion Price per share of the
Preferred Stock.
The Warrants will be exercisable by the holder at any
time, subject only to the Transfer Restrictions,
until the close of business on the fifth anniversary
of the Closing Date (the "Expiration Date").
13
The Warrants will be separately transferable from the
Preferred Stock, subject to a minimum number of
Warrants being transferred (to be mutually agreed
upon).
The Warrants and the shares of stock issuable upon
exercise of the Warrants will be subject to all of
the same Registration Rights, Antidilution Rights and
Transfer Restrictions as those applying to the
Preferred Stock.
REPRESENTATIONS AND
WARRANTIES: Customary representations and warranties including
those relating to organization and qualification,
financial statements, authorization, execution and
delivery, validity and enforceability of agreements,
issuance of the Preferred Stock, SEC reports, actions
pending, compliance with laws and environmental
regulations, ERISA qualifications, Y2K compliance,
governmental consent, taxes, insurance adequacy, no
conflict with agreements and charter provisions,
capitalization, taxes, and no material adverse
change.
INDEMNITIES: The Company will indemnify the Holders, their
affiliates, their directors, officers and employees
against all losses resulting from the transaction
other than losses which arise out of such indemnified
person's bad faith, gross negligence or willful
misconduct. The Company will provide a standard
indemnification for any material misstatements or
omissions in any of the Company's filings with the
SEC.
AMENDMENT: Amendments to the applicable documents of the
Preferred Stock will require the consent of the
holders of a majority of the outstanding shares of
Preferred Stock (voting as a single class).
CONDITIONS PRECEDENT
TO CLOSING: The closing will be subject to a number of
conditions, including the conditions set forth in the
Commitment Letter, satisfactory completion of
financial and legal due diligence, satisfactory
completion of purchase documents, receipt of
governmental consents (if required), receipt of
consents required from the Company's existing
creditors or other third parties (if required).
14
