EXHIBIT 4
MEMORANDUM
Re: Proposed Initial Public Offering of Equity Securities by Crown
Castle International Corp. and Certain Transitional Changes
Affecting Management of Crown Castle
-----------------------------------------------------------------
This memorandum is intended to summarize the terms and conditions
under which Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx would agree to participate in
the proposed initial public offering of equity securities by Crown Castle
International Corp. ("Crown Castle") and in the implementation of certain
transitional changes affecting management of Crown Castle.
A. Background
----------
1. Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx (together with certain
trusts established by them, the "Crowns") currently own an
aggregate of 1,465,000 shares of Class B Common Stock of Crown
Castle. Crown Castle has granted options to Xxxxxx X. Xxxxx to
acquire 17,500 shares of Class B Common Stock at an exercise
price of $37.54 per share.
2. Crown Castle has advised the Crowns of its intention to complete
an initial public offering (the "Offering") of its Common Stock.
The Offering is expected to be underwritten on a firm commitment
basis by a syndicate led by Xxxxxx Brothers, Credit Suisse First
Boston, Xxxxxxx, Xxxxx & Co. and Xxxxxxx Xxxxx Xxxxxx
(collectively, the "Underwriters"). Crown Castle expects to file
a registration statement with the Securities and Exchange
Commission ("SEC") with respect to the proposed Offering on or
before June 19, 1998 and, subject to market conditions, to
complete the Offering by the first week of October, 1998.
2
3. Crown Castle has advised the Crowns that the Offering will be
completed contemporaneous with a Share Exchange Agreement dated
April 20, 1998 (the "Exchange Agreement"), pursuant to which (i)
all the shareholders of Castle Transmission Services (Holdings)
Ltd. ("CTSH") (other than Crown Castle, Telediffusion de France
International S.A. ("TDF") and an affiliate of TDF) will exchange
their shares of capital stock of CTSH for newly issued shares of
Common Stock of Crown Castle, (ii) the affiliate of TDF will
exchange its shares of capital stock of CTSH for newly issued
shares of Class A Common Stock of Crown Castle, and (iii) CTSH
will become an 80% owned subsidiary of Crown Castle and TDF will
own the remaining 20% of CTSH. These transactions are
collectively referred to as the "Rollup." Contemporaneous with
the Rollup, certain existing stockholders of Crown Castle will be
requested to execute a Stockholders Agreement (the "New
Stockholders Agreement"), which is intended to amend and restate
the existing Amended and Restated Stockholders Agreement dated as
of August 15, 1997, as amended (the "Existing Stockholders
Agreement"). The Crowns have advised Crown Castle that they would
be willing to become parties to the New Stockholders Agreement,
subject to satisfactory completion of the matters set forth
herein. Concurrently with the Rollup, Crown Castle will complete
a recapitalization pursuant to which, among other things, the
Crowns would exchange their shares of Class B Common Stock for
1,465,000 shares of newly issued Common Stock of Crown Castle,
and the outstanding options held by Mr. Xxxxx will be modified so
that they apply to 17,500 shares of Common Stock.
3
4. The parties acknowledge that the implementation of certain of the
arrangements set forth herein will require modification to
certain provisions of the New Stockholders Agreement and such
modification shall require, and be subject to, the approval of
all parties to the New Stockholders Agreement. In addition to any
approval required pursuant to the previous sentence, the parties
acknowledge that this memorandum (or certain provisions hereof)
may require the approval of TDF under the Exchange Agreement and
this memorandum (or such provisions, as applicable) shall be
subject to any such approval of TDF prior to the closing of the
Offering. Crown Castle will use its best efforts to obtain, as
soon as possible, all such approvals and any other consents or
approvals as may be required to implement the provisions of this
memorandum.
B. Sale of Crown Stock in the Offering
-----------------------------------
1. The parties intend for the Offering to be structured in a manner
that will allow the Crowns to sell (a) 50% (or such lesser
percentage as the Crowns may determine) of their current holdings
of shares of Crown Castle Common Stock and (b) any additional
shares that the managing underwriter of the Offering shall be of
the opinion would not adversely affect the marketing of the
shares of Common Stock to be sold by Crown Castle in the
Offering. Crown Castle will pay for all registration and filing
fees, printing expenses, fees and disbursements of counsel for
Crown Castle and the Crowns and independent public accountants
for Crown Castle, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of
4
Securities Dealers, Inc., transfer taxes and fees of transfer
agents and registrars associated with such sale by the Crowns.
If, after the marketing of the Common Stock has commenced, the
managing underwriter is of the opinion that the number of shares
to be offered in the Offering should be reduced, the number of
shares offered by the Crowns and Crown Castle in the Offering
shall be reduced pro rata in proportion to the aggregate number
of shares offered by each of the Crowns and Crown Castle in the
preliminary prospectus ("red xxxxxxx") in connection with the
Offering. The parties understand that there can be no assurance
that the Offering will occur or that the Crowns will be able to
sell 50% of their current holdings of shares of Crown Castle
Common Stock in the Offering.
2. Upon the successful closing of the Offering (as defined in item
D.8., below), Crown Castle will grant to Xxxxxx X. Xxxxx
additional options to purchase 125,000 shares of Common Stock at
the initial public offering price (granted in lieu of options
from the existing stock option pool, which is being terminated).
The terms of such options will be consistent with those of
options to be granted to other members of most senior executive
level of management at the time of the Offering, but all options
granted to Mr. Xxxxx will vest no later than the termination, for
any reason, of Mr. Xxxxx's employment by Crown Castle.
3. Crown Castle will grant to Mr. Xxxxx options to purchase 10,000
shares of Common Stock at $37.54 per share, fully vested
immediately (granted in lieu of 1997 performance bonus), whether
or not the Offering is successful.
5
4. Mr. Xxxxx's existing options to purchase up to 17,500 shares of
Crown Castle Common Stock shall be fully vested prior to the
closing of the Offering.
5. Crown Castle will confirm that the options referred to in items
B.2, B.3 and B.4, above, and in item C.3, below, have been
granted under circumstances such that they are exempt from
liability under Section 16 of the Securities Exchange Act of
1934, as amended, pursuant to Rule 16b-3 thereunder.
6. At the closing of the Offering the Crowns will execute and
deliver an appropriate and customary lock-up agreement in favor
of the Underwriters, so long as (a) the lock-up period extends no
more than six (6) months after the closing of the Offering; (b)
the lock-up agreement identifies mutually agreeable categories of
permitted transferees, such as trusts or other entities
controlled by the Crowns, to which the Crowns may transfer shares
within such six-month period without approval by any of the
Underwriters; and (c) the terms of the lock-up agreement are at
least as favorable to the Crowns as those applicable to any other
stockholder or officer or director of Crown Castle. If the Crowns
elect to participate in the Offering, the Crowns also will
execute and deliver an appropriate and customary underwriting
agreement in favor of the Underwriters simultaneously with Crown
Castle's execution and delivery of the same underwriting
agreement, so long as, it being understood that, insofar as Crown
Castle is concerned, (i) the Crowns are not required to make any
representations or warranties of any nature other than (w)
ownership of and clear title to the shares to be sold, (x)
authority and power to enter into the underwriting
6
agreement and to sell their shares in the Offering, (y) upon
delivery of and payment for the shares to be sold the
Underwriters will acquire valid and clear title to such shares,
and (z) the completeness and accuracy of the descriptions in the
registration statement and prospectus prepared in connection with
the Offering relating to the Crowns and provided by the Crowns to
Crown Castle and/or the Underwriters specifically for use
therein; (ii) the Crowns are not required to indemnify the
Underwriters and their affiliates other than for losses, claims,
damages or liabilities arising in connection with an untrue
statement or omission in the registration statement or prospectus
relating to or arising from any breach of the representations and
warranties in clause (i), above, and provided that the maximum
amount of the Crowns' indemnification liability will not exceed
the proceeds received by them from the sale of their shares in
the Offering; (iii) the Crowns are not required to make any
certifications or execute any additional documentation other than
such certificates and agreements as are necessary and typical to
transfer shares in transactions of this type, including but not
limited to custody agreements, stock powers and proxies relating
to the shares to be sold; and (iv) the terms of the underwriting
agreement are at least as favorable to the Crowns as those
applicable to any other selling stockholder. If the Crowns fail
to execute an underwriting agreement which complies with the
foregoing, their election to participate in the Offering will be
null and void.
7
C. Management Transition
---------------------
1. Xxxxxx X. Xxxxx will retain his position as Chairman of the Board
of Directors, President and Chief Executive Officer of CCI for a
period of six (6) months after the closing of the Offering. This
period will be used to implement a transition of management which
is intended to develop and promote the existing management team
of CCI and to reduce the dependence upon the Crowns for day-to-
day management. During this transition period, Mr. Xxxxx will
continue to groom his successor, who will report to Mr. Xxxxx
during such period. Mr. Xxxxx's successor shall, after
consultation with, and giving due regard to the recommendation
of, Mr. Xxxxx, be selected by the CCI Board and shall be approved
by each of the CCI and Crown Castle Boards of Directors, and such
successor will assume the title of President and Chief Executive
Officer of CCI at the end of such six-month transition period (or
possibly earlier, if agreed by Mr. Xxxxx and the CCI Board of
Directors). Also during this transition period, Crown Castle and
the Crowns will work together to address other management needs,
including (a) recruitment of additional management personnel as
needed; (b) clarification and communication of the organizational
structure, functions and reporting obligations within Crown
Castle and CCI; (c) expanding the sales and marketing department
which is specifically responsible for lease-ups and third party
revenues; and (d) developing and implementing improved financial
reporting functions throughout Crown Castle.
2. At the completion of the six-month management transition period,
Mr. Xxxxx will retain his position as a director of Crown Castle
and
8
will remain Chairman of the Board of Directors of CCI, assuming
satisfactory implementation of the foregoing transition, but will
no longer serve as President and Chief Executive Officer of CCI.
Prior to the printing of the preliminary prospectus relating to
the Offering, Mr. Xxxxx and Crown Castle will enter into a
mutually satisfactory two-year agreement to take effect at the
completion of the management transition period (or earlier, if
agreed by Mr. Xxxxx and the CCI Board of Directors) and which
will address the following, as well as any additional points
agreed upon by the parties:
. Mr. Xxxxx will provide such services to Crown Castle
and CCI as are reasonably requested by the Board of
Crown Castle in the context of Mr. Xxxxx's schedule and
other responsibilities, and will report to the Board of
Directors of Crown Castle.
. Continuation of cash compensation to Mr. Xxxxx of
$300,000 annually for two years, which obligation will
continue notwithstanding termination, for any reason
other than termination for "cause," of the agreement.
In addition, Mr. Xxxxx will receive a severance benefit
at the end of such two-year period, payable as cash
compensation of $300,000 for the year following such
two-year period unless terminated for "cause."
Additional compensation may be paid to Mr. Xxxxx in
consideration of additional services and/or the
provision of value to Crown Castle and CCI at the
discretion of the Compensation
9
Committee of the Crown Castle Board. As used herein,
"cause" shall mean conviction of or a plea of guilty or
nolo contendere to any criminal violation involving
dishonesty, fraud or breach of trust, or any felony
which materially adversely affects Crown Castle.
. Administrative matters such as provision by CCI of Mr.
Xxxxx's current office space so long as he serves as
Chairman of CCI and an administrative assistant of Mr.
Xxxxx's choice to support him in his efforts.
. Maintenance of a vehicle of Mr. Xxxxx's choice to be
owned or leased and maintained by CCI for the benefit
of Mr. Xxxxx at an annual cost to CCI not to exceed
$12,000 plus routine vehicle maintenance and operating
costs.
. Maintenance by CCI of a golf membership at Southpointe
Golf Club for the benefit of Mr. Xxxxx.
. Maintenance by CCI of wireless services such as a
cellular phone and pager for use of Mr. Xxxxx.
3. Maintenance by CCI of health insurance, hospitalization and other
employee benefits comparable to other senior executives for Mr.
and Mrs. Xxxxx and their dependents
4. Reimbursement by CCI of reasonable travel expenses incurred by
Mr. Xxxxx in connection with CCI business, including reasonable
charter fees for the use of private aircraft
10
Mr. Xxxxx will not be obligated to enter into any noncompete or
other similar agreement Whether or not the Offering is
successful, Crown Castle will grant to Xxxxxx Xxxxx options to
purchase a total of 12,000 shares of Crown Castle Common Stock at
an exercise price of $37.54 per share, which will be vested
immediately and exercisable under the same terms and conditions
of Xx. Xxxxx'x existing option agreement. Xx. Xxxxx shall be
permitted to transfer such shares in accordance with the
Securities Act of 1933. Xx. Xxxxx will be granted a "piggyback"
registration right to participate in the registration statement
contemplated by item D.4, below, or such shares will be
registered separately by Crown Castle on Form S-8, if available.
Xx. Xxxxx'x continued assistance has been requested by Mr. Xxxxx,
consequently Crown Castle and Xx. Xxxxx agree that the current
Consulting Agreement will remain in full force and effect at the
rate of Twenty Thousand Dollars per month ($20,000) effective
July 1, 1998 provided, however, that the parties will revise the
scope of the engagement as follows:
"Consultee hereby engages Consultant and Consultant hereby
accepts such engagement to perform such specialized services
as Robert Crown as President and Chief Executive Officer may
from time to time reasonably request. Services to be
rendered by Consultant pursuant to this agreement shall
include, without limitation, rendering recommendations to
Consultee and Consultee's affliates in investigating and
negotiating and consummating commercial business
transactions, and any and all other activities and services
incidental thereto. Should Robert Crown not be
11
serving as President and Chief Executive Officer either
party may request renegotiation of this agreement. Until
such time as negotiations are completed Consultant shall
continue to take direction from Robert Crown and Consultee
shall continue to compensate Consultant in accordance with
the current Agreement."
and provided further any notices of termination whether at the
end of the initial term or termination with or without cause
shall be modified to provide sixty (60) days written notice prior
to termination being effective.
D. Board Representation and Certain Other Matters
----------------------------------------------
1. Mr. Xxxxx will continue to serve as a member of the Crown Castle
Board of Directors so long as the Crowns' ownership interest in
Crown Castle has a market value of $10 million, in accordance
with the New Stockholders Agreement.
2. Subject to the provisions of Section 3.10 of the New Stockholders
Agreement, so long as the Crowns and their permitted transferees
maintain ownership of a minimum of 1% of the outstanding Crown
Castle Common Stock (a) Crown Castle shall retain the name "Crown
Castle International Corp.," (b) Crown Castle's principal
affiliate owning communications towers in the United States shall
retain the name "Crown Communication Inc.," (c) all of Crown
Castle's operations in the United States will be conducted by
CCI, and any subsidiaries or affiliates of Crown Castle or CCI
conducting such operations will include the name "Crown" first in
their corporate name or will otherwise be conducted under the
name "Crown"
12
consistent with the provisions of the Governance Memorandum (as
defined below) relating to CCI, and (d) CCI and all of its United
States subsidiaries will retain the current "Crown" logo.
3. Crown Castle will maintain the headquarters of its domestic
operations in Pittsburgh, Pennsylvania or the surrounding area
unless a majority of the independent members of the Crown Castle
Board of Directors, in exercising their business judgment and
fiduciary responsibilities, determines in good faith that
relocating such headquarters will be in the best interests of
Crown Castle and its stockholders.
4. The Crowns will be provided a separate demand registration right
pursuant to the New Stockholders Agreement, which right may be
exercised following the expiration of the six-month lockup period
referred to above.
5. Effective upon the closing of the Offering, the CCI Board of
Directors shall initially consist of the following five members:
Xxxxxx X. Xxxxx, Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxxx (or another
member of the Crown Castle Board of Directors acceptable to Mr.
Xxxxx), Xxxxx Xxx and Xxx Xxxxxx.
6. Xxxxxx X. Xxxxx will provide a list of operating issues which
will require approval by the CCI Board of Directors, including
such matters as insurance, internal policies and procedures,
employee benefits, employee handbooks and consulting agreements.
7. So long as Mr. Xxxxx is a director of CCI or Crown Castle, he
shall have a continuing right to bring an advisor of his choice
to all meetings of the Boards of Directors of CCI or Crown
Castle, as applicable.
13
8. Until the successful closing of the Offering, the provisions of
each of the Existing Stockholders Agreement and the Memorandum of
Understanding Regarding Management and Governance of Castle Tower
Holding Corp. and Crown Communications, Inc., dated as of August
15, 1997 (the "Governance Memorandum"), shall remain in full
force and effect. For the avoidance of doubt, a "successful
closing of the Offering" shall mean the closing of the IPO, as
defined in the IPO Side Letter, which in turn is defined in the
Exchange Agreement, as such IPO Side Letter may be amended,
subject to the minimum price of $45 per share being satisfied.
9. Upon the successful closing of the Offering (as defined above),
the New Stockholders Agreement will be in effect (and will be
modified as necessary to reflect the terms of this memorandum).
The Governance Memorandum shall remain in full force and effect
(and will be modified as necessary to reflect the terms of this
memorandum) until the earlier of (a) termination of the
aforementioned six-month management transition period, and (b)
such time as Mr. Xxxxx resigns as President and Chief Executive
Officer of CCI, in each case as contemplated in this memorandum.
E. Termination
-----------
1. Unless extended by the parties hereto, the agreements reflected
in this memorandum shall be terminated if the Offering shall not
have been successfully closed by October 31, 1998, other than
items B.3, C.3 and D.3 hereof which will survive such termination
in full force and effect. Upon such termination, the Existing
Stockholders Agreement and the Governance Memorandum will
continue in full force and effect, except to the extent that
14
the Governance Memorandum is modified in accordance with item D.3
hereof.
Intending to be legally bound, the parties have executed this
memorandum this 2nd day of July, 1998
___________________________________
XXXXXX X. XXXXX
___________________________________
XXXXXXX X. XXXXX
___________________________________
CROWN CASTLE INTERNATIONAL CORP.
By: Xxxx Xxxxxxxxx
Title: Chairman of the Board
