UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

Transcription

1 IN RE PINNACLE HOLDINGS CORP. SECURITIES LITIGATION TO: UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION / No. 8:01-CV-624-T-27-MSS NOTICE OF PENDENCY OF CLASS ACTION, HEARING ON PROPOSED SETTLEMENT AND ATTORNEYS FEE PETITION AND RIGHT TO SHARE IN SETTLEMENT FUND ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED THE COMMON STOCK OF PINNACLE HOLDINGS INC. ( PINNACLE ) DURING THE PERIOD FROM JUNE 29, 1999 THROUGH AND INCLUDING AUGUST 14, 2001, INCLUDING PERSONS WHO ACQUIRED PINNACLE COMMON STOCK PURSUANT TO OR TRACEABLE TO THE JANUARY 18, 2000 OFFERING. PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE AFFECTED BY PROCEEDINGS IN THIS ACTION. IF YOU ARE A CLASS MEMBER, YOU ULTIMATELY MAY BE ENTITLED TO RECEIVE BENEFITS PURSUANT TO THE PROPOSED SETTLEMENT DESCRIBED HEREIN. CLAIMS DEADLINE: CLAIMANTS MUST SUBMIT PROOFS OF CLAIM, ON THE FORM ACCOMPANYING THIS NOTICE, POSTMARKED ON OR BEFORE JANUARY 3, EXCLUSION DEADLINE: REQUESTS FOR EXCLUSION MUST BE SUBMITTED POSTMARKED ON OR BEFORE NOVEMBER 22, SECURITIES BROKERS AND OTHER NOMINEES: PLEASE SEE INSTRUCTIONS AT PARAGRAPH 58 HEREIN. SUMMARY OF SETTLEMENT AND RELATED MATTERS I. Purpose of this Notice 1. This Notice is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the Court dated September 24, The purpose of this Notice is to inform you that this Action, and the proposed Settlement, will affect all Class Members rights. This Notice describes rights you may have under the proposed Settlement and what steps you may take in relation to this Action. This Notice is not an expression of any opinion by the Court as to the merits of any claims or any defenses asserted by any party in this Action, or the fairness or adequacy of the proposed Settlement. All defined terms used herein have the definitions given them in the parties Stipulation and Agreement of Settlement dated September 23, 2002 (the Stipulation ). II. Statement of Plaintiff Recovery 2. Pursuant to the Settlement described herein, a Gross Settlement Fund consisting of Eleven Million Dollars ($11,000,000), plus interest, has been established. Plaintiffs estimate that there were approximately 30.3 million shares of Pinnacle common stock traded during the Class Period which may have been damaged as a result of the alleged wrongdoing described at paragraphs 12 to 22 below. Plaintiffs estimate that the average recovery per damaged share of Pinnacle common stock under the Settlement is approximately $0.36 per damaged share before deduction of Court-awarded attorneys fees and expenses. Depending on the number of claims submitted, when during the Class Period a Class Member purchased his or her shares of Pinnacle common stock, and whether those shares were held at the end of the Class Period or sold during the Class Period, and if sold, when they were sold, an individual Class Member may receive more or less than this average amount. 3. Under the relevant securities laws, a claimant s recoverable damages are limited to the losses attributable to the alleged fraud. Losses which resulted from factors other than the alleged fraud are not recoverable from the Gross Settlement Fund. For purposes of the Settlement herein, a Class Member s distribution from the Net Settlement Fund will be governed by the proposed Plan of Allocation described below at paragraphs 39 to 44, or such other Plan of Allocation as may be approved by the Court. III. Statement of Potential Outcome of Case 4. The parties disagreed on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if Plaintiffs were to have prevailed on each claim alleged. The issues on which the parties disagree include 1) the appropriate economic model for determining the amount by which Pinnacle common stock was allegedly artificially inflated (if at all) during the Class Period; 2) the amount by which Pinnacle common stock was allegedly artificially inflated (if at all) during the Class Period; 3) the effect of various market forces influencing the trading price of Pinnacle common stock at various times during the Class Period; 4) the extent to which external factors, such as general market and industry conditions, influenced the trading price of Pinnacle common stock at various times during the Class Period; 5) the extent to which the various matters that Plaintiffs alleged were materially false or misleading influenced (if at all) the trading price of Pinnacle common stock at various times during the Class Period; 6) the extent to which the various allegedly adverse material facts that Plaintiffs alleged were omitted influenced (if at all) the trading price of Pinnacle common stock at various times during the Class Period; and 7) whether the statements made or facts allegedly omitted were material or otherwise actionable under the federal securities laws. 5. Plaintiffs Counsel considered that there was a substantial risk that Plaintiffs and the Class might not have prevailed on all their claims and that there were risks that the decline in the price of Pinnacle common stock could be attributed, in whole or in part, to other factors. This risk was compounded by the risk that even if Plaintiffs succeeded in proving liability and proving damages the judgment might not be collectible. Therefore, Plaintiffs could have recovered nothing or substantially less than the amount of the Settlement. 6. Defendants have denied, and continue to deny, each and every claim and contention alleged by plaintiffs in this litigation. Defendants have expressly denied, and continue to deny, all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or omissions

2 alleged, or that could have been alleged, in the litigation. Defendants also have denied, and continue to deny, among other things, the allegations that plaintiffs or the Class have suffered damage, that the price of Pinnacle common stock was artificially inflated by reasons of alleged misrepresentations, nondisclosures or otherwise, or that plaintiffs or the Class were harmed by the conduct alleged in the litigation. Nonetheless, Defendants have concluded that further conduct of this litigation would be protracted and expensive, and that it is desirable that the litigation be fully and finally settled in the manner and upon the terms and conditions set forth in the Stipulation. Defendants also have taken into account the uncertainty and risks inherent in any litigation, especially in complex cases like this litigation. Defendants have therefore determined that it is desirable and beneficial to them that this litigation be settled in the manner and upon the terms and conditions set forth in the Stipulation. IV. Statement of Attorneys Fees and Costs Sought 7. Plaintiffs Counsel intend to apply for fees of up to one-third (33 1/3%) of the Gross Settlement Fund, and for reimbursement of expenses incurred in connection with the prosecution of this Action in the approximate amount of $425,000. The requested fees and expenses would amount to an average of approximately $0.14 per damaged share in total for fees and expenses. Plaintiffs Counsel have expended considerable time and effort in the prosecution of this litigation on a contingent fee basis, and have advanced the expenses of the litigation, in the expectation that if they were successful in obtaining a recovery for the Class they would be paid from such recovery. In this type of litigation it is customary for counsel to be awarded a percentage of the common fund recovery as their attorneys fees. V. Further Information 8. Further information regarding the Action and this Notice may be obtained by contacting Plaintiffs Co-Lead Counsel: Kenneth J. Vianale, Esq., Milberg Weiss Bershad Hynes & Lerach LLP, The Plaza, 5355 Town Center Road, Suite 900, Boca Raton, Florida 33486, Telephone (561) ; or David Kessler, Esq., Schiffrin & Barroway, LLP, Three Bala Plaza East, Suite 400, Bala Cynwyd, Pennsylvania 19004, Telephone (610) VI. Reasons for the Settlement 9. The principal reason for the Settlement is the benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future. Pinnacle has filed a petition in bankruptcy. A Plan of Reorganization for Pinnacle has been confirmed which Plan authorizes this Pinnacle s Officers and Director s Insurer to fund this Settlement on behalf of Pinnacle and the Officer and Director Defendants but which Plan also provides for the release of Pinnacle and its officers and directors and PricewaterhouseCoopers LLP from claims of the nature alleged in the Complaint herein. Absent this Settlement, any recovery from the parties granted a release in the bankruptcy court would be problematic. NOTICE OF SETTLEMENT FAIRNESS HEARING 10. NOTICE IS HEREBY GIVEN, pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the United States District Court for the Middle District of Florida, Tampa Division (the Court ) dated September 24, 2002, that a hearing will be held before the Honorable James D. Whittemore in the Sam M. Gibbons U.S. Courthouse, 801 North Florida Avenue, Tampa, Florida 33602, at 9:00 a.m., on January 17, 2003 (the Settlement Fairness Hearing ) to determine whether a proposed settlement (the Settlement ) of the above-captioned action (the Action ) as set forth in the Stipulation and Agreement of Settlement dated September 23, 2002 (the Stipulation ), is fair, reasonable and adequate and to consider the proposed Plan of Allocation for the Settlement proceeds and the application of Plaintiffs Counsel for attorneys fees and reimbursement of expenses. 11. The Court, by Preliminary Order In Connection With Settlement Proceedings, dated September 24, 2002, has certified a Plaintiff Class for purposes of this Settlement consisting of: all persons who purchased or otherwise acquired the common stock of Pinnacle Holdings Inc. ( Pinnacle ) during the period from June 29, 1999 through and including August 14, 2001, including persons who acquired Pinnacle common stock pursuant to or traceable to the January 18, 2000 Offering. Excluded from the Class are Defendants in this Action, members of the immediate families (parents, spouses, siblings, and children) of Robert Wolsey ( Wolsey ), Steven Day ( Day ), Jeffrey Card ( Card ) (together the Individual Defendants ) or Peter O Brien, Andrew Banks, Peni Garber, Peggy Koenig, and Royce Yudkoff (collectively with the Individual Defendants, the Officer and Director Defendants ), any subsidiary or affiliate of Pinnacle, Deutsche Bank Securities, Inc. (originally sued as Deutsche Bank Alex. Brown ), Goldman Sachs & Co., Merrill Lynch & Company, Raymond James & Associates, Inc., Salomon Smith Barney, and Banc of America Securities LLC (collectively, the Underwriter Defendants ) and PricewaterhouseCoopers LLP ( PwC ) and the directors and officers of Pinnacle, PwC, the Underwriter Defendants or their subsidiaries or affiliates, or any entity in which any excluded person has a controlling interest, and the legal representatives, heirs, successors in interest or assigns of any excluded person. The Court further certified a Sub-Class (the Section 11 Sub-Class ) consisting of all persons who acquired Pinnacle common stock pursuant to or traceable to the January 18, 2000 Offering. Excluded from the Section 11 Sub- Class are all persons excluded from the Class. BACKGROUND OF THE LITIGATION 12. Throughout the Class Period, Pinnacle was engaged in the business of providing wireless communications site rental space to providers of wireless communications services such as PCS, cellular, paging, wireless data transmission, and radio and television broadcasting. Part of Pinnacle s business strategy was to increase its cash flow through marketing, acquisitions of existing towers, and selective construction of new towers. On June 29, 1999, the start of the Class Period, Pinnacle announced the acquisition of over 1,800 antenna towers, management agreements and leases from Motorola, Inc. (the Motorola Acquisition ). On January 18, 2000, Pinnacle completed a secondary public offering, registering 8,000,000 shares at an offering price of $ per share. During the Class Period, Pinnacle common stock traded as high as $76.75 per share on March 31, In an August 7, 2000 press release, Pinnacle revealed that the SEC had opened an investigation into certain accounting issues associated with Pinnacle s accounting for the Motorola Acquisition and the independence of PwC as Pinnacle s auditor. After this announcement, the trading price of Pinnacle common stock fell approximately $7.00 per share. 14. On October 11, 2000, Pinnacle issued another press release discussing the status of the SEC investigation. After the October 11 press release, the trading price of Pinnacle common stock fell from $ per share at the close of trading on October 11, 2000 to $ per share at the close of trading on October 12, 2000 on heavy volume. 2

3 15. On November 9, 2000, Pinnacle issued a press release reporting revenues and cash flow for the quarter ended September 30, After the November 9, 2000 press release, the trading price of Pinnacle common stock again fell approximately $7.00 per share. 16. On March 17, 2001, Pinnacle announced that its previously issued financial statements for the fiscal year ended December 31, 1999 and its quarterly reports for the three months ended September 30, 1999, March 31, 2000, June 30, 2000, and September 30, 2000 would be restated. Pinnacle also announced that the restatements would be necessary to revise its accounting for the Motorola Acquisition. Thereafter, on or about March 23, 2001, when Pinnacle common stock was trading at about $9.00 per share, lawsuits were commenced against Pinnacle and certain of the other defendants herein alleging violations of the federal securities laws. 17. Further, as of March 31, 2001, Pinnacle had acquired five carrier neutral colocation facilities for an aggregate purchase price of $68.8 million (the Colocation Acquisitions ). On August 14, 2001, the end of the Class Period, Pinnacle filed its quarterly report for the three months ended June 30, 2001 with the Securities and Exchange Commission ( SEC ), in which Pinnacle announced a charge related to the colocation facilities in the amount of $34.6 million. The market price of Pinnacle common stock dropped from $2.75 per share on August 14, 2001 to $1.30 per share at the close of trading on August 15, 2001, a 53% decline. 18. The Second Consolidated Amended Complaint (the Complaint ) alleges, among other things, that Pinnacle, the Officer and Director Defendants (other than Card) and the Underwriter Defendants violated Sections 11 and 15 of the Securities Act of 1933 by disseminating to the public a false and misleading Registration Statement and Prospectus (collectively hereinafter referred to as the Prospectus ) relating to the secondary offering of shares of Pinnacle common stock (the January 18, 2000 Offering ). The Complaint also alleges that the false and misleading information in the Prospectus caused the price of the stock issued under the Prospectus to be artificially inflated. The Section 11 claims are brought on behalf of all persons who bought Pinnacle shares on, or traceable to, the January 18, 2000 Offering. 19. The Complaint also alleges that Pinnacle, Day, Wolsey, Card and PwC (the Section 10(b) Defendants ) violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by disseminating false and misleading statements and/or concealing material adverse facts regarding Pinnacle s business operations and financial condition between June 29, 1999 and August 14, 2001, inclusive (the Class Period ). The Complaint alleges that the false and misleading information caused the price of Pinnacle s common stock to be artificially inflated during the Class Period. The Section 10(b) claims are brought on behalf of all persons who purchased Pinnacle s common stock during the Class Period. The Complaint also alleges that Day, Wolsey and Card are liable as control persons under Section 20(a) of the Securities Exchange Act of Plaintiffs alleged that a principal part of Defendants alleged scheme to artificially inflate the value of Pinnacle s securities included the overstatement of income and the understatement of expenses during the Class Period. It was alleged that accurately reporting such financial information would have, among other things, harmed Pinnacle s ability to meet securities analysts consensus revenue and earnings expectations, reduced Pinnacle s access to capital (including credit lines and Pinnacle s ability to successfully complete the January 18, 2000 Offering), decreased Pinnacle s common stock price (including the price received on stock sales by certain Pinnacle directors and officers, including Officer and Director Defendants Wolsey and Day), and harmed Pinnacle s ability to acquire additional towers. 21. Plaintiffs alleged that Defendants materially misled the investing public by publicly issuing materially false and misleading statements and by concealing and/or failing to disclose material facts necessary to correct such statements, including, inter alia, that: 1) that Pinnacle s EBITDA (earnings before interest, taxes other than real estate, depreciation and amortization) for the third and fourth quarters of 1999 and the first, second, and third quarters of 2000 had been materially overstated and that Defendants were required to restate downward the income for those periods; 2) that these overstatements primarily resulted from several violations of generally accepted accounting principles ( GAAP ) involving acquisition accounting and deferral of expenses; 3) that the financial statements violated GAAP due to improper accounting practices which made Defendants representations that the financial statements were prepared in accordance with generally accepted accounting principles materially false and misleading; 4) that the audited financial statements for the 1999 fiscal year included in the January 18, 2000 Registration Statement and Prospectus were not presented in accordance with GAAP and the audits were not performed in accordance with generally accepted auditing standards ( GAAS ); 5) that from March 31, 2001 through the end of the Class Period, Pinnacle represented that its Colocation Acquisition assets were not impaired and continued to account for their value as at least $68.8 million on Pinnacle s balance sheet when their actual value was over 50% less than the $68.8 million carrying value; 6) that Pinnacle s income statements fraudulently excluded ordinary operating expenses by improperly capitalizing them as costs of acquiring communication sites in violation of GAAP; 7) that the Prospectus overstated Pinnacle s EBITDA and understated corporate development expenses for the quarter ended September 30, 1999 in violation of GAAP; 8) that the Prospectus contained materially false information regarding Pinnacle s acquisitions, including the Motorola Acquisition, including Pinnacle s assurances that it was performing ongoing monitoring of its newly acquired sites and integrating the due diligence data because the vast majority of the towers acquired were ancient, junk or suffered from clouded title; 9) that the Prospectus did not adequately warn investors of the material adverse effects of Pinnacle s failure to bring its acquired towers into compliance with local and state regulations and in fact many of the acquired tower sites faced either demolition or complete rebuilding in order to obtain the necessary operating permits from governmental authorities; and 10) that proper due diligence had not been performed prior to Pinnacle s tower acquisitions and in fact most of the due diligence review of the assets acquired during the Class Period was performed well after the Class Period ended. 22. The Complaint further alleges that Plaintiffs and other Class Members purchased the common stock of Pinnacle during the Class Period and/or pursuant or traceable to the Prospectus issued in connection with the January 18, 2000 Offering during the Class Period and were damaged as a result thereof. SUBSEQUENT EVENTS 23. Pinnacle has filed a petition under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ). On July 30, 2002, the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court ) entered an order (the Confirmation Order ) confirming the First Amended Plan of Reorganization of Pinnacle Towers III Inc., Pinnacle Holdings Inc., Pinnacle Towers Inc. and Pinnacle San Antonio LLC, debtors and debtors-in-possession (collectively Debtors ), dated June 27, 2002 (the Plan ). In the Confirmation Order, the Bankruptcy Court approved the payment by Pinnacle s Directors and Officers insurer, Genesis Insurance Company ( Genesis ) of $8,200,000 on behalf of Pinnacle and the Officer and Director Defendants to the plaintiff Class. Pursuant to the confirmed Plan, effective as of the Confirmation Date, but subject to the occurrence of the effective 3

4 date of the Plan, certain creditors and equity holders of Pinnacle are deemed to have given releases to Pinnacle, the Officer and Director Defendants and PwC of all claims which any of such parties may be entitled to assert based in whole or in part upon any act or omission, transaction or other occurrence taking place on or before the Confirmation Date in any way relating to the Debtors, their business, their governance, their securities disclosure practices, the purchase or sale of any of Debtors debt securities or equity securities. The releases of non-debtor Defendants under the Plan are contingent on this Settlement becoming effective. BACKGROUND TO THE SETTLEMENT 24. The Defendants (as defined below) have denied all averments of wrongdoing or liability in the Action and all other accusations of wrongdoing or violations of law. The Stipulation is not and shall not be construed or be deemed to be evidence or an admission or a concession on the part of any of the Defendants of any fault or liability or damages whatsoever, and Defendants do not concede any infirmity in the defenses which they have asserted or intended to assert in the Action. 25. Prior to entering into the Stipulation, Plaintiffs Counsel represent that they conducted a pre-filing investigation relating to the events and transactions underlying Plaintiffs claims, including, inter alia, review and analysis of Pinnacle s SEC financial filings, press releases and analysts first call reports, consulting with accounting experts and interviews with former employees. Subsequent to entering into the Settlement Plaintiffs Counsel conducted a review and analysis, with the help of forensic accounting experts, of Confirmatory Discovery on the merits, including, inter alia, analysis of thousands of pages of documents produced by Pinnacle, which included documents prepared by PwC and the Underwriter Defendants. Plaintiffs Counsel s decision to recommend that the Lead Plaintiffs enter into this Settlement was made with knowledge of the facts and circumstances underlying Plaintiffs claims and the strengths and weaknesses of those claims. In determining to settle the Action, they have evaluated the pre-trial investigation and Confirmatory Discovery taken in the Action and taken into account the substantial expense and length of time necessary to prosecute the Action through trial, post-trial motions, and likely appeals, taking into consideration the significant uncertainties in predicting the outcome of this complex litigation, including Pinnacle s bankruptcy. Counsel for Plaintiffs believe that the Settlement described herein confers very substantial benefits upon the Class. Based upon their consideration of all of these factors, Plaintiffs and their counsel have concluded that it is in the best interest of Plaintiffs and the Class to settle the Action on the terms described herein. 26. Plaintiffs recognize the uncertainty and the risk of the outcome of any litigation, especially complex litigation such as this, and the difficulties and risks inherent in the trial of such an action. Plaintiffs desire to settle the claims of the Class against Defendants on the terms and conditions described herein which provide substantial benefits to the Class. Plaintiffs Counsel deem such settlement to be fair, reasonable and adequate, and in the best interests of the members of the Class. 27. The Defendants, while continuing to deny all allegations of wrongdoing or liability whatsoever, desired to settle and terminate all existing or potential claims against them, without in any way acknowledging any fault or liability. 28. The amount of damages, if any, that Plaintiffs could prove was also a matter of serious dispute, and the Settlement s use of a Recognized Claim formula for distributing the Settlement proceeds does not constitute a finding, admission or concession that provable damages could be measured by the Recognized Claim formula. No determination has been made by the Court as to liability or the amount, if any, of damages suffered by the Class, nor on the proper measure of any such damages. The determination of damages, like the determination of liability, is a complicated and uncertain process, typically involving conflicting expert opinions. During the course of the Action, Defendants, in addition to denying any liability, disputed that Plaintiffs and the Class were damaged by any wrongful conduct on the part of Defendants. The Settlement herein provides an immediate and substantial cash benefit and avoids the risks that liability or damages might not have been proven at trial. 29. The Court has not determined the merits of the Plaintiffs claims or the defenses thereto. This Notice does not imply that there has been or would be any finding of violation of the law or that recovery could be had in any amount if the Action were not settled. TERMS OF THE SETTLEMENT 30. The Settlement provides a total of Eleven Million Dollars ($11,000,000) for settlement of the claims of the Class: (a) Subject to the terms and conditions of the Stipulation, Defendants Pinnacle and the Officer and Director Defendants have caused Pinnacle s directors and officers liability insurance carrier, Genesis Insurance Company, to pay into escrow $8,200,000 (the Genesis Cash Settlement Amount ), which has been earning interest for the benefit of the Class since June 14, (b) Subject to the terms and conditions of the Stipulation, PwC has paid into escrow $2,600,000 (the PwC Cash Settlement Amount ), which has been earning interest for the benefit of the Class since June 14, (c) Subject to the terms and conditions of the Stipulation, Defendants have paid into escrow $200,000 (the Underwriter Cash Settlement Amount ), which has been earning interest for the benefit of the Class since June 12, Pursuant to the Settlement, Plaintiffs and other members of the Class on behalf of themselves, their heirs, executors, administrators, successors, and assigns shall release and forever discharge, and shall forever be enjoined from prosecuting, the Released Parties (defined below) with respect to each and every Settled Claim (defined below). 32. The Defendants include the following, each of whom will be released from all Settled Claims: 1) Pinnacle; 2) the Officer and Director Defendants; 3) the Underwriter Defendants; and 4) PwC. In addition, the Settlement will release all Class Members Settled Claims against Defendants, their past or present affiliates, subsidiaries, parents, successors and predecessors, shareholders, creditors, partners, principals, officers, directors, agents, employees, insurers, reinsurers, professional advisors, attorneys, auditors, accountants and any person, firm, trust, corporation, officer, director or other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any of the Defendants, and the legal representatives, heirs, successors in interest or assigns of the Defendants (collectively, the Released Parties ). 33. Settled Claims means any and all claims, demands, rights, causes of action or liabilities, of every nature and description whatsoever, whether based in law or equity, on federal, state, local, statutory or common law, or any other law, rule or regulation, including both known claims and Unknown Claims, that have been or could have been asserted in any forum by Class Members, or any of them, or the successors or assigns of any of them, 4

5 whether directly, indirectly, representatively or in any other capacity, against any of the Released Parties, which arise out of, or relate in any way, directly or indirectly, to the allegations, transactions, facts, events, matters, occurrences, acts, representations or omissions involved in, set forth in, referred to, or that could have been asserted in this Securities Action, including without limitation, claims for negligence, gross negligence, breach of duty of care, breach of duty of loyalty, breach of duty of candor, fraud, negligent misrepresentation, and breach of fiduciary duty, arising out of, based upon or related in any way to the purchase or acquisition of Pinnacle securities by any Class Member during the Class Period or in the Pinnacle January 18, 2000 Secondary Offering. 34. If the Settlement is approved by the Court, pursuant to the Order and Final Judgment, Plaintiffs and members of the Class on behalf of themselves, their heirs, executors, administrators, successors, and assigns, with respect to each and every Barred Claim, release and forever discharge, and shall forever be enjoined from prosecuting, and shall covenant to refrain from instituting, commencing or prosecuting, either directly, indirectly, representatively, or in any other capacity, all Barred Claims against any of the Released Parties. Barred Claims means any and all claims, demands, rights, causes of action or liabilities, of every nature and description whatsoever, whether based in law or equity, on federal, state, local, statutory or common law, or any other law, rule or regulation, including both known claims and unknown claims, that have been or could have been asserted in any forum by the Class Members, or any of them, or the successors or assigns of any of them, whether directly, indirectly, representative or in any other capacity, against any of the Released Parties, which arise out of, or relate in any way, directly or indirectly, to, or could have been asserted based upon, the allegations, transactions, facts, events, matters, occurrences, acts, representations or omissions involved in, set forth in, referred to, or which relate directly or indirectly to this Securities Action, including, without limitation, claims for negligence, gross negligence, breach of duty of care, breach of duty of loyalty, breach of duty of candor, fraud, negligent misrepresentation, and breach of fiduciary duty. 35. If the Settlement is approved by the Court, pursuant to the Order and Final Judgment, to the full extent provided by Section 21D(f)(7) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(f)(7), and the common law of the U.S. Court of Appeals for the Eleventh Circuit, all claims, including, but not limited to, claims for contribution, or equitable indemnification against any party or third person, including but not limited to, any trustee appointed in a Chapter 7 or 11 bankruptcy proceeding, related, directly or indirectly, to the facts of this action shall be barred; provided, however, that certain claims excluded from the definition of Inter-Defendant Claims shall not be barred. 36. Pursuant to the Settlement and the Order and Final Judgment, the Defendants shall be deemed to have exchanged mutual releases of certain Inter-Defendant Claims as against Inter-Defendant Released Parties. 37. The Stipulation provides that the Defendants may withdraw from and terminate the Settlement in the event that in excess of a certain amount of claimants exclude themselves from the Class. In the event of a withdrawal by any Defendant(s) from the Stipulation pursuant to the Supplemental Agreement, all other parties shall have the right to withdraw from the Stipulation during the period beginning five (5) calendar days and ending twenty (20) calendar days after the first such withdrawal, in accordance with the terms of the Supplemental Agreement. In the event that either (a) Plaintiffs Co- Lead Counsel or (b) all Defendants withdraw from the Stipulation pursuant to the terms of the Supplemental Agreement, the Settlement will be terminated. 38. The Settlement will become effective at such time as an Order entered by the Court approving the Settlement shall become final and not subject to appeal and other conditions specified in the Stipulation are satisfied (the Effective Date ). ALLOCATION OF SETTLEMENT PROCEEDS AMONG CLASS MEMBERS 39. The $11,000,000 cash settlement amount and the interest earned thereon, shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the Net Settlement Fund ) shall be distributed to members of the Class who file acceptable Proofs of Claim ( Authorized Claimants ) in proportion to their Weighted Recognized Claims as defined below. 40. The Weighted Recognized Claim formula is not intended to be an estimate of the amount that a Class Member might have been able to recover after a trial; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the Settlement. The Weighted Recognized Claim formula is the basis upon which the Net Settlement Fund will be proportionately allocated to the Authorized Claimants. A Class Member s Weighted Recognized Claim is determined first by calculating the Recognized Claim and then applying a Weighting factor. 41. An Authorized Claimant s Recognized Claim shall mean (a) With respect to each share of Pinnacle common stock acquired during the Class Period (June 29, 1999 through August 14, 2001) other than shares pursuant to or traceable to the January 18, 2000 Offering, the Recognized Claim amount shall be calculated as follows: (i) for each share of Pinnacle common stock purchased on the open market during the Class Period which an Authorized Claimant continued to hold as of the close of trading on August 14, 2001 (the end of the Class Period), the Recognized Claim shall be equal to the Plaintiffs Contention Of The Estimated Inflation Per Share on the date of purchase of the Pinnacle common stock (as shown on the table set forth below); (ii) for each share of Pinnacle common stock purchased on the open market during the Class Period which an Authorized Claimant sold at a loss prior to the close of trading on August 14, 2001, the Recognized Claim shall be equal to the lesser of: (A) the difference, if a loss, between the Plaintiffs Contention Of The Estimated Inflation Per Share on the date of purchase of the Pinnacle common stock during the Class Period and the Plaintiffs Contention Of The Estimated Inflation Per Share on the date of sale of the Pinnacle common stock; or (B) the difference, if a loss, between the purchase price paid (including commissions etc.) and the proceeds received on sale (net of commissions etc.). (b) With respect to each share of Pinnacle common stock acquired pursuant to or traceable to the January 18, 2000 Offering, the Recognized Clam amount shall be the greater of the amount calculated under (i) or (ii) below: 5

6 (i) (Section 11 calculation) for each share of Pinnacle common stock acquired pursuant to or traceable to the January 18, 2000 Offering, the Recognized Claim shall be equal to (A) for shares sold on or before March 23, 2001, the difference, if a loss, between $ and the sum for which said shares were sold at a loss (net of brokerage commissions and transaction charges) on or before March 23, 2001; or (B) for such shares still owned at the close of trading on March 23, 2001, $ per share (this is the difference between the secondary offering price ($40.375) and the $9.00 market value at the date suit was commenced); or (ii) (Section 10(b) calculation) the amount calculated in accordance with the formula set forth in paragraph 41(a) above. PLAINTIFFS CONTENTION OF THE ESTIMATED INFLATION PER SHARE DATES ALLEGED INFLATION June 29, 1999 through August 4, 2000 $21.22 August 7, 2000 through October 11, 2000 $14.22 October 12, 2000 through November 8, 2000 $8.69 November 9, 2000 through August 13, 2001 $1.63 (c) Sales made during the Class Period will be matched against purchases during the Class Period on a First-In, First-Out basis. 42. The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund based upon each Authorized Claimant s Weighted Recognized Claim. An Authorized Claimant s Weighted Recognized Claim shall mean 100% of the Recognized Claim amount calculated under paragraph 41(a) above and 125% 1 of the Recognized amount calculated under paragraph 41(b) above. 43. Class Members who do not submit acceptable Proofs of Claim will not share in the settlement proceeds. Class Members who do not either submit a request for exclusion or submit an acceptable Proof of Claim and Release will nevertheless be bound by the Settlement and the Order and Final Judgment of the Court dismissing this Action. 44. Checks will be distributed to Authorized Claimants after all claims have been processed and after the Court has finally approved the Settlement. If any funds remain in the Net Settlement Fund by reason of uncashed checks or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distribution checks, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed to Class Members who have cashed their checks and who would receive at least $10.00 from such re-distribution. If after six months after such re-distribution any funds shall remain in the Net Settlement Fund, then such balance shall be contributed to non-sectarian, not-for-profit, 501(c)(3) organization(s) designated by Plaintiffs Co-Lead Counsel. THE RIGHTS OF CLASS MEMBERS 45. The Court has preliminarily certified this Action to proceed as a class action. If you purchased or otherwise acquired the common stock of Pinnacle during the period from June 29, 1999 through and including August 14, 2001 and you are not excluded by the definition of the Class and do not elect to exclude yourself, then you are a Class Member. Class Members have the following options pursuant to Rule 23 (c) (2) of the Federal Rules of Civil Procedure: (a) If you wish to remain a member of the Class, you may share in the proceeds of the Settlement, provided that you submit an acceptable Proof of Claim and Release. Class Members will be represented by the Plaintiffs and their counsel, unless you enter an appearance through counsel of your own choice at your own expense. You are not required to retain your own counsel, but if you choose to do so, such counsel must file an appearance on your behalf on or before November 22, 2002, and must serve copies of such appearance on the attorneys listed in paragraph 54 below. (b) If you do not wish to remain a member of the Class, you may exclude yourself from the Class by following the instructions in paragraph 51 below. Persons who exclude themselves from the Class will NOT receive any share of the Settlement proceeds and will not be bound by the Settlement. Please be advised that the recovery of Class Members who exclude themselves from the Class is limited by the terms of Pinnacle s Plan. Class Members who exclude themselves from the Class are classified under the Plan, as holders of Class PHI-8 Equity Securities Interests and their recovery shall consist solely of a pro rata distribution of certain common stock warrants. Holders of Class PHI-8 Equity Securities Interests, including Class Members who exclude themselves from the Class, are not entitled to any cash distribution under the Plan or any other recovery from Pinnacle or any of the Released Parties. Also, Article XIV(I) of the Plan provides that any holders of Class PHI-8 Equity Securities Interests, including Class Members who exclude themselves from the Class, will be deemed to have released Pinnacle, the Officer and Director Defendants, and PwC for certain claims, including securities claims. In addition, Class Members who exclude themselves from the Class must file a Proof of Claim with the Bankruptcy Court at the following address on or before December 13, 2002 (the Securities Claim Bar Date ), or be forever barred from any distribution under the Plan: Clerk of the Court United States Bankruptcy Court Alexander Hamilton Customs House 1 Bowling Green P.O. Box 106 New York, New York In addition to the claims asserted by all Class Members under Section 10(b) of the Securities Exchange Act of 1934, Class Members who acquired shares pursuant to or traceable to the January 18, 2000 Offering have claims under Section 11 of the Securities Act of Accordingly, the Recognized Claims of Class Members who purchased on the January 18, 2000 Offering are given a greater Weighting. 6

7 (c) If you object to the Settlement or any of its terms, or to Plaintiffs Counsel s application for fees and expenses, and if you do not exclude yourself from the Class, you may present your objections by following the instructions in paragraph 54 below. SUBMISSION AND PROCESSING OF PROOFS OF CLAIM AND RELEASES 46. In order to be eligible to receive any distribution from the Net Settlement Fund, you must complete and sign the accompanying Proof of Claim and Release form and send it by first class mail postmarked on or before January 3, 2003, addressed as follows: In re Pinnacle Holdings Corp. Securities Litigation c/o Gilardi & Co. LLC Claims Administrator Post Office Box 990 Corte Madera, CA If you do not submit a proper Proof of Claim and Release form, you will not be entitled to any share of the Net Settlement Fund. 48. If you are a Class Member and you do not properly exclude yourself from the Class, you will be bound by the Settlement and the Order and Final Judgment of the Court dismissing this Action, even if you do not submit a Proof of Claim and Release. If you exclude yourself from the Class, you will not be bound by the judgment but you will not be entitled to any share of the Net Settlement Fund. However, pursuant to the terms of Pinnacle s Plan, any Class Member who excludes himself, herself, or itself from the Class shall only be entitled to receive certain Common Stock Warrants as described in the Plan, and shall not be entitled to any other recovery from Pinnacle or any of the Released Parties regarding the Settled Claims or Barred Claims, except as set forth in the Plan. 49. All Proofs of Claim and Releases must be submitted by the date specified in this Notice unless such period is extended by Order of the Court. 50. Each Claimant shall be deemed to have submitted to the jurisdiction of the United States District Court for the Middle District of Florida, Tampa Division with respect to his, her or its Proof of Claim and Release. EXCLUSION FROM THE CLASS 51. Each Member of the Class shall be bound by all determinations and judgments in this Action concerning the Settlement, whether favorable or unfavorable, unless such person shall mail, by first class mail, a written request for exclusion from the Class, postmarked no later than November 22, 2002, addressed to In re Pinnacle Holdings Corp. Securities Litigation Exclusions, c/o Gilardi & Co. LLC, P.O. Box 990, Corte Madera, CA No person may exclude himself from the Class after that date. In order to be valid, each such request for exclusion must set forth the name and address of the person or entity requesting exclusion, must state that such person or entity requests exclusion from the Class in the In re Pinnacle Holdings Corp. Securities Litigation, Case No. 8:01-CV-624-T-27MSS and must be signed by such person or entity. Persons and entities requesting exclusion are requested to also provide the following information: their telephone number, the date(s), price(s), and number(s) of shares of all purchases and sales of Pinnacle common stock during the Class Period. The request for exclusion shall not be effective unless the request for exclusion provides the required information and is made within the time stated above, or the exclusion is otherwise accepted by the Court. 52. Pursuant to Pinnacle s Plan of Reorganization, as approved by the Bankruptcy Court, any claims based on the purchase of Pinnacle common stock of any person(s) who elect(s) to be excluded from the Class herein shall be subordinated pursuant to section 510(b) of the Bankruptcy Code. Any claim of such excluded person will be discharged by the distributions to allowed holders of former equity interests in Pinnacle. Accordingly, persons considering exclusion should consult the Plan to determine what, if any, rights they may preserve by excluding themselves from the Class. SETTLEMENT FAIRNESS HEARING 53. At the Settlement Fairness Hearing, the Court will determine whether to finally approve this Settlement and dismiss the Action and the claims of the Class Members. The Court will also determine whether the Plan of Allocation for the Settlement proceeds is fair and reasonable. The Settlement Fairness Hearing may be adjourned from time to time by the Court without further written notice to the Class. If you intend to attend the Settlement Fairness Hearing, you should confirm the date and time with Plaintiffs Co-Lead Counsel. If the Settlement is approved, the Court will also consider the application of Plaintiffs Counsel for attorneys fees. 54. At the Settlement Fairness Hearing, any Class Member who has not properly submitted a request for exclusion from the Class may appear in person or by counsel and be heard to the extent allowed by the Court in opposition to the fairness, reasonableness and adequacy of the Settlement, the Plan of Allocation, or the application for an award of attorneys fees and reimbursement of expenses, provided, however, that in no event shall any person be heard in opposition to the Settlement, the Plan of Allocation, or Plaintiffs Counsel s application for attorneys fees and expenses and in no event shall any paper or brief submitted by any such person be accepted or considered by the Court, unless, on or before November 22, 2002, such person (a) files with the Clerk of the Court notice of such person s intention to appear, showing proof of such person s membership in the Class, and providing a statement that indicates the basis for such opposition, along with any documentation in support of such objection, and (b) simultaneously serves copies of such notice, proof, statement and documentation, together with copies of any other papers or briefs such person files with the Court, in person or by mail upon Plaintiffs Co-Lead Counsel: Kenneth J. Vianale, Esq. David Kessler, Esq. MILBERG WEISS BERSHAD SCHIFFRIN & BARROWAY, LLP HYNES & LERACH LLP Three Bala Plaza East, Suite 400 The Plaza Bala Cynwyd, PA Town Center Road, Suite 900 (610) Boca Raton, FL (561)

8 and upon Defendants Counsel: Tracy A. Nichols, Esq. James D. Mathias, Esq. Andrew B. Weissman, Esq. HOLLAND & KNIGHT, LLP PIPER RUDNICK LLP WILMER, CUTLER & PICKERING 701 Brickell Avenue, Suite Smith Avenue 2445 M Street, N.W. Miami, FL Baltimore, MD Washington, D.C (305) (410) (202) Richard S. Davis, Esq. Stanley Wakshlag, Esq. FOLEY & LARDNER AKERMAN SENTERFITT & EIDSON, P.A. 777 South Flagler Drive, Suite 901 One Southeast Third Avenue, 28th Floor West Palm Beach, FL Miami, FL (561) (305) Attendance at the hearing is not necessary; however, persons wishing to be heard orally in opposition to the approval of the Settlement, the Plan of Allocation, and/or the request for attorneys fees are required to indicate in their written objection their intention to appear at the hearing. Persons who intend to object to the Settlement, the Plan of Allocation, and/or counsel s application for an award of attorneys fees and expenses and desire to present evidence at the Settlement Fairness Hearing must include in their written objections the identity of any witnesses they may call to testify and exhibits they intend to introduce into evidence at the Settlement Fairness Hearing. Class Members do not need to appear at the hearing or take any other action to indicate their approval. ATTORNEYS FEES AND DISBURSEMENTS 55. At the Settlement Fairness Hearing or at such other time as the Court may direct, Plaintiffs Counsel intend to apply to the Court for an award of attorneys fees from the Gross Settlement Fund in an amount not greater than one-third (33 1/3%) of the Gross Settlement Fund and for reimbursement of their expenses up to a maximum amount of $425,000, plus interest on such expenses at the same net rate as earned by the Gross Settlement Fund. Plaintiffs Counsel, without further notice to the Class, may subsequently apply to the Court for fees and expenses incurred in connection with administering and distributing the Settlement proceeds to the members of the Class. FURTHER INFORMATION 56. For a more detailed statement of the matters involved in this Action, reference is made to the pleadings, to the Stipulation, to the Orders entered by the Court and to the other papers filed in the Action, which may be inspected at the Office of the Clerk of the United States District Court for the Middle District of Florida, 223 Sam M. Gibbons U.S. Courthouse, 801 North Florida Avenue, Tampa, Florida 33602, during regular business hours. 57. ALL INQUIRIES CONCERNING THIS NOTICE OR THE PROOF OF CLAIM AND RELEASE FORM BY CLASS MEMBERS SHOULD BE MADE TO THE CLAIMS ADMINISTRATOR IN WRITING AT THE ADDRESS INDICATED BELOW. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES 58. If you purchased or otherwise acquired the common stock of Pinnacle during the period from June 29, 1999 through and including August 14, 2001 for the beneficial interest of a person or organization other than yourself, the Court has directed that, within seven (7) days of your receipt of this Notice, you either (a) provide to the Claims Administrator the name and last known address of each person or organization for whom or which you purchased such stock during such time period or (b) request additional copies of this Notice and the Proof of Claim and Release form, which will be provided to you free of charge, and within seven (7) days mail the Notice and Proof of Claim and Release form directly to the beneficial owners of the securities referred to herein. If you choose to follow alternative procedure (b), the Court has directed that, upon such mailing, you send a statement to the Claims Administrator confirming that the mailing was made as directed. You are entitled to reimbursement from the Gross Settlement Fund of your reasonable expenses actually incurred in connection with the foregoing, including reimbursement of postage expense and the cost of ascertaining the names and addresses of beneficial owners. Those expenses will be paid upon request and submission of appropriate supporting documentation. 59. All communications concerning the foregoing should be addressed to the Claims Administrator: In re Pinnacle Holdings Corp. Securities Litigation c/o Gilardi & Co. LLC Claims Administrator P.O. Box 990 Corte Madera, CA (800) Tampa, Florida Dated: October 18, 2002 By Order of the Court CLERK OF THE COURT 8