-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Td3f+Eur5bSDxD1xzgBLSvGI9EGM10RgkCJA2qcnP/a1LfQCxgcdmpfxHkGQINsW yyFAtD2v43oMeJJdwdiMgw== 0000940180-98-000430.txt : 19980417 0000940180-98-000430.hdr.sgml : 19980417 ACCESSION NUMBER: 0000940180-98-000430 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19980415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBA COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001034054 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650716501 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-50219 FILM NUMBER: 98595052 BUSINESS ADDRESS: STREET 1: ONE TOWN CENTER RD STREET 2: THIRD FLOOR CITY: BOCA RATON STATE: FL ZIP: 33486 BUSINESS PHONE: 5619957670 MAIL ADDRESS: STREET 1: ONE TOWN CENTER RD STREET 2: THIRD FLOOR CITY: BOCA RATON STATE: FL ZIP: 33486 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- SBA COMMUNICATIONS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA 6749 65-0716501 (STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.) INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NUMBER) --------------- ONE TOWN CENTER ROAD THIRD FLOOR BOCA RATON, FLORIDA 33486 (561) 995-7670 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- STEVEN E. BERNSTEIN CHAIRMAN OF THE BOARD OF DIRECTORS PRESIDENT AND CHIEF EXECUTIVE OFFICER SBA COMMUNICATIONS CORPORATION ONE TOWN CENTER ROAD THIRD FLOOR BOCA RATON, FLORIDA 33486 (561) 995-7670 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: KIRK A. DAVENPORT, ESQ. JEFFREY A. STOOPS, ESQ. LATHAM & WATKINS SENIOR VICE PRESIDENT--CORPORATE 885 THIRD AVENUE DEVELOPMENT AND GENERAL COUNSEL NEW YORK, NEW YORK 10022 SBA COMMUNICATIONS CORPORATION (212) 906-1200 ONE TOWN CENTER ROAD THIRD FLOOR BOCA RATON, FLORIDA 33486 (561) 995-7670 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon as practicable after this Registration Statement becomes effective. IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [_] IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [_] . . . . . . . . . . . . IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [_] . . . . . . . . . . . . CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
TITLE OF EACH AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED PER NOTES(2) OFFERING PRICE(2) FEE(2) - -------------------------------------------------------------------------------- 12% Senior Discount Notes due 2008(1).. $269,000,000 56.641% $152,362,948 $44,947.07
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) The "Amount to be Registered" with respect to the 12% Senior Discount Notes due 2008 represents the aggregate principal amount at maturity of such notes. The 12% Senior Discount Notes due 2008 were sold at a substantial discount from their principal amount at maturity. The registration fee with respect to the 12% Senior Discount Notes due 2008 was calculated based on the approximate accreted value thereof as of April 15, 1998 determined pursuant to the provisions of the indenture governing such notes. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SBA COMMUNICATIONS CORPORATION CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4 1. Forepart of Registration Statement and Outside Front Outside Front Cover Page; Cross Cover Page of Prospectus........ Reference Sheet; Inside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Outside Back Prospectus...................... Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Prospectus Summary; Risk Factors; Information..................... Selected Historical Financial Data 4. Terms of the Transaction......... The Exchange Offer; Certain United States Federal Income Tax Considerations; Description of Exchange Notes 5. Pro Forma Financial Information.. Prospectus Summary; Unaudited Pro Forma Condensed Consolidated Financial Statements 6. Material Contacts with the Company Being Not Applicable Acquired........................ 7. Additional Information Required for Reoffering by Not Applicable Persons and Parties Deemed to be Underwriters.................... 8. Interests of Named Experts and Not Applicable Counsel......................... 9. Disclosure of Commission Position on Not Applicable Indemnification for Securities Act Liabilities................. 10. Information with Respect to S-3 Not Applicable Registrants..................... 11. Incorporation of Certain Not Applicable Information by Reference........ 12. Information with Respect to S-2 Not Applicable or S-3 Registrants.............. 13. Incorporation of Certain Not Applicable Information by Reference........ 14. Information with Respect to Registrants Other Than S-3 or S- Prospectus Summary; Capitalization; 2 Registrants................... Selected Historical Financial Data; Unaudited Pro Forma Condensed Consolidated Financial Statements; Selected Historical Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Industry Overview; Business; Management; Ownership of Capital Stock; Certain Transactions; Description of New Credit Facility; Description of Exchange Notes; Financial Statements 15. Information with Respect to S-3 Not Applicable Companies....................... 16. Information with Respect to S-2 Not Applicable or S-3 Companies................ 17. Information with Respect to Companies Other Than S-2 or S-3 Not Applicable Companies....................... 18. Information if Proxies, Consents or Authorizations are to be Not Applicable Solicited....................... 19. Information if Proxies, Consents or Authorizations are not to be Management; The Exchange Offer; Certain Solicited or in an Exchange Transactions Offer...........................
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED APRIL 15, 1998 PROSPECTUS $269,000,000 SBA COMMUNICATIONS CORPORATION OFFER TO EXCHANGE ITS 12% SENIOR DISCOUNT NOTES DUE 2008, FOR ALL OUTSTANDING 12% SENIOR DISCOUNT NOTES DUE 2008 ----------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1998 UNLESS EXTENDED. SBA Communications Corporation, a Florida corporation ("SBACC"), is hereby offering (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its 12% Senior Discount Notes due 2008 (the "Exchange Notes"), which exchange has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement of which this Prospectus is a part (the "Registration Statement"), for each $1,000 principal amount of its outstanding 12% Senior Discount Notes due 2008 (the "Private Notes"), of which $269,000,000 in aggregate principal amount at maturity was issued on March 2, 1998 (the "Private Offering") and is outstanding as of the date hereof. The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will have been registered under the Securities Act, and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Private Notes under the Registration Rights Agreement (as defined herein), which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be entitled to the benefits of an indenture dated as of March 2, 1998 governing the Private Notes and the Exchange Notes (the "Indenture"). The Private Notes and the Exchange Notes are sometimes referred to herein collectively as the "Notes." See "The Exchange Offer" and "Description of Exchange Notes." The Exchange Notes will mature on March 1, 2008. The Exchange Notes will bear interest at the same rate and on the same terms as the Private Notes. The Private Notes were issued at a substantial discount to their principal amount at maturity. Consequently, the Exchange Notes will be issued at a substantial discount to their principal amount at maturity. The Exchange Notes will accrete in value from and including the date of issuance of the Private Notes (March 2, 1998) until March 1, 2003 at which time they will have an aggregate principal amount of $269.0 million. Thereafter, cash interest will accrue on the Exchange Notes and will be payable semiannually in arrears on March 1 and September 1, commencing September 1, 2003, at a rate of 12% per annum. Holders whose Private Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES. (Continued on next page) THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The date of this Prospectus is , 1998 (Continued from Previous Page) The Notes will be redeemable at the option of SBACC, in whole or in part, at any time on or after March 1, 2004, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, thereon to the date of redemption. In addition, prior to March 1, 2001, SBACC may redeem up to 20% of the aggregate principal amount at maturity of Notes at 112.0% of the Accreted Value (as defined) thereof, to the redemption date with the net cash proceeds of one or more Public Equity Offerings or Strategic Equity Investments (each as defined); provided that at least 80% of the aggregate principal amount at maturity of Notes remains outstanding immediately after the occurrence of such redemption. The Notes will be general unsecured obligations of SBACC, will rank senior in right of payment to any future indebtedness of the Company which is made expressly junior thereto, and will rank pari passu in right of payment with all current and future unsecured senior Indebtedness (as defined) of SBACC. As of December 31, 1997, on a pro forma basis, SBACC (unconsolidated) had $1,000 of indebtedness outstanding that would rank pari passu to the Notes, all of which was secured indebtedness under the Existing Credit Facility. All of the operations of SBACC are conducted through its subsidiaries, and SBACC's subsidiaries will not be guarantors of the Notes. Accordingly, the Notes will be effectively subordinated to all indebtedness and all other liabilities or obligations of such subsidiaries, including borrowings under the anticipated $75.0 million New Credit Facility (as defined). See "Description of New Credit Facility." As of December 31, 1997, SBACC's subsidiaries had approximately $9.0 million of liabilities which, on a pro forma basis, constitute indebtedness that would be senior to the Notes. SBACC's subsidiaries will be entitled to borrow substantial additional indebtedness under the New Credit Facility or otherwise. See "Capitalization." Upon the occurrence of a Change of Control (as defined), each holder of Notes will have the right to require SBACC to purchase all or any part of such holder's Notes at a purchase price equal to 101% of the Accreted Value thereof, to the date of purchase prior to March 1, 2003 or 101% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of purchase on or after March 1, 2003. See "Description of Exchange Notes." SBACC will accept for exchange any and all validly tendered Private Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by SBACC in its sole discretion (the "Expiration Date"). Tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. Private Notes may be tendered only in integral multiples of $1,000. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer--Conditions." Based on an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties (See e.g., Exxon Capital Holdings Corp., SEC No-Action Letter (available April 13, 1989) and Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991), collectively, the "No-Action Letters"), SBACC believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker-dealer who purchases such Exchange Notes directly from SBACC to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of SBACC within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that the holder is acquiring the Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders who tender their Private Notes in the Exchange Offer with the intention of participating in a distribution of the Exchange Notes will not be able to rely on the No-Action Letters or similar no-action letters. Holders of Private Notes wishing to accept the Exchange Offer must represent to SBACC, as required by the Registration Rights Agreement, that such conditions have been met. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. SBACC believes that none of the registered holders of the Private Notes is an affiliate (as such term is defined in Rule 405 under the Securities Act) of SBACC. (Continued on Next Page) ii (Continued from Previous Page) Prior to the Exchange Offer, there has been no public market for the Notes. SBACC does not intend to list the Exchange Notes on any securities exchange, but the Private Notes are eligible for trading in the National Association of Securities Dealers, Inc.'s Private Offerings, Resales and Trading through Automatic Linkages (PORTAL) market. There can be no assurance that an active market for the Notes will develop. To the extent that a market for the Notes does develop, the market value of the Notes will depend on market conditions (such as yields on alternative investments), general economic conditions, SBACC's financial condition and certain other factors. Such conditions might cause the Notes, to the extent that they are traded, to trade at a significant discount from face value. See "Risk Factors--Absence of Public Market for the Notes; Restrictions on Transfer." Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes where such Private Notes were acquired by such broker-dealer as a result of market- making activities or other trading activities. SBACC has indicated its intention to make this Prospectus (as it may be amended or supplemented) available to any broker-dealer for use in connection with any such resale for a period of 180 days after the Expiration Date. See "Plan of Distribution." SBACC will not receive any proceeds from, and has agreed to bear the expenses of, the Exchange Offer. No underwriter is being used in connection with this Exchange Offer. See "The Exchange Offer." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL SBACC ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SBACC. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. The Exchange Notes will be available initially only in book-entry form. SBACC expects that the Exchange Notes issued pursuant to the Exchange Offer will be issued in the form of one or more fully registered global notes that will be deposited with, or on behalf of, the Depository Trust Company ("DTC" or the "Depository") and registered in its name or in the name of Cede & Co., as its nominee. Beneficial interests in the global note representing the Exchange Notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository and its participants. After the initial issuance of such global note, Exchange Notes in certificated form will be issued in exchange for the global note only in accordance with the terms and conditions set forth in the Indenture. See "The Exchange Offer--Book-Entry Transfer" and "Book Entry; Delivery and Form." (Continued on Next Page) iii (Continued from Previous Page) MARKET DATA MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM INTERNAL COMPANY SURVEYS AND INDUSTRY PUBLICATIONS. INDUSTRY PUBLICATIONS GENERALLY STATE THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT THAT THE ACCURACY AND COMPLETENESS OF SUCH INFORMATION IS NOT GUARANTEED. ALTHOUGH SBACC BELIEVES SUCH INFORMATION TO BE RELIABLE, SBACC HAS NOT INDEPENDENTLY VERIFIED SUCH MARKET DATA. SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY SBACC TO BE RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE CAPTIONS "PROSPECTUS SUMMARY," "PRO FORMA FINANCIAL DATA," "THE COMPANY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING THE COMPANY'S FINANCIAL POSITION AND OPERATING STRATEGY, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. 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. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING THOSE UNDER "RISK FACTORS" AND ALSO INCLUDING THE FOLLOWING: (1) ABILITY TO OBTAIN NEEDED REGULATORY APPROVALS, PRINCIPALLY LOCAL ZONING PERMITS AND VARIATIONS, IN EACH AREA IN WHICH THE COMPANY SEEKS TO CONSTRUCT, OWN OR OPERATE A COMMUNICATION SITE AND THE ABILITY TO CONTINUE TO COMPLY WITH ANY REGULATORY REQUIREMENTS AND ZONING LIMITATIONS; (2) INCREASED COSTS OR DIFFICULTIES RELATED TO ACQUISITIONS; (3) INABILITY TO OBTAIN ADDITIONAL LEASES ON TOWERS OR INABILITY TO OBTAIN SUCH LEASES ON TERMS AS FAVORABLE AS EXPECTED; (4) UNANTICIPATED INCREASES IN FINANCING AND OTHER COSTS OR THE INABILITY TO OBTAIN ADDITIONAL DEBT AND EQUITY FINANCING ON ATTRACTIVE TERMS; (5) CHANGES IN GENERAL ECONOMIC OR BUSINESS CONDITIONS, EITHER NATIONALLY OR IN THE REGIONS IN WHICH THE COMPANY CONDUCTS BUSINESS; (6) INCREASED COMPETITION; AND (7) ABILITY TO REPAY INDEBTEDNESS OF SUBSIDIARIES OF THE COMPANY OR TO REFINANCE SUCH INDEBTEDNESS ON ATTRACTIVE TERMS, INCLUDING TERMS PERMITTING THE PAYMENT OF DIVIDENDS BY SUCH SUBSIDIARIES IN AMOUNTS SUFFICIENT TO PAY INTEREST ON THE NOTES AND THE OTHER OBLIGATIONS OF SBACC. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. iv PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information (including the financial statements and the notes thereto) included elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Unless otherwise indicated, (i) "SBACC" refers to SBA Communications Corporation and (ii) "SBA" or the "Company" refers (A) to SBACC, together with its subsidiaries SBA Telecommunications, Inc. ("Telecommunications"), SBA, Inc., SBA Leasing, Inc. ("Leasing"), SBA Towers, Inc. ("Towers"), Communication Site Services, Inc. ("CSSI"), SBA Communications International, Inc. ("International") and SBA Subsidiary Holdings, Inc. ("Holdings") and (B) prior to the formation of SBACC in the fourth quarter of 1996, to SBA, Inc. and Leasing. THE COMPANY The Company is a leading independent provider of communication site services, offering a broad array of site development services to the wireless communications industry. In order to capitalize on the trend toward colocation and independent tower ownership in the wireless communications industry, the Company is aggressively expanding its site leasing business by utilizing its site development experience and relationships with wireless service providers to source opportunities to build and acquire communication sites. The Company believes that it is the largest provider of site development services in the United States, having participated since its founding in 1989 in one or more aspects of the development of more than 8,000 antennae sites (including over 3,500 in 1997) in 49 of the 51 major trading areas ("MTAs"). The Company anticipates significant future growth in its site leasing business whereby the Company leases antennae space on towers it owns, leases or manages. The Company is both acquiring towers suited for multi-tenant use and building such towers, generally under build-to-suit programs whereby a wireless service provider enters into a lease as an anchor tenant with the Company for antennae space prior to the Company's commencement of tower construction. As of March 31, 1998, the Company owned 90 towers, had 73 towers pending acquisition under written or verbal letters of intent or definitive agreements, had signed anchor tenant leases for an additional 54 towers (36 of which were with Sprint PCS) under build-to-suit programs (the construction of which was pending or ongoing) and had non-binding mandates to build up to approximately 410 additional towers (the majority of which the Company expects will result in signed anchor tenant leases). The Company's build-to-suit awards as of March 31, 1998 included 183 mandates from BellSouth Mobility, 69 from Nextel and 48 mandates from AT&T Wireless. For a discussion of the process by which mandates lead to signed anchor tenant leases and constructed towers, see "Business--Site Leasing Business--Build-to-Suit Program." The Company's revenues and Adjusted EBITDA (as defined) for the year ended December 31, 1997 were $55.0 million and $7.6 million, respectively. The Company's annualized site leasing revenues for the month of December 1997, based on leases then in effect, were $8.4 million. The Company offers an integrated "end-to-end" service with design, construction and operating expertise to a range of wireless service providers, including personal communications services ("PCS"), cellular, paging, specialized mobile radio ("SMR"), enhanced specialized mobile radio ("ESMR") and other providers. The Company's site development services include site location analysis, site acquisition, zoning and land use permitting, construction and construction management, Federal Aviation Administration ("FAA") compliance analysis and filings, contract and title administration and building permit administration. The Company is typically paid fees for its site development services on a project-by-project basis. In the site leasing business, the Company's primary focus is the ownership of multi-tenant towers and the leasing of antennae space on such towers to a variety of wireless service providers under long-term lease contracts. The site leasing business typically benefits from diversified recurring revenue and effective operating leverage as a result of several factors, including: (i) the long-term contract nature of lease revenues; (ii) low customer churn rates due to the high cost 1 of relocation; (iii) low variable operating costs, which cause increases in revenues to generate disproportionately larger increases in tower cash flow; (iv) low on-going maintenance capital expenditure requirements; (v) a customer base diversified across geographic markets, industry segments (PCS, cellular, paging, ESMR and SMR) and individual customers within these segments; and (vi) the limited number of available tower sites serving a given area and consequent barriers to entry, principally as a result of local opposition to the proliferation of towers within such area. In the fourth quarter of 1996, based on its analysis of accelerating trends in the wireless communications industry and the financial benefits of the site leasing business, the Company determined to leverage its leadership in the site development services business in order to expand into the ownership and leasing of communication sites. Consequently, the Company has added build-to-suit programs and other antennae site leasing options to its service offerings and has sought the acquisition of attractive communication sites. Under a build-to- suit program, the Company generally undertakes its site development services on behalf of a wireless service provider but constructs a tower at the Company's expense. In return, the wireless service provider enters into a long-term anchor tenant lease and the Company retains ownership of the tower and has the ability to colocate additional tenants. Management believes that many wireless service providers are using build-to-suit programs as an alternative to tower ownership and that this outsourcing trend is likely to continue. The Company's build-to-suit programs provide an end-to-end solution to those wireless service providers seeking to minimize their capital expenditures, overhead and time associated with the build-out and on-going maintenance of their wireless network infrastructure. Management believes its leadership in site development services, its existing national field organization of more than 300 employees and its strong relationships with wireless service providers position the Company to be a leader in the developing build-to-suit market. The Company believes that its site leasing business will continue to grow, particularly through greater acceptance of build-to-suit programs, but that it will continue to experience a decrease in its site development business. Management expects that the site leasing services offered by the Company will, in time, produce the majority of the Company's operating cash flows. However, due to trends in the wireless communications industry and the promotion of build-to-suit programs by the Company, the Company expects that its total revenues and EBITDA will decline in the near term, as the demand for site development services decreases and is replaced by an expected increase in site leasing revenues over the longer term. In addition, the Company anticipates that its operating expenses will increase significantly as the Company implements its strategy of acquiring tower assets. The Company's results of operations in 1997 have begun to reflect the impact of these trends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Management believes that the number of communication sites (which include towers, rooftops and other structures) in use will continue to increase with the growth in demand for wireless services. This growth is the result of several factors, including (i) the issuance of new wireless network licenses requiring the construction of new wireless networks; (ii) the continuing build- out of higher frequency technologies (such as PCS) which have a reduced cell range and thus require a more dense network of towers; (iii) the need to expand services and fill-in and upgrade existing networks; and (iv) the emergence of new wireless technologies. In October 1995, the Personal Communications Industry Association ("PCIA") estimated that the number of antennae sites in the United States for both cellular and PCS providers will increase by an additional 100,000 antennae sites (more than one of which can be located on a single communication site) over the next ten years as cellular systems expand coverage and PCS systems are deployed. Management believes that wireless service providers have begun to focus their capital and operations primarily on activities that build subscriber growth, such as marketing and distribution, and, therefore, that wireless service providers will increasingly seek to outsource communication site ownership, construction, management and maintenance. The Company believes that it will benefit from this trend. 2 BUSINESS STRATEGY The Company's strategy is to build on its leadership position in site development services to become a leading owner and operator of communication sites. Key elements of the Company's strategy include: BUILD, OWN AND LEASE TOWERS. The Company believes that there are various financial considerations currently affecting wireless service providers, including the need to optimize capital resources. Increasingly, these factors have led wireless service providers to consider outsourcing the investment in, and ownership of, towers. Management believes that it has positioned the Company to meet these outsourcing needs, leveraging its expertise in the site development business to construct towers with anchor tenants pursuant to build- to-suit programs. The Company believes that it has one of the largest number of non-binding build-to-suit mandates from wireless service providers in the industry. The Company has received non-binding mandates from approximately eight major wireless service providers to execute build-to-suit programs. As of March 31, 1998, the Company had signed anchor tenant leases for 54 towers (the construction of which were pending or ongoing) and had non-binding mandates to build up to approximately 410 additional towers under build-to-suit programs. ACQUIRE EXISTING TOWERS. The Company intends to continue to make strategic acquisitions in the fragmented tower owner and operator industry. The Company's strategy is to acquire only those towers that the Company believes will be attractive to, and capable of use by, multiple tenants based on location, height, local competition and available capacity. The Company will continue to pursue larger acquisitions to provide critical mass and smaller acquisitions that have the potential for more attractive returns. Management believes that its existing national field organization provides it with a competitive advantage in identifying opportunities for the acquisition of existing towers. The Company regularly evaluates acquisition opportunities and engages in negotiations with respect to acquisitions of individual tower sites, groups of tower sites and entities that own or manage towers and related businesses. However, except as otherwise contemplated herein, as of the date hereof, there are currently no agreements with respect to any pending acquisitions. MAINTAIN AND CAPITALIZE ON STRONG RELATIONSHIPS WITH MAJOR WIRELESS SERVICE PROVIDERS. Management believes that it is well-positioned to be a preferred partner in build-to-suit programs because of its strong relationships with wireless service providers and proven operating experience. The Company believes that it will be able to build upon its existing relationships with wireless service providers to source further opportunities for build-to-suit programs and lease antennae space on its owned towers. In many cases, the personnel awarding site development projects for wireless service providers are the same personnel who make decisions with respect to build-to-suit programs. The Company is continually marketing its build-to-suit programs to its site development service customers. The Company's build-to-suit customers as of March 31, 1998 included Sprint PCS, AT&T Wireless, PrimeCo PCS, Nextel and BellSouth Mobility. INCREASE USE OF COMPANY-OWNED TOWERS. The Company's strategy for its owned, leased and managed towers is to maximize the number of tenants on each tower, thereby increasing its leasing revenues per tower. Because most tower costs are fixed, leasing available space on an existing tower results in minimal additional ongoing expenses and therefore generates a disproportionately large increase in operating cash flow. The Company believes that many of its towers have or will have significant capacity available for antennae space leasing and that increased use of its owned towers can be achieved at low incremental cost. The Company generally constructs build-to-suit towers to accommodate multiple tenants in addition to the anchor tenant. The Company actively markets space on its owned towers through its internal sales force. Once the Company has identified a site for acquisition or construction, the sales force immediately commences marketing that site to potential tenants. MAINTAIN LEADERSHIP POSITION IN SITE DEVELOPMENT SERVICES. The Company has performed an array of site development services for over 35 wireless service providers across the United States, including Sprint PCS, Pacific Bell Mobile Services, AT&T Wireless, Nextel, PrimeCo PCS, PageNet and BellSouth Mobility. 3 Management believes the Company is the largest provider of site development services in the United States. The Company has a broad national field organization that allows it to identify and participate in site development projects across the country. Knowledge of local markets and strong customer relationships with wireless service providers are competitive strengths that position the Company to further capitalize on the site development needs of the wireless communications industry. The Company recently acquired CSSI, which is a tower construction company operating primarily in the southeastern United States. This acquisition increased the Company's expertise in managing the construction component of its business which enabled the Company to directly provide construction services to third parties and, on a selective basis, for its own build-to-suit programs. The Company believes that CSSI will enable the Company to capture more of the wireless service providers' total site development business and build-to-suit programs and to enhance its end-to-end approach to service. COMPETITIVE STRENGTHS Management believes that the Company has several important competitive strengths that have contributed to its leadership position in the site development business. Management believes that these strengths will enable it to successfully expand its site leasing business. Key strengths include: PROVEN OPERATING EXPERIENCE. The Company has been operating in the site development business since 1989 and believes that it is the largest provider of such services in the United States. As of December 31, 1997, the Company had successfully participated in one or more aspects of the development of more than 8,000 antennae sites (including over 3,500 in 1997). As a result, management believes that the Company has built a strong national reputation with wireless service providers as a leading provider of site development services. Operating its site development business has enabled the Company and management to gain experience executing all stages of site development, and these same skills are utilized in the course of constructing a build-to-suit tower. Management believes that this operating history and proven track record give the Company a competitive advantage in the build-to-suit tower construction business. In addition, as of March 31, 1998, the Company administered approximately 1,075 antennae sites whereby it leases the sites from site owners and subleases such sites to wireless service providers at a profit. The Company has developed and will continue to improve the systems and software to manage and oversee multiple sites and lease contracts. Management believes that these systems and software capabilities, together with the Company's operating expertise, will be critical to it in building a successful national site leasing business. MARKET EXPERIENCE. The Company believes that its national field organization and site development experience in 49 of the 51 MTAs provide the Company with a significant competitive advantage. Because of such experience, the Company has its own knowledge base of many areas within most MTAs and, more importantly, has the ability to more effectively analyze local requirements with respect to a particular site development project or a build-to-suit mandate. The Company also believes that its substantial field experience provides it with an advantage in selecting and constructing new towers. INTEGRATED PROVIDER OF SITE DEVELOPMENT SERVICES. Management believes that the Company benefits from its integrated, end-to-end service capabilities, as wireless service providers prefer the flexibility of a vendor who can perform, directly or through subcontractors, any or all of the functions related to site acquisition, development, construction and on-going operation. CAPABILITY TO MANAGE MULTIPLE PROJECTS. The Company has been able to successfully manage multiple site development projects in various locations across the country at the same time. Management believes that the ability to undertake concurrent build-to-suit programs in multiple markets will be attractive to wireless service providers. 4 RECENT EVENTS Since June 1, 1997, the Company has taken a number of important steps to expand its site leasing business, including: THE CSSI ACQUISITION. On September 18, 1997, the Company consummated the acquisition of CSSI and certain related tower assets of Segars Communications Group, Inc. ("SCGI," and together with the acquisition of CSSI, the "CSSI Acquisition"). The CSSI Acquisition provided the Company with 21 towers in Florida and Georgia in varying stages of construction, together with a number of parcels of leased real estate on which towers may be constructed in the future, and gave the Company the in-house capability to construct towers in the southeastern United States. The Company paid $7.0 million at closing, and expects to invest up to an additional $4.8 million by September 1998 to complete construction of the towers acquired and as a contingent payment to the sellers, provided that certain tenant leasing goals are realized. OTHER TOWER ACQUISITIONS. In addition to the 21 towers acquired in the CSSI Acquisition, the Company has acquired 53 towers since June 1997 through March 1998 in nine separate transactions for an aggregate initial investment of $10.9 million plus up to an additional $2.8 million in consideration to be paid in 1998 in the event certain tenant leasing goals are realized. These acquired towers are located in Connecticut, New York, Florida, Pennsylvania and Tennessee. As of March 31, 1998, the Company has also entered into verbal or written letters of intent or definitive agreements with respect to the purchase of 73 towers in 16 separate transactions for an aggregate purchase price of $22.4 million. Certain of these acquisitions are subject to definitive documentation and other closing conditions, certain of which are out of the control of the Company. There can be no assurance that any of these tower acquisitions will close on the terms currently anticipated or at all. MAJOR BUILD-TO-SUIT AWARD. The Company has been awarded a mandate for, and has entered into a non-binding letter of intent with, BellSouth Mobility with respect to 183 communication sites (as of March 31, 1998) to be located on newly constructed towers or colocated on existing structures in 1998. The Company will construct and own all new towers in the search rings issued with respect to these 183 sites. The Company will also receive a site development fee for any colocations arranged in these search rings. BellSouth Mobility will be the anchor tenant on all new towers in these search rings. The Company currently expects that approximately 70% of these 183 search rings will result in build-to-suit towers. These sites, which represent approximately 50% of the number of sites awarded by BellSouth Mobility to be constructed or colocated in 1998, will be located in eastern Tennessee, South Carolina and coastal Georgia. The award is subject to definitive documentation which is expected to be finalized during the second quarter of 1998. PRINCIPAL EXECUTIVE OFFICES The Company's principal executive offices are located at One Town Center Road, Third Floor, Boca Raton, Florida 33486, and its telephone number is (561) 995-7670. 5 THE EXCHANGE OFFER THE EXCHANGE OFFER.......... The Company is hereby offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Private Notes that are properly tendered and accepted. The Company will issue Exchange Notes on or promptly after the Expiration Date. As of the date hereof, there is $269,000,000 aggregate principal amount at maturity of Private Notes outstanding. See "The Exchange Offer." Based on an interpretation by the staff of the Commission set forth in no action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) a broker dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that the holder is acquiring Exchange Notes in the ordinary course of its business and is not participating, and had no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. (See e.g. Exxon Capital Holdings Corp., SEC No-Action Letter (available April 13, 1989) and Morgan Stanley & Co. Inc., SEC No Action Letter (available June 5, 1991), collectively, the "No Action Letters"). Holders who tender their Private Notes in the Exchange Offer with the intention of participating in a distribution of the Exchange Notes will not be able to rely on the No Action Letters or similar no-action letters. Each broker dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker dealer as a result of market making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer-- Resale of the Exchange Notes." REGISTRATION RIGHTS The Private Notes were sold by the Company on AGREEMENT................... March 2, 1998 to BT Alex. Brown Incorporated and Lehman Brothers Inc. (the "Initial Purchasers") pursuant to a Purchase Agreement, dated February 25, 1998, by and among the Company and the Initial Purchasers (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the Company and the Initial Purchasers entered into a Registration Rights Agreement, dated as of March 2, 1998 (the "Registration Rights Agreement"), which grants the holders of the Private Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such rights, which will terminate upon the consummation of the Exchange Offer. The holders of the Exchange Notes will not be entitled to any exchange 6 or registration rights with respect to the Exchange Notes. See "The Exchange Offer-- Termination of Certain Rights." EXPIRATION DATE............. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended by the Company in its sole discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer--Expiration Date; Extensions; Amendments." ACCRUED INTEREST ON THE EXCHANGE NOTES AND THE PRIVATE NOTES............... The Exchange Notes will accrete in value from and including the date of issuance of the Private Notes (March 2, 1998) until March 1, 2003 at which time they will have an aggregate principal amount of $269.0 million. Thereafter, cash interest will accrue on the Exchange Notes. Holders whose Private Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. See "The Exchange Offer--Interest on the Exchange Notes." CONDITIONS TO THE EXCHANGE OFFER....................... The Exchange Offer is subject to certain customary conditions that may be waived by the Company. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Private Notes being tendered for exchange. See "The Exchange Offer--Conditions." PROCEDURES FOR TENDERING PRIVATE NOTES............... Each holder of Private Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Private Notes and any other required documentation to State Street Bank and Trust Company, as exchange agent (the "Exchange Agent"), at the address set forth herein. By executing the Letter of Transmittal, the holder will represent to and agree with the Company that, among other things, (i) the Exchange Notes to be acquired by such holder of Private Notes in connection with the Exchange Offer are being acquired by such holder in the ordinary course of its business, (ii) such holder has no arrangement or understanding with any person to participate in a distribution of the Exchange Notes, (iii) that if such holder is a broker dealer registered under the Exchange Act or is participating in the Exchange Offer for the purposes of distributing the Exchange Notes, such holder will comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in no action letters (see "The Exchange Offer--Resale of Exchange Notes"), (iv) such holder understands that a secondary resale transaction described in 7 clause (iii) above and any resales of Exchange Notes obtained by such holder in exchange for Private Notes acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (v) such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. (See e.g., Exxon Capital Holdings Corp., SEC No Action Letter (available April 13, 1989) and Morgan Stanley & Co. Inc., SEC No Action Letter (available June 5, 1991), collectively, the "No Action Letters"). Holders who tender their Private Notes in the Exchange Offer with the intention of participating in a distribution of the Exchange Notes will not be able to rely on the No Action Letters or similar no action letters. If the holder is a broker dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market making activities or other trading activities, such holder will be required to acknowledge in the Letter of Transmittal that such holder will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer--Procedures for Tendering." SPECIAL PROCEDURES FOR BENEFICIAL OWNERS........... Any beneficial owner whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Private Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. See "The Exchange Offer-- Procedures for Tendering." GUARANTEED DELIVERY PROCEDURES......... Holders of Private Notes who wish to tender their Private Notes and whose Private Notes are not immediately available or who cannot deliver their Private Notes, the Letter of Transmittal or any other documentation required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Private Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer--Guaranteed Delivery Procedures." ACCEPTANCE OF THE PRIVATE NOTES AND DELIVERY OF THE EXCHANGE NOTES.............. Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company will accept for exchange any and all 8 Private Notes that are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." WITHDRAWAL RIGHTS........... Tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer--Withdrawal of Tenders." CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.............. For a discussion of certain material federal income tax considerations relating to the exchange of the Exchange Notes for the Private Notes, see "Certain United States Federal Income Tax Considerations." THE EXCHANGE NOTES The Exchange Offer applies to $269,000,000 in aggregate principal amount at maturity of the Private Notes. The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to certain rights of holders of the Private Notes under the Registration Rights Agreement, which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture. For further information and for definitions of certain capitalized terms used below, see "Description of Exchange Notes." SECURITIES OFFERED.......... $269,000,000 in aggregate principal amount at maturity of 12% Senior Discount Notes due 2008. MATURITY DATE............... March 1, 2008. YIELD AND INTEREST.......... Interest will accrue at a rate of 12% per annum, to an aggregate principal amount of $269.0 million by March 1, 2003. Cash interest will not accrue on the Notes prior to March 1, 2003. Thereafter, cash interest on the Notes will accrue and be payable semiannually in arrears on each March 1 and September 1, commencing September 1, 2003, at a rate of 12% per annum. ORIGINAL ISSUE DISCOUNT..... The Notes are being offered at an original issue discount for U.S. federal income tax purposes. Thus, although cash interest will not be payable on the Notes prior to September 1, 2003, original issue discount will accrue from the issue date of the Notes and will be included as interest income periodically (including for periods ending prior to September 1, 2003) in a holder's gross income for U.S. federal income tax purposes in advance of receipt of the cash payments to which the income is attributable. See "Certain United States Federal Income Tax Considerations." OPTIONAL REDEMPTION......... Except as described below, the Notes will not be redeemable at the Company's option prior to March 1, 2004. Thereafter, the Notes will 9 be subject to redemption at any time at the option of the Company, in whole or in part, at the redemption prices set forth herein plus accrued and unpaid interest thereon, if any, to the applicable redemption date. In addition, at any time prior to March 1, 2001, the Company may on any one or more occasions redeem up to 20% of the aggregate principal amount at maturity of the Notes issued at a redemption price of 112% of the Accreted Value thereof, to the redemption date, with the net cash proceeds from one or more Public Equity Offerings or Strategic Equity Investments; provided, however, that at least 80% of the aggregate principal amount at maturity of Notes issued remains outstanding immediately after the occurrence of such redemption (excluding Notes held by SBACC or any of its subsidiaries). See "Description of Exchange Notes--Optional Redemption." RANKING..................... The Notes will be general unsecured obligations of SBACC, will rank senior in right of payment to any future indebtedness of the Company which is made expressly junior thereto, and will rank pari passu in right of payment with all current and future unsecured senior Indebtedness of SBACC. All of the operations of SBACC are conducted through its subsidiaries, and SBACC's subsidiaries will not be guarantors of the Notes. Accordingly, the Notes will be effectively subordinated to all indebtedness and all other liabilities or obligations of such subsidiaries, including borrowings under the anticipated $75.0 million New Credit Facility. As of December 31, 1997, after giving pro forma effect to the Private Offering, SBACC (unconsolidated) would have other outstanding liabilities of approximately $0.4 million and $1,000 of indebtedness outstanding in addition to the Notes and SBACC's subsidiaries would have approximately $9.0 million of indebtedness and other outstanding liabilities (including trade payables). SBACC's subsidiaries will be entitled to borrow substantial additional indebtedness under the New Credit Facility or otherwise. See "Capitalization." CHANGE OF CONTROL........... Upon the occurrence of a Change of Control, the holders of the Notes will have the right to require the Company to repurchase such holders' Notes, in whole or in part, at a price equal to 101% of the Accreted Value thereof to the date of purchase prior to March 1, 2003 or 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase on or after March 1, 2003. There can be no assurance that the Company will be able to raise sufficient funds to meet this obligation should it arise. See "Description of Exchange Notes--Repurchase at the Option of Holders--Change of Control." CERTAIN COVENANTS........... The indenture pursuant to which the Exchange Notes will be issued (the "Indenture") contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined) to (i) incur additional indebtedness and issue preferred stock; (ii) pay dividends or make certain other 10 restricted payments; (iii) enter into transactions with affiliates; (iv) make certain asset dispositions; (v) merge or consolidate with, or transfer substantially all its assets to, another Person (as defined); (vi) create Liens securing Indebtedness (as defined); or (vii) permit Subsidiaries to incur restrictions on their ability to pay dividends to the Company. Each of these covenants are subject to important and substantial exceptions. In addition, under certain circumstances, the Company is required to offer to purchase the Notes with the Net Proceeds (as defined) of certain Asset Sales (as defined) at a price equal to 100% of the principal amount (or Accreted Value, as applicable) plus accrued and unpaid interest thereon, if any, to the date of purchase. For additional information regarding the Notes, see "Description of Exchange Notes." RISK FACTORS For a discussion of certain factors that should be considered in connection with an investment in the Notes, see "Risk Factors." 11 SUMMARY HISTORICAL FINANCIAL DATA The following table setting forth summary historical financial data of the Company as of and for the years ended December 31, 1994, 1995, 1996 and 1997 has been derived from, and is qualified by reference to, the audited financial statements of the Company included elsewhere in this Prospectus. The historical financial data as of and for the year ended December 31, 1993 has been derived from unaudited financial statements of the Company. The financial statements for periods ending on or prior to December 31, 1996 are the combined financial statements of SBA, Inc. and Leasing (the "Predecessor Companies"), which were acquired by SBACC during the first quarter of 1997 in connection with the Company's exchange of shares of its Class B Common Stock for all of the issued and outstanding shares of capital stock of the Predecessor Companies (the "Corporate Reorganization"). The unaudited financial data have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information included therein. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ----------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) OPERATING DATA: Revenues: Site development revenue. $ 6,109 $ 10,604 $ 22,700 $ 60,276 $ 48,241 Site leasing revenue..... 125 896 2,758 4,530 6,759 ------- -------- -------- -------- -------- Total revenues............. 6,234 11,500 25,458 64,806 55,000 Cost of revenues: Cost of site development revenue................. 4,928 7,358 13,993 39,822 31,470 Cost of site leasing rev- enue.................... 77 647 2,121 3,638 5,356 ------- -------- -------- -------- -------- Total cost of revenues..... 5,005 8,005 16,114 43,460 36,826 ------- -------- -------- -------- -------- Gross profit............... 1,229 3,495 9,344 21,346 18,174 ------- -------- -------- -------- -------- General and administra- tive(1)(2)................ 1,138 1,546 5,804 18,151 8,317 Sales and marketing(2)..... -- 86 237 697 2,697 Tower expenses(3).......... -- -- -- -- 599 ------- -------- -------- -------- -------- Operating income........... 91 1,863 3,303 2,498 6,561 Interest, net (income)..... 8 17 5 132 (237) ------- -------- -------- -------- -------- Income before income taxes. 83 1,846 3,298 2,366 6,798 Provision for income tax- es(4)..................... 33 738 1,319 946 5,596 ------- -------- -------- -------- -------- Net income................. $ 50 $ 1,108 $ 1,979 $ 1,420 $ 1,202 ======= ======== ======== ======== ======== Other Data: EBITDA(5)(6)............... $ 96 $ 1,868 $ 4,702 $ 15,512 $ 7,075 Adjusted EBITDA(7)......... 96 1,979 4,829 15,612 7,586 Depreciation and amortiza- tion...................... 5 5 73 160 563 Capital expenditures....... 14 51 660 145 16,292 Interest expense........... 9 19 11 139 407 Ratio of earnings to fixed charges(8)................ 4.6x 41.8x 33.8x 5.8x 4.1x Net cash provided by (used in) operating activities.. 873 (533) 1,215 6,506 Net cash used in investing activities................ (51) (660) (145) (16,292) Net cash provided by (used in) financing activities.. (689) 1,298 (1,036) 15,584 AS OF DECEMBER 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ----------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) Balance Sheet Data (at end of period): Total assets............... $ 922 $ 2,610 $ 7,429 $ 18,060 $ 44,797 Total debt(9).............. -- 1 1,500 4,921 10,184 Redeemable preferred stock. -- -- -- -- 30,983 Common stockholders' equity (deficit)................. 265 1,745 4,793 102 (4,344)
(footnotes on following page) 12 - -------- (1) General and administrative expense includes depreciation and amortization. For the year ended December 31, 1995, general and administrative expense includes cash compensation expense of $1.3 million representing the amount of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during that period. For the year ended December 31, 1996, general and administrative expense includes non-cash compensation expense of $7.9 million incurred in the Corporate Reorganization and cash compensation expense of $4.9 million representing the amount of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during that period. See "Certain Transactions." (2) Salaries and benefits expenses have been reclassified as general and administrative expenses, with the exception of $0.3 million allocated to sales and marketing expenses in the year ended December 31, 1996. (3) Tower expenses represent non-capitalized expenses associated with tower acquisition activity. (4) Provision for income taxes represents a pro forma calculation (40%) for the years ended December 31, 1993, 1994, 1995 and 1996, when the Company was treated as an S Corporation under Subchapter S of the Code (as defined). Provision for income taxes for the year ended December 31, 1997 represents an actual provision. The effective rate is in excess of the 40% rate used in the pro forma calculations due to the tax effect of the conversion of the Company to a C Corporation. See "Reorganization and Prior S Corporation Status." (5) EBITDA represents earnings before interest income, interest expense, other income, income taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA is not intended to represent cash flows for the periods presented, nor has it been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Companies calculate EBITDA differently and, therefore, EBITDA as presented for the Company may not be comparable to EBITDA reported by other companies. See the Company's Consolidated Statements of Cash Flows in the Company's Consolidated Financial Statements contained elsewhere in this Prospectus. (6) EBITDA for the years ended December 31, 1995 and 1996 excludes cash compensation expense of $1.3 million and $4.9 million, respectively, representing the amounts of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during such periods. Additionally, EBITDA for the year ended December 31, 1996 also excludes the effect of non-cash compensation expense of $7.9 million incurred in the Corporate Reorganization. (7) Adjusted EBITDA for the years ended December 31, 1993, 1994, 1995, 1996 and 1997 is defined as the sum of (i) EBITDA for the most recent calendar quarter attributable to the Company's site leasing business multiplied by four and (ii) EBITDA, less all site leasing EBITDA for the most recent four calendar quarters. For the purpose of calculating Adjusted EBITDA, general and administrative expenses and sales and marketing expenses are allocated between the Company's site leasing EBITDA and site development EBITDA on a pro rata basis based on the revenues generated by each of such businesses. Tower expenses are allocated to the Company's site leasing EBITDA. Adjusted EBITDA is presented as additional information because management believes it to be a useful indicator of the Company's ability to meet debt service and capital expenditure requirements and because it is expected that certain debt covenants of the Company will utilize Adjusted EBITDA to measure compliance with such covenants. It is not, however, intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles). Adjusted EBITDA as presented herein is equivalent to Adjusted Consolidated Cash Flow, as such term is defined in the Indenture. Tower cash flow, as presented herein and as defined in the Indenture, is the equivalent of site leasing EBITDA. Tower cash flow, which requires an allocation of the Company's total operating expenses to its site leasing business, for the fiscal quarter ended December 31, 1997 was ($145,000). (8) For purposes of computing the ratio of earnings to fixed charges, earnings represent net income before income taxes and fixed charges. Fixed charges consist of interest expense, the component of rental expense believed by management to be representative of the interest factor thereon, amortization of deferred financing costs and preferred stock dividends. (9) Total debt does not include amounts owed to the stockholder of $0.1 million and $10.7 million as of December 31, 1995 and 1996, respectively. These amounts were paid in March 1997. 13 SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA The following table presents summary unaudited pro forma financial data of the Company for the year ended December 31, 1997. The pro forma summary operating data give effect to the CSSI Acquisition, the Private Offering and the application of a portion of the net proceeds from the Private Offering to repay outstanding indebtedness (collectively, the "Transactions") as if each had occurred at the beginning of the period presented. The following unaudited pro forma balance sheet data as of December 31, 1997 give effect to the Private Offering as if it had occurred on December 31, 1997. The information set forth below should be read in conjunction with "Unaudited Pro Forma Condensed Consolidated Financial Statements", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) ---------------------- OPERATING DATA: Revenues: Site development revenue............................... $ 53,246 Site leasing revenue................................... 6,953 -------- Total revenues........................................... 60,199 Cost of revenues Cost of site development revenue....................... 35,324 Cost of site leasing revenue........................... 5,396 -------- Total cost of revenues................................... 40,720 -------- Gross profit............................................. 19,479 General and administrative(1)(2)......................... 9,584 Sales and marketing(2)................................... 2,700 Tower expenses(3)........................................ 599 -------- Operating income......................................... 6,596 Interest expense, net.................................... 18,487 -------- Income (loss) before income taxes........................ (11,891) Provision for income taxes(4)............................ 5,609 -------- Net loss................................................. $(17,500) ======== Other Data: EBITDA(5)................................................ $ 7,593 Adjusted EBITDA(6)....................................... 8,105 Depreciation and amortization............................ 997 Capital expenditures..................................... 16,292 Ratio of earnings to fixed charges(7).................... -- Net cash provided by (used in) operating activities...... (11,268) Net cash used in investing activities.................... (16,292) Net cash provided by (used in) financing activities...... 151,322
AS OF DECEMBER 31, 1997(8) -------------------------- BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents............................ $141,847 Working capital...................................... 144,554 Total assets......................................... 186,235 Total debt........................................... 151,622 Redeemable preferred stock........................... 30,983 Common stockholders' deficit......................... (4,344)
(footnotes on following page) 14 - -------- (1) General and administrative expense includes depreciation and amortization. (2) Salaries and benefits expenses have been reclassified as general and administrative expenses. (3) Tower expenses represent non-capitalized expenses associated with tower acquisition activity. (4) Provision for income taxes for the year ended December 31, 1997 represents an actual provision. The effective rate is in excess of the 40% rate used in the pro forma calculations due to the tax effect of the conversion of the Company to a C Corporation. See "Reorganization and Prior S Corporation Status." (5) EBITDA represents earnings before interest income, interest expense, other income, income taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA is not intended to represent cash flows for the periods presented, nor has it been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Companies calculate EBITDA differently and, therefore, EBITDA as presented for the Company may not be comparable to EBITDA reported by other companies. See the Company's Consolidated Statements of Cash Flows in the Company's Consolidated Financial Statements contained elsewhere in this Prospectus. (6) Adjusted EBITDA for the year ended December 31, 1997 is defined as the sum of (i) EBITDA for the most recent calendar quarter attributable to the Company's site leasing business multiplied by four and (ii) EBITDA, less all site leasing EBITDA for the most recent four calendar quarters. For the purpose of calculating Adjusted EBITDA, general and administrative expenses and sales and marketing expenses are allocated between the Company's site leasing EBITDA and site development EBITDA on a pro rata basis based on the revenues generated by each of such businesses. Tower expenses are allocated to the Company's site leasing EBITDA. Adjusted EBITDA is presented as additional information because management believes it to be a useful indicator of the Company's ability to meet debt service and capital expenditure requirements and because it is expected that certain debt covenants of the Company will utilize Adjusted EBITDA to measure compliance with such covenants. It is not, however, intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles). Adjusted EBITDA as presented herein is equivalent to Adjusted Consolidated Cash Flow, as such term is defined in the Indenture. (7) For purposes of computing the pro forma ratio of earnings to fixed charges, pro forma earnings represent, pro forma net income before income taxes and pro forma fixed charges. Pro forma fixed charges consist of pro forma interest expense, the component of rental expense believed by management to be representative of the interest factor thereon, amortization of deferred financing costs and preferred stock dividends. Pro forma earnings would have been insufficient to cover fixed charges by $12.9 million for the year ended December 31, 1997. (8) Adjusted to reflect the pro forma effect of the Private Offering assuming the Private Offering occurred on December 31, 1997. 15 RISK FACTORS This Prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and 21E of the Exchange Act. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from the Company's forward- looking statements are set forth below and elsewhere in this Prospectus. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth below. FAILURE TO EXCHANGE PRIVATE NOTES Exchange Notes will be issued in exchange for Private Notes only after timely receipt by the Exchange Agent of such Private Notes, a properly completed and duly executed Letter of Transmittal and all other required documentation. Therefore, holders of Private Notes desiring to tender such Private Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor the Company is under any duty to give notification of defects or irregularities with respect to tenders of Private Notes for exchange. Private Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. In addition, any holder of Private Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or any other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. To the extent that Private Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Private Notes could be adversely affected due to the limited amount, or "float," of the Private Notes that are expected to remain outstanding following the Exchange Offer. Generally, a lower "float" of a security could result in less demand to purchase such security and could, therefore, result in lower prices for such security. For the same reason, to the extent that a large amount of Private Notes are not tendered or are tendered and not accepted in the Exchange offer, the trading market for the Exchange Notes could be adversely affected. See "Plan of Distribution" and "The Exchange Offer." TRANSITION TO TOWER OWNERSHIP; EXPECTED DECLINE IN SITE DEVELOPMENT REVENUES The Company's growth strategy depends on its ability to successfully transition from its site development business to the site leasing business. Substantially all of the Company's revenues have historically come from the site development business, and the Company expects to leverage its experience and relationships in the site development business to build its site leasing business. The construction and acquisition by the Company of towers are key elements to this growth strategy. The success of the Company's site leasing business will depend on its ability to construct and acquire towers and profitably manage the leasing of antennae sites on those towers. In particular, the profitability of the Company's site leasing business will depend on the ability to secure additional tenants following initial tower construction or acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Tower Economics." The Company has only limited experience in owning towers, and there can be no assurance that it will be successful in acquiring or constructing towers or securing additional tenants. In addition, the Company believes that wireless service providers have begun to move away from the traditional build-out formula whereby such providers contract for site development services for a fee and invest the capital necessary to build and own their own network of communication towers. The Company believes that build-to-suit programs, whereby wireless service providers outsource tower ownership and lease antennae sites on independently- owned towers, is rapidly becoming the preferred method of wireless network expansion. As a result, the Company has begun to experience a decline in its site development revenues in fiscal 1997, and the 16 Company expects a further decline in its site development revenues in fiscal 1998. The Company does not expect that revenues recognized from its site development business will return to the level experienced in fiscal 1996. The Company expects that its site development business will decline in the near term and this rate of decline will increase for the foreseeable future as its customers move toward build-to-suit programs and other outsourcing alternatives while moving away from wireless service provider-funded site development and ownership. In addition, the Company anticipates that its operating expenses will increase significantly as the Company implements its strategy of acquiring tower assets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's success in the site leasing business will depend to a large extent on management's expectations and assumptions concerning future demand for independently-owned communication sites and numerous other factors, many of which are beyond the Company's control. Any material error in any of these expectations or assumptions, as well as the Company's ability to bid for and manage the substantial number of projects for which it currently has mandates, could have a material adverse effect on the Company's prospects, financial condition or results of operations. VARIABILITY IN QUARTERLY AND ANNUAL PERFORMANCE Demand for the Company's site development services fluctuates from period to period and within periods. These fluctuations are caused by a number of factors, including the timing of customers' capital expenditures, the number and significance of active customer engagements during a quarter, delays incurred in connection with a project, employee hiring, consultant utilization and the rate and volume of wireless service providers' tower build-outs. While such demand fluctuates, the Company incurs certain fixed costs, such as maintaining a staff and office space in anticipation of future contracts, even when there may be no current business. The timing of revenues is difficult to forecast as the Company's sales cycle can be relatively long and may depend on factors such as the size and scope of assignments, budgetary cycles and pressures and general economic conditions. Seasonal factors, such as vacation days and total business days in a quarter, and the business practices of customers, such as deferring commitments on new projects until after the end of the calendar year or the customers' fiscal year, may add to the variability of revenues and could therefore have a material adverse effect on the Company's prospects, financial condition or results of operations. Consequently, the operating results of the Company's site development business for any particular period may vary significantly, and should not be considered as necessarily being indicative of longer-term results. RISKS ASSOCIATED WITH CONSTRUCTION AND ACQUISITION OF TOWERS The Company's growth strategy depends on its ability to construct, acquire and operate towers in conjunction with the expansion by wireless service providers of their tower network infrastructure. The Company's ability to construct new towers can be affected by a number of factors beyond its control, including zoning and local permitting requirements, FAA considerations, availability of tower components and construction equipment, skilled construction personnel and bad weather conditions. In addition, as the concern over tower proliferation has grown in recent years, certain communities have placed restrictions on new tower construction or have delayed granting permits required for construction. There can be no assurance (i) of the number of mandates that the Company will be awarded or the number of mandates that will result in towers; (ii) that the Company will be able to overcome regulatory or other barriers to new construction; (iii) that the number of towers planned for construction will be completed in accordance with the requirements of the Company's customers; or (iv) that there will be a significant need for the construction of new towers once the wireless service providers complete their tower network infrastructure build-out. Certain of the Company's anchor tenant leases contain penalty or forfeiture provisions in the event the towers are not completed within specified time periods. With respect to the acquisition of towers, the Company competes with certain wireless service providers, broadcasters, site developers and other independent tower owners and operators for acquisitions of towers, and expects such competition to increase. Increased competition for acquisitions may result in fewer acquisition opportunities for the Company, as well as higher acquisition prices. The Company regularly explores acquisition 17 opportunities, and the Company is currently actively negotiating to acquire additional towers, although no agreements with respect to any such acquisitions have been reached other than with respect to 73 towers (as of March 31, 1998) that the Company intends on acquiring in the near term. There can be no assurance that the Company will be able to identify towers or tower companies to acquire in the future. The Company currently estimates that it will make at least $250.0 million of capital expenditures through the end of 1999 for the construction and acquisition of communication sites, primarily towers. However, the Company may need to seek additional debt or equity financing in order to fund such construction and acquisitions within such time period or thereafter if its estimates prove inaccurate. However, if acquisition or other opportunities present themselves more rapidly than management currently anticipates, the Company may be required to seek additional sources of debt or equity capital prior to the end of 1999 or to scale back the scope of its tower buildout. The availability of additional financing cannot be assured and depending on the terms of proposed acquisitions and financing, could be restricted by the terms of the New Credit Facility and the Indenture. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." No assurance can be given that the Company will be able to identify, finance and complete future acquisitions on acceptable terms or that the Company will be able to manage profitably and market available space on its towers. The extent to which the Company is unable to construct or acquire additional towers, or manage profitably such tower operations, may have a material adverse effect on the Company's prospects, financial condition or results of operations. In addition, the timeframe for the current wireless build-out cycle may be limited to the next few years, and many PCS networks have already been built out in large markets. A failure by the Company to move quickly and aggressively to obtain growth capital and capitalize on this infrastructure opportunity could have a material adverse effect on the Company's prospects, financial condition or results of operations with respect to both site development services and site leasing. Implementation of the Company's strategy to expand its site leasing business may impose significant strains on the Company's management, operating systems and financial resources. In addition, the Company anticipates that its operating expenses will increase significantly as the Company implements its strategy of acquiring tower assets. Failure by the Company to manage its growth or unexpected difficulties encountered during expansion could have a material adverse effect on the Company's prospects, financial condition or results of operations. The pursuit and integration of build-to-suit prospects, acquisitions, investments, joint ventures and strategic alliances will require substantial attention from the Company's senior management, which will limit the amount of time available to devote to the Company's existing operations. Future acquisitions by the Company could result in the incurrence of debt and contingent liabilities and an increase in amortization expenses related to goodwill and other intangible assets, which could have a material adverse effect upon the Company's prospects, financial condition or results of operations. DEPENDENCE ON DEMAND FOR WIRELESS COMMUNICATIONS; RISK ASSOCIATED WITH NEW TECHNOLOGIES Substantially all of the Company's customers to date have been providers of wireless communications services and, therefore, the success of the Company is dependent on the success of such providers of wireless communications services. Demand for the Company's services is dependent on demand for communication sites from wireless service providers, which, in turn, is dependent on the demand for wireless services. Most types of wireless services currently require ground-based network facilities, including communication sites for transmission and reception. The extent to which wireless service providers lease such communication sites depends on a number of factors beyond the Company's control, including the level of demand for such wireless services, the financial condition and access to capital of such providers, the strategy of providers with respect to owning or leasing communication sites, government licensing of broadcast rights, changes in telecommunications regulations and general economic conditions. In addition, wireless service providers frequently enter into roaming agreements with competitors allowing each other to utilize one another's wireless communications facilities to accommodate customers who are out of range of their home provider's services. Such roaming 18 agreements may be viewed by wireless service providers as a superior alternative to leasing antennae space on communications sites owned by the Company. The proliferation of such roaming agreements could have a material adverse effect on the Company's prospects, financial condition or results of operations. The wireless communications industry has undergone significant growth in recent years. A slowdown in the growth of, or reduction in, demand in a particular wireless segment could adversely affect the demand for communication sites. For example, the Company anticipates that a significant amount of its revenues over the next several years will be generated from providers in the PCS market and, as such, the Company will be subject to downturns in PCS demand. Moreover, wireless service providers often operate with substantial leverage, and financial problems for the Company's customers could result in accounts receivable going uncollected, in the loss of a customer and the associated lease revenue, or in a reduced ability of these customers to finance expansion activities. The emergence of new technologies could also have a negative impact on the Company's operations. For example, the Federal Communications Commission (the "FCC") has granted license applications for three low-earth orbiting satellite systems that are intended to provide mobile voice and data services. Although such systems are highly capital-intensive and technologically untested, mobile satellite systems could compete with land-based wireless communications systems, thereby reducing the demand for the infrastructure services provided by the Company. The occurrence of any of these factors could have a material adverse effect on the Company's prospects, financial condition or results of operations. COMPETITION The Company competes for site leasing tenants with (i) wireless service providers that own and operate their own tower footprints and lease, or may in the future decide to lease, antennae space to other providers, (ii) site development companies which acquire antennae space on existing towers for wireless service providers, manage new tower construction and provide site development services, (iii) other independent tower companies and (iv) traditional local independent tower operators. Wireless service providers that own and operate their own tower footprints generally are substantially larger and have greater financial resources than the Company. The Company believes that tower location and capacity, price, quality of service and density within a geographic market historically have been and will continue to be the most significant competitive factors affecting the site leasing business. While the Company believes it is currently the largest provider of site development services to the wireless communications industry in the United States, numerous companies have entered and continue to enter into the business. In addition, many of these are local companies that market their services based on knowledge of the community. There can be no assurance that the Company will maintain its current position and the Company is subject to numerous risks as a result of competition. The Company competes for acquisition and new tower construction opportunities primarily with site developers and other independent tower companies. The Company believes that competition for tower acquisitions and new tower construction opportunities will increase and that additional competitors will enter the tower market. Some of these additional competitors have or are expected to have greater financial resources than the Company. NO ASSURANCE THAT MANDATES WILL YIELD BINDING AGREEMENTS As of March 31, 1998, the Company had non-binding mandates to build up to approximately 410 towers under build-to-suit programs, including a mandate for 183 towers from BellSouth Mobility. Although the Company believes that the majority of these non-binding mandates will result in long-term anchor leases for specific communication towers, there are a number of steps that need to occur before any such leases are executed. These steps include, in some cases, finalization of build-out plans by the customers who have awarded the mandates, completion of due diligence by the Company and its customers and finalization of other definitive 19 documents between the parties. As a result, there can be no assurance as to the percentage of current and future non-binding mandates that will ultimately result in binding anchor tenant leases and constructed towers. NEED TO ATTRACT, RETAIN AND MANAGE PROFESSIONAL STAFF The Company's business involves the delivery of professional services and is labor-intensive. The Company's success depends in large part upon its ability to attract, develop, motivate and retain skilled employees. There is significant competition for employees with the skills required to perform the services offered by the Company from other wireless communications firms and other enterprises. There can be no assurance that the Company will be able to attract and retain a sufficient number of highly-skilled employees in the future or that it will continue to be successful in training, retaining and motivating employees. The loss of a significant number of employees and/or the Company's inability to hire a sufficient number of qualified employees could have a material adverse effect on the Company's prospects, financial condition or results of operations. CUSTOMER CONCENTRATION The Company derives a significant portion of its revenues from a small number of customers. For example, during 1996 and 1997, the Company's five largest customers accounted for approximately 93.7% and 85.9%, respectively, of the Company's revenues from site development services. Four of the five largest customers in 1996 were also among the Company's five largest customers for the year ended December 31, 1997. Sprint PCS, the Company's largest customer for the year ended December 31, 1997, accounted for 53.6% of the Company's revenues from site development services during this period. Customers engage the Company on a project-by-project basis, and a customer can generally terminate an assignment at any time without penalty. In addition, a customer's need for site development services can decrease, and there can be no assurance that the Company will be successful in establishing relationships with new clients. Moreover, there can be no assurance that the Company's existing customers will continue to engage the Company for additional projects, and the Company has experienced and expects to continue to experience a decline in overall demand for its site development services. The loss of any significant customer could have a material adverse effect on the Company's prospects, financial condition or results of operations. MANAGEMENT OF GROWTH The Company's revenues for the year ended December 31, 1997 increased $29.5 million, or 116%, from revenues for the 1995 fiscal year. From January 1, 1995 to December 31, 1997, the work force of the Company increased from 82 to 365 employees. This growth has placed, and will likely continue to place a substantial strain on the Company's administrative, operational and financial resources. The Company's executive officers have had no experience in managing companies as large as the Company. In addition, as part of its business strategy, the Company may acquire complementary businesses or expand into new businesses. There can be no assurance that the Company will be able to manage its growth successfully, or that its management, personnel or operational and financial control systems will be adequate to support expanded operations. Any such inabilities or inadequacies would have a material adverse effect on the Company's prospects, financial condition or results of operations. DISCRETIONARY USE OF FUNDS The Company intends to use the remaining proceeds of the Private Offering to build and acquire additional communications sites and, if attractive opportunities become available, to acquire other companies that own towers, as well as for general corporate and working capital purposes. The Company cannot predict in which, if any, of its existing or future opportunities it will ultimately invest. While the Company currently expects to use the remaining proceeds of the Private Offering as set forth above, if the Company's plans change, the Company would use any remaining cash to fund other development projects and or acquisitions and for general corporate and working capital purposes. See "Use of Proceeds." 20 PROJECT RISKS Most of the Company's site development services and build-to-suit programs involve projects which are critical to the operations of its customers' businesses and which provide benefits that may be difficult to quantify. The Company's failure to meet customer expectations in the performance of its services could damage the Company's reputation and adversely affect its ability to attract new business. In addition, the Company could incur substantial costs and expend significant resources correcting errors in its work and could become liable for damages caused by such errors. When the Company bids on contracts where the pricing is fixed, the Company could incur losses with regard to such projects if the expenditures associated with such projects exceed the Company's estimate in making its bid pursuant to that contract. REGULATORY COMPLIANCE AND APPROVAL The Company is subject to a variety of regulations, including those at the federal, state and local level. Both the FCC and the FAA regulate towers and other sites used for wireless communications transmitters and receivers. Such regulations control siting and marking of towers and may, depending on the characteristics of the tower, require registration of tower facilities. Wireless communications devices operating on towers are separately regulated and independently licensed based upon the regulation of the particular frequency used. All proposals to construct new communication sites or to modify existing communication sites are reviewed by both the FCC and the FAA to ensure that a site will not present a hazard to aviation. Owners of towers may have an obligation to paint them or install lighting to conform to FCC and FAA standards and to maintain such painting or lighting. Tower owners may also bear the responsibility for notifying the FAA of any tower lighting failures. The Company generally indemnifies its customers against any failure to comply with applicable standards. Failure to comply with applicable requirements may lead to civil penalties. Local regulations include city or other local ordinances, zoning restrictions and restrictive covenants imposed by community developers. These regulations vary greatly, but typically require tower owners to obtain approval from local officials or community standards organizations prior to tower construction. Local regulations can delay or prevent new tower construction or site upgrade projects, thereby limiting the Company's ability to respond to customers' demands. In addition, such regulations increase the costs associated with new tower construction. There can be no assurance that existing regulatory policies will not adversely affect the timing or cost of new tower construction or that additional regulations will not be adopted which increase such delays or result in additional costs to the Company. Such factors could have a material adverse effect on the Company's prospects, financial condition or results of operations and on the Company's ability to implement and/or achieve its business objectives in the future. The Company's customers may also become subject to new regulations or regulatory policies which adversely affect the demand for communication sites. In addition, if the Company pursues international opportunities, it will be subject to regulation in foreign jurisdictions. TITLE TO REAL PROPERTY The Company's real property interests relating to its towers consist of fee interests, leasehold interests, private easements and licenses and easements and rights-of-way granted by governmental entities. With respect to acquired towers, the Company generally obtains title insurance on most fee and leased properties and relies on title warranties from sellers with respect to other acquired properties. The Company's ability to protect its rights against persons claiming superior rights in towers depends on the Company's ability to (i) recover under title policies, the policy limits of which may be less than the purchase price of a particular tower; (ii) in the absence of title insurance coverage, realize on title warranties given by tower sellers, which warranties often terminate after the expiration of a specific period (typically one to three years); and (iii) realize on title covenants from landlords contained in lease agreements. 21 ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local environmental laws and regulations regarding the use, storage, disposal, emission, release and remediation of hazardous and nonhazardous substances, materials or wastes ("Environmental Laws"). Under certain Environmental Laws, the Company could be held strictly, jointly and severally liable for the remediation of hazardous substance contamination at its facilities or at third-party waste disposal sites, and could also be held liable for any personal or property damage related to such contamination. Although the Company believes that it is in substantial compliance with and has no material liability under all applicable Environmental Laws, there can be no assurance that the costs of compliance with existing or future Environmental Laws and liability related thereto will not have a material adverse effect on the Company's prospects, financial condition or results of operations. See "Business--Regulatory and Environmental Matters." RISKS ASSOCIATED WITH DAMAGE TO TOWERS The Company's towers are subject to risks associated with natural disasters such as tornadoes, hurricanes and earthquakes. The Company maintains insurance to cover the estimated cost of replacing damaged towers (subject to certain caps). The Company also maintains third party liability insurance to protect the Company in the event of an accident involving a tower. A tower accident for which the Company is uninsured or underinsured, or damage to a tower or group of towers, could have a material adverse effect on the Company's prospects, financial condition or results of operations. PERCEIVED HEALTH RISKS ASSOCIATED WITH RADIO FREQUENCY EMISSIONS The Company and the wireless service providers that utilize the Company's towers are subject to government requirements and other guidelines relating to radio frequency ("RF") emissions. The potential connection between RF emissions and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. To date, the results of these studies have been inconclusive. Although the Company has not been subject to any claims relating to RF emissions, there can be no assurance that it will not be subject to such claims. CONTROL OF THE COMPANY BY STEVEN E. BERNSTEIN Steven E. Bernstein, President and Chief Executive Officer of the Company, currently owns 100% of the Company's outstanding common stock and, by virtue of his ownership of shares of Class B Common Stock, controls 50.1% of all votes on a primary basis and 49.5% of all votes on a fully diluted basis. As a result, Mr. Bernstein has the ability to elect three out of five of the Company's directors and the ability to control the outcome of all matters determined by a vote of the Company's common stockholders. See "--Dependence on Key Personnel" and "Management." DEPENDENCE ON KEY PERSONNEL The Company's success depends to a significant extent upon the continued services of Steven E. Bernstein, its President and Chief Executive Officer, Ronald G. Bizick, II, its Executive Vice President-Sales and Marketing, Robert M. Grobstein, its Chief Financial Officer and Jeffrey A. Stoops, its Senior Vice President-Corporate Development and General Counsel. Messrs. Bizick, Grobstein and Stoops have employment agreements. The Company does not have an employment agreement with Steven E. Bernstein, its President and Chief Executive Officer and the owner of 100% of the Company's outstanding common stock and the majority of its voting shares. Mr. Bernstein's compensation and other terms of employment will be determined by the Board of Directors. For further information, see "Management." Although the Company maintains key person life insurance on Messrs. Bernstein and Bizick, such insurance would not adequately compensate for the loss of the services of either Mr. Bernstein or Mr. Bizick. The loss of the services of Messrs. Bernstein, Bizick, Grobstein, Stoops or other key managers or employees, could have a material adverse effect upon the Company's prospects, financial condition or results of operations. 22 SUBSTANTIAL LEVERAGE; RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S INDEBTEDNESS The Company is highly leveraged. As of December 31, 1997, after giving pro forma effect to the Private Offering, the Company would have had total consolidated indebtedness of approximately $151.6 million (all except $1.4 million of which would have consisted of the Notes), total redeemable preferred stock of $31 million and total stockholders' deficit of approximately $4.3 million. Also, after giving pro forma effect to the Private Offering, excluding the CSSI Acquisition, the Company's pro forma earnings would have been inadequate to service its pro forma fixed charges by $12.9 million for the year ended December 31, 1997. The Company expects that its earnings will continue to be inadequate to service its pro forma fixed charges at least through fiscal 1998. The Company and its subsidiaries will be permitted to incur substantial additional indebtedness in the future, including under the $75.0 million New Credit Facility. See "Description of New Credit Facility" and "Description of Exchange Notes." The degree to which the Company is leveraged could have important consequences to holders of the Exchange Notes, including, but not limited to: (i) making it more difficult for the Company to satisfy its obligations with respect to the Notes, (ii) increasing the Company's vulnerability to general adverse economic and industry conditions, (iii) limiting the Company's ability to obtain additional financing to fund its growth strategy, future working capital, capital expenditures and other general corporate requirements, (iv) requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund its growth strategy, working capital, capital expenditures or other general corporate purposes, (v) limiting the Company's flexibility in planning for, or reacting to, changes in its business and the industry, and (vi) placing the Company at a competitive disadvantage vis-a-vis less leveraged competitors. In addition, the degree to which the Company is leveraged could prevent it from repurchasing any Notes tendered to it upon the occurrence of a Change of Control. See "Description of New Credit Facility." The Company's ability to make scheduled payments of principal of, or to pay interest on, its debt obligations, and its ability to refinance any such debt obligations (including the Notes), or to fund planned capital expenditures, will depend on its future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. The Company's business strategy contemplates substantial capital expenditures in connection with its planned tower buildout and acquisitions. Based on the Company's current operations and anticipated revenue growth, management believes that, if its business strategy is successful, cash flow from operations and available cash (including the proceeds from the Private Offering), together with available borrowings under the New Credit Facility, will be sufficient to fund the Company's anticipated capital expenditures through fiscal 1999. Thereafter, however, or in the event the Company exceeds its currently anticipated capital expenditures for fiscal 1998 or 1999, the Company anticipates that it will need to seek additional equity or debt financing to fund its business plan. Failure to obtain any such financing could require the Company to significantly reduce its planned capital expenditures, scale back the scope of its tower buildout or acquisitions and/or delay its transition to tower ownership, any of which could have a material adverse effect on the Company's prospects, financial condition or results of operations. In addition, the Company may need to refinance all or a portion of its indebtedness (including the Notes and/or the New Credit Facility) on or prior to its scheduled maturity. There can be no assurance that the Company will generate sufficient cash flow from operations in the future, that anticipated revenue growth will be realized or that future borrowings or equity contributions will be available in amounts sufficient to service its indebtedness and make anticipated capital expenditures. In addition, there can be no assurance that the Company will be able to effect any required refinancings of its indebtedness (including the Notes) on commercially reasonable terms or at all. See "--Holding Company Structure; Restrictions on Access to Cash Flow of Subsidiaries" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Indenture contains and the New Credit Facility is expected to contain numerous restrictive covenants, including but not limited to covenants that restrict the Company's ability to incur indebtedness, pay dividends, create liens, sell assets and engage in certain mergers and acquisitions. In addition, the New Credit Facility will require subsidiaries of the Company to maintain certain financial ratios. The ability of the Company to comply 23 with the covenants and other terms of the New Credit Facility and the Indenture and to satisfy its respective debt obligations (including, without limitation, borrowings and other obligations under the New Credit Facility) will depend on the future operating performance of the Company. In the event the Company fails to comply with the various covenants contained in the New Credit Facility or the Indenture, as applicable, it would be in default thereunder, and in any such case, the maturity of substantially all of its long-term indebtedness could be accelerated. A default under the Indenture would also constitute an event of default under the New Credit Facility. See "Description of New Credit Facility" and "Description of Exchange Notes." HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION; RESTRICTIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES SBACC is a holding company with no business operations of its own. SBACC's only significant asset is and will be the outstanding capital stock of its subsidiaries. SBACC conducts, and will conduct, all of its business operations through its subsidiaries. Accordingly, SBACC's only source of cash to pay interest on and principal of the Notes is distributions with respect to its ownership interest in its subsidiaries from the net earnings and cash flow generated by such subsidiaries. Although the Notes do not require cash interest payments until September 1, 2003, at such time the Notes will have accreted to $269.0 million and will require annual cash interest payments of $32.3 million. In addition, the Notes mature on March 1, 2008. SBACC currently expects that the earnings and cash flow of its subsidiaries will be retained and used by such subsidiaries in their operations, including to service their respective debt obligations. Even if SBACC determined to pay a dividend on or make a distribution in respect of the capital stock of its subsidiaries, there can be no assurance that SBACC's subsidiaries will generate sufficient cash flow to pay such a dividend or distribute such funds to SBACC or that applicable state law and contractual restrictions, including negative covenants contained in the debt instruments of such subsidiaries, will permit such dividends or distributions. The Notes are not guaranteed by SBACC's subsidiaries. As a result, all indebtedness, including trade payables, of such subsidiaries, including borrowings under the New Credit Facility, are structurally senior to the Notes. As of December 31, 1997, SBACC's subsidiaries (on a pro forma basis) had $25 million of borrowing availability under the New Credit Facility, and $9.0 million of liabilities outstanding, which would have been structurally senior in right of payment to the Notes. See "Capitalization" and "Description of New Credit Facility." The New Credit Facility is expected to be finalized and in place in the second quarter of 1998. Pursuant to that certain commitment letter dated February 3, 1998 (the "Commitment Letter") by and among BankBoston, N.A. ("BankBoston"), as agent, BancBoston Securities Inc. ("BancBoston Securities"), as arranger and Telecommunications, SBA, Inc., Leasing, Towers, CSSI, International and Holdings, the Company expects that the New Credit Facility will, subject to certain limited exceptions, prohibit dividends or other distributions by SBACC's subsidiaries to SBACC at any time prior to September 1, 2003. Thereafter, the New Credit Facility will permit dividend payments by SBACC's subsidiaries to SBACC sufficient to pay the interest on the Notes coming due in that year and thereafter but only if no default or event of default then exists under certain covenants of the New Credit Facility or otherwise, as those covenants are then in effect. See "Description of New Credit Facility". In addition, SBACC's subsidiaries are permitted under the terms of the Indenture to incur certain additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to SBACC. Accordingly, SBACC does not anticipate that it will receive any material distributions from its subsidiaries prior to September 1, 2003 and there can be no assurance that sufficient amounts will be available to service interest on the Notes that becomes payable on a semiannual basis commencing in 2003. In the event of any or all of SBACC's subsidiaries becoming subject to bankruptcy proceedings prior to payment of the Notes neither the holders of Notes nor SBACC will be expected to have claims in such proceedings. Only after such subsidiaries' creditors are fully paid would any remaining value of such subsidiaries' assets be available to SBACC or its creditors, including the holders of the Notes. See "--Substantial Leverage; Restrictions Imposed by the Terms of the Company's Indebtedness" and "Description of New Credit Facility." It is expected that the New Credit Facility will permit distributions to SBACC in an amount sufficient to pay scheduled interest payments on the Notes commencing in 2003, provided that there is then no default or 24 event of default outstanding under the New Credit Facility, including under the financial maintenance tests to be set forth in the New Credit Facility. While management believes that, assuming the Company is able to meet its scheduled build out program as contemplated, it will be in compliance with the covenants expected to be contained in the New Credit Facility and, therefore, able to make distributions to SBACC in amounts sufficient to pay scheduled interest on the Notes, no assurances that such will be the case can be given. If the Company is not able to make distributions to SBACC so that SBACC can make payments on the Notes, SBACC and the Company will be required to pursue other alternatives which may include refinancing the New Credit Facility, seeking other sources of debt or equity capital (if available), or other alternatives. The Company currently anticipates that, in order to pay the principal of the Notes or to redeem or repurchase the Notes upon a Change of Control, the Company will be required to adopt one or more alternatives, such as refinancing its indebtedness or selling its equity securities or the equity securities or assets of its subsidiaries. There can be no assurance that any of the foregoing actions could be effected on satisfactory terms, that any of the foregoing actions would enable SBACC to pay the principal amount of the Notes or that any of such actions would be permitted by the terms of the Indenture or any other debt instruments of SBACC or SBACC's subsidiaries then in effect. See "--Substantial Leverage; Restrictions Imposed by the Terms of the Company's Indebtedness." ORIGINAL ISSUE DISCOUNT; APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS The Exchange Notes will bear interest at the same rate and on the same terms as the Private Notes. Therefore, the Exchange Notes will be issued at a substantial discount from their stated principal amount at maturity. Consequently, although cash interest on the Exchange Notes generally will not be payable prior to September 1, 2003, original issue discount ("OID") will be includable in the gross income of a holder of the Exchange Notes for U.S. federal income tax purposes in advance of the receipt of such cash payments on the Exchange Notes. See "Certain United States Federal Income Tax Considerations" for a more detailed discussion of the U.S. federal income tax consequences of the purchase, ownership and disposition of the Exchange Notes. If a bankruptcy case is commenced by or against the Company under the U.S. Bankruptcy Code after the issuance of the Exchange Notes, the claim of a holder of Exchange Notes with respect to the principal amount thereof would likely be limited to an amount equal to the sum of (i) the initial offering price and (ii) that portion of the OID that is not deemed to constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code. Any OID that was not accrued as of any such bankruptcy filing would constitute "unmatured interest." If the Exchange Notes provide initial holders with a yield to maturity which exceeds the Treasury-based interest rate in effect for the month of their issuance plus five percentage points, then OID with respect to the Exchange Notes will not be deductible by the Company until paid. In the event that such yield to maturity equals or exceeds such interest rate plus six percentage points, then a portion of such OID will not be deductible by the Company on a permanent basis. REPURCHASE OF THE NOTES UPON A CHANGE OF CONTROL Upon a Change of Control, the holders of the Notes have the right to require the Company to repurchase such holders' Notes, in whole or in part, at a price equal to 101% of the Accreted Value thereof to the date of purchase prior to March 1, 2003 or 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase on or after March 1, 2003. If a Change of Control were to occur, the Company may not have the financial resources to repurchase all of the Notes and repay any other indebtedness that would become payable upon the occurrence of such Change of Control. The Change of Control purchase feature of the Notes may in certain circumstances discourage or make more difficult a sale or takeover of the Company. See "Description of Exchange Notes--Repurchase at the Option of Holders--Change of Control." 25 ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER As of the date hereof, the only registered holder of Private Notes is Cede & Co., as the nominee of DTC. The Company believes that, as of the date hereof, such holder is not an "affiliate" (as such term is defined in Rule 405 under the Securities Act) of the Company. Prior to the Private Offering, there had been no market for the Notes and there can be no assurance that such a market will develop or, of such a market develops, as to the liquidity of such market. The Exchange Notes will not be listed on any securities exchange, but the Private Notes are eligible for trading in the National Association of Securities Dealers, Inc.'s Private Offering, Resales and Trading through Automatic Linkages (PORTAL) market. The Exchange Notes are new securities for which there is currently no market. The Exchange Notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities, the performance of the Company and other factors. The Company has been advised by the Initial Purchasers that they intend to make a market in the Exchange Notes, as well as the Private Notes, as permitted by applicable laws and regulations; however, the Initial Purchasers are not obligated to do so and any such market making activities may be discontinued at any time without notice. In addition, such market making activities may be limited during the Exchange Offer and the pendency of the Shelf Registration Statement (as defined in the Registration Rights Agreement). Therefore, there can be no assurance that an active market for the Notes will develop. See "The Exchange Offer" and "Plan of Distribution." 26 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The Private Notes were sold by the Company on March 2, 1998 (the "Closing Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently sold the Private Notes to "qualified institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule 144A"), in reliance on Rule 144A. As a condition to the sale of the Private Notes, the Company and the Initial Purchaser entered into the Registration Rights Agreement on March 2, 1998. Pursuant to the Registration Rights Agreement, the Company agreed that, unless the Exchange Offer is not permitted by applicable law or Commission policy, it would (i) file with the Commission a Registration Statement under the Securities Act with respect to the Exchange Notes within 60 days after the Closing Date, (ii) use its best efforts to cause such Registration Statement to become effective under the Securities Act within 150 days after the Closing Date and (iii) use its best efforts to consummate the Exchange Offer within 30 days after the date on which the Registration Statement was declared effective by the Commission. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement. The Registration Statement is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement and the Purchase Agreement. RESALE OF THE EXCHANGE NOTES With respect to the Exchange Notes, based upon an interpretation by the staff of the Commission set forth in certain no-action letters issued to third parties, the Company believes that a holder (other than (i) a broker-dealer who purchases such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act or (ii) any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who exchanges Private Notes for Exchange Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement with any person to participate, in a distribution of the Exchange Notes, will be allowed to resell Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. See e.g. Exxon Capital Holdings Corp., SEC No-Action Letter (available April 13, 1989) and Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991). However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in the distribution of the Exchange Notes or is a broker-dealer, such holder cannot rely on the position of the staff of the Commission enumerated in certain no-action letters issued to third parties and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities. Pursuant to the Registration Rights Agreement, the Company has agreed to make this Prospectus, as it may be amended or supplemented from time to time, available to broker-dealers for use in connection with any resale for a period of 180 days after the Expiration Date. See "Plan of Distribution." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Private Notes validly tendered and not withdrawn prior to the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Private Notes surrendered pursuant to the Exchange Offer. Private Notes may be tendered only in integral multiples of $1,000. 27 The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the exchange will be registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) holders of the Exchange Notes will not be entitled to any of the rights of holders of Private Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be issued under, and be entitled to the benefits of, the Indenture, which also authorized the issuance of the Private Notes, such that both series of Notes will be treated as a single class of debt securities under the Indenture. As of the date of this Prospectus, $269,000,000 in aggregate principal amount of the Private Notes are outstanding and registered in the name of Cede & Co., as nominee for DTC. Only a registered holder of the Private Notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of the Trustee under the Indenture may participate in the Exchange Offer. There will be no fixed record date for determining registered holders of the Private Notes entitled to participate in the Exchange Offer. Holders of the Private Notes do not have any appraisal or dissenters' rights under the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Private Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Private Notes for the purposes of receiving the Exchange Notes from the Company. Holders who tender Private Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Private Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will (i) notify the Exchange Agent of any extension by oral or written notice, (ii) mail to the registered holders an announcement thereof and (iii) issue a press release or other public announcement which shall include disclosure of the approximate number of Private Notes deposited to date, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make a public announcement of any delay, extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. The Company reserves the right, in its sole discretion, (i) to delay accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any conditions set forth below under "--Conditions" shall not have been satisfied, to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. 28 INTEREST ON THE EXCHANGE NOTES The Exchange Notes will bear interest at the same rate and on the same terms as the Private Notes. Consequently, the Exchange Notes will be issued at a substantial discount to their principal amount at maturity. The Exchange Notes will accrete in value from and including the date of issuance of the Private Notes (March 2, 1998) until March 1, 2003 at which time they will have an aggregate principal amount of $269.0 million. Thereafter, cash interest will accrue on the Exchange Notes and will be payable semiannually in arrears on March 1 and September 1, commencing September 1, 2003, at a rate of 12% per annum. Holders whose Private Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Private Notes. PROCEDURES FOR TENDERING Only a registered holder of Private Notes may tender such Private Notes in the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile to the Exchange Agent at the address set forth below under "-- Exchange Agent" for receipt prior to the Expiration Date. In addition, either (i) certificates for such Private Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book- entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such procedure is available, into the Exchange Agent's account at the Depository pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the holder must comply with the guaranteed delivery procedures described below. The tender by a holder that is not withdrawn prior to the Expiration Date will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner(s) of the Private Notes whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal described below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Private Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box titled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (an "Eligible Institution"). 29 If the Letter of Transmittal is signed by a person other than the registered holder of any Private Notes listed therein, such Private Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Private Notes. If the Letter of Transmittal or any Private Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Exchange Agent and the Depository have confirmed that any financial institution that is a participant in the Depository's system may utilize the Depository's Automated Tender Offer Program to tender Private Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Private Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Private Notes not properly tendered or any Private Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Private Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Private Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Private Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While the Company has no present plan to acquire any Private Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any Private Notes that are not tendered pursuant to the Exchange Offer, the Company reserves the right in its sole discretion to purchase or make offers for any Private Notes that remain outstanding subsequent to the Expiration Date or, as set forth below under "--Conditions," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Private Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering, each holder of Private Notes will represent to the Company that, among other things, (i) Exchange Notes to be acquired by such holder of Private Notes in connection with the Exchange Offer are being acquired by such holder in the ordinary course of business of such holder, (ii) such holder has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iii) if such Holder is a resident of the State of California, it falls under the self-executing institutional investor exemption set forth under Section 25102(i) of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California Blue Sky Regulations, (iv) if such Holder is a resident of the Commonwealth of Pennsylvania, it falls under the self-executing institutional investor exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v) such holder acknowledges and agrees that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purposes of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (vi) such holder understands that a secondary resale transaction described in clause (v) above and any resales of Exchange Notes obtained by such holder in exchange for Private Notes acquired by such holder directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (vii) such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. If the holder is a broker-dealer that will receive Exchange Notes for such holder's own account in exchange for Private Notes that were 30 acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the Letter of Transmittal that such holder will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. RETURN OF PRIVATE NOTES If any tendered Private Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Private Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes will be returned without expense to the tendering holder thereof (or, in the case of Private Notes tendered by book-entry transfer into the Exchange Agent's account at the Depository pursuant to the book-entry transfer procedures described below, such Private Notes will be credited to an account maintained with the Depository) as promptly as practicable. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Private Notes at the Depository for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Depository's systems may make book- entry delivery of Private Notes by causing the Depository to transfer such Private Notes into the Exchange Agent's account at the Depository in accordance with the Depository's procedures for transfer. However, although delivery of Private Notes may be effected through book-entry transfer at the Depository, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "--Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Private Notes and (i) whose Private Notes are not immediately available or (ii) who cannot deliver their Private Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Private Notes and the principal amount of Private Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the Private Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Private Notes in proper form for transfer and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Private Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. 31 To withdraw a tender of Private Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes) and (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, whose determination shall be final and binding on all parties. Any Private Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described above under "The Exchange Offer-Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange the Exchange Notes for, any Private Notes, and may terminate the Exchange Offer as provided herein before the acceptance of such Private Notes, if the Exchange Offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the Commission. If the Company determines in its sole discretion that any of these conditions are not satisfied, the Company may (i) refuse to accept any Private Notes and return all tendered Private Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Private Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Private Notes that have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders of the Private Notes, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. TERMINATION OF CERTAIN RIGHTS All rights under the Registration Rights Agreement (including registration rights) of holders of the Private Notes eligible to participate in the Exchange Offer will terminate upon consummation of the Exchange Offer except with respect to the Company's continuing obligations (i) to indemnify such holders (including any broker-dealers) and certain parties related to such holders against certain liabilities (including liabilities under the Securities Act), (ii) to provide, upon the request of any holder of a transfer-restricted Private Note, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Private Notes pursuant to Rule 144A, (iii) to use its best efforts to keep the Registration Statement effective to the extent necessary to ensure that it is available for resales of transfer-restricted Private Notes by broker-dealers for a period of up to 180 days from the Expiration Date and (iv) to provide copies of the latest version of the Prospectus to broker-dealers upon their request for a period of up to 180 days after the Expiration Date. ADDITIONAL INTEREST In the event of a registration default, the Company is required to pay as liquidated damages, Additional Interest (as defined in the Registration Rights Agreement) to each holder of Transfer Restricted Securities (as defined below), during the first 90-day period immediately following the occurrence of such registration default in an amount equal to $0.05 per week per $1,000 Accreted Value of Private Notes constituting Transfer Restricted Securities held by such holder. Such Additional Interest rate will increase by an additional $0.05 per week at the beginning of each subsequent 90-day period during which the registration default continues. Transfer 32 Restricted Securities shall mean each Private Note until (i) the date on which such Private Note has been exchanged for an Exchange Note in the Exchange Offer, (ii) the date on which such Private Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement (as defined in the Registration Rights Agreement) or (iii) the date on which such Private Note is distributed to the public pursuant to Rule 144(k) under the Securities Act. The amount of the Additional Interest will increase by an additional $0.05 per week per $1,000 Accreted Value of Private Notes constituting Transfer Restricted Securities for each subsequent 90-day period until all registration defaults have been cured, up to a maximum Additional Interest of $0.50 per week per $1,000 Accreted Value of Private Notes constituting Transfer Restricted Securities. Following the cure of all Registration Defaults, the payment of Additional Interest will cease. The filing and effectiveness of the Registration Statement of which this Prospectus is a part and the consummation of the Exchange Offer will eliminate all rights of the holders of Private Notes eligible to participate in the Exchange Offer to receive damages that would have been payable if such actions had not occurred. EXCHANGE AGENT State Street Bank and Trust Company has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Registered or Certified Mail: By Hand Delivery: State Street Bank and Trust Company State Street Bank and Trust Company Two International Place Two International Place Boston, MA 02110 Boston, MA 02110 Attention: Corporate Trust Attention: Corporate Trust Fourth Floor Fourth Floor By Overnight Delivery: By Facsimile: State Street Bank and Trust Company (617) 664 5371 Two International Place Boston, MA 02110 Confirm by Telephone: Attention: Corporate Trust Fourth Floor (617) 664 5602 FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company and are estimated in the aggregate to be approximately $150,000. Such expenses include registration fees, fees and expenses of the Exchange Agent and the Trustee, accounting and legal fees and printing costs, among others. The Company will pay all transfer taxes, if any, applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Private Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 33 CONSEQUENCE OF FAILURES TO EXCHANGE Participation in the Exchange Offer is voluntary. Holders of the Private Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. The Private Notes that are not exchanged for the Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Private Notes may be offered, resold, pledged or otherwise transferred only (1) to a person who the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if the Company so requests), (2) to the Company or (3) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. ACCOUNTING TREATMENT For accounting purposes, the Company will recognize no gain or loss as a result of the Exchange Offer. The expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. 34 USE OF PROCEEDS The Company will not receive proceeds from the Exchange Offer. The net proceeds to the Company from the Private Offering were approximately $144.5 million after deducting the Initial Purchasers' discounts and estimated transaction fees and expenses payable by the Company. The remaining net proceeds raised by the Company in the Private Offering will be used, together with borrowings under the New Credit Facility, for the construction and acquisition of towers and for general corporate purposes, including working capital. The Company expects that the remaining net proceeds from the Private Offering, together with available borrowings under the New Credit Facility, will be sufficient to meet its capital needs through the end of 1999. However, if acquisition or other opportunities present themselves more rapidly than management currently anticipates, the Company may be required to seek additional sources of debt or equity capital prior to the end of 1999 or to scale back the scope of its tower buildout or acquisitions. The Company regularly evaluates acquisition opportunities and engages in negotiations with respect to acquisitions of individual tower sites, groups of tower sites and entities that own or manage communication towers and related businesses. In addition, the Company is currently actively negotiating to acquire additional towers, although no agreements with respect to any such acquisitions have been reached other than with respect to the towers described under the caption "Recent Events." There can be no assurance that the Company will be able to identify towers or tower companies to acquire in the future. See "Risk Factors--Discretionary Use of Funds." REORGANIZATION AND PRIOR S CORPORATION STATUS Prior to 1997, the business currently conducted by the Company was conducted by the Predecessor Companies. Effective January 1, 1997 (the "Effective Date"), in connection with the private placement of shares of its 4% Series A Convertible Preferred Stock (the "Series A Preferred Stock") which was consummated on March 7, 1997 (the "Preferred Stock Offering"), the Company issued its shares of Class B Common Stock for all of the issued and outstanding shares of capital stock of the Predecessor Companies. Until the Effective Date, the Predecessor Companies elected to be treated as S Corporations under Subchapter S of the Internal Revenue Code of 1986, as amended ("the Code") and comparable state tax laws. As a result, until the Effective Date the earnings of the Predecessor Companies were attributable, with certain exceptions, for federal and certain state income tax purposes to their existing stockholder rather than to the Predecessor Companies. 35 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of December 31, 1997 on an historical basis and as adjusted for the Private Offering. This table should be read in conjunction with the Historical Financial Statements of the Company included elsewhere in this Prospectus and the related Notes thereto.
DECEMBER 31, 1997 -------------------- ACTUAL AS ADJUSTED ------- ----------- (IN THOUSANDS) -------------------- Cash and cash equivalents.................................. $ 6,109 $150,646 ======= ======== Long-term debt (less current maturities): Existing Credit Facility(1).............................. $ -- $ -- 12% Senior Discount Notes due 2008....................... -- 150,237 ------- -------- Total long-term debt................................... -- 150,237 ------- -------- Preferred stock............................................ 30,983 30,983 Stockholders' equity: Class A Common Stock..................................... -- -- Class B Common Stock..................................... 81 81 Paid-in capital.......................................... -- -- Retained earnings........................................ (4,425) (4,425) ------- -------- Total stockholders' equity (deficit)................... (4,344) (4,344) ------- -------- Total capitalization................................. $26,639 $176,876 ======= ========
- -------- (1) Pursuant to the Commitment Letter, the Company has obtained a commitment from the Lenders (as defined) under the Existing Credit Facility to provide the New Credit Facility. The New Credit Facility is expected to provide for revolving credit loans of up to $75.0 million and an additional $75.0 million incremental facility. See "Description of New Credit Facility." 36 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements (the "Pro Forma Financial Statements") are based on the historical financial statements of SBA and the historical financial statements of CSSI and SCGI during the periods presented, adjusted to give effect to the CSSI Acquisition and the Private Offering. The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1997 gives effect to the CSSI and SCGI Acquisitions and the Offering as if they had occurred as of January 1, 1997. The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the Private Offering as if it had occurred as of December 31, 1997. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that management believes are reasonable. The Pro Forma Financial Statements do not purport to represent what SBA's results of operations or financial condition would actually have been had the CSSI Acquisition and the Private Offering in fact occurred on such dates or to project SBA'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 included elsewhere in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The CSSI Acquisition is accounted for under the purchase method of accounting. The total purchase price for the CSSI Acquisition has been allocated to the identifiable tangible and intangible assets and liabilities of the applicable acquired business based upon SBA's preliminary estimate of their fair values with the remainder allocated to goodwill and other intangible assets. The allocations of the purchase price are subject to revision when additional information concerning asset and liability valuations is obtained. 37 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
ADJUSTMENTS HISTORICAL FOR SBA REFINANCING PRO FORMA ---------- ----------- --------- ASSETS Current assets: Cash and equivalents........................ $ 6,109 $135,738(1) $141,847 Accounts receivable......................... 10,931 -- 10,931 Prepaid..................................... 983 -- 983 Costs and estimated earnings in excess of billings on uncompleted contracts.................................. 118 -- 118 ------- ---------- -------- Total current assets...................... 18,141 135,738 153,879 Property and equipment, net................... 16,445 -- 16,445 Intangible assets, net........................ 3,500 -- 3,500 Note receivable, stockholder.................. 3,561 -- 3,561 Deferred tax assets........................... 2,257 -- 2,257 Deferred financing costs...................... 741 5,700(2) 6,441 Other assets.................................. 152 -- 152 ------- ---------- -------- Total assets.............................. $44,797 $ 141,438 $186,235 ======= ========== ======== LIABILITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................ $ 2,182 $ -- $ 2,182 Accrued expenses............................ 919 -- 919 Accrued salaries and payroll taxes.......... 1,729 -- 1,729 Billings in excess of costs and estimated earnings on uncompleted contracts.................................. 957 -- 957 Other liabilities........................... 531 -- 531 Current deferred tax liability.............. 1,622 -- 1,622 Notes payable............................... 10,184 (8,799) 1,385 ------- ---------- -------- Total current liabilities................. 18,124 (8,799) 9,325 ------- ---------- -------- Long term liabilities: Long term debt.............................. -- 150,237(3) 150,237 Other liabilities........................... 34 -- 34 ------- ---------- -------- Total long-term liabilities............... 34 150,237 150,271 ------- ---------- -------- Redeemable preferred stock.................... 30,983 -- 30,983 ------- ---------- -------- Stockholders' equity.......................... (4,344) -- (4,344) ------- ---------- -------- Total liabilities and stockholders' equi- ty....................................... $44,797 $ 141,438 $186,235 ======= ========== ========
- -------- (1) Reflects the proceeds of $150,237 from the issuance and sale of the Private Notes less estimated issuance costs of $5,700 and repayment of $8,799 of outstanding amounts under the Existing Credit Facility. (2) Reflects estimated issuance costs incurred in connection with the Private Offering which have been deferred and will be amortized over the life of the Notes. (3) Reflects the issuance and sale of the Private Notes. See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. 38 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
PRO FORMA SBA CSSI(1) SCGI(1) ADJUSTMENTS TOTAL -------- ------- ------- ----------- -------- Revenues: Site development reve- nue.................. $ 48,241 $ 5,005 $ -- $ -- $ 53,246 Site leasing revenue.. 6,759 -- 194 -- 6,953 -------- ------- ---- ------- -------- Total revenues...... 55,000 5,005 194 -- 60,199 Cost of revenues: Cost of site develop- ment................. 31,470 3,936 -- (82)(2) 35,324 Cost of site leasing.. 5,356 -- 72 (32)(2) 5,396 -------- ------- ---- ------- -------- Total cost of reve- nue................ 36,826 3,936 72 (114) 40,720 -------- ------- ---- ------- -------- Gross profit........ 18,174 1,069 122 114 19,479 Operating expenses: General and adminis- trative.............. 8,317 777 18 114(2) 9,584 358(3) Sales and marketing... 2,697 2 1 -- 2,700 Tower expenses........ 599 -- -- -- 599 -------- ------- ---- ------- -------- Total operating ex- penses............. 11,611 779 19 472 12,883 -------- ------- ---- ------- -------- Operating income........ 6,561 290 103 (358) 6,596 Interest expense/(income)..... (237) 16 41 18,666(4)(5)(6) 18,487 -------- ------- ---- ------- -------- Earnings (Loss) before provision for income taxes.................. 6,798 274 62 (19,024) (11,891) Provision for income taxes.................. 5,596 -- -- 13(7) 5,609 -------- ------- ---- ------- -------- Net income (loss)... 1,202 274 62 (19,037) (17,500) -------- Dividends on preferred stock.................. 983 -- -- -- 983 -------- ------- ---- ------- -------- Net income (loss) after preferred stock divi- dends.................. 219 274 62 (19,037) (18,483) ======== ======= ==== ======= ======== Other data: EBITDA.................. 7,594(8) ========
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. 39 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) On September 18, 1997, the Company acquired certain assets, and assumed certain liabilities of CSSI and SCGI in a business acquisition which was accounted for using the purchase method. The accompanying unaudited pro forma statements of operations for CSSI and SCGI reflect the results of operations from January 1, 1997 to September 18, 1997. The results of operations of CSSI and SCGI subsequent to September 18, 1997 are included in the Company's results of operations. (2) Reflects reclassification of depreciation for CSSI and SCGI previously classified as "Cost of revenue." (3) Reflects incremental amortization of goodwill acquired in connection with the CSSI Acquisition and additional depreciation resulting from a step up in basis of assets acquired. Goodwill is being amortized over 15 years. (4) Reflects interest expense reduction as if the Notes had been issued January 1, 1997 and the proceeds were used to retire outstanding debt. (5) Reflects interest expense as if the Notes had been issued January 1, 1997. (6) Reflects amortization of deferred financing costs incurred in connection with the Private Offering. Deferred financing costs are being amortized over the ten-year term of the debt. (7) Reflects a pro forma provision for taxes (at 40%) for the year ended December 31, 1997, for CSSI and SCGI, when each company was an S Corporation under Subchapter S of the Code (as defined) and the income tax effect of the incremental amortization of goodwill and depreciation of property and equipment as a result of the CSSI Acquisition. See "Reorganization and Prior S Corporation Status." (8) EBITDA represents earnings before interest income, interest expense, other income, income taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA is not intended to represent cash flows for the periods presented, nor has it been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Companies calculate EBITDA differently and, therefore, EBITDA as presented for the Company may not be comparable to EBITDA reported by other companies. See the Company's Consolidated Statements of Cash Flows in the Company's Consolidated Financial Statements contained elsewhere in this Prospectus. 40 SELECTED HISTORICAL FINANCIAL DATA The following table setting forth summary historical data of the Company as of and for the years ended December 31, 1994, 1995, 1996 and 1997 has been derived from, and is qualified by reference to, the audited financial statements of the Company included elsewhere in this Prospectus. The historical financial data as of and for the year ended December 31, 1993 has been derived from unaudited financial statements of the Company. The financial statements for periods ending on or prior to December 31, 1996 are the combined financial statements of the Predecessor Companies, which were acquired in connection with the Corporate Reorganization. The unaudited financial data have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information included therein. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus.
YEAR ENDED DECEMBER 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ----------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) OPERATING DATA: Revenues: Site development revenue. $ 6,109 $ 10,604 $ 22,700 $ 60,276 $ 48,241 Site leasing revenue..... 125 896 2,758 4,530 6,759 ------- -------- -------- -------- -------- Total revenues............. 6,234 11,500 25,458 64,806 55,000 Cost of revenues: Cost of site development revenue................. 4,928 7,358 13,993 39,822 31,470 Cost of site leasing rev- enue.................... 77 647 2,121 3,638 5,356 ------- -------- -------- -------- -------- Total cost of revenues..... 5,005 8,005 16,114 43,460 36,826 ------- -------- -------- -------- -------- Gross profit............... 1,229 3,495 9,344 21,346 18,174 ------- -------- -------- -------- -------- General and administra- tive(1)(2)................ 1,138 1,546 5,804 18,151 8,317 Sales and marketing(2)..... -- 86 237 697 2,697 Tower expenses(3).......... -- -- -- -- 599 ------- -------- -------- -------- -------- Operating income........... 91 1,863 3,303 2,498 6,561 Interest, net (income)..... 8 17 5 132 (237) ------- -------- -------- -------- -------- Income before income taxes. 83 1,846 3,298 2,366 6,798 Provision for income tax- es(4)..................... 33 738 1,319 946 5,596 ------- -------- -------- -------- -------- Net income................. $ 50 $ 1,108 $ 1,979 $ 1,420 $ 1,202 ======= ======== ======== ======== ======== Other Data: EBITDA(5)(6)............... $ 96 $ 1,868 $ 4,702 $ 15,512 $ 7,075 Adjusted EBITDA(7)......... 96 1,979 4,829 15,612 7,586 Depreciation and amortiza- tion...................... 5 5 73 160 563 Capital expenditures....... 14 51 660 145 16,292 Interest expense........... 9 19 11 139 407 Ratio of earnings to fixed charges(8)................ 4.6x 41.8x 33.8x 5.8x 4.1x Net cash provided by (used in) operating activities.. 873 (533) 1,215 6,506 Net cash used in investing activities................ (51) (660) (145) (16,292) Net cash provided by (used in) financing activities.. (689) 1,298 (1,036) 15,584 AS OF DECEMBER 31, -------------------------------------------------- 1993 1994 1995 1996 1997 ----------- -------- -------- -------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) Balance Sheet Data (at end of period): Total assets............... $ 922 $ 2,610 $ 7,429 $ 18,060 $ 44,797 Total debt(9).............. -- 1 1,500 4,921 10,184 Redeemable preferred stock. -- -- -- -- 30,983 Common stockholders' equity (deficit)................. 265 1,745 4,793 102 (4,344)
(footnotes on following page) 41 - -------- (1) General and administrative expense includes depreciation and amortization for the year ended December 31, 1995, general and administrative expense includes cash compensation expense of $1.3 million representing the amount of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during that period. For the year ended December 31, 1996, general and administrative expense includes non-cash compensation expense of $7.9 million incurred in the Corporate Reorganization and cash compensation expense of $4.9 million representing the amount of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during that period. (2) Salaries and benefits expenses have been reclassified as general and administrative expenses, with the exception of $0.3 million allocated to sales and marketing expenses in the year ended December 31, 1996. (3) Tower expenses represent non-capitalized expenses associated with tower acquisition activity. (4) Provision for income taxes represents a pro forma calculation (40%) for the years ended December 31, 93, 1994, 1995 and 1996, when the Company was treated as an S Corporation under Subchapter S of the Code. Provision for income taxes for the year ended December 31, 1997 represents an actual provision. The effective rate is in excess of the 40% rate used in the pro forma calculations due to the tax effect of the conversion of the Company to a C Corporation. See "Reorganization and Prior S Corporation Status." (5) EBITDA represents earnings before interest income, interest expense, other income, income taxes, depreciation and amortization. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA is not intended to represent cash flows for the periods presented, nor has it been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Companies calculate EBITDA differently and, therefore, EBITDA as presented for the Company may not be comparable to EBITDA reported by other companies. See the Company's Consolidated Statements of Cash Flows in the Company's Consolidated Financial Statements contained elsewhere in this Prospectus. (6) EBITDA for the years ended December 31, 1995 and 1996 excludes cash compensation expense of $1.3 million and $4.9 million, respectively, representing the amounts of officer compensation in excess of what would have been paid had the officer employment agreements entered into in 1997 been in effect during such periods. Additionally, EBITDA for the year ended December 31, 1996 also excludes the effect of non-cash compensation expense of $7.9 million incurred in the Corporate Reorganization. (7) Adjusted EBITDA for the years ended December 31, 1993, 1994, 1995, 1996 and 1997 is defined as the sum of (i) EBITDA for the most recent calendar quarter attributable to the Company's site leasing business multiplied by four and (ii) EBITDA, less all site leasing EBITDA for the most recent four calendar quarters. For the purpose of calculating Adjusted EBITDA, general and administrative expenses and sales and marketing expenses are allocated between the Company's site leasing EBITDA and site development EBITDA on a pro rata basis based on the revenues generated by each of such businesses. Tower expenses are allocated to the Company's site leasing EBITDA. Adjusted EBITDA is presented as additional information because management believes it to be a useful indicator of the Company's ability to meet debt service and capital expenditure requirements and because it is expected that certain debt covenants of the Company will utilize Adjusted EBITDA to measure compliance with such covenants. It is not, however, intended as an alternative measure of operating results or cash flow from operations (as determined in accordance with generally accepted accounting principles). Adjusted EBITDA as presented herein is equivalent to Adjusted Consolidated Cash Flow, as such term is defined in the Indenture. Tower cash flow, as presented herein and as defined in the Indenture, is the equivalent of site leasing EBITDA. Tower cash flow, which requires an allocation of the Company's total operating expenses to its site leasing business, for the fiscal quarter ended December 31, 1997 was ($145,000). (8) For purposes of computing the ratio of earnings to fixed charges, earnings represent net income before income taxes and fixed charges. Fixed charges consist of interest expense, the component of rental expense believed by management to be representative of the interest factor thereon, amortization of deferred financing costs and preferred stock dividends. (9) Total debt does not include amounts owed to the stockholder of $0.1 million and $10.7 million as of December 31, 1995 and 1996, respectively. These amounts were paid in March 1997. 42 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a leading independent provider of communication site services to the wireless communications industry. The Company's strategy is to maintain its leadership position in the site development business and to build upon this position to become a leading owner and operator of communication towers. While the Company intends to continue to sustain its market leadership position in the site development business, it will emphasize its site leasing business through the construction of Company-owned towers pursuant to build- to-suit programs for lease to wireless service providers, the acquisition of existing sites and the leasing, sub-leasing and management of other antennae sites. The Company determined to shift its emphasis to site leasing in the latter half of 1996, and began to implement the shift in the second quarter of 1997. The Company believes it is well-positioned to become a leader in the site leasing business because of its proven operating experience, market knowledge, its working relationships with major wireless service providers and the experience it has gained through its existing site development business. The Company will increasingly focus on tower ownership and the conversion of its site development services customers to site leasing customers in order to provide it with recurring revenues that complement the variable nature of the project-specific revenues from its site development services. Management believes that as the site development industry matures, revenues from that business will decline in the near term and this rate of decline will increase for the foreseeable future as wireless service providers choose to outsource ownership of communication sites, in order to conserve capital. Management also believes that over the longer term, site leasing revenues will correspondingly increase as its customers transition to outsourced tower ownership. As of March 31, 1998, SBACC had no Unrestricted Subsidiaries, as defined in the Indenture. As a result of these trends and shift in business, the Company believes that revenue and EBITDA may decline over the short term and capital expenditures will increase sharply. In addition, the Company anticipates that its operating expenses will increase significantly as the Company implements its strategy of constructing and acquiring tower assets. The Company also became a taxpayer commencing January 1, 1997 as a result of the Corporate Reorganization, and will report federal income taxes on its financial statements and be responsible for the payment thereof. Finally, as a result of the March 1997 preferred stock offering and certain other matters, the Company expects that its ongoing compensation expense will not include the amounts of cash and non- cash compensation experienced in 1996. The Company's revenues are generated through contracts for site development services and site leasing services. The Company provides site development services on a contract basis which is usually customer and project specific. The Company generally charges for site development services on either a time and materials basis, with or without a success fee, or a fixed price basis. For the year ended December 31, 1997, approximately 61% of site development services were performed on a time and materials basis. For the year ended December 31, 1996, the approximate percentage was 80%. The balance of services were performed on a fixed fee basis. SBA also provides site leasing services on a contract basis. The Company's antennae site leases are typically long- term agreements with renewal periods. Leases are generally paid on a monthly basis. Because of the low variable operating costs of the site leasing business, additional tenants on a tower generate disproportionately larger increases in tower cash flow. The Company is in the process of acquiring and constructing towers to be owned by the Company and leased to wireless services providers. The Company intends to continue to make strategic acquisitions in the fragmented tower owner and operator industry. The Company completed its first tower acquisition in June 1997, and spent $16.3 million in capital expenditures in fiscal 1997 on the acquisition and construction of tower assets and the acquisition of a tower construction company. Of the 90 towers owned by the Company as of March 31, 1998, 31 towers were constructed by the Company pursuant to build-to-suit programs. The Company currently owns towers in Connecticut, Florida, Georgia, Indiana, New York, Pennsylvania and Tennessee. As of such date, the Company had signed anchor tenant leases for 54 towers (the construction of which were pending or ongoing), 43 and non-binding mandates to build up to approximately 410 additional towers under build-to-suit programs (the majority of which the Company expects will result in binding anchor tenant lease agreements). The Company believes it has one of the largest numbers of non-binding build-to-suit mandates from wireless service providers in the industry. In addition, the Company is currently actively negotiating to acquire additional towers, although no agreements with respect to any such acquisitions have been reached other than with respect to 73 towers (as of March 31, 1998) that the Company intends on acquiring in the near term. There can be no assurance that the Company will be able to identify towers or tower companies to acquire in the future. TOWER ECONOMICS The Company intends to increase the site leasing portion of its business by constructing new multi-tenant towers, primarily through build-to-suit programs for wireless service providers, and by making selective acquisitions of existing towers. The Company evaluates potential tower construction and acquisition opportunities for projected future operating results before making any capital investments. The total cost of constructing a tower can vary significantly from site to site. The primary components of tower costs are the tower structure and related components, tower foundations, labor, site preparation and finish and providing vehicular and utilities access. If the Company is responsible for the zoning of a site prior to construction (which is often the case), the cost associated with obtaining such zoning may also be material. The Company estimates that the average cost of constructing a multi-tenant build-to-suit tower is approximately $225,000 exclusive of land costs, although this estimate may vary from site to site. While the Company may purchase the underlying property, the Company typically leases any necessary real estate pursuant to a long-term lease. The typical property lease has a term of five years, with the Company having the option to renew the lease for up to four additional five-year terms, and usually provides for annual or periodic price increases. As part of its build-to-suit strategy, the Company generally begins construction of a new tower only if an anchor tenant (which is typically a PCS, cellular or ESMR provider) has signed an antennae site lease agreement with the Company. The tower site is marketed to other wireless service providers whose monthly rents vary based usually on the different antennae installations and tower loading requirements of each type of service. The typical PCS, cellular or ESMR provider pays a monthly rent substantially greater than that of the typical paging provider. Other tenants, including local wireless service providers, generally pay lower monthly rent. Anchor tenants usually receive a discount over subsequent tenants of the same type of wireless service. In certain cases, an anchor tenant may also enjoy an introductory lease rate for a period of time. The Company's objective is to construct towers for identified anchor tenants in locations where it believes it can secure other wireless providers as additional tenants. Through the addition of new tenants, the Company seeks to achieve a target multiple of tower-level cash flow to the cost of construction by the end of a specified period following construction. The Company believes that its targeted multiple, which it constantly evaluates and is subject to change from time to time, can be achieved through a variety of tenant mixes ranging from two to three PCS, cellular or ESMR tenants to a greater number of paging or local wireless service providers. Additional tenants provide an increase in revenue without generating significant increases in operating expense. The expenses associated with tower ownership are limited and generally remain fixed regardless of the number of tenants on the tower. These expenses are primarily ground lease payments, real estate taxes, utilities, insurance and maintenance. Because of the operating leverage of the site leasing business, additional tenant leases generate a disproportionately higher increase in tower cash flow. Build-to-suit projects typically originate from a Company proposal submitted in response to a request from a wireless service provider. If the wireless service provider accepts the terms of the proposal submitted by the Company, the provider will award the Company a non-binding mandate to pursue (i) specific sites; (ii) search rings; or (iii) general areas. Based on the status of the site the Company has been given a mandate to pursue, the Company will perform due diligence investigations for a designated period (typically not to exceed 30 days) during which time the Company will analyze the site based on a number of factors, including collocation opportunities, zoning and permitting issues, economic potential of the site, difficulty of constructing a 44 multi-tenant tower and remoteness of the site. These mandates are non-binding agreements and either party may terminate the mandate at any time. If the Company concludes that it is economically feasible to construct the tower after the Company's due diligence investigation during the mandate, the Company will enter into an antennae site lease agreement with the provider. The antennae site lease agreements provide, among other terms, that all obligations are conditioned on the Company receiving all necessary zoning approvals where zoning remains to be obtained. Certain of the antennae site lease agreements contain penalty or forfeiture provisions in the event the tower is not completed within specified time periods. The Company has negotiated several master build-to-suit agreements (including antennae site lease terms) with wireless service providers in those markets where the Company believes that such agreements would encourage wireless service providers to award the Company with build-to-suit programs. The Company also regularly explores tower acquisition opportunities as part of its growth strategy. While the Company evaluates potential acquisitions on an individual basis, the Company's acquisition criteria are similar to its construction criteria. In general, the Company seeks to acquire towers with existing revenues in locations where it believes it will be able to secure other wireless service providers as tenants so that the tower will generate a targeted multiple of tower-level cash flow by a certain time period after its acquisition. Factors that the Company evaluates in making this determination include the existing number of tenants, current revenue of the tower, tower location, available tower capacity for additional tenants and the availability and likelihood of securing additional tenants. While the Company utilizes projections of future tower cash flows when evaluating potential tower constructions or acquisitions, there can be no assurance that the Company's projections will prove to be accurate nor can there be any assurance the Company will be able to successfully market a tower to other tenants or implement its build-out strategy on the timetable currently contemplated or at all. The economics of each tower are affected by numerous factors, many of which are beyond the Company's control, and there can be no assurance that any particular tower will generate the revenue projected at the time it is first constructed or acquired by the Company. See "Risk Factors." RESULTS OF OPERATIONS As the Company transitions its business by expanding into site leasing, operating results in prior periods may not be meaningful predictors of future prospects. Readers of the foregoing should be aware of the significant changes in the nature and scope of the Company's business when reviewing the following discussion of comparative historical results. Management expects that the acquisitions consummated to date, any future acquisitions and the Company's build-to-suit programs will have a material impact on future revenues, expenses and net income. In particular, operating expenses, depreciation and amortization and interest expense are expected to increase significantly in future periods. Management believes that the Company's build-to-suit programs will have a material adverse effect on future operations until such time (if ever) as the newly constructed towers attain higher levels of utilization. Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended December 31, 1996 Total revenues decreased 15% to $55.0 million for the twelve months ended December 31, 1997 from $64.8 million for the twelve months ended December 31, 1996. Site development revenues decreased 20% to $48.2 million for the twelve months ended December 31, 1997 from $60.3 million for the twelve months ended December 31, 1996, due primarily to the decreased demand for site development services from A- and B- block broadband PCS licensees. This was partially offset by the increased demand for services from D-, E-, and F- block broadband PCS licensees and ESMR providers. The decreased demand from A- and B- block licensees resulted from (i) the nearly completed build-out of their initial markets, (ii) the delayed commencement of the anticipated build-out of secondary or tertiary markets and (iii) the increasing acceptance by these licensees of outsourced communication site infrastructure through build-to- suit programs. Site leasing revenues increased 49% to $6.8 million in the twelve months ended December 31, 1997 from $4.5 million in the twelve months 45 ended December 31, 1996, due primarily to the continued growth of the lease/sublease business from new and existing paging clients and the acquisition by the Company of 30 revenue producing towers. At December 31, 1997, the Company's lease/sublease business covered approximately 1,041 antennae sites with an average monthly revenue of approximately $521 per site. At December 31, 1996, the Company's site leasing services covered approximately 980 antennae sites with an average monthly revenue of approximately $482 per site. Total cost of revenues decreased 15% to $36.8 million for the twelve months ended December 31, 1997 from $43.5 million for the twelve months ended December 31, 1996. Site development cost of revenues decreased 21% to $31.5 for the 1997 period from $39.8 million for the 1996 period, due primarily to decreased site development revenues. Site leasing cost of revenues increased 47% to $5.4 million in the 1997 period from $3.6 million in the 1996 period, due primarily to the increased volume of lease payments to site owners. Gross profits decreased 15% to $18.2 million for the 1997 period from $21.3 million for the 1996 period, due primarily to the decrease in site development revenues. Gross profit for site development services decreased 18% to $16.8 million for the twelve months ended December 31, 1997 from $20.5 million for the twelve months ended December 31, 1996. Gross profit for the site leasing business increased 57% to $1.4 million for the 1997 period from $0.9 million for the 1996 period. As a percentage of total revenues, gross profits remained constant at 33% for the 1997 period and the 1996 period. Sales and marketing expenses increased 273% to $2.7 million for the twelve months ended December 31, 1997 from $0.7 million for the twelve months ended December 31, 1996, due primarily to the establishment of regional offices and the reclassification of associated expenses. Due to the discontinuance by the Company of its regional office strategy, it is anticipated that sales and marketing expenses will decrease in future periods. General and administrative expenses decreased 54% to $8.3 million for the twelve months ended December 31, 1997 from $18.1 million for the twelve months ended December 1996 of $4.0 million, due primarily to a reduction in executive compensation and increased 1996 expenses associated with a bonus paid to Mr. Bernstein in 1996, the sole stockholder of the Company, and non-cash compensation expenses of $7.9 million relating to the granting of options to other officers of the Company. As a percentage of total revenues, general and administrative expenses decreased to 15% for 1997 from 28% in 1996. Excluding the effect of the above mentioned bonus and non-cash compensation expense, general and administrative expenses as a percentage of revenues would have increased to 15% for the 1997 period from 10% for the 1996 period. This increase was due to the addition of personnel and increased operating expenses required to grow the site leasing business. Operating income increased 163% to $6.6 million for the twelve months ended December 31, 1997 from $2.5 million for the twelve months ended December 31, 1996. Other income (expense) was not material in either period. Net income decreased 49% to $1.2 million for the twelve months ended December 31, 1997 from $2.4 million for the twelve months ended December 31, 1996. On a pro forma basis, net income decreased 15% to $1.2 million for the twelve months ended December 31, 1997 from $1.4 million for the twelve months ended December 31, 1996. These decreases resulted from a reduction in site development revenues and the inclusion of a provision for income taxes in 1997. Prior to 1997, the Company was not subject to tax at the corporate level. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 166% to $7.1 million in the twelve months ended December 31, 1997 from $2.7 million in the twelve months ended December 31, 1996, as a result of the factors discussed above. Tower Cash Flow, as defined in the Indenture, which requires an allocation of the Company's total operating expenses to its site leasing business, for the fourth quarter ended December 31, 1997 was ($0.1 million). Adjusted EBITDA for the year ended December 31, 1997 was $7.6 million. Twelve Months Ended December 31, 1996 Compared to Twelve Months Ended December 31, 1995 Total revenues increased 155% to $64.8 million for the twelve months ended December 31, 1996 from $25.5 million for the twelve months ended December 31, 1995. Site development revenues increased 166% to $60.3 million for the 1996 period from $22.7 million for the 1995 period, due primarily to the increased demand for site development services from A- and B- block broadband PCS licensees. Site leasing revenues increased 46 64% to $4.5 million in the 1996 period from $2.8 million in the 1995 period, due primarily to the continued growth of lease/sublease business from new and existing paging clients. At December 31, 1996, the Company's site leasing services covered approximately 980 sites with an average monthly revenue of approximately $482 per site. At December 31, 1995, the Company's site leasing services covered 640 sites with an average monthly revenue of approximately $430 per site. Total cost of revenues increased 170% to $43.5 million for the twelve months ended December 31, 1996 from $16.1 million for the twelve months ended December 31, 1995. Site development cost of revenues increased 185% to $39.8 million for the 1996 period from $14.0 million for the 1995 period, due primarily to higher personnel costs necessary to support the expansion of the business. Site leasing cost of revenues increased 72% to $3.6 million in the 1996 period from $2.1 million in the 1995 period, due primarily to the increased volume of lease payments to site owners. Gross profit increased 128% to $21.3 million for the 1996 period from $9.3 million for the 1995 period, due primarily to the increase in site development revenues. Gross profit for site development services increased 135% to $20.5 million for the twelve months ended December 31, 1996 from $8.7 million for the twelve months ended December 31, 1995. Gross profit for site leasing services increased 40% to $0.9 million for the 1996 period from $0.6 million for 1995 period. As a percentage of total revenues, gross profit decreased to 33% for the 1996 period from 37% for the 1995 period. This decrease was primarily due to the processing of pass-through costs (such as surveys, title reports and option fees) as a service to clients without markups and an increase in operations support personnel. Sales and marketing expenses increased 205% to $0.7 million for the twelve months ended December 31, 1996 from $0.2 million for the twelve months ended December 31, 1995, due principally to increased marketing activity and the hiring of additional sales and marketing personnel. General and administrative expenses increased 212% to $18.1 million for the twelve months ended December 31, 1996 from $5.8 million for the twelve months ended December 31, 1995, due primarily to an increase in the bonus paid to Mr. Bernstein, the sole stockholder of the Company and non-cash compensation expenses of $7.9 million relating to the granting of options to other officers of the Company. The bonus was $4.0 million for the 1996 period and $1.8 million for the 1995 period. Excluding the bonuses and non-cash compensation expenses, general and administrative expenses would have increased 54% to $6.2 million in the latter period from $4.0 million in the earlier period, primarily reflecting costs of the addition of personnel and increased operating cost. As a percentage of total revenues, general and administrative expenses increased to 28% for the 1996 period from 23% for the 1995 period. Excluding the effect of the above mentioned bonus and non-cash compensation expenses, general and administrative expenses as a percentage of revenues would have decreased to 10% for the 1996 period from 16% for the 1995 period. This decrease is attributable to significantly increased revenues offset by economies of scale. Operating income decreased 24% to $2.5 million for the twelve months ended December 31, 1996 from $3.3 million for the twelve months ended December 31, 1995. Other income (expense) was not material in either period. Accordingly, net income decreased 28% to $2.4 million for the 1996 period from $3.3 million for the 1995 period, due primarily to the non-cash compensation expenses of $7.9 million. Excluding the bonuses to Mr. Bernstein and the non-cash compensation expense described above, net income would have increased 181% to $14.3 million for the twelve months ended December 31, 1996 from $5.1 million for the twelve months ended December 31, 1995. On a pro forma basis, net income decreased 28% to $1.4 million for the year ended December 31, 1996 from $2.0 million for the year ended December 31, 1995. EBITDA declined 21% to $2.7 million in the twelve months ended December 31, 1996 from $3.4 million for the twelve months ended December 31, 1995, as a result of the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company is a holding company with no business operations of its own. The Company's only significant asset is the outstanding capital stock of its subsidiaries. The Company conducts all its business operations 47 through its subsidiaries. Accordingly, the Company's only source of cash to pay its obligations is distributions with respect to its ownership interest in its subsidiaries from the net earnings and cash flow generated by such subsidiaries. Even if the Company determined to pay a dividend on or make a distribution in respect of the capital stock of its subsidiaries, there can be no assurance that its subsidiaries will generate sufficient cash flow to pay such a dividend or distribute such funds. As a result of a preferred stock offering in March 1997, the Company realized net proceeds of $25.3 million after deducting the agents' commission, offering expenses and a stock redemption. These proceeds were used primarily for the repayment of short-term debt, for the funding of various expansion costs, for the construction and acquisition of various towers and for general working capital. Net cash provided by operations during the twelve months ended December 31, 1997 was $6.5 million compared to $1.2 million in the comparable period in 1996. The increase in net cash provided by operations was primarily attributable to the decrease in net income together with changes in the account balances associated with accounts receivable, accounts payable, intangibles and various tax accounts for the respective periods. Net cash used in investing activities for the twelve months ended December 31, 1997 was $16.3 million compared to $0.1 million for the twelve months ended December 31, 1996. The increase in cash used for investing activities resulted from the acquisition of towers and a tower construction company. Net cash provided by financing activities for the twelve months ended December 31, 1997 was $15.6 million compared to net cash used in financing activities of $1.0 million for the same period in 1996. The increase in net cash provided by financing activities was primarily attributable to the proceeds from the preferred stock offering. As of December 31, 1997 and December 31, 1996, the Company had negative working capital of $1.6 million and $0.7 million, respectively. On March 2, 1998 the Company issued $269 million 12% Senior discount notes due 2008 (the "Notes"). This offering provided approximately $150.2 million of gross proceeds to the Company. From these gross proceeds, the Company repaid approximately $20.2 million of existing indebtedness and paid approximately $5.7 million of fees and expenses. The remaining proceeds will be used primarily for the acquisition and construction of wireless communications towers, and for general corporate purposes including working capital. Prior to March 1, 2003, interest expense on the Notes will consist solely of non-cash accretion of original issue discount and the Notes will not require cash interest payments. After such time, the Notes will have accreted to $269.0 million and will require annual cash interest payments of approximately $32.3 million. In addition, the Notes mature on March 1, 2008. In February 1998, the Company received a commitment from a syndication of banks to amend and restate its existing credit facility. The new facility is expected to provide for revolving credit loans of $75.0 million and an additional $75.0 million incremental facility which may be made available within the initial 24 months of the credit facility, each to fund the acquisition and construction of towers, to provide working capital and for general corporate purposes. Pursuant to the commitment, the New Credit Facility is expected to provide for quarterly interest payments commencing as soon as any funds are borrowed thereunder, and the incremental facility is expected to have a 24-month revolving period after which any outstanding amounts will convert to a term loan and begin to amortize. Availability under the New Credit Facility is subject to a reduction schedule that commences on March 31, 2001. The schedule provides for a quarterly 5% amortization rate with a balloon payment on March 31, 2005. As of December 31, 1997, approximately $25.0 million would have been available under the New Credit Facility. The New Credit Facility is expected to be finalized and in place in the second quarter of 1998. The Company currently estimates that it will make at least $250.0 million of capital expenditures through fiscal year end 1999 for the construction and acquisition of communication sites, primarily towers. The Company and its subsidiaries expect to use the net proceeds, together with the availability under the New Credit Facility to fund these capital expenditures. However, the exact amount of the Company's future capital expenditures will depend on a number of factors. In 1998, the Company currently anticipates that it will build a significant number 48 of towers for which the Company has mandates pursuant to its build-to-suit program. The Company also intends to continue to explore opportunities to acquire additional towers. The Company's actual capital expenditures through fiscal year end 1999 will depend in part upon the attractiveness of acquisition opportunities that become available during the period, the needs of its primary build-to-suit customers and the availability of additional debt or equity capital on acceptable terms. In the event that the net proceeds from the Notes or borrowings under the New Credit Facility have otherwise been utilized when an acquisition or construction opportunity arises, the Company would be required to seek additional debt or equity financing, there can be no assurance that any such financing will be available on commercially reasonable terms or at all or that any additional debt financing would be permitted by the terms of the Company's existing indebtedness. The Company's ability to make scheduled payments of principal of, or to pay interest on, its debt obligations, and its ability to refinance any such debt obligations (including the Notes), or to fund planned capital expenditures, will depend on its future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. The Company's business strategy contemplates substantial capital expenditures in connection with its planned tower build-out and acquisition. Based on the Company's current operations and anticipated revenue growth, management believes that, if its business strategy is successful, cash flow from operations and available cash (including the proceeds from the Notes), together with available borrowings under the New Credit Facility, will be sufficient to fund the Company's anticipated capital expenditures through fiscal 1999. Thereafter, however, or in the event the Company exceeds its currently anticipated capital expenditures for fiscal 1998 or 1999, the Company anticipates that it will need to seek additional equity or debt financing to fund its business plan. Failure to obtain any such financing could require the Company to significantly reduce its planned capital expenditures, scale back the scope of its tower build-out or acquisitions and/or delay its transition to tower ownership, any of which could have a material adverse effect on the Company's prospects financial condition or results of operations. In addition the Company may need to refinance all or a portion of its indebtedness (including the Notes and/or the New Credit Facility) on or prior to its scheduled maturity. There can be no assurance that the Company will generate sufficient cash flow from operations in the future, that anticipated revenue growth will be realized or that future borrowings or equity contributions will be available in amounts sufficient to service its indebtedness and make anticipated capital expenditures. In addition, there can be no assurance that the Company will be able to effect any required refinancing of its indebtedness (including the Notes) on commercially reasonable terms or at all. YEAR 2000 The Company is aware of the issues associated with the Year 2000 (the "Year 2000") as it relates to information systems. The Year 2000 is not expected to have a material impact on the Company's current information systems because its current software is either already Year 2000 compliant or required changes are not expected to be material. Based on the nature of the Company's business the Company anticipates it is not likely to experience material business interruption due to the impact of Year 2000 compliance on its customers and vendors. As a result, the Company does not anticipate that incremental expenditures to address Year 2000 compliance will be material to the Company's liquidity, financial position or results of operations over the next few years. INFLATION The impact of inflation on the Company's operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future will not have material adverse effect on the Company's operating results. MARKET RISK The Company is exposed to market risks, including changes in interest rates and currency exchange rates. Based on the Company's interest rate and foreign exchange rate exposure at December 31, 1997, a 10% change in the current interest rate or historical currency rate movements would not have a material effect on the Company's financial position or results of operations over the next fiscal year. 49 INDUSTRY OVERVIEW GENERAL The Company is a leading independent provider of communication site services, offering a broad array of site development services to the wireless communications industry. In order to capitalize on the trend toward colocation and independent tower ownership in the wireless communications industry, the Company is aggressively expanding its site leasing business by utilizing its site development services experience and relationships with wireless service providers to source opportunities to build and acquire communication sites. The wireless communications industry continues to grow as consumers become more aware of the benefits of wireless services, current wireless technologies are used in more applications, the cost of wireless services to consumers declines and new wireless technologies are developed. Changes in U.S. federal regulatory policy, including the implementation of the Telecommunications Act of 1996 (the "1996 Telecom Act"), have led to a significant number of new competitors in the industry through the auction of frequency spectrum for a wide range of uses, most notably PCS. This competition, combined with a growing reliance on wireless services by consumers, has led to an increased demand for higher quality, uninterrupted service and improved coverage, which, in turn, has led to increased demand for communication sites as new providers build out their networks and existing providers upgrade and expand their networks to maintain their competitiveness. The Company believes that, as the wireless communications industry has become more competitive, wireless service providers have sought operating and capital efficiencies by outsourcing certain network services and build-out activities and by colocating transmission equipment with other providers on multi-tenant towers. The need for colocation has also been driven by the growing trend by municipalities to slow the proliferation of towers by requiring that towers accommodate multiple tenants. All of these factors have provided an opportunity for the Company to provide and own communication sites, lease antennae space on such sites and provide related network infrastructure and support services. NETWORKS AND TOWERS Wireless service providers require wireless transmission "networks" in order to provide service to their customers. Each of these networks is configured specifically to meet the coverage requirements of the particular provider and includes transmission equipment such as antennae placed at various locations throughout the service area. These locations, or "communication sites," are critical to the operation of a wireless network. A communication site may have the capacity for multiple antennae installations, or "antennae sites," depending on the size and type of the communication site. The value of a tower generally depends on its location and the number of antennae that it can support. 50 Set forth below is a diagram illustrating the basic functions of each of the primary components of a "wireless network." [WIRELESS COMMUNICATIONS NETWORK DIAGRAM APPEARS HERE] Communication sites consist of towers, rooftops and other structures upon which antennae are placed. A typical tower includes a compound enclosing the tower and an equipment shelter (which houses a variety of transmitting, receiving and switching equipment). The tower can be either a self-supported or guyed model. There are two types of self-supported models: the lattice and the monopole. A lattice model is usually tapered from the bottom up and can have three or four sides of open-framed steel supports. A monopole is a free- standing tubular structure. Guyed towers gain their support capacity from a series of guy cables attaching separate levels of the tower to anchor foundations in the ground. Monopoles typically range in height from 50-200 feet, lattice towers can reach up to 1000 feet and guyed towers can reach 2000 feet or more. Rooftop sites are more common in urban areas where tall buildings are generally available and multiple communication sites are required because of high wireless traffic density. One advantage of a rooftop site is that zoning regulations typically permit installation of antennae. In cases of such high population density, neither height nor extended radius of coverage are as important and the installation of a tower structure may prove to be impossible because of zoning restrictions, land cost and land availability. Other structures on which antennae have been installed include electric transmission towers, silos, water tanks, windmills and smokestacks. Operation of Two-Way Wireless Systems Wireless transmission networks use a variety of radio frequencies to transmit voice and data. Wireless transmission networks include two-way radio applications, such as cellular, wide band and narrow band PCS and ESMR networks, and one way radio applications, such as paging services. Each application operates within a distinct radio frequency. Although cellular represents the largest segment of the wireless communications industry, other wireless technologies are expected to grow significantly. Two-way wireless service areas are divided into multiple regions called "cells," each of which contains a base station consisting of a low-power transmitter, a receiver and signaling equipment, typically located on a 51 tower. The cells are usually configured in a grid pattern, although terrain factors (including natural and man-made obstructions) and signal coverage patterns may result in irregularly shaped cells and overlaps or gaps in coverage. Cellular system cells generally have a radius ranging from two miles to 25 miles and PCS system cells generally have a radius ranging from one- quarter mile to 12 miles, depending on the PCS technology being used, installation, height and the terrain. Growing demand for cell sites is one of the primary reasons for growing demand for the Company's services. The base station in each cell is connected by microwave, fiber optic cable or telephone wires to a switch, which uses computers and specially developed software to control the operation of the wireless telephone system for its entire service area. The switch controls the transfer of calls from cells within the system and connects calls to the local landline telephone system or to a long distance telephone carrier. Each wireless transmission network is planned to meet a certain level of subscriber density and traffic demand in addition to providing a certain geographic coverage. Each transmission requires a certain amount of radio frequency, so a system's capacity is limited by the amount of frequency that is available. The same frequency can be reused by each separate transmitter, subject to certain interference limitations. The design of each wireless system involves the placement of transmission equipment in locations that will make optimal use of available frequency based upon projected usage patterns, subject to the availability of such locations and the ability to use them for wireless transmission under applicable zoning requirements. Wireless Communications The wireless communications industry now provides a broad range of services, including cellular, PCS, paging, SMR and ESMR. The industry has benefited in recent years from increasing demand for its services, and industry experts expect this demand to continue to increase. The following table sets forth industry estimates regarding projected subscriber growth for certain types of wireless communications services:
1997-2001 2001-2006 ESTIMATED PROJECTED PROJECTED COMPOUNDED COMPOUNDED 1997 2001 2006 ANNUAL ANNUAL SUBSCRIBERS SUBSCRIBERS SUBSCRIBERS GROWTH RATE GROWTH RATE ----------- ----------- ----------- ----------- ----------- (IN MILLIONS, EXCEPT PERCENTAGES) Cellular(1)........ 52.8 79.1 91.4 14.4% 3.7% PCS(1)............. 3.5 29.7 54.7 104.0% 16.5% Paging(2).......... 48.6 61.9 67.8 8.4% 2.3% ESMR(1)............ 1.3 6.7 11.0 72.7% 13.2%
- -------- (1) Data is from January 1998. (2) Data is from January 1997, except year end 1997 number. Source: Paul Kagan Associates, Inc. There can be no assurance that these projections will prove to be accurate. The Company believes that more communication sites will be required in the future to accommodate the expected increase in demand for wireless communications services. Current emerging wireless communications systems, such as PCS and ESMR, represent an immediate and sizable market for providers of communication site services as they build out large nationwide and regional networks. The development of higher frequency technologies such as PCS offer the Company opportunities as the reduced cell range of those technologies require a more dense network of towers. While several PCS and ESMR providers have already built limited networks in certain markets, these providers still need to fill in "dead zones" and expand geographic coverage. The Cellular Telecommunications Industry Association (the "CTIA") estimates that, as of June 30, 1997, there were 38,650 antennae sites in the United States. In October 1995, the PCIA estimated that the number of antennae sites in the United States for both cellular and PCS providers will increase by an additional 100,000 antennae sites (more than one of which can be located on a single communication site) over the next ten years as cellular systems expand coverage and PCS systems are deployed. As a result of advances in digital technology, ESMR operators have also begun to design and deploy digital mobile telecommunications networks in competition with cellular providers. In response to the increased competition, cellular operators are re-engineering their networks by increasing the number of sites, locating sites 52 within a smaller radius, filling in "dead zones" and converting from analog to digital cellular service in order to manage subscriber growth, extend geographic coverage and provide competitive services. The demand for communication sites is also being stimulated by the development of new paging applications, such as e-mail and voicemail notification and two-way paging, as well as other wireless data applications. Licenses are also being awarded, and technologies are being developed, for numerous new wireless applications that will require networks of communication sites. These future potential applications include the auction of licenses scheduled for February 1998 for local multi-point distribution services, including wireless local loop, wireless cable television, data and Internet access. Radio spectrum required for these technologies has, in many cases, already been awarded and licensees have begun to build out and offer services through new wireless systems. Examples of these systems include local loop networks operated by WinStar and Teligent, wireless cable networks operated by companies such as Cellular Vision and CAI Wireless, and data networks being constructed and operated by RAM Mobile Data, MTEL and Ardis. CHARACTERISTICS OF THE TOWER INDUSTRY In addition to the increased demand for wireless services and the need to develop and expand wireless communications networks, the Company believes that other trends influencing the wireless communications industry have important implications for independent tower operators. In this increasingly competitive wireless industry environment, the Company believes that many providers are dedicating their capital and operations primarily to those activities that directly contribute to subscriber growth, such as marketing and distribution. Management believes these providers, therefore, will seek to reduce costs and increase efficiency through the outsourcing of infrastructure network functions such as communication site ownership, construction, operation and maintenance. Further, in order to speed new network deployment or expansion and generate efficiencies, providers are increasingly colocating transmission equipment with that of other wireless service providers. The trend towards colocation has been furthered by the "Not-In-My-Backyard" arguments generated by local zoning/planning authorities in opposition to the proliferation of towers. Management believes that, in addition to the favorable growth and outsourcing trends in the wireless communications industry and high barriers to entry as a result of regulatory and local zoning restrictions associated with new tower sites, tower operators benefit from several favorable characteristics. The ability of tower operators to provide antennae sites to customers on multiple tenant towers diversifies them against the specific technology, product and market risks typically faced by any individual provider. The emergence of new technologies, providers, products and markets may allow independent tower operators to further diversify against such risks. The Company believes that independent tower operators also benefit from the contract nature of the site leasing business and the predictability and stability of these recurring revenues. In addition, the site leasing business has low variable operating costs and significant operating leverage. Towers generally are fixed cost assets with minimal variable operating costs associated with additional tenants. A tower operator can generally expect to experience increasing operating margins when new tenants are added to existing towers. The site leasing business typically experiences low customer churn rates as a result of the high costs that would be incurred by a wireless service provider were it to relocate an antennae to another site and consequently be forced to re-engineer its network. Moving a single antennae may alter the pre- engineered maximum signal coverage, requiring a reconfigured network at significant cost to maintain the same coverage. Municipal approvals are becoming increasingly difficult to obtain and may also affect the provider's decision to relocate. The costs associated with network reconfiguration and municipal approval and the time required to complete these activities are not justified by any potential savings in reduced site rental expense. 53 BUSINESS GENERAL The Company is a leading independent provider of communication site services, offering a broad array of site development services to the wireless communications industry. In order to capitalize on the trend toward colocation and independent tower ownership in the wireless communications industry, the Company is aggressively expanding its site leasing business by utilizing its site development experience and relationships with wireless service providers to source opportunities to build and acquire communication sites. The Company believes that it is the largest provider of site development services in the United States, having participated since its founding in 1989 in one or more aspects of the development of more than 8,000 antennae sites (including over 3,500 in 1997) in 49 of the 51 MTAs. The Company anticipates significant future growth in its site leasing business whereby the Company leases antennae space on towers it owns, leases or manages. The Company is both acquiring towers suited for multi-tenant use and building such towers, generally under build-to-suit programs whereby a wireless service provider enters into a lease as an anchor tenant with the Company for antennae space prior to the Company's commencement of tower construction. As of March 31, 1998, the Company owned 90 towers, had 73 towers pending acquisition under written or verbal letters of intent or definitive agreements, had signed anchor tenant leases for an additional 54 towers (36 of which were with Sprint PCS) under build-to-suit programs (the construction of which was pending or ongoing) and had non- binding mandates to build up to approximately 410 additional towers (the majority of which the Company expects will result in signed anchor tenant leases). The Company's build-to-suit awards as of March 31, 1998 included 183 mandates from BellSouth Mobility, 69 from Nextel and 48 mandates from AT&T Wireless. For a discussion of the process by which mandates lead to signed anchor tenant leases and constructed towers, see "Business--Site Leasing Business--Build-to-Suit Program." The Company's revenues and Adjusted EBITDA (as defined) for the year ended December 31, 1997 were $55.0 million and $7.6 million, respectively. The Company's annualized site leasing revenues for the month of December 1997, based on leases then in effect, were $8.4 million. The Company offers an integrated "end-to-end" service with design, construction and operating expertise to a range of wireless service providers, including PCS, cellular, paging, SMR, ESMR and other providers. The Company's site development services include site location analysis, site acquisition, zoning and land use permitting, construction and construction management, FAA compliance analysis and filings, contract and title administration and building permit administration. The Company is typically paid fees for its site development services on a project-by-project basis. In the site leasing business, the Company's primary focus is the ownership of multi-tenant towers and the leasing of antennae space on such towers to a variety of wireless service providers under long-term lease contracts. The site leasing business typically benefits from diversified recurring revenue and effective operating leverage as a result of several factors, including: (i) the long-term contract nature of lease revenues; (ii) low customer churn rates due to the high cost of relocation; (iii) low variable operating costs, which cause increases in revenues to generate disproportionately larger increases in tower cash flow; (iv) low on-going maintenance capital expenditure requirements; (v) a customer base diversified across geographic markets, industry segments (PCS, cellular, paging, ESMR and SMR) and individual customers within these segments; and (vi) the limited number of available tower sites serving a given area and consequent barriers to entry, principally as a result of local opposition to the proliferation of towers within such area. In the fourth quarter of 1996, based on its analysis of accelerating trends in the wireless communications industry and the financial benefits of the site leasing business, the Company determined to leverage its leadership in the site development services business in order to expand into the ownership and leasing of communication sites. Consequently, the Company has added build-to- suit programs and other antennae site leasing options to its service offerings and has sought the acquisition of attractive communication sites. Under a build-to-suit program, the Company generally undertakes its site development services on behalf of a wireless service provider but constructs a tower at the Company's expense. In return, the wireless service provider enters into a long-term anchor tenant lease and the Company retains ownership of the tower and has the ability to colocate additional tenants. Management believes that many wireless service providers are using build-to-suit programs as an alternative to tower ownership and that this outsourcing trend is likely to continue. The Company's build-to-suit 54 programs provide an end-to-end solution to those wireless service providers seeking to minimize their capital expenditures, overhead and time associated with the build-out and on-going maintenance of their wireless network infrastructure. Management believes its leadership in site development services, its existing national field organization of more than 300 employees and its strong relationships with wireless service providers position the Company to be a leader in the developing build-to-suit market. The Company believes that its site leasing business will continue to grow, particularly through greater acceptance of build-to-suit programs, but that it will continue to experience a decrease in its site development business. Management expects that the site leasing services offered by the Company will, in time, produce the majority of the Company's operating cash flows. However, due to trends in the wireless communications industry and the promotion of build-to- suit programs by the Company, the Company expects that its total revenues and EBITDA will decline in the near term, as the demand for site development services decreases and is replaced by an expected increase in site leasing revenues over the longer term. In addition, the Company anticipates that its operating expenses will increase significantly as the Company implements its strategy of acquiring tower assets. The Company's results of operations in 1997 have begun to reflect the impact of these trends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Management believes that the number of communication sites (which include towers, rooftops and other structures) in use will continue to increase with the growth in demand for wireless services. This growth is the result of several factors, including (i) the issuance of new wireless network licenses requiring the construction of new wireless networks; (ii) the continuing build-out of higher frequency technologies (such as PCS) which have a reduced cell range and thus require a more dense network of towers; (iii) the need to expand services and fill-in and upgrade existing networks; and (iv) the emergence of new wireless technologies. In October 1995, the PCIA estimated that the number of antennae sites in the United States for both cellular and PCS providers will increase by an additional 100,000 antennae sites (more than one of which can be located on a single communication site) over the next ten years as cellular systems expand coverage and PCS systems are deployed. Management believes that wireless service providers have begun to focus their capital and operations primarily on activities that build subscriber growth, such as marketing and distribution, and, therefore, that wireless service providers will increasingly seek to outsource site ownership, construction, management and maintenance. The Company believes that it will benefit from this trend. BUSINESS STRATEGY The Company's strategy is to build on its leadership position in site development services to become a leading owner and operator of communication sites. Key elements of the Company's strategy include: BUILD, OWN AND LEASE TOWERS. The Company believes that there are various financial considerations currently affecting wireless service providers, including the need to optimize capital resources. Increasingly, these factors have led wireless service providers to consider outsourcing the investment in, and ownership of, communication sites. Management believes that it has positioned the Company to meet these outsourcing needs, leveraging its expertise in the site development business to construct towers with anchor tenants pursuant to build-to-suit programs. The Company believes that it has one of the largest number of non-binding build-to-suit mandates from wireless service providers in the industry. The Company has received non-binding mandates from approximately eight major wireless service providers to execute build-to-suit programs. As of March 31, 1998, the Company had signed anchor tenant leases for 54 towers (the construction of which were pending or ongoing) and had non-binding mandates to build up to approximately 410 additional towers under build-to-suit programs. ACQUIRE EXISTING TOWERS. The Company intends to continue to make strategic acquisitions in the fragmented tower owner and operator industry. The Company's strategy is to acquire only those towers that the Company believes will be attractive to, and capable of use by, multiple tenants based on location, height, local competition and available capacity. The Company will continue to pursue larger acquisitions to provide critical mass and smaller acquisitions that have the potential for more attractive returns. Management believes that its existing national field organization provides it with a competitive advantage in identifying opportunities for the acquisition of existing towers. The Company regularly evaluates acquisition opportunities and engages in 55 negotiations with respect to acquisitions of individual towers, groups of towers and entities that own or manage towers and related businesses. However, except as otherwise contemplated herein, as of the date hereof, there are currently no agreements with respect to any pending acquisitions. MAINTAIN AND CAPITALIZE ON STRONG RELATIONSHIPS WITH MAJOR WIRELESS SERVICE PROVIDERS. Management believes that it is well-positioned to be a preferred partner in build-to-suit programs because of its strong relationships with wireless service providers and proven operating experience. The Company believes that it will be able to build upon its existing relationships with wireless service providers to source further opportunities for build-to-suit programs and lease antennae space on its owned towers. In many cases, the personnel awarding site development projects for wireless service providers are the same personnel who make decisions with respect to build-to-suit programs. The Company is continually marketing its build-to-suit programs to its site development service customers. The Company's build-to-suit customers as of March 31, 1998 included Sprint PCS, AT&T Wireless, PrimeCo PCS, Nextel and BellSouth Mobility. INCREASE USE OF COMPANY-OWNED TOWERS. The Company's strategy for its owned, leased and managed towers is to maximize the number of tenants on each tower, thereby increasing its leasing revenues per tower. Because most tower costs are fixed, leasing available space on an existing tower results in minimal additional ongoing expenses and therefore generates a disproportionately large increase in operating cash flow. The Company believes that many of its towers have or will have significant capacity available for antennae space leasing and that increased use of its owned towers can be achieved at low incremental cost. The Company generally constructs build-to-suit towers to accommodate multiple tenants in addition to the anchor tenant. The Company actively markets space on its owned towers through its internal sales force. Once the Company has identified a site for acquisition or construction, the sales force immediately commences marketing that site to potential tenants. MAINTAIN LEADERSHIP POSITION IN SITE DEVELOPMENT SERVICES. The Company has performed an array of site development services for over 35 wireless service providers across the United States, including Sprint PCS, Pacific Bell Mobile Services, AT&T Wireless, Nextel, PrimeCo PCS, PageNet and BellSouth Mobility. Management believes the Company is the largest provider of site development services in the United States. The Company has a broad national field organization that allows it to identify and participate in site development projects across the country. Knowledge of local markets and strong customer relationships with wireless service providers are competitive strengths that position the Company to further capitalize on the site development needs of the wireless communications industry. The Company recently acquired CSSI, which is a tower construction company operating primarily in the southeastern United States. This acquisition increased the Company's expertise in managing the construction component of its business which enabled the Company to directly provide construction services to third parties and, on a selective basis, for its own build-to-suit programs. The Company believes that CSSI will enable the Company to capture more of the wireless service providers' total site development business and build-to-suit programs and to enhance its end- to-end approach to service. COMPETITIVE STRENGTHS Management believes that the Company has several important competitive strengths that have contributed to its leadership position in the site development business. Management believes that these strengths will enable it to successfully expand its site leasing business. Key strengths include: PROVEN OPERATING EXPERIENCE. The Company has been operating in the site development business since 1989 and believes that it is the largest provider of such services in the United States. As of December 31, 1997, the Company had successfully participated in one or more aspects of the development of more than 8,000 antennae sites (including over 3,500 in 1997). As a result, management believes that the Company has built a strong national reputation with wireless service providers as a leading provider of site development services. Operating its site development business has enabled the Company and management to gain experience executing all stages of site development, and these same skills are utilized in the course of constructing a build-to-suit tower. Management believes that this operating history and proven track record give the Company a competitive 56 advantage in the build-to-suit tower construction business. In addition, as of March 31, 1998, the Company administered approximately 1,075 antennae sites whereby it leases the sites from site owners and subleases such sites to wireless service providers at a profit. The Company has developed and will continue to improve the systems and software to manage and oversee multiple sites and lease contracts. Management believes that these systems and software capabilities, together with the Company's operating expertise, will be critical to it in building a successful national site leasing business. MARKET EXPERIENCE. The Company believes that its national field organization and site development experience in 49 of the 51 MTAs provide the Company with a significant competitive advantage. Because of such experience, the Company has its own knowledge base of many areas within most MTAs and, more importantly, has the ability to more effectively analyze local requirements with respect to a particular site development project or a build-to-suit mandate. The Company also believes that its substantial field experience provides it with an advantage in selecting and constructing new towers. INTEGRATED PROVIDER OF SITE DEVELOPMENT SERVICES. Management believes that the Company benefits from its integrated, end-to-end service capabilities, as wireless service providers prefer the flexibility of a vendor who can perform, directly or through subcontractors, any or all of the functions related to site acquisition, development, construction and on-going operation. CAPABILITY TO MANAGE MULTIPLE PROJECTS. The Company has been able to successfully manage multiple site development projects in various locations across the country at the same time. Management believes that the ability to undertake concurrent build-to-suit programs in multiple markets will be attractive to wireless service providers. COMPANY SERVICES General The Company is a leading independent provider of communication site services, offering a broad array of site development services to the wireless communications industry. The Company is a provider with end-to-end design, construction and operating expertise, offering its customers the flexibility of choosing between the provision of a full ready-to-operate site or any of the component services involved therein. The site development services provided by the Company, directly or through subcontractors, include all activities associated with the selection, acquisition and construction of communication sites for wireless service providers. The site leasing services provided by the Company directly or through subcontractors include owning, leasing or managing communication sites and leasing antennae space on communication sites to wireless service providers. The full range of services of the site development business typically occur in five phases: (i) network pre-design; (ii) communication site selection; (iii) communication site acquisition; (iv) local zoning and permitting; and (v) site construction and antennae installation. The Company utilizes its experience and expertise in the site development business to provide additional services in its site leasing business, providing for (i) the ownership or management of communication sites by the Company pursuant to build-to-suit programs and through acquisitions; (ii) the leasing or subleasing of antennae space on communication sites to wireless service providers and (iii) the maintenance and management of communication sites by the Company. Where appropriate, the Company contracts out certain of the site development services. Site Development Business The Company offers each phase of its site development services to its customers. During Phase I, network pre-design, the Company performs pre-design analysis by investigating those areas of the MTA or basic trading area ("BTA"), as each term has been adopted by the FCC, that are designated as a priority by the customer. The Company will then identify, to the extent possible, all sites which meet the customer's RF requirements. Geographic Information Systems ("GIS") specialists create maps of the sites, analyzing for a number of factors, including which areas may have the most favorable zoning regulations and availability of colocation opportunities. A preliminary zoning analysis is typically conducted, and the Company will determine those areas of the MTA or BTA where zoning approval is likely, along with a possible time frame for approval. Phase I 57 services are intended to eliminate costly redesigns once a project is commenced which can result in significant savings of both time and money. In Phase II, site selection, the Company determines (i) which sites most closely meet the RF engineering requirements of the customer; (ii) are leasable or can be purchased; (iii) have the potential to be zoned for site construction or colocation based on the then current zoning requirements; and (iv) are suitable for the construction of a site. GIS specialists select the most suitable sites based on demographics, traffic patterns and signal characteristics. Typically, the Company will identify two or three potential sites for each location in the RF engineering plan, with the intent of colocating on an existing site or constructing a new site on the location most advantageous to the customer. FAA approval, when necessary, is also typically sought at this time. In Phase III, site acquisition, the Company secures the right from the property owner to construct a tower or colocate on the site. Depending on the type of interest in the property that the Company believes will best suit the needs of the customer, the Company will negotiate and enter into on behalf of the customer (i) a contract of sale pursuant to which the customer acquires fee title to the property; (ii) a long-term ground or rooftop lease pursuant to which the customer acquires a leasehold interest in the property (typically a five-year lease with four or five renewal periods of five years each); (iii) an easement agreement pursuant to which the customer acquires an easement over the property; or (iv) an option to purchase or lease the property pursuant to which the customer has a future right to acquire fee title to the property or acquire a leasehold interest. It is during this phase of the site development services that the Company generally obtains a title report on the site, conducts a survey of the site, performs soil analysis of the site and obtains an environmental survey of the site. Phase IV, local zoning and permitting, includes preparing all appropriate zoning applications and providing representation at any zoning hearings that may be conducted. The Company also obtains all necessary entitlement land use permits necessary to commence construction on the site or install equipment on the site. Phase V, construction and installation, involves the construction management of the tower on a selected site, whether by the third party or directly by the Company. Phase V includes preparing a construction budget, installing or monitoring the installation of equipment and antennae, hiring sub-contractors to perform the actual construction of the tower or equipment installation when not performed by the Company, preparing a construction schedule, monitoring all vendors' delivery and installation of equipment and monitoring the completion of all construction and landscaping of the site. The CSSI Acquisition provides the Company with in-house tower construction and antennae installation capability. CSSI has extensive experience in the development and construction of tower sites and the installation of antennae, microwave dishes and electrical and telecommunications lines. CSSI's site development and construction services include clearing sites, laying foundations and electrical and telecommunications lines, and constructing equipment shelters and towers. CSSI has designed and built tower sites for a number of its customers and will continue to provide construction services for third parties. In addition, CSSI has constructed and is expected to construct a portion of the Company's towers in the future. Through CSSI, the Company can provide cost-effective and timely completion of construction projects in part because its site development personnel are cross-trained in all areas of site development, construction and antennae installation. CSSI maintains a varied inventory of heavy construction equipment and materials at its five-acre equipment storage and handling facility in Florida, which is used as a staging area for projects in the southeastern region of the United States. The Company's site development business is headquartered in Boca Raton, Florida. Once the Company is hired on a site development project, a site development team is dispatched from headquarters to the project site. A temporary field office is established for the duration of the project. The site development team is typically composed of permanent Company employees and supplemented with local hires employed only for that particular project. A team leader is assigned to each phase of the site development project and reports to a project manager who oversees all team leaders. Upon the completion of a site development project, the field office is typically closed and all permanent Company employees are either relocated to another project or directed to return to headquarters. 58 The Company generally sets prices for each site development service separately. Customers are billed for these services on a fixed price or time and materials basis and the Company may negotiate fees on individual sites or for groups of sites. Site Leasing Business The site leasing business consists of (i) the ownership of communication sites pursuant to build-to-suit programs and acquisitions; (ii) the leasing or subleasing of antennae space on communication sites to wireless service providers; and (iii) the maintenance and management of communication sites. The Company leases and subleases antennae space on communication sites to a variety of wireless service providers. The Company owns or leases such communication sites from third parties, and in the future may manage communication sites for third parties in exchange for a percentage of the revenues or tower-level cash flow. All of the Company's owned towers are the result of build-to-suit programs or acquisitions. In its build-to-suit programs, the Company utilizes some or all of the five phases of its site development business as it would when providing site development services to a third party. After a tower has been constructed, the Company leases antennae space on the tower. The Company generally receives monthly lease payments from customers payable under written antennae site leases. The majority of the Company's outstanding customer leases, and the new leases typically entered into by the Company, have original terms of five years (with four or five renewal periods of five years each) and usually provide for annual or periodic price increases. Monthly lease pricing varies with the number and type of antennae installed on a communication site. Broadband customers such as PCS, cellular or ESMR generally pay substantially more monthly rent than paging or other narrowband customers. The Company also provides a lease/sublease service as part of its site leasing business whereby the Company leases space on a communication site and subleases the space to a wireless service provider. Management believes that the site leasing portion of the Company's business has significant potential for growth and the Company intends to expand its site leasing business through (i) increasing activity from its build-to-suit programs and (ii) selective acquisitions. As of March 31, 1998, the following table indicates the total number of build-to-suit and acquired towers of the Company.
BUILD- NUMBER OF TO- LOCATION OF TOWERS TOWERS SUIT ACQUIRED % OF TOTAL - ------------------ --------- ------ -------- ---------- Connecticut............................... 1 -- 1 1 Florida................................... 15 5 10 17 Georgia................................... 21 21(1) -- 23 Indiana................................... 1 1 -- 1 Kentucky.................................. 1 1 -- 1 New York.................................. 23 3 20 26 Pennsylvania.............................. 17 -- 17 19 Tennessee................................. 11 -- 11 12 --- --- --- --- Total................................... 90 31 59 100 === === === ===
- -------- (1) This number includes 13 build-to-suit towers acquired prior to their completion as part of the CSSI Acquisition. Build-to-Suit Programs Under its build-to-suit programs, the Company generally constructs towers only after having signed an antennae site lease agreement with an anchor tenant and having made the determination that the initial or planned capital investment for such tower would not exceed a targeted multiple of tower cash flow after a certain period of time. In selling its build-to-suit programs, the Company's sales representatives utilize their existing relationships in the wireless communications industry to target wireless service providers interested in outsourcing their network buildout. Proposals for build-to-suit towers are made by the Company's sales 59 representatives in response to competitive bids or specific requests and in circumstances where the Company believes the provider would have interest in build-to-suit towers. Although the terms vary from proposal to proposal, the Company typically offers a five-year lease agreement with four additional five-year renewal periods. While the proposed monthly rent also varies, broadband customers such as PCS, cellular or ESMR generally pay more than the aggregate monthly rent paid by paging or other narrowband customers. In addition, anchor tenants will typically pay lower monthly rents than subsequent tenants of a similar type service. In certain cases, an anchor tenant may also enjoy an introductory lease rate for a period of time. If a wireless provider accepts the terms of the proposal submitted by the Company, the provider will award the Company a non-binding mandate to pursue (i) specific sites; (ii) search rings; or (iii) general areas. Based on the status of the site the Company has been given a mandate to pursue, the Company will perform due diligence investigations for a designated period (typically not to exceed 30 days) during which time the Company will analyze the site based on a number of factors, including colocation opportunities, zoning and permitting issues, economic potential of the site, difficulty of constructing a multi-tenant tower and remoteness of the site. These mandates are non- binding agreements and either party may terminate the mandate at any time. If, after the Company's due diligence investigation during the mandate, the Company concludes that it is economically feasible to construct the tower, the Company will enter into an antennae site lease agreement with the provider. The antennae site lease agreements provide, among other terms, that all obligations are conditioned on the Company receiving all necessary zoning approvals where zoning remains to be obtained. Certain of the antennae site lease agreements contain penalty or forfeiture provisions in the event the tower is not completed within specified time periods. The Company has negotiated several master build-to-suit agreements, including antennae site lease terms, with providers in specific markets that the Company believes will facilitate its obtaining build-to-suit programs from such providers in those markets. Acquisitions The Company actively pursues acquisitions of revenue-producing communication sites. The Company's acquisition strategy, like its build-to-suit strategy, is financially-oriented as opposed to geographically or customer-oriented. The Company's goal is to acquire towers that have an initial or planned capital investment not exceeding a targeted multiple of tower cash flow after a certain period of time. Tower cash flow is determined by subtracting from gross tenant revenues the direct expenses associated with operating the communication site, such as ground lease payments, real estate taxes, utilities, insurance and maintenance. As of March 31, 1998, the Company owned 90 revenue producing towers, including 15 through the CSSI Acquisition for which the Company completed construction. As of December 31, 1997, total capital expenditures associated with the acquisition and construction of 51 towers were approximately $14.2 million. In connection with the CSSI Acquisition, the Company expects to invest up to $4.8 million by September 1998 to complete construction of the towers acquired and as a contingent payment to the sellers, provided that certain tenant revenue goals are realized. In January 1998, the Company also acquired 17 towers in Pennsylvania at an initial cost of $3.3 million with an additional contingent payment of $2.0 million if certain target revenues are met. Further, the Company anticipates that it will cost an additional $0.7 million to upgrade and rebuild such towers. As of December 31, 1997, there were 230 tenant leases on such towers, ranging from one tenant to 13 tenants per tower and generating gross revenues per tower ranging from $9,600 per year to $98,105 per year. The Company's acquisition activities are directed by dedicated mergers and acquisitions personnel who are responsible for identification, negotiation, documentation and consummation of acquisition opportunities, as well as the coordination and management of independent advisors and consultants retained by the Company from time to time in connection with acquisitions. In addition to its mergers and acquisitions personnel, the Company relies on its national field representatives to identify potential acquisitions. Acquisition prospects identified by the Company's field representatives are generally smaller, involving one to five towers, and often provide the Company with the exclusive opportunity to structure and consummate a transaction with the potential seller. The Company believes that its field representatives and knowledge of potential acquisition candidates gained through its substantial site development business experience provide it with a competitive advantage, and will permit the 60 Company to identify and consummate acquisitions on more favorable terms than would be available to the Company through competitively-bid or brokered acquisition prospects. As is the case with its build-to-suit programs, the Company's focus is to acquire multi-tenant communication sites with underutilized capacity in locations that the Company believes will be attractive to wireless service providers which have not yet built out their service in such locations. Lease/Sublease Under its lease/sublease program, the Company leases antennae space on a communication site and then subleases such space to wireless service providers. These providers prefer the financial benefits associated with the lease/sublease program, which include reduced capital expenditures, as compared to paying for site development services on a fee basis. Wireless paging providers comprise a significant majority of customers who sublease antennae sites from the Company. The subleases generally have original terms of five years (with four or five renewal periods of five years each) and usually provide for annual or periodic price increases. Maintenance and Management Once acquired or constructed, the Company maintains and manages its communication sites through a combination of in-house personnel and independent contractors. In-house personnel are responsible for oversight and supervision of all aspects of site maintenance and management, and are particularly responsible for monitoring security access and lighting, RF emission and interference issues, signage, structural engineering and tower capacity, tenant relations and supervision of independent contractors. Independent contractors are hired locally by the Company to perform routine maintenance functions such as landscaping, pest control, snow removal, vehicular access, site access and equipment installation oversight. Independent contractors are engaged by the Company on a fixed fee or time and materials basis or, in a few limited circumstances where such contractors were sellers of towers to the Company, for a percentage of tower cash flow. The Company is in the process of developing its network operations center in Boca Raton, Florida where it will centralize monitoring of security access and lighting, as well as other functions. These tasks are currently outsourced by the Company to independent contractors or to the PCS or cellular tenants on the Company's towers. It is anticipated that the network operations center will be operational in the second quarter of 1998. As the number of communication sites owned and managed by the Company increases, the Company anticipates increased expenditures to expand its maintenance infrastructure, including expenditures for personnel and computer hardware and software, and such expenditures may be material. CUSTOMERS The Company has performed site development and site leasing services for several of the largest wireless service providers over the past eight years. The majority of the Company's contracts have been for PCS broadband, cellular and paging customers. The Company also serves PCS narrowband, ESMR, SMR and MDS wireless providers. In both its site development and site leasing businesses, the Company works with both large national providers and smaller local, regional or private operators. In the twelve-month period ended December 31, 1997, the Company's largest customers were Sprint PCS and Pacific Bell Mobile Services, representing 53.6% and 13.9%, respectively, of site development revenues and PageNet and A+ Network, representing 60.0% and 12.5%, respectively, of site leasing revenues. No other customer represented more than 10.0% of the Company's revenues. See "Risk Factors--Customer Concentration." 61 Customers for whom the Company has provided site development services in 1996 or 1997 include: A+ Network Pacific Bell Mobile Services Aerial Communications PageNet AT&T Wireless Services Paging Network, Inc. Bell Atlantic NYNEX Mobile Systems Powertel BellSouth Mobility PrimeCo PCS CellNet Data Systems Spectrum Resources, Inc. Centennial Communications Sprint PCS Commnet Cellular, Inc. 360(degrees)Communications Company Nextel US West Communication Omnipoint WinStar SALES AND MARKETING The Company's sales and marketing goals are (i) to further cultivate existing customers to maximize sales of site development services, as well as to obtain mandates for build-to-suit programs; (ii) to sustain its market leadership position in the site development business; (iii) to position the Company to become a market leader in the site leasing business; (iv) to use existing relationships and develop new relationships with wireless service providers to lease antennae space on Company owned or managed communication sites; and (v) to form affiliations with select communications systems vendors who utilize end-to-end services, including those provided by the Company, which will enable the Company to market its services and product offerings through additional channels of distribution. Historically, the Company has capitalized on the strength of its experience, performance and relationships with wireless service providers to position itself for additional site development business. The Company has leveraged these attributes to obtain build-to-suit mandates, and expects to continue to enhance and leverage these attributes to sell site development services, build-to-suit programs and antennae space on Company owned or managed communications sites. The Company has a dedicated sales force supplemented by members of the Company's executive management team. Maintaining and cultivating relationships with wireless service providers is a main focus of senior management. The Company's strategy is to delegate sales efforts to those Company employees who have the best relationships with the wireless service providers. The representatives are assigned specific accounts based on historical experience with a provider and the quality of the relationship between the Company representative and such provider. Most wireless service providers have national corporate headquarters with regional offices. The Company believes that most decisions for site development and site leasing services are made by providers at the regional level with input from their corporate headquarters. The Company's sales representatives work with provider representatives at the local level and at the national level when appropriate. The Company's sales staff compensation is heavily weighted to incentive-based goals and measurements. In addition to its marketing and sales staff, the Company relies upon its executive and operations personnel on the national and field office levels to identify sales opportunities within existing customer accounts, as well as acquisition opportunities. The Company's primary marketing and sales support is centralized and directed from its headquarters office in Boca Raton, Florida. The Company has a full-time staff dedicated to its marketing efforts. The marketing and sales support staff are charged with implementing the Company's marketing strategies, prospecting and producing sales presentation materials and proposals. The Company believes that its centralized marketing and sales support provides process efficiencies, quality control and economies of scale. Its headquarters office is equipped with the requisite computer hardware and software (including a national database of sales and marketing information). COMPETITION The Company competes with (i) other independent tower owners, some of which also provide site leasing and site development services; (ii) providers, which own and operate their own tower networks; (iii) service 62 companies that provide engineering and site development services; and (iv) other potential competitors, such as utilities, outdoor advertisers and broadcasters, some of which have already entered the tower industry. Wireless service providers that own and operate their own tower networks generally are substantially larger and have greater financial resources than the Company. The Company believes that tower location, capacity, price, quality of service and density within a geographic market historically have been and will continue to be the most significant competitive factors affecting tower leasing companies. The Company also competes for development and new tower construction opportunities with wireless service providers, site developers and other independent tower operating companies and believes that competition for site development will increase and that additional competitors will enter the tower market, some of which may have greater financial resources than the Company. The following is a list of certain of the tower companies that compete with the Company: American Tower Corporation (an affiliate of Clear Channel Communication), American Tower Systems (currently a wholly owned subsidiary of American Radio Systems which has announced a merger with American Tower Corporation), Crown Castle International Corp., Lodestar Communications, Microcell, Motorola, OmniAmerica Wireless (an affiliate of Hicks, Muse, Tate and Furst), Pinnacle Tower, SpectraSite, TeleCom Towers (an affiliate of Cox Enterprises) and Unisite. The following companies are primarily competitors for the Company's site management activities: AAT, APEX, Comsite International, JJS Leasing, Inc., Motorola, Signal One, Subcarrier Communications and Tower Resources Management. The Company believes that the majority of its competitors in the site development business operate within local market areas exclusively, while some firms appear to offer their services nationally, including Whalen & Company, Gearon & Company (a subsidiary of American Tower Systems) and SpectraSite. The market includes participants from a variety of market segments offering individual, or combinations of, competing services. The field of competitors includes site development consultants, zoning consultants, real estate firms, right-of-way consulting firms, construction companies, tower owners/managers, radio frequency engineering consultants, telecommunications equipment vendors (which provide end-to-end site development services through multiple subcontractors) and providers' internal staff. The Company believes that providers base their decisions on site development services on certain criteria, including a company's experience, track record, local reputation, price and time for completion of a project. The Company believes that it competes favorably in these areas. EMPLOYEES As of March 31, 1998, the Company had 457 employees, none of whom are represented by a collective bargaining agreement. The Company considers its employee relations to be good. Due to the nature of the business of the Company, it experiences a "run-up" and "run-down" in employees as contracts are completed in one area of the country and are commenced in a different area. PROPERTIES The Company is headquartered in Boca Raton, Florida, where it currently leases approximately 32,000 square feet of space. Due to the need for additional space resulting from its growth, in February 1998 the Company increased and consolidated its headquarters space in a single location in Boca Raton. The aggregate annual lease expense for the headquarters space is anticipated to increase by approximately $500,000 as a result of the relocation. The Company opens and closes project offices from time to time in connection with its site development business, which offices are generally leased for periods not to exceed 18 months. LEGAL PROCEEDINGS From time to time, the Company is involved in various legal proceedings relating to claims arising in the ordinary course of business. The Company is not a party to any such legal proceeding, the adverse outcome of which, individually or in the aggregate, is expected to have a material adverse effect on the Company's financial prospects, condition or results of operations. 63 INTERNATIONAL The Company's primary focus is on its domestic operations. From time to time, however, the Company may evaluate international opportunities and take advantage of those that it feels may be profitable for the Company. Currently, the Company is not considering any significant international projects. REGULATORY AND ENVIRONMENTAL MATTERS Federal Regulations. Both the FCC and FAA regulate towers used for wireless communications transmitters and receivers. Such regulations control the siting and marking of towers and may, depending on the characteristics of particular towers, require registration of tower facilities. Wireless communications devices operating on towers are separately regulated and independently licensed based upon the particular frequency used. Pursuant to the requirements of the Communications Act of 1934, as amended, the FCC, in conjunction with the FAA, has developed standards to consider proposals for new or modified antennae. These standards mandate that the FCC and the FAA consider the height of proposed antennae, the relationship of the structure to existing natural or man-made obstructions and the proximity of the antennae to runways and airports. Proposals to construct or to modify existing antennae above certain heights are reviewed by the FAA to ensure the structure will not present a hazard to aviation. The FAA may condition its issuance of a no-hazard determination upon compliance with specified lighting and/or marking requirements. The FCC will not license the operation of wireless telecommunications devices on towers unless the tower has been registered with the FCC or a determination has been made that such registration is not necessary. The FCC will not register a tower unless it has been cleared by the FAA. The FCC may also enforce special lighting and painting requirements. Owners of wireless transmissions towers may have an obligation to maintain painting and lighting to conform to FCC standards. Tower owners may also bear the responsibility of notifying the FAA of any tower lighting outage. The Company generally indemnifies its customers against any failure to comply with applicable regulatory standards. Failure to comply with the applicable requirements may lead to civil penalties. The 1996 Telecom Act amended the Communications Act of 1934 by giving state and local zoning authorities jurisdiction over the construction, modification and placement of towers. The new law preserves local zoning authority by prohibiting any action that would (i) discriminate between different providers of personal wireless services or (ii) ban altogether the construction, modification or placement of radio communication towers. Finally, the 1996 Telecom Act requires the federal government to help licensees for wireless communications services gain access to preferred sites for their facilities. This may require that federal agencies and departments work directly with licensees to make federal property available for tower facilities. Owners and operators of antennae may be subject to, and therefore must comply with, Environmental Laws. The FCC's decision to license a proposed tower may be subject to environmental review pursuant to the National Environmental Policy Act of 1969 ("NEPA"), which requires federal agencies to evaluate the environmental impacts of their decisions under certain circumstances. The FCC has issued regulations implementing NEPA. Such regulations place responsibility on each applicant to investigate any potential environmental effects of operations and to disclose any significant effects on the environment in an environmental assessment prior to constructing a tower. In the event the FCC determines the proposed tower would have a significant environmental impact based on the standards the FCC has developed, the FCC would be required to prepare an environmental impact statement. This process could significantly delay the registration of a particular tower. As an owner and operator of real property, the Company is subject to certain Environmental Laws which may impose strict, joint and several liability for the cleanup of on-site or off-site contamination and related personal or property damages. The Company is also subject to certain Environmental Laws that govern tower placement, including pre-construction environmental studies. Operators of towers must also take into consideration certain RF emissions regulations that impose a variety of procedural and operating requirements. The potential connection between RF emissions and certain negative health effects, including some forms of 64 cancer, has been the subject of substantial study by the scientific community in recent years. To date, the results of these studies have been inconclusive. The Company believes that it is in substantial compliance with and has no material liability under all applicable Environmental Laws. Nevertheless, there can be no assurance that the costs of compliance with existing or future Environmental Laws and liability related thereto will not have a material adverse effect on the Company's prospects, financial condition or results of operations. State and Local Regulations. Most states regulate certain aspects of real estate acquisition and leasing activities. Where required, the Company conducts the site acquisition portions of its site development services business through licensed real estate brokers or agents, who may be employees of the Company or hired as independent contractors. Local regulations include city and other local ordinances, zoning restrictions and restrictive covenants imposed by community developers. These regulations vary greatly, but typically require tower owners to obtain approval from local officials or community standards organizations prior to tower construction. Local zoning authorities generally have been hostile to construction of new transmission towers in their communities because of the height and visibility of the towers. 65 MANAGEMENT EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES The executive officers, directors and key employees of the Company are as follows:
NAME AGE POSITION - ---- --- -------- Steven E. Bernstein..... 37 Chairman of the Board, President and Chief Executive Officer Ronald G. Bizick, II.... 30 Executive Vice President--Sales and Marketing Robert M. Grobstein..... 38 Chief Financial Officer Michael N. Simkin....... 45 Chief Operating Officer Jeffrey A. Stoops....... 39 Senior Vice President--Corporate Development and General Counsel William K. Ogilvie...... 44 Senior Vice President of Operations Tom Hoffman............. 31 Vice President of Construction--CSSI Donald B. Hebb, Jr...... 55 Director C. Kevin Landry......... 53 Director Richard W. Miller....... 57 Director
Steven E. Bernstein, founder of the Company, has been President and Chief Executive Officer of the Company since its inception in 1989. From 1986 to 1989, Mr. Bernstein was employed by McCaw Cellular Communications ("McCaw"). While at McCaw, Mr. Bernstein was responsible for the development of the initial Pittsburgh non-wireline cellular system and the start-up of the Pittsburgh sales network. Mr. Bernstein is a graduate of the University of Florida, where he majored in Real Estate and earned a Bachelor of Science degree in Business Administration. He was PCIA's 1996 Entrepreneur of the Year. Ronald G. Bizick, II has been an executive officer since 1993. He is responsible for sales and marketing of the Company's site development and site leasing services. Prior to joining the Company in 1990, Mr. Bizick was employed by a private land planning and development firm specializing in commercial and residential wetland and zoning approvals. Mr. Bizick is a cum laude graduate of the University of Pittsburgh, where he earned a Bachelor of Arts degree in Business and Communications. Robert M. Grobstein, CPA, has been the Chief Financial Officer of the Company since December 1993. He is responsible for risk management, financial reporting, site administration and accounting. From January 1990 to December 1993, Mr. Grobstein served as Controller for Turnberry Isle Resort and Country Club, where he supervised a 28-person accounting staff. Mr. Grobstein is a graduate of Robert Morris College, where he majored in Accounting and earned a Bachelor of Science degree in Business Administration. He is a member of both the American Institute of C.P.A.'s and the Florida Institute of C.P.A.'s. Michael N. Simkin, Chief Operating Officer, joined the Company on April 13, 1998. From July 1997 to February 1998, he was Chief Executive Officer of Centennial Communications Corporation, a specialized mobile radio service provider based in Denver. From April 1995 to April 1997, he was Vice President and General Manager of PrimeCo Personal Communications for the South Florida region. Prior to his service with PrimeCo., Mr. Simkin held various management positions with Airtouch Communications. He has an A.B. in Economics and MBA Degree from the University of California at Berkeley. Jeffrey A. Stoops, Senior Vice President--Corporate Development and General Counsel, joined the Company in April 1997. Mr. Stoops is responsible for all mergers and acquisitions, capital market activities and legal matters for the Company. Prior to joining the Company, Mr. Stoops was a partner with Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., a South Florida law firm, where he practiced for thirteen years in the corporate, securities and mergers and acquisitions areas. Mr. Stoops received his Bachelor of Science degree and his JD degree from Florida State University, and is a member of The Florida Bar. William K. Ogilvie, Senior Vice President of Operations, joined the Company in 1993. He has over fifteen years experience in the wireless communications industry and his responsibilities include overseeing all ongoing 66 operations of site development and build-to-suit programs nationwide. From 1992 through September 1993, Mr. Ogilvie served as a Project Director for Microfuel. In 1990, he served as a consultant for the D-2 cellular telephone project in Germany, where he facilitated the transfer of knowledge to his counterparts within the client firm, Mannesmann Mobilfunk. From 1982 to 1989, Mr. Ogilvie acted as a consultant to various major wireless providers and was is involved with various technologies including analog and digital radio systems, earth stations, fiber optics, cellular, ESMR and PCS. Tom Hoffman, Vice President of Construction for CSSI, joined the Company in May 1997. Mr. Hoffman manages the operations of CSSI. Prior to joining the Company, Mr. Hoffman served as a Senior Project Manager/General Manager for TGI Construction Group, overseeing PCS buildouts in several markets throughout the country. Mr. Hoffman also served as Project Manager/Field Quality Control for AirNet Communications, where he developed specifications guidelines for cellular site construction. In addition, he spent six years with Valmont Industries, where he was a Structural Engineer. Mr. Hoffman has a Bachelor of Science degree in Construction Engineering Technology from the University of Nebraska, Omaha. Donald B. Hebb, Jr. was elected as a director of the Company in February 1997. Mr. Hebb also has been a Managing Member of the general partner of ABS Capital Partners II, L.P. ("ABS"), a private equity fund, and related entities, since December 1993. Prior to that time, he was a Managing Director of Alex. Brown and Sons Incorporated, investing private equity funds. Prior to that time, Mr. Hebb served as President and Chief Executive Officer of Alex. Brown Incorporated, and in that capacity, initiated the Alex. Brown Merchant Banking Group early in 1990. Mr. Hebb was the nominee of ABS for election as director. C. Kevin Landry was elected as a director of the Company in March 1997. Mr. Landry has been a Managing Director and Chief Executive Officer of TA Associates, Inc. ("TA Associates") since its incorporation in 1994. From 1982 to 1994, he served as a Managing Partner of its predecessor partnership. Mr. Landry also serves on the Board of Directors of Standex International Corporation. He has also served as a director of Alex. Brown Incorporated. Mr. Landry was the nominee of TA Associates for election as director. Richard W. Miller was elected as a director of the Company in May 1997. From 1993 to 1997, Mr. Miller was a Senior Executive Vice President and Chief Financial Officer of AT&T. From 1990 to 1993, he was the Chairman and Chief Executive Officer of Wang Laboratories, Inc. Mr. Miller also serves on the Board of Directors of Avalon Properties, Inc. and Closure Medical Corporation. The terms of the Company's Series A Preferred Stock contemplate a five person Board of Directors. Such terms provide that two of these persons will be elected by the Series A Preferred Stockholders and the other two (other than Mr. Bernstein) will be determined by a vote of the stockholders (with one required to be reasonably acceptable to the Directors elected by the Series A Preferred Stockholders) of the Company. Mr. Bernstein, through his current ability to vote in excess of 50% of all votes represented by outstanding capital stock of the Company, effectively controls this determination. Messrs. Hebb and Landry currently serve as the representatives of the Series A Preferred Stockholders. 67 EXECUTIVE COMPENSATION The following table sets forth the cash and non-cash compensation paid by or incurred on behalf of the Company to its Chief Executive Officer and three other executive officers for each of the years ended December 31, 1995, 1996 and 1997: SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION --------------------- LONG TERM COMPENSATION AWARDS ------------ NUMBER OF SECURITIES ALL UNDERLYING OTHER OPTIONS/ COMPEN- NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SARS (#) SATION($) --------------------------- ---- ---------- ---------- ------------ --------- Steven E. Bernstein......... Chairman of the Board, 1997 354,822 100,000(1) -- 14,669(2) President and Chief 1996 195,000 3,995,000 -- 22,172(2) Executive Officer 1995 195,000 1,800,000 -- 19,201(2) Ronald G. Bizick, II........ 1997 275,000 100,000 773,528 -- Executive Vice President- 1996 75,000 1,629,000 -- -- Sales and Marketing 1995 75,000 506,444 -- -- 1997 204,815 100,000 386,764 -- Robert M. Grobstein......... 1996 104,980 560,020 -- -- Chief Financial Officer 1995 94,980 85,770 -- -- Jeffrey A. Stoops........... Senior Vice President- Corporate 1997 304,798(3) 100,000 100,000(4) -- Development and General 1996 -- -- -- -- Counsel 1995 -- -- -- --
- -------- (1) Represents 26,810 shares of Class A Common Stock to be issued to Mr. Bernstein in the second quarter of 1998. (2) This represents the provision of a car allowance to Mr. Bernstein for the years ending December 31, 1997, 1996 and 1995. (3) This represents Mr. Stoops' annual compensation. Mr. Stoops began his employment with the Company on April 1, 1997. (4) On March 14, 1997, Mr. Bernstein granted Mr. Stoops options to purchase 1,369,863 shares of his Class B Common Stock at an exercise price of $2.19 a share. For a more detailed description of this transaction, see "Certain Transactions." OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATE OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM(1) ---------------------------------------------- ----------------------- NUMBER OF % OF TOTAL SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO EXERCISE OPTIONS/SARS EMPLOYEES PRICE EXPIRATION NAME GRANTED IN 1997 PER SHARE DATE 5% ($) 10% ($) ---- ------------ ------------ --------- ---------- ----------- ----------- Steven E. Bernstein..... -- -- -- N/A -- -- Ronald G. Bizick, II.... 773,528(1) 43.0 $ 0.05 12/31/06 3,276,000 5,238,000 Robert M. Grobstein..... 386,764(2) 21.5 $ 0.05 12/31/06 1,638,000 2,619,000 Jeffrey A. Stoops....... 100,000(3) 5.5 $ 2.63 3/17/07 165,000 419,000
- -------- (1) This represents options issued in partial substitution for Mr. Bizick's ownership rights in SBA, Inc. prior to the Corporate Reorganization. See "Certain Transactions." (2) This represents options issued in partial substitution for Mr. Grobstein's ownership rights in SBA, Inc. prior to the Corporate Reorganization. See "Certain Transactions." (3) See footnote 3 to the Summary Compensation Table above. 68 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS AT AT DECEMBER 31, 1997 DECEMBER 31, 1997($) -------------------------- ------------------------- SHARES ACQUIRED ON VALUE NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- -------- ----------- ------------- ----------- ------------- Steven E. Bernstein..... -- -- -- -- -- -- Ronald G. Bizick, II.... -- -- 773,528 -- 1,995,702 -- Robert M. Grobstein..... -- -- 386,764 -- 997,851 -- Jeffrey A. Stoops....... -- -- 33,333(1) 66,667(2) -- --
- -------- (1) This does not include exercisable options to acquire 456,621 shares of Class B Common Stock granted to Mr. Stoops by Mr. Bernstein. (2) This does not include unexercisable options to acquire 913,242 shares of Class B Common Stock granted to Mr. Stoops by Mr. Bernstein. EMPLOYMENT AGREEMENTS Steven E. Bernstein. The Company does not have an employment agreement with Steven E. Bernstein, its President and Chief Executive Officer and the owner of 100% of the Company's outstanding common stock and the majority of its voting shares. Mr. Bernstein is, therefore, not subject to non-competition or non-solicitation contractual restrictions. Mr. Bernstein was paid a base salary of $350,000 for 1997 and an annual cash bonus based on achievement of performance criteria established by the Board which did not exceed his base annual salary. Mr. Bernstein's compensation and other terms of employment are determined by the Company's Board of Directors. Ronald G. Bizick, II. Mr. Bizick is party to an employment agreement with the Company dated as of January 1, 1997. Under his employment agreement, Mr. Bizick receives an initial base salary of $275,000 per annum and an annual cash bonus based on achievement of performance criteria established by the Board of Directors, that is not permitted to exceed Mr. Bizick's base annual salary. Mr. Bizick's employment agreement is for an initial three-year term, and automatically renews for an additional one-year term unless either Mr. Bizick or the Company provides written notice to the other party at least 90 days prior to renewal. Mr. Bizick's employment agreement provides that upon termination of employment by the Company, other than for cause or retirement, the Company shall pay an amount equal to the aggregate present value of the product of (i) the base annual compensation paid to Mr. Bizick by the Company and (ii) 2.0. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. Robert M. Grobstein. Mr. Grobstein is party to an employment agreement with the Company dated as of January 1, 1997. Under his employment agreement, Mr. Grobstein received an initial base salary of $200,000 per annum and an annual cash bonus based on achievement of performance criteria established by the Board of Directors, which is not permitted to exceed Mr. Grobstein's base annual salary. Mr. Grobstein's employment agreement is for an initial three- year term, and automatically renews for an additional one-year term unless either Mr. Grobstein or the Company provides written notice to the other party at least 90 days prior to renewal. Mr. Grobstein's employment agreement provides that upon termination of employment by the Company, other than for cause or retirement, the Company shall pay an amount equal to the aggregate present value of the product of (i) the base annual compensation paid to Mr. Grobstein by the Company, and (ii) 2.0. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. Jeffrey A. Stoops. Mr. Stoops is party to an employment agreement with the Company dated as of March 14, 1997. Under his employment agreement, Mr. Stoops receives an initial base salary of $300,000 per annum and an annual cash bonus based on achievement of performance criteria established by the Board of Directors. 69 This bonus is not permitted to exceed $200,000 for calendar year 1997; for the remainder of the employment agreement, the bonus is not permitted to exceed Mr. Stoops' base annual salary. Mr. Stoops' employment agreement is for an initial 32-month term, and automatically renews for an additional one-year term, unless either Mr. Stoops or the Company provides written notice to the other party at least 90 days prior to renewal. Mr. Stoops' employment agreement provides that upon termination of employment by the Company, other than for cause or retirement, the Company shall pay an amount equal to the aggregate present value of the product of (i) the base annual compensation paid to Mr. Stoops by the Company, multiplied by (ii) 1.0. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. COMPENSATION OF DIRECTORS The three outside directors of the Company are reimbursed for expenses incidental to attendance at meetings of the Board of Directors. In addition, Richard W. Miller receives compensation for his services as director and a consultant to the Company. Mr. Miller receives $1,000 per Board meeting for attendance at such meetings, and $1,000 per day for consulting, plus expenses. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company's Board of Directors does not currently have a compensation committee. During 1996, Mr. Bernstein served as a director, Chairman of the Board, President and Chief Executive Officer of the Company. Mr. Bernstein participated in deliberations of the Company's Board of Directors concerning executive compensation. STOCK OPTION PLAN The Company has adopted the 1996 Stock Option Plan (the "Option Plan"), pursuant to which stock options (both Nonqualified Stock Options and Incentive Stock Options, as defined in the Option Plan), stock appreciation rights and restricted stock may be granted to directors, key employees and consultants (the "Plan Participants") at a price per share equal to the greater of fair market value or $2.63. A total of 1,800,000 shares of Class A Common Stock are reserved for issuance under the Option Plan. As of March 31, 1998, options to acquire 808,000 shares were issued and outstanding, each with an exercise price of $2.63 per share. These options generally vest over three-year periods from the date of grant. As of March 31, 1998, none of the options granted under the Option Plan had been exercised. With respect to the grant of awards under the Option Plan, the Board of Directors or a committee thereof will determine persons to be granted stock options, stock appreciation rights and restricted stock, the amount of stock or rights to be optioned or granted to each such person, and the terms and conditions of any stock options, stock appreciation rights and restricted stock. Both Incentive Stock Options and Nonqualified Stock Options may be granted under the Option Plan. Stock appreciation rights may be granted in conjunction with the grant of an Incentive or Nonqualified Stock Option under the Option Plan or independently of any such stock option. A stock appreciation right granted in conjunction with a stock option may be an alternative right. In which event, the exercise of the stock option terminates the stock appreciation right to the extent of the shares purchased upon exercise of the stock option and, correspondingly, the exercise of the stock appreciation right terminates the stock option to the extent of the shares with respect to which such right is exercised. Subject to the terms of the Option Plan, the Board of Directors or a committee thereof may award shares of restricted stock to the Plan Participants. Generally, a restricted stock award will not require the payment of any option price by a Plan Participant but will call for the transfer of shares to the Plan Participant subject to forfeiture, without payment of any consideration by the Company, if the Plan Participant's employment terminates during a "restricted" period (which must be at least six months) specified in the award of the restricted stock. 70 CERTAIN TRANSACTIONS SBACC was formed in December, 1996 to be the holding company for all of the Company's various subsidiaries. In March 1997, Steven E. Bernstein, at that time the sole stockholder of SBA, Inc. and Leasing, contributed all of the outstanding shares of capital stock of such companies to SBACC in exchange for 8,075,000 shares of Class B Common Stock. In addition, also at the same time in March 1997, Ronald G. Bizick, II and Robert M. Grobstein, the Company's Executive Vice President-Sales and Marketing and Chief Financial Officer, respectively, who held options in SBA, Inc. and Leasing, voluntarily terminated these options (along with existing employment and incentive agreements) in exchange for, in the case of Mr. Bizick, 176,472 shares of Class A Common Stock and immediately exercisable options to purchase an additional 773,528 shares of Class A Common Stock and, in the case of Mr. Grobstein, 88,236 shares of Class A Common Stock and immediately exercisable options to purchase an additional 386,764 shares of Class A Common Stock. These options are exercisable at $0.05 per share. On March 7, 1997, the Company redeemed the outstanding shares of Class A Common Stock from Messrs. Bizick and Grobstein for $8.50 per share. On March 8, 1997, the Company loaned Mr. Bernstein $3.5 million at the applicable Federal rate (the "AFR") determined by the Internal Revenue Service (the "IRS"). The loan provides that no payments of principal or interest are required to be made by Mr. Bernstein until maturity, which is the earlier of three years or upon consummation by the Company of an initial public offering of its Common Stock. The loan is non-recourse and is secured by 823,530 shares of Class B Common Stock owned by Mr. Bernstein. The loan may be paid, at Mr. Bernstein's option, in shares of Common Stock valued at the initial public offering price. On March 14, 1997, Mr. Bernstein granted Jeffrey A. Stoops, the Company's Senior Vice President-Corporate Development and General Counsel, an option to purchase 1,369,863 shares of his Class B Common Stock at an exercise price of $2.19 per share. The options vest in equal one-third increments over three years, with the first 456,621 shares having become vested on December 31, 1997. Upon exercise by Mr. Stoops, the shares become Class A Common Stock. THE PREFERRED STOCK OFFERING The Company's Preferred Stock Offering raised $30.0 million of gross proceeds and binding commitments to fund an additional $20.0 million in Series A Preferred Stock, all at $8.50 per share. The Preferred Stock Offering was closed on the basis of the information set forth in an Prospectus including projected financial information, which projected 1997 and 1998 site development revenues in excess of those recognized in 1996. In a Board of Directors meeting held at the end of March 1997, management of the Company presented projected short-term and interim financial information which cast in doubt the continued reasonableness of the projections. The reasons provided by management of the Company for the revised projected short- term and interim financial information centered around (i) the current and anticipated near-term market conditions for site development services including construction and design services and (ii) the belief that the domestic market for these services would probably not be as favorable in 1997 and possibly in 1998 as it was for the Company in 1996. This was primarily due to the inability of PCS and C-block licensees to obtain financing necessary to begin their site development activities and changing industry trends, particularly the move toward outsourcing tower ownership to independent third parties. Management of the Company and representatives of ABS and TA Associates agreed that the conditions described above were materially different from those reflected in the interim financial information and from those reflected in the projections. As a result, management of the Company and the representatives of ABS and TA Associates agreed to a repricing of the Series A Preferred Stock (by issuing additional shares for no additional consideration) and to revise certain terms of the Series A Preferred Stock. Among other terms that were revised, the obligation of the Series A Preferred Stock purchasers to fund an additional $20.0 million on a pro rata basis at $4.73 per share became contingent on the Company meeting certain revenue and/or operating income targets in 1997 and 1998. The Company does not currently expect these targets to be met. See "Description of Capital Stock--Preferred Stock" for a description of the revisions to the terms of the Series A Preferred Stock. 71 LIMITED LIABILITY AND INDEMNIFICATION Under the Florida Business Corporation Act (the "FBCA"), a director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to act unless (i) the director breached or failed to perform his duties as a director and (ii) the director's breach of, or failure to perform, those duties constitutes: (1) a violation of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (2) a transaction from which the director derived an improper personal benefit, either directly or indirectly, (3) a circumstance under which an unlawful distribution is made, (4) in a proceeding by or in the right of the corporation to procure a judgment in its favor or by or in the right of a stockholder, conscious disregard for the best interest of the corporation or willful misconduct, or (5) in a proceeding by or in the right of someone other than the corporation or stockholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. A corporation may purchase and maintain insurance on behalf of any director or officer against any liability asserted against him or her and incurred by him or her in his or her capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the FBCA. The Articles of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all officers and directors of the Company. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. 72 OWNERSHIP OF CAPITAL STOCK The table below sets forth, as of March 31, 1998, certain information with respect to the beneficial ownership of Capital Stock by (i) each person who is known by the Company to be beneficial owner of more than 5% of any class or series of Capital Stock of the Company; (ii) each of the directors and executive officers individually; and (iii) all directors and executive officers as a group. At March 31, 1998, the Company had outstanding the following shares of Capital Stock: Class B Common Stock--8,075,000 shares; Series A Preferred Stock--8,050,000 shares. At March 31, 1998 no other classes or series of Capital Stock have any shares issued and outstanding. Each share of Series A Preferred Stock is currently convertible into one share of Class A Common Stock and one share of Series B Preferred Stock upon the occurrence of certain events. See "Description of Capital Stock." This table does not give effect to shares of Class A Common Stock that may be acquired pursuant to options outstanding as of March 31, 1998, except as described in footnote 2.
NUMBER OF PERCENTAGE OF TOTAL SHARES VOTING POWER OF EXECUTIVE OFFICERS BENEFICIALLY FULLY DILUTED CLASS AND DIRECTORS(1) TITLE OF CLASS OWNED(2) A COMMON STOCK(2) - ------------------ -------------- ------------ ------------------- Steven E. Bernstein(3).. Class B Common Stock 8,075,000 49.5% Ronald G. Bizick, II(4). Class A Common Stock 773,528 * Robert M. Grobstein(4).. Class A Common Stock 386,764 * Jeffrey A. Stoops(5).... Class A Common Stock 489,954 * Donald B. Hebb, Jr.(6).. Series A Preferred Stock 3,220,000 19.8 C. Kevin Landry(7)...... Series A Preferred Stock 2,736,987 16.8 Richard W. Miller(8).... Class A Common Stock 33,333 * All executive officers and directors as a group (7 persons)............ 15,258,945 86.8 BENEFICIAL OWNERS OF 5% OR MORE OF CAPITAL STOCK - -------------------------- ABS Capital Partners, II, L.P.(9)............ Series A Preferred Stock 3,220,000 19.8% TA Associates, Inc.(10). Series A Preferred Stock 2,736,987 16.8 The Hillman Company(11). Series A Preferred Stock 1,169,808 7.2
- -------- *Less than 1%. (1) Except as otherwise indicated, the address of each executive officer and director named in this table is c/o SBA Communications Corporation, One Town Center Road, Third Floor, Boca Raton, Florida 33486. (2) In determining the number and percentage of shares beneficially owned by each person, shares that may be acquired by such person pursuant to options exercisable within 60 days after March 31, 1998 are deemed outstanding for purposes of determining the total number of outstanding shares for such person and are not deemed outstanding for such purpose for all other stockholders. To the Company's actual knowledge, except as otherwise indicated, beneficial ownership includes sole voting and dispositive power with respect to all shares. The Company has reserved for issuance options to purchase 1,800,000 shares of the Class A Common Stock at exercise prices at or above $2.63 per share, of which options for 808,000 shares were issued at March 31, 1998. Of these options, 191,164 will be exercisable within 60 days after March 31, 1998. (3) Does not include 26,810 shares of Class A Common Stock to be issued to Mr. Bernstein in the second quarter of 1998 as part of his 1997 compensation. Mr. Bernstein has granted Mr. Stoops options to purchase 1,369,863 of his shares of Class B Common Stock at an exercise price of $2.19 per share, which options vest over an approximately 33 month period in three equal installments. On December 31, 1997, options to purchase 456,621 of such shares became exercisable. Until such time as Mr. Stoops exercises his options, Mr. Bernstein retains voting control over such shares. Upon exercise by Mr. Stoops, the shares convert to Class A Common Stock. (4) All shares are in the form of an immediately exercisable option to purchase Class A Common Stock at $.05 per share. (5) Includes currently exercisable options granted by Mr. Bernstein to Mr. Stoops for 456,621 shares at $2.19 per share and options granted under the Option Plan for 33,333 shares currently exercisable at $2.63 per share. Until exercised, the shares subject to the options granted by Mr. Bernstein remain in the voting control of Mr. Bernstein. Does not include options to purchase an additional 913,242 shares of Common Stock for $2.19 per share granted from Mr. Bernstein to Mr. Stoops, which vest in equal installments on December 31, 1998 and December 31, 1999. Also does not include additional options to purchase 66,667 shares of Class A Common Stock at $2.63 per share granted under the Option Plan, which vest in equal installments on December 31, 1998 and December 31, 1999. (6) Includes 3,220,000 shares of Series A Preferred Stock owned by ABS. Mr. Hebb is Managing Member of ABS Partners II, L.L.C., the general partner of ABS. Mr. Hebb disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. 73 (7) Includes 1,102,850 shares owned by Advent Atlantic and Pacific III, L.P., of which Mr. Landry is a Managing Director of the General Partner; 1,610,000 shares owned by Advent VII, L.P., of which Mr. Landry is Managing Director of the General Partner; and 24,147 shares owned by TA Venture Investors Limited Partnership, of which Mr. Landry is a General Partner. Mr. Landry disclaims beneficial ownership of these shares, with the exception of 2,212.93 shares held through TA Venture Investors Limited Partnership. (8) Includes options to purchase 33,333 shares of Class A Common Stock, of a total number of options to purchase 100,000 shares at $2.63 per share, which vest in three equal annual installments beginning May 22, 1998. (9) See "Plan of Distribution." The principal business address of ABS Capital Partners, II, L.P. is One South Street, Baltimore, MD 21202. (10) Includes 1,102,850 shares owned by Advent Atlantic and Pacific III, L.P., of which TA Associates is a General Partner, 1,610,000 shares owned by Advent VII, L.P., of which TA Associates is a General Partner, and 24,147 shares owned by TA Venture Investors Limited Partnership, of which Mr. Landry is a General Partner. The principal business address of TA Associates, Inc. is 125 High Street, Boston, MA 02110. (11) Includes 233,960 shares held by C.G. Grefenstette and Thomas G. Bigley as Trustees for Henry Lea Hillman, Jr., Juliet Lea Hillman, Audry Hilliard Hillman, and William Talbott Hillman, 175,470 shares held by Henry L. Hillman, Elsie Hilliard Hillman and C.G. Grefenstette as Trustees of the Henry L. Hillman Trust, 584,908 shares owned by Juliet Challenger, Inc., and 175,470 shares owned by Venhill Limited Partnership. The principal business address of The Hillman Company is Grant Building, Pittsburgh, PA 15219. 74 DESCRIPTION OF CAPITAL STOCK The following summary of the terms and provisions of the Company's capital stock does not purport to be complete and is qualified in its entirety by reference to the actual terms and provisions of, including certain defined terms used herein, the capital stock contained in the Company's Articles of Incorporation, as amended. The Company's Articles of Incorporation authorize 32,000,000 shares of Class A Common Stock, 8,100,000 shares of Class B Common Stock and 30,000,000 shares of preferred stock, of which 8,050,000 shares have been designated as Series A Preferred Stock and 8,050,000 shares have been designated as Series B Preferred Stock. In addition, the Company has designated 4,472,272 shares of preferred stock as Series C Preferred Stock and 4,472,272 shares of preferred stock as Series D Preferred Stock. At March 31, 1998, there were 8,075,000 shares of Class B Common Stock issued and outstanding and 8,050,000 shares of Series A Preferred Stock issued and outstanding. No other shares of any class or series was issued and outstanding at March 31, 1998. In addition, (i) 1,800,000 shares of Class A Common Stock were reserved for issuance upon the exercise of stock options available for future grant under the Option Plan (of which 808,000 options have been granted and remained outstanding as of March 31, 1998), (ii) 8,050,000 shares of Series B Preferred Stock are reserved for issuance upon conversion of the shares of Series A Preferred Stock sold in the Preferred Stock Offering, (iii) 8,452,500 shares of Class A Common Stock are reserved for issuance upon conversion of the shares of Series A Preferred Stock sold in the Preferred Stock Offering, or issuable upon exercise of warrants granted to BT Alex. Brown in connection with the Preferred Stock Offering, and (iv) 1,160,292 shares of Class A Common Stock are reserved for issuance upon the exercise of stock options held by Messrs. Bizick and Grobstein. COMMON STOCK The Company has two classes of authorized Common Stock; Class A Common Stock and Class B Common Stock. The Class A Common Stock has one vote per share. The Class B Common Stock has ten votes per share. All outstanding shares of Class A Common Stock and Class B Common Stock are, and will be upon conversion of the Series A Preferred Stock, validly issued, fully paid and nonassessable. At March 31, 1998 Steven E. Bernstein controlled 50.1% of all votes on a primary basis and 49.5% of all votes on a fully diluted basis. As a result, Mr. Bernstein has the ability to elect three out of five of the Company's directors and continues to control the Company. See "Risk Factors--Control of the Company by Steven E. Bernstein." Except as otherwise required by law, owners of the Class A Common Stock, Class B Common Stock and Series A Preferred Stock vote together on all matters, including the election of directors. Each outstanding share of Class B Common Stock may, at the option of the holder thereof, at any time, be converted into one share of Class A Common Stock. Each share of outstanding Class B Common Stock shall convert into one share of Class A Common Stock immediately upon transfer to any holder other than the following (an "Eligible Class B Stockholder"): any one or more of Steven E. Bernstein, other members of the immediate family of Steven E. Bernstein, or their lineal descendants, spouses of lineal descendants or lineal descendants of spouses, or any trusts for the benefit of any of the foregoing, or any estate or tax planning vehicles on the part of Mr. Bernstein. If the shares of Class B Common Stock held by Eligible Class B Stockholders in the aggregate constitute 10% or less of the outstanding shares of Common Stock, each share of Class B Common Stock shall immediately convert into one share of Class A Common Stock. Each share of outstanding Class B Common Stock which is held by any Eligible Class B Stockholder shall immediately convert into one share of Class A Common Stock (i) at such time as such holder is no longer an Eligible Class B Stockholder, or (ii) upon the death or mental incapacity of Mr. Bernstein. Other than the rights described above, the holders of Common Stock have no cumulative rights and no preemptive, subscription, redemption, sinking fund or conversion rights and have equal rights and preferences. Subject to preferences that may be applicable to the Series A Preferred Stock, the Series B Preferred Stock or any preferred stock which the Company may issue in the future, holders of the Common Stock will be entitled to receive such dividends as may be declared by the board of directors out of funds legally available therefor. 75 The rights and preferences of holders of Common Stock are subject to the rights of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and will be subject to the rights of any series of preferred stock which the Company may issue in the future. PREFERRED STOCK All shares of Series A Preferred Stock are, and Series B Preferred Stock upon conversion of the Series A Preferred Stock will be, fully paid and nonassessable. The Company's board of directors will be authorized by the Articles of Incorporation to provide for the issuance of shares of preferred stock, other than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the designation, rights, preferences, privileges and restrictions of the shares of each such series and to increase or decrease the number of shares of any series of preferred stock (including the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,) all without any further vote or action by the Company's shareholders other than the vote of the holders of the Series A Preferred Stock to the extent required under the terms of the Series A Preferred Stock. See "--Restrictive Covenants." In connection with the Private Offering, certain terms of the Series A, Series B, Series C and Series D Preferred Stock were amended. The description of the Series A, Series B, Series C and Series D Preferred Stock contained in this Prospectus gives effect to such amendments. The Company has designated the Series C Preferred Stock and Series D Preferred Stock to be issued, at its option upon the payment of $4.47 per share, to holders of the Series A Preferred Stock if certain target operating results have been met prior to June 30, 1998. Management of the Company does not believe at this time that such shares of Series C Preferred Stock or Series D Preferred Stock will be issued. In March 1997, the Company sold 3,529,412 shares of 2% Series A Preferred Stock, convertible initially into one share of the Company's Class A Common Stock and one share of the Company's 4% Series B Redeemable Preferred Stock, to a syndicate of institutional investors including ABS and TA Associates (the "Private Investors"). The Series A Preferred Stock had an initial conversion price of $8.50. In May 1997, in response to the acknowledgment by the Company that certain of the financial projections originally provided to the Private Investors prior to the consummation of the Preferred Stock Offering were substantially different from revised financial information provided shortly after the Preferred Stock Offering, casting in doubt the continued reasonableness of the original projections, the Company issued an additional 4,520,588 shares of the Series A Preferred Stock, increased by 200 basis points the rate per annum of cumulative dividends and amended the initial conversion price to $3.73. Each of the Private Investors executed a release exonerating the Company from any liability that it may have had in connection with the offering of Series A Preferred Stock. An affiliate of BT Alex. Brown Incorporated, one of the Initial Purchasers, is a limited partner in ABS and certain employees of BT Alex. Brown Incorporated are investors in another Private Investor. In addition, certain officers of BT Alex. Brown Incorporated are holders of Series A Preferred Stock. The Series A Preferred Stock has the following rights and preferences: Conversion. Each holder of Series A Preferred Stock has the right to convert his or her shares at any time. Each share of Series A Preferred Stock is currently convertible into one share of Class A Common Stock, subject to certain antidilution protection provisions, and one share of Series B Preferred Stock. The number of shares of Class A Common Stock into which a share of Series A Preferred Stock is convertible is equal to the ratio of $3.73 divided by the conversion price, which is currently $3.73. Under the antidilution provisions, the conversion price of the Series A Preferred Stock is subject to adjustment in the event of any subdivision, combination or reclassification of the Company's outstanding Common Stock or stock dividend to holders of Common Stock payable in Common Stock. In the event of any distribution by the Company payable other than in Common Stock, debt or assets (other than cash dividends), holders of Series A Preferred Stock are entitled to their 76 proportionate share (on an as-if-converted basis) of such distribution. The conversion price of Series A Preferred Stock will also be adjusted, on a "full ratchet" basis for the first 18 months following the Preferred Stock Offering and on a weighted average basis thereafter, upon the Company's issuance of additional shares of Common Stock or warrants or rights to purchase Common Stock or securities convertible into Common Stock for a consideration per share which is less than the then applicable per share conversion price of the Series A Preferred Stock. The conversion price of the Series A Preferred Stock will not be adjusted for issuances of Common Stock upon the exercise or conversion of options, warrants or other rights to purchase Common Stock outstanding as of the date, or issued as a result, of the Corporate Reorganization, or upon the future issuance of Common Stock, or options, warrants or other rights to purchase Common Stock to employees, directors, consultants or vendors of the Company directly or pursuant to a stock option plan or restricted stock plan approved by the Board of Directors, or in connection with certain acquisitions determined by the Company's Board of Directors to be in the best interests of the Company and its stockholders, so long as such shares or options are issued at fair market value. The Series A Preferred Stock will automatically convert into Class A Common Stock and Series B Preferred Stock upon the earlier of (i) completion by the Company of a public offering raising gross proceeds of at least $20.0 million and have either an (a) offering price per share greater than or equal to 150% of the then applicable conversion price of the Series A Preferred Stock if such public offering occurs before June 30, 1998 or (b) an offering price per share greater than or equal to 200% of the then applicable conversion price of the Series A Preferred Stock if such public offering occurs after June 30, 1998 (a "Qualified Public Offering") or (ii) the written consent of the holders of at least 662/3% of the Series A Preferred Stock then outstanding. Dividends. Subject to the terms of the Indenture or any documents relating to any refinancing of the Notes, as each may be in effect from time to time, the holders of outstanding shares of Series A Preferred Stock are entitled, in preference to the holders of any and all other classes of capital stock of the Company (other than the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock which will rank equally with the Series A Preferred Stock as to dividends), to receive, out of funds legally available therefore, cumulative dividends on the Series A Preferred Stock in cash, at a rate per annum of 4% of the Series A base liquidation amount (the "Series A Base Liquidation Amount") subject to proration for partial years. The Series A Base Liquidation Amount equals the sum of $3.73 and any accumulated but unpaid dividends on the Series A Preferred Stock. No dividends will be paid on the Common Stock until all accumulated but unpaid dividends have been paid on the Series A Preferred Stock. Accrued but unpaid dividends on the Series A Preferred Stock will be payable upon conversion of the Series A Preferred Stock into Class A Common Stock and Series B Preferred Stock. At March 7, 2002, the dividend rate of the Series A Preferred Stock will increase to 8% of the Series A Base Liquidation Amount per annum. On March 7, 2003, the dividend rate on the Series A Preferred Stock shall increase to 14% of the Series A Base Liquidation Amount per annum. Liquidation Preference. In the event of any liquidation or winding up of the Company, including a merger, sale of all of its outstanding shares of capital stock, consolidation or sale of all or substantially all of the assets of the Company, the funds available for distribution will be paid out first to the holders of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock, which shall rank equally in the event of a liquidation. The holders of Series A Preferred Stock will be entitled to receive the greater of: (a) the Series A Base Liquidation Amount and (b) the amount per share which such holders would have received if all such shares had been converted to Class A Common Stock and Series B Preferred Stock immediately prior to such liquidation distribution. Thereafter, the remaining assets will be distributed to the holders of any other stock ranking on liquidation junior to the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock. Redemption Rights. Subject to the terms of the Indenture or any documents relating to any refinancing of the Notes, on the fifth anniversary date of the Preferred Stock Offering, the Company will, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series A Preferred Stock over a two year period, one half in each year, at an aggregate price equal to the Series A Base Liquidation Amount. 77 Voting. The holders of Series A Preferred Stock have ten votes for each share until converted to Class A Common Stock and Series B Preferred Stock and vote with holders of shares of Class A Common Stock and Class B Common Stock and Series C Preferred Stock as a single voting group on all matters brought before the shareholders, except as otherwise required by law and except to the extent described under "--Restrictive Covenants." The Series B Preferred Stock does not have voting rights. Preemptive Rights. The holders of the shares of Series A Preferred Stock are entitled to participate on a pro rata basis in certain issuances of equity securities by the Company. These preemptive rights do not apply where shares are issued in connection with: (i) a merger, consolidation, combination, share exchange or sale or lease of all or substantially all the assets of the Company or another corporation; (ii) conversion of Series A Preferred Stock into Class A Common Stock and Series B Preferred Stock; (iii) exercise of outstanding options and the warrant to BT Alex. Brown Incorporated; and (iv) any stock option or other any employee benefit plans of the Company. All preemptive rights expire upon a Qualified Public Offering by the Company. Board Representation. Holders of the Series A Preferred Stock and Series C Preferred Stock, voting together as a single class, are entitled to elect two board members of a five member Board of Directors of the Company. Other than the rights described above, the holders of Series A Preferred Stock have no subscription, sinking fund or conversion rights. The Series B Preferred Stock has the following rights and preferences: Dividends. Subject to the terms of the Indenture, or any documents relating to any refinancing of the Notes, as each may be in effect from time to time, the holders of outstanding shares of Series B Preferred Stock are entitled, in preference to the holders of any and all other classes of capital stock of the Company (other than the Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, which will rank equally with the Series B Preferred Stock as to dividends), to receive, out of funds legally available therefore, cumulative dividends on the Series B Preferred Stock in cash, at a rate per annum of 4% of the Series B base liquidation amount (the "Series B Base Liquidation Amount") subject to proration for partial years. The Series B Base Liquidation Amount equals the sum of $3.73 and any accumulated but unpaid dividends on the Series B Preferred Stock. No dividends will be paid on the Common Stock until all accrued but unpaid dividends have been paid on the Series B Preferred Stock. At March 7, 2002, the dividend rate of the Series B Preferred Stock will be increased to 8% of the Series B Base Liquidation Amount. At March 7, 2003, the dividend rate on the Series B Preferred Stock shall increase to 14% of the Series B Base Liquidation Amount per annum. Redemption. Upon a Qualified Public Offering, the Company will redeem all of the outstanding shares of Series B Preferred Stock at an aggregate price equal to the Series B Base Liquidation Amount. Subject to the terms of the Indenture or any documents relating to any refinancing of the Notes, on the fifth anniversary date of issuance of the Notes, the Company will, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series B Preferred Stock over a two year period, one half in each year, at an aggregate price equal to the Series B Base Liquidation Amount. Liquidation. In the event of any liquidation or winding up of the Company, including a merger, sale of all of its outstanding shares of capital stock, consolidation or sale of all or substantially all of the assets of the Company, each holder of outstanding shares of Series B Preferred Stock will be entitled to receive, before any amount shall be paid or distributed to the holders of the Common Stock, an amount in cash equal to the sum of $3.73 per share plus any accumulated but unpaid dividends to which such holder is entitled. The terms of the Series C Preferred Stock are substantially similar to the terms of the Series A Preferred Stock other than the Series C base liquidation amount, which currently equals the sum of $4.47 and any accumulated but unpaid dividends on the Series C Preferred Stock. The terms of the Series D Preferred Stock are substantially similar to the terms of the Series B Preferred Stock other than the Series D base liquidation amount, which currently equals the sum of $4.47 and any accumulated but unpaid dividends on the Series D Preferred Stock. Management at this time does not expect to issue any shares of Series C Preferred Stock or Series D Preferred Stock. 78 RESTRICTIVE COVENANTS So long as 20% or more of the shares of the Series A Preferred Stock sold in the Preferred Stock Offering are outstanding, the Company may not, without the consent of holders of at least 662/3% of the outstanding Series A Preferred Stock: (i) authorize or issue any class or series of equity securities having equal or superior rights to the Series A Preferred Stock as to payment upon liquidation, dissolution or a winding up of the Company; (ii) enter into any agreement that would restrict the Company's ability to perform under the purchase agreement for the Series A Preferred Stock; (iii) amend its Articles of Incorporation or Bylaws in any way which adversely affects the rights and preferences of the holders of Series A Preferred Stock as a class; (iv) sell or lease 20% or more of its assets, except in the ordinary course of business; (v) issue additional securities to employees, officers or directors, except securities issuable upon the exercise of options and warrants outstanding immediately prior to consummation of the Preferred Stock Offering, or issuable upon the exercise of options granted in the future at fair market value; (vi) issue any securities for a price less than fair market value, other than as may be required by contractual commitments existing prior to consummation of the Preferred Stock Offering; or (vii) adopt any additional stock option plans or increase the number of shares available for issuance under existing plans. REGISTRATION RIGHTS If at any time after the earlier of (i) six months after the effective date of an initial public offering of the Company's securities or (ii) June 30, 1998, the holders of not less than 25% of the Class A Common Stock issued or issuable upon conversion of the Series A Preferred Stock request that the Company file a registration statement covering Common Stock (with an anticipated aggregate offering price of $15.0 million or more in the case of a registration which is an initial public offering and $3.0 million for any other registration), the Company will use its best efforts to cause such shares to be registered, subject to certain cut-back provisions; provided, however, that the Company may delay any such registration for a period of up to three months for a valid business reason. The Company will not be required to file more than three registration statements, other than on Form S-3. The holders of Series A Preferred Stock will have the right to require the Company to file up to two registration statements per year on Form S-3, provided the anticipated aggregate offering price in each registration on Form S-3 equals $1.0 million or more. Messrs. Bernstein, Bizick, Grobstein and Stoops also have certain rights to have their shares of Common Stock registered under the Securities Act. The holders of Series A Preferred Stock are entitled to have the shares of Class A Common Stock issued upon conversion of the Series A Preferred Stock included in each registration statement filed on behalf of the Company or other stockholders, subject to certain cut-back provisions. In the event of an application of such cut-back provisions, the holders of Series A Preferred Stock have a priority right to participate in such registration over Messrs. Bernstein, Bizick, Grobstein or Stoops. CO-SALE RIGHTS Until a Qualified Public Offering, if Steven E. Bernstein proposes to sell any of his shares of Class B Common Stock, he must first give the holders of Series A Preferred Stock the opportunity to participate in such sale on a basis proportionate to the amount of securities owned by Mr. Bernstein and those owned by all holders of Series A Preferred Stock who wish to participate in such sale (a "Co-Sale Right"). To participate, holders of Series A Preferred Stock must convert their shares of Series A Preferred Stock into Series B Preferred Stock and Class A Common Stock. Should Mr. Bernstein elect to transfer any of his shares of Class B Common Stock to an Eligible Class B Stockholder, such transfer will not trigger Co-Sale Rights. Any recipient of shares of Class B Common Stock from Mr. Bernstein, however, will be subject to these Co-Sale Right provisions. 79 DESCRIPTION OF NEW CREDIT FACILITY A wholly owned subsidiary of SBACC, SBA Telecommunications, Inc. ("Telecommunications"), together with six wholly owned subsidiaries of Telecommunications, SBA, Inc., SBA Leasing, Inc. ("Leasing"), SBA Towers, Inc. ("Towers"), Communication Site Services, Inc. ("CSSI"), SBA Communications International, Inc. ("International") and SBA Subsidiary Holdings, Inc. ("Holdings," and together with Telecommunications, SBA, Inc., Leasing, Towers, CSSI and International, the "Borrowers") are expected to enter into the New Credit Facility with a group of banks and other financial institutions led by BankBoston, as agent, and BancBoston Securities, as arranger (collectively, the "Lenders"). The Company received a Commitment Letter from the Lenders on February 3, 1998 pursuant to which they committed to the New Credit Facility. It is expected that the New Credit Facility will be entered into in the second quarter of 1998. The following is a summary of certain provisions of the New Credit Facility, therefore, does not purport to be complete and is subject to, and is qualified in its entirety by, the final terms of the New Credit Facility which may differ from the provisions described in this summary. In addition, there can be no assurances that the Company will be able to enter into the New Credit Agreement. All defined terms used herein have the meanings given to them in the Commitment Letter. The New Credit Facility is expected to provide for revolving credit loans of $75.0 million and an additional $75.0 million incremental facility (the "Incremental Facility") which may be made available within the initial 24 months of the New Credit Facility, each to fund the acquisition and construction of towers, to provide working capital and for general corporate purposes. The Incremental Facility will be made on substantially similar terms and conditions to the New Credit Facility provided that lenders holding at least 60% of the facility approve the funding of the Incremental Facility. The Incremental Facility will have a 24 month revolving period after which any outstanding amounts will convert to a term loan and begin to amortize. As of March 31, 1998, the Borrowers had borrowing availability under the New Credit Facility of approximately $25.0 million. The New Credit Facility is expected to mature in the first quarter of 2005. In addition, the New Credit Facility will provide for mandatory reduction of the loan commitment with the net proceeds of all asset sales. In addition, if the Incremental Facility is accessed and converted into a term loan, the New Credit Facility will provide for mandatory prepayments with (i) 50% of Excess Cash Flow (as defined in the New Credit Facility) within one hundred twenty (120) days from the fiscal year end and (ii) proceeds from certain equity issuances (other than under employee stock option plans) that are not used to acquire and construct towers. Availability under the New Credit Facility is subject to a reduction schedule that commences on March 31, 2001. The schedule provides for a quarterly five percent amortization rate with a balloon payment in March 31, 2005. The Borrowers' obligations under the New Credit Facility will be guaranteed by each direct and indirect subsidiary of the Borrower and secured by (i) substantially all the assets of SBACC's direct and indirect subsidiaries, (ii) a pledge of capital stock of all of the direct and indirect subsidiaries of SBACC and (iii) perfected mortgages and landlord estoppel agreements for each material property now and hereafter owned or leased and, in any case, towers representing a minimum of 80% of total tower revenues. In addition, the New Credit Facility will be guaranteed on a limited recourse basis by SBACC, limited in recourse to the pledged capital stock of SBACC's direct and indirect subsidiaries, as well as the intercompany subordinated notes evidencing the contribution of the net proceeds of the Private Offering from SBACC to Telecommunications as well as any debt owing from Telecommunications and its subsidiaries. The capital stock of SBACC will not be pledged to secure the New Credit Facility. The loans under the New Credit Facility will bear interest, at the Borrowers' option, at either (i) an "alternate base rate" equal to the greater of (A) the rate of interest announced by BankBoston at the Boston office as the alternate base rate or (B) the sum of 0.5% plus the federal funds rate or (ii) the reserve "LIBOR rate," in each case plus an applicable margin ranging from 1.0% to 3.25% (determined based on a leverage ratio.) Upon any default after the expiration of any cure period and upon maturity, the applicable margin will increase by 2.0% per annum. 80 The New Credit Facility is expected to contain a number of covenants that, among other things, restrict the ability of the Borrowers and their respective subsidiaries to dispose of assets, incur additional indebtedness, incur guaranty obligations, pay dividends or make capital distributions, create liens on assets, make investments, engage in international activities, make acquisitions, engage in mergers or consolidations, engage in certain transactions with subsidiaries and affiliates and otherwise restrict corporate activities. In addition, the New Credit Facility will require compliance with certain financial covenants, including requiring the Borrowers and their respective subsidiaries to maintain a maximum ratio of Total Debt to Adjusted EBITDA, a minimum Fixed Charge Coverage Ratio, a minimum ratio of Consolidated Adjusted EBITDA to Pro Forma Interest, a minimum level of Consolidated Adjusted EBITDA and a minimum Pro Forma Fixed Charge Coverage Ratio. SBACC does not expect that such covenants will materially impact the ability of the Borrowers and their respective subsidiaries to operate their respective businesses. Pursuant to the expected terms of the New Credit Facility, as long as no mature event of default exists, the Borrowers will be entitled to pay dividends or make distributions to SBACC in order to permit SBACC to pay its expenses and to pay cash interest on certain indebtedness of SBACC (including the Notes); provided that the amount of such dividends or distributions does not exceed $2.5 million in any year ending on or prior to the fifth anniversary of the Private Offering (such period being the period prior to the date that the Notes begin to accrue cash interest). The New Credit Facility will also allow the Borrowers to pay dividends or distribute cash to SBACC to the extent required to pay taxes that are due and owing and allocable to the Borrowers and their respective subsidiaries so long as no payment default then exists. The New Credit Facility is expected to contain customary events of default, including the failure to pay principal when due or any interest or other amount that becomes due within three business days after the due date thereof, any representation or warranty being made by the Borrowers that is incorrect in any material respect on or as of the date made, a default in the performance of any negative covenants or a default in the performance of certain other covenants or agreements for a period of thirty days, default in certain other indebtedness, certain insolvency events and certain change of control events. In addition, a default under the Indenture will result in a default under the New Credit Facility. 81 DESCRIPTION OF EXCHANGE NOTES GENERAL The Exchange Notes will be issued pursuant to an Indenture (the "Indenture"), dated as of March 2, 1998 between SBACC and State Street Bank and Trust Company, as trustee (the "Trustee"). The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be entitled to the benefits of the Indenture. The form and terms of the Exchange Notes are the same as the form and terms of the Private Notes except that (i) the Exchange Notes will have been registered under the Securities Act, and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) Holders of the Exchange Notes will not be entitled to certain rights of Holders of Private Notes under the Registration Rights Agreement, which rights will terminate upon the consummation of the Exchange Offer. The terms of the Exchange Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "TIA"), as in effect on the date of the Indenture. The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Indenture, including the definitions of certain terms contained therein and those terms made a part of the Indenture by reference to the TIA. The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." As used below in this "Description of Exchange Notes" section, the term "SBACC" refers only to SBA Communications Corporation, but not any of its Subsidiaries. The Notes will be general unsecured obligations of SBACC and will rank pari passu in right of payment with all future unsecured senior Indebtedness of SBACC. However, the operations of SBACC are conducted through its Subsidiaries and, therefore, SBACC is dependent upon the cash flow of its Subsidiaries to meet its obligations, including its obligations under the Notes. SBACC's Subsidiaries will not be guarantors of the Notes and are separate entities with no obligation to make payments on the Notes or to make funds available therefor. The Notes will be effectively subordinated to all Indebtedness (including all obligations under the New Credit Facility) and other liabilities and commitments (including trade payables and lease obligations) of SBACC's Subsidiaries. Any right of SBACC to receive assets of any of its Subsidiaries upon such Subsidiary's liquidation or reorganization (and the consequent right of the Holders of the Notes to participate in those assets) will be effectively subordinated to the claims of that Subsidiary's creditors, except to the extent that SBACC is itself recognized as a creditor of such Subsidiary, in which case the claims of SBACC would still be subordinate to any security in the assets of such Subsidiary and any indebtedness of such Subsidiary senior to that held by SBACC. There can be no assurances that, if a Default or Event of Default occurs, SBACC will have sufficient cash or other assets available to meet SBACC's obligations, especially after repayment by its Subsidiaries of their obligations. For other information relating to SBACC and its Subsidiaries and the structural subordination of the Notes to indebtedness and other obligations of such Subsidiaries, see "Risk Factors-- Holding Company Structure; Effective Subordination; Restrictions on Access to Cash Flow of Subsidiaries." As of the date of the Indenture, all of SBACC's Subsidiaries were Restricted Subsidiaries. However, under certain circumstances, SBACC is able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not be subject to many of the restrictive covenants set forth in the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes will be limited in aggregate principal amount at maturity to $350.0 million and are scheduled to mature on March 1, 2008. The Indenture permits additional issues of Notes in one or more series from time to time, subject to the limitations set forth under "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." The Notes are being offered at a substantial discount from their principal amount at maturity. Until March 1, 2003, no interest will accrue, but the Accreted Value will accrete (representing the amortization of original issue discount) between the date of original issuance and March 1, 2003, on a semiannual bond equivalent basis using a 360-day year comprised of twelve 30-day months such that the Accreted Value shall be equal to the full principal amount of the Notes on March 1, 2003 (the "Full Accretion Date"). The initial Accreted Value per $1,000 in principal amount of Notes will be $558.50 (representing the original price at which Notes were offered in the Private Offering). 82 Beginning on March 1, 2003, interest on the Notes will accrue at the rate of 12% per annum and will be payable in U.S. dollars semiannually in arrears on March 1 and September 1, commencing on September 1, 2003, to Holders of record on the immediately preceding February 15 and August 15. Holders of record on such record dates will become irrevocably entitled to receive accrued interest in respect of the interest period during which such record date occurs as of the close of business on such record date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest, on the Notes will be payable at the office or agency of SBACC maintained for such purpose within the City and State of New York or, at the option of SBACC, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium and interest with respect to Notes the Holders of which have given wire transfer instructions to SBACC will be required to be made by wire transfer of immediately available funds to the accounts in the United States specified by the Holders thereof. Until otherwise designated by SBACC, SBACC's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. OPTIONAL REDEMPTION Except as described below, the Notes will not be redeemable at SBACC's option prior to March 1, 2004. Thereafter, the Notes will be subject to redemption at any time at the option of SBACC, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on March 1 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2004.............................................................. 107.500% 2005.............................................................. 105.000 2006.............................................................. 102.500 2007 and thereafter............................................... 100.000
At any time prior to March 1, 2001, SBACC may on any one or more occasions redeem up to 20% of the aggregate principal amount at maturity of Notes issued under the Indenture at a redemption price of 112% of the Accreted Value thereof on the redemption date with the net cash proceeds of one or more Public Equity Offerings and/or Strategic Equity Investments; provided that at least 80% of the aggregate principal amount at maturity of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by SBACC or any of its Subsidiaries), and provided, further, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering and/or Strategic Equity Investment. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest 83 ceases to accrue on Notes or portions of them called for redemption so long as SBACC has deposited with the Paying Agent funds in satisfaction at the applicable redemption price pursuant to the Indenture. MANDATORY REDEMPTION SBACC is not required to make mandatory redemption or sinking fund payments with respect to the Notes. PURCHASE AT THE OPTION OF HOLDERS Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require SBACC to purchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, if any (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), to the date of purchase or, in the case of purchases of Notes prior to the Full Accretion Date, at a purchase price equal to 101% of the Accreted Value thereof on the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, SBACC will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. On the Change of Control Payment Date, SBACC will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by SBACC. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. SBACC will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations applicable to any Change of Control Offer. To the extent that the provisions of any such securities laws or securities regulations conflict with the provisions of the covenant described above, SBACC will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the covenant described above by virtue thereof. The Change of Control purchase feature is a result of negotiations between SBACC and the Initial Purchasers. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that SBACC would decide to do so in the future. Subject to the limitations discussed below, SBACC could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect SBACC's capital structure. Restrictions on the ability of SBACC to incur additional Indebtedness are contained in the covenants described under "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," "--Certain Covenants--Liens" and "--Certain Covenants--Sale and Leaseback Transactions." Such restrictions can be waived only with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture does not contain any covenants or provisions that may afford holders of the Notes protection in the event of certain highly leveraged transactions. 84 The New Credit Facility is expected to limit SBACC's access to the cash flow of its Subsidiaries and, therefore, restrict SBACC's ability to purchase any Notes. The New Credit Facility is also expected to provide that the occurrence of certain change of control events with respect to SBACC will constitute a default thereunder. In the event that a Change of Control occurs at a time when SBACC's Subsidiaries are prohibited from making distributions to SBACC to purchase Notes, SBACC could cause its Subsidiaries to seek the consent of the lenders under the New Credit Facility to allow such distributions or could attempt to refinance the borrowings that contain such prohibition. If SBACC does not obtain such a consent or repay such borrowings, SBACC will remain prohibited from purchasing Notes. In such case, SBACC's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute a default under the New Credit Facility. Future indebtedness of SBACC and its Subsidiaries may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require such indebtedness to be purchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require SBACC to purchase the Notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such purchase on SBACC. Finally, SBACC's ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by SBACC's then existing financial resources, including its ability to access the cash flow of its Subsidiaries. See "Risk Factors--Repurchase of the Notes upon a Change of Control" and "Risk Factors--Holding Company Structure; Effective Subordination; Restrictions on Access to Cash Flow of Subsidiaries." There can be no assurance that sufficient funds will be available when necessary to make any required purchases. SBACC is not required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by SBACC and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The provisions under the Indenture relative to SBACC's obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes then outstanding. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of SBACC and its Restricted Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require SBACC to purchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of SBACC and its Subsidiaries taken as a whole to another Person or group may be uncertain. Asset Sales The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) SBACC (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by SBACC or such Restricted Subsidiary is in the form of (a) cash or Cash Equivalents, (b) Tower Assets or (c) any combination of the foregoing; provided that the amount of (x) any liabilities (as shown on SBACC's or such Restricted Subsidiary's most recent balance sheet) of SBACC or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases SBACC or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by SBACC or any such Restricted Subsidiary from such transferee that are converted by SBACC or such Restricted Subsidiary into cash within 20 days of the applicable Asset Sale (to the extent of the cash received) shall be deemed to be cash for purposes of this provision. 85 Within 360 days after the receipt of any Net Proceeds from an Asset Sale, SBACC or the applicable Restricted Subsidiary may apply such Net Proceeds to: (a) reduce (which reduction may be temporary) Indebtedness under a Credit Facility; (b) reduce other Indebtedness of any of SBACC's Restricted Subsidiaries; (c) acquire all or substantially all the assets of a Permitted Business; (d) acquire Voting Stock of a Permitted Business from a Person that is not a Subsidiary of SBACC; provided, that, after giving effect thereto, SBACC or its Restricted Subsidiary owns a majority of such Voting Stock; or (e) make a capital expenditure or acquire other long-term assets that are used or useful in a Permitted Business. Pending the final application of any such Net Proceeds, SBACC may invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, SBACC will be required to make an offer to all Holders of Notes and all holders of other senior Indebtedness of SBACC containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase, on a pro rata basis, the maximum principal amount (or accreted value, as applicable) of Notes and such other senior Indebtedness of SBACC that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount (or accreted value, as applicable) thereof plus accrued and unpaid interest thereon, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the procedures set forth in the Indenture and such other senior Indebtedness of SBACC. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, SBACC may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other senior Indebtedness of SBACC tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other senior Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. CERTAIN COVENANTS Restricted Payments The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of SBACC's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving SBACC) or to the direct or indirect holders of SBACC's Equity Interests in their capacity as such (other than dividends or distributions payable in Qualified Equity Interests or to SBACC or a Restricted Subsidiary of SBACC); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving SBACC) any Equity Interests of SBACC; (iii) designate any Restricted Subsidiary as an Unrestricted Subsidiary; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) SBACC would have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Adjusted Consolidated Cash Flow Ratio test set forth in the first paragraph of the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by SBACC and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (ii) and (iii) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of SBACC (or, in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) accrued subsequent to the Issue Date to the most recent date for which financial information is available to SBACC, taken as one accounting period, plus (ii) 100% of the aggregate net cash proceeds received by SBACC (from persons other than Subsidiaries) since the Issue Date as a contribution to its common equity capital or from the issue and sale of Qualified Equity 86 Interests (except to the extent such net cash proceeds are used to incur new Indebtedness outstanding pursuant to clause (x) of the second paragraph of the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock") or from the issue and sale (other than to a Subsidiary of SBACC) of Disqualified Stock or debt securities of SBACC that have been converted into Qualified Equity Interests (provided that any net cash proceeds that are used pursuant to the second paragraph under "Optional Redemption" shall not be so included), plus (iii) to the extent that any Unrestricted Subsidiary of SBACC is redesignated as a Restricted Subsidiary after the Issue Date, the fair market value of such Subsidiary as of the date of such redesignation, plus (iv) to the extent not included in the Adjusted Consolidated Cash Flow referred to in clause (i), 100% of the net cash proceeds received by SBACC or a Restricted Subsidiary from (x) the sale or other disposition of Restricted Investments made by SBACC or any Restricted Subsidiary after the Issue Date or (y) the sale of the Capital Stock of any Unrestricted Subsidiary by the Company or any Restricted Subsidiary or the sale of all or substantially all of the assets of any Unrestricted Subsidiary to the extent that a liquidating dividend or similar distribution is paid to the Company or any Restricted Subsidiary from the proceeds of such asset sale. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; or (ii) the making of any Investment or the redemption or repurchase of any Equity Interests in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of SBACC) of, any Qualified Equity Interests; provided that such net cash proceeds are not used to incur new Indebtedness pursuant to clause (x) of the second paragraph of the covenant described below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock" or pursuant to the second paragraph under "Optional Redemption"; and provided further that, in each such case, the amount of any such net cash proceeds that are so utilized shall be excluded from clause (c)(ii) of the preceding paragraph; or (iii) the repurchase, redemption or other acquisition or retirement for value of Equity Interests of SBACC held by any member of SBACC's management; provided that the aggregate amount expended pursuant to this clause (iii) shall not exceed $500,000 in any twelve-month period. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such Subsidiary, after giving effect to such designation, would meet the requirements of the definition of "Unrestricted Subsidiary." SBACC will not, and will not permit any of its Subsidiaries to, enter into, or suffer to exist, any transaction or arrangement, with a Subsidiary that is a Restricted Subsidiary that would be inconsistent with or violate the terms set forth in the definition of "Unrestricted Subsidiary." The amount of all Restricted Payments (other than cash), including the amount of the Restricted Payment that will be deemed to occur upon the designation of a Subsidiary as an Unrestricted Subsidiary, shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by SBACC or the applicable Restricted Subsidiary, or of the Company's proportionate interest in the Subsidiary so to be designated as the case may be, pursuant to the Restricted Payment. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that SBACC will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that SBACC may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and SBACC's Restricted Subsidiaries may incur Eligible Indebtedness if, in each case, (i) no Default shall have occurred and be continuing or would occur as a consequence thereof and (ii) SBACC's Debt to Adjusted Consolidated Cash Flow Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom would have been no greater than (a) 6.5 to 1.0 if 87 such incurrence or issuance is prior to the first anniversary of the Issue Date; (b) 6.0 to 1.0 if such incurrence or issuance is on or after the first anniversary of the Issue Date but prior to the second anniversary of the Issue Date; (c) 5.5 to 1.0 if such incurrence or issuance is on or after the second anniversary of the Issue Date; and (d) 6.0 to 1.0 if a Public Equity Offering has occurred and a ratio more restrictive to the Company would otherwise be in effect. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt") if no Default shall have occurred and be continuing or would occur as a consequence thereof: (i) the incurrence by SBACC or any of its Restricted Subsidiaries of Indebtedness under one or more Credit Facilities or through the issuance of Seller Paper in an aggregate principal amount (with letters of credit being deemed to have an aggregate principal amount equal to the maximum potential liability of SBACC and its Restricted Subsidiaries thereunder) at any one time outstanding not to exceed $125.0 million less the aggregate amount of commitment reductions under Credit Facilities resulting from the application of proceeds of Asset Sales since the Issue Date; provided, however, that the aggregate principal amount of Seller Paper at any one time outstanding under this clause (i) shall not exceed $50.0 million; (ii) the incurrence by SBACC and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by SBACC of Indebtedness represented by the Notes issued on the Issue Date, and the New Notes; (iv) the incurrence by SBACC or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of SBACC or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (iv), not to exceed $5.0 million at any one time outstanding; (v) the incurrence by SBACC or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph hereof or clause (ii) or (iii) or this clause (v) of this paragraph; (vi) the incurrence by SBACC or any of its Restricted Subsidiaries of intercompany Indebtedness or intercompany preferred stock between or among SBACC and any of its Restricted Subsidiaries; provided, however, that (i) if SBACC is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness or preferred stock being held by a Person other than SBACC or a Restricted Subsidiary and (B) any sale or other transfer of any such Indebtedness or preferred stock to a Person that is not either SBACC or a Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness or preferred stock by SBACC or such Restricted Subsidiary, as the case may be; (vii) the incurrence by SBACC or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding or currency exchange risk or otherwise entered into for bona fide purposes designed to protect against interest rate or currency exchange risk and not for speculative purposes; (viii) the guarantee by SBACC or any of its Restricted Subsidiaries of Indebtedness of SBACC or a Restricted Subsidiary of SBACC that was permitted to be incurred by another provision of the Indenture; (ix) the incurrence by SBACC or any of its Restricted Subsidiaries of Acquired Debt in connection with the acquisition of assets or a new Subsidiary and the incurrence by SBACC's Restricted Subsidiaries 88 of Indebtedness as a result of the designation of an Unrestricted Subsidiary as a Restricted Subsidiary; provided that, in the case of any such incurrence of Acquired Debt, such Acquired Debt was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by SBACC or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by SBACC or one of its Restricted Subsidiaries; and provided further that, in the case of any incurrence pursuant to this clause (ix), SBACC would have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) immediately after such incurrence pursuant to the Debt to Adjusted Consolidated Cash Flow Ratio test set forth in the first paragraph of this covenant, calculated as if such incurrence had occurred as of the actual date of incurrence and the related acquisition or designation (as applicable) had occurred at the beginning of the most recently ended four full fiscal quarter period of SBACC for which internal financial statements are available; (x) the incurrence by SBACC of Indebtedness not to exceed, at any one time outstanding, 2.0 times the aggregate net cash proceeds from the issuance and sale, other than to a Subsidiary, of Equity Interests (other than Disqualified Stock) of SBACC since the Issue Date (less the amount of such proceeds used to make Restricted Payments as provided in clause (c)(ii) of the first paragraph or clause (ii) of the second paragraph of the covenant described above under the caption "--Restricted Payments"); provided that such Indebtedness does not mature prior to the Stated Maturity of the Notes and the Weighted Average Life to Maturity of such Indebtedness is longer than that of the Notes; (xi) the issuance by Restricted Subsidiaries of Permitted Subsidiary Equity Interests; and (xii) the incurrence by SBACC or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $5.0 million. The Indenture provides that (i) SBACC will not incur any Indebtedness that is contractually subordinated in right of payment to any other Indebtedness of SBACC unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of SBACC shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of SBACC solely by virtue of being unsecured; and (ii) SBACC will not permit any of its Unrestricted Subsidiaries to incur any Indebtedness other than Non-Recourse Debt; and (iii) Restricted Subsidiaries may not issue or sell, and the Company may not permit any Restricted Subsidiary to have outstanding, any Equity Interests (other than (x) Equity Interests held by the Company or its Restricted Subsidiaries or (y) Permitted Subsidiary Equity Interests). For purposes of determining compliance with this covenant, in the event that an item of Indebtedness or preferred stock meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) in the second paragraph of this covenant or is entitled to be incurred pursuant to the first paragraph of this covenant, SBACC shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant. Accrual of interest, accretion or amortization of original issue discount and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. Liens The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. Dividend and Other Payment Restrictions Affecting Subsidiaries The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual 89 encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to SBACC or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to SBACC or any of its Restricted Subsidiaries, (ii) make loans or advances to SBACC or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to SBACC or any of its Restricted Subsidiaries. However, the foregoing restrictions will not apply to encumbrances or restrictions existing under or by reason of (a) any agreement or instrument governing Existing Indebtedness as in effect on the Issue Date or as amended, modified, restated or renewed in any manner not materially more restrictive, taken as a whole, (b) the Indenture, the Notes or the New Credit Facility or any other Credit Facility (so long as such other Credit Facility contains restrictions that are not materially more restrictive, taken as a whole, than those described in the Commitment Letter), (c) applicable law, (d) any instrument governing Indebtedness or Capital Stock of a Person acquired by SBACC or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (e) by reason of customary non-assignment provisions in leases or licenses or other contracts entered into in the ordinary course of business, (f) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (g) the provisions of agreements governing Indebtedness incurred pursuant to clause (iv) of the second paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock," (h) any agreement for the sale of a Restricted Subsidiary that restricts that Restricted Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, (j) Liens permitted to be incurred pursuant to the provisions of the covenant described under the caption "--Liens" that limit the right of the debtor to transfer the assets subject to such Liens, (k) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements and (l) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Merger, Consolidation or Sale of Assets The Indenture provides that SBACC may not consolidate or merge with or into (whether or not SBACC is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) SBACC is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than SBACC) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than SBACC) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of SBACC under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; and (iii) immediately after such transaction no Default exists. Transactions with Affiliates The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to SBACC or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by SBACC or such Restricted Subsidiary with an unrelated Person and (ii) SBACC delivers to the Trustee (a) with respect to any Affiliate 90 Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following items shall not be deemed to be Affiliate Transactions: (i) any employment arrangements with any executive officer of SBACC or a Restricted Subsidiary that is entered into by SBACC or any of its Restricted Subsidiaries in the ordinary course of business and consistent with compensation arrangements of similarly situated executive officers at comparable companies engaged in Permitted Businesses, (ii) transactions between or among SBACC and/or its Restricted Subsidiaries, (iii) payment of directors' fees in an aggregate annual amount not to exceed $25,000 per Person, (iv) Restricted Payments and Permitted Investments that are permitted by the provisions of the Indenture described above under the caption "-- Restricted Payments" and (v) the issuance or sale of Equity Interests (other than Disqualified Stock) of SBACC. Sale and Leaseback Transactions The Indenture provides that SBACC will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction (as seller); provided that SBACC or any of its Restricted Subsidiaries may enter into a sale and leaseback transaction if (i) SBACC or such Restricted Subsidiary, as applicable, could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Debt to Adjusted Consolidated Cash Flow Ratio test set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption "--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and SBACC applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Repurchase at the Option of Holders-- Asset Sales." Limitations on Issuances of Guarantees of Indebtedness The Indenture provides that SBACC will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee or pledge any assets to secure the payment of any Indebtedness of SBACC (except Indebtedness of SBACC under a guarantee of Indebtedness of one or more of its Restricted Subsidiaries) unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for the Guarantee of the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be senior to or pari passu with such Restricted Subsidiary's Guarantee of or pledge to secure such other Indebtedness. Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer, to any Person other than a Restricted Subsidiary of SBACC, of all of SBACC's stock in, or all or substantially all the assets of, such Restricted Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture. The form of such Guarantee will be attached as an exhibit to the Indenture. Business Activities The Indenture provides that SBACC will not, and will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to SBACC and its Restricted Subsidiaries taken as a whole. 91 Reports The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, SBACC will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if SBACC were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of SBACC and its consolidated Subsidiaries (showing in reasonable detail, in the footnotes to the financial statements and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" (in each case to the extent not prohibited by the Commission's rules and regulations), (a) the financial condition and results of operations of SBACC and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of SBACC and (b) the Tower Cash Flow for the most recently completed fiscal quarter and the Adjusted Consolidated Cash Flow for the most recently completed four-quarter period) and, with respect to the annual information only, a report thereon by SBACC's certified independent accountants, and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if SBACC were required to file such reports, in each case within the time periods specified in the Commission's rules and regulations; provided that the report for the period ended December 31, 1997 need not be furnished until April 15, 1998. In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, SBACC will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, SBACC will, for so long as any Notes remain outstanding, furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by SBACC or any of its Subsidiaries to comply with the provisions described under the caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" or failure by SBACC to consummate a Change of Control Offer or Asset Sale Offer in accordance with the provisions of the Indenture applicable thereto; (iv) failure by SBACC or any of its Subsidiaries for 30 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by SBACC or any of its Significant Subsidiaries (or the payment of which is guaranteed by SBACC or any of its Significant Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by SBACC or any of its Significant Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; or (vii) certain events of bankruptcy or insolvency with respect to SBACC or any of its Restricted Subsidiaries that is a Significant Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount at maturity of the then outstanding Notes may declare all of the Notes to be due and payable immediately. Upon any such declaration, the principal of (or, if prior to the Full Accretion Date, the Accreted Value of) and accrued and unpaid interest, if any, shall become due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with 92 respect to SBACC, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount at maturity of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Holders of a majority in aggregate principal amount at maturity of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each holder of the Notes notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not opposed to the interest of the holders of the Notes. In addition, SBACC is required to deliver to the Trustee, within 90 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. SBACC is also required to deliver to the Trustee, forthwith after the occurrence thereof, written notice of any event that would constitute a Default, the status thereof and what action SBACC is taking or proposes to take in respect thereof. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of SBACC, as such, shall have any liability for any obligations of SBACC under the Notes, the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE SBACC may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due from the trust referred to below, (ii) SBACC's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and SBACC's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, SBACC may, at its option and at any time, elect to have the obligations of SBACC released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment and bankruptcy, receivership, rehabilitation and insolvency events with respect to SBACC) described under "--Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) SBACC must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in United States dollars, noncallable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and SBACC must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, SBACC shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) SBACC has received from, or there 93 has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, SBACC shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events with respect to SBACC are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which SBACC or any of its Restricted Subsidiaries is a party or by which SBACC or any of its Restricted Subsidiaries is bound; (vi) SBACC must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) SBACC must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by SBACC with the intent of preferring the Holders of Notes over the other creditors of SBACC with the intent of defeating, hindering, delaying or defrauding creditors of SBACC or others; and (viii) SBACC must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and SBACC may require a Holder to pay any taxes and fees required by law. SBACC is not required to transfer or exchange any Note selected for redemption. Also, SBACC is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least 662/3 of the aggregate principal amount at maturity of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount at maturity of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (specifically excluding the provisions relating to the covenants described above under the caption "Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default 94 that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (specifically excluding the payment required by one of the covenants described above under the caption "Repurchase at the Option of Holders"), (viii) except as provided under the caption "Legal Defeasance and Covenant Defeasance" or in accordance with the terms of any Subsidiary Guarantee, release a Subsidiary Guarantor from its obligations under its Subsidiary Guarantee or make any change in a Subsidiary Guarantee that would adversely affect the Holders of the Notes, (ix) provide for contractual subordination of the Notes or (x) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, SBACC and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of SBACC's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of SBACC, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount at maturity of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the decree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Accreted Value" means, as of any date of determination the sum of (a) the initial Accreted Value (which is $558.50 per $1,000 in principal amount at maturity of Notes) and (b) the portion of the excess of the principal amount at maturity of each Note over such initial Accreted Value which shall have been amortized through such date, such amount to be so amortized on a daily basis and compounded semiannually on each March 1 and September 1 at the rate of 12% per annum from the date of original issuance of the Notes through the date of determination computed on the basis of a 360-day year of twelve 30-day months. The Accreted Value of any Note on or after the Full Accretion Date shall be equal to 100% of its stated principal amount. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. 95 "Adjusted Consolidated Cash Flow" has the meaning given to such term in the definition of "Debt to Adjusted Consolidated Cash Flow Ratio." "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise, provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback, as seller), in any case, outside of the ordinary course of business provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of SBACC and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "--Purchase at the Option of Holders--Change of Control" and/or the provisions described above under the caption "Purchase at the Option of Holders--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant and (ii) the issue or sale by SBACC or any of its Restricted Subsidiaries of Equity Interests of any of SBACC's Subsidiaries (other than (x) directors' qualifying shares or shares required by applicable law to be held by a Person other than SBACC or a Restricted Subsidiary or (y) Permitted Subsidiary Equity Interests), in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for net proceeds in excess of $2.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by SBACC to a Restricted Subsidiary or by a Restricted Subsidiary to SBACC or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Subsidiary to SBACC or to another Restricted Subsidiary, (iii) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments," (iv) grants of leases or licenses in the ordinary course of business and (v) disposals of Cash Equivalents. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Broker-Dealer" means any broker or dealer registered under the Exchange Act. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than 12 months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight 96 bank deposits, in each case with any lender party to the New Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and in each case maturing within 12 months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this definition. "Change of Control" means the occurrence of any of the following; (i) 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 SBACC 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; (ii) the adoption of a plan relating to the liquidation or dissolution of SBACC; (iii) 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 SBACC (measured by voting power rather than number of shares); (iv) the first day on which a majority of the members of the Board of Directors of SBACC are not Continuing Directors; or (v) SBACC consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, SBACC, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of SBACC is converted into or exchanged for cash, securities or other property, other than any such transaction where (x) the Voting, Stock of SBACC 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. "Commitment Letter" means that certain Commitment Letter and related Term Sheet dated as of February 3, 1998 by and among BankBoston, N.A. as agent, BancBoston Securities Inc. as arranger and SBA Communications Corporation. "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, (i) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period to the extent that such provision for taxes was included in computing, such Consolidated Net Income, plus (ii) consolidated interest expense ("Consolidated Interest Expense") of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iii) depreciation, amortization (including amortization of goodwill and other intangibles and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period)) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (iv) non-cash items increasing such Consolidated Net Income for such period (excluding any items that were accrued in the ordinary course of business), in each case on a consolidated basis and determined in accordance with GAAP. 97 "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person (other than Permitted Subsidiary Equity Interests), in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Assets" means, with respect to SBACC, the total consolidated assets of SBACC and its Restricted Subsidiaries, as shown on the most recent internal consolidated balance sheet of SBACC and such Restricted Subsidiaries calculated on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" has the meaning given to such term in the definition of Consolidated Cash Flow. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person (other than SBACC) that is not a Restricted Subsidiary of SBACC or that is accounted for by the equity method of accounting shall be excluded, except that for purposes of determining compliance with the covenant described unless "Certain Covenants--Restricted Payments" above, such Net Income shall be included but only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iii) the cumulative effect of a change in accounting principles shall be excluded, (iv) the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded whether or not distributed to SBACC or one of its Restricted Subsidiaries or whether or not otherwise included pursuant to clause (i) and (v) any deferred financing costs written off in connection with the early extinguishment of any Indebtedness shall be added back to Consolidated Net income to the extent otherwise deducted therefrom. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of SBACC who (i) was a member of such Board of Directors on the date of the Indenture, (ii) 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 (iii) is a designee of a Principal or was nominated by a Principal. "Credit Facility" means one or more senior debt facilities (including, without limitation, the New Credit Facility) or commercial paper facilities with banks or other institutional lenders providing for revolving credit loans, term loans or letters of credit, in each case, as amended, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time (including subsequent refinancings); provided, however, that the terms and conditions in any such facility (including the New Credit Facility) relating to the ability of Subsidiaries of SBACC to pay dividends or make distributions to SBACC shall not, taken as a whole, be materially more restrictive than those described in the Commitment Letter. "Debt to Adjusted Consolidated Cash Flow Ratio" means, as of any date of determination, the ratio of (a) the Consolidated Indebtedness of SBACC as of such date to (b) the sum of (1) the Consolidated Cash Flow of SBACC for the four most recent full fiscal quarters ending immediately prior to such date for which internal financial statements are available, less SBACC's Tower Cash Flow for such four-quarter period, plus (2) the product of four times SBACC's Tower Cash Flow for the most recent quarterly period (such sum being, referred to as "Adjusted Consolidated Cash Flow"), in each case determined on a pro forma basis after giving effect to all acquisitions or dispositions of assets made by SBACC and its Subsidiaries from the beginning of such four-quarter period through and including such date of determination (including any related financing transactions) as if such acquisitions and dispositions had occurred at the beginning of such four-quarter period. For purposes of 98 making the computation referred to above, (i) acquisitions that have been made by SBACC or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (ii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to Calculation Date, shall be excluded. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in each case, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require SBACC to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that SBACC may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described under the caption "Certain Covenants--Restricted Payments." "Eligible Indebtedness" means any Indebtedness for money borrowed incurred by one or more Restricted Subsidiaries of SBACC, provided that such Indebtedness for money borrowed is contractually pari passu with and secured equally and ratably with all other Indebtedness for money borrowed of such Restricted Subsidiaries, including, without limitation, Indebtedness outstanding under the New Credit Facility. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock) (it being understood that Permitted Subsidiary Equity Interests shall not be deemed Equity Interests of SBACC until they have been converted into Equity Interests of SBACC in accordance with the terms thereof). "Exchange Offer" means exchange and issuance by SBACC of a principal amount of New Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Notes that are tendered by such Holders in connection with such exchange and issuance. "Exchange Offer Registration Statement" means the Registration Statement relating to the Exchange Offer, including the related Prospectus. "Existing Indebtedness" means Indebtedness of SBACC and its Subsidiaries (other than Indebtedness under the Credit Facility) in existence on the original issuance of the Notes, until such amounts are repaid. "fair market value" means the price which could be negotiated in an arm's length, free market transaction, for cash, between a willing and able seller and a willing and able buyer, neither of whom is under undue pressure, or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of SBACC acting reasonably and in good faith, evidenced by a resolution of the Company's Board of Directors delivered to the Trustee; provided, however, that fair market value shall be determined by a nationally recognized independent investment banking, accounting or appraisal firm for any transaction which is reasonably likely to exceed $10 million in value. "Full Accretion Date" means March 1, 2003. 99 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements relating to or based upon fluctuations in interest rates or currency exchange rates. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person whether or not such Indebtedness is assumed by such Person (the amount of such Indebtedness as of any date being deemed to be the lesser of the value of such property or assets as of such date or the principal amount of such Indebtedness of such other Person so secured) and, to the extent not otherwise included, the Guarantee by such Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. In calculating the amount of Indebtedness outstanding, letters of credit supporting obligations otherwise included as Indebtedness (and reimbursement obligations with respect to such letters of credit to the extent supporting obligations otherwise included in Indebtedness) shall not be included. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If SBACC or any Restricted Subsidiary of SBACC sells or otherwise disposes of all Equity Interests of any direct or indirect Subsidiary of SBACC or a Restricted Subsidiary of SBACC issues any of its Equity Interests such that, in each case, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of SBACC, SBACC shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Issue Date" means March 2, 1998, the date of original issuance of the Notes. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). 100 "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with (a) any asset sale outside the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by SBACC or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non- cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, (ii) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iii) amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under a Credit Facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale, (iv) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale, (v) the deduction of appropriate amounts provided by the seller as a reserve in accordance with GAAP against any liabilities associated with the assets disposed of in such Asset Sale and retained by SBACC or any Restricted Subsidiary after such Asset Sale and (vi) without duplication, any reserves that SBACC's Board of Directors determines in good faith should be made in respect of the sale price of such asset or assets for post closing adjustments; provided that in the case of any reversal of any reserve referred to in clause (v) or (vi) above, the amount so reserved shall be deemed to be Net Proceeds from an Asset Sale as of the date of such reversal. "New Credit Facility" means that certain loan agreement to be entered into by SBA Telecommunications, Inc., on terms substantially equivalent to those described in the Commitment Letter, and including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time (including subsequent refinancings). "New Notes" means SBACC's 12% Senior Discount Notes due 2008 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) as contemplated by the Registration Rights Agreement. "Non-Recourse Debt" means Indebtedness (i) as to which neither SBACC nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of SBACC or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of SBACC or any of its Restricted Subsidiaries. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Payment Restriction" means, with respect to a subsidiary of any Person, any encumbrance, restriction or limitation, whether by operation of the terms of its charter or by reason of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation, on the ability of (i) such subsidiary to (a) pay dividends or make other distributions on its Capital Stock or make payments on any obligation, liability or Indebtedness owed to such Person or any other subsidiary of such Person, (b) make loans or advances to such 101 Person or any other subsidiary of such Person, or (ii) such Person or any other subsidiary of such Person to receive or retain any such (a) dividends, distributions or payments, (b) loans or advances or (c) transfer of properties or assets. "Permitted Business" means any business conducted by SBACC and its Restricted Subsidiaries on the date of the Indenture and any other business related, ancillary or complementary to any such business. "Permitted Investments" means (a) any Investment in SBACC or in a Restricted Subsidiary of SBACC; (b) any Investment in Cash Equivalents; (c) any Investment by SBACC or any Restricted Subsidiary of SBACC in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of SBACC or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, SBACC or a Restricted Subsidiary of SBACC; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "Repurchase at the Option of Holders--Asset Sales," (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of SBACC; (f) receivables created in the ordinary course of business; (g) loans or advances to employees made in the ordinary course of business not to exceed $5.0 million at any one time outstanding; (h) securities and other assets received in settlement of trade debts or other claims arising in the ordinary course of business; and (i) other Investments in Permitted Businesses not to exceed 5% of SBACC's Consolidated Assets at any one time outstanding (each such Investment being measured as of the date made and without giving effect to subsequent changes in value). "Permitted Liens" means (i) Liens securing Eligible Indebtedness of SBACC under one or more Credit Facilities that was permitted by the terms of the Indenture to be incurred; (ii) Liens securing any Indebtedness of any of SBACC's Restricted Subsidiaries that was permitted by the terms of the Indenture to be incurred; (iii) Liens in favor of SBACC; (iv) Liens existing on the Issue Date; (v) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (vi) Liens securing Indebtedness permitted to be incurred under clause (iv) of the second paragraph of the covenant described above under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (vii) Liens incurred in the ordinary course of business of SBACC or any Restricted Subsidiary of SBACC with respect to obligations that do not exceed $10 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by SBACC or such Restricted Subsidiary. "Permitted Refinancing Indebtedness" means any Indebtedness of SBACC or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of SBACC or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or initial accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of expenses and prepayment premiums incurred in connection therewith), (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded, and (iv) such Indebtedness is incurred either by SBACC or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. 102 "Permitted Subsidiary Equity Interests" means Equity Interests of Restricted Subsidiaries of SBACC that (i) will automatically convert into common stock of SBACC in the event of a Public Equity Offering of SBACC or the occurrence of an Event of Default under the Indenture, (ii) does not entitle the holder to any registration rights, (iii) is issued as consideration in a Tower Asset Acquisition and (iv) does not provide for any dividends other than in additional shares of such Equity Interests. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Principal" means Steven E. Bernstein. "Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. "Public Equity Offering" means an underwritten primary public offering of common stock of SBACC pursuant to an effective registration statement under the Securities Act. "Qualified Equity Interests" means Equity Interests of SBACC other than Disqualified Stock. "Registration Statement" means any registration statement of SBACC relating to (a) an offering of New Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of the Registration Rights Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. "Related Party" with respect to any Principal means (A) any controlling stockholder, 80% (or more) owned Subsidiary of such Principal or (B) 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 (A). "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the relevant Person that is not an Unrestricted Subsidiary. "Seller Paper" means Indebtedness incurred by SBACC or any of its Restricted Subsidiaries as consideration in a Tower Asset Acquisition. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means, with respect to any Person, any Restricted Subsidiary of such Person that would be a "significant subsidiary" of such Person as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof, except that all references to "10 percent" in Rule 1-02(w)(1), (2) and (3) shall mean "5 percent." "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. 103 "Strategic Equity Investment" means a cash contribution to the common equity capital of SBACC or a purchase from SBACC of common Equity Interests (other than Disqualified Stock), in either case by or from a Strategic Equity Investor and for aggregate cash consideration of at least $10.0 million. "Strategic Equity Investor" means a Person engaged in a Permitted Business whose Total Equity Market Capitalization exceeds $1 billion. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Total Equity Market Capitalization" of any Person means, as of any day of determination, the sum of (i) the product of (A) the aggregate number of outstanding primary shares of common stock of such Person on such day (which shall not include any options or warrants on, or securities convertible or exchangeable into, shares of common stock of such person) multiplied by (B) the average closing price of such common stock listed on a national securities exchange or the Nasdaq National Market System over the 20 consecutive business days immediately preceding such day, plus (ii) the liquidation value of any outstanding shares of preferred stock of such Person on such day. "Tower Asset Acquisition" means an acquisition of Tower Assets or a business substantially all of the assets of which are Tower Assets. "Tower Assets" means wireless transmission towers and related assets that are located on the site of a transmission tower. "Tower Cash Flow" means, for any period, the Consolidated Cash Flow of SBACC and its Restricted Subsidiaries for such period that is directly attributable to site rental revenue, license or management fees paid to manage, lease or sublease space on communication sites owned, leased or managed by SBACC (collectively, "site leasing revenues"), all determined on a consolidated basis and in accordance with GAAP. Tower Cash Flow will not include revenue derived from the sale of assets. In allocating corporate general, administrative and other operating expenses that are not, in the financial statements of SBACC allocated to any particular line of business, such expenses shall be allocated to the Company's site leasing business in proportion to the percentage of the Company's total revenues for the applicable period that were site leasing revenues. "Transfer Restricted Securities" means each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) or (d) the date on which such Note is distributable to the public pursuant to Rule 144 under the Act. "Unrestricted Subsidiary" means any Subsidiary of SBACC that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with SBACC or any Restricted Subsidiary of SBACC unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to SBACC or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of SBACC; (c) is a Person with respect to which neither SBACC nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe 104 for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of SBACC or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of SBACC or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of SBACC or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of SBACC as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described above under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," SBACC shall be in default of such covenant). The Board of Directors of SBACC may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of SBACC of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described above under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default would occur or be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person. 105 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following general discussion summarizes certain of the material U.S. federal income tax aspects of the Exchange Offer to holders of the Private Notes. This discussion is summary for general information only and does not consider all aspects of the Private Notes in light of such holder's personal circumstances. This discussion also does not address the U.S. federal income tax consequences to holders subject to special treatment under the U.S. federal income tax laws, such as dealers in securities, or foreign currency, tax-exempt entities, banks, thrifts, insurance companies, persons that hold the Notes as part of a "straddle", a "hedge" against currency risk or a "conversion transaction"; persons that have a "functional currency" other than the U.S. dollar, and investors in pass-through entities. In addition, this discussion does not prescribe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction. This discussion is based upon the Code, existing and proposed regulations thereunder, Internal Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). The Company has not and will not seek any rulings or opinions from the IRS or counsel with respect to the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the Exchange Offer which are different from those discussed herein. HOLDERS OF THE PRIVATE NOTES SHOULD CONSULT THEIR OWN ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THE EXCHANGE OFFER IN LIGHT OF THEIR PARTICULAR SITUATIONS. The exchange of Private Notes for Exchange Notes pursuant to the Exchange Offer should not constitute a taxable exchange. As a result, a holder (i) should not recognize taxable gain or loss as a result of exchanging Private Notes for Exchange Notes pursuant to the Exchange Offer; (ii) the holding period of the Exchange Notes should include the holding period of the Private Notes exchanged therefor and (iii) the adjusted tax basis of the Exchange Notes should be the same as the adjusted tax basis of the Private Notes exchanged therefor immediately before the exchange. 106 BOOK ENTRY; DELIVERY AND FORM Except as described in the next paragraph, the Notes initially will be represented by one or more permanent global certificates in definitive, fully registered form (the "Global Notes"). The Global Notes will be deposited with, or on behalf of, DTC, New York, New York, and registered in the name of a nominee of DTC. The Global Notes will be subject to certain restrictions on transfer set forth therein and will bear the legend regarding such restrictions set forth under the heading "Transfer Restrictions" herein. The Global Notes. The Company expects that pursuant to procedures established by DTC (i) upon the issuance of the Global Notes, DTC or its custodian will credit, on its internal system, the principal amount of the individual beneficial interests represented by such Global Notes to the respective accounts of persons who have accounts with such depositary and (ii) ownership of beneficial interests in the Global Notes will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Such accounts initially will be designated by or on behalf of the Initial Purchasers and ownership of beneficial interests in the Global Notes will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. QIBs may hold their interests in the Global Note directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. So long as DTC, or its nominee, is the registered owner or holder of the Notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Notes for all purposes under the Indenture. No beneficial owner of an interest in any of the Global Notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the Indenture with respect to the Notes. Interests in the Global Notes will also be subject to certain restrictions on transfers as set forth under the heading "Transfer Restrictions." Payments of the principal of, premium (if any) and interest (including Additional Interest) on the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest (including Additional Interest) in respect of the Global Notes, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Notes as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in same day funds. If a holder requires physical delivery of a Certificated Note ("Certificated Note") for any reason, including to sell Notes to persons in states which require physical delivery of the Notes, or to pledge such securities, such holder must transfer its interest in a Global Note, in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. DTC has advised the Company that it will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given 107 such direction. However, if there is an Event of Default under the Indenture, DTC will exchange the Global Notes for Certificated Notes, which it will distribute to its participants and which will be legended as set forth under the heading "Transfer Restrictions." DTC has advised the Company as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes. If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, Certificated Notes will be issued in exchange for the Global Notes. 108 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account in connection with the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes if such Private Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer that requests such documents in the Letter of Transmittal, for use in connection with any such resale. In addition, until (90 days after the date of this Prospectus), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account in connection with the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such release may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions of concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account in connection with the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. An affiliate of BT Alex. Brown Incorporated, one of the Initial Purchasers, is a limited partner in ABS and certain employees of BT Alex. Brown Incorporated are investors in another Private Investor. In addition, certain officers of BT Alex. Brown Incorporated are holders of Series A Preferred Stock. Further, in connection with the Preferred Stock Offering, the Company granted BT Alex. Brown Incorporated a five-year warrant to purchase up to 402,500 shares of Class A Common Stock, subject to certain anti-dilution rights, with an exercise price of $3.73 per share of Class A Common Stock. See "Ownership of Capital Stock" and "Certain Transactions." 109 LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for the Company by Latham & Watkins, New York, New York and Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., West Palm Beach, Florida. INDEPENDENT ACCOUNTANTS The audited financial statements and schedule of SBA Communications Corporation for each of the three years in the period ended December 31, 1997 and the audited balance sheet of SBA Communications Corporation as of December 31, 1997 and 1996, which are included in this Registration Statement, have been included in reliance on the reports of Arthur Andersen LLP, independent public accountants, given on the authority of that firm as experts in giving said reports. The financial statements of Communication Site Services, Inc. and Segars Communication Group, Inc. as of December 31, 1996 and 1995 and for the years then ended, included in this Prospectus, have been audited by Robson, Scribner & Stewart, P.A., Certified Public Accountants, as stated in their reports appearing herein. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 under the Securities Act with respect to the Exchange Notes offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus omits certain information, exhibits and undertakings contained in the Registration Statement. For further information with respect to the Company and the Exchange Notes offered hereby, reference is made to the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. As a result of the Exchange Offer, the Company will become subject to the informational requirements of the Exchange Act. The Registration Statement (and the exhibits and schedules thereto), as well as the periodic reports and other information filed by the Company with the Commission, may be inspected and copied at the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at Room 1400, 75 Park Place, New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 6061-2511. Copies of such materials may be obtained from the Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its public reference facilities in New York, New York and Chicago, Illinois at the prescribed rates. The Commission maintains a web site (http://www.sec.gov), that contains periodic reports, proxy and information statements and other information regarding registrants that file documents electronically with the Commission. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. Pursuant to the Indenture, the Company has agreed to furnish to the Trustee and to registered holders of the Exchange Notes, without cost to the Trustee or such registered holders, copies of all reports and other information that would be required to be filed by the Company with the Commission under the Exchange Act, whether or not the Company is then required to file reports with the Commission. As a result of this Exchange Offer, the Company will become subject to the periodic reporting and other informational requirements of the Exchange Act. In the event that the Company ceases to be subject to the informational requirements of the Exchange Act, the Company has agreed that, so long as any Notes remain outstanding, it will file with the Commission (but only if the Commission at such time is accepting such voluntary filings) and distribute to holders of the Private Notes or the Exchange Notes, as applicable, copies of the financial information that would have been contained in such annual reports and quarterly reports, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations," that would have been required to be filed with the Commission pursuant to the Exchange Act. The Company will also furnish such other reports as it may determine or as may be required by law. 110 INDEX TO FINANCIAL STATEMENTS SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES Report of Independent Certified Public Accountants...................... F-3 Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996................................................................... F-4 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995.................................................... F-5 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995............................................................... F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995.................................................... F-7 Notes to Consolidated Financial Statements ............................. F-8 COMMUNICATION SITE SERVICES, INC. UNAUDITED FINANCIAL STATEMENTS: Independent Accountants' Report......................................... F-19 Balance Sheet as of September 18, 1997 and September 30, 1996........... F-20 Statement of Income for the nine months ended September 18, 1997 and September 30, 1996..................................................... F-21 Statements of Retained Earnings for the nine months ended September 18, 1997 and September 30, 1996..................................................... F-22 Statements of Cash Flows for the nine months ended September 18, 1997 and September 30, 1996................................................. F-23 Notes to Financial Statements for the nine months ended September 18, 1997, September 30, 1996 and December 31, 1996......................... F-24 AUDITED FINANCIAL STATEMENTS: Independent Auditors' Report............................................ F-29 Balance Sheet as of December 31, 1996................................... F-30 Statement of Income for the year ended December 31, 1996................ F-31 Statement of Retained Earnings for the year ended December 31, 1996..... F-32 Statement of Cash Flows for the year ended December 31, 1996............ F-33 Notes to Financial Statements for the year ended December 31, 1996...... F-34 Independent Accountants' Report......................................... F-41 Balance Sheet as of December 31, 1995................................... F-42 Statement of Income for the year ended December 31, 1995................ F-43 Statement of Retained Earnings for the year ended December 31, 1995..... F-44 Statement of Cash Flows for the year ended December 31, 1995............ F-45 Notes to Financial Statements for the year ended December 31, 1995...... F-46 SEGARS COMMUNICATION GROUP, INC. UNAUDITED FINANCIAL STATEMENTS: Independent Accountants' Report......................................... F-52 Balance Sheets as of September 18, 1997 and December 31, 1996........... F-54 Statements of Operations for the nine months ended September 18, 1997 and September 18, 1996................................................. F-55 Statements of Retained Earnings for the periods ended September 18, 1997 and September 30, 1996 F-56 Statements of Cash Flows for the nine months ended September 18, 1997 and September 30, 1996................................................. F-57 Condensed Notes to Financial Statements for the nine months ended September 18, 1997 and September 30, 1996.............................. F-58
F-1
PAGE ---- AUDITED FINANCIAL STATEMENTS: Independent Auditors' Report............................................. F-61 Balance Sheet as of December 31, 1996.................................... F-62 Statement of Income for the year ended December 31, 1996................. F-63 Statement of Retained Earnings for the year ended December 31, 1996...... F-64 Statement of Cash Flows for the year ended December 31, 1996............. F-65 Notes to Financial Statements for the year ended December 31, 1996....... F-66 Independent Accountants' Report.......................................... F-69 Balance Sheet as of December 31, 1995.................................... F-70 Statement of Income for the year ended December 31, 1995................. F-71 Statement of Retained Earnings for the year ended December 31, 1995...... F-72 Statement of Cash Flows for the year ended December 31, 1995............. F-73 Notes to Financial Statements for the year ended December 31, 1995....... F-74
F-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders of SBA Communications Corporation and Subsidiaries: We have audited the accompanying consolidated balance sheets of SBA Communications Corporation (a Florida corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SBA Communications Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 10, 1998. F-3 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (SEE NOTE 2)
DECEMBER 31, ------------------------ 1997 1996 ----------- ----------- ASSETS Current assets: Cash and cash equivalents, includes interest bearing amounts of $1,397,047 and $260,949 in 1997 and 1996. $ 6,109,418 $ 310,936 Accounts receivable, net of allowances of $508,268 and $1,024,100 in 1997 and 1996..................... 10,931,038 16,093,979 Prepaid and other current assets..................... 982,722 884,394 Costs and estimated earnings in excess of billings on uncompleted contracts............................... 118,235 -- ----------- ----------- Total current assets................................ 18,141,413 17,289,309 Property and equipment, net........................... 16,445,008 632,110 Note receivable-stockholder........................... 3,561,306 -- Intangible assets, net................................ 3,499,992 -- Deferred financing fees............................... 740,338 -- Deferred tax asset.................................... 2,257,462 -- Other assets.......................................... 151,885 139,027 ----------- ----------- Total assets........................................ $44,797,404 $18,060,446 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $ 2,182,447 $ 1,202,973 Accrued expenses..................................... 919,563 682,483 Accrued salaries and payroll taxes................... 1,729,273 391,101 Notes payable........................................ 10,184,054 4,921,350 Current deferred tax liability....................... 1,621,714 -- Billings in excess of costs and estimated earnings on uncompleted contracts............................... 956,688 -- Other liabilities.................................... 530,964 66,177 Due to stockholder................................... -- 10,665,788 ----------- ----------- Total current liabilities........................... 18,124,703 17,929,872 Long-term liabilities................................. 33,635 28,959 Commitments and contingencies (see Note 11)........... Redeemable preferred stock............................ 30,983,333 -- Stockholders' equity (deficit): Common stock-Class A (200 shares authorized and outstanding in 1996 32,000,000 shares authorized none outstanding in 1997)................................. -- 1,615 Class B (8,100,000 shares authorized, 8,075,000 outstanding)........................................ 80,750 -- Retained earnings (deficit).......................... (4,425,017) 100,000 ----------- ----------- Total stockholders' equity (deficit)................ (4,344,267) 101,615 ----------- ----------- Total liabilities and stockholders' equity.......... $44,797,404 $18,060,446 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. F-4 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (SEE NOTE 2)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ----------- ----------- ----------- Revenues: Site development revenue................ $48,240,443 $60,276,160 $22,699,812 Site leasing revenue.................... 6,759,362 4,530,152 2,758,319 ----------- ----------- ----------- Total revenues....................... 54,999,805 64,806,312 25,458,131 ----------- ----------- ----------- Cost of revenues: Cost of site development revenue........ 31,470,203 39,821,589 13,992,689 Cost of site leasing revenue............ 5,356,160 3,638,133 2,121,376 ----------- ----------- ----------- Total cost of revenues............... 36,826,363 43,459,722 16,114,065 ----------- ----------- ----------- Gross profit......................... 18,173,442 21,346,590 9,344,066 Operating expenses: Sales and marketing..................... 2,696,229 721,927 236,756 General and administrative.............. 8,316,909 18,126,317 5,804,347 Tower expenses.......................... 599,307 -- -- ----------- ----------- ----------- Total operating expenses............. 11,612,445 18,848,244 6,041,103 ----------- ----------- ----------- Operating income..................... 6,560,997 2,498,346 3,302,963 Interest income (expense), net........... 236,917 (132,413) (5,335) ----------- ----------- ----------- Income before provision for income taxes................................ 6,797,914 2,365,933 3,297,628 Provision for income taxes............... 5,595,998 -- -- ----------- ----------- ----------- Net income........................... 1,201,916 2,365,933 3,297,628 Proforma income tax provision (See note 946,373 1,319,052 10)...................................... ----------- ----------- Proforma net income.................. 1,419,560 1,978,576 Dividends on preferred stock............. 983,333 -- -- ----------- ----------- ----------- Net income available to common $ 218,583 $ 1,419,560 $ 1,978,576 stockholders......................... =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-5 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (SEE NOTE 2)
COMMON STOCK RETAINED --------------------------------- EARNINGS CLASS A CLASS B (DEFICIT) TOTAL -------------- ----------------- ----------- ----------- NUMBER AMOUNT NUMBER AMOUNT ------ ------ --------- ------- BALANCE, December 31, 1994................... 200 $ 200 -- $ -- $ 1,744,956 $ 1,745,156 Net income............. -- -- -- -- 3,297,628 3,297,628 Stockholder distribution.......... -- -- -- -- (250,000) (250,000) ------ ------ --------- ------- ----------- ----------- BALANCE, December 31, 1995................... 200 200 -- -- 4,792,584 4,792,784 Issuance of common stock................. 1,415 1,415 -- -- -- 1,415 Non-cash compensation adjustment............ -- -- -- -- 7,945,419 7,945,419 Net income............. -- -- -- -- 2,365,933 2,365,933 Stockholder distribution.......... -- -- -- -- (15,003,936) (15,003,936) ------ ------ --------- ------- ----------- ----------- BALANCE, December 31, 1996................... 1,615 1,615 -- -- 100,000 101,615 Corporate reorganization........ (1,615) (1,615) 8,075,000 80,750 (4,743,600) (4,664,465) Net income............. -- -- -- -- 1,201,916 1,201,916 Preferred stock dividends............. -- -- -- -- (983,333) (983,333) ------ ------ --------- ------- ----------- ----------- BALANCE, December 31, 1997................... -- -- 8,075,000 $80,750 $(4,425,017) $(4,344,267) ====== ====== ========= ======= =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-6 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (SEE NOTE 2)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ----------- ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.............................. $ 1,201,916 $ 2,365,933 $3,297,628 Adjustments to reconcile net income to net cash provided by (used in) operating activities-- Depreciation and amortization........... 562,653 160,050 73,297 Provision for doubtful accounts......... 163,416 451,349 572,751 Non-cash compensation adjustment........ -- 7,945,419 -- Changes in operating assets and liabili- ties: (Increase) decrease in-- Accounts receivable................... 4,999,525 (10,445,316) (4,456,615) Prepaid and other current assets...... (98,328) (539,713) (194,467) Costs and estimated earnings in excess of billings on uncompleted contracts................ (118,235) -- -- Intangible assets..................... (3,536,920) -- -- Other assets.......................... (12,858) (78,770) (49,085) Deferred tax asset.................... (2,257,462) -- -- Increase (decrease) in-- Accounts payable...................... 979,474 892,851 (109,681) Accrued expenses...................... 237,080 398,010 120,375 Accrued salaries and payroll taxes.... 1,338,172 90,617 258,938 Current deferred tax liability........ 1,621,714 -- -- Other liabilities..................... 464,787 (25,442) (45,806) Other long-term liabilities........... 4,676 -- -- Billings in excess of costs and esti- 956,688 -- -- mated earnings....................... ----------- ----------- ---------- Total adjustments..................... 5,304,382 (1,150,945) (3,830,293) ----------- ----------- ---------- Net cash provided by (used in) operat- 6,506,298 1,214,988 (532,665) ing activities....................... ----------- ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Tower acquisitions and other capital (16,291,764) (144,942) (660,199) expenditures......................... ----------- ----------- ---------- Net cash used in investing activities. (16,291,764) (144,942) (660,199) ----------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds on notes payable........... 5,262,704 3,421,350 1,498,622 Issuance of common stock................ -- 1,415 -- Stockholder loans....................... (14,227,094) 10,545,028 49,027 Stockholder distribution................ -- (15,003,936) (250,000) Financing fees.......................... (787,197) -- -- Proceeds from private offering.......... 25,335,535 -- -- ----------- ----------- ---------- Net cash provided by (used in) financ- 15,583,948 (1,036,143) 1,297,649 ing activities....................... ----------- ----------- ---------- Net increase in cash and cash equiva- lents................................ 5,798,482 33,903 104,785 CASH AND CASH EQUIVALENTS: Beginning of year....................... 310,936 277,033 172,248 ----------- ----------- ---------- End of year............................. $ 6,109,418 $ 310,936 $ 277,033 =========== =========== ========== SUPPLEMENTAL DISCLOSURE OF CASH-FLOW IN- FORMATION: Cash paid during the year for: Interest................................ $ 193,269 $ 139,056 $ 10,762 Taxes................................... $ 6,070,423 $ -- $ -- NON-CASH ACTIVITIES: Liabilities assumed in acquisition of assets................................. $ 2,559,505 $ -- $ -- Dividends on preferred stock............ $ 983,333 $ -- $ --
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-7 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL SBA Communications Corporation (the "Company") was incorporated in the State of Florida in March, 1997. The Company was formed to hold all of the outstanding capital stock of SBA, Inc. ("SBA" ) and SBA Leasing, Inc. ("Leasing"). In addition to SBA and Leasing, the Company also holds all of the outstanding capital stock of SBA Towers, Inc. ("Towers"), Communication Site Services, Inc ("CSSI") and SBA Telecomunicacoes do Brasil, LTDA ("Brazil"). SBA provides comprehensive turnkey services for the telecommunications industry in the areas of site development services for wireless carriers. Site development services provided by SBA includes site identification and acquisition, contract and title administration, zoning and land use permitting, construction management and microwave relocation. Leasing leases antenna tower sites from owners and then subleases such sites to wireless telecommunications providers, thereby generating recurring revenue. Towers owns and maintains transmission towers in various parts of the country. Space on these towers is leased primarily to wireless communications carriers. CSSI is engaged in the erection and repair of transmission towers, including hanging of antennae, cabling and associated tower components. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements is as follows: a. Basis of Consolidation The consolidated financial statements include the accounts of the Company, SBA, Leasing, Towers, CSSI, and Brazil. All significant intercompany transactions have been eliminated in consolidation. Prior to the formation of the Company, SBA and Leasing were 100% owned by their founder. The 1996 and 1995 financial statements reflect the combining of these two companies rather than a consolidation. b. Use of Accounting Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. c. Cash and Cash Equivalents The Company classifies as cash and cash equivalents all interest-bearing deposits or investments with original maturities of three months or less. d. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over their estimated useful lives as follows: Vehicles......................................... 2-5 years Furniture and equipment.......................... 2-7 years Buildings and improvements....................... 5-26 years Towers........................................... 15 years
F-8 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) e. Deferred Financing Fees Loan financing fees have been deferred and are being amortized using the straight-line method over the length of the loan. This method approximates the effective interest rate method. Financing fees are currently being amortized over 84 months. f. Intangible Assets Intangible assets are comprised of costs paid in excess of the fair value of assets acquired and amounts paid related to covenants not to compete. Goodwill is being amortized over a 15 year period. The covenants not to compete are being amortized over the terms of the contracts, which range from 7 to 10 years. Accumulated amortization totaled $36,928 at December 31, 1997. g. Income Taxes Effective January 1, 1997, the Company converted to a C Corporation under Subchapter C of the Internal Revenue Code of 1986, as amended. The proforma provision for income taxes for the years ended December 31, 1996 and December 31, 1995 represent a pro forma calculation (40%) as if the Company was an C Corporation. Effective January 1, 1997, the Company began accounting for income taxes in accordance with the provisions of Statement of Financial Accounting Standards No., 109 Accounting for Income Taxes ("SFAS No. 109"). SFAS No. 109 requires a company to recognize deferred tax liabilities and assets for the expected future income tax consequences of events that have been recognized in the Company's consolidated financial statements. Deferred tax liabilities and assets are determined based on the temporary differences between the consolidated financial statements carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in the years in which the temporary differences are expected to reverse. h. Revenue Recognition Revenue from site development projects is recognized when services are rendered, coinciding with direct costs incurred to complete each project. Revenue from leasing services is recorded on a monthly basis. Subleases generating the lease revenue are entered into for periods of time equivalent to the original lease. Current lease terms range from one to five years. Revenue received in advance is recorded in other liabilities. Revenue from construction projects is recognized on the percentage-of- completion method of accounting, determined by the percentage of cost incurred to date compared to management's estimated total anticipated cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on the contracts nears completion. The asset "Costs and estimated earnings in excess of billings on uncompleted contracts", represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on complete contracts", represents billings in excess of revenues recognized. Costs of site development project revenue and construction revenue include all direct material costs, salaries and labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly related to the projects. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. F-9 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) i. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses and long-term debt approximates fair value. j. Market Risk The Company is exposed to market risks, including changes in interest rates and currency exchange rates. Based on the Company's interest rate and foreign exchange rate exposure at December 31, 1997, a 10% change in the current interest rate or historical currency rate movements would not have a material effect on the company's financial position or results of operations over the next fiscal year. k. Impairment of Long-Lived Assets Statement of Financial Accounting Standards No. 121 ("SFAS 121") Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of requires that long- lived assets, including certain identifiable intangibles, and the goodwill related to those assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. Management has reviewed the Company's long- lived assets and has determined that there are no events requiring impairment loss recognition. l. Reclassifications Certain reclassifications have been made to the 1996 and 1995 financial statements to conform to the 1997 presentation. 3. ACQUISITIONS CSSI Acquisition On September 18, 1997, the Company consummated the acquisition of CSSI and certain related tower assets of Segars Communications Group, Inc. ("SCGI," and together with the acquisition of CSSI, the "CSSI Acquisition"). The CSSI Acquisition provided the Company with 21 towers in Florida and Georgia in varying stages of construction, together with a number of parcels of leased real estate on which towers may be constructed in the future, and gave the Company the in-house capability to construct towers in the southeastern United States. The Company paid $7 million at closing, and expects to invest up to an additional $4.8 million by September 1998 to complete construction of the towers acquired and as a contingent payment to the sellers, provided that certain tenant leasing goals are realized. The acquisition was accounted for under the purchase method of accounting. Accordingly, the excess of the purchase price over the estimated fair value of the net assets acquired, or approximately $3.5 million, was recorded as goodwill which is being amortized on a straight-line basis over a period of 15 years. CSSI's results of operations have been included in the Company's consolidated financial statements from the date of acquisition. The following unaudited pro forma information combines the consolidated results of operations of the Company and CSSI as if the acquisition had occurred at the beginning of the periods presented.
FOR THE YEARS ENDED DECEMBER 31, --------------------------------- 1997 1996 ---------------- ---------------- Revenues................. $ 60,199,299 $ 71,224,345 ================ ================ Net income............... $ 545,717 $ 1,702,815 ================ ================
F-10 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of goodwill and pro forma provision for income taxes for the amortization of goodwill and for each period in which CSSI and the Company were S Corporations under Subchapter S of the Internal Revenue Code. The pro forma results do not purport to be indicative of results that would have occurred had the combination been in effect for the periods presented, nor do they purport to be indicative of the results that will be obtained in the future. Other Acquisitions The Company has also acquired 30 towers since June 1997 in five separate transactions for an aggregate initial investment of $9.4 million. These towers are located in New York, Pennsylvania and Tennessee. 4. CONCENTRATION OF CREDIT RISK The Company's credit risks consist of accounts receivable in the telecommunications industry. The Company performs periodic credit evaluations of its customers' financial condition and provides allowances for doubtful accounts as required. Following is a list of significant customers:
FOR THE YEARS ENDED DECEMBER 31, -------------- 1997 1996 1995 ---- ---- ---- (% OF REVENUE) -------------- Sprint Spectrum............................................ 47.0 50.4 10.0 Pacific Bell Mobile Systems................................ 12.3 18.8 28.2 AT&T Wireless.............................................. 5.3 11.6 -- Nextel..................................................... 7.8 -- -- Page Net................................................... 7.6 9.0 28.7 Bell South................................................. 6.6 .4 -- ---- ---- ---- 86.6 90.2 66.9 ==== ==== ====
5. PROPERTY AND EQUIPMENT Property and equipment, net consists of the following:
AS OF DECEMBER 31, ---------------------- 1997 1996 ----------- --------- Land.............................................. $ 414,770 $ -- Buildings and improvements........................ 107,931 -- Vehicles.......................................... 358,569 -- Furniture and equipment........................... 1,299,341 864,668 Towers............................................ 12,141,428 -- Construction in process........................... 2,840,593 -- Leasehold improvements............................ -- 6,200 ----------- --------- 17,162,632 870,868 Less: Depreciation and amortization............... (717,624) (238,758) ----------- --------- Property and equipment, net....................... $16,445,008 $ 632,110 =========== =========
F-11 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings on uncompleted contracts consist of the following at December 31, 1997: Costs incurred on uncompleted contracts..................... $ 862,660 Estimated earnings.......................................... 280,438 ----------- 1,143,098 Billings to date............................................ (1,981,551) ----------- $ (838,453) =========== This amount is included in the accompanying balance sheet as of December 31, 1997 under the following captions: Costs and estimated earnings in excess of billing........... $ 118,235 Billings in excess of costs and estimated earnings.......... (956,688) ----------- $ (838,453) ===========
7. NOTES PAYABLE Bank Credit Agreement On August 8, 1997, the Company entered into a credit agreement with a syndicate of banks (the "Credit Agreement"). The Credit Agreement consisted of a secured revolving line of credit in the amount of $10,000,000 and a term note in the amount of $65,000,000. Available borrowings under the credit agreement will generally be used to construct new towers and to finance a portion of the purchase price for towers and related assets. In addition, up to $15,000,000 of the term note may be used for letters of credit. Funds are generally borrowed at the EURO rate at the time of borrowing plus 1.25%. As of December 31, 1997, there was $8,800,000 outstanding at various rates ranging from 7.0% to 7.1563%. Additionally, $10,000,000 of the term facility was available to the Company to be used to secure letters of credit. As of December 31, 1997, there was $4,750,000 outstanding under letters of credit. The Credit Agreement is secured by substantially all of the Company's tower assets and assignment of tower leases, requires the Company to maintain certain financial covenants and places restrictions on the Company's ability to, among other things, incur debt and liens, dispose of assets, undertake transactions with affiliates and make investments. Installment Note Payable In connection with the acquisition of CSSI in September 1997, the Company became contingently liable to the sellers for an amount not to exceed $4,750,000. This amount is to be paid to the sellers provided certain leasing revenue targets are met and is to be reduced by certain costs incurred in connection with the construction completion of certain towers. This amount may also be reduced if the certain revenue targets are not met. The Company is required to calculate the amount due on a monthly basis. As of December 31, 1997, the Company has calculated its liability under this agreement to be $1,384,054. This amount was reflected as an increase to goodwill. This amount was paid in January 1998. 8. DUE TO/FROM STOCKHOLDER The amount due from stockholder as of December 31, 1997, represents a loan made to one of the stockholders plus accrued interest. The loan was in the amount of $3.5 million and bears interest at a rate of 6.86%. This loan matures at the earlier of three years or upon consummation of an initial public offering of the Company. This loan is secured by 823,530 shares of Class B Common Stock of the Company owned by the stockholder. F-12 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The amount due to the stockholder as of December 31, 1996, primarily represents a distribution payable to the Company's sole stockholder, prior to reorganization, for previously undistributed earnings of the Company in excess of $100,000 through December 31, 1996. 9. REDEEMABLE PREFERRED STOCK In March 1997, the Company sold 3,529,412 shares of 2% Series A Preferred Stock, convertible initially into one share of the Company's Class A Common Stock and one share of the Company's 4% Series B Redeemable Preferred Stock, to a syndicate of institutional investors (the "Private Investors"). The Series A Preferred Stock had an initial conversion price of $8.50 and net proceeds received by the Company from the sale of the shares was approximately $25,300,000 (net of approximately $4,700,000 of issuance costs charged to retained earnings). In May 1997, in response to the acknowledgment by the Company that certain of the financial projections originally provided to the Private Investors prior to the consummation of the Preferred Stock Offering were substantially different from revised financial information provided shortly after the Preferred Stock Offering casting in doubt the continued reasonableness of the original projections, the Company issued an additional 4,520,588 shares of the Series A Preferred Stock at no additional consideration, increased by 200 basis points the rate per annum of cumulative dividends and amended the initial conversion price to $3.73. Each of the Private Investors executed a release exonerating the Company from any liability that it may have had in connection with the offering of Series A Preferred Stock. The Series A Preferred Stock has the following rights and preferences: Each holder of Series A Preferred Stock has the right to convert his or her shares at any time into one share of Class A Common Stock, subject to certain antidilution protection provisions, and one share of Series B Preferred Stock. The Series A Preferred Stock will automatically convert into Class A Common Stock and Series B Preferred Stock upon the earlier of (i) completion by the Company of a public offering raising gross proceeds of at least $20,000,000 at an offering price per share greater than or equal to 150% of then applicable conversion price of the Series A Preferred Stock if such public offering occurs before June 30, 1998 or at a price per share greater than or equal to 200% of the then applicable conversion price of the Series A Preferred Stock if such public offering occurs after June 30, 1998 or (ii) the written consent of the holders of at least 66 2/3% of the Series A Preferred Stock then outstanding. The holders of outstanding shares of Series A Preferred Stock are entitled, in preference to the holders of any and all other classes of capital stock of the Company (other than the Series B Preferred Stock, which will rank equally with the Series A Preferred Stock as to dividends), to receive, out of funds legally available therefore, cumulative dividends on the Series A Preferred Stock in cash, at a rate per annum of 4% of the Series A Base Liquidation Amount subject to proration for partial years. The Series Base Liquidation Amount equals the sum of $3.73 and any accumulated and unpaid dividends on the Series A Preferred Stock. Accrued but unpaid dividends on the Series A Preferred Stock will be payable upon conversion of the Series A Preferred Stock into Class A Common Stock and Series B Preferred Stock. At December 31, 1997, such accrued and unpaid dividends amounted to $983,333. At March 7, 2002, the dividend rate of the Series A Preferred Stock will increase to 8% of the Series A Base Liquidation Amount per annum. On March 7, 2003, the dividend rate on the Series A Preferred Stock will increase to 14% per year. On March 7, 2002, the Company will, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series A Preferred Stock over a two year period, one half in each year, at an aggregate price equal to the Series A Base Liquidation Amount. F-13 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In the event of any liquidation or winding up of the Company, including a merger, sale of all of its outstanding shares of capital stock, consolidation or sale of all or substantially all of the assets of the Company, each holder of outstanding Shares of Series B Preferred Stock will be entitled to receive before any amount shall be paid or distributed to the holders of the Common Stock, an amount in cash equal to the sum of $3.73 per share plus any accumulated but unpaid dividends to which such holder is entitled. The holders of Series A Preferred Stock have ten votes for each share until converted to Class A Common Stock and Series B Preferred Stock and votes with holders of shares of Class A Common Stock and Class B Common Stock as a single voting group on all matters brought before the shareholders, except as otherwise required by law and other restrictive covenants. The Series B Preferred Stock does not have voting rights. The holders of the shares of Series A Preferred Stock are entitled to participate on a pro rata basis in certain issuances of equity securities by the Company. The Series B Preferred Stock generally has the same rights and preferences as the Series A Preferred Stock plus the following rights and preferences: Upon a qualified public offering, the Company will redeem all of the outstanding shares of Series B Preferred Stock at an aggregate price equal to the Series B Base Liquidation Amount. The Company's Articles of Incorporation also provide for the issuance of Series C Preferred Stock and Series D Preferred Stock. The terms of the Series C Preferred Stock are substantially similar to the terms of the Series A Preferred Stock other than the Series C Base Liquidation Amount, which is currently $4.472 per share. The terms of the Series D Preferred Stock is substantially similar to the terms of the Series B Preferred Stock other than the Series D Liquidation Amount, which is $4.472. Management at this time does not expect to issue any shares of Series C Preferred Stock or Series D Preferred Stock. 10. INCOME TAXES The provision for income taxes in the consolidated statements of operations for the year ended December 31, 1997 consists of the following components: Federal income taxes Current ..................................................... $5,033,333 Deferred..................................................... (556,280) ---------- 4,477,053 ---------- State income taxes Current...................................................... 1,198,413 Deferred..................................................... (79,468) ---------- 1,118,945 ---------- Total........................................................ $5,595,998 ========== A reconciliation of the statutory U.S. Federal tax rate (34%) and the effective income tax rate for the year ended December 31, 1997 is as follows: Federal income tax............................................ $2,311,291 State income tax.............................................. 224,311 Corporate reorganization...................................... 2,930,926 Other......................................................... 129,450 ---------- $5,595,998 ==========
F-14 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The components of the net deferred income tax asset (liability) accounts for the year ended December 31, 1997 are as follows: Cash to accrual Section 481(a) adjustment................... $(2,087,966) Allowance for doubtful accounts............................. 203,307 Deferred revenue............................................ 127,723 Other....................................................... 135,222 ----------- Current deferred tax liability.............................. $(1,621,714) =========== Employee stock compensation................................. $ 2,278,161 Book vs. tax depreciation................................... (154,143) Other....................................................... 133,444 ----------- Non-current deferred tax asset.............................. $ 2,257,462 ===========
11. COMMITMENTS AND CONTINGENCIES a. Leases The Company is obligated under several noncancelable operating leases for office space, vehicles and equipment that expire over the next five years. The annual minimum lease payments under noncancelable operating leases as of December 31, 1997 are as follow: 1998............................................. $ 862,679 1999............................................. 222,826 2000............................................. 150,317 2001............................................. 143,596 2002............................................. 49,033 ---------- Total............................................ $1,428,451 ==========
Rent expense for operating leases was $863,287, $1,779,100 and $447,743 for the years ended December 31, 1997, 1996, and 1995 respectively. b. Employment Agreements The Company currently has employment contracts with the Chief Operating Officer, the Chief Financial Officer, the Senior Vice President and General Counsel and the Senior Vice President of Operations. These employment contracts are for a three year period and provide for minimum annual compensation of $900,000. Additionally, these contracts provide for incentive bonuses of annual amounts up to $900,000. c. Litigation The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs that may be incurred, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. F-15 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 12. HEALTH AND RETIREMENTS PLANS The Company has a defined contribution profit sharing plan under Section 401 (k) of the Internal Revenue Code that provides for voluntary employee contributions of 1% to 14% of compensation for substantially all employees. The company makes a matching contribution of 50% of an employee's first $2,000 of contributions. Company contributions and other expenses associated with the plan were $126,101, $98,052 and $92,038 for the years ended December 31, 1997, 1996 and 1995, respectively. 13. STOCK OPTIONS AND WARRANTS The Company has a stock option plan whereby options (both Non-qualified and Incentive Stock Options), stock appreciation rights and restricted stock may be granted to directors, key employees and consultants at a price per share equal to the greater of fair market value or $2.63. A total of 900,000 shares of Class A Common Stock are reserved for issuance under this plan. These options generally vest over three-year periods from the date of grant. A summary of the status of the stock option plan and changes during 1997 is as follows:
NUMBER OF OPTION PRICE SHARES PER SHARE --------- ------------ Outstanding at December 31, 1996.................. -- $ -- Granted........................................... 810,500 2.63 Exercised......................................... -- -- Forfeited/ canceled............................... (173,500) 2.63 -------- ----- Outstanding at December 31, 1997.................. 637,000 $2.63 ======== ===== Options exercisable at December 31, 1997.......... 33,333 ========
The Company accounts for this plan under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for this plan been determined based on the fair value at date of grant in accordance with FASB Statement No. 123, the Company's net income would not have been materially reduced. In connection with the issuance of the redeemable preferred stock the Company issued a five year warrant enabling the holder to purchase up to 402,500 shares of Class A Common stock with an exercise price of $3.73 per share. Accordingly, 402,500 shares of Class A Common stock are reserved. F-16 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 14. SEGMENT DATA The Company operates principally in two areas of the telecommunications industry: Site development and Site leasing. Revenue, operating income, identifiable assets, capital expenditures and depreciation and amortization pertaining to the segments in which the Company operates are presented below:
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ----------- ----------- ----------- Revenue: Site development......................... $48,240,443 $60,276,160 $22,699,812 Site leasing............................. 6,759,362 4,530,152 2,758,319 ----------- ----------- ----------- $54,999,805 $64,806,312 $25,458,131 =========== =========== =========== Operating income: Site development......................... $ 6,873,602 $ 2,245,253 $ 2,875,671 Site leasing............................. (312,605) 253,093 427,292 ----------- ----------- ----------- $ 6,560,997 $ 2,498,346 $ 3,302,963 =========== =========== =========== Identifiable assets: Site development......................... $29,075,879 $17,423,131 $ 7,035,862 Site leasing............................. 15,721,525 637,315 393,339 ----------- ----------- ----------- $44,797,404 $18,060,446 $ 7,429,201 =========== =========== =========== Capital expenditures: Site development......................... $ 959,453 $ 144,942 $ 660,199 Site leasing............................. 15,332,311 -- -- ----------- ----------- ----------- $16,291,764 $ 144,942 $ 660,199 =========== =========== =========== Depreciation and amortization: Site development......................... $ 298,900 $ 160,050 $ 73,297 Site leasing............................. 263,753 -- -- ----------- ----------- ----------- $ 562,653 $ 160,050 $ 73,297 =========== =========== ===========
15. SUBSEQUENT EVENTS a. Preferred Stock Modifications In February 1998, the terms of the Series A Redeemable Preferred Stock of the Company were amended to defer payment of cash dividends on or redemptions of the Series A Preferred Stock until permitted by the terms of the Senior Discount Notes due 2008. In connection with the amendment, the dividend rate on the Series A Preferred Stock was increased to 14% of the Series A Base Liquidation amount commencing March 7, 2003. b. Rent Expense In February 1998, the Company moved its corporate headquarters. In connection with this move the Company vacated its previously leased office space. The Company had entered into several leases relating to the vacated space which will expire at various times thru February, 2002. The Company has recorded rental expense of approximately $500,000 in February, 1998, related to the vacated space. c. Bond Offering On March 2, 1998, the Company closed on $269,000,000 12% Senior Discount Notes (the "Notes") due March 1, 2008. The issuance of the Notes netted approximately $150,200,000 in proceeds to the Company. The F-17 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Notes will accrete in value until March 1, 2003 at which time they will have an aggregate principle amount of $269,000,000. Thereafter, interest will accrue on the Notes and will be payable semi-annually in arrears on March 1 and September 1, commencing September 1, 2003. The Notes are unsecured obligations of the Company. Proceeds from the bond offering will be used to acquire and construct telecommunications towers as well as for general working capital purposes. After the issuance of the Notes, the Company will be highly leveraged. The degree to which the Company will be leveraged following the issuance could have important consequences to holders of the Notes, including, but not limited to: (i) making it more difficult for the Company to satisfy its obligations with respect to the Notes, (ii) increasing the Company's vulnerability to general adverse economic and industry conditions, (iii) limiting the Company's ability to obtain additional financing to fund its growth strategy, future working capital, capital expenditures and other general corporate requirements, (iv) requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund its growth strategy, working capital, capital expenditures or other general corporate purposes, (v) limiting the Company's flexibility in planning for, or reacting to, changes in its business and the industry, and (vi) placing the Company at a competitive disadvantage vis-a-vis less leveraged competitors. In addition, the degree to which the Company is leveraged could prevent it from repurchasing any Notes tendered to it upon the occurrence of a change of control. There can be no assurance that the Company will generate sufficient cash flow from operations in the future, that anticipated revenue growth will be realized or that future borrowings or equity contributions will be available in amounts sufficient to service its indebtedness and make anticipated capital expenditures. In addition, there can be no assurance that the Company will be able to effect any required refinancing of its indebtedness (including the Notes) on commercially reasonable terms or at all. The Notes and Credit Agreement contain numerous restrictive covenants, including but not limited to covenants that restrict the Company's ability to incur indebtedness, pay dividends; create liens, sell assets and engage in certain mergers and acquisitions. In addition, the Credit Agreement requires subsidiaries of the Company to maintain certain financial ratios. The ability of the Company to comply with the covenants and other terms of the Credit Agreement and the Notes and to satisfy its respective debt obligations will depend on the future operating performance of the Company. In the event the Company fails to comply with the various covenants contained in the Credit Agreement or the Notes, as applicable, it would be in default thereunder, and in any such case, the maturity of substantially all of its long-term indebtedness could be accelerated. F-18 INDEPENDENT ACCOUNTANTS' REPORT February 4, 1998 To the Board of Directors of Communication Site Services, Inc. Ocala, Florida We have compiled the accompanying balance sheets of Communication Site Services, Inc. (an S corporation) as of September 18, 1997, and September 30, 1996, and the related statements of income, retained earnings, and cash flows for the periods then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. The financial statements for the year ended December 31, 1996, were audited by us and we expressed an unqualified opinion on them in our report dated March 5, 1997, but we have not performed any auditing procedures since that date. /s/ Robson, Scribner & Stewart, P.A. _____________________________________ ROBSON, SCRIBNER & STEWART, P.A. Certified Public Accountants F-19 COMMUNICATION SITE SERVICES, INC. BALANCE SHEETS
SEPTEMBER 18, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996 ------------------ ------------------ ----------------- (UNAUDITED) (UNAUDITED) (AUDITED) ASSETS Current assets: Cash and cash equivalents.......... $ 151,199 $ 171,691 $ 289,225 Accounts receivable, trade................ 1,017,980 816,308 666,693 Employee advances..... 477 1,200 6,654 Accounts receivable, Segars Communication Group................ 136,934 108,024 143,375 Prepaid expenses...... 31,663 16,971 -- Inventories........... 103,353 38,494 78,663 Costs and estimated earnings in excess of billings on uncompleted contracts............ 38,585 126,666 37,616 ---------- ---------- ---------- Total current assets............. 1,480,191 1,279,354 1,222,226 ---------- ---------- ---------- Land, property and equipment: Land, property and equipment............ 1,029,665 725,355 895,207 Construction in progress............. 1,393,919 -- -- Less: accumulated depreciation......... (394,764) (303,119) (327,674) ---------- ---------- ---------- Net property and equipment.......... 2,028,820 422,236 567,533 ---------- ---------- ---------- Other assets: Deposit............... 3,413 500 1,000 Loan fees, net........ 7,406 8,005 7,799 ---------- ---------- ---------- Total other assets.. 10,819 8,505 8,799 ---------- ---------- ---------- Total assets...... $3,519,830 $1,710,095 $1,798,558 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable...... $1,193,864 $ 478,903 $ 496,555 Accrued expenses...... 199 14,432 19,902 Prepaid leases........ 72,000 -- -- Billings in excess of costs and estimated earnings and uncompleted contracts............ 225,905 210,102 62,213 Current portion of notes payable........ 49,007 47,147 70,952 Loan payable, SBA..... 1,000,000 -- -- ---------- ---------- ---------- Total current liabilities........ 2,540,975 750,584 649,622 Long-term debt, net of current portion........ 369,030 279,839 401,585 ---------- ---------- ---------- Total liabilities... 2,910,005 1,030,423 1,051,207 ---------- ---------- ---------- Stockholders' equity: Common stock, $1 par value, 100 shares issued and outstanding.......... 100 100 100 Retained earnings..... 609,725 679,572 747,251 ---------- ---------- ---------- Total stockholders' equity............. 609,825 679,672 747,351 ---------- ---------- ---------- Total liabilities and stockholders' equity........... $3,519,830 $1,710,095 $1,798,558 ========== ========== ==========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-20 COMMUNICATION SITE SERVICES, INC. STATEMENTS OF INCOME
NINE MONTHS PERIOD ENDED ENDED YEAR ENDED SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ UNAUDITED UNAUDITED AUDITED Net sales............................. $5,005,290 $4,325,619 $6,055,073 Cost of sales: Labor and related costs............. 568,206 472,136 677,938 Subcontractors and consultants...... 2,426,717 1,809,010 2,690,003 Equipment and vehicle costs and rentals............................ 453,738 328,963 434,368 Materials and supplies.............. 329,870 339,623 467,822 Travel and per diem cost............ 77,337 82,706 101,878 Engineering, permits and security... 80,037 283,813 311,151 ---------- ---------- ---------- Total cost of sales................. 3,935,905 3,316,251 4,683,160 ---------- ---------- ---------- Gross profit...................... 1,069,385 1,009,368 1,371,913 ---------- ---------- ---------- Operating expenses: Advertising......................... 1,732 250 1,127 Conferences......................... 2,270 1,110 -- Consultants......................... 5,258 5,590 6,594 Depreciation........................ 10,556 11,553 15,405 Dues and subscriptions.............. 1,713 550 550 Entertainment....................... 6,646 3,741 5,245 Interest............................ 26,735 28,334 36,827 Insurance, employee health.......... 9,701 4,931 6,441 Insurance, general.................. 77,024 47,165 62,887 Insurance, workers compensation..... 52,253 10,389 13,582 Miscellaneous expenses.............. 2,193 2,467 3,272 Office supplies and expenses........ 23,338 12,868 24,729 Payroll taxes....................... 31,878 15,683 22,244 Postage and shipping................ 4,857 3,775 5,783 Professional fees................... 77,038 7,631 8,456 Repairs and maintenance............. 12,983 9,847 20,396 Salaries............................ 376,291 155,680 294,739 Security............................ 362 767 1,036 SEP retirement contribution......... 14,171 7,929 11,536 Taxes and license................... 4,235 13,132 16,978 Telephone........................... 43,477 49,619 66,673 Travel.............................. 13,550 1,317 2,515 Utilities........................... 4,365 5,162 6,797 ---------- ---------- ---------- Total operating expenses.......... 802,626 399,490 633,812 ---------- ---------- ---------- Income from operations.......... 266,759 609,878 738,101 Other income (expenses): Interest and dividend income........ 9,879 357 1,128 Bad debt............................ (6,134) -- -- Contributions....................... (7,050) (1,800) (11,900) Gain on sale of equipment........... 8,796 (1,869) (2,290) Miscellaneous income (expense)...... 2,200 195 234 ---------- ---------- ---------- Net other income (expenses)....... 7,691 (3,117) (12,828) ---------- ---------- ---------- Net income...................... $ 274,450 $ 606,761 $ 725,273 ========== ========== ==========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-21 COMMUNICATION SITE SERVICES, INC. STATEMENTS OF RETAINED EARNINGS
PERIOD ENDED NINE MONTHS ENDED YEAR ENDED SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ----------------- ------------ (UNAUDITED) (UNAUDITED) (AUDITED) Retained earnings, beginning of period........................... $ 747,251 $ 517,146 $ 517,146 Net income...................... 274,450 606,661 725,273 Distributions to stockholders: Cash distributions............ (411,976) (444,235) (495,168) --------- --------- --------- Retained earnings, end of period.. $ 609,725 $ 679,572 $ 747,251 ========= ========= =========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-22 COMMUNICATION SITE SERVICES, INC. STATEMENTS OF CASH FLOWS
PERIOD ENDED NINE MONTHS ENDED YEAR ENDED SEPTEMBER 18, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996 ------------------ ------------------ ----------------- (UNAUDITED) (UNAUDITED) (AUDITED) Cash flows from operating activities: Net income........... $ 274,450 $ 606,761 $ 725,273 Adjustments to reconcile net income to net cash provided by operating activities Depreciation....... 92,307 84,097 112,131 (Gain) loss on sale of equipment...... (8,796) 1,869 2,290 (Increase) decrease in: Accounts receivable, trade............. (351,287) (351,602) (201,987) Accounts receivable, Segars Communication Group, Inc. ...... 6,441 (58,852) (94,203) Prepaid expenses... (31,663) (16,971) -- Inventories........ (24,690) (9,159) (49,328) Costs in excess of billings on uncompleted contracts......... 969 (24,074) 64,976 Increases (decreases) in: Accounts payable... 697,309 190,364 208,016 Accrued expenses... (19,703) 3,002 8,472 Prepaid leases..... 72,000 -- -- Billings in excess of costs on uncompleted contracts......... 163,692 126,546 (21,343) ----------- --------- --------- Net cash provided by operating activities...... 871,029 551,981 754,297 ----------- --------- --------- Cash flows from invest- ing activities: Proceeds from sale of equipment........... 34,500 5,000 7,400 Purchase of equipment and tower construction........ (1,580,873) (102,160) (284,311) (Increase) decrease in deposits......... (2,413) 1,000 500 (Increase) decrease in miscellaneous receivables......... 6,177 (1,200) (6,654) ----------- --------- --------- Net cash used by investing activities...... (1,542,609) (97,360) (283,065) ----------- --------- --------- Cash flows from financ- ing activities: Payments on notes and leases payable...... (54,500) (491,154) (503,298) Loan proceeds........ -- 621,110 785,110 Loan proceeds, SBA... 1,000,000 -- -- Stockholder distributions....... (411,976) (444,235) (495,168) ----------- --------- --------- Net cash used by financing activities...... 533,524 (314,279) (213,356) ----------- --------- --------- Net increase (decrease) in cash............ (138,056) 140,342 257,876 Cash and cash equivalents, beginning of period............. 289,255 31,349 31,349 ----------- --------- --------- Cash and cash equivalents, end of period................ $ 151,199 $ 171,691 $ 289,225 =========== ========= =========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-23 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is the erection and repair of transmission towers, including hanging of antennae, cabling, and associated tower components. During 1997, the Company has expanded its business activities to include building and maintaining towers for internal use. See Note 5. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from fixed-price and modified fixed-price construction contracts on the percentage-of- completion method of accounting, determined by the percentage of cost incurred to date to management's estimated total anticipated cost for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced progressively as work on the contracts nears completion. Contract costs include all direct material, labor, subcontractor costs and indirect costs related to direct labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. The asset, "Costs & estimated earnings in excess of billings", represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs & estimated earnings", represents billings in excess of revenues recognized. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible; therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged to expense when that determination is made. F-24 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows: Office equipment................................ 7 Years Buildings 31 Years Vehicles........................................ 5 Years Towers 10 Years Machinery & equipment........................... 5-7 Years
Certain assets are pledged as security for loan allegations. See Note 4 below. Assets which have not been put into operational use as of the balance sheet date, are carried at cost as equipment. Loan Fees Loan fees are amortized using the straight-line method over the length of the loan. Loan fees are currently amortized over 120 months. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. The Company reports income on the cash basis for income tax purposes, which results in timing differences between income reported for financial statements and income tax purposes. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. As of September 18, 1997, the Company had demand deposits on hand in financial institutions, which exceeded depositor's insurance provided by the applicable guaranty agency by $47,464. NOTE 2--PROPERTY AND EQUIPMENT: Property and equipment consist of the following:
SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Office equipment.................... $ 50,322 $ 37,928 $ 34,714 Vehicles............................ 615,943 344,250 513,090 Machinery and equipment............. 187,954 169,581 173,807 Buildings and improvements.......... 143,446 141,596 141,596 Land................................ 32,000 32,000 32,000 ---------- --------- --------- 1,029,665 725,355 895,207 Tower construction in progress...... 1,393,919 -- -- Less: accumulated depreciation.... (394,764) (303,119) (327,674) ---------- --------- --------- $2,028,820 $ 422,236 $ 567,533 ========== ========= =========
F-25 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 Total depreciation expense is $92,307, $84,097, and $112,131, of which $81,751, $72,544, and $96,726, are included in the cost of goods sold for the periods ended September 18, 1997, September 30, 1996, and December 31, 1996. NOTE 3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Costs incurred on uncompleted con- tracts............................ $ 712,296 $ 928,288 $ 1,295,918 Estimated earnings................. 113,602 394,895 223,825 ----------- ----------- ----------- 825,898 1,323,183 1,519,743 Billings to date................... (1,013,218) (1,406,619) (1,544,340) ----------- ----------- ----------- $ (187,320) $ (83,436) $ (24,597) =========== =========== =========== Included in the accompanying balance sheet under the following captions: SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Costs & estimated earnings in ex- cess of billings....................... $ 38,585 $ 126,666 $ 37,616 Billings in excess of costs & esti- mated earnings.................... (225,905) (210,102) (62,213) ----------- ----------- ----------- $ (187,320) $ (83,436) $ (24,597) =========== =========== ===========
F-26 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 NOTE 4--NOTES PAYABLE: Notes payable consist of the following:
SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Note payable to bank, payable in monthly installments of $2,687, including interest at 8.25 percent through March 2006. Secured by real estate........... $256,315 $269,596 $263,312 Note payable to bank, payable in monthly installments of $859, including interest at 8.04 percent through January 1999. Secured by a vehicle. ........... 13,765 21,843 19,684 Note payable to bank, payable in monthly installments of $3,099, including interest at 8.25 percent through December 1998. Secured by a vehicle ............ 145,900 -- 162,066 Capital lease payable, payable in monthly installments of $140 including interest at 12.21 percent through December 1998. Secured by equipment............. 2,056 3,289 3,010 Note payable to bank, payable in monthly installments of $2,821, including interest at 9 percent through September 1997. Secured by equipment..................... -- 32,257 24,464 Note payable to bank, credit line with $250,000 available. Interest is payable monthly at 1 percent over the bank prime. Interest is at 8 percent at year end. Secured by accounts receivable and inventory........................ 1 1 1 -------- -------- -------- Total notes payable............. 418,037 326,986 472,537 Less: current portion......... (49,007) (47,147) (70,952) -------- -------- -------- Long-term debt portion.......... $369,030 $279,839 $401,585 ======== ======== ========
Maturities of long-term debt are as follows: 1998............................................................. $ 49,007 1999............................................................. 47,863 2000............................................................. 44,787 2001............................................................. 48,625 2002............................................................. 49,207 Thereafter....................................................... 178,548 -------- $418,037 ========
NOTE 5--BUSINESS SEGMENT AND MAJOR CUSTOMER INFORMATION: The Company operates in one business segment. The Company is engaged primarily in the erection and repairs of transmission towers for various communication companies in the southeast. Accordingly, the risk exists that the ability to collect amounts due from customers could be affected by economic fluctuations in the markets for communication towers in the southeast. During 1997, the Company has changed some business strategies to include building and maintaining towers for internal use. This change in strategies, during the interim process, may cause a decrease in profitability and may increase demands on cash flows. F-27 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 NOTE 6--RELATED PARTY TRANSACTIONS: The Company has common ownership with Segars Communication Group, Inc. During the periods, certain expenses were paid and revenues were received in behalf of Segars Communication Group, Inc. The net of these transactions are reflected in Communication Site Services, Inc.'s books as a net receivable of $136,934, $108,024, and $143,375 from Segars Communication Group, Inc. at September 18, 1997, September 30, 1996, and December 31, 1996. Additionally, the Company has several contracts in progress for a tower construction projects for Segars Communication Group. NOTE 7--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the periods ending September 18, 1997, September 30, 1996, and December 31, 1996 for interest expense amounts to $26,440, $27,986, and $36,827. Significant Non-Cash Transactions: The Company entered into a capital lease, during 1996, for equipment with an estimated purchase value of $4,200. The Company refinanced the mortgage on the warehouse and office building. The total loan amount was $277,000, with $117,626 going directly to pay off prior mortgage, $30,323 to pay off short-term borrowings, and $8,258 used to pay off loan costs. The net cash to the Company amounted to $120,793. NOTE 8--PENSION PLANS The Company has a SAR-SEP pension plan covering substantially all employees. The Company may contribute amounts as determined by the Board of Directors. The Company has accrued and paid contributions totalling $28,342, $19,829, and $30,357 for the periods ended September 18, 1997, September 30, 1996, and December 31, 1996. NOTE 9--SUBSEQUENT EVENTS: On July 22, 1997, the Company entered into a purchase and sale agreement. The agreement, if executed, provides for the purchase of all the assets of Communication Site Services, Inc. and its related organization. Upon execution of this agreement, the Company (Communication Site Services, Inc.) would discontinue operations and all activities of the Company would convert to the purchaser. NOTE 10--PRIOR PERIOD ADJUSTMENT: Certain errors, resulting in both the overstatement and understatement of previously reported assets, liabilities, and expenses of the 1995 year, were corrected in 1996, resulting in the following changes to retained earnings as of January 1, 1996.
RETAINED EARNINGS -------- As previously reported......................................... $488,882 Understatement of costs and estimated earnings in excess of billings on uncompleted contracts............................. 29,992 Understatement of accounts payable............................. (1,728) -------- As adjusted.................................................. $517,146 ========
F-28 INDEPENDENT AUDITORS' REPORT March 5, 1997 To the Stockholders of Communication Site Services, Inc. Ocala, Florida We have audited the accompanying balance sheet of Communication Site Services, Inc. (an S corporation) as of December 31, 1996, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted out audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Communication Site Services, Inc. as of December 31, 1996, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information contained in the Schedule of Major Contracts Completed and the Schedule of Contracts in Progress is presented for purposes of additional analysis and is not required part of the basic financial statements. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Robson, Scribner & Stewart, P.A. Robson, Scribner & Stewart, P.A. Certified Public Accountants F-29 COMMUNICATION SITE SERVICES, INC. BALANCE SHEET
YEAR ENDED DECEMBER 31, 1996 ------------ ASSETS Current assets: Cash and cash equivalents......................................... $ 289,225 Accounts receivable, trade........................................ 666,693 Accounts receivable, miscellaneous................................ 6,654 Accounts receivable, SCGI......................................... 143,375 Inventories....................................................... 78,663 Costs and estimated earnings in excess of billings on uncompleted contracts........................................................ 37,616 ---------- Total current assets.......................................... 1,222,226 Land, property and equipment: Land, property and equipment.................................... 895,207 Less: accumulated depreciation.................................. 327,674 ---------- Property and equipment, net................................... 567,533 Other assets: Deposit......................................................... 1,000 Loan fees, net.................................................. 7,799 ---------- Total other assets............................................ 8,799 ---------- Total assets................................................ $1,798,558 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................ $ 496,555 Accrued expenses................................................ 19,902 Billings in excess of costs and estimated earnings on uncompleted contracts.......................................... 62,213 Current portion of notes payable................................ 70,952 ---------- Total current liabilities..................................... 649,622 Long-term debt, net of current portion............................ 401,585 ---------- Total liabilities............................................. 1,051,207 Stockholders' equity: Common stock, $1 par value, 100 shares issued and outstanding... 100 Retained earnings............................................... 747,251 ---------- Total stockholders' equity.................................... 747,351 ---------- Total liabilities and stockholders' equity.................. $1,798,558 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-30 COMMUNICATION SITE SERVICES, INC. STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996 --------------- Net sales...................................................... $6,055,073 Cost of sales: Labor and related costs...................................... 677,938 Subcontractors and consultants............................... 2,690,003 Equipment and vehicle costs and rentals...................... 434,368 Materials and supplies....................................... 467,822 Travel and per diem cost..................................... 101,878 Engineering, permits and security............................ 311,151 ---------- Total cost of sales.......................................... 4,683,160 ---------- Gross profit............................................... 1,371,913 ---------- Operating expenses: Advertising.................................................. 1,127 Consultants.................................................. 6,594 Depreciation................................................. 15,405 Dues and subscriptions....................................... 550 Entertainment................................................ 5,245 Interest..................................................... 36,827 Insurance, employee health................................... 6,441 Insurance, general........................................... 62,887 Insurance, workers compensation.............................. 13,582 Miscellaneous expenses....................................... 3,272 Office supplies and expenses................................. 24,729 Payroll taxes................................................ 22,244 Postage and shipping......................................... 5,783 Professional fees............................................ 8,456 Radio........................................................ -- Repairs and maintenance...................................... 20,396 Salaries..................................................... 294,739 Security..................................................... 1,036 SEP retirement contribution.................................. 11,536 Taxes and license............................................ 16,978 Telephone.................................................... 66,673 Travel....................................................... 2,515 Utilities.................................................... 6,797 ---------- Total operating expenses................................... 633,812 ---------- Income from operations................................... 738,101 Other income (expenses): Interest and dividend income................................. 1,128 Contributions................................................ (11,900) (Loss) on sale of equipment.................................. (2,290) Miscellaneous income (expense)............................... 234 ---------- Net income................................................. (12,828) ---------- $ 725,273 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-31 COMMUNICATION SITE SERVICES, INC. STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996 ------------- Retained earnings, beginning of year............................ $488,882 Prior period adjustment......................................... 28,264 -------- Retained earnings, beginning of year as restated................ 517,146 Net income...................................................... 725,273 Distributions to stockholders: Cash distributions............................................ (495,168) -------- Retained earnings, end of year.................................. $747,251 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-32 COMMUNICATION SITE SERVICES, INC. STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 -------------- Cash flows from operating activities: Net income.................................................. $ 725,273 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.............................................. 112,131 (Loss) on sale of equipment............................... 2,290 (Increase) decrease in: Accounts receivable, trade................................ (201,987) Accounts receivable, Segars Communication Group, Inc. .... (94,203) Inventories............................................... (49,328) Costs in excess of billings on uncompleted contracts...... 64,976 Increases (decreases) in: Accounts payable.......................................... 208,016 Accrued expenses.......................................... 8,472 Billings in excess of costs on uncompleted contracts...... (21,343) --------- Net cash provided by operating activities..................... 754,297 --------- Cash flows from investing activities: Proceeds from sale of equipment............................. 7,400 Purchase of equipment....................................... (284,311) Decrease in deposits........................................ 500 Increase in miscellaneous receivables....................... (6,654) --------- Net cash used by investing activities......................... (283,065) --------- Cash flows from financing activities: Payments on notes and leases payable........................ (503,298) Loan proceeds............................................... 785,110 Stockholder distributions................................... (495,168) --------- Net cash used by financing activities......................... (213,356) --------- Net increase in cash.......................................... 257,876 Cash and cash equivalents, beginning of year.................. 31,349 --------- Cash and cash equivalents, end of year........................ $ 289,225 =========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-33 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1996 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is the erection and repair of transmission towers, including hanging of antennae, cabling and associated tower components. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from fixed-price and modified fixed-price construction contracts on the percentage-of- completion method of accounting, determined by the percentage of cost incurred to date to management's estimated total anticipated cost for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced progressively as work on the contracts nears completion. Contract costs include all direct material, labor, subcontractor costs and indirect costs related to direct labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. The asset, "Costs & Estimated Earnings in Excess of Billings", represents revenues recognized in excess of amounts billed. The liability, "Billings in Excess of Costs & Estimated Earnings", represents billings in excess of revenues recognized. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible, therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged to expense when that determination is made. Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows: Office equipment................... 7 years Vehicles........................... 5 years Machinery & equipment.............. 5-7 years Buildings.......................... 31 years Towers............................. 10 years
F-34 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1996 Certain assets are pledged as security for loan allegations. See Note 4 below. Assets which have not been put into operational use as of December 31, 1996, are carried at cost as equipment. Loan Fees Loan fees are amortized using the straight-line method over the length of the loan. Loan fees are currently amortized over 120 months. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. The Company reports income on the cash basis for income tax purposes, which results in timing differences between income reported for financial statements and income tax purposes. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. NOTE 2--PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1996:
1996 --------- Office equipment................................................ $ 34,714 Vehicles........................................................ 513,090 Machinery and equipment......................................... 173,807 Buildings and improvements...................................... 141,596 Land............................................................ 32,000 --------- 895,207 Less: accumulated depreciation................................ (327,674) --------- $ 567,533 =========
Total depreciation expense is $112,131, of which $96,726, is included in the cost of goods sold for the year ended December 31, 1996. NOTE 3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
1996 ----------- Costs incurred on uncompleted contracts...................... $ 1,295,918 Estimated earnings........................................... 223,825 ----------- 1,519,743 Billings to date............................................. (1,544,340) ----------- $ (24,597) ===========
F-35 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1996 Included in the accompanying balance sheet under the following captions: Costs & estimated earnings in excess of billings................ $ 37,616 Billings in excess of costs & estimated earnings................ (62,213) -------- $(24,597) ========
NOTE 4--NOTES PAYABLE Notes payable consist of the following at December 31, 1996: 1996 -------- Notes payable to bank, payable in monthly installments of $2,687, including interest at 8.25 percent through March, 2006. Secured by real estate with a net book value of $151,185 at year end....................................................... $263,312 Notes payable to bank, payable in monthly installments of $859, including interest at 8.04 percent through January, 1999. Secured by a vehicle with a net book value of $21,621 at year end............................................................ 19,684 Notes payable to bank, payable in monthly installments of $3,099, including interest at 8.25 percent through December, 1998. Secured by a vehicle with a net book value of $173,840 at year end....................................................... 162,066 Capital lease payable, payable in monthly installments of $140 including interest at 12.21 percent through December, 1998. Secured by equipment with a net book value of $3,600........... 3,010 Note payable to bank, payable in monthly installments of $2,821, including interest at 9 percent through September, 1997. Secured by equipment with a net book value of $34,735 at year end............................................................ 24,464 Note payable to bank, credit line with $250,000 available. Interest is payable monthly at 1 percent over the bank prime. Interest is at 8 percent at year end. Secured by real estate owned by the stockholder....................................... 1 -------- Total notes payable........................................... 472,537 Less: current portion....................................... (70,952) -------- Long-term debt portion........................................ $401,585 ========
Maturities of long-term debt are as follows:
DECEMBER 31 ----------- 1997.............................................................. $ 70,952 1998.............................................................. 49,854 1999.............................................................. 42,587 2000.............................................................. 32,845 2001.............................................................. 49,233 Thereafter........................................................ 227,066 -------- $472,537 ========
F-36 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1996 NOTE 5--SCHEDULE OF CONTRACT BACKLOG The following schedule summarizes changes in backlog contracts during the year ended December 31, 1996. Backlog represents the amount of revenue the company expects to realize from work to be performed or uncompleted contracts in progress at year end and from contracted agreements on which work has not yet begun. Balance, January 1, 1996....................................... $ 249,899 New contracts during 1996...................................... 7,675,843 ---------- 7,925,742 Less: contract revenue earned, 1996............................ 6,055,073 ---------- Balance, December 31, 1996..................................... $1,870,669 ==========
NOTE 6--BUSINESS SEGMENT AND MAJOR CUSTOMER INFORMATION The Company operates in one business segment. The Company is engaged primarily in the erection and repairs of transmission towers for various communication companies in the southeast. Accordingly, the risk exists that the ability to collect amounts due from customers could be affected by economic fluctuations in the markets for communication towers in the southeast. At December 31, 1996, 83 percent of the accounts receivable balance is owed by two customers. Approximately 10 percent of the Company's sales for 1996 are comprised of one job site. The Additional Information on pages F-41 and F-42 contain schedules of major contracts completed during 1996, and contracts in progress at year end. NOTE 7--RELATED PARTY TRANSACTIONS The Company has common ownership with Segars Communication Group, Inc. During the year, certain expenses were paid and revenues received in behalf of Segars Communication Group, Inc. The net of these transactions are reflected in Communication Site Services, Inc.'s books as a receivable of $143,376 from Segars Communication Group, Inc., at December 31, 1996. Additionally, at December 31, 1996, the Company has a contract in progress for a tower construction project for Segars Communication Group. See contract number 96-78 on the Schedule of Contracts in Progress. NOTE 8--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year ended December 31,1996, for interest expense is $36,872. Significant Non-Cash Transactions: . The Company entered into a capital lease during 1996 for equipment with an estimated purchase value of $4,200. F-37 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1996 . The Company refinanced the mortgage on the warehouse and office building. The total loan amount was $277,000, with $117,626 going directly to pay off prior mortgage, $30,323 to pay off short-term borrowings and $8,258 used to pay loan costs. The net cash to the Company amounted to $120,793. NOTE 9--PENSION PLANS The Company has a SAR-SEP pension plan covering substantially all employees. The Company may contribute amounts as determined by the Board of Directors. The Company has accrued and paid contributions totalling $30,357 for the year ended December 31, 1996. NOTE 10--PRIOR PERIOD ADJUSTMENT Certain errors, resulting in both the overstatement and understatement of previously reported assets, liabilities and expenses of the prior year were corrected this year, resulting in the following changes to retained earnings as of December 31, 1995:
RETAINED EARNINGS -------- As previously reported............................................ $488,882 Understatement of costs and estimated earnings in excess of billings on uncompleted contracts................... 29,992 Understatement of accounts payable................................ (1,728) -------- As adjusted..................................................... $517,146 ========
F-38 COMMUNICATION SITE SERVICES, INC. SCHEDULE OF MAJOR CONTRACTS COMPLETED SCHEDULE 1
1996 ---------- CONTRACT CONTRACT OVER $100,000 REVENUES - ---------------------- ---------- 95-49............................................................. $ 249,427 96-14............................................................. 110,546 96-34............................................................. 120,060 96-35............................................................. 106,390 96-41............................................................. 106,115 96-46............................................................. 110,050 96-47............................................................. 123,445 96-50............................................................. 172,755 96-52............................................................. 114,866 96-53............................................................. 111,220 96-54............................................................. 154,762 96-56............................................................. 113,865 96-66............................................................. 111,500 96-67............................................................. 106,295 ---------- Total contracts over $100,000....................................... 1,811,296 Contracts over $50,000 less $100,000................................ 1,590,630 Contracts less $50,000.............................................. 1,133,404 ---------- Contract revenues from completed contracts in 1996.................. $4,535,330 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-39 COMMUNICATION SITE SERVICES, INC. SCHEDULE OF CONTRACTS IN PROGRESS FOR THE YEAR ENDED DECEMBER 31, 1996 SCHEDULE 2
ESTIMATED CONTRACT COST IN BILLINGS CONTRACT GROSS REVENUES COST TO GROSS BILLINGS COSTS TO EXCESS OF IN EXCESS PERCENT CONTRACT PRICE PROFIT EARNED DATE PROFIT TO DATE COMPLETE BILLINGS OF COSTS COMPLETE - -------- ---------- --------- ---------- ---------- -------- ---------- ---------- --------- --------- -------- 96-13........... $ 164,920 $ 35,005 $ 150,321 $ 118,415 $ 31,906 $ 164,920 $ 11,500 $ 0 $14,599 91.2% 96-30........... 177,910 39,260 176,293 137,390 38,903 177,910 1,260 0 1,617 99.0% 96-31........... 206,023 27,336 203,963 176,715 27,248 206,023 1,972 2,060 99.0% 96-43........... 108,240 16,732 58,654 49,587 9,067 76,890 41,921 0 18,236 54.2% 96-61........... 146,857 32,273 110,290 86,053 24,237 130,017 28,531 0 19,727 75.1% 96-69........... 1,115,910 112,387 615,424 553,427 61,997 620,910 450,096 0 5,486 55.2% 96-78........... 178,427 0 77,015 77,015 0 62,582 101,412 14,433 0 43.0% 96-79........... 67,090 13,780 66,956 53,193 13,763 60,605 117 6,351 0 99.8% 96-81........... 162,500 32,500 0 0 0 0 130,000 0 0 0.0% 96-82........... 121,018 24,204 0 0 0 0 96,814 0 0 0.0% 96-80........... 171,500 34,300 0 0 0 0 137,200 0 0 0.0% 96-83........... 105,450 21,090 0 0 0 0 84,360 0 0 0.0% 96-84........... 164,177 27,810 6,567 5,025 1,542 0 131,342 6,567 0 4.0% 96-85........... 217,430 43,485 0 144 (144) 0 173,801 0 0 0.0% 96-86........... 38,850 6,603 38,850 32,247 6,603 30,885 0 7,965 0 100.0% 96-87........... 101,775 30,532 0 0 0 0 71,243 0 0 0.0% 96-88........... 12,098 7,869 12,098 4,229 7,869 11,298 0 800 0 100.0% 96-89........... 33,925 10,177 1,812 1,269 543 2,300 22,479 0 488 5.3% 96-91........... 46,312 13,894 0 0 0 0 32,418 0 0 0.0% 96-93........... 25,000 (1,996) 500 319 181 0 26,677 500 0 2.0% 96-94........... 25,000 3,869 1,000 890 110 0 20,241 1,000 0 4.0% ---------- -------- ---------- ---------- -------- ---------- ---------- ------- ------- $3,390,412 $531,110 $1,519,743 $1,295,918 $223,825 $1,544,340 $1,563,384 $37,616 $62,213 ========== ======== ========== ========== ======== ========== ========== ======= =======
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-40 INDEPENDENT ACCOUNTANTS' REPORT December 23, 1997 To the Stockholders of Communication Site Services, Inc. Ocala, Florida We have audited the accompanying balance sheet of Communication Site Services, Inc. (an S corporation) as of December 31, 1995, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Communication Site Services, Inc. as of December 31, 1995, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information contained in the Schedule of Major Contracts Completed and the Schedule of Contracts in Progress is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Robson, Scribner & Stewart, P.A. _____________________________________ ROBSON, SCRIBNER & STEWART, P.A. Certified Public Accountants F-41 COMMUNICATION SITE SERVICES, INC. BALANCE SHEET
YEAR ENDED DECEMBER 31, 1995 ------------ ASSETS Current assets: Cash and cash equivalents......................................... $ 31,349 Accounts receivable, trade........................................ 464,706 Accounts receivable, miscellaneous................................ -- Accounts receivable, SCGI......................................... 49,172 Inventories....................................................... 29,335 Costs and estimated earnings in excess of billings on uncompleted contracts........................................................ 102,592 ---------- Total current assets.......................................... 677,154 Land, property and equipment: Land, property and equipment.................................... 629,220 Less: accumulated depreciation.................................. 228,377 ---------- Net property and equipment, net............................... 400,843 Other assets: Deposit......................................................... 1,500 Loan fees, net.................................................. -- ---------- Total other assets............................................ 1,500 ---------- Total assets................................................ $1,079,497 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................ $ 288,539 Accrued expenses................................................ 11,430 Billings in excess of costs and estimated earnings on uncompleted contracts.......................................... 83,556 Current portion of notes payable................................ 37,201 ---------- Total current liabilities..................................... 420,726 Long-term debt, net of current portion............................ 141,525 ---------- Total liabilities............................................. 562,251 Stockholders' equity: Common stock, $1 par value, 100 shares issued and outstanding... 100 Retained earnings............................................... 517,146 ---------- Total stockholders' equity.................................... 517,246 ---------- Total liabilities and stockholders' equity.................. $1,079,497 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-42 COMMUNICATION SITE SERVICES, INC. STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995 ------------ Net sales.......................................................... $3,479,153 Cost of sales...................................................... 2,734,460 ---------- Gross profit................................................... 744,693 ---------- Operating expenses: Advertising...................................................... 1,090 Consultants...................................................... -- Depreciation..................................................... 10,023 Dues and subscriptions........................................... 2,977 Entertainment.................................................... 2,291 Interest......................................................... 23,755 Insurance, employee health....................................... 17,365 Insurance, general............................................... 23,629 Insurance, workers compensation.................................. 87,347 Miscellaneous expenses........................................... 412 Office supplies and expenses..................................... 8,625 Payroll taxes.................................................... 42,355 Postage and shipping............................................. 2,351 Professional fees................................................ 5,269 Radio............................................................ 109 Repairs and maintenance.......................................... 7,818 Salaries......................................................... 155,103 Security......................................................... 945 SEP retirement contribution...................................... 2,224 Taxes and license................................................ 9,995 Telephone........................................................ 40,166 Travel........................................................... -- Utilities........................................................ 4,764 ---------- Total operating expenses....................................... 448,613 ---------- Income from operations....................................... 296,080 Other income (expenses): Interest and dividend income..................................... 472 Contributions.................................................... (3,775) (Loss) on sale of equipment...................................... 1,855 Miscellaneous income (expense)................................... 180 ---------- Net income..................................................... (1,268) ---------- $ 294,812 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-43 COMMUNICATION SITE SERVICES, INC. STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 ------------ Retained earnings, beginning of year............................... $303,219 Net income......................................................... 294,812 Distributions to stockholders: Cash distributions............................................... (80,885) -------- Retained earnings, end of year..................................... $517,146 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-44 COMMUNICATION SITE SERVICES, INC. STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 ------------ Cash flows from operating activities: Net income...................................................... $ 294,812 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................................. 84,581 (Loss) on sale of equipment................................... (1,855) (Increase) decrease in: Accounts receivable, trade.................................... (151,299) Accounts receivable, Segars Communication Group, Inc. ........ (31,609) Inventories................................................... (942) Costs in excess of billings on uncompleted contracts.......... (94,194) Increases (decreases) in: Accounts payable.............................................. 206,296 Accrued expenses.............................................. 11,313 Billings in excess of costs on uncompleted contracts.......... 33,313 --------- Net cash provided by operating activities......................... 350,416 --------- Cash flows from investing activities: Proceeds from sale of equipment................................. 8,000 Purchase of equipment........................................... (159,500) Decrease in deposits............................................ Increase in miscellaneous receivables........................... --------- Net cash used by investing activities............................. (151,500) --------- Cash flows from financing activities: Payments on notes and leases payable............................ (112,564) Loan proceeds................................................... 0 Stockholder distributions....................................... (80,885) --------- Net cash used by financing activities............................. (193,449) --------- Net increase in cash.............................................. 5,467 Cash and cash equivalents, beginning of year...................... 25,882 --------- Cash and cash equivalents, end of year............................ $ 31,349 =========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-45 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is the erection and repair of transmission towers, including hanging of antennae, cabling, and associated tower components. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from fixed-price and modified fixed-price construction contracts on the percentage-of- completion method of accounting, determined by the percentage of cost incurred to date to management's estimated total anticipated cost for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced progressively as work on the contracts nears completion. Contract costs include all direct material, labor, subcontractor costs and indirect costs related to direct labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. The asset, "Costs & Estimated Earnings in Excess of Billings", represents revenues recognized in excess of amounts billed. The liability, "Billings in Excess of Costs & Estimated Earnings", represents billings in excess of revenues recognized. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible, therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged to expense when that determination is made. Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows: Office equipment................... 7 years Vehicles........................... 5 years Machinery & equipment.............. 5-7 years Buildings.......................... 31 years Towers............................. 10 years
F-46 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1995 Certain assets are pledged as security for loan obligations. See Note 4 below. Assets which have not been put into operational use as of December 31,1996, are carried at cost as equipment. Loan Fees Loan fees are amortized using the straight-line method over the length of the loan. Loan fees are currently amortized over 60 months. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. The Company reports income on the cash basis for income tax purposes, which results in timing differences between income reported for financial statements and income tax purposes. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. NOTE 2--PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1995:
1995 --------- Office equipment................................................ $ 14,092 Vehicles........................................................ 286,524 Machinery and equipment......................................... 156,794 Buildings and improvements...................................... 139,810 Land............................................................ 32,000 --------- 629,220 Less: Accumulated depreciation................................ (228,377) --------- $ 400,843 =========
Total depreciation expense is $84,581, of which $74,558, is included in the cost of goods sold for the year ended December 31, 1995. NOTE 3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
1995 -------- Costs incurred on uncompleted contracts.......................... $739,112 Estimated earnings............................................... 209,341 -------- 948,261 Billings to date................................................. (929,225) -------- $ 19,036 ========
F-47 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1995 Included in the accompanying balance sheet under the following captions: Costs & estimated earnings in excess of billings................. $102,592 Billings in excess of costs & estimated earnings................. (83,556) -------- $ 19,036 ========
NOTE 4--NOTES PAYABLE Notes payable consist of the following at December 31, 1995: 1995 -------- Note payable to bank, payable in monthly installments of $1,290, including interest at 8 percent through July, 2007. Secured by real estate with a net book value of $156,061 at year end...... $117,630 Note payable to bank, payable in monthly installments of $387, including interest at 9.746 percent through June 1997. Secured by a vehicle with a net book value of $8,294 at year end....... 6,464 Note payable to bank, payable in monthly installments of $2,821, including interest at 9 percent through September 1997. Secured by a vehicle with a net book value of $53,462 at year end...... 54,631 Note payable to bank, credit line with $150,000 available. Interest is payable monthly at 2 percent over the bank prime. Interest is at 8 percent at year end. Secured by real estate owned by the stockholder....................................... 1 -------- Total notes payable........................................... 178,726 Less: current portion....................................... (37,201) -------- Long-term debt portion........................................ $141,525 ========
Maturities of long-term debt are as follows:
DECEMBER 31 ----------- 1997.............................................................. $ 37,201 1998.............................................................. 33,544 1999.............................................................. 7,380 2000.............................................................. 7,993 2001.............................................................. 7,233 Thereafter........................................................ 48,174 -------- $141,525 ========
F-48 COMMUNICATION SITE SERVICES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED DECEMBER 31, 1995 NOTE 5--SCHEDULE OF CONTRACT BACKLOG The following schedule summarizes changes in backlog contracts during the year ended December 31, 1995. Backlog represents the amount of revenue the company expects to realize from work to be performed or uncompleted contracts in progress at year end and from contracted agreements on which work has not yet begun. Balance, January 1, 1995....................................... $ 112,068 New contracts during 1995...................................... 3,616,984 ---------- 3,729,052 Less: contract revenue earned, 1995............................ 3,479,153 ---------- Balance, December 31, 1995..................................... $ 249,899 ==========
NOTE 6--BUSINESS SEGMENT AND MAJOR CUSTOMER INFORMATION The Company operates in one business segment. The Company is engaged primarily in the erection and repairs of transmission towers for various communication companies in the southeast. Accordingly, the risk exists that the ability to collect amounts due from customers could be affected by economic fluctuations in the markets for communication towers in the southeast. At December 31, 1995, 92 percent of the accounts receivable balance is owed by five customers. Approximately 37 percent of the Company's sales for 1996 are comprised of eight job sites. The Additional Information on pages F-53 and F-54 contain schedules of major contracts completed during 1995, and contracts in progress at year end. NOTE 7--RELATED PARTY TRANSACTIONS The Company has common ownership with Segars Communication Group, Inc. During the year, certain expenses were paid and revenues received in behalf of Segars Communication Group, Inc. The net of these transactions are reflected in Communication Site Services, Inc.'s books as a receivable of $49,172 from Segars Communication Group, Inc., at December 31, 1995. Additionally, at December 31, 1995, the Company has a contract in progress for a tower construction project for Segars Communication Group. See contract labeled Owens Road on the Schedule of Contracts in Progress. The amount due on this contract of $82,901, is included in Accounts Receivable Trade as part of the tower construction project for Segars Communications Group, Inc. NOTE 8--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year ended December 31,1995 for interest expense is $23,755. NOTE 9--PENSION PLANS The Company has a SAR-SEP pension plan covering substantially all employees. The Company may contribute amounts as determined by the Board of Directors. The Company has accrued and paid contributions totalling $2,224 for the year ended December 31, 1995. F-49 COMMUNICATION SITE SERVICES, INC. SCHEDULE OF MAJOR CONTRACTS COMPLETED SCHEDULE 1
1995 ---------- CONTRACT CONTRACT OVER $100,000 REVENUES - ---------------------- ---------- Cellular One-DA II................................................ $ 237,095 Havana............................................................ 174,471 Nutall Rise....................................................... 167,185 Ponce de Leon..................................................... 147,100 Clarksville....................................................... 144,987 Capital Circle.................................................... 142,397 North Bay......................................................... 142,378 Holopaw........................................................... 126,929 ---------- Total contracts over $100,000....................................... $1,282,542 ==========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-50 COMMUNICATIONS SITE SERVICES, INC. SCHEDULE OF CONTRACTS IN PROGRESS FOR THE YEAR ENDED DECEMBER 31, 1995 SCHEDULE 2
ESTIMATED COST IN BILLINGS CONTRACT GROSS REVENUES COST TO GROSS BILLINGS COSTS TO EXCESS OF IN EXCESS PERCENT CONTRACT PRICE PROFIT EARNED DATE PROFIT TO DATE COMPLETE BILLINGS OF COSTS COMPLETE -------- ---------- --------- -------- -------- -------- -------- -------- --------- --------- -------- Plant City.............. $ 691,212 $172,764 $681,535 $511,348 $170,345 $612,712 $ 7,100 $ 68,823 $ -- 98.6% Greenland............... 61,883 15,471 53,838 40,412 13,460 55,694 6,000 -- 1,856 87.0% Winter Park Roof........ 61,765 15,265 -- -- -- 55,589 46,500 -- 55,589 0.0% Orange Park............. 38,718 9,773 33,375 24,945 8,424 34,718 4,000 -- 1,343 86.2% Anders.................. 79,465 19,873 56,659 42,492 14,169 71,519 17,100 -- 14,860 71.3% Jax Bch Water Twr....... 50,683 12,624 345 259 88 -- 37,800 345 -- 0.7% Worthington Wireless ... 7,150 1,759 3,432 2,591 844 -- 2,800 3,432 -- 48.0% Sprint Generators....... 11,985 4,727 2,077 1,258 818 11,985 6,000 -- 9,908 17.3% Callahan................ 43,370 3,338 15,396 14,203 1,193 2,171 25,829 13,225 -- Owens Road.............. 151,929 -- 101,604 101,604 -- 84,837 50,325 16,767 -- ---------- -------- -------- -------- -------- -------- -------- -------- ------- $1,198,160 $255,594 $948,261 $739,112 $209,341 $929,225 $203,454 $102,592 $83,556 ========== ======== ======== ======== ======== ======== ======== ======== =======
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-51 INDEPENDENT ACCOUNTANTS' REPORT February 4, 1998 To the Stockholders of Segars Communication Group, Inc. Ocala, Florida We have compiled the accompanying balance sheets of Segars Communication Group, Inc. (an S corporation) as of September 18, 1997, and September 30, 1996, and the related statements of income, retained earnings, and cash flows for the periods then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. The financial statements for the year ended December 31, 1996, were audited by us and we expressed an unqualified opinion on them in our report dated January 9, 1997, but we have not performed any auditing procedures since that date. Robson, Scribner & Stewart, P.A. Certified Public Accountants F-52 SEGARS COMMUNICATION GROUP, INC. UNAUDITED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 18, 1997, SEPTEMBER 30, 1996 AND DECEMBER 31, 1996 F-53 SEGARS COMMUNICATION GROUP, INC. BALANCE SHEET
SEPTEMBER 18, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996 ------------------ ------------------ ----------------- (UNAUDITED) (UNAUDITED) (AUDITED) ASSETS Current assets: Cash and cash equiva- lents................ $ 45,383 $ 54,003 $ 6,315 Accounts receivable, trade................ 3,213 2,766 5,780 Inventories........... 9,923 9,923 9,923 --------- --------- --------- Total current as- sets............... 58,519 66,692 22,018 --------- --------- --------- Land, property and equipment: Land, property and equipment............ 901,932 552,125 617,514 Less: accumulated de- preciation........... (147,001) (100,440) (114,050) --------- --------- --------- Net property and equipment.......... 754,931 451,685 503,464 --------- --------- --------- Other assets: Deposit............... 1,255 6,095 11,095 Intangible assets, net.................. 13,293 9,564 9,314 --------- --------- --------- Total other assets.. 14,548 15,659 20,409 --------- --------- --------- Total assets...... $ 827,998 $ 534,036 $ 545,891 ========= ========= ========= LIABILITIES AND STOCK- HOLDERS' EQUITY Current liabilities: Accounts payable-- SBA.................. $ 11,946 $ -- $ -- Accounts payable-- CSSI................. 136,934 108,024 143,377 Accrued expenses...... 5,992 6,891 3,987 Customer deposits..... 27,985 12,367 9,825 Current portion of notes payable........ 96,035 42,117 49,436 --------- --------- --------- Total current lia- bilities........... 278,892 169,399 206,625 Long-term debt, net of current portion........ 592,197 298,885 319,859 Loan payable--stockhold- er..................... 1,373 58,073 1,373 --------- --------- --------- Total liabilities... 872,462 526,357 527,857 --------- --------- --------- Stockholders' equity: Common stock, $1 par value, 200 shares issued and outstanding.......... 200 200 200 Retained earnings (deficit)............ (44,664) 7,479 17,834 --------- --------- --------- Total stockholders' equity............. (44,464) 7,679 18,034 --------- --------- --------- Total liabilities and stockholders' equity........... $ 827,998 $ 534,036 $ 545,891 ========= ========= =========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-54 SEGARS COMMUNICATION GROUP, INC. STATEMENTS OF OPERATIONS
PERIOD ENDED NINE MONTHS ENDED YEAR ENDED ------------------ ------------------ ----------------- SEPTEMBER 18, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996 ------------------ ------------------ ----------------- (UNAUDITED) (UNAUDITED) (AUDITED) Net sales............... $194,204 $275,871 $362,960 Cost of sales........... 72,378 197,004 248,828 -------- -------- -------- Gross profit........ 121,826 78,867 114,132 -------- -------- -------- Operating expenses: Advertising........... 500 2,073 3,136 Amortization.......... 2,770 2,173 2,897 Bank service charges.. -- 33 33 Depreciation.......... 358 1,675 2,233 Dues and subscriptions........ -- 30 30 Entertainment......... -- 286 286 Insurance............. -- 4,249 5,779 Interest.............. 41,174 22,244 29,911 Office expense........ -- 1,390 1,412 Penalties............. -- -- 54 Professional fees..... 1,570 1,116 3,291 Rent.................. -- 1,597 2,290 Repairs and maintenance.......... -- 150 150 Taxes and license..... 398 3,330 4,352 Telephone............. 524 5,038 6,302 Travel................ -- 264 264 Utilities............. -- 16 16 Vehicle expense....... -- 1,605 1,605 -------- -------- -------- Total operating expenses........... 47,294 47,269 64,041 -------- -------- -------- Income from operations....... 74,532 31,598 50,091 Other income (expenses): Miscellaneous income.. 713 538 660 Contributions......... (13,988) (7,416) (15,676) Gain on sale of equipment............ -- 3,006 3,006 -------- -------- -------- Net other income (expenses)......... (13,275) (3,872) (12,010) -------- -------- -------- Net income........ $ 61,257 $ 27,726 $ 38,081 ======== ======== ========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-55 SEGARS COMMUNICATION GROUP, INC. STATEMENTS OF RETAINED EARNINGS FOR THE PERIODS ENDED SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, ANDFOR THE YEAR ENDED DECEMBER 31, 1996
UNAUDITED UNAUDITED UNAUDITED SEPTEMBER SEPTEMBER DECEMBER 18, 1997 30, 1996 31, 1996 --------- --------- --------- Retained Earnings, Beginning of Period.......... $ 17,834 $(20,247) $(20,247) Net Income..................................... 61,257 27,726 38,081 Distributions to Stockholders: Cash and Property Distributions............... (123,755) -- -- --------- -------- -------- Retained Earnings (Deficit), End of Period...... $ (44,664) $ 7,479 $ 17,834 ========= ======== ========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-56 SEGARS COMMUNICATION GROUP, INC. STATEMENTS OF CASH FLOWS
PERIOD ENDED NINE MONTHS ENDED YEAR ENDED SEPTEMBER 18, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996 ------------------ ------------------ ----------------- (UNAUDITED) (UNAUDITED) (AUDITED) Cash flows from operating activities: Net income........... $ 61,257 $ 27,726 $ 38,081 Adjustments to reconcile net income to net cash provided by operating activities Depreciation....... 32,951 39,408 52,541 Amortization....... 2,770 2,173 2,897 (Gain) on sale of equipment......... 0 (3,006) (3,006) (Increase) decrease in: Accounts receivable, trade............. 2,567 (1,933) (4,947) Deposits........... 9,840 (4,310) (9,310) Inventories........ 0 (1,200) (1,200) Increases (decreases) in: Accounts payable... 11,946 (54) (54) Accounts payable-- CSSI.............. (6,443) 58,852 94,205 Accrued expenses... 2,005 4,509 1,605 Customer deposits.. 18,160 10,456 7,914 -------- -------- -------- Net cash provided by operating activities...... 135,053 132,621 178,726 -------- -------- -------- Cash flows from investing activities: Purchase of equipment........... (284,417) (160,784) (226,174) Proceeds from sale of equipment........... 0 4,000 4,000 -------- -------- -------- Net cash used by investing activities...... (284,417) (156,784) (222,174) -------- -------- -------- Cash flows from financing activities: Payments on notes payable............. (77,813) (25,384) (35,590) Stockholder distributions....... (123,755) 0 (64,077) Stockholder loans.... 0 (7,377) 0 Loan proceeds........ 390,000 95,000 133,500 -------- -------- -------- Net cash provided by financing activities...... 188,432 (62,239) 33,833 -------- -------- -------- Net increase (decrease) in cash............ 39,068 38,070 (9,615) Cash and cash equivalents, beginning of period............. 6,315 15,927 15,927 -------- -------- -------- Cash and cash equivalents, end of period................ $ 45,383 $ 51,003 $ 6,312 ======== ======== ========
See accountants' report. The accompanying notes are an integral part of these financial statements. F-57 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is leasing air space on transmission towers. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from signed lease contracts using the accrual method of accounting. Cost of sales include all tower repairs, commission expense, land leases, engineering costs and directly related depreciation costs. Selling, general and administrative costs are charged to expense as incurred. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible; therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged as an expense when that determination is made. Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows: Office Equipment.............................................. 5 Years Buildings and Improvements.................................... 10-15 Years Towers and Improvements....................................... 10 Years Machinery and Equipment....................................... 5 Years
Certain assets are pledged as security for loan obligations. See Note 3 below. Loan Fees and Organizational Costs Loan fees and organizational costs are amortized using the straight-line method over the length of the loan. Loan fees and organizational costs are currently amortized over a period of 60-84 months. F-58 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. NOTE 2--PROPERTY AND EQUIPMENT: Property and equipment consist of the following:
SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Office Equipment.................... $ 1,912 $ 1,912 $ 1,912 Towers & Improvements............. 455,248 223,609 288,998 Machinery & Equipment............. 321 321 321 Buildings and Improvements........ 298,477 180,309 180,309 Land.............................. 145,974 145,974 145,974 --------- --------- --------- 901,932 552,125 617,514 Less: Accumulated Depreciation.... (147,001) (100,440) (114,050) --------- --------- --------- $ 754,931 $ 451,685 $ 503,464 ========= ========= =========
Total depreciation expense for the period ended September 18, 1997 and September 30, 1996 is $32,951 and $32,593 of which $32,593 and $37,733 is included in the cost of goods sold. Total depreciation expense for the year ended December 31, 1996 is $52,544 of which $50,311 is included in the cost of goods sold. NOTE 3--NOTES PAYABLE: Notes payable consist of the following:
SEPTEMBER 18, SEPTEMBER 30, DECEMBER 31, 1997 1996 1996 ------------- ------------- ------------ Note payable to bank, payable in monthly installments of $4,005, including interest at 9.25 percent through December, 2000............ $166,547 $197,384 $189,917 Note payable to bank, payable in monthly installments of $2,432, including interest at 9.25 percent through May, 2003................. 128,265 143,618 140,987 Note payable to bank, payable in monthly installments of $3,205, including interest at 8.50 percent through August, 2004.............. 202,288 -- -- Note payable to bank, payable in monthly installments of $3,028, including interest at 8.5 percent through Sept., 2004............... 191,132 -- -- Note payable to bank, payable in monthly installments of $359, including interest at 9.5 percent through June, 2016................ -- -- 38,391 -------- -------- -------- Total Notes Payable.............. 688,232 341,002 369,295 Less: Current Portion............ (96,035) (42,117) (49,436) -------- -------- -------- Long-Term Debt Portion........... $592,197 $298,885 $319,859 ======== ======== ========
F-59 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SEPTEMBER 18, 1997, SEPTEMBER 30, 1996, AND DECEMBER 31, 1996 Maturities of long-term debt are as follows as of September 18, 1997: 1998............................................................. $ 97,381 1999............................................................. 106,424 2000............................................................. 116,308 2001............................................................. 123,106 Thereafter....................................................... 148,978 -------- $592,197 ========
NOTE 4--RELATED PARTY TRANSACTIONS: The Company has common ownership with Communication Site Services, Inc. During the year, certain expenses were paid and revenues received in behalf of Communication Site Services, Inc. The net of these transactions are reflected in Segars Communication Group, Inc.'s books as a payable to Communication Site Services, Inc., of $136,934, $108,024, and $143,377, at September 18, 1997, September 30, 1996, and December 31, 1996. NOTE 5--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the periods ended September 18, 1997 and September 30, 1996, for interest expense is $41,174 and $21,471, and for the year ended December 31, 1996, is $29,911. Significant Non-Cash Transactions: During the period ending September 18, 1997, the Company obtained financing for two new notes totalling $396,750. Loan costs were deducted from the note balances providing for net cash loan proceeds of $390,000. During 1996, the Company obtained financing for two new notes totalling $138,500. Loan costs were deducted from the note balances providing for net cash loan proceeds of $133,500. F-60 INDEPENDENT AUDITORS' REPORT January 9, 1998 To the Stockholders of Segars Communication Group, Inc. Ocala, Florida We have audited the accompanying balance sheet of Segars Communication Group, Inc. (an S corporation) as of December 31, 1996, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Segars Communication Group, Inc. as of December 31, 1996, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Robson, Scribner & Stewart, P.A. _____________________________________ ROBSON, SCRIBNER & STEWART, P.A. Certified Public Accountants F-61 SEGARS COMMUNICATION GROUP, INC. BALANCE SHEET
DECEMBER 31, 1996 ------------ ASSETS Current assets: Cash and cash equivalents........................................ $ 6,315 Accounts receivable, trade....................................... 5,780 Inventories...................................................... 9,923 -------- Total current assets........................................... 22,018 Land, property and equipment: Land, property and equipment..................................... 617,514 Less: accumulated depreciation................................... 114,050 -------- Net property and equipment..................................... 503,464 Other assets: Deposit.......................................................... 11,095 Intangible assets, net........................................... 9,314 -------- Total other assets............................................. 20,409 -------- Total assets................................................. $545,891 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................. $ -- Accounts payable--Communication Site Services, Inc. ............. 143,377 Customer deposits................................................ 9,825 Accrued expenses................................................. 3,987 Current portion of notes payable................................. 49,436 -------- Total current liabilities...................................... 206,625 Long-term debt, net of current portion............................. 319,859 Loan payable, stockholder.......................................... 1,373 -------- Total liabilities.............................................. 527,857 Stockholders' equity: Common stock, $1 par value, 200 shares issued and outstanding.... 200 Retained earnings (deficit)...................................... 17,834 -------- Total stockholders' equity (deficit)........................... 18,034 -------- Total liabilities and stockholders' equity................... $545,891 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-62 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996 ------------ Net sales.......................................................... $362,960 Cost of sales...................................................... 248,828 -------- Gross profit..................................................... 114,132 -------- Operating expenses: Advertising...................................................... 3,136 Amortization..................................................... 2,897 Bank charges..................................................... 33 Depreciation..................................................... 2,233 Dues and subscriptions........................................... 30 Entertainment.................................................... 286 Interest......................................................... 29,911 Insurance........................................................ 5,779 Office supplies and expenses..................................... 1,412 Penalties........................................................ 54 Professional fees................................................ 3,291 Repairs and maintenance.......................................... 150 Rent............................................................. 2,290 Taxes and license................................................ 4,352 Telephone........................................................ 6,302 Travel........................................................... 264 Utilities........................................................ 16 Vehicle expense.................................................. 1,605 -------- Total operating expenses....................................... 64,041 -------- Income (loss) from operations...................................... 50,091 Other income (expenses): Contributions.................................................... (15,676) Donations........................................................ -- Gain on sale of equipment........................................ 3,006 Miscellaneous income............................................. 660 -------- Net other income (expenses).................................... (12,010) -------- Net income (loss)................................................ $ 38,081 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-63 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996 ------------ Retained earnings, beginning of year............................... $(20,247) Net income......................................................... 38,081 -------- Retained earnings, end of year..................................... $ 17,834 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-64 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 ------------ Cash flows from operating activities: Net income $ 38,081 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................................. 52,544 Amortization.................................................. 2,897 (Gain) on sale of equipment................................... (3,006) (Increase) decrease in: Accounts receivable, trade.................................... (4,947) Deposits...................................................... (9,310) Inventories................................................... (1,200) Increases (decreases) in: Accounts payable--Communication Site Services, Inc. .......... 94,205 Accounts payable.............................................. (54) Accrued expenses.............................................. 1,605 Customer deposits............................................. 7,914 --------- Net cash provided by operating activities......................... 178,729 --------- Cash flows from investing activities: Proceeds from sale of equipment................................. 4,000 Purchase of equipment and property.............................. (226,174) --------- Net cash used by investing activities............................. (222,174) --------- Cash flows from financing activities: Payments on notes payable....................................... (35,590) Loan proceeds................................................... 133,500 Stockholder distributions....................................... (64,077) --------- Net cash provided by (used in) financing activities............... 33,833 --------- Net decrease in cash.............................................. (9,612) Cash and cash equivalents, beginning of year...................... 15,927 --------- Cash and cash equivalents, end of year............................ $ 6,315 =========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-65 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is leasing air space on transmission towers. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from signed lease contracts using the accrual method of accounting. Cost of sales include all tower repairs, commission expense, land leases, engineering costs and directly related depreciation costs. Selling, general and administrative costs are charged to expense as incurred. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible; therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged as an expense when that determination is made. Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows:
Office equipment................. 5-7 years Buildings and improvements....... 10-15 years Towers and improvements.......... 10 years Machinery and equipment.......... 5 years
Certain assets are pledged as security for loan obligations. See Note 3 below. Loan Fees and Organizational Costs Loan fees and organizational costs are amortized using the straight-line method over the length of the loan. Loan fees and organizational are currently amortized over 60 months. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. F-66 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--PROPERTY AND EQUIPMENT: Property and equipment consist of the following at December 31, 1996: Office equipment................................................ $ 1,912 Towers & improvements........................................... 288,998 Machinery and equipment......................................... 321 Buildings and improvements...................................... 180,309 Land............................................................ 145,974 --------- 617,514 Less: accumulated depreciation................................ (114,050) --------- $ 503,464 =========
Total depreciation expense is $52,544 of which $50,311 is included in the cost of goods sold for the year ended December 31, 1996. NOTE 3--NOTES PAYABLE: Notes payable consist of the following at December 31, 1996: Note payable to bank, payable in monthly installments of $4,005, including interest at 9.25 percent through December, 2000. Secured by real estate with a net book value of $127,926 at year end................................................... $189,917 Note payable to bank, payable in monthly installments of $2,432, including interest at 9.25 percent through May, 2003. Secured by a real estate with a net book value of $134,151 at year end...................................................... 140,987 Note payable to bank, payable in monthly installments of $359, including interest at 9.5 percent through June, 2016. Secured by real estate with a net book value of $163,280 at year end.. 38,391 -------- Total notes payable.......................................... 369,295 Less: current portion........................................ (49,436) -------- Long-term debt portion....................................... $319,859 ========
Maturities of long-term debt are as follows:
DECEMBER 31 ----------- 1998................................ $ 54,212 1999................................ 59,543 2000................................ 65,184 2001................................ 67,393 Thereafter.......................... 73,527 -------- $319,859 ========
F-67 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1996 NOTE 4--RELATED PARTY TRANSACTIONS: The Company has common ownership with Communication Site Services, Inc. During the year, certain expenses were paid and revenues received in behalf of Communication Site Service, Inc. The net of these transactions are reflected in Segars Communication Group, Inc.'s books as a payable of $143,377 to Communication Site Service Inc., at December 31, 1996. NOTE 5--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the year ended December 31, 1996, for interest expense is $29,911. Significant Non-Cash Transactions: none. During 1996, the Company obtained financing for two new notes totalling $138,500. Loan costs were deducted from the note balances providing for net cash loan proceeds of $133,500. F-68 INDEPENDENT ACCOUNTANTS' REPORT January 9, 1998 To the Stockholders of Segars Communication Group, Inc. Ocala, Florida We have audited the accompanying balance sheet of Segars Communication Group, Inc. (an S corporation) as of December 31, 1995, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted audited standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence support the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Segars Communication Group, Inc. as of December 31, 1995, and the results of operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Robson, Scribner & Stewart, P.A. _____________________________________ ROBSON, SCRIBNER & STEWART, P.A. Certified Public Accountants F-69 SEGARS COMMUNICATION GROUP, INC. BALANCE SHEET
DECEMBER 31, 1995 ------------ ASSETS Current assets: Cash and cash equivalents........................................ $ 15,927 Accounts receivable, trade....................................... 833 Inventories...................................................... 8,723 -------- Total current assets........................................... 25,483 Land, property and equipment: Land, property and equipment..................................... 393,941 Less: accumulated depreciation................................... 63,112 -------- Net property and equipment..................................... 330,829 Other assets: Deposit.......................................................... 1,785 Intangible assets, net........................................... 7,211 -------- Total other assets............................................. 8,996 -------- Total assets................................................. $365,308 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................. $ 54 Accounts payable--Communication Site Services, Inc. ............. 49,172 Customer deposits................................................ 1,911 Accrued expenses................................................. 2,382 Current portion of notes payable................................. 38,220 -------- Total current liabilities...................................... 91,739 Long-term debt, net of current portion............................. 228,166 Loan payable, stockholder.......................................... 65,450 -------- Total liabilities.............................................. 385,355 Stockholders' equity: Common stock, $1 par value, 200 shares issued and outstanding.... 200 Retained earnings (deficit)...................................... (20,247) -------- Total stockholders' equity (deficit)........................... (20,047) -------- Total liabilities and stockholders' equity................... $365,308 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-70 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995 ------------ Net sales.......................................................... $ 85,871 Cost of sales...................................................... 52,634 -------- Gross profit..................................................... 33,237 -------- Operating expenses: Advertising...................................................... 600 Amortization..................................................... 1,897 Bank charges..................................................... 30 Depreciation..................................................... -- Dues and subscriptions........................................... -- Entertainment.................................................... -- Interest......................................................... 25,913 Insurance........................................................ 5,565 Office supplies and expenses..................................... 51 Penalties........................................................ 42 Professional fees................................................ 5,608 Repairs and maintenance.......................................... 8,053 Rent............................................................. -- Taxes and license................................................ 2,914 Telephone........................................................ 786 Travel........................................................... -- Utilities........................................................ 1,910 Vehicle expense.................................................. -- -------- Total operating expenses....................................... 53,369 -------- Income (loss) from operations...................................... (20,132) Other income (expenses): Contributions.................................................... -- Donations........................................................ (6,970) Gain on sale of equipment........................................ -- Miscellaneous income............................................. 112 -------- Net other income (expenses).................................... (6,858) -------- Net income (loss)................................................ $(26,990) ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-71 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995 ------------ Retained earnings, beginning of year............................... $ 6,743 Net loss........................................................... (26,990) -------- Retained earnings, end of year..................................... $(20,247) ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-72 SEGARS COMMUNICATION GROUP, INC. STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995 ------------- Cash flows from operating activities: Net loss $(26,990) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation............................................... 44,100 Amortization............................................... 1,897 (Gain) on sale of equipment................................ -- (Increase) decrease in: Accounts receivable, trade................................. (833) Deposits................................................... 305 Inventories................................................ (1,225) Increases (decreases) in: Accounts payable--Communication Site Services, Inc. ....... 31,609 Accounts payable........................................... (426) Accrued expenses........................................... -- Customer deposits.......................................... 1,911 -------- Net cash provided by operating activities...................... 50,348 -------- Cash flows from investing activities: Proceeds from sale of equipment.............................. -- Purchase of equipment and property........................... (40,799) -------- Net cash used by investing activities.......................... (40,799) -------- Cash flows from financing activities: Payments on notes payable.................................... (28,513) Loan proceeds................................................ 50,000 Stockholder distributions.................................... (25,900) -------- Net cash provided by (used in) financing activities............ (4,413) -------- Net decrease in cash........................................... 5,136 Cash and cash equivalents, beginning of year................... 10,791 -------- Cash and cash equivalents, end of year......................... $ 15,927 ========
See independent auditors' report. The accompanying notes are an integral part of these financial statements. F-73 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A summary of the significant accounting policies applied in the preparation of the accompanying financial statements is as follows: Business Activity The Company's primary business activity is leasing air space on transmission towers. Revenue and Cost Recognition For financial reporting, the Company recognized revenues from signed lease contracts using the accrual method of accounting. Cost of sales include all tower repairs, commission expense, land leases, engineering costs and directly related depreciation costs. Selling, general and administrative costs are charged to expense as incurred. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash equivalents includes all highly liquid investments with an original maturity of three months or less. Inventory Inventory is stated at the lower of cost (first-in, first-out method) or market. Accounts Receivable Management believes that all accounts receivable are collectible; therefore, no allowance for uncollectible accounts has been established. Accounts which are deemed to be uncollectible are charged as an expense when that determination is made. Property and Equipment Property and equipment are carried at cost. Depreciation is provided for on the accelerated method over the estimated useful lives of the assets as follows:
Office equipment................. 5-7 years Buildings and improvements....... 10-15 years Towers and improvements.......... 10 years Machinery and equipment.......... 5 years
Certain assets are pledged as security for loan obligations. See Note 3 below. Assets which have not been put into operational use as of December 31, 1995 are carried at cost as equipment. Loan Fees and Organizational Costs Loan fees and organizational costs are amortized using the straight-line method over the length of the loan. Loan fees and organizational are currently amortized over 60 months. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. F-74 SEGARS COMMUNICATION GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 1995 NOTE 2--PROPERTY AND EQUIPMENT: Property and equipment consist of the following at December 31, 1995: Towers & improvements........................................... $ 228,303 Machinery and equipment......................................... 2,600 Buildings and improvements...................................... 18,064 Land............................................................ 144,974 --------- 393,941 Less: accumulated depreciation................................ (63,112) --------- $ 330,829 =========
Total depreciation expense is $44,100, which is included in the cost of goods sold for the year ended December 31, 1995. NOTE 3--NOTES PAYABLE: Notes payable consist of the following at December 31, 1995: Note payable to bank, payable in monthly installments of $4,005, including interest at 9.25 percent through December 2000. Secured by real estate with a net book value of $159,484 at year end....................................................... $216,386 Note payable to bank, payable in monthly installments of $2,432, including interest at 9.25 percent through May 2003. Secured by a real estate with a net book value of $57,874 at year end. This amount represents the first construction draw first draw taken.......................................................... 50,000 -------- Total notes payable........................................... 266,386 Less: current portion......................................... (38,220) -------- Long-term debt portion........................................ $228,166 ========
Maturities of long-term debt are as follows:
DECEMBER 31 ----------- 1997................................ $ 48,747 1998................................ 53,452 1999................................ 43,839 2000................................ 42,036 2001................................ 40,092 -------- $228,166 ========
NOTE 4--RELATED PARTY TRANSACTIONS: The Company has common ownership with Communication Site Services, Inc. During the year, certain expenses were paid and revenues received in behalf of Communication Site Service, Inc. The net of these transactions are reflected in Segars Communication Group, Inc.'s books as a payable of $49,172 to Communication Site Service Inc., at December 31, 1995. NOTE 5--SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the year ended December 31, 1995, for interest expense is $25,913. Significant Non-Cash Transactions: none F-75 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ----------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 1 Risk Factors.............................................................. 16 The Exchange Offer........................................................ 27 Use of Proceeds........................................................... 35 Reorganization and Prior S Corporation Status............................. 35 Capitalization............................................................ 36 Unaudited Pro Forma Condensed Consolidated Financial Statements........... 37 Selected Historical Financial Data........................................ 41 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 43 Industry Overview......................................................... 50 Business.................................................................. 54 Management................................................................ 66 Certain Transactions...................................................... 71 Ownership of Capital Stock................................................ 73 Description of Capital Stock.............................................. 75 Description of New Credit Facility........................................ 80 Description of Exchange Notes............................................. 82 Certain United States Federal Income Tax Considerations................... 106 Book-Entry; Delivery and Form............................................. 107 Plan of Distribution...................................................... 109 Legal Matters............................................................. 110 Independent Accountants................................................... 110 Available Information..................................................... 110 Index to Financial Statements............................................. F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -------------- PROSPECTUS -------------- SBA Communications Corporation OFFER TO EXCHANGE ITS 12% SENIOR DISCOUNT NOTES DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 12% SENIOR DISCOUNT NOTES DUE 2008 , 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under the Florida Business Corporation Act (the "FBCA"), a director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to act unless (i) the director breached or failed to perform his duties as a director and (ii) the director's breach of, or failure to perform, those duties constitutes: (1) a violation of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (2) a transaction from which the director derived an improper personal benefit, either directly or indirectly, (3) a circumstance under which an unlawful distribution is made, (4) in a proceeding by or in the right of the corporation to procure a judgment in its favor or by or in the right of a stockholder, conscious disregard for the best interest of the corporation or willful misconduct, or (5) in a proceeding by or in the right of someone other than the corporation or stockholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. A corporation may purchase and maintain insurance on behalf of any director or officer against any liability asserted against him or her and incurred by him or her in his or her capacity or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the FBCA. The Articles of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all officers and directors of the Company. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. II-1 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
EXHIBIT NO. DESCRIPTION - ------- ----------- 3.1 --Articles of Incorporation, as amended, of SBA Communications Corporation. 3.2 --Amended and Restated Statement of Designation of SBA Communications Corporation. 3.3 --By-Laws of SBA Communications Corporation. *4.1 --Indenture, dated as of March 2, 1998, between SBA Communications Corporation and State Street Bank and Trust Company, as trustee, relating to $269,000,000 in aggregate principal amount at maturity of 12% Senior Discount Notes due 2008. *4.2 --Specimen Certificate of 12% Senior Discount Notes due 2008 (the "Private Notes") (included in Exhibit 4.1 hereto). *4.3 --Specimen Certificate of 12% Senior Discount Notes due 2008 (the "Exchange Notes") (included in Exhibit 4.1 hereto). *4.4 --Registration Rights Agreement, dated as of March 2, 1998, between SBA Communications Corporation and BT Alex. Brown Incorporated and Lehman Brothers Inc. *5.1 --Opinion of Latham & Watkins regarding the validity of the Exchange Notes. *5.2 --Opinion of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., regarding the validity of the Exchange Notes. 10.1 --SBA Communications Corporation Registration Rights Agreement dated as of March 5, 1997, among the Company, Steven E. Bernstein, Ronald G. Bizick, II and Robert M. Grobstein. 10.2 --SBA Communications Corporation Registration Rights Agreement dated as of March 6, 1997, among the Company and the Preferred Shareholders, as defined therein. 10.3 --SBA Communications Corporation Shareholders Agreement dated as of March 6, 1997, among the Company, Steven E. Bernstein and the Preferred Shareholders, as defined therein. 10.4 --$3,500,000 Promissory Note dated as of March 8, 1997 of Steven E. Bernstein in favor of the Company. 10.5 --Pledge and Security Agreement dated as of March 8, 1997, between the Company and Steven E. Bernstein. 10.6 --Warrant to Purchase 402,500 Shares of Class A Common Stock of SBA Communications Corporation dated March 6, 1997. *10.7 --Credit Agreement dated as of August 8, 1997, between the Company, BankBoston N.A., First Union National Bank and Fleet National Bank. 10.8 --Employment Agreement dated as of January 1, 1997, between the Company and Ronald G. Bizick, II. 10.9 --Employment Agreement dated as of January 1, 1997, between the Company and Robert M. Grobstein. *10.10 --Employment Agreement dated as of March 14, 1997, between the Company and Jeffrey A. Stoops. 10.11 --Stock Option Agreement dated as of March 5, 1997, between the Company and Ronald G. Bizick, II.
II-2
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.12 --Stock Option Agreement dated as of March 5, 1997, between the Company and Robert M. Grobstein. *10.13 --Nonqualified Stock Option Agreement-Revised dated March 14, 1997, between the Company and Jeffrey A. Stoops. *10.14 --SBA Communications Corporation Subordination Agreement dated as of August 8, 1997, among the Company, the holders of in excess of the 73% of the Company's Series A Convertible Preferred Stock, and BankBoston, N.A. *10.15 --Purchase and Sale Agreement, dated July 22, 1997, by and among SBA Towers Florida, Inc., SBA Construction Acquisition, Inc., Communication Site Services, Inc., Segars Communication Group, Inc., Robert Segars and Denise Segars. *12.1 --Statement of Computation of Ratio of Earnings to Fixed Charges. *21.1 --Subsidiaries of SBA Communications Corporation. *23.1 --Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1). *23.2 --Consent of Arthur Andersen LLP *23.3 --Consent of Robson, Scribner & Stewart, P.A. 24.1 --Power of Attorney of SBA Communications Corporation (included on signature page to this Registration Statement on Form S-4). *25.1 --Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of State Street Bank and Trust Company. 27.1 --Financial Data Schedule. *99.1 --Form of Letter of Transmittal and related documents to be used in conjunction with the Exchange Offer.
- -------- * To be filed by amendment. (b) Financial Statement Schedules: Schedule II. Valuation of Qualifying Accounts. II-3 SCHEDULES OMITTED Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes that insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions described under Item 20 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim of indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes (i) to respond to requests for information that is incorporated by reference into this Prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This undertaking also includes documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. The undersigned Registrant hereby undertakes to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the undersigned undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the application form. The undersigned Registrant hereby undertakes that every prospectus: (i) that is filed pursuant to the immediately preceding paragraph or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOCA RATON, STATE OF FLORIDA ON APRIL 15, 1998. SBA Communications Corporation /s/ Steven E. Bernstein By: _________________________________ STEVEN E. BERNSTEIN CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND CHIEF EXECUTIVE OFFICER KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and directors of SBA Communications Corporation, a Florida corporation (the "Company"), for himself and not for one another, does hereby constitute and appoint Jeffrey A. Stoops and Robert M. Grobstein and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement with respect to the proposed issuance, sale and delivery by the Company of 12% Senior Discount Notes due 2008, or any registration statement for this offering that is to be effective upon the filing pursuant to rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND AS OF THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Steven E. Bernstein Chairman of the Board of April 15, _________________________________ Directors, President and Chief 1998 STEVEN E. BERNSTEIN Executive Officer (Principal Executive Officer) /s/ Robert M. Grobstein Chief Financial Officer April 15, _________________________________ (Principal Financial and 1998 ROBERT M. GROBSTEIN Accounting Officer) /s/ Donald B. Hebb, Jr. Director April 15, _________________________________ 1998 DONALD B. HEBB, JR. /s/ C. Kevin Landry Director April 15, _________________________________ 1998 C. KEVIN LANDRY /s/ Richard W. Miller Director April 15, _________________________________ 1998 RICHARD W. MILLER II-5 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT BEGINNING OF COSTS AND FROM END OF PERIOD EXPENSES RESERVES PERIOD ------------ ---------- ---------- ---------- Allowance for Doubtful Accounts: December 31, 1995............. $ -- $572,751 $ -- $ 572,751 December 31, 1996............. $ 572,751 $451,349 $ -- $1,024,100 December 31, 1997............. $1,024,100 $163,416 $679,248 $ 508,268
S-1 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - ------- ----------- ---- 3.1 --Articles of Incorporation, as amended, of SBA Communications Corporation. 3.2 --Amended and Restated Statement of Designation of SBA Communications Corporation. 3.3 --By-Laws of SBA Communications Corporation. *4.1 --Indenture, dated as of March 2, 1998, between SBA Communications Corporation and State Street Bank and Trust Company, as trustee, relating to $269,000,000 in aggregate principal amount at maturity of 12% Senior Discount Notes due 2008. *4.2 --Specimen Certificate of 12% Senior Discount Notes due 2008 (the "Private Notes") (included in Exhibit 4.1 hereto). *4.3 --Specimen Certificate of 12% Senior Discount Notes due 2008 (the "Exchange Notes") (included in Exhibit 4.1 hereto). *4.4 --Registration Rights Agreement, dated as of March 2, 1998, between SBA Communications Corporation and BT Alex. Brown Incorporated and Lehman Brothers Inc. *5.1 --Opinion of Latham & Watkins regarding the validity of the Exchange Notes. *5.2 --Opinion of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., regarding the validity of the Exchange Notes. 10.1 --SBA Communications Corporation Registration Rights Agreement dated as of March 5, 1997, among the Company, Steven E. Bernstein, Ronald G. Bizick, II and Robert M. Grobstein. 10.2 --SBA Communications Corporation Registration Rights Agreement dated as of March 6, 1997, among the Company and the Preferred Shareholders, as defined therein. 10.3 --SBA Communications Corporation Shareholders Agreement dated as of March 6, 1997, among the Company, Steven E. Bernstein and the Preferred Shareholders, as defined therein. 10.4 --$3,500,000 Promissory Note dated as of March 8, 1997 of Steven E. Bernstein in favor of the Company. 10.5 --Pledge and Security Agreement dated as of March 8, 1997, between the Company and Steven E. Bernstein. 10.6 --Warrant to Purchase 402,500 Shares of Class A Common Stock of SBA Communications Corporation dated March 6, 1997. *10.7 --Credit Agreement dated as of August 8, 1997, between the Company, BankBoston N.A., First Union National Bank and Fleet National Bank. 10.8 --Employment Agreement dated as of January 1, 1997, between the Company and Ronald G. Bizick, II. 10.9 --Employment Agreement dated as of January 1, 1997, between the Company and Robert M. Grobstein. *10.10 --Employment Agreement dated as of March 14, 1997, between the Company and Jeffrey A. Stoops. 10.11 --Stock Option Agreement dated as of March 5, 1997, between the Company and Ronald G. Bizick, II.
EXHIBIT NO. DESCRIPTION PAGE - ------- ----------- ---- 10.12 --Stock Option Agreement dated as of March 5, 1997, between the Company and Robert M. Grobstein. *10.13 --Nonqualified Stock Option Agreement-Revised dated March 14, 1997, between the Company and Jeffrey A. Stoops. *10.14 --SBA Communications Corporation Subordination Agreement dated as of August 8, 1997, among the Company, the holders of in excess of the 73% of the Company's Series A Convertible Preferred Stock, and BankBoston, N.A. *10.15 --Purchase and Sale Agreement, dated July 22, 1997, by and among SBA Towers Florida, Inc., SBA Construction Acquisition, Inc., Communication Site Services, Inc., Segars Communication Group, Inc., Robert Segars and Denise Segars. *12.1 --Statement of Computation of Ratio of Earnings to Fixed Charges. *21.1 --Subsidiaries of SBA Communications Corporation. *23.1 --Consent of Latham & Watkins (included in their opinion filed as Exhibit 5.1). *23.2 --Consent of Arthur Andersen LLP *23.3 --Consent of Robson, Scribner & Stewart, P.A. 24.1 --Power of Attorney of SBA Communications Corporation (included on signature page to this Registration Statement on Form S-4). *25.1 --Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939 of State Street Bank and Trust Company. 27.1 --Financial Data Schedule. *99.1 --Form of Letter of Transmittal and related documents to be used in conjunction with the Exchange Offer.
- -------- * To be filed by amendment. EX-3.1 2 ARTICLES OF INCORPORATION AS AMENDED, OF SBA COMM EXHIBIT 3.1 ----------- THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION OF SBA COMMUNICATIONS CORPORATION SBA Communications Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the Florida Business Corporation Act (the "Act"), does hereby certify that: 1. The original Articles of Incorporation of the Corporation were filed with the Secretary of State of the State of Florida on December 23, 1996, were amended on January 23, 1997, were amended and restated on February 21, 1997 and March 4, 1997, and amended on March 5, 1997. 2. The Amended and Restated Articles of Incorporation set forth herein have been duly approved by joint written consent dated April __, 1997 of all of the Directors and the holders of over 66 2/3% of outstanding voting control of the Corporation in accordance with Sections 607.0821 and 607.0704 of the Act and the number of votes cast were sufficient for approval. 3. The Articles of Incorporation of the Corporation are hereby amended and restated as follows: ARTICLE I --------- NAME, PRINCIPAL PLACE OF BUSINESS AND INITIAL REGISTERED AGENT AND OFFICE The name of the Corporation is SBA Communications Corporation. The principal place of business and mailing address of this Corporation shall be 6001 Broken Sound Parkway, Suite 400, Boca Raton, Florida 33487. The street address of the initial registered office of this Corporation is 777 South Flagler Drive, East Tower, Suite 500, West Palm Beach, Florida 33401. The name of the initial registered agent of this Corporation at such address is VALDES-FAULI CORPORATE SERVICES, INC. Pursuant to Section 607.0501(3), Florida Statutes, a written acceptance is attached. ARTICLE II ---------- PURPOSE AND POWERS The purpose for which the Corporation is organized is to engage in or transact any and all lawful activities or business for which a corporation may be incorporated under the laws of the State of Florida. The Corporation shall have all of the corporate powers enumerated in the Florida Business Corporation Act. ARTICLE III ----------- CAPITAL STOCK A. AUTHORIZED SHARES The total number of shares of all classes of stock that the Corporation shall have the authority to issue is Seventy Million One Hundred Thousand (70,100,000) shares, of which Thirty Million (30,000,000) shares shall be Preferred Stock, having a par value of $0.01 per share ("Preferred Stock"), Thirty Two Million (32,000,000) shares shall be classified as Class A Common Stock, par value $0.01 per share ("Class A Common Stock") and Eight Million One Hundred (8,100,000) shares shall be classified as Class B Common Stock, par value $0.01 per share ("Class B Common Stock") (collectively, together with the Class A Common Stock, the "Common Stock"). The Board of Directors is expressly authorized to provide for the classification and reclassification of any unissued shares of Common Stock or Preferred Stock and the issuance thereof in one or more classes or series without the approval of the stockholders of the Corporation. B. PROVISIONS RELATING TO COMMON STOCK 1. Relative Rights. The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the certificate of designations filed to establish the respective series of Preferred Stock. Except as provided in this Article III.B, each share of Class A Common Stock and Class B Common Stock shall have the same relative rights and shall be identical in all respects as to all matters. 2. Ownership of Class B Common Stock. (a) The Corporation may issue shares of Class B Common Stock only to Steven E. Bernstein, who may transfer such shares only to other members of his Immediate Family or their lineal descendants, spouses of lineal descendants or lineal descendants of spouses, whether alive as of the date hereof or born subsequently, any trusts or other estate planning vehicles for the benefit of any of the foregoing, whether existing as of the date hereof or created subsequently, or any estate or tax planning vehicles on the part of Mr. Bernstein (collectively, "Eligible Class B Stock Holder"); provided, however, that the Corporation may not issue any Class B Common Stock at any time after the date on which the Corporation issues any Preferred Stock to any person other than Mr. Bernstein. For purposes of this Article III.B.2, an entity shall be deemed to be controlled by any person or entity who or which, directly or indirectly, holds more than 50% of the outstanding voting rights of such entity and has the power to direct or cause the direction of the management and policies of such entity. (b) "Immediate Family" of Mr. Bernstein shall include his spouse, parents, children, siblings, mother and father-in-law, sons and daughters-in- laws and brothers and sisters-in-law, or any other person who is supported, directly or indirectly, to a material extent by Mr. Bernstein. 3. Voting Rights. Each holder of shares of Class A Common Stock and Class B Common Stock shall be entitled to attend all special and annual meetings of the stockholders of the 2 Corporation. On all matters upon which stockholders are entitled or permitted to vote, every holder of Class A Common Stock shall be entitled to cast one (1) vote in person or by proxy for each outstanding share of Class A Common Stock standing in such holder's name on the transfer books of the Corporation, and every holder of Class B Common Stock shall be entitled to cast ten (10) votes in person or by proxy for each outstanding share of Class B Common Stock standing in such holder's name on the transfer books of the Corporation. Except as otherwise provided in these Articles of Incorporation or by applicable law, the holders of shares of Class A Common Stock and Class B Common Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock. 4. Dividends. Whenever there shall have been paid, or declared and set aside for payment, to the holders of shares of any class of stock having preference over the Common Stock as to the payment of dividends, the full amount of dividends and of sinking fund or retirement payments, if any, to which such holders are respectively entitled in preference to the Common Stock, then the holders of record of the Class A Common Stock and Class B Common Stock, and any class or series of stock entitled to participate therewith as to dividends, shall be entitled to receive dividends, when, as, and if declared by the Board of Directors, out of any assets legally available for the payment of dividends thereon, provided that no dividend may be declared and paid to the holders of the Class A Common Stock unless at the same time the Board of Directors shall also declare and pay to the holders of the Class B Common Stock a per share dividend equal to and, subject to the next sentence, in the same form as the dividend declared and paid to the holders of the Class A Common Stock, and vice versa. Dividends payable in Common Stock declared on Class A Common Stock shall be payable in Class A Common Stock and Common Stock dividends declared on Class B Common Stock shall be payable in Class B Common Stock. 5. Dissolution, Liquidation, Winding Up. In the event of any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of record of the Class A Common Stock then outstanding and the holders of record of the Class B Common Stock then outstanding, and all holders of any class or series of stock entitled to participate therewith, in whole or in part, as to distribution of assets, shall become entitled to participate equally on a per share basis in the distribution of any assets of the Corporation remaining after the Corporation shall have paid or provided for payment of all debts and liabilities of the Corporation, and shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Common Stock in the event of dissolution, liquidation or winding up, the full preferential amounts (if any) to which they are entitled. 6. Conversion of Class B Common Stock. (a) Conversion Events. (i) Each outstanding share of Class B Common ----------------- Stock may, at the option of the holder thereof, at any time, be converted into one fully paid and non-assessable share of Class A Common Stock. (ii) Each share of outstanding Class B Common Stock which is transferred to any holder other than an Eligible Class B Stock Holder shall convert into one fully paid and non-assessable share of Class A Common Stock immediately upon such transfer. (iii) If the shares of Class B Common Stock held by the Eligible Class B Stock Holders in the aggregate constitute 10% or less of the outstanding shares of Common Stock of the Corporation 3 or upon the death or mental incapacity of Steven E. Bernstein, each share of Class B Common Stock shall immediately convert into one fully paid and non- assessable share of Class A Common Stock. (iv) At such time as an Eligible Class B Stock Holder ceases to be an Eligible Class B Stock Holder, each share of Class B Common Stock held by such person or entity shall immediately convert into one fully paid and non-assessable share of Class A Common Stock. (v) In the event that any shares of Series C Preferred Stock are issued, each share of Class B Common Stock shall immediately convert into one fully paid and non- assessable share of Class A Common Stock. (b) Automatic Conversion Procedure. In the event of any conversion of ------------------------------ shares of Class B Common Stock pursuant to Article III.B.6(a), the holder of such shares of Class B Common Stock shall promptly surrender the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of transfer, at the office of the Corporation, or of any transfer agent for such shares, and shall give written notice to the Corporation (the "Notice"), at such office: (i) stating that shares of Class B Common Stock have been converted into shares of Class A Common Stock as provided in this Article III.B.6; (ii) specifying the subdivision of Article III.B.6(a) pursuant to which the conversion occurred; (iii) identifying the number of shares of Class B Common Stock being converted; and (iv) setting out the name or names (with addresses) and denominations in which the certificate or certificates for shares of Class A Common Stock shall be issued, with instructions for delivery thereof. Delivery of such notice together with the certificates representing the shares of Class B Common Stock shall obligate the Corporation to issue such shares of Class A Common Stock. Thereupon the Corporation or its agent shall promptly issue and deliver to such holder a certificate or certificates representing the shares to which such holder is entitled, registered in the name of such holder or designee as specified in the Notice. The Corporation shall take any and all steps necessary to effect a conversion pursuant to Article III.B.6(a), notwithstanding any failure by the holder to deliver to the Corporation the Notice or the certificates representing the shares subject to such conversion. (c) Effect of Automatic Conversion. To the extent permitted by law, ------------------------------ conversion shall be deemed to have been effected as of the date on which conversion was first permitted under Article III.B.6(a) (such date being the "Conversion Time"). The person entitled to receive shares issuable upon such conversion shall be treated for all purposes as the record holder of such class of shares at and as of the Conversion Time, and the right of such person as a holder of the shares held prior to such conversion shall cease and terminate at and as of the Conversion Time, in each case notwithstanding any failure by the holder to deliver to the Corporation the Notice or the certificates representing the shares subject to conversion, or the Corporation's failure to issue to the holder certificates representing the shares to be held after the conversion has been effected. (d) Reservation. The Corporation hereby reserves and shall at all ----------- times reserve and keep available, out of its authorized and unissued shares of capital stock, for the purposes of effecting conversions, such number of duly authorized shares of capital stock as shall from time to time be sufficient to effect the conversion of the Class B Common Stock contemplated herein. All such shares so issuable shall, when so issued, be duly and validly issued, fully paid and non-assessable, and free from liens and charges with respect to the issue. The Corporation will take all such action as may be necessary to ensure that all such shares may be so issued without violation 4 of any applicable law or regulation, or of any requirements of any national securities exchange or The Nasdaq Stock Market's National Market upon which such shares may be listed or traded. 7. Subdivisions and Combinations of Shares. If the Corporation in any manner subdivides (by any stock split, reclassification, stock dividend, recapitalization or otherwise) or combines the outstanding shares of one class of Common Stock at a time when shares of the other class of Common Stock are outstanding, the outstanding shares of the other class of Common Stock will be likewise subdivided or combined. C. PREFERRED STOCK 1. Issuance, Designations, Powers, etc. The Board of Directors expressly is authorized, subject to limitations prescribed by the Florida Business Corporation Act and the provisions of these Articles of Incorporation, to provide, by resolution for the issuance from time to time of the shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the foregoing, the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and 5 (h) Any other relative powers, preferences, and rights of that series, and qualifications, limitations or restrictions on that series. 2. Dissolution, Liquidation, Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock of each series shall be entitled to receive only such amount or amounts as shall have been fixed by the resolution or resolutions of the Board of Directors providing for the issuance of such series. ARTICLE IV ---------- EXISTENCE The Corporation shall exist perpetually unless sooner dissolved according to law. ARTICLE V --------- MANAGEMENT OF THE CORPORATION The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and shareholders: A. BOARD OF DIRECTORS The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by Statute or by these Articles of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. SPECIAL MEETINGS CALLED BY BOARD OF DIRECTORS OR SHAREHOLDERS Special Meetings of Shareholders of the Corporation may be called by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption) (the "Full Board"), or by the holders of not less than fifty percent (50%) of all the votes entitled to be cast on any issue at the proposed special meeting if such holders of stock sign, date and deliver to the Corporation's Secretary one or more written demands for the meeting describing the purpose or purposes for which the special meeting is to be held. 6 ARTICLE VI ---------- NUMBER OF DIRECTORS; VACANCIES A. NUMBER OF DIRECTORS AND COMPOSITION OF BOARD The initial number of directors of the Corporation shall be one (1). The number of directors may be either increased or diminished from time to time in the manner provided in the Bylaws, but shall never be less than one (1) nor more than twenty-five (25). B. VACANCIES A director shall hold office until the annual meeting of the shareholders and until his successors shall be elected, subject, however, to the director's prior death, resignation, retirement, disqualification or removal from office. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy on the Board of Directors, howsoever resulting (including vacancies created as a result of a resolution of the Board of Directors increasing the authorized number of directors), may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. ARTICLE VII ----------- INDEMNIFICATION Provided the person proposed to be indemnified satisfies the requisite standard of conduct for permissive indemnification by a corporation as specifically set forth in the applicable provisions of the Florida Business Corporation Act (currently, Sections 607.0850(1) and (2) of the Florida Statutes), as the same may be amended from time to time, the Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, to the fullest extent provided, authorized, permitted or not prohibited by the provisions of the Florida Business Corporation Act and the Bylaws of the Corporation, as the same may be amended and supplemented, from and against any and all of the expenses or liabilities incurred in defending a civil or criminal proceeding, or other matters referred to in or covered by said provisions, including advancement of expenses prior to the final disposition of such proceedings and amounts paid in settlement of such proceedings, both as to action in his or her official capacity and as to action in another capacity while an officer, director, employee or other agent. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of shareholders or Disinterested Directors or otherwise. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent, and shall inure to the benefit of the heirs and personal representatives of such a person. Except as otherwise required by law, an adjudication of liability shall not affect the right to indemnification for those indemnified. 7 ARTICLE VIII ------------ AMENDMENT The Corporation reserves the right to amend or repeal any provision contained in these Articles of Incorporation in the manner prescribed by the laws of the State of Florida and all rights conferred upon shareholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of these Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any votes of the holders of any class or series of the stock of this Corporation required by law or by these Articles of Incorporation, the affirmative vote of the holders of at least two-thirds (66 2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class shall be required to amend or repeal any of Articles V, VI, VII, and VIII. IN WITNESS WHEREOF, for the purposes of Amending and Restating the Articles of Incorporation of this Corporation under the laws of the State of Florida the undersigned has executed these Amended and Restated Articles of Incorporation this 21st day of July, 1997. /s/ Steven E. Bernstein --------------------------------------- Steven E. Bernstein President and Chief Executive Officer 8 EX-3.2 3 AMENDED AND RESTATED STATEMENT OF DESIGNATION EXHIBIT 3.2 ----------- ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF SBA COMMUNICATIONS CORPORATION AMENDED AND RESTATED STATEMENT OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS AMENDING TERMS OF 4% SERIES A CONVERTIBLE PREFERRED STOCK, 4% SERIES B REDEEMABLE PREFERRED STOCK, 4% SERIES C CONVERTIBLE PREFERRED STOCK AND 4% SERIES D REDEEMABLE PREFERRED STOCK OF SBA COMMUNICATIONS CORPORATION RESOLVED, that on February 4, 1998, the Board of Directors and shareholders of the Corporation desired that the preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the 4% Series A Preferred Stock, $.01 par value per share, consisting of 8,050,000 shares issued and authorized, the 4% Series B Redeemable Preferred Stock, $.01 par value per share, consisting of 8,050,000 shares authorized, no shares issued, the 4% Series C Convertible Preferred Stock, par value $.01 per share, consisting of up to 4,472,272 shares authorized, no shares issued, and the 4% Series D Redeemable Preferred Stock, par value $.01 per share, consisting of up to 4,472,272 shares authorized, no shares issued, shall be amended and restated as set forth in the Amended and Restated Statement of Designation, Preferences, Rights and Limitations, as follows: A. 4% SERIES A CONVERTIBLE PREFERRED STOCK ------------------------------------------ 1. Dividends. --------- (a) The holders of outstanding shares of Series A Preferred Stock shall be entitled, in preference to the holders of any and all other classes of capital stock of the Corporation (other than the Series B Preferred Stock, the Series C Preferred Stock, and the Series D Preferred Stock, which will rank equally with the Series A Preferred Stock as to dividends), to receive, out of any funds legally available therefore, cumulative dividends on the Series A Preferred Stock in cash, at the rate per annum of four percent (4%) of the Series A Base Liquidation Amount (as defined in Section A.2 below), subject to proration for partial years on the basis of a 365-day year ("Series A Cumulative Preference Dividends"). Such dividends will accumulate commencing as of the date of issuance of the Series A Preferred Stock and will be cumulative, to the extent unpaid, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Accrued but unpaid dividends on the Series A Preferred Stock shall be payable upon conversion of the Series A Preferred Stock into Class A Common Stock and Series B Preferred Stock. Dividends paid in cash in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series A Preferred Stock, including fractions, shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. At any time when shares of Series A Preferred Stock are outstanding and the Series A Cumulative Preference Dividends have not been paid in full in cash: (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation ranking junior to the Series A Preferred Stock; and no shares of capital stock of the Corporation ranking junior to the Series A Preferred Stock shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. All numbers relating to the calculation of dividends pursuant to this Section A.1(a) shall be subject to equitable adjustment in the event of any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Series A Preferred Stock. At the time of the fifth anniversary following the initial sale of the Series A Preferred Stock, the dividend rate on the Series A Preferred Stock shall increase to 8% of the Series A Base Liquidation Amount per annum. On the sixth anniversary date, the dividend rate on the Series A Preferred Stock shall increase to 14% of the Series A Base Liquidation Amount per annum. (b) Notwithstanding the foregoing, while any of the Corporation's Senior Discount Notes Due 2008, or any refinancing thereof (the "Senior Notes") remain outstanding, the Corporation shall not be permitted to pay any cash dividends upon the Series A Preferred Stock (including any such dividends payable in connection with a conversion of the Series A Preferred Stock) and the holders of the Series A Preferred Stock shall not be entitled to receive any such dividends, if and to the extent that such dividends would be prohibited by any term or provision of the indenture governing the Senior Notes issued by the Corporation on or prior to April 1, 1998, as the same is in effect on the date of original issuance of the Senior Notes and as may be amended, supplemented or modified from time to time (the "Indenture"), or any documents relating to any refinancing of the Senior Notes; provided that the covenant under the caption -------- "Restricted Payments" in the Indenture, or any documents relating to any refinancing of the Senior Notes, will not be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" set forth in the Company's final Offering Memorandum, dated February 25, 1998 (the "Referenced Document"), and provided further that no such amendment, supplement or modification of the ---------------- Indenture, or any documents relating to any refinancing of the Senior Notes, shall (i) increase the aggregate principal amount of Senior Notes outstanding, (ii) be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants-- Restricted Payments" in the Referenced Document or (iii) extend the maturity of the Senior Notes. Any change that will prohibit a payment that would otherwise be permitted pursuant to the Referenced Document will be deemed material. 2. Liquidation Preferences. ----------------------- (a) In the event of any distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, including by consolidation, merger, share exchange or sale of all or substantially all of the assets of the Corporation (in each case, an "Event of Dissolution"), each holder of outstanding shares of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, whether such assets are capital, surplus, or earnings, and before any amount shall be paid or distributed to the holders of Class A Common Stock or Class B Common Stock or of any other stock ranking on liquidation junior to the Series A Preferred Stock (other than the Series B Preferred Stock, the Series C Preferred Stock, and the Series D Preferred Stock, which will rank equally with the Series A Preferred Stock in an Event of Dissolution) an amount in cash equal to the greater of (i) the sum of (a) $3.726708075 per share (adjusted appropriately for stock splits, stock 2 dividends, recapitalizations and the like with respect to the Series A Preferred Stock), plus (b) any accumulated but unpaid dividends to which such holder of outstanding shares of Series A Preferred Stock is entitled pursuant to Section A.1 hereof (the sum of (a) and (b) being referred to as the "Series A Base Liquidation Amount") or (ii) the amount per share of Series A Preferred Stock which the holders thereof would have received if all such shares had been converted to Class A Common Stock and Series B Preferred Stock pursuant to Sections A.5, A.6 or A.7 hereof immediately prior to such Event of Dissolution, less any amount previously distributed on such shares in connection with such Event of Dissolution; provided, however, that if, upon any Event of Dissolution, -------- ------- the amounts payable with respect to the Series A Preferred Stock are not paid in full, the holders of the Series A Preferred Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. (b) After full payment shall have been made to the holders of shares of the Series A Preferred Stock (and Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock in accordance with Sections B.2, C.2 and D.2, respectively), any balance of the assets of the Corporation then remaining shall be allocated to the holders of shares of other classes of stock ranking junior to the Series A Preferred Stock, including the holders of Class A Common Stock and Class B Common Stock, in accordance with the respective interests therein. 3. Voting Rights. ------------- (a) Except as otherwise expressly provided in these Amended and Restated Articles of Incorporation, or as required by the Florida Business Corporation Act (the "FBCA"), the holders of shares of Series A Preferred Stock shall vote together with the holders of Class A Common Stock, Class B Common Stock and Series C Preferred Stock as a single voting group on all actions to be taken by the shareholders of the Corporation. Each share of Series A Preferred Stock shall entitle the holder thereof to such number of votes per share on each such action as shall equal (i) the largest number of whole shares of Class A Common Stock into which such shares of Series A Preferred Stock could be converted, pursuant to the provisions of Sections A.5, A.6 or A.7 hereof, multiplied by (ii) ten (10) at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. (b) Except as expressly provided herein or as required by law, as long as 20% or more of the greatest number of shares of Series A Preferred Stock issued remain outstanding, the Corporation shall not, without the approval by vote or written consent of the holders of at least 66% of the outstanding shares of Series A Preferred Stock; (i) authorize or issue any class or series of equity securities having equal or superior rights to the Series A Preferred Stock as to payment upon liquidation, dissolution or a winding up of the Corporation; (ii) enter into any agreement that would restrict the Corporation's ability to perform under any purchase agreement executed by the Corporation in connection with an issuance of Series A Preferred Stock; (iii) amend its Articles of Incorporation or Bylaws in any way which adversely affects the rights and preferences of the holders of Series A Preferred Stock as a class; (iv) sell or lease 20% or more of its assets, except in the ordinary course of business; (v) issue additional securities to employees, officers 3 or directors, except securities issuable upon the exercise of options and warrants outstanding immediately prior to the issuance of any Series A Preferred Stock, or issuable upon the exercise of options granted in the future at fair market value; (vi) issue any securities for a price less than fair market value, other than as may be required by contractual commitments existing prior to the issuance of any Series A Preferred Stock; or (vii) adopt any stock option plan other than the Corporation's 1996 Stock Option Plan or increase the number of shares available for issuance under such plan. (c) The holders of the Series A Preferred Stock and Series C Preferred Stock, voting together as a single class, shall be entitled to elect two-fifths (2/5) of the number of directors on the Board of Directors of the Corporation. 4. Redemption. ---------- (a) Commencing on the fifth anniversary of the initial sale of the Series A Preferred Stock (the "Redemption Commencement Date"), the Corporation shall, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series A Preferred Stock at a price equal to the Series A Base Liquidation Amount at the time of redemption. Such redemption shall occur in two payments, the first to occur on the Redemption Commencement Date and the second to occur one (1) year thereafter (each a "Payment Date"). Each payment (a "Redemption Payment") shall be in an amount equal to one-half of the Series A Base Liquidation Amount calculated as of the date of such payment, with the final Redemption Payment in an amount necessary to fully redeem all remaining outstanding Series A Preferred Stock at a price equal to the Series A Base Liquidation Amount. (b) On each Payment Date, the Corporation shall redeem shares of Series A Preferred Stock ratably from the holders thereof to the extent of the Redemption Payment due on such date, according to the respective amounts which would be payable with respect to the full number of Series A Preferred Stock to be redeemed from them on such date, as if all such Series A Preferred Stock were redeemed in full. The Redemption Payment shall be payable in cash in immediately available funds on the Payment Date. Any outstanding shares of Series A Preferred Stock not redeemed shall remain outstanding. All shares of Series A Preferred Stock which are to be redeemed hereunder shall remain issued and outstanding until the Redemption Price therefor has been indefeasibly paid in full in cash or has been deposited with an independent payment agent pursuant to Section A.4(c). Any Series A Preferred Stock which would otherwise be redeemed on a Payment Date may be converted by the holder thereof to Class A Common Stock and Series B Preferred Stock, in accordance with the provisions hereof, at any time prior to the close of business on the last business day next preceding such Payment Date. (c) On or before the Redemption Commencement Date, the Corporation will give written notice by mail, postage prepaid to the holders of record of Series A Preferred Stock to be redeemed, such notice to be addressed to each such holder at its post office address shown by the records of the Corporation, specifying the place of such redemption; provided, however, that the Corporation's failure to give such notice shall in no way affect its obligation to redeem the shares of Series A Preferred Stock as provided in this Section A.4. If on or before a Payment Date, the funds necessary for satisfaction of the Redemption 4 Payment on such date shall have been deposited with an independent payment agent so as to be, and continue to be, available for such redemption, then, notwithstanding that any certificate for shares of Series A Preferred Stock to be redeemed shall not have been surrendered for cancellation, from and after the close of business on the Payment Date, the shares to be redeemed as of such Payment Date shall no longer be deemed outstanding, any dividends thereof shall cease to accrue, and all rights with respect to such shares shall forthwith cease, except the conversion rights pursuant to Sections A.5 and A.6, and the right of the holders thereof to receive, upon presentation of the certificate representing shares so called for redemption, the Redemption Payment applicable to such Series A Preferred Stock without interest thereon. (d) If the funds of the Corporation legally available for redemption of Series A Preferred Stock on a Payment Date are insufficient to pay the Redemption Payment then due and to redeem the number of outstanding Series A Preferred Stock to be redeemed on such Payment Date, the Corporation shall redeem such shares of Series A Preferred Stock ratably from the holders thereof to the extent of any funds legally available for redemption of such Series A Preferred Stock, according to the respective amounts which would be payable with respect to the full number of Series A Preferred Stock to be redeemed from them on such date, as if all such Series A Preferred Stock were redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series A Preferred Stock, such funds will be used to redeem the balance of such Series A Preferred Stock which would have otherwise been redeemed on such Payment Date, or such portion thereof for which funds are then available, on the basis set forth above. (e) Subsequent to the Redemption Commencement Date, until the full Series A Base Liquidation Amount has been paid in cash for all outstanding shares of Series A Preferred Stock: (A) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation other than shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; and (B) no shares of capital stock of the Corporation (other than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or the Series D Preferred Stock) shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. (f) Upon receipt of the applicable Redemption Payment by certified check or wire transfer, each holder of shares of Series A Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer (or accompanied by duly executed stock powers relating thereto), or shall deliver an Affidavit of Loss with respect to such certificates at the principal executive office or the Corporation or the office of the transfer agent for the Series A Preferred Stock or such office or offices in the continental United States of an agent for redemption as may from time to time be designated by notice to the holders of Series A Preferred Stock and each surrendered certificate shall be canceled and retired. (g) No share or shares of Series A Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled and retired. 5 (h) Notwithstanding anything in this Section A.4 to the contrary, the Corporation shall not be permitted to effect any redemption of the Series A Preferred Stock, and no holder thereof shall have any right to have his or her shares of Series A Preferred Stock redeemed by the Corporation, if at that time such redemption is not permitted by the terms and provisions of the Indenture or any refinancing thereof. 5. Optional Conversion. ------------------- (a) Beginning on and at all times after the effective date of this Amended and Restated Statement of Designation, Preferences, Rights and Limitations, the holder of each single share of the outstanding Series A Preferred Stock of the Corporation shall have the right to surrender the certificate or certificates evidencing such share(s) and receive, in lieu and in conversion thereof for each one (1) share of Series A Preferred Stock of the Corporation so surrendered, a certificate evidencing (i) a number of shares of Class A Common Stock of the Corporation equal to the quotient obtained by dividing $3.726708075 by the then applicable Conversion Price, plus (ii) one (1) share of Series B Preferred Stock of the Corporation. The "Conversion Price" of the Series A Preferred Stock is initially $3.726708075, subject to adjustment as provided in Section A.7(a) hereof. Fractional shares of Series A Preferred Stock may not be surrendered. Except as provided in Section A.1.(b) hereof, accumulated but unpaid dividends on the shares of Series A Preferred Stock converted shall be paid at the time of conversion, and such dividends are not convertible into Class A Common Stock or Series B Preferred Stock. (b) In the event the Corporation shall, at any time that any of the shares of Series A Preferred Stock are outstanding, be consolidated with or merged into any other corporation or corporations, or sell or lease all or substantially all of its property and business as an entirety, then lawful provision shall be made as part of the terms of such consolidation, merger, sale, or lease for the holder of any shares of Series A Preferred Stock thereafter to receive in lieu of such shares of Class A Common Stock and Series B Preferred Stock otherwise issuable to him upon conversion of his shares of Series A Preferred Stock, but at the Conversion Price which would otherwise be in effect at the time of conversion as hereinbefore provided, the same kind and relative amount of securities or assets as may be issuable, distributable, or payable upon such consolidation, merger, sale or lease, with respect to shares of Class A Common Stock of the Corporation. (c) The Corporation need not issue fractional shares in satisfaction of the conversion privilege of the shares of Series A Preferred Stock but, in lieu of fractional shares, the Corporation at its option may make a cash settlement in respect thereof equal to the purchase price of such Series A Preferred Stock, as adjusted in accordance with Section A.7(a), multiplied by such fractional share amount, or may issue scrip certificates exchangeable together with other such scrip certificates aggregating one or more full shares for certificates representing such full share or shares. Until the exchange thereof for certificates representing full shares of Class A Common Stock and Series B Preferred Stock, the holder of any such scrip certificates shall not be entitled to receive dividends thereon, to vote with respect thereto, or to have any other rights by virtue thereof as a shareholder of the Corporation, except such rights, if any, as the Board of Directors may in its discretion determine in the event of dissolution of the Corporation. 6 (d) The right of conversion of any holder of Series A Preferred Stock shall be exercisable only if he or she provides thirty (30) days prior written notice, by certified or registered mail, addressed to the attention of the Secretary of the Corporation at the principal office of the Corporation, of his or her intention to surrender shares of Series A Preferred Stock for conversion. Such conversion notice shall state the number of shares of Series A Preferred Stock to be converted. (e) As promptly as practicable after the surrender for conversion of any Series A Preferred Stock and considering the requirements for and in conformity with all applicable laws, including, but not limited to, the Securities Act of 1933, as amended, the Corporation shall deliver or cause to be delivered at the principal office of the Corporation (or such other places as may be designated by the Corporation) to or upon the written order of the holder of such Series A Preferred Stock, certificates representing the shares of Class A Common Stock and Series B Preferred Stock, issuable upon such conversion, issued in such name or names as such holder may direct. Shares of the Series A Preferred stock shall be deemed to have been converted as of the close of business on the date of the surrender of the Series A Preferred Stock for conversion and the rights of the holders of such Series A Preferred Stock shall cease at such time, and the person or persons in whose name or names the certificates for such surrender are to be issued shall be treated for all purposes as having become the record holder or holders of such Class A Common Stock and Series B Preferred Stock at such time; provided, however, that if the surrender is on any date when the stock transfer books of the Corporation shall be closed, the person or persons in whose name or names the certificates for such shares are to be issued shall be treated as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open. (f) The issuance of certificates for shares of Class A Common Stock and Series B Preferred Stock upon conversion of the Series A Preferred Stock shall be made without charge for any tax in respect of such issuance. However, if any certificate is to be issued in a name other than that of the holder of record of the Series A Preferred Stock so converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance, or shall establish to the satisfaction of the Corporation that such tax has been paid or is not due and payable. 6. Automatic Conversion. -------------------- (a) Each outstanding share of Series A Preferred Stock shall automatically be converted into (i) a number of shares of Class A Common Stock equal to the quotient obtained by dividing $3.726708075 by the then applicable Conversion Price, plus (ii) one (1) share of Series B Preferred Stock, immediately upon the first to occur of either of the following events (each, an "Automatic Conversion Event"): (A) the authorization of such conversion, including without limitation in an action by written consent in accordance with Section 607.0704, Florida Statutes, as amended from time to time, by the holders of not less than two- thirds (66%) of all of the then issued and outstanding shares of Series A Preferred Stock, or (B) the consummation by the Corporation of a public offering of its securities which offering shall (x) raise total gross proceeds to the Corporation of greater than or equal to $20,000,000 and (y) have a per share offering price (I) if such offering is consummated on or before June 30, 1998, greater than or equal 7 to 150% of the then applicable Conversion Price, or (II) if such offering is consummated after June 30, 1998, greater than or equal to 200% of the then applicable Conversion Price (a "Qualified Public Offering"). (b) On or after the date of an occurrence of an Automatic Conversion Event, and in any event within ten (10) days after receipt of notice, by mail, postage prepaid from the Corporation of the occurrence of such event, each holder of record of shares of Series A Preferred Stock shall surrender such holder's certificates evidencing such shares at the principal office of the Corporation or at such other place as the Corporation shall designate, and shall thereupon be entitled to receive certificates evidencing the number of shares of Class A Common Stock and Series B Preferred Stock into which such shares of Series A Preferred Stock are converted. Notwithstanding any other provisions herein to the contrary, on the date of the occurrence of an Automatic Conversion Event, each holder of record of the shares of Series A Preferred Stock shall be deemed to be the holder of record of the Class A Common Stock and Series B Preferred Stock issuable upon such conversion and no shares of Series A Preferred Stock shall be considered outstanding notwithstanding that the certificates representing such shares of Series A Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any holder of record of shares of Series A Preferred Stock, or that the certificates evidencing such shares of Class A Common Stock and Series B Preferred Stock shall not then be actually delivered to such holder; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Class A Common Stock and Series B Preferred Stock issuable upon such conversion unless certificates evidencing such shares of the Series A Preferred Stock being converted are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. 7. Provisions Relating to Automatic and Optional Conversions. --------------------------------------------------------- (a) Adjustments to Conversion Price. ------------------------------- (i) Subdivision, Combination or Reclassification of Class A Common -------------------------------------------------------------- Stock. ----- (A) If the Corporation shall, while there are any shares of Series A Preferred Stock issued and outstanding, effect a subdivision of its shares of Common Stock into a greater number of such shares or a combination of such shares into a lesser number of shares, whether by forward or reverse stock split, stock dividend (payable in shares of Common Stock) or otherwise, the Conversion Price shall be proportionally increased or reduced, as the case may be, to reflect the effectuation of such subdivision or combination. (B) If the Corporation shall, while there are any shares of Series A Preferred Stock issued and outstanding, effect a capital reorganization or 8 reclassification of the Common Stock or any distribution by the Corporation to holders of Class A Common Stock, whether in the form of stock, debt securities, or other assets or property of the Corporation, (each, an "Adjustment Event"), then, as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Series A Preferred Stock shall thereafter have the right to acquire and receive upon conversion of the Series A Preferred Stock such shares of stock, securities, assets or property as would have been issuable or payable as a result of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received as if such Series A Preferred Stock were converted immediately prior to the consummation of such Adjustment Event. (C) In the event that an Adjustment Event shall occur by means of a merger, consolidation, combination, share exchange, or sale or lease of all or substantially all the assets of the Corporation, then as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Series A Preferred Stock shall thereafter have the rights to acquire and receive upon conversion of their shares of Series A Preferred Stock, such shares of stock, securities or assets as would have been issuable or payable as part of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received upon conversion of the Series A Preferred Stock (in all instances) immediately before such Adjustment Event, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Series A Preferred Stock such that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price and of the number of shares of Class A Common Stock acquirable and receivable upon the conversion of the Series A Preferred Stock) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of the Series A Preferred Stock (including an immediate adjustment, by reason of such Adjustment Event of the Series A Preferred Stock to the value for the Class A Common Stock reflected by the terms of such Adjustment Event if the value so reflected is less than the Conversion Price in effect immediately prior to such Adjustment Event). In the event of an Adjustment Event as a result of which a number of shares of Common Stock of the surviving or purchasing corporation is greater or lesser than the number of shares of Common Stock of the Corporation outstanding immediately prior to such Adjustment Event, then the Conversion Price in effect immediately prior to such Adjustment Event shall be adjusted in the same manner as though there were a subdivision or combination of the 9 outstanding shares of Class A Common Stock of the Corporation. The Corporation will not effect any such Adjustment Event unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the purchase or lease of such assets shall assume by written instrument mailed or delivered to the holders of the Series A Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled. (ii) Issuance of Common Stock. Except as provided in Sections ------------------------ A.7(a)(iii) and A.7(a)(iv), if and whenever the Corporation shall issue or sell, or shall in accordance with subparagraphs (A) through (F), inclusive, of Section A.7(a)(iii) be deemed to have issued or sold, any shares of its Class A Common Stock, or options, warrants or other rights to purchase Class A Common Stock or securities convertible into Class A Common Stock, for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issuance or sale, then forthwith upon such issuance or sale, the Conversion Price shall, subject to subparagraphs (A) to (F) of Section A.7(a)(iii), be reduced to: (A) For issuances or sales on or before 18 months after the date of the first issuance of Series A Preferred Stock, the Conversion Price shall equal such issuance or sale price. (B) For issuances or sales after 18 months from the date of the first issuance of Series A Preferred Stock, the Conversion Price shall be determined by multiplying the Conversion Price in effect immediately prior to such issuance or sale by a fraction; the numerator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock, plus (2) the number of shares of Class A Common Stock which the net aggregate consideration, if any, received by the Corporation for the total number of such additional shares of Class A Common Stock so issued would purchase at the Conversion Price in effect immediately prior to such issuance, and; the denominator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock plus (2) the number of such additional shares of Class A Common Stock so issued. 10 (iii) For purposes of determining the adjusted Conversion Price under Section A.7(a)(ii)(A) and (B), the following subsections (A) to (F), inclusive, shall be applicable: (A) Issuance of Rights or Options. Except as provided Section ------------------------------ A.7(a)(iv), in case at any time the Corporation shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Class A Common Stock or any stock or other securities convertible into or exchangeable for Class A Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such Option, then the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued by the Corporation for such price per share. No adjustment of the Conversion Price shall be made upon the actual issuance of such Convertible Securities except as otherwise provided in subsection (C) below. (B) Issuance of Convertible Securities. In case the ---------------------------------- Corporation shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Corporation as consideration for the issuance or sale of 11 such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of such issuance or sale, then the total maximum number of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share, provided that, except as otherwise specified in subsection (C) below, no adjustment of the Conversion Price shall be made upon the actual issue of such Class A Common Stock upon exercise of any Options for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this Section A.7(a) and no further adjustment of the Conversion Price shall be made by reason of such issuance or sale. (C) Change in Option Price or Conversion Rate. If the ----------------------------------------- purchase price provided for in any Option referred to in subparagraph (A), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (A) or (B), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall change at any time (other than under or by reason of provisions designed to protect against dilution of the type set forth in Section A.7(a)), the Conversion Price in effect at the time of such change shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price provided for in any Option referred to in subsection (A), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall be reduced at any time under or by reason or provisions with respect thereto designed to protect against dilution, then in case of the delivery of Class A Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Conversion Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Class A Common Stock and had adjustments been made upon the issuance of the shares of Class A Common 12 Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is hereby reduced. (D) Treatment of Expired Options and Unexercised Convertible -------------------------------------------------------- Securities. On the expiration of any Option or the ---------- termination of any right to convert or exchange any Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. (E) Integral Transaction. In case any Options shall be issued -------------------- in connection with the issue or sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration. (F) Consideration for Stock. In case any shares of Class A ----------------------- Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be attributable to such Class A Common Stock, Options, or Convertible Securities, as the case may be. In the event of any consolidation or merger of the Corporation in which the Corporation is not the surviving corporation, or, in the event of any sale of all or substantially all of the assets of the Corporation for stock or other securities of any corporation, this subsection shall be applied in the same manner as if the Corporation had been the surviving corporation in such consolidation or merger, or the purchasing corporation in such sale of assets; and for purposes of this sentence the Corporation shall be deemed: (1) to have issued and sold a number of shares of its Class A Common Stock, Options, or Convertible Securities equal to the sum of (x) the number of shares of the Corporation's Class A Common Stock 13 actually outstanding, (y) the number of shares of the Corporation's Class A Common Stock acquirable upon the exercise of all outstanding Options, and (z) the number of shares of the Corporation's Class A Common Stock acquirable upon conversion of all outstanding Convertible Securities, which those persons who were security holders of the surviving corporation immediately before the consummation of the transaction would have received in exchange for the common stock, options, and convertible securities of the surviving corporation held by them immediately after consummation of the transaction, based on the exchange ratio on which the transaction was consummated (i.e., the inverse of the ratio pursuant to which the Corporation's Class A Common Stock were exchangeable into the surviving corporation's securities) and assuming that Corporation had been the surviving corporation; and (2) to have received in exchange therefor a consideration equal to the fair market value (immediately before the consummation of such transaction) of the assets (less the liabilities) of the surviving corporation; and if the application of this sentence results in adjustment of the Conversion Price and number of Conversion Shares issuable upon conversion of the Series A Preferred Stock, then the determination of the Conversion Price and the number of Conversion Shares issuable upon conversion of the Series A Preferred Stock immediately prior to such merger, consolidation, or sale shall be made after giving effect to the adjustment set forth herein. If the stock of the surviving or purchasing corporation in such a transaction is publicly traded, the market value of such corporation's outstanding stock immediately before consummation of the exchange shall be presumptive evidence of the fair market value of its assets (less liabilities). (iv) Notwithstanding anything in Section A.7 to the contrary, no adjustment shall be made to the Conversion Price upon (w) the issuance of any shares of Class A Common Stock, options or Convertible Securities in connection with an acquisition by the Corporation or a merger in which the Corporation is the surviving corporation, calculated on a fully diluted basis and further provided such issuance is to the sellers of the acquired entity or assets or security of the merged entity and is made for fair value and the Board of Directors of the Corporation determines that the acquisition or merger is in the best interests of the Corporation and its stockholders; (x) the issuance of any shares of Class A Common Stock upon conversion of any shares of Series A Preferred Stock; (y) the issuance of Class A Common Stock upon 14 the exercise of any options, warrants or other rights to purchase Class A Common Stock outstanding on the date of the first issuance of Series A Preferred Stock, including the warrant to be issued to Alex. Brown & Sons Incorporated in connection with the initial sale of Series A Preferred Stock or (z) the future issuance of Class A Common Stock or warrants, options or rights to purchase such Class A Common Stock to employees, consultants, directors or vendors directly or pursuant to plans approved by the Board of Directors so long as such options are granted at fair market value. (b) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock pursuant to Sections A.5 and A.6 hereof, such number of its shares of Class A Common Stock and Series B Preferred Stock as shall from time to time be sufficient to effect such conversion of all outstanding shares of the Series A Preferred Stock; and, if at any time the number of authorized but unissued shares of Class A Common Stock or Series B Preferred Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of Series A Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel be necessary to increase its authorized but unissued shares of Class A Common Stock or Series B Preferred Stock to such number of shares as shall be sufficient for such purposes. 8. Preemptive Rights. ----------------- (a) At any time after the first closing of the sale of the Series A Preferred Stock but prior to the filing of effective registration statement relating to a Qualified Public Offering, or from time to time prior thereto, if the Corporation shall issue, grant or sell any of its equity securities, the Corporation shall, in each such case, offer a pro rata share of any such issuance, grant or sale to the holders of Series A Preferred Stock and Series C Preferred Stock. If any holders of Series A Preferred Stock or Series C Preferred Stock determine not to accept their pro rata share, then the other Series A Preferred Stock holders and Series C Preferred Stockholders shall be given the right to accept such share on a pro rata basis. (b) Notwithstanding the foregoing, the preemptive rights set forth in Section A.8(a) shall not apply in the event of any issue, grant or sale in connection with (i) a merger, consolidation, combination, share exchange or sale or lease of all or substantially all assets of the Corporation or another corporation; (ii) conversion of Series A Preferred Stock pursuant to Sections A.5 or A.6 hereof; (iii) the exercise of options, warrants or other rights to purchase stock outstanding prior to the issuance of any Series A Preferred Stock; (iv) any stock option or other employee benefit plans of the Corporation and (v) the grant or exercise of a warrant to purchase Class A Common Stock issued to Alex. Brown & Sons Incorporated in connection with the initial sale of Series A Preferred Stock. In any event, all preemptive rights shall expire and be of no further force and effect upon the effectiveness of a registration statement relating to a Qualified Public Offering. 9. No Impairment of Rights. ----------------------- 15 Other than pursuant to the provisions of Section E hereunder, the Corporation will not, by amendment of the Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series A Preferred Stock set forth herein, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Series A Preferred Stock against dilution or other impairment. Without limiting the generality of the foregoing, other than pursuant to the provisions of Section E hereunder, the Corporation (i) will not increase the par value of any shares of stock receivable on the conversion of the Series A Preferred Stock above the amount payable therefore on such conversion, and (ii) will take all such action as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and non-assessable shares of stock on the conversion of all Series A Preferred Stock under the terms hereof from time to time outstanding. B. 4% SERIES B REDEEMABLE PREFERRED STOCK -------------------------------------- 1. Dividends. --------- (a) The holders of outstanding shares of Series B Preferred Stock shall be entitled, in preference to the holders of any and all other classes of capital stock of the Corporation (other than the Series A Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, which will rank equally with the Series B Preferred Stock as to dividends), to receive, out of any funds legally available therefore, cumulative dividends on the Series B Preferred Stock in cash, at the rate per annum of four percent (4%) of the Series B Base Liquidation Amount (as defined in Section B.2 below), subject to proration for partial years on the basis of a 365-day year ("Series B Cumulative Preference Dividends"). Such dividends will accumulate commencing as of the date of issuance of the Series B Preferred Stock and will be cumulative, to the extent unpaid, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Series B Cumulative Preference Dividends shall become due and payable with respect to any share of Series B Preferred Stock as provided in Section B.2 and Section B.4. Dividends paid in cash in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series B Preferred Stock, including fractions, shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. At any time when shares of Series B Preferred Stock are outstanding and the Series B Cumulative Preference Dividends have not been paid in full in cash: (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation ranking junior to the Series B Preferred Stock; and no shares of capital stock of the Corporation ranking junior to the Series B Preferred Stock shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. All numbers relating to the calculation of dividends pursuant to this Section B.1 shall be subject to equitable adjustment in the event of any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Series B Preferred Stock. At the time of the fifth anniversary following the initial sale of the Series A Preferred Stock, the dividend on the Series B Preferred Stock shall increase to 8% of the Series B Base Liquidation Amount per annum. 16 At the time of the sixth anniversary following the initial sale of the Series A Preferred Stock, the dividend rate on the Series B Preferred Stock shall increase to 14% of the Series B Base Liquidation Amount per annum. (b) Notwithstanding the foregoing, while any of the Senior Notes remain outstanding, the Corporation shall not be permitted to pay any cash dividends upon the Series B Preferred Stock (including any such dividends payable in connection with a conversion of the Series B Preferred Stock) and the holders of the Series B Preferred Stock shall not be entitled to receive any such dividends, if and to the extent that such dividends would be prohibited by any term or provision of the Indenture or any documents relating to any refinancing of the Senior Notes; provided that the covenant under the caption "Restricted -------- Payments" in the Indenture, or any documents relating to any refinancing of the Senior Notes, will not be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document, and provided further ---------------- that no such amendment, supplement or modification of the Indenture, or any documents relating to any refinancing of the Senior Notes, shall (i) increase the aggregate principal amount of Senior Notes outstanding, (ii) be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document or (iii) extend the maturity of the Senior Notes. Any change that will prohibit a payment that would otherwise be permitted pursuant to the Referenced Document will be deemed material. 2. Liquidation Preferences. ----------------------- (a) Upon any Event of Dissolution, each holder of an outstanding share of Series B Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, whether such assets are capital, surplus, or earnings as follows, and before any amount shall be paid or distributed to the holders of Class A Common Stock or Class B Common Stock or of any other stock ranking on liquidation junior to the Series B Preferred Stock (other than the Series A Preferred Stock, the Series C Preferred Stock, and the Series D Preferred Stock, which will rank equally with the Series B Preferred Stock in an Event of Dissolution) an amount in cash equal to the sum of (a) $3.726708075 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock), plus (b) any accumulated but unpaid dividends to which such holder of outstanding shares of Series B Preferred Stock is entitled pursuant to Section B.1 hereof (the sum of (a) and (b) being referred to as the "Series B Base Liquidation Amount"); provided, however, that if, upon any Event of Dissolution, -------- ------- the amounts payable with respect to the Series B Preferred Stock are not paid in full, the holders of the Series B Preferred Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. (b) After full payment shall have been made to the holders of shares of the Series B Preferred Stock (and Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock in accordance with Sections A.2, C.2 and D.2), any balance of the assets of the Corporation then remaining shall be allocated to the holders of shares of other classes of stock ranking junior to the Series B Preferred Stock, 17 including the holders of Class A Common Stock and Class B Common Stock, in accordance with the respective interests therein. 3. Voting Rights. ------------- The holders of Series B Preferred Stock shall not be entitled to vote on any matters except those contemplated by Section E and to the extent otherwise required under the FBCA. 4. Redemption. ---------- (a) The Corporation shall redeem the Series B Preferred Stock as follows: (i) The Corporation shall, upon consummation of a Qualified Public Offering, to the extent it may do so under applicable law and to the extent it may do so under Section B.4(a)(ii), redeem all of the outstanding shares of Series B Preferred Stock at a price equal to the Series B Base Liquidation Amount as of the date of such consummation. For redemptions required under this Section B.4(a)(i), the "Payment Date" shall be the date of consummation of a Qualified Public Offering, and the "Redemption Payment" shall be the aggregate Series B Base Liquidation Amount. (ii) The managing underwriter of the Qualified Public Offering shall have the right to limit the redemption of all or any part of the Series B Preferred Stock then outstanding. In such event, the part of the Series B Preferred Stock not redeemed shall automatically convert into a three year obligation (the "Obligation") payable to the holder thereof in the principal amount of the Series B Base Liquidation Amount. Principal and interest on each Obligation shall be payable quarterly, with interest at the rate of 2% over the Prime Rate during the first year, 4% over the Prime Rate during the second year, and 6% over the Prime Rate during the third year after issuance. "Prime Rate" shall mean the prime rate reported from time to time in The Wall Street Journal, initially on the date the ----------------------- Series B Preferred Stock converts into the Obligation, and each anniversary thereafter. In the event that any quarterly payment on the Obligations is not paid when due, the interest rate applicable over the remaining life of the Obligations shall be increased to 6% over the Prime Rate. (iii) Commencing on the fifth anniversary of the initial sale of the Series A Preferred Stock, the Corporation shall, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series B Preferred Stock at a price equal to the Series B Base Liquidation Amount at the time of redemption. 18 (b) Any redemption under Section B.4(a)(iii) shall occur in two payments, the first to occur on the Redemption Commencement Date and the second to occur one (1) year thereafter (each a "Payment Date"). Each payment (a "Redemption Payment") shall be in an amount equal to one-half of the Series B Base Liquidation Amount calculated as of the date of such payment, with the final Redemption Payment in an amount necessary to fully redeem all remaining outstanding Series B Preferred Stock at a price equal to the Series B Base Liquidation Amount. (c) On each Payment Date, the Corporation shall redeem shares of Series B Preferred Stock ratably from the holders thereof to the extent of the Redemption Payment due on such date, according to the respective amounts which would be payable with respect to the full number of Series B Preferred Stock to be redeemed from them on such date, as if all such Series B Preferred Stock were redeemed in full. The Redemption Payment shall be payable in cash in immediately available funds on the Payment Date. Any outstanding shares of Series B Preferred Stock not redeemed shall remain outstanding. All shares of Series B Preferred Stock which are to be redeemed hereunder shall remain issued and outstanding until the Redemption Price therefor has been indefeasibly paid in full in cash or has been deposited with an independent payment agent pursuant to Section B.4(d). (d) On or before the Redemption Commencement Date, the Corporation will give written notice by mail, postage prepaid to the holders of record of Series B Preferred Stock to be redeemed under Section B.4(a), such notice to be addressed to each such holder at its post office address shown by the records of the Corporation, specifying the place of such redemption; provided, however, that the Corporation's failure to give such notice shall in no way affect its obligation to redeem the shares of Series B Preferred Stock as provided in this B.4. If on or before a Payment Date, the funds necessary for satisfaction of the Redemption Payment under Section B.4(a) on such date shall have been deposited with an independent payment agent so as to be, and continue to be, available for such redemption, then, notwithstanding that any certificate for shares of Series B Preferred Stock to be redeemed shall not have been surrendered for cancellation, from and after the close of business on the Payment Date, the shares to be redeemed as of such Payment Date shall no longer be deemed outstanding, any dividends thereof shall cease to accrue, and all rights with respect to such shares shall forthwith cease, except the right of the holders thereof to receive, upon presentation of the certificate representing shares so called for redemption, the Redemption Payment applicable to such Series B Preferred Stock without interest thereon. (e) If the funds of the Corporation legally available for redemption of Series B Preferred Stock on the Payment Date are insufficient to pay the Redemption Payment then due and to redeem the number of outstanding Series B Preferred Stock to be redeemed on such Payment Date, the Corporation shall redeem such shares of Series B Preferred Stock ratably from the holders thereof to the extent of any funds legally available for redemption of such Series B Preferred Stock, according to the respective amounts which would be payable with respect to the full number of Series B Preferred Stock to be redeemed from them on such date, as if all such Series B Preferred Stock were redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series B Preferred Stock, such funds will be used to redeem the balance of such Series B Preferred Stock, which would have 19 otherwise been redeemed on such Payment Date, or such portion thereof for which funds are then available, on the basis set forth above. (f) Subsequent to the Redemption Commencement Date, until the full Series B Base Liquidation Amount has been paid in cash for all outstanding shares of Series B Preferred Stock: (A) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation other than shares of Series A Preferred Stock, Series B Preferred Stock Series C Preferred Stock or Series D Preferred Stock; and (B) no shares of capital stock of the Corporation (other than the Series A Preferred Stock or the Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock) shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. (g) Upon receipt of the applicable Redemption Payment by certified check or wire transfer, each holder of shares of Series B Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer (or accompanied by duly executed stock powers relating thereto), or shall deliver an Affidavit of Loss with respect to such certificates at the principal executive office or the Corporation or the office of the transfer agent for the Series B Preferred Stock or such office or offices in the continental United States of an agent for redemption as may from time to time be designated by notice to the holders of Series B Preferred Stock and each surrendered certificate shall be canceled and retired. (h) No share or shares of Series B Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled and retired. (i) Notwithstanding anything in this Section B.4. to the contrary, the Corporation shall not be permitted to effect any redemption of the Series B Preferred Stock, and no holder thereof shall have any right to have his or her shares of Series B Preferred Stock redeemed by the Corporation, if at that time such redemption is not permitted by the terms and provisions of the Indenture or any documents relating to any refinancing of the Senior Notes. Any change that will prohibit a payment that would otherwise be permitted pursuant to the Referenced Document will be deemed material. 5. No Impairment of Rights. ----------------------- Other than pursuant to the provisions of Section E hereunder, the Corporation will not, by amendment of the Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series B Preferred Stock set forth herein, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Series B Preferred Stock against dilution or other impairment. 20 C. 4% SERIES C CONVERTIBLE PREFERRED STOCK ------------------------------------------- 1. Dividends. --------- (a) The holders of outstanding shares of Series C Preferred Stock shall be entitled, in preference to the holders of any and all other classes of capital stock of the Corporation (other than the Series A Preferred Stock, the Series B Preferred Stock, and the Series D Preferred Stock, which will rank equally with the Series C Preferred Stock as to dividends), to receive, out of any funds legally available therefore, cumulative dividends on the Series C Preferred Stock in cash, at the rate per annum of four percent (4%) of the Series C Base Liquidation Amount (as defined in Section C.2 below), subject to proration for partial years on the basis of a 365-day year ("Series C Cumulative Preference Dividends"). Such dividends will accumulate commencing as of the date of issuance of the Series C Preferred Stock and will be cumulative, to the extent unpaid, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Accrued but unpaid dividends on the Series C Preferred Stock shall be payable upon conversion of the Series C Preferred Stock into Class A Common Stock and Series D Preferred Stock. Dividends paid in cash in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series C Preferred Stock, including fractions, shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. At any time when shares of Series C Preferred Stock are outstanding and the Series C Cumulative Preference Dividends have not been paid in full in cash: (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation ranking junior to the Series C Preferred Stock; and no shares of capital stock of the Corporation ranking junior to the Series C Preferred Stock shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. All numbers relating to the calculation of dividends pursuant to this Section C.1 shall be subject to equitable adjustment in the event of any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Series C Preferred Stock. At the time of the fifth anniversary following the initial sale of the Series A Preferred Stock, the dividend rate on the Series C Preferred Stock shall increase to 8% of the Series C Base Liquidation Amount per annum. On the sixth anniversary date, the dividend rate on the Series C Preferred Stock shall increase to 14% of the Series C Base Liquidation Amount per annum. (b) Notwithstanding the foregoing, while any of the Senior Notes remain outstanding, the Corporation shall not be permitted to pay any cash dividends upon the Series C Preferred Stock (including any such dividends payable in connection with a conversion of the Series C Preferred Stock) and the holders of the Series C Preferred Stock shall not be entitled to receive any such dividends, if and to the extent that such dividends would be prohibited by any term or provision of the Indenture or any documents relating to any refinancing of the Senior Notes; provided that the covenant under the caption "Restricted -------- Payments" in the Indenture, or any documents relating to any refinancing of the Senior Notes, will not be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document, and provided further ---------------- that no such amendment, supplement or modification of the Indenture, or any documents relating to any refinancing of the Senior Notes, shall (i) increase the aggregate principal amount of Senior Notes outstanding, (ii) be materially more restrictive with regard to payments than the restrictions set forth in the 21 covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document or (iii) extend the maturity of the Senior Notes. Any change that will prohibit a payment that would otherwise be permitted pursuant to the Referenced Document will be deemed material. 2. Liquidation Preferences. ----------------------- (a) In the event of any distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, including by consolidation, merger, share exchange or sale of all or substantially all of the assets of the Corporation (in each case, an "Event of Dissolution"), each holder of outstanding shares of Series C Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, whether such assets are capital, surplus, or earnings, and before any amount shall be paid or distributed to the holders of Class A Common Stock or Class B Common Stock or of any other stock ranking on liquidation junior to the Series C Preferred Stock (other than the Series A Preferred Stock, the Series B Preferred Stock, and the Series D Preferred Stock, which will rank equally with the Series C Preferred Stock in an Event of Dissolution) an amount in cash equal to the greater of (i) the sum of (a) $4.472 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like with respect to the Series C Preferred Stock), plus (b) any accumulated but unpaid dividends to which such holder of outstanding shares of Series C Preferred Stock is entitled pursuant to Section C.1 hereof (the sum of (a) and (b) being referred to as the "Series C Base Liquidation Amount") or (ii) the amount per share of Series C Preferred Stock which the holders thereof would have received if all such shares had been converted to Class A Common Stock and Series D Preferred Stock pursuant to Sections C.5, C.6 or C.7 hereof immediately prior to such Event of Dissolution, less any amount previously distributed on such shares in connection with such Event of Dissolution; provided, however, -------- ------- that if, upon any Event of Dissolution, the amounts payable with respect to the Series C Preferred Stock are not paid in full, the holders of the Series C Preferred Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. (b) After full payment shall have been made to the holders of shares of the Series C Preferred Stock (and Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock in accordance with Sections A.2, B.2 and D.2, respectively), any balance of the assets of the Corporation then remaining shall be allocated to the holders of shares of other classes of stock ranking junior to the Series C Preferred Stock, including the holders of Class A Common Stock and Class B Common Stock, in accordance with the respective interests therein. 22 3. Voting Rights. ------------- (a) Except as otherwise expressly provided in these Amended and Restated Articles of Incorporation, or as required by the FBCA, the holders of shares of Series C Preferred Stock shall vote together with the holders of Class A Common Stock, Class B Common Stock and Series A Preferred Stock as a single voting group on all actions to be taken by the shareholders of the Corporation. Each share of Series C Preferred Stock shall entitle the holder thereof to such number of votes per share on each such action as shall equal (i) the largest number of whole shares of Class A Common Stock into which such shares of Series C Preferred Stock could be converted, pursuant to the provisions of Sections C.5, C.6 or C.7 hereof, multiplied by (ii) ten (10) at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. (b) Except as expressly provided herein or as required by law, as long as 20% or more of the greatest number of shares of Series C Preferred Stock issued remain outstanding, the Corporation shall not, without the approval by vote or written consent of the holders of at least 66% of the outstanding shares of Series C Preferred Stock; (i) authorize or issue any class or series of equity securities having equal or superior rights to the Series C Preferred Stock as to payment upon liquidation, dissolution or a winding up of the Corporation; (ii) enter into any agreement that would restrict the Corporation's ability to perform under any purchase agreement executed by the Corporation in connection with an issuance of Series C Preferred Stock; (iii) amend its Articles of Incorporation or Bylaws in any way which adversely affects the rights and preferences of the holders of Series C Preferred Stock as a class; (iv) sell or lease 20% or more of its assets, except in the ordinary course of business; (v) issue additional securities to employees, officers or directors, except securities issuable upon the exercise of options and warrants outstanding immediately prior to the issuance of any Series C Preferred Stock, or issuable upon the exercise of options granted in the future at fair market value; (vi) issue any securities for a price less than fair market value, other than as may be required by contractual commitments existing prior to the issuance of any Series C Preferred Stock; or (vii) adopt any stock option plan other than the Corporation's 1996 Stock Option Plan or increase the number of shares available for issuance under such plan. (c) The holders of the Series C Preferred Stock and Series A Preferred Stock, voting together as a single class, shall be entitled to elect two-fifths (2/5) of the number of directors on the Board of Directors of the Corporation. 4. Redemption. ---------- (a) Commencing on the fifth anniversary of the initial sale of the Series A Preferred Stock (the "Redemption Commencement Date"), the Corporation shall, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series C Preferred Stock at a price equal to the Series C Base Liquidation Amount at the time of redemption. Such redemption shall occur in two payments, the first to occur on the Redemption Commencement Date and the second to occur one (1) year thereafter (each a "Payment Date"). Each payment (a "Redemption Payment") shall be in an amount equal to one-half of the Series C Base Liquidation Amount calculated as of the date of such payment, with the final Redemption 23 Payment in an amount necessary to fully redeem all remaining outstanding Series C Preferred Stock at a price equal to the Series C Base Liquidation Amount. (b) On each Payment Date, the Corporation shall redeem shares of Series C Preferred Stock ratably from the holders thereof to the extent of the Redemption Payment due on such date, according to the respective amounts which would be payable with respect to the full number of Series C Preferred Stock to be redeemed from them on such date, as if all such Series C Preferred Stock were redeemed in full. The Redemption Payment shall be payable in cash in immediately available funds on the Payment Date. Any outstanding shares of Series C Preferred Stock not redeemed shall remain outstanding. All shares of Series C Preferred Stock which are to be redeemed hereunder shall remain issued and outstanding until the Redemption Price therefor has been indefeasibly paid in full in cash or has been deposited with an independent payment agent pursuant to Section C.4(c). Any Series C Preferred Stock which would otherwise be redeemed on a Payment Date may be converted by the holder thereof to Class A Common Stock and Series D Preferred Stock, in accordance with the provisions hereof, at any time prior to the close of business on the last business day next preceding such Payment Date. (c) On or before the Redemption Commencement Date, the Corporation will give written notice by mail, postage prepaid to the holders of record of Series A Preferred Stock to be redeemed, such notice to be addressed to each such holder at its post office address shown by the records of the Corporation, specifying the place of such redemption; provided, however, that the Corporation's failure to give such notice shall in no way affect its obligation to redeem the shares of Series C Preferred Stock as provided in this Section C.4. If on or before a Payment Date, the funds necessary for satisfaction of the Redemption Payment on such date shall have been deposited with an independent payment agent so as to be, and continue to be, available for such redemption, then, notwithstanding that any certificate for shares of Series C Preferred Stock to be redeemed shall not have been surrendered for cancellation, from and after the close of business on the Payment Date, the shares to be redeemed as of such Payment Date shall no longer be deemed outstanding, any dividends thereof shall cease to accrue, and all rights with respect to such shares shall forthwith cease, except the conversion rights pursuant to Sections C.5 and C.6, and the right of the holders thereof to receive, upon presentation of the certificate representing shares so called for redemption, the Redemption Payment applicable to such Series C Preferred Stock without interest thereon. (d) If the funds of the Corporation legally available for redemption of Series C Preferred Stock on a Payment Date are insufficient to pay the Redemption Payment then due and to redeem the number of outstanding Series C Preferred Stock to be redeemed on such Payment Date, the Corporation shall redeem such shares of Series C Preferred Stock ratably from the holders thereof to the extent of any funds legally available for redemption of such Series C Preferred Stock, according to the respective amounts which would be payable with respect to the full number of Series C Preferred Stock to be redeemed from them on such date, as if all such Series C Preferred Stock were redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series C Preferred Stock, such funds will be used to redeem the balance of such Series C Preferred Stock which would have otherwise been redeemed on such Payment Date, or such portion thereof for which funds are then available, on the basis set forth above. 24 (e) Subsequent to the Redemption Commencement Date, until the full Series C Base Liquidation Amount has been paid in cash for all outstanding shares of Series C Preferred Stock: (A) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation other than shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock; and (B) no shares of capital stock of the Corporation (other than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or the Series D Preferred Stock) shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. (f) Upon receipt of the applicable Redemption Payment by certified check or wire transfer, each holder of shares of Series C Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer (or accompanied by duly executed stock powers relating thereto), or shall deliver an Affidavit of Loss with respect to such certificates at the principal executive office or the Corporation or the office of the transfer agent for the Series C Preferred Stock or such office or offices in the continental United States of an agent for redemption as may from time to time be designated by notice to the holders of Series C Preferred Stock and each surrendered certificate shall be canceled and retired. (g) No share or shares of Series C Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled and retired. (h) Notwithstanding anything in this Section C.4. to the contrary, the Corporation shall not be permitted to effect any redemption of the Series C Preferred Stock, and no holder thereof shall have any right to have his or her shares of Series C Preferred Stock redeemed by the Corporation, if at that time such redemption is not permitted by the terms and provisions of the Indenture or any refinancing thereof. 5. Optional Conversion. ------------------- (a) Beginning on and at all times after the effective date of this Amended and Restated Statement of Designation, Preferences, Rights and Limitations, the holder of each single share of the outstanding Series C Preferred Stock of the Corporation shall have the right to surrender the certificate or certificates evidencing such share(s) and receive, in lieu and in conversion thereof for each one (1) share of Series C Preferred Stock of the Corporation so surrendered, a certificate evidencing (i) a number of shares of Class A Common Stock of the Corporation equal to the quotient obtained by dividing $4.472 by the then applicable Conversion Price, plus (ii) one (1) share of Series D Preferred Stock of the Corporation. The "Conversion Price" of the Series C Preferred Stock is initially $4.472, subject to adjustment as provided in Section C.7(a) hereof. Fractional shares of Series C Preferred Stock may not be surrendered. Except as provided in Section C.1.(b) hereof, accumulated but unpaid dividends on the shares of Series C Preferred Stock converted shall be paid at the time of conversion, and such dividends are not convertible into Class A Common Stock or Series D Preferred Stock. (b) In the event the Corporation shall, at any time that any of the shares of Series C Preferred Stock are outstanding, be consolidated with or merged into any other corporation or corporations, or sell 25 or lease all or substantially all of its property and business as an entirety, then lawful provision shall be made as part of the terms of such consolidation, merger, sale, or lease for the holder of any shares of Series C Preferred Stock thereafter to receive in lieu of such shares of Class A Common Stock and Series D Preferred Stock otherwise issuable to him upon conversion of his shares of Series C Preferred Stock, but at the Conversion Price which would otherwise be in effect at the time of conversion as hereinbefore provided, the same kind and relative amount of securities or assets as may be issuable, distributable, or payable upon such consolidation, merger, sale or lease, with respect to shares of Class A Common Stock of the Corporation. (c) The Corporation need not issue fractional shares in satisfaction of the conversion privilege of the shares of Series C Preferred Stock but, in lieu of fractional shares, the Corporation at its option may make a cash settlement in respect thereof equal to the purchase price of such Series C Preferred Stock, as adjusted in accordance with Section C.7(a), multiplied by such fractional share amount, or may issue scrip certificates exchangeable together with other such scrip certificates aggregating one or more full shares for certificates representing such full share or shares. Until the exchange thereof for certificates representing full shares of Class A Common Stock and Series D Preferred Stock, the holder of any such scrip certificates shall not be entitled to receive dividends thereon, to vote with respect thereto, or to have any other rights by virtue thereof as a shareholder of the Corporation, except such rights, if any, as the Board of Directors may in its discretion determine in the event of dissolution of the Corporation. (d) The right of conversion of any holder of Series C Preferred Stock shall be exercisable only if he or she provides thirty (30) days prior written notice, by certified or registered mail, addressed to the attention of the Secretary of the Corporation at the principal office of the Corporation, of his or her intention to surrender shares of Series C Preferred Stock for conversion. Such conversion notice shall state the number of shares of Series C Preferred Stock to be converted. (e) As promptly as practicable after the surrender for conversion of any Series C Preferred Stock and considering the requirements for and in conformity with all applicable laws, including, but not limited to, the Securities Act of 1933, as amended, the Corporation shall deliver or cause to be delivered at the principal office of the Corporation (or such other places as may be designated by the Corporation) to or upon the written order of the holder of such Series C Preferred Stock, certificates representing the shares of Class A Common Stock and Series D Preferred Stock, issuable upon such conversion, issued in such name or names as such holder may direct. Shares of the Series C Preferred Stock shall be deemed to have been converted as of the close of business on the date of the surrender of the Series C Preferred Stock for conversion and the rights of the holders of such Series C Preferred Stock shall cease at such time, and the person or persons in whose name or names the certificates for such surrender are to be issued shall be treated for all purposes as having become the record holder or holders of such Class A Common Stock and Series D Preferred Stock at such time; provided, however, that if the surrender is on any date when the stock transfer books of the Corporation shall be closed, the person or persons in whose name or names the certificates for such shares are to be issued shall be treated as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open. 26 (f) The issuance of certificates for shares of Class A Common Stock and Series D Preferred Stock upon conversion of the Series C Preferred Stock shall be made without charge for any tax in respect of such issuance. However, if any certificate is to be issued in a name other than that of the holder of record of the Series C Preferred Stock so converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance, or shall establish to the satisfaction of the Corporation that such tax has been paid or is not due and payable. 6. Automatic Conversion. -------------------- (a) Each outstanding share of Series C Preferred Stock shall automatically be converted into (i) a number of shares of Class A Common Stock equal to the quotient obtained by dividing $4.472 by the then applicable Conversion Price, plus (ii) one (1) share of Series D Preferred Stock, immediately upon the first to occur of either of the following events (each, an "Automatic Conversion Event"): (A) the authorization of such conversion, including without limitation in an action by written consent in accordance with Section 607.0704, Florida Statutes, as amended from time to time, by the holders of not less than two- thirds (66%) of all of the then issued and outstanding shares of Series C Preferred Stock, or (B) the consummation by the Corporation of a Qualified Public Offering. (b) On or after the date of an occurrence of an Automatic Conversion Event, and in any event within ten (10) days after receipt of notice, by mail, postage prepaid from the Corporation of the occurrence of such event, each holder of record of shares of Series C Preferred Stock shall surrender such holder's certificates evidencing such shares at the principal office of the Corporation or at such other place as the Corporation shall designate, and shall thereupon be entitled to receive certificates evidencing the number of shares of Class A Common Stock and Series D Preferred Stock into which such shares of Series A Preferred Stock are converted. Notwithstanding any other provisions herein to the contrary, on the date of the occurrence of an Automatic Conversion Event, each holder of record of the shares of Series C Preferred Stock shall be deemed to be the holder of record of the Class A Common Stock and Series D Preferred Stock issuable upon such conversion and no shares of Series C Preferred Stock shall be considered outstanding notwithstanding that the certificates representing such shares of Series C Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any holder of record of shares of Series C Preferred Stock, or that the certificates evidencing such shares of Class A Common Stock and Series D Preferred Stock shall not then be actually delivered to such holder; provided, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Class A Common Stock and Series D Preferred Stock issuable upon such conversion unless certificates evidencing such shares of the Series C Preferred Stock being converted are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith. 7. Provisions Relating to Automatic and Optional Conversions. --------------------------------------------------------- (a) Adjustments to Conversion Price. ------------------------------- 27 (i) Subdivision, Combination or Reclassification of Class A Common -------------------------------------------------------------- Stock. ----- (A) If the Corporation shall, while there are any shares of Series C Preferred Stock issued and outstanding, effect a subdivision of its shares of Common Stock into a greater number of such shares or a combination of such shares into a lesser number of shares, whether by forward or reverse stock split, stock dividend (payable in shares of Common Stock) or otherwise, the Conversion Price shall be proportionally increased or reduced, as the case may be, to reflect the effectuation of such subdivision or combination. (B) If the Corporation shall, while there are any shares of Series C Preferred Stock issued and outstanding, effect a capital reorganization or reclassification of the Common Stock or any distribution by the Corporation to holders of Class A Common Stock, whether in the form of stock, debt securities, or other assets or property of the Corporation, (each, an "Adjustment Event"), then, as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Series C Preferred Stock shall thereafter have the right to acquire and receive upon conversion of the Series C Preferred Stock such shares of stock, securities, assets or property as would have been issuable or payable as a result of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received as if such Series C Preferred Stock were converted immediately prior to the consummation of such Adjustment Event. (C) In the event that an Adjustment Event shall occur by means of a merger, consolidation, combination, share exchange, or sale or lease of all or substantially all the assets of the Corporation, then as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Series C Preferred Stock shall thereafter have the rights to acquire and receive upon conversion of their shares of Series C Preferred Stock, such shares of stock, securities or assets as would have been issuable or payable as part of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received upon conversion of the 28 Series C Preferred Stock (including an immediate adjustment, by reason of such Adjustment Event of the Series C Preferred Stock to the value for the Class A Common Stock reflected by the terms of such Adjustment Event if the value so reflected is less than the Conversion Price in effect immediately prior to such Adjustment Event). In the event of an Adjustment Event as a result of which a number of shares of Common Stock of the surviving or purchasing corporation is greater or lesser than the number of shares of Common Stock of the Corporation outstanding immediately prior to such Adjustment Event, then the Conversion Price in effect immediately prior to such Adjustment Event shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Class A Common Stock of the Corporation. The Corporation will not effect any such Adjustment Event unless prior to the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the purchase or lease of such assets shall assume by written instrument mailed or delivered to the holders of the Series C Preferred Stock at the last address of each such holder appearing on the books of the Corporation, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled. (ii) Issuance of Common Stock. Except as provided in Sections ------------------------ C.7(a)(iii) and C.7(a)(iv), if and whenever the Corporation shall issue or sell, or shall in accordance with subparagraphs (A) through (F), inclusive, of Section C.7(a)(iii) be deemed to have issued or sold, any shares of its Class A Common Stock, or options, warrants or other rights to purchase Class A Common Stock or securities convertible into Class A Common Stock, for a consideration per share less than the Conversion Price in effect immediately prior to the time of such issuance or sale, then forthwith upon such issuance or sale, the Conversion Price shall, subject to subparagraphs (A) to (F) of Section C.7(a)(iii), be reduced to: (A) For issuances or sales on or before 18 months after the date of the first issuance of Series A Preferred Stock, the Conversion Price shall equal such issuance or sale price. (B) For issuances or sales after 18 months from the date of the first issuance of Series A Preferred Stock, the Conversion Price shall be determined by multiplying the Conversion Price in effect immediately prior to such issuance or sale by a fraction; the numerator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock, plus (2) the number of shares of Class A Common Stock which the net aggregate consideration, if any, received by the Corporation for the total number of 29 such additional shares of Class A Common Stock so issued would purchase at the Conversion Price in effect immediately prior to such issuance, and; the denominator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock plus (2) the number of such additional shares of Class A Common Stock so issued. (iii) For purposes of determining the adjusted Conversion Price under Section C.7(a)(ii)(A) and (B), the following subsections (A) to (F), inclusive, shall be applicable: (A) Issuance of Rights or Options. Except as provided Section ----------------------------- C.7(a)(iv), in case at any time the Corporation shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Class A Common Stock or any stock or other securities convertible into or exchangeable for Class A Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options) shall be less than the Conversion Price in effect immediately prior to the time of the granting of such Option, then the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued by the Corporation for such price per share. No adjustment of the Conversion Price shall be made upon the actual issuance of such Convertible Securities except as otherwise provided in subsection (C) below. (B) Issuance of Convertible Securities. In case the Corporation ---------------------------------- shall in any manner issue (whether directly or by assumption in a merger or otherwise) 30 or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Corporation as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to the time of such issuance or sale, then the total maximum number of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Corporation for such price per share, provided that, except as otherwise specified in subsection (C) below, no adjustment of the Conversion Price shall be made upon the actual issue of such Class A Common Stock upon exercise of any Options for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this Section C.7(a) and no further adjustment of the Conversion Price shall be made by reason of such issuance or sale. (C) Change in Option Price or Conversion Rate. If the purchase ----------------------------------------- price provided for in any Option referred to in subparagraph (A), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (A) or (B), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall change at any time (other than under or by reason of provisions designed to protect against dilution of the type set forth in Section C.7(a)), the Conversion Price in effect at the time of such change shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price provided for in any Option referred to in subsection (A), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall be reduced at any time under or by reason or provisions with respect thereto designed to protect against dilution, then in case of the delivery of Class A Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Conversion Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Class A Common Stock and had 31 adjustments been made upon the issuance of the shares of Class A Common Stock delivered as aforesaid, but only if as a result of such adjustment the Conversion Price then in effect hereunder is hereby reduced. (D) Treatment of Expired Options and Unexercised Convertible -------------------------------------------------------- Securities. On the expiration of any Option or the ---------- termination of any right to convert or exchange any Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. (E) Integral Transaction. In case any Options shall be issued in -------------------- connection with the issue or sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration. (F) Consideration for Stock. In case any shares of Class A ----------------------- Common Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be attributable to such Class A Common Stock, Options, or Convertible Securities, as the case may be. In the event of any consolidation or merger of the Corporation in which the Corporation is not the surviving corporation, or, in the event of any sale of all or substantially all of the assets of the Corporation for stock or other securities of any corporation, this subsection shall be applied in the same manner as if the Corporation had been the surviving corporation in such consolidation or merger, or the purchasing corporation in such sale of assets; and for purposes of this sentence the Corporation shall be deemed: (1) to have issued and sold a number of shares of its Class A Common Stock, Options, or Convertible Securities equal to the sum of (x) the number of shares of the Corporation's Class A Common Stock actually outstanding, (y) the number of shares of the Corporation's 32 Class A Common Stock acquirable upon the exercise of all outstanding Options, and (z) the number of shares of the Corporation's Class A Common Stock acquirable upon conversion of all outstanding Convertible Securities, which those persons who were security holders of the surviving corporation immediately before the consummation of the transaction would have received in exchange for the common stock, options, and convertible securities of the surviving corporation held by them immediately after consummation of the transaction, based on the exchange ratio on which the transaction was consummated (i.e., the inverse of the ratio pursuant to which the Corporation's Class A Common Stock were exchangeable into the surviving corporation's securities) and assuming that Corporation had been the surviving corporation; and (2) to have received in exchange therefor a consideration equal to the fair market value (immediately before the consummation of such transaction) of the assets (less the liabilities) of the surviving corporation; and if the application of this sentence results in adjustment of the Conversion Price and number of Conversion Shares issuable upon conversion of the Series C Preferred Stock, then the determination of the Conversion Price and the number of Conversion Shares issuable upon conversion of the Series C Preferred Stock immediately prior to such merger, consolidation, or sale shall be made after giving effect to the adjustment set forth herein. If the stock of the surviving or purchasing corporation in such a transaction is publicly traded, the market value of such corporation's outstanding stock immediately before consummation of the exchange shall be presumptive evidence of the fair market value of its assets (less liabilities). (iv) Notwithstanding anything in Section C.7 to the contrary, no adjustment shall be made to the Conversion Price upon (w) the issuance of any shares of Class A Common Stock, options or Convertible Securities in connection with an acquisition by the Corporation or a merger in which the Corporation is the surviving corporation, calculated on a fully diluted basis and further provided such issuance is to the sellers of the acquired entity or assets or security of the merged entity and is made for fair value and the Board of Directors of the Corporation determines that the acquisition or merger is in the best interests of the Corporation and its stockholders; (x) the issuance of any shares of Class A Common Stock upon conversion of any shares of Series C Preferred Stock; (y) the issuance of Class A Common Stock upon the exercise of any options, warrants or other rights to purchase Class A Common Stock outstanding on the date of the first issuance of Series A Preferred Stock, including the warrant to be issued to Alex. Brown & Sons 33 Incorporated in connection with the initial sale of Series A Preferred Stock or (z) the future issuance of Class A Common Stock or warrants, options or rights to purchase such Class A Common Stock to employees, consultants, directors or vendors directly or pursuant to plans approved by the Board of Directors so long as such options are granted at fair market value. (b) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock solely for the purpose of effecting the conversion of the shares of Series C Preferred Stock pursuant to Sections C.5 and C.6 hereof, such number of its shares of Class A Common Stock and Series D Preferred Stock as shall from time to time be sufficient to effect such conversion of all outstanding shares of the Series C Preferred Stock; and, if at any time the number of authorized but unissued shares of Class A Common Stock or Series D Preferred Stock shall not be sufficient to effect the conversion of all of the then outstanding shares of Series C Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel be necessary to increase its authorized but unissued shares of Class A Common Stock or Series D Preferred Stock to such number of shares as shall be sufficient for such purposes. 8. Preemptive Rights. ----------------- (a) At any time after the first closing of the sale of the Series A Preferred Stock but prior to the filing of effective registration statement relating to a Qualified Public Offering, or from time to time prior thereto, if the Corporation shall issue, grant or sell any of its equity securities, the Corporation shall, in each such case, offer a pro rata share of any such issuance, grant or sale to the holders of Series A Preferred Stock and Series C Preferred Stock. If any holders of Series A Preferred Stock or Series C Preferred Stock determine not to accept their pro rata share, then the other Series A Preferred Stock holders and Series C Preferred Stockholders shall be given the right to accept such share on a pro rata basis. (b) Notwithstanding the foregoing, the preemptive rights set forth in Section C.8(a) shall not apply in the event of any issue, grant or sale in connection with (i) a merger, consolidation, combination, share exchange or sale or lease of all or substantially all assets of the Corporation or another corporation; (ii) conversion of Series C Preferred Stock pursuant to Sections C.5 or C.6 hereof; (iii) the exercise of options, warrants or other rights to purchase stock outstanding prior to the issuance of any Series C Preferred Stock; (iv) any stock option or other employee benefit plans of the Corporation and (v) the grant or exercise of a warrant to purchase Class A Common Stock issued to Alex. Brown & Sons Incorporated in connection with the initial sale of Series A Preferred Stock. In any event, all preemptive rights shall expire and be of no further force and effect upon the effectiveness of a registration statement relating to a Qualified Public Offering. 9. No Impairment of Rights. ----------------------- Other than pursuant to the provisions of Section E hereunder, the Corporation will not, by amendment of the Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series C Preferred Stock set forth herein, and will 34 at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Series C Preferred Stock against dilution or other impairment. Without limiting the generality of the foregoing, other than pursuant to the provisions of Section E hereunder, the Corporation (i) will not increase the par value of any shares of stock receivable on the conversion of the Series C Preferred Stock above the amount payable therefore on such conversion, and (ii) will take all such action as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and non-assessable shares of stock on the conversion of all Series C Preferred Stock under the terms hereof from time to time outstanding. 10. Issuance of Series C Preferred Stock. ------------------------------------ The Series C Preferred Stock shall only be issued in connection with the consummation of the Series A Convertible Preferred Stock Purchase Agreement dated as of March 6, 1997, among the Corporation and the Purchasers named therein. D. 4% SERIES D REDEEMABLE PREFERRED STOCK -------------------------------------- 1. Dividends. --------- (a) The holders of outstanding shares of Series D Preferred Stock shall be entitled, in preference to the holders of any and all other classes of capital stock of the Corporation (other than the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, which will rank equally with the Series D Preferred Stock as to dividends), to receive, out of any funds legally available therefore, cumulative dividends on the Series D Preferred Stock in cash, at the rate per annum of four percent (4%) of the Series D Base Liquidation Amount (as defined in Section D.2 below), subject to proration for partial years on the basis of a 365-day year ("Series D Cumulative Preference Dividends"). Such dividends will accumulate commencing as of the date of issuance of the Series D Preferred Stock and will be cumulative, to the extent unpaid, whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Series D Cumulative Preference Dividends shall become due and payable with respect to any share of Series D Preferred Stock as provided in Section D.2 and Section D.4. Dividends paid in cash in an amount less than the total amount of such dividends at the time accumulated and payable on all outstanding shares of Series D Preferred Stock, including fractions, shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. At any time when shares of Series D Preferred Stock are outstanding and the Series D Cumulative Preference Dividends have not been paid in full in cash: (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation ranking junior to the Series D Preferred Stock; and no shares of capital stock of the Corporation ranking junior to the Series D Preferred Stock shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. All numbers relating to the calculation of dividends pursuant to this Section D.1 shall be subject to equitable adjustment in the event of any stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Series D Preferred Stock. At the time of the fifth anniversary following the initial sale of the Series A Preferred Stock, the dividend on the Series D Preferred Stock shall increase to 8% of the Series D Base Liquidation 35 Amount per annum. At the time of the sixth anniversary following the initial sale of the Series A Preferred Stock, the dividend rate on the Series D Preferred Stock shall increase to 14% of the Series D Base Liquidation Amount per annum. (b) Notwithstanding the foregoing, while any of the Senior Notes remain outstanding, the Corporation shall not be permitted to pay any cash dividends upon the Series D Preferred Stock (including any such dividends payable in connection with a conversion of the Series D Preferred Stock) and the holders of the Series D Preferred Stock shall not be entitled to receive any such dividends, if and to the extent that such dividends would be prohibited by any term or provision of Indenture or any documents relating to any refinancing of the Senior Notes; provided that the covenant under the caption "Restricted -------- Payments" in the Indenture, or any documents relating to any refinancing of the Senior Notes, will not be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document, and provided further ---------------- that no such amendment, supplement or modification of the Indenture, or any documents relating to any refinancing of the Senior Notes, shall (i) increase the aggregate principal amount of Senior Notes outstanding, (ii) be materially more restrictive with regard to payments than the restrictions set forth in the covenant under the caption "Certain Covenants--Restricted Payments" in the Referenced Document or (iii) extend the maturity of the Senior Notes. Any change that will prohibit a payment that would otherwise be permitted pursuant to the Referenced Document will be deemed material. 2. Liquidation Preferences. ----------------------- (a) Upon any Event of Dissolution, each holder of an outstanding share of Series D Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, whether such assets are capital, surplus, or earnings as follows, and before any amount shall be paid or distributed to the holders of Class A Common Stock or Class B Common Stock or of any other stock ranking on liquidation junior to the Series D Preferred Stock (other than the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock, which will rank equally with the Series D Preferred Stock in an Event of Dissolution) an amount in cash equal to the sum of (a) $4.472 per share (adjusted appropriately for stock splits, stock dividends, recapitalizations and the like with respect to the Series D Preferred Stock), plus (b) any accumulated but unpaid dividends to which such holder of outstanding shares of Series D Preferred Stock is entitled pursuant to Section D.1 hereof (the sum of (a) and (b) being referred to as the "Series D Base Liquidation Amount"); provided, however, that if, upon any Event of Dissolution, -------- ------- the amounts payable with respect to the Series D Preferred Stock are not paid in full, the holders of the Series D Preferred Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. (b) After full payment shall have been made to the holders of shares of the Series D Preferred Stock (and Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock in accordance with Sections A.2, B.2 and C.2), any balance of the assets of the Corporation then remaining shall be allocated to the holders of shares of other classes of stock ranking junior to the Series D Preferred Stock, including the holders of Class A Common Stock and Class B Common Stock, in accordance with the respective interests therein. 36 3. Voting Rights. ------------- The holders of Series D Preferred Stock shall not be entitled to vote on any matters except those contemplated by Section E and to the extent otherwise required under the FBCA. 4. Redemption. ---------- (a) The Corporation shall redeem the Series D Preferred Stock as follows: (i) The Corporation shall, upon consummation of a Qualified Public Offering, to the extent it may do so under applicable law and to the extent it may do so under Section D.4(a)(ii), redeem all of the outstanding shares of Series D Preferred Stock at a price equal to the Series D Base Liquidation Amount as of the date of such consummation. For redemptions required under this Section D.4(a)(i), the "Payment Date" shall be the date of consummation of a Qualified Public Offering, and the "Redemption Payment" shall be the aggregate Series D Base Liquidation Amount. (ii) The managing underwriter of the Qualified Public Offering shall have the right to limit the redemption of all or any part of the Series D Preferred Stock then outstanding. In such event, the part of the Series D Preferred Stock not redeemed shall automatically convert into a three year obligation (the "Obligation") payable to the holder thereof in the principal amount of the Series D Base Liquidation Amount. Principal and interest on each Obligation shall be payable quarterly, with interest at the rate of 2% over the Prime Rate during the first year, 4% over the Prime Rate during the second year, and 6% over the Prime Rate during the third year after issuance. "Prime Rate" shall mean the prime rate reported from time to time in The Wall Street Journal, initially on the date the Series B ----------------------- Preferred Stock converts into the Obligation, and each anniversary thereafter. In the event that any quarterly payment on the Obligations is not paid when due, the interest rate applicable over the remaining life of the Obligations shall be increased to 6% over the Prime Rate. (iii) Commencing on the fifth anniversary of the initial sale of the Series A Preferred Stock, the Corporation shall, to the extent it may do so under applicable law, redeem all of the outstanding shares of Series D Preferred Stock at a price equal to the Series D Base Liquidation Amount at the time of redemption. (b) Any redemption under Section D.4(a)(iii) shall occur in two payments, the first to occur on the Redemption Commencement Date and the second to occur one (1) year thereafter (each a "Payment Date"). Each payment (a "Redemption Payment") shall be in an amount equal to one-half of the Series D Base Liquidation Amount calculated as of the date of such payment, with the final Redemption Payment in an amount necessary to fully redeem all remaining outstanding Series D Preferred Stock at a price equal to the Series D Base Liquidation Amount. 37 (c) On each Payment Date, the Corporation shall redeem shares of Series D Preferred Stock ratably from the holders thereof to the extent of the Redemption Payment due on such date, according to the respective amounts which would be payable with respect to the full number of Series D Preferred Stock to be redeemed from them on such date, as if all such Series D Preferred Stock were redeemed in full. The Redemption Payment shall be payable in cash in immediately available funds on the Payment Date. Any outstanding shares of Series D Preferred Stock not redeemed shall remain outstanding. All shares of Series D Preferred Stock which are to be redeemed hereunder shall remain issued and outstanding until the Redemption Price therefor has been indefeasibly paid in full in cash or has been deposited with an independent payment agent pursuant to Section D.4(d). (d) On or before the Redemption Commencement Date, the Corporation will give written notice by mail, postage prepaid to the holders of record of Series D Preferred Stock to be redeemed under Section D.4(a), such notice to be addressed to each such holder at its post office address shown by the records of the Corporation, specifying the place of such redemption; provided, however, that the Corporation's failure to give such notice shall in no way affect its obligation to redeem the shares of Series D Preferred Stock as provided in this Section D.4. If on or before a Payment Date, the funds necessary for satisfaction of the Redemption Payment under Section D.4(a) on such date shall have been deposited with an independent payment agent so as to be, and continue to be, available for such redemption, then, notwithstanding that any certificate for shares of Series D Preferred Stock to be redeemed shall not have been surrendered for cancellation, from and after the close of business on the Payment Date, the shares to be redeemed as of such Payment Date shall no longer be deemed outstanding, any dividends thereof shall cease to accrue, and all rights with respect to such shares shall forthwith cease, except the right of the holders thereof to receive, upon presentation of the certificate representing shares so called for redemption, the Redemption Payment applicable to such Series D Preferred Stock without interest thereon. (e) If the funds of the Corporation legally available for redemption of Series D Preferred Stock on the Payment Date are insufficient to pay the Redemption Payment then due and to redeem the number of outstanding Series D Preferred Stock to be redeemed on such Payment Date, the Corporation shall redeem such shares of Series D Preferred Stock ratably from the holders thereof to the extent of any funds legally available for redemption of such Series D Preferred Stock, according to the respective amounts which would be payable with respect to the full number of Series D Preferred Stock to be redeemed from them on such date, as if all such Series D Preferred Stock were redeemed in full. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series D Preferred Stock, such funds will be used to redeem the balance of such Series D Preferred Stock, which would have otherwise been redeemed on such Payment Date, or such portion thereof for which funds are then available, on the basis set forth above. (f) Subsequent to the Redemption Commencement Date, until the full Series D Base Liquidation Amount has been paid in cash for all outstanding shares of Series B Preferred Stock: (A) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on any capital stock of the Corporation other than shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock; and (B) no shares of capital stock of the Corporation (other than the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D 38 Preferred Stock) shall be purchased, redeemed or acquired by the Corporation and no monies shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof. (g) Upon receipt of the applicable Redemption Payment by certified check or wire transfer, each holder of shares of Series D Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares to the Corporation, duly assigned or endorsed for transfer (or accompanied by duly executed stock powers relating thereto), or shall deliver an Affidavit of Loss with respect to such certificates at the principal executive office or the Corporation or the office of the transfer agent for the Series D Preferred Stock or such office or offices in the continental United States of an agent for redemption as may from time to time be designated by notice to the holders of Series D Preferred Stock and each surrendered certificate shall be canceled and retired. 39 (h) No share or shares of Series D Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled and retired. (i) Notwithstanding anything in this Section D.4. to the contrary, the Corporation shall not be permitted to effect any redemption of the Series D Preferred Stock, and no holder thereof shall have any right to have his or her shares of Series D Preferred Stock redeemed by the Corporation, if at that time such redemption is not permitted by the terms and provisions of the Indenture or any refinancing thereof. 5. No Impairment of Rights. ----------------------- Other than pursuant to the provisions of Section E hereunder, the Corporation will not, by amendment of the Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series D Preferred Stock set forth herein, and will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Series D Preferred Stock against dilution or other impairment. 6. Issuance of Series D Preferred Stock. ------------------------------------ The Series D Preferred Stock shall only be issued in connection with the consummation of the Series A Convertible Preferred Stock Purchase Agreement dated as of March 6, 1997, among the Corporation and the Purchasers named therein. E. AMENDMENT OF RIGHTS, DESIGNATIONS AND PREFERENCES HEREUNDER. ----------------------------------------------------------- The holders of at least 66% of the then outstanding Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock voting together as a single class, shall have the authority to bind the holders of all of the then outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock on all matters related to the rights and preferences of such shares, including a waiver of any of the rights and preferences afforded to such holders hereunder. IN WITNESS WHEREOF, SBA Communications Corporation has caused its corporate seal to be hereunto affixed and this statement to be executed by its President and Secretary this 24th day of February, 1998. /s/ Steven E. Bernstein (CORPORATE SEAL) ___________________________________ Steven E. Bernstein, President /s/ Robert M. Grobstein ___________________________________ Robert M. Grobstein, Secretary 40 EX-3.3 4 BY-LAWS OF SBA COMMUNICATIONS EXHIBIT 3.3 ----------- BYLAWS OF SBA COMMUNICATIONS CORPORATION As adopted by the Board of Directors on the 24th day of December, 1996. ARTICLE I MEETINGS OF SHAREHOLDERS ------------------------ Section 1. Annual Meeting. The annual meeting of the shareholders of -------------- this Corporation shall be held annually at the time and place designated by the Board of Directors of the Corporation. Business transacted at the annual meeting shall include the election of directors of the Corporation, in accordance with the applicable provisions of the Articles of Incorporation, and all other duties and powers conferred upon the shareholders by the laws of the State of Florida. Section 2. Special Meetings. Special meetings of the shareholders ---------------- shall be held when directed by the Board of Directors through a resolution adopted by a majority of the total number of authorized directors (whether or not any vacancies of previously authorized directorships exist at the time the Board is presented with such resolution), or when requested in writing by the holders of not less than fifty percent (50%) of all the shares entitled to vote on any issue at the meeting. The call for the meeting shall be issued by the Secretary or the shareholders requesting the special meeting, unless the President, the Board of Directors or such shareholders designate another person to do so. Section 3. Place. Meetings of shareholders may be held within or ----- outside of the State of Florida. If no place is designated in the notice for a meeting of shareholders, the place of meeting shall be the principal office of the Corporation. Section 4. Notice. Except as provided in the Florida Business ------ Corporation Act (the "Act"), written notice stating the place, day and hour of the meeting, and in the case of a special meeting, or as otherwise provided by law, the purpose or purposes for which the meeting is called, shall be delivered to each shareholder of record entitled to vote at such meeting. Such notice shall be given at least ten (10) but not more than sixty (60) days before the date of the meeting, by first class mail by the Secretary or, in the case of a special meeting duly called by the shareholders, the shareholders requesting the special meeting, unless the President, the Board of Directors or such shareholders designate another person to do so. Such notice shall be mailed to each shareholder at his or her address as it appears on the books of the Corporation. If the notice is mailed at least thirty (30) days before the date of the meeting, it may be done by a class of United States mail other than first class. Such notice is deemed delivered when deposited in the United States mail with postage prepaid thereon. Section 5. Notice of Adjourned Meetings. When a meeting is adjourned ---------------------------- to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in Article I, Section 4 of these Bylaws to each shareholder of record on the new record date entitled to vote at such meeting. Section 6. Waiver of Notice of Shareholders Meetings. Whenever any ----------------------------------------- notice is required to be given to any shareholder, a waiver thereof in writing signed by the shareholder or shareholders entitled to such notice, whether before, during or after the time of the meeting stated therein and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall be equivalent to the giving of such notice. Attendance by a shareholder at a meeting shall constitute a waiver of: (a) lack of notice or defective notice of such meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting; or (b) lack of defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering that particular matter when it is presented. Unless otherwise required by the Articles of Incorporation, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Section 7. Fixing Record Date. For the purpose of determining ------------------ shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or to demand a special meeting, or to receive payment of any distribution, or in order to make a determination of shareholders for any other purpose, the Board of Directors may fix in advance a date as the record date for any determination of shareholders, such date in any case to be not more than seventy (70) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. A determination of shareholders entitled to notice of, or to vote at, any meeting of shareholders shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. Section 8. Voting Record. After fixing a record date for a meeting of ------------- shareholders, the Corporation shall prepare an alphabetical list of the names of all shareholders who are entitled to notice of such meeting, arranged by voting group, with the address of, and the number and class and series, if any, of the shares held by, each shareholder. The shareholders' list must be available for inspection by any shareholder for a period of ten (10) days prior to the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or his agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of the Act), during regular business hours and at the shareholder's expense, during the period it is available for inspection. The Corporation shall make the shareholders' list available at the meeting of shareholders, and any shareholder or his agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. If the requirements of this Section have not been substantially complied with, the meeting shall be adjourned until such time as the Corporation complies with such requirements on demand of any shareholder in person or by proxy who failed to get such access. If no such demand is made, failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting. 2 Section 9. Shareholder Quorum and Voting. Shares entitled to vote as a ----------------------------- separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Except as otherwise provided in the Articles of Incorporation or by the Act, a majority of the shares entitled to vote on the matter by each voting group, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the shares of each voting group entitled to vote. If less than a majority of outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting. When a specified item of business is required to be voted on by a class or series of stock, a majority of the shares of such class or series shall constitute a quorum for the transaction of such item of business by that class or series. Section 10. Votes Per Share. Except as otherwise provided in the --------------- Articles of Incorporation, the terms of any outstanding Preferred Stock or by the Act, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Section 11. Manner of Action. If a quorum is present, action on a ---------------- matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater or lesser number of affirmative votes is required by the Articles of Incorporation, the Bylaws or by law. Section 12. Voting for Directors. At each election for directors, every -------------------- shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him or her for as many persons as there are directors to be elected at that time and for whose election he or she has a right to vote. Unless otherwise and affirmatively provided for in the Articles of Incorporation, cumulative voting is not authorized and the directors shall be elected by a plurality of the votes cast by the shares entitled to vote in such election at a meeting at which a quorum is present. Section 13. Voting of Shares. A shareholder may vote at any duly called ---------------- and noticed meeting of shareholders of the Corporation, either in person or by proxy. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the bylaws of the corporate shareholder or, in the absence of any applicable bylaw, by such person as the board of directors of the corporate shareholder may designate. Proof of such designation may be made by presentation of a certified copy of the Bylaws or other instrument of the corporate shareholder. In the absence of any such designation or, in the case of conflicting designation by the corporate shareholder, the chairman of the board, the president, 3 any vice president, the secretary and the treasurer of the corporate shareholder shall be presumed to possess, in that order, authority to vote such shares. Shares held by an administrator, executor, guardian, personal representative or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name or the name of his or her nominee. Shares held by or under the control of a receiver, a trustee in bankruptcy proceedings or an assignee for the benefit of creditors may be voted by such person without the transfer thereof into his or her name. If a share or shares stand of record in the names of two or more persons, whether as fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship with respect to the same shares, unless the Secretary of the Corporation is given notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, that act binds all; (b) if more than one votes, in person or by proxy, the act of the majority so voting binds all; (c) if more than one votes, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum. Section 14. Proxies. Any shareholder of the Corporation, other person ------- entitled to vote on behalf of a shareholder pursuant to the Act, or attorney-in- fact for such persons, may vote the shareholder's shares in person or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or otherwise act for him or her by signing an appointment form, either personally or by an attorney-in-fact. An executed telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form. An appointment of a proxy is effective when received by the Secretary of the Corporation or such other officer or agent which is authorized to tabulate votes, and shall be valid for up to eleven (11) months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment. 4 An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Section 15. Voting Trusts. One or more shareholders may create a voting ------------- trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all owners of beneficial interest in the trust, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the Corporation's principal office. After filing a copy of the list and agreement in the Corporation's principal office, such copies shall be open to inspection by any shareholder of the Corporation, subject to the requirements of the Act, or to any beneficiary of the trust under the agreement during business hours. The trustee must also deliver a copy of each extension of the voting trust agreement, and a list of beneficial owners under such extended agreement, to the Corporation's principal office. Section 16. Shareholders' Agreements. Two or more shareholders may ------------------------ provide for the manner in which they will vote their shares, and providing for such other matters as are permitted by the Act, by signing an agreement for that purpose. When a shareholders' agreement is signed, the shareholders who are parties thereto shall deliver copies of the agreement to the Corporation's principal office. After filing a copy of the agreement in the Corporation's principal office, such copies shall be open to inspection by any shareholder of the Corporation, subject to the requirements of the Act, or any party to the agreement during business hours. Section 17. Inspectors of Election. Prior to each meeting of ---------------------- shareholders, the Board of Directors or the President may appoint one or more Inspectors of Election. Upon his appointment, each such Inspector shall take and sign an oath to faithfully execute the duties of Inspector at such meeting with strict impartiality and to the best of his ability. Such Inspector(s) shall determine the number of shares outstanding, the number of shares present at the meeting and whether a quorum is present at such meeting. The Inspector(s) shall receive votes and ballots and shall determine all challenges and questions as to the right to vote and shall thereafter count and tabulate all votes and ballots and determine the result. Such Inspector(s) shall do such further acts as are proper to conduct the elections of directors and the vote on other matters with fairness to all shareholders. The Inspector(s) shall make a certificate of the results of the elections of directors and the vote on other matters. No Inspector shall be a candidate for election as a director of the Corporation. Section 18. Action by Shareholders Without a Meeting. Unless otherwise ---------------------------------------- provided in the articles of incorporation, action required or permitted to be taken at any meeting of the shareholders may be taken without a meeting, without prior notice and without a vote if the action is taken by the holders of outstanding shares of each voting group entitled to vote thereon having not less than the minimum number of votes with respect to each voting group that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted. In order to be effective, the action must be evidenced by one or more written consents describing the action taken, dated and signed by approving shareholders having the requisite number of votes of each voting group entitled to vote thereon, and delivered to the corporation by delivery to its principal office in Florida, its principal place of business, the Secretary 5 of the corporation, or another office or agent of the corporation having custody of the book in which proceedings of meetings of shareholders are recorded. No written consent shall be effective to take such corporate action unless, within sixty (60) days of the date of the earliest dated consent delivered in the manner required by this Section, written consents signed by the number of holders required to take such action are delivered to the corporation as set forth in this Section. Any written consent may be revoked prior to the date that the corporation receives the required number of consents to authorize the proposed action. No revocation is effective unless in writing and until received by the corporation at its principal office in Florida or its principal place of business, or received by the Secretary or other officer or agent of the corporation having custody of the book in which proceedings of meetings of shareholders are recorded. Within ten (10) days after obtaining such authorization by written consent, notice shall be given to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action and, if the action is one for which dissenters' rights are provided under the articles of incorporation or by law, the notice shall contain a clear statement of the right of shareholders dissenting therefrom to be paid the fair value of their shares upon compliance with applicable law. A consent signed as required in this Section has the effect of a meeting vote and may be described as such in any document. Whenever action is taken as set forth in this Section, the written consent of the shareholders consenting thereto or the written reports of inspectors appointed to tabulate such consents shall be filed with the minutes of proceedings of shareholders. ARTICLE II DIRECTORS --------- Section 1. Functions. Except as provided in the Articles of --------- Incorporation or by law, all corporate powers shall be exercised by or under the authority of, and the business and affairs of this Corporation shall be managed under the direction of, the Board of Directors. Section 2. Number. The Board of Directors of the Corporation shall ------ consist of a number of persons fixed by a resolution of the Board of Directors from time to time; provided, however, that the Board of Directors shall not consist of less than one (1) person, and not more than twenty-five (25) persons. Section 3. How Selected. Unless appointed to fill a vacancy, directors ------------ shall be elected at the annual meeting of shareholders or at a special meeting, in accordance with the Articles of Incorporation, as it may be amended from time to time. Section 4. Qualifications. Directors must be natural persons over the -------------- age of 18 years old, but need not be residents of the State of Florida or shareholders of this Corporation. 6 Section 5. Resignation. Any director may resign at any time by ----------- delivering written notice to the Corporation, the Board of Directors or its Chairman. Such resignation is effective when the notice is delivered unless the notice specifies a later effective date, in which event the Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not take office until the effective date. Section 6. Vacancies. A director shall hold office until the annual --------- meeting of the shareholders and until his successors shall be elected and shall qualify, subject, however, to the director's prior death, resignation, retirement, disqualification, or removal from office. Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors, or by the sole remaining director. Section 7. Regular Meetings. An annual regular meeting of the Board of ----------------- Directors shall be held without notice as soon as practicable after the annual meeting of shareholders for the purpose of the election of officers and the transaction of such other business as may come before the meeting, and at such other time and place as may be determined by the Board of Directors. The Board of Directors may, with or without notice, at any time and from time to time, decide the time and place, either within or outside of the State of Florida, for the holding of the annual regular meeting or additional regular meetings of the Board of Directors. Meetings of the Board of Directors may be called by the Chairman of the Board, the President of the Corporation, or a majority of the Board of Directors. Section 8. Special Meetings. Special meetings of the Board of ----------------- Directors may be called by the Chairman of the Board, the President of the Corporation, or a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may designate any place, either within or outside of the State of Florida, as the place for holding any special meeting of the Board of Directors called by them. If no designation is made, the place of meeting shall be the principal office of the Corporation in the State of Florida. Notice of any special meeting of the Board of Directors may be given by any reasonable means, whether oral or written, and at any reasonable time prior to such meeting. The reasonableness of any notice given in connection with any special meeting of the Board of Directors shall be determined in light of all of the pertinent circumstances. It shall be presumed that notice of any special meeting given at least two (2) days prior to such special meeting, either orally (by telephone or in person), or by written notice delivered personally or mailed to each director at his or her business or residence address, is reasonable. If mailed, such notice of any special meeting shall be deemed to be delivered on the second day after it is deposited in the United States mail, so addressed, with postage thereon prepaid. If notice is given by electronic transmission, such notice shall be deemed to be delivered when the notice is delivered by the electronic device. Neither the business to be transacted at, nor the purpose or purposes of, any special meetings of the Board of Directors need be specified in the notice or in any written waiver of notice of such meeting. 7 Section 9. Waiver of Notice of Meeting. Notice of a meeting of the --------------------------- Board of Directors need not be given to any director who signs a written waiver of notice either before, during or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened. Section 10. Quorum and Voting. A majority of the number of directors ----------------- fixed in the manner provided by these Bylaws shall constitute a quorum for the transaction of business; provided, however, that whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled. The act of the majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors. A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors. Section 11. Presumption of Assent. A director of this Corporation who --------------------- is present at a meeting of its Board of Directors, or a committee of the Board of Directors, at which action on any corporate matter is taken shall be presumed to have assented to the action taken, unless he or she (i) objects at the beginning of the meeting (or promptly upon his or her arrival) to holding the meeting or transacting specified business at the meeting, or (ii) votes against such action or abstains from the action taken; or (iii) has his or her dissent entered into the minutes of the meeting or filed with the person acting as the secretary of the meeting before the adjournment thereof or immediately thereafter, unless the dissenting director voted in favor of such action. Section 12. Meetings of the Board of Directors by Means of a Conference ----------------------------------------------------------- Telephone or Similar Communications. Members of the Board of Directors may - ------------------------------------ participate in a meeting of such Board by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 13. Action Without a Meeting. Any action required or permitted ------------------------ to be taken at a meeting of the Board of Directors or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the directors of this Corporation, or all the members of the committee, as the case may be. Action taken under this Section is effective when the last director or member of the committee signs the consent, unless the consent specifies a different effective date. Such consent shall have the effect as a meeting vote and may be described as such in any document. Section 14. Compensation. Each director may be paid his expenses, if ------------ any, of attendance at each meeting of the Board of Directors and a committee thereof, and may be paid a stated salary 8 as a director or a fixed sum for attendance at each meeting of the Board of Directors (or a committee thereof) or both, as may from time to time be determined by action of the Board of Directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 15. Director Conflicts of Interests. No contract or other ------------------------------- transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors of this Corporation are directors or officers or are financially interested shall be either void or voidable because of such relationship or interest, or because such director or directors of this Corporation are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction, or because his or their vote(s) are counted for such purpose, if: (a) The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the vote(s) or written consent(s) of such interested director(s); or (b) The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote taken at an annual or special meeting of shareholders; or (c) The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction. ARTICLE III COMMITTEES OF THE BOARD OF DIRECTORS ------------------------------------ Section 1. Committees. The Board of Directors or the Chairman of the ---------- Board may designate from among its members committees from time to time for such purposes and with such powers as the Board or Chairman may determine. Section 2. Term. The term of each committee appointed shall continue ---- until the next annual meeting of shareholders following its appointment, at which time the existence of the committee shall automatically terminate unless the committee is reappointed in the annual meeting of directors held immediately thereafter; provided, however, that the existence of any committee may be terminated at any time by affirmative action of the Board. Section 3. Meetings. Each committee shall hold as many meetings as are -------- necessary to continue or complete the performance of its duties. 9 Section 4. Record of Meetings. Each committee shall keep or cause to ------------------ be kept minutes of each meeting held, and each set of minutes shall include a description of all matters considered and all decisions, if any, made. The minutes of all meetings held since the time of the last preceding regular Board of Directors meeting shall be filed with the Chairman of the Board at or prior to the next regular meeting of the Board of Directors, and copies of the minutes shall be presented to the Board of Directors as part of the committee's reports. ARTICLE IV OFFICERS -------- Section 1. Officers. If so appointed by the Board of Directors, the -------- officers of this Corporation shall consist of a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as appointed by the Board of Directors. Any two (2) or more offices may be held by the same person; however, such a person shall, when acting on behalf of the Corporation in his capacity as an officer of the Corporation, designate in which capacity or capacities he is acting and shall be deemed to act only in the capacity(ies) so designated. Section 2. Appointment and Term of Office. The officers of the ------------------------------ Corporation shall be appointed annually by the Board of Directors at the first meeting of the Board held after the shareholders' annual meeting. If the appointment of officers does not occur at this meeting, the appointment shall occur as soon thereafter as practicable. Each officer shall hold office until a successor has been duly appointed and qualified, or until an earlier resignation, removal from office, or death. Section 3. Removal of Officers. Any officer of the Corporation may be ------------------- removed from his or her office or position at any time, with or without cause, by a majority vote of the Board of Directors. Any officer or assistant officer, if appointed by another officer pursuant to authority, if any, received from the Board of Directors, may likewise be removed by such officer. Section 4. Resignation. Any officer of the Corporation may resign at ----------- any time from his or her office or position by delivering notice to the Corporation, the Board of Directors or its Chairman. Such resignation is effective when the notice is delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until the effective date. Section 5. Duties. If so appointed by the Board of Directors, the ------ officers of this Corporation shall have the following duties: (a) President. Unless otherwise designated by the Board of Directors, --------- the President shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, in general, supervise and control all of the business and affairs of the Corporation, and shall preside at all meetings of the shareholders, the Board of Directors and all committees of the Board of Directors on which he or she may serve. In addition, the President shall have the following powers and duties. 10 (1) He or she may cause to be called special meetings of the shareholders and directors in accordance with these Bylaws. (2) He or she shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation, other than the duly elected officers, subject to policies adopted by the Board of Directors. (3) He or she shall sign and make all contracts and agreements in the name of the Corporation, and see that they are properly carried out. (4) He or she shall see that the books, reports, statements, and certificates of the Corporation are properly kept, made, and filed according to law. (5) He or she shall sign all certificates of stock, notes, drafts, or bills of exchange, warrants or other orders for the payment of money duly drawn by the treasurer. (6) He or she shall enforce these Bylaws and perform all of the duties incident to the position and office, and which are required by law. (7) He or she shall solely and personally be responsible for collecting, accounting for, and paying of all taxes imposed upon the Corporation by any governmental authority, whether municipal, county, state or federal. This power is personal and exclusive to the Chief Executive Officer and may not be delegated by him or her or regulated by the Board, nor shall it descend to any other officer. (b) Vice President. One or more Vice Presidents may be designated by -------------- that title or such additional title or titles as the Board of Directors may determine. The duties of the Vice Presidents shall be as follows: During the absence and inability of the President to perform his or her duties or exercise his powers, as set forth in these Bylaws or in the acts under which this Corporation is organized, the same shall be performed and exercised by a Vice President (in such order of seniority as may be determined by the Board of Directors or, failing such determination, as may be designated by the Chairman of the Board); and when so acting, he or she shall have the powers and be subject to all responsibilities hereby given to or imposed upon the President. The Vice Presidents shall have such powers and perform such duties as usually pertain to their office, or as are assigned to them by the President or the Board of Directors. (c) Secretary. The Secretary shall have such powers and perform such --------- duties as are incident to the Office of Secretary of a Corporation, or as are assigned to him or her by the President or the Board of Directors, including the following: (1) He or she shall keep the resolutions, forms of written consent, minutes of the meetings of the Board of Directors and of the shareholders, and other official records of the Corporation in appropriate books. 11 (2) He or she shall give and serve all notices of the Corporation. (3) He or she shall be custodian of the records and of the corporate seal, and affix the latter when required to authenticate the records of the Corporation. (4) He or she shall keep the stock and transfer books in the manner prescribed by law, so as to show at all times the amount of capital stock, the manner and the time the same was paid in, the names of the owners thereof, alphabetically arranged, their respective places of residences, their post office addresses, the number of shares owned by each, the time at which each person became such owner, and the amount paid thereon; and keep such stock and transfer books open daily during the business hours and at the main office of the Corporation, subject to the inspection of such shareholders as are authorized to inspect the same, as provided in Article I, Section 8 of these Bylaws. (5) He or she shall sign all certificates of stock. (6) He or she shall present to the Board of Directors all communications addressed to him or her officially by the President or any officer or shareholder of the Corporation. (7) He or she shall attend to all correspondence and perform all the duties incident to the Office of Secretary. (8) In the absence of an appointment of a Treasurer, the duties of the Treasurer. (d) Treasurer. The Treasurer shall have custody of all corporate --------- funds and financial records, shall keep full and accurate accounts of receipts and disbursements and shall perform such other duties as may be prescribed by the Board of Directors or the President. Section 6. Other Officers, Employees, and Agents. Each and every other ------------------------------------- officer, employee, and agent of the Corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him or her by the Board of Directors, the officer appointing him or her, and such officer or officers who may from time to time be designated by the Board to exercise supervisory authority. ARTICLE V SHARES OF STOCK --------------- Section 1. Certificates for Shares. The Board of Directors shall ----------------------- determine whether shares of the corporation shall be uncertificated or certificated. If certificated shares are issued, certificates representing shares in the Corporation shall be signed (either manually or by facsimile) by the President or Vice President and the Secretary or an Assistant Secretary and may be sealed with the seal of the Corporation or a facsimile thereof. A certificate which has been signed by an officer or officers who later shall have ceased to be such officer when the certificate is issued shall nevertheless 12 be valid. Upon receipt of the consideration for which the Board of Directors has authorized for the issuance of the shares, such shares so issued shall be fully paid and nonassessable. Each share certificate representing shares shall state upon the face thereof: (a) the name of the Corporation; (b) that the Corporation is organized under the laws of the State of Florida; (c) the name of the person or persons to whom issued; (d) the number and class of shares, and the designation of the series, if any, which such certificate represents; and (e) if different classes of shares or different series within a class are authorized, a summary of the designation, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series), or in the alternative, that the Corporation will provide the shareholder with a full statement of this information on request and without charge. Section 2. Issuance of Shares. All certificates issued shall be ------------------ registered and numbered in the order in which they are issued. They shall be issued in consecutive order, and on the face of each share shall be entered the name of the person owning the shares represented by the certificate, the number of shares represented by the certificate, and the date of issuance of the certificate. Upon issuance, the certificate shall be signed by the President or a Vice President, and countersigned by the Secretary or an assistant secretary, and sealed with the seal of the Corporation. No certificate shall be issued for any share until such share is fully paid. Section 3. Transfer of Shares; Ownership of Shares. Transfers of --------------------------------------- shares of stock of the Corporation shall be made only on the stock transfer books of the Corporation, and only after the surrender to the Corporation of the certificates representing such shares, if any, by the person in whose name the shares stand on the books of the Corporation, or his duly authorized legal representative. In all cases of transfer, the former certificate must be surrendered and cancelled before a new certificate will be issued. In case of transfer by an attorney-in-fact, the power of attorney, duly executed and acknowledged, shall be deposited with the Secretary of the Corporation. Section 4. Lost, Stolen or Destroyed Certificates. The Corporation -------------------------------------- shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate: (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) at the discretion of the Board of Directors, gives bond in such form and amount as the Corporation may require, to indemnify the Corporation, the transfer agent and registrar against any claim that may be made on account of the alleged loss, destruction or theft of such certificate; and (d) satisfies any other reasonable requirements imposed by the Corporation. ARTICLE VI ACTIONS WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS -------------------------------------------------------- Unless otherwise directed by the Board of Directors, the President or a designee of the President shall have the power to vote and to otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of shareholders on, or with respect to, any action of shareholders of any 13 other Corporation in which this Corporation may hold securities and to otherwise exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in other corporations. ARTICLE VII DIVIDENDS --------- Section 1. Declaration. The Board of Directors may by resolution or ----------- vote declare such dividends as are permitted pursuant to Florida law, and which are not otherwise prohibited by any other applicable law or regulation, whenever in their opinion the condition of the Corporation's affairs will render it expedient for such dividends to be declared; provided, however that no such dividends shall be declared when the Corporation is insolvent, when such payment would render the Corporation insolvent, or when the declaration or payment thereof would be contrary to applicable laws or regulations or to any restrictions contained in the Articles of Incorporation. Section 2. Types. The following types of dividends may be declared ----- from time to time by the Board of Directors: (a) Dividends in cash or property; provided, however, that such dividends may be paid only out of the unreserved and unrestricted earned surplus of the Corporation. (b) Dividends in cash paid for out of current net profits or retained earnings in accordance with the provisions of Florida Statutes, or any successor statute. (c) Dividends paid in the Corporation's own authorized but unissued shares out of any unreserved and unrestricted surplus of the Corporation upon the following conditions: (1) If the dividend is payable in its own shares having a par value, such shares shall be issued at not less than the par value, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend; (2) If a dividend is payable in its own shares without par value, such shares shall be issued at such stated value as shall be fixed by the Board of Directors by a resolution adopted at the time such dividend is declared, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed in respect to such shares, and the amount per share so transferred to stated capital shall be disclosed to the shareholders receiving such dividend concurrently with the payment thereof. (d) No dividend payable in shares of any class shall be paid to the holders of the shares of any other class unless the Articles of Incorporation so provide, or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the payment is to be made. 14 ARTICLE VIII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS ------------------------------------------------------------ Section 1. Insurance. The Board of Directors of the Corporation, in --------- its discretion, shall have authority on behalf of the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. The provisions of the following sections of this Article VIII shall apply only in the event that no such insurance is in effect or, if such insurance is in effect, only to the extent that matters for which indemnification by the Corporation is permitted by such sections are not within the coverage of such insurance. Section 2. Action Against a Party Because of Corporation Position. The ------------------------------------------------------ Corporation shall indemnify each officer or director, and may indemnify, in its sole discretion, any employee or agent who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by, or in the right of, the Corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, partner, officer, employee, or agent of another corporation, a partnership, joint venture, trust, or other enterprise against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, including any appeal thereof, if he or she acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any claim, action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 3. Action by or in the Right of Corporation. The Corporation ---------------------------------------- shall indemnify any officer or director, and may indemnify, at its sole discretion, any employee or agent who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed claim, action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, partner, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such claim, action, or suit, including any appeal thereof, if he or she acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue, or matter as to which 15 such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless, and only to the extent that, the court in which such claim, action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. Section 4. Reimbursement if Successful. To the extent that the --------------------------- director, officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of any claim, action, suit, or proceeding referred to in Section 2 or Section 3 of this Article VIII, or in defense of any claim, issue, or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, notwithstanding that he had not been successful (on the merits or otherwise) on any other claim, issue, or matter in any such claim, action, suit or proceeding. Section 5. Authorization. Any indemnification under Section 2 or ------------- Section 3 of this Article VIII (unless ordered by a court of competent jurisdiction) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she met the applicable standard of conduct set forth in Section 2 or Section 3 of this Article VIII. Such determination shall be made: (a) By a majority vote of a quorum of the Board of Directors; however, for the purposes of this Subsection, a quorum shall consist of directors who are or were not parties to such action, suit or proceeding; or (b) If such quorum is not obtainable, or even if obtainable, by a majority vote of a committee duly designated by the Board of Directors (in which directors who are parties may participate) consisting solely of two or more directors who were not at the time parties to the proceeding; (c) By independent legal counsel who are (i) selected by the Board of Directors prescribed in paragraph (a) or the committee prescribed in paragraph (b); or (ii) if a quorum of the directors cannot be obtained for paragraph (a) and the committee cannot be designated under paragraph (b), selected by majority vote of the full Board of Directors (in which directors who are parties may participate); (d) By the shareholders by a majority vote of a quorum consisting of shareholders who are or were not parties to such action, suit or proceeding, or, if no such quorum is obtainable, by a majority vote of shareholders who were not parties to such action, suit or proceeding. Section 6. Advance Reimbursement. Expenses, including attorneys' fees, --------------------- incurred in defending a civil or criminal action, suit, or proceeding shall be paid to officers and directors, and, in its sole discretion, may be paid to agents and employees by the Corporation in advance of the final disposition of such action, suit or proceeding, upon a preliminary determination, following one of the procedures set forth in Section 5 of this Article VIII, that the director, officer, employee or agent 16 met the applicable standard of conduct set forth in Section 2 or Section 3 of this Article VIII, or as authorized by the Board of Directors in the specific case and, in either event, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article. Section 7. Further Indemnification. Indemnification as provided in ----------------------- this Article shall not be deemed exclusive. The Corporation shall make any other further indemnification of any of its directors, officers, employees or agents that may be authorized under any statute, rule or law, provision of Articles of Incorporation, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, except an indemnification against gross negligence or willful misconduct. Where such other provision provides broader rights of indemnification than these Bylaws, such other provision shall control. Section 8. Continuing Right of Indemnification. Indemnification as ----------------------------------- provided in this Article shall continue as to a person who has ceased to be a director, officer, employee, or agent, and shall inure to the benefit of the heirs, executors, and administrators of such a person. Section 9. Limitation on Indemnity and Reimbursement. Notwithstanding ----------------------------------------- any other provisions of this Article, in the event that the Board of Directors determines that the action giving rise to a claim for indemnity or expense reimbursement is the result of gross negligence or willful misconduct upon the part of the claimant, no such indemnity or expense reimbursement shall be provided by the Corporation. ARTICLE IX BOOKS AND RECORDS ----------------- Section 1. Books and Records. This Corporation shall maintain accurate ----------------- accounting records and shall keep records of minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the Board of Directors without a meeting and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the Corporation. The Corporation's books and records may be inspected by any shareholder upon reasonable written notice to the Corporation, provided his or her request is made in good faith and for a proper purpose. This Corporation or its agent shall also maintain a record of its shareholders in a form that permits preparation of a list of names and addresses of all shareholders in alphabetical order by classes of shares showing the number and series of shares held by each. This Corporation shall keep a copy of the following records: (a) its Articles or Restated Articles of Incorporation and all amendments thereto currently in effect; (b) its Bylaws or Restated Bylaws and all amendments thereto currently in effect; (c) written communications to all shareholders generally or all shareholders of a class or series within the past three years, including the financial statements furnished for the past three years; (d) a list of the names and business street 17 addresses of its current directors and officers; and (e) its most recent annual report delivered to the Department of State. Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. Section 2. Annual Financial Information. Unless modified by a ---------------------------- resolution of the shareholders within one hundred twenty (120) days of the close of each fiscal year, this Corporation shall furnish each shareholder annual financial statements which may be consolidated or combined statements of the Corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of such fiscal year, an income statement for that year, and a statement of cash flows for that year. If financial statements are prepared for the Corporation on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. If the annual financial statements are reported upon by a certified public accountant, his, her, or its report must accompany the statements. If not, the statements must be accompanied by a statement of the President or the person responsible for this Corporation's accounting records: (a) stating his, her or its reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation; and (b) describing any respects in which the statements were not prepared in accordance with any basis of accounting consistent with the statements prepared for the preceding year. The annual financial statements shall be mailed to each shareholder within one hundred twenty (120) days after the close of each fiscal year or within such additional time thereafter as is reasonably necessary to enable the Corporation to prepare its financial statements if, for reasons beyond its control, the Corporation is unable to prepare its financial statements within the prescribed period. Thereafter, on written request from a shareholder who has not been mailed the statements, the Corporation shall mail him or her the latest financial statements. ARTICLE X CORPORATE SEAL -------------- The Board of Directors shall provide for a corporate seal which may be facsimile, engraved, printed or an impression seal which shall be circular in form and shall have inscribed thereon the name of the Corporation, the words "seal" and "Florida" and the year of incorporation. ARTICLE XI AMENDMENTS ---------- These Bylaws may be altered, amended or repealed and new Bylaws may be adopted, by either a majority of members of the Board of Directors or a majority vote of the shareholders; provided that (i) the Board of Directors may not alter, amend or repeal any Bylaw adopted by shareholders if the shareholders specifically provide that such Bylaw is not subject to amendment or repeal by the directors; and (ii) in the case of any amendment of these Bylaws by shareholder 18 action, two-thirds (66 2/3%) of the shareholders, acting only by voting at a special meeting, will be required to amend any provision in Articles I, II, Article VIII, or this Article XI. 0232448.03 19 EX-10.1 5 SBA COMMUNICATIONS CORP REGISTRATION RIGHTS EXHIBIT 10.1 ------------ SBA COMMUNICATIONS CORPORATION REGISTRATION RIGHTS AGREEMENT ----------------------------- THIS AGREEMENT is made as of this 5th day of March, 1997 by and among SBA Communications Corporation, a Florida Corporation (the "Company"), Steven E. Bernstein ("Bernstein"), Ronald G. Bizick, II ("Bizick") and Robert M. Grobstein ("Grobstein"). RECITALS: --------- WHEREAS, the Company has issued to Bernstein Eight Million Seventy-Five Thousand (8,075,000) shares of its Class B Common Stock, $.01 par value per share (the "Class B Common Stock") and has granted options (the "Options") to Messrs. Bizick and Grobstein to purchase shares of its Class A Common Stock entitling them to purchase Seven Hundred Seventy-Three Thousand Five Hundred Twenty-Eight (773,528) shares and Three Hundred Eighty-Six Thousand Seven Hundred Sixty-Four (386,764) shares, respectively; and WHEREAS, the Company wishes to provide Bernstein, Bizick and Grobstein, and they desire to have, registration rights with respect to shares of Class A Common Stock issuable upon conversion of the Class B Common Stock or exercise of the Options. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. The following terms shall be used in this Agreement with ----------- the following respective meanings: "Affiliate" shall mean (a) any Person directly or indirectly controlling, controlled by or under common control with another Person; (b) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other Person; (c) any officer, director or partner of such Person; (d) any liquidating trust, trustee or other similar Person or entity for any Person; or (e) in case of an individual, any family member to whom such individual may transfer his or her shares pursuant to the provisions of the Shareholders Agreement of even date herewith among the parties hereto and Steven E. Bernstein. "Agreement" shall mean this Registration Rights Agreement, as amended from time to time hereafter. "Commission" shall mean the Securities and Exchange Commission. "Class A Common Stock" shall mean and include the Company's Class A Common Stock, par value $.01 per share, as authorized on the date of this Agreement, and any other securities into which or for which the Company's Class A Common Stock is converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Exchange Act) thereunder, all as the same shall be in effect at the time. "Holder" shall mean Bernstein, Bizick or Grobstein or any other Person who or which is a holder of Registrable Stock and to whom or to which the rights of registration hereunder have been transferred or assigned pursuant to the provisions hereof. "NASD" shall mean the National Association of Securities Dealers, Inc. "Person" shall mean any natural person, partnership, corporation or other legal entity. "Preferred Shareholder" shall mean any Person who purchased Series A Convertible Preferred Stock, par value $.01 per share, pursuant to the Company's Confidential Private Memorandum dated February 21, 1997, and their permitted transferees or assigns. "Registrable Stock" shall mean (a) all Class A Common Stock issued or issuable pursuant to the conversion of the Class B Common Stock or exercise of the Options and (b) any other shares of Class A Common Stock issued in respect of such shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger or consolidation or reorganization, provided, however, that shares of Class A Common Stock shall only be treated as Registrable Stock if and so long as they have not been (i) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such Class A Common Stock are removed upon the consummation of such sale. "Registration Statement" shall mean a registration statement filed by the Company with the Commission for public offering and sale of equity securities of the Company (other than a registration statement on Form S-8, Form S-4, or any successor forms thereto, any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation, any other form of registration statement not available for registering the Registrable Stock or any registration statement relating solely to employee stock option, stock purchase, benefit or similar plans (collectively, "Employee Plans")). "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Securities Act) thereunder, all as the same shall be in effect at the time. 2 "Series A Preferred Shareholders" shall mean those Persons who purchase shares of Series A Preferred Stock of the Company pursuant to the Stock Purchase Agreement and who become a party hereto as provided in the Stock Purchase Agreement. 2. Required Registration. --------------------- (a) If at any time (a) a Holder or Holders request that the Company file a registration statement on Form S-3 or any successor form thereto for a public offering of all or any portion of the shares of Registrable Stock held by such requesting Holder or Holders, and (b) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Registrable Stock specified in such notice; provided, however, that (a) the Company shall not be obligated to effect any registration on Form S-3 pursuant to this Section 2 (whether of Registrable Stock of a Holder or of one or more other Persons) (i) more frequently than twice every twelve (12) months, or (ii) if such registration is proposed to be part of a firm commitment underwritten public offering, unless the underwriters are reasonably acceptable to the Company. Other than as set forth in this Section 2, there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 2. (b) Notwithstanding anything to the contrary contained herein, the Company shall not be required to seek to cause a Registration Statement to become effective pursuant to this Section 2: (i) within one hundred eighty (180) days after the effective date of a Registration Statement filed by the Company (other than a registration of securities solely in connection with an Employee Plan), provided, however, that the Company shall use its best efforts to achieve effectiveness of a registration requested hereunder promptly following such one hundred eighty (180) day period if such request is made during such one hundred eighty (180) day period; (ii) if the Company shall furnish to holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a Registration Statement to be filed in the near future due to pending Company events, or that it would require disclosure of material non- public information relating to the Company which, in the reasonable opinion of the Board of Directors, should not be disclosed, then the Company's obligation to use all reasonable efforts to register, qualify or comply under this Section 2 shall be deferred for a period not to exceed ninety (90) consecutive days from the date of receipt of written request from such Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; (iii) if such registration is proposed to be part of a firm commitment underwritten public offering, unless the underwriters are reasonably acceptable to the Company; and 3 (iv) for any Holder requesting such registration who may then dispose of all of such Holder's Registrable Stock proposed to be so registered pursuant to Rule 144 promulgated under the Securities Act within the three-month period following such proposed registration (taking into account all sales of Registrable Stock which such Holder proposes to sell pursuant to Rule 144 during such three-month period). (c) Following receipt of any notice under this Section 2, the Company shall immediately notify all Holders of Registrable Stock from whom notice has not been received, and such other Persons to whom the Company is obligated to provide notice, that such registration is to be effected and shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from requesting Holders, the number of shares of Registrable Stock specified in such notice (and in all notices received by the Company from other Holders within thirty (30) days after the giving of such notice by the Company). If the proposed method of disposition is an underwriting, the Holders of a majority of the shares of Registrable Stock to be sold in such offering may designate the managing underwriter of such offering, who shall be reasonably acceptable to the Company; provided, however, that the selection by Preferred Shareholders who elect to participate in such offering of a managing underwriter shall prevail over any conflicting selection by the Holders. (d) The Company shall be entitled to include in any Registration Statement referred to in this Section 2, for sale in accordance with the method of disposition specified by the requesting Holders, shares of Class A Common Stock to be sold by the Company for its own account and shares to be sold by any other shareholder pursuant to incidental registration rights granted to such shareholders (such as those rights provided in Section 3), except as and to the extent that, in the opinion of the managing underwriter, if any, such inclusion of shares by other Shareholders would adversely affect the marketing of the Registrable Stock to be sold or that such inclusion is otherwise unadvisable. If, in the good-faith judgment of the managing underwriter of such public offering, if any, the inclusion of all of the shares of Class A Common Stock requested for inclusion pursuant to this Section 2 would adversely affect the successful marketing of the proposed offering or a reduction in the number of shares of Class A Common Stock to be sold is otherwise advisable, then the number of shares of Class A Common Stock to be included in the offering shall be reduced to the required level, first, pro rata by excluding shares to be sold by all Holders of Registrable Stock and any other Persons to whom registration rights are granted by the Company ("Other Persons") based upon the number of shares of Registrable Stock then held by such Other Persons eligible for inclusion in such registration (unless otherwise agreed by the Company and such Other Persons) and then, second, by excluding shares to be sold by Preferred Shareholders. Except for Registration Statements on Form S-8, Form S-4, any successor forms thereto, any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation, any other form of registration statement not available for registering the Registrable Stock or any registration statement relating solely to Employee Plans, the Company will not cause any other Registration Statement with respect to its Class A Common Stock for its own account to become effective less than ninety (90) days after the effective date of any registration requested pursuant to this Section 2. 4 (e) Whenever a requested registration is for an underwritten offering, only shares which are to be included in the underwriting may be included in the registration unless the managing underwriter consents otherwise. 3. Incidental Registration. Each time the Company shall determine to ----------------------- file a Registration Statement in connection with the proposed offer and sale for money of any its equity securities by it or any of its security holders, the Company will give written notice of its determination to all Holders. Upon the written request of a Holder given within thirty (30) days after the giving of any such notice by the Company, the Company will use its best efforts to cause all such shares of Registrable Stock, the Holders of which have so requested registration thereof, to be included in such Registration Statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Stock. If the Registration Statement is to cover, in whole or in part, an underwritten distribution, the Company shall use its best efforts to cause the Registrable Stock requested for inclusion pursuant to this Section 3 to be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. In the event of any such underwritten distribution pursuant to this Section 3, the number of shares of Registrable Stock of the Holders may be reduced if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company or another shareholder of the Company therein or that such reduction is otherwise advisable; provided, however, that any such reduction shall be accomplished first pro rata by excluding shares to be sold by all Holders of Registrable Stock and any other Persons to whom registration rights are granted by the Company ("Other Persons") based upon the number of shares of Registrable Stock then held by such Other Persons eligible for inclusion in such registration (unless otherwise agreed by the Company and such Other Persons) and then, second, by excluding shares to be sold by Preferred Shareholders. Notwithstanding the foregoing provisions, the Company may withdraw any Registration Statement referred to in this Section 3 without thereby incurring any liability to holders of shares of Registrable Stock. In addition, whenever a registration pursuant to this Section 3 is for an underwritten offering, only shares which are to be included in the underwriting may be included in the registration unless the managing underwriter consents otherwise. 4. Registration Procedures. If and whenever the Company is required by ----------------------- the provisions of Section 2 or 3 hereof to effect the registration of shares of Registrable Stock under the Securities Act, the Company will at its expense, as expeditiously as possible: (a) In accordance with the Securities Act and the rules and regulations of the Commission, (i) prepare and file with the Commission a Registration Statement with respect to such securities and use its best efforts to cause such Registration Statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided), (ii) prepare and file with the Commission such amendments to such Registration Statement and supplements to the prospectus contained therein as may be necessary to keep such Registration Statement effective and such Registration Statement and prospectus contained therein accurate and complete for the period of the distribution contemplated thereby (determined as hereinafter 5 provided), and (iii) comply with the provisions of the Securities Act with respect to the distribution of all shares of Registrable Stock covered by such Registration Statement in accordance with the sellers' intended method of distribution set forth in such Registration Statement for such period; (b) If the offering is to be underwritten in whole or in part, enter into a written underwriting agreement in form and substance reasonably satisfactory to the managing underwriter of the public offering, the Company and the Holders participating in such offering; (c) Furnish to the participating Holders and to the underwriters such reasonable number of copies of the Registration Statement, preliminary prospectus, final prospectus and such other documents as such underwriters and participating Holders may reasonably request in order to facilitate the public offering of such securities; (d) Use its best efforts to register or qualify the securities covered by such Registration Statement under such state securities or blue sky laws of such jurisdictions (i) as shall be reasonably appropriate for distribution of the securities covered by such Registration Statement and (ii) as such participating Holders or, in the case of an underwritten public offering, the managing underwriter, may reasonably request within twenty (20) days following the original filing of such Registration Statement, except that the Company shall not for any purpose be required to execute a general consent to service of process, to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified or to subject itself to taxation in such jurisdiction; (e) Promptly notify such participating Holders and each underwriter under the Registration Statement, at any time when a prospectus relating to such securities is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (f) During the time period during which the Company is required, pursuant to Section 4(a), to cause a Registration Statement to be effective, in case any of such participating Holders or any underwriter for any such Holders is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations of the Commission, prepare promptly upon request such amendments or supplements to such Registration Statement and such prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations; (g) Advise such participating Holders promptly after it shall receive notice or obtain knowledge thereof of the issuance of any stop order by the Commission or any state securities commissions or agency suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; 6 (h) Use its best efforts to ensure the obtaining of all necessary approvals from the NASD; and (i) Cause the Registrable Stock registered pursuant to the terms of this Agreement to be listed with Nasdaq or on a securities exchange (which shall be the same as where similar securities of the Company are listed, if the Company has listed securities at the time of such registration). As used herein, the "period of distribution" of Registrable Stock in a firm commitment underwritten public offering shall be deemed to extend until the first to occur of (A) each underwriter completing the distribution of all securities purchased by it or (B) ninety (90) days after the effective date of the Registration Statement, and the "period of distribution" of Registrable Stock in any other registration shall be deemed to extend until the earlier of (i) the sale of all Registrable Stock covered thereby and (ii) ninety (90) days after the effective date of the Registration Statement, if on Form S-1, S-2 or SB-2 (or any such form of registration statement subsequently adopted as a successor to such Form S-1, S-2 or SB-2) and one hundred eighty (180) days after the effective date of the Registration Statement, if on Form S-3 (or any such form of registration statement subsequently adopted as a successor to such Form S-3). In connection with each registration hereunder, the Holders of Registrable Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to ensure compliance with federal and applicable state securities laws. 5. Expenses. -------- (a) With respect to each registration effected pursuant to Section 2 or 3 hereof, all fees, costs and expenses of and incidental to such registration and the public offering in connection therewith shall be borne by the Company; provided, however, that (i) security holders participating in any such registration shall bear their pro rata share of the underwriting discounts and selling commissions and (ii) any such fee, cost or expense which does not constitute a normal fee, cost or expense of such registration and which is attributable solely to a particular security holder participating in any such registration shall be borne by that holder. (b) The fees, costs and expenses of registration to be borne as provided in paragraph (a) above shall include, without limitation, all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and disbursements of counsel for the underwriter or underwriters of such securities (if and only if the Company and/or selling security holders are otherwise required to bear such fees and disbursements), all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified, reasonable fees and disbursements of one counsel for the selling security holders and the premiums 7 and other costs of policies of insurance insuring the Company against liability arising out of such public offering. 6. Indemnification and Contribution. -------------------------------- (a) In the event of a registration of any shares of Registrable Stock pursuant to Section 2 or 3, the Company will indemnify and hold harmless each Holder of such shares of Registrable Stock included in a Registration Statement pursuant to the provisions of this Agreement and any underwriter (as defined in the Securities Act) of such Registrable Stock and any person who controls such Holder or such underwriter within the meaning of the Securities Act, and each of their successors from and against, and will reimburse such Holder and each such underwriter and controlling person with respect to, any and all claims, actions, demands, losses, damages, liabilities, cost and expenses to which such Holder or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or arise out of any violation by the Company of any rule or regulation under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such regulation; provided, however, that the Company will not be liable in any such case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in strict conformity with information furnished by such Holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof; provided, further, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the Final Prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or any Holder or controlling person of such Holder or indemnitee if there is no underwriter or if such underwriter or Holder failed to deliver a copy of the Final Prospectus to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act; and provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations. (b) Each Holder of shares of Registrable Stock, severally and not jointly, which shares are included in a registration pursuant to the provisions of this Agreement, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the Registration Statement, each director of the Company, each underwriter and any person who controls the underwriter and each of their successors from and against, and will reimburse the Company and such officer, director, underwriter or controlling person with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs or expenses to which the Company or such officer, director, underwriter or 8 controlling person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading; provided, however, that such Holder will be liable in any such case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in strict conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the liability of each Holder hereunder shall be limited to the proportion of any such claim, action, demand, loss, damage, liability, cost or expense which is equal to the proportion that the public offering price of the shares of Registrable Stock sold by such Holder under such Registration Statement bears to the total offering price of all securities sold thereunder, but not, in any event, to exceed the proceeds received by such Holder from the sale of shares of Registrable Stock covered by the Registration Statement; provided, further, that the foregoing indemnity agreement is subject to the condition that, insofar as it related to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the Registration Statement becomes effective or in the amended prospectus on file with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any indemnitee if a copy of the Final Prospectus was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act; and provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations. (c) Promptly after receipt by a party to be indemnified pursuant to the provisions of paragraph (a) or (b) of this Section 6 (an "indemnified party") of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of paragraph (a) or (b) of this Section 6, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6 and shall not relieve the indemnifying party from liability under this Section 6 unless such indemnifying party is prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of such paragraph (a) and (b) of this Section 6 for any legal expense subsequently incurred by such indemnified party in connection with the defense thereof other than 9 reasonable costs of investigation; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it that are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party and no indemnifying party may unreasonable withhold its consent to any such settlement. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) In order to provide for just and equitable contributions to joint liability under the Securities Act in any case in which either (i) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Holder of Registrable Stock on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holder of Registrable Stock on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Holder of Registrable Stock on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in any such case, (A) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation and (B) no such Holder will be required to contribute any amount in excess of the proceeds received by such Holder from the sales of Registrable Stock covered by the Registration Statement. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection 10 with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 7. Reporting Requirements Under Securities Exchange Act of 1934. When it ------------------------------------------------------------ is first legally required to do so, the Company shall register its Class A Common Stock under Section 12 of the Exchange Act and shall keep effective such registration and shall timely file such information, documents and reports as the Commission may require or prescribe under Section 13 of the Exchange Act. From and after the effective date of the first Registration Statement filed by the Company, the Company shall (whether or not it shall then be required to do so) timely file such information, documents and reports as the Commission may require or prescribe under Section 13 or 15(d) (whichever is applicable) of the Exchange Act. Immediately upon becoming subject to the reporting requirements of either Section 13 or 15(d) of the Exchange Act, the Company shall forthwith upon request furnish any Holder of Registrable Stock (a) a written statement by the Company that it has complied with such reporting requirements, (b) a copy of the most recent annual or quarterly report of the Company, and (c) such other reports and documents filed by the Company with the Commission as such Holder may reasonably request in availing itself of an exemption for the sale of Registrable Stock without registration under the Securities Act. The Company acknowledges and agrees that the purposes of the requirements contained in this Section 7 are (i) to enable any such Holder to comply with the current public information requirement contained in Paragraph (c) of Rule 144 under the Securities Act should such Holder ever wish to dispose of any of the securities of the Company acquired by it without registration under the Securities Act in reliance upon Rule 144 (or any other similar or successor exemptive provision), and (ii) to qualify the Company for the use of Registration Statements on Form S-3. In addition, the Company shall take such other measures and file such other information, documents and reports as shall hereafter be required by the Commission as a condition to the availability of Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect) and the use of Form S-3. The Company also covenants to use its best efforts, to the extent that it is reasonably within its power to do so, to qualify for the use of Form S-3. From and after the effective date of the first Registration Statement filed by the Company, the Company agrees to use its reasonable best efforts to facilitate and expedite transfers of Registrable Stock pursuant to Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect), which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Stock. 8. Shareholder Information. The Company may require each Holder of ----------------------- Registrable Stock as to which any registration is to be effected pursuant to this Agreement to furnish the Company in a timely manner such information with respect to such Holder and the distribution of such Registrable Stock as the Company may from time to time reasonably request in writing and as shall be required by law or by the Commission in connection therewith. 9. Restrictions on Offerings. Upon written request from the Company and ------------------------- its underwriters, each Holder agrees, for himself, herself and/or itself and any Affiliates or other transferees of his, her or its Registrable Stock, not to, directly or indirectly, offer, sell, pledge, contract to sell, grant any option to purchase, grant a security interest in, hypothecate or otherwise 11 sell or dispose of any Registrable Stock or other equity securities of the Company (including, without limitation, equity securities that may be deemed to be beneficially owned by the Holder in accordance with the rules and regulations of the Commission and equity securities that may be issued upon the exercise of a stock option or warrant) or any securities convertible into, derivative of or exercisable or exchangeable for any rights to purchase or acquire equity securities of the Company, whether now owned or hereafter acquired during the period commencing on the date of the underwriting agreement signed in connection with the Company's initial public offering and ending on the close of business on the one hundred and eightieth (180th) day after the date of the Company's Final Prospectus relating to such initial public offering, and for up to 90 days in connection with subsequent registrations, if any, or for such longer period as may be required by any regulatory agency. The restriction contained in this Section 9 shall not apply (i) to sales of any Registrable Stock or other securities sold by a Holder in such public offering (to the extent such Person is entitled or permitted to do so) and (ii) unless each executive officer and director of the Company and any employee holding five percent (5%) or more of the outstanding Common Stock has agreed to the same restriction. 10. Specific Enforcement. All of the parties hereto acknowledge that the -------------------- parties will be irreparably damaged in the event that this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants or conditions of this Agreement by any of the parties hereto, the other parties shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, or a decree for specific performance, in accordance with the provisions hereof. 11. Notices. Any notice required or permitted to be given hereunder shall ------- be in writing and shall be deemed to be properly given when sent by registered or certified mail, return receipt requested, by Federal Express or other guaranteed overnight delivery service or by facsimile transmission, addressed as follows: If to the Company: SBA Communications Corporation 6001 Broken Sound Parkway Suite 400 Boca Raton, FL 33487 Attention: President If to the Holders: Steven E. Bernstein 5246 Princeton Way Boca Raton, FL 33496 Ronald G. Bizick, II 822 Rambling Drive Circle West Palm Beach, FL 33414 12 Robert M. Grobstein 18949 Treble Lane Boca Raton, FL 33498 and if to any other Holder at such Holder's address for notice as set forth in the register maintained by the Company or, as to any of the foregoing, to such other address as any such party may give the others notice of pursuant to this Section 11, provided, however, that a change of address shall only be effective ----------------- upon receipt. 12. Governing Law. This Agreement shall be governed by, and construed in ------------- accordance with, the laws of the State of Florida, without giving effect to any conflict or choice of law provisions. 13. Waivers; Amendments. No waiver of any right hereunder by any party ------------------- shall operate as a waiver of any other right, or of the same right with respect to any subsequent occasion for its exercise, or of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a continuation of the same breach. All remedies provided by this Agreement are in addition to all other remedies provided by law. 14. Successors and Assigns. This Agreement shall be binding upon and ---------------------- shall inure to the benefit of the respective legal representatives, successors and assigns of the parties hereto; provided, however, that the registration rights conferred herein on the Holders shall only inure to the benefit of a transferee of shares of Class B Common Stock, Class A Common Stock or the Options if: (a) such transferee (other than a transferee that is already a Holder) delivers to the Company a written instrument by which such transferee identifies itself, given the Company notice of such rights, indicates the shares of Registrable Stock owned by it and agrees to be bound by the obligations imposed upon it hereunder (any such transfer shall not be effective unless and until the Company shall have received such written instrument); and (b) any transfer to a subsequent transferee or a transferee also complies with the provisions of this Section 14. 15. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Headings. Headings in this Agreement are included for reference only -------- and shall have no effect upon the construction or interpretation of any part of this Agreement. 17. Severability. If any provision of this Agreement shall be held to be ------------ illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of 13 this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a fully authorized signatory, and each Holder has caused this Agreement to be executed by such individual Holder or by a duly authorized signatory, as of the date first written above. ATTEST: SBA COMMUNICATIONS CORPORATION /s/ Robert M. Grobstein /s/ Steven E. Bernstein _____________________________ By:________________________________ Secretary Steven E. Bernstein, President /s/ Steven E. Bernstein ___________________________________ Steven E. Bernstein /s/ Ronald G. Bizick, II ___________________________________ Ronald G. Bizick, II /s/ Robert M. Grobstein ___________________________________ Robert M. Grobstein 246201.03 14 EX-10.2 6 SBA COMMUNICATIONS CORPORATION REGISTRATION RIGHTS EXHIBIT 10.2 ------------ SBA COMMUNICATIONS CORPORATION REGISTRATION RIGHTS AGREEMENT WHEREAS, SBA Communications Corporation (the "Company"), is this date consummating the Closing pursuant to a Series A Convertible Preferred Stock Purchase Agreement (the "Stock Purchase Agreement"); and WHEREAS, the Company is issuing to certain purchasers shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), and issuing a warrant to purchase shares of Class A Common Stock (each Person who acquires any such shares of Series A Preferred Stock or holds a warrant to purchase shares of Class A Common Stock or the shares acquired upon the exercise of such warrant being herein referred to as a "Preferred Shareholder"); and WHEREAS, the Stock Purchase Agreement and the terms of the warrants provide that the Preferred Shareholders shall be entitled to registration rights and shall be entitled to become parties to and entitled to the benefits of this Agreement, upon the attachment hereto of a signature page executed by each such purchaser; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. The following terms shall be used in this Agreement with the ------------ following respective meanings: "Affiliate" shall mean (a) any Person directly or indirectly controlling, controlled by or under common control with another Person; (b) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other Person; (c) any officer, director or partner of such Person; (d) any liquidating trust, trustee or other similar Person or entity for any Person; or (e) in case of an individual, any family member to whom such individual may transfer his or her shares pursuant to the provisions of the Shareholders Agreement of even date herewith among the parties hereto and Steven E. Bernstein. "Agreement" shall mean this Registration Rights Agreement, as amended from time to time hereafter. "Commission" shall mean the Securities and Exchange Commission. "Class A Common Stock" shall mean and include the Company's Class A Common Stock, par value $.01 per share, as authorized on the date of this Agreement, and any other securities into which or for which the Company's Class A Common Stock is converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Exchange Act) thereunder, all as the same shall be in effect at the time. "Holder" shall mean the Series A Preferred Shareholders or any other Person who or which is a holder of Registrable Stock and to whom or to which the rights of registration hereunder have been transferred or assigned pursuant to the provisions hereof. "NASD" shall mean the National Association of Securities Dealers, Inc. "Person" shall mean any natural person, partnership, corporation or other legal entity. "Registrable Stock" shall mean (a) all Class A Common Stock issued or issuable pursuant to the conversion of the Series A Preferred Stock or the exercise of the warrant issued to Alex. Brown & Sons Incorporated upon consummation of the offering of the Series A Preferred Stock, and (b) any other shares of Class A Common Stock issued in respect of such shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger or consolidation or reorganization, provided, however, that shares of Class A Common Stock shall only be treated as Registrable Stock if and so long as they have not been (i) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction or (ii) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such Class A Common Stock are removed upon the consummation of such sale. "Registration Statement" shall mean a registration statement filed by the Company with the Commission for public offering and sale of equity securities of the Company (other than a registration statement on Form S-8, Form S-4, or any successor forms thereto, any registration statement covering only securities proposed to be issued in exchange for securities or assets of another corporation, any other form of registration statement not available for registering the Registrable Stock or any registration statement relating solely to employee stock option, stock purchase, benefit or similar plans (collectively, "Employee Plans")). "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Securities Act) thereunder, all as the same shall be in effect at the time. "Series A Preferred Shareholders" shall mean those Persons who purchase shares of Series A Preferred Stock of the Company pursuant to the Stock Purchase Agreement and who become a party hereto as provided in the Stock Purchase Agreement. 2 2. Required Registration. ---------------------- (a) At any time, and from time to time, after the earlier to occur of (i) six (6) months after a Registration Statement covering an underwritten initial public offering of shares of Class A Common Stock shall have become effective, or (ii) June 30, 1998, Holders holding in the aggregate not less than 25% of the Registrable Stock may request the Company to register under the Securities Act all or any portion of shares of Registrable Stock held by such requesting Holder or Holders for sale in the manner specified in such notice, subject to the conditions set forth in Section 2(b) below. (b) The Company's obligation to register Registrable Stock under Section 2(a) above is subject to the condition that the reasonably anticipated aggregate price to the public of all Registrable Stock for which registration has been requested by Holders, together with any shares sold by the Company for its own account, will exceed Fifteen Million Dollars ($15,000,000) in the case of a registration which is an initial public offering and Three Million Dollars ($3,000,000) for any other registration, or except as otherwise provided in this Agreement. (c) Notwithstanding anything to the contrary contained herein, the Company shall not be required to seek to cause a Registration Statement to become effective pursuant to this Section 2: (i) within one hundred eighty (180) days after the effective date of a Registration Statement filed by the Company (other than a registration of securities solely in connection with an Employee Plan), provided, however, that the Company shall use its best efforts to achieve effectiveness of a registration requested hereunder promptly following such one hundred eighty (180) day period if such request is made during such one hundred eighty (180) day period; (ii) if the Company shall furnish to holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a Registration Statement to be filed in the near future due to pending Company events, or that it would require disclosure of material non-public information relating to the Company which, in the reasonable opinion of the Board of Directors, should not be disclosed, then the Company's obligation to use all reasonable efforts to register, qualify or comply under this Section 2 shall be deferred for a period not to exceed ninety (90) consecutive days from the date of receipt of written request from such Holders; provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; (iii) if such registration is proposed to be part of a firm commitment underwritten public offering, unless the underwriters are reasonably acceptable to the Company; or (iv) for any Holder requesting such registration who may then dispose of all of such Holder's Registrable Stock proposed to be so registered pursuant to Rule 144 promulgated 3 under the Securities Act within the three-month period following such proposed registration (taking into account all sales of Registrable Stock which such Holder proposes to sell pursuant to Rule 144 during such three-month period). (d) Following receipt of any notice under this Section 2, the Company shall immediately notify all Holders of Registrable Stock from whom notice has not been received that such registration is to be effected and shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from requesting Holders, the number of shares of Registrable Stock specified in such notice (and in all notices received by the Company from other Holders within thirty (30) days after the giving of such notice by the Company). If the proposed method of disposition is an underwriting, the Holders of a majority of the shares of Registrable Stock to be sold in such offering may designate the managing underwriter of such offering, who shall be reasonably acceptable to the Company. The Company shall be obligated to register Registrable Stock pursuant to this Section 2 only on three (3) occasions (other than on Form S-3 pursuant to Section 4 hereof); provided, however, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Registrable Stock specified in notices received as aforesaid and which have not been withdrawn by the Holder thereof or excluded by the underwriter, if any, for sale in accordance with the method of disposition specified by the requesting holders, shall have become effective and all such shares shall have been sold pursuant thereto. (e) The Company shall be entitled to include in any Registration Statement referred to in this Section 2, for sale in accordance with the method of disposition specified by the requesting Holders, shares of Class A Common Stock to be sold by the Company for its own account and shares to be sold by any other shareholder pursuant to incidental registration rights granted to such shareholders in accordance with Section 15, except as and to the extent that, in the opinion of the managing underwriter, if any, such inclusion would adversely affect the marketing of the Registrable Stock to be sold or that such inclusion is otherwise unadvisable. If the Company determines to include shares to be sold by it in any registration requests pursuant to this Section 2, such registration shall be deemed to have been a registration under Section 3 of this Agreement, and not a registration under this Section 2, if the holders of Registrable Stock are unable to include in any such registration statement all of the Registrable Stock initially requested for inclusion in such registration statement. If, in the good-faith judgment of the managing underwriter of such public offering, if any, the inclusion of all of the shares of Class A Common Stock requested for inclusion pursuant to this Section 2 would adversely affect the successful marketing of the proposed offering or a reduction in the number of shares of Class A Common Stock to be sold is otherwise advisable, then the number of shares of Class A Common Stock to be included in the offering shall be reduced to the required level, first, by excluding (on a pro rata basis) shares of Common Stock to be sold by the Company for its own account and shares proposed to be sold by such shareholders granted such incidental registration rights in accordance with Section 15 hereof, and, second, by reducing the participation of such Holders in such offering pro rata among such Holders thereof requesting such registration, based upon the number of shares of Registrable Stock owned by such Holders. Except for Registration Statements on Form S-8, Form S-4, any successor forms thereto, any registration 4 statement covering only securities proposed to be issued in exchange for securities or assets of another corporation, any other form of registration statement not available for registering the Registrable Stock or any registration statement relating solely to Employee Plans, the Company will not cause any other Registration Statement with respect to its Class A Common Stock for its own account to become effective less than ninety (90) days after the effective date of any registration requested pursuant to this Section 2. (f) Whenever a requested registration is for an underwritten offering, only shares which are to be included in the underwriting may be included in the registration unless the managing underwriter consents otherwise. 3. Incidental Registration. Each time the Company shall determine to ----------------------- file a Registration Statement (other than pursuant to Section 2 or Section 4) in connection with the proposed offer and sale for money of any its equity securities by it or any of its security holders, the Company will give written notice of its determination to all Holders. Upon the written request of a Holder given within thirty (30) days after the giving of any such notice by the Company, the Company will use its best efforts to cause all such shares of Registrable Stock, the Holders of which have so requested registration thereof, to be included in such Registration Statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Stock. If the Registration Statement is to cover, in whole or in part, an underwritten distribution, the Company shall use its best efforts to cause the Registrable Stock requested for inclusion pursuant to this Section 3 to be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. 4. Registration on Form S-3. If at any time (a) a Holder or Holders -------------------------- request that the Company file a registration statement on Form S-3 or any successor form thereto for a public offering of all or any portion of the shares of Registrable Stock held by such requesting Holder or Holders, and (b) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Registrable Stock specified in such notice; provided, however, that (a) the Company shall not be obligated to effect any registration on Form S-3 pursuant to this Section 4 (whether of Registrable Stock of such Holder or of one or more other Holders) (i) more frequently than twice every twelve (12) months, (ii) if a certificate of the type discussed in Section 2(c)(ii) has been provided (in which case the restrictions on the Company's right to delay such a registration set forth in Section 2(c)(ii) shall apply), (iii) unless the aggregate offering price in each registration on Form S-3 equals $1.0 million or more; or (iv) if such registration is proposed to be part of a firm commitment underwritten public offering, unless the underwriters are reasonably acceptable to the Company, and (b) the Company shall not be obligated to effect any such registration for any Holder desiring to participate in such registration who may then dispose of all such Holder's Registrable Stock proposed to be so registered pursuant to Rule 144 under the Securities Act within the three (3) months period following such proposed registration on Form S-3 (taking into account all sales of Registrable Stock which such Holder proposes to sell pursuant to 5 Rule 144 during such three (3) month period). Whenever the Company is required by this Section 4 to use its best efforts to effect the registration of Registrable Stock, each of the procedures and requirements of Section 2 (including, but not limited to, the requirements that the Company notify all Holders from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration, provided, however, in all events, other than as set forth in this Section 4, there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 4. Notwithstanding the foregoing, the Company shall not be required to seek to cause a Registration Statement to become effective pursuant to this Section 4 within one hundred eighty days (180) days after the effective date of a Registration Statement filed by the Company (other than a registration of securities solely in connection with an Employee Plan); provided, that the Company shall use its best efforts to achieve effectiveness of a registration requested pursuant to this Section 4 promptly following such one hundred eighty (180) day period if such request is made during such one hundred eighty (180) day period. 5. Registration Procedures. If and whenever the Company is required by ------------------------ the provisions of Section 2, 3 or 4 hereof to effect the registration of shares of Registrable Stock under the Securities Act, the Company will at its expense, as expeditiously as possible: (a) In accordance with the Securities Act and the rules and regulations of the Commission, (i) prepare and file with the Commission a Registration Statement with respect to such securities and use its best efforts to cause such Registration Statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided), (ii) prepare and file with the Commission such amendments to such Registration Statement and supplements to the prospectus contained therein as may be necessary to keep such Registration Statement effective and such Registration Statement and prospectus contained therein accurate and complete for the period of the distribution contemplated thereby (determined as hereinafter provided), and (iii) comply with the provisions of the Securities Act with respect to the distribution of all shares of Registrable Stock covered by such Registration Statement in accordance with the sellers' intended method of distribution set forth in such Registration Statement for such period; (b) If the offering is to be underwritten in whole or in part, enter into a written underwriting agreement in form and substance reasonably satisfactory to the managing underwriter of the public offering, the Company and the Holders participating in such offering; (c) Furnish to the participating Holders and to the underwriters such reasonable number of copies of the Registration Statement, preliminary prospectus, final prospectus and such other documents as such underwriters and participating Holders may reasonably request in order to facilitate the public offering of such securities; (d) Use its best efforts to register or qualify the securities covered by such Registration Statement under such state securities or blue sky laws of such jurisdictions (i) as shall be reasonably appropriate for distribution of the securities covered by such Registration Statement 6 and (ii) as such participating Holders or, in the case of an underwritten public offering, the managing underwriter, may reasonably request within twenty (20) days following the original filing of such Registration Statement, except that the Company shall not for any purpose be required to execute a general consent to service of process, to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified or to subject itself to taxation in such jurisdiction; (e) Promptly notify such participating Holders and each underwriter under the Registration Statement, at any time when a prospectus relating to such securities is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (f) During the time period during which the Company is required, pursuant to Section 5(a), to cause a Registration Statement to be effective, in case any of such participating Holders or any underwriter for any such Holders is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations of the Commission, prepare promptly upon request such amendments or supplements to such Registration Statement and such prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations; (g) Advise such participating Holders promptly after it shall receive notice or obtain knowledge thereof of the issuance of any stop order by the Commission or any state securities commissions or agency suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (h) Use its best efforts to ensure the obtaining of all necessary approvals from the NASD; and (i) Cause the Registrable Stock registered pursuant to the terms of this Agreement to be listed with Nasdaq or on a securities exchange (which shall be the same as where similar securities of the Company are listed, if the Company has listed securities at the time of such registration). As used herein, the "period of distribution" of Registrable Stock in a firm commitment underwritten public offering shall be deemed to extend until the first to occur of (A) each underwriter completing the distribution of all securities purchased by it or (B) ninety (90) days after the effective date of the Registration Statement, and the "period of distribution" of Registrable Stock in any other registration shall be deemed to extend until the earlier of (i) the sale of all Registrable Stock covered thereby and (ii) one hundred eighty (180) days after the effective date of the Registration Statement, if on Form S-1, S-2 or SB-2 (or any such form of registration statement subsequently adopted as a successor to such Form S-1, S-2 or SB-2) and ninety (90) days after the effective date of the 7 Registration Statement, if on Form S-3 (or any such form of registration statement subsequently adopted as a successor to such Form S-3). In connection with each registration hereunder, the Holders of Registrable Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to ensure compliance with federal and applicable state securities laws. In the event of any underwritten distribution pursuant to Sections 2, 3 or 4 hereof, the number of shares of Registrable Stock of the Holders and the number of other securities ("Other Securities") to be included in such offering (pursuant to registration rights granted to Persons pursuant to the provisions of Section 15 (herein "Other Persons")) may be reduced (except for shares to be sold by the Company in an offering initiated by the Company or prorata with shares to be sold by any Other Person pursuant to demand registration rights granted to such party in accordance with Section 15) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company or another shareholder of the Company therein or that such reduction is otherwise advisable; provided, however, that any such reduction shall be accomplished first pro rata among any such Other Persons holding Other Securities based upon the number of shares of Other Securities then held by such Other Persons eligible for inclusion in such registration and, second, pro rata among all Holders of Registrable Stock. Notwithstanding the foregoing provisions, the Company may withdraw any Registration Statement referred to in Sections 2, 3 or 4 without thereby incurring any liability to holders of shares of Registrable Stock. In addition, whenever a registration pursuant to Sections 2, 3 or 4 is for an underwritten offering, only shares which are to be included in the underwriting may be included in the registration unless the managing underwriter consents otherwise 6. Expenses. -------- (a) With respect to each registration effected pursuant to Section 2, 3 or 4 hereof, all fees, costs and expenses of and incidental to such registration and the public offering in connection therewith shall be borne by the Company; provided, however, that (i) security holders participating in any such registration shall bear their pro rata share of the underwriting discounts and selling commissions and (ii) any such fee, cost or expense which does not constitute a normal fee, cost or expense of such registration and which is attributable solely to a particular security holder participating in any such registration shall be borne by that holder. (b) The fees, costs and expenses of registration to be borne as provided in paragraph (a) above shall include, without limitation, all registration, filing and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and disbursements of counsel for the underwriter or underwriters of such securities (if and only if the Company and/or selling security holders are otherwise required to bear such fees and disbursements), all legal fees and disbursements and other expenses of complying with state 8 securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified, reasonable fees and disbursements of one counsel for the selling security holders and the premiums and other costs of policies of insurance insuring the Company against liability arising out of such public offering. 7. Indemnification and Contribution. --------------------------------- (a) In the event of a registration of any shares of Registrable Stock pursuant to Section 2, 3, or 4, the Company will indemnify and hold harmless each Holder of such shares of Registrable Stock included in a Registration Statement pursuant to the provisions of this Agreement and any underwriter (as defined in the Securities Act) of such Registrable Stock and any person who controls such Holder or such underwriter within the meaning of the Securities Act, and each of their successors from and against, and will reimburse such Holder and each such underwriter and controlling person with respect to, any and all claims, actions, demands, losses, damages, liabilities, cost and expenses to which such Holder or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or arise out of any violation by the Company of any rule or regulation under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such regulation; provided, however, that the Company will not be liable in any such case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in strict conformity with information furnished by such Holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof; provided, further, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the Final Prospectus, such indemnity agreement shall not inure to the benefit of any underwriter or any Holder or controlling person of such Holder or indemnitee if there is no underwriter or if such underwriter or Holder failed to deliver a copy of the Final Prospectus to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act; and provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations. (b) Each Holder of shares of Registrable Stock, severally and not jointly, which shares are included in a registration pursuant to the provisions of this Agreement, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the Registration Statement, each director of the Company, each underwriter and any person who controls the underwriter and each of their successors from and against, and will reimburse the Company and such officer, director, underwriter or controlling person with respect to, any and all claims, actions, demands, losses, damages, 9 liabilities, costs or expenses to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Registration Statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading; provided, however, that such Holder will be liable in any such case to the extent, but only to the extent, that any such claim, action, demand, loss, damage, liability, cost or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in strict conformity with written information furnished by such Holder specifically for use in the preparation thereof; provided, however, that the liability of each Holder hereunder shall be limited to the proportion of any such claim, action, demand, loss, damage, liability, cost or expense which is equal to the proportion that the public offering price of the shares of Registrable Stock sold by such Holder under such Registration Statement bears to the total offering price of all securities sold thereunder, but not, in any event, to exceed the proceeds received by such Holder from the sale of shares of Registrable Stock covered by the Registration Statement; provided, further, that the foregoing indemnity agreement is subject to the condition that, insofar as it related to any such untrue statement (or alleged untrue statement) or omission (or alleged omission) made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the Registration Statement becomes effective or in the amended prospectus on file with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any indemnitee if a copy of the Final Prospectus was not furnished to the person or entity asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act; and provided, further, that this indemnity shall not be deemed to relieve any underwriter of any of its due diligence obligations. (c) Promptly after receipt by a party to be indemnified pursuant to the provisions of paragraph (a) or (b) of this Section 7 (an "indemnified party") of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of paragraph (a) or (b) of this Section 7, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7 and shall not relieve the indemnifying party from liability under this Section 7 unless such indemnifying party is prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of such paragraph (a) and (b) of this Section 7 for any legal expense 10 subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it that are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party and no indemnifying party may unreasonable withhold its consent to any such settlement. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) In order to provide for just and equitable contributions to joint liability under the Securities Act in any case in which either (i) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 7, then, and in each such case, the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Holder of Registrable Stock on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holder of Registrable Stock on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Holder of Registrable Stock on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in any such case, (A) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation and (B) no such Holder will be required to contribute any amount in excess of the proceeds received by such Holder from the sales of Registrable Stock covered by the Registration Statement. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection 11 with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 8. Reporting Requirements Under Securities Exchange Act of 1934. When --------------------------------------------------------------- it is first legally required to do so, the Company shall register its Class A Common Stock under Section 12 of the Exchange Act and shall keep effective such registration and shall timely file such information, documents and reports as the Commission may require or prescribe under Section 13 of the Exchange Act. From and after the effective date of the first Registration Statement filed by the Company, the Company shall (whether or not it shall then be required to do so) timely file such information, documents and reports as the Commission may require or prescribe under Section 13 or 15(d) (whichever is applicable) of the Exchange Act. Immediately upon becoming subject to the reporting requirements of either Section 13 or 15(d) of the Exchange Act, the Company shall forthwith upon request furnish any Holder of Registrable Stock (a) a written statement by the Company that it has complied with such reporting requirements, (b) a copy of the most recent annual or quarterly report of the Company, and (c) such other reports and documents filed by the Company with the Commission as such Holder may reasonably request in availing itself of an exemption for the sale of Registrable Stock without registration under the Securities Act. The Company acknowledges and agrees that the purposes of the requirements contained in this Section 8 are (i) to enable any such Holder to comply with the current public information requirement contained in Paragraph (c) of Rule 144 under the Securities Act should such Holder ever wish to dispose of any of the securities of the Company acquired by it without registration under the Securities Act in reliance upon Rule 144 (or any other similar or successor exemptive provision), and (ii) to qualify the Company for the use of Registration Statements on Form S-3. In addition, the Company shall take such other measures and file such other information, documents and reports as shall hereafter be required by the Commission as a condition to the availability of Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect) and the use of Form S-3. The Company also covenants to use its best efforts, to the extent that it is reasonably within its power to do so, to qualify for the use of Form S-3. From and after the effective date of the first Registration Statement filed by the Company, the Company agrees to use its reasonable best efforts to facilitate and expedite transfers of Registrable Stock pursuant to Rule 144 under the Securities Act (or any similar or successor exemptive provision hereafter in effect), which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Stock. 9. Shareholder Information. The Company may require each Holder of Registrable Stock as to which any registration is to be effected pursuant to this Agreement to furnish the Company in a timely manner such information with respect to such Holder and the distribution of such Registrable Stock as the Company may from time to time reasonably request in writing and as shall be required by law or by the Commission in connection therewith. 10. Restrictions on Offerings. Upon written request from the Company and its underwriters, each Holder agrees, for himself, herself and/or itself and any Affiliates or other transferees of his, her or its Registrable Stock, not to, directly or indirectly, offer, sell, pledge, contract to sell, grant any option to purchase, grant a security interest in, hypothecate or otherwise 12 sell or dispose of any Registrable Stock or other equity securities of the Company (including, without limitation, equity securities that may be deemed to be beneficially owned by the Holder in accordance with the rules and regulations of the Commission and equity securities that may be issued upon the exercise of a stock option or warrant) or any securities convertible into, derivative of or exercisable or exchangeable for any rights to purchase or acquire equity securities of the Company, whether now owned or hereafter acquired during the period commencing on the date of the underwriting agreement signed in connection with the Company's initial public offering and ending on the close of business on the one hundred and eightieth (180th) day after the date of the Company's Final Prospectus relating to such initial public offering, and for up to 90 days in connection with subsequent registrations, if any (but only to the extent that such Holder is a beneficial owner of at least 5% of the outstanding Common Stock), or for such longer period as may be required by any regulatory agency. The restriction contained in this Section 10 shall not apply (i) to sales of any Registrable Stock or other securities sold by a Holder in such public offering, (to the extent such Person is entitled or permitted to do so) and (ii) unless each executive officer and director of the Company and any employee holding five percent (5%) or more of the outstanding Common Stock has agreed to the same restriction. In addition, the Company will waive this restriction if consented to by the managing underwriter. Except in a public offering registered under the Securities Act, the Company shall not issue or sell any equity security unless each recipient thereof agrees in writing with the Company not to offer to sell or sell such equity security on terms at least as restrictive as those set forth herein. 11. Specific Enforcement. All of the parties hereto acknowledge that ---------------------- the parties will be irreparably damaged in the event that this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants or conditions of this Agreement by any of the parties hereto, the other parties shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, or a decree for specific performance, in accordance with the provisions hereof. 12. Notices. Any notice required or permitted to be given hereunder -------- shall be in writing and shall be deemed to be properly given when sent by registered or certified mail, return receipt requested, by Federal Express or other guaranteed overnight delivery service or by facsimile transmission, addressed as follows: If to the Company: SBA Communications Corporation 6001 Broken Sound Parkway Suite 400 Boca Raton, FL 33487 Attention: Steven E. Bernstein, President If to the Holders: At their respective addresses as set forth on their signature pages hereto; 13 and if to any other Holder at such Holder's address for notice as set forth in the register maintained by the Company or, as to any of the foregoing, to such other address as any such party may give the others notice of pursuant to this Section 12, provided, however, that a change of address shall only be effective upon receipt. 13. Governing Law. This Agreement shall be governed by, and construed ------------- in accordance with, the laws of the State of Florida, without giving effect to any conflict or choice of law provisions. 14. Waivers; Amendments. No waiver of any right hereunder by any party --------------------- shall operate as a waiver of any other right, or of the same right with respect to any subsequent occasion for its exercise, or of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a continuation of the same breach. All remedies provided by this Agreement are in addition to all other remedies provided by law. This Agreement may not be amended except by a writing executed by the Company and by Holders of at least seventy-five percent (75%) of the Registrable Stock held by the Holders (including for this purpose all shares of Class A Common Stock issued or issuable upon conversion of the Series A Preferred Stock); provided that (a) the provisions of Section 10 may not be amended unless such amendment is executed by each Holder affected thereby and (b) the provisions of this Section 14 may not be amended unless such amendment is executed by each Holder. 15. Other Registration Rights. -------------------------- (a) Within the limitations prescribed by this Section 15(a), but not otherwise, the Company may grant to subsequent investors in the Company rights of incidental registration (such as those rights provided in Section 3 hereof); provided that (i) such rights may only pertain to shares of the Class A Common Stock authorized after the date hereof, (ii) such rights may be granted with respect to registrations requested by Holders pursuant to Section 2 or Section 4 hereof, but only in respect of that portion of any such registration as remains after inclusion of all shares of Registrable Stock requested by Holders, and (iii) such rights may be granted with respect to registrations initiated by the Company, but only in respect of that portion of any such registration as is available under the limitations set forth in Section 3 hereof. (b) The Company may not grant to subsequent investors in the Company rights of registration upon request (such as those rights provided in Sections 2 and 4 hereof) unless (i) such rights pertain only to shares of Class A Common Stock, authorized after the date hereof, (ii) such rights shall not become exercisable prior to the first registration pursuant to Section 2 hereof or prior to the first Registration Statement filed by the Company, (iii) all Holders are given enforceable contractual rights to participate in registrations requested by such subsequent investors (but subject to the right of prorata allocation of registration for such subsequent investors in the event of underwriters' cutbacks), (iv) such rights shall not permit such investors the right to cause a registration to become effective earlier than ninety (90) days after the effective date of any 14 registration requested by the Holders pursuant to Section 2, and (v) such rights shall not be more favorable than those granted to the Holders. (c) The parties acknowledge that as of the date hereof the Company has granted rights of incidental registration (such as those rights provided in Section 3 hereof) and rights of registration on Form S-3 upon request (such as those rights provided in Section 4 hereof) to the holders of 9,235,292 shares (including options to acquire such shares) of Class B Common Stock and Class A Common Stock or their equivalents. 16. Successors and Assigns. This Agreement shall be binding upon and ---------------------- shall inure to the benefit of the respective legal representatives, successors and assigns of the parties hereto; provided, however, that the registration rights conferred herein on the Holders shall only inure to the benefit of a transferee of shares of Class A Common Stock if: (a) such transferee agrees to the provisions of Section 10 in advance if required by the underwriters; (b) there is transferred to such transferee at least thirty-three and one-third percent (331/3%) of the total number of shares of Registrable Stock originally issued (including for this purpose shares of Registrable Stock issuable upon conversion of the Series A Preferred Stock) to such transferor Holder (as such number is adjusted in the event that the outstanding shares of Class A Common Stock shall have been changed into a different number of shares by reason of any recapitalization, split-up, combination, exchange of shares, readjustment or a stock dividend thereon); (c) such transferee (other than a transferee that is already a Holder) delivers to the Company a written instrument by which such transferee identifies itself, gives the Company notice of such rights, indicates the shares of Registrable Stock owned by it and agrees to be bound by the obligations imposed upon it hereunder (any such transfer shall not be effective unless and until the Company shall have received such written instrument); (d) any transfer to a subsequent transferee or a transferee also complies with the provisions of this Section 16; and (e) such transferee is not a Person engaged in a competitive activity with the Company. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18. Headings. Headings in this Agreement are included for reference only and shall have no effect upon the construction or interpretation of any part of this Agreement. 15 19. Severability. If any provision of this Agreement shall be held to ------------- be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a fully authorized signatory, and each Holder has caused this Agreement to be executed by such individual Holder or by a duly authorized signatory, as of the 6th day of March, 1997. ATTEST: SBA COMMUNICATIONS CORPORATION /s/ Robert M. Grobstein /s/ Steven E. Bernstein _____________________________ By:________________________________ Secretary Steven E. Bernstein, President PREFERRED SHAREHOLDERS: [See counterpart signature pages] 16 EX-10.3 7 SBA COMMUNICATIONS CORPORATION SHAREHOLDERS EXHIBIT 10.3 ------------ SBA COMMUNICATIONS CORPORATION SHAREHOLDERS AGREEMENT This Shareholders Agreement (this "Agreement") is made and entered into as of the date set forth below by and among Steven E. Bernstein, SBA Communications Corporation, a Florida corporation (the "Company"), and the purchasers of shares of Series A Convertible Preferred Stock. WHEREAS, Mr. Bernstein holds an aggregate of 8,075,000 shares of the Company's Class B Common Stock; and WHEREAS, the Company is as of this date consummating the Closing under a Series A Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to which the Company is issuing to certain purchasers shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred Stock") and the Company is issuing to Alex. Brown & Sons Incorporated a warrant (the "Agent's Warrant") to purchase shares of Class A Common Stock (each Person (defined below), who acquires any such shares of Class A Common Stock or holds a warrant to purchase shares of Series A Preferred Stock or the shares acquired upon the exercise of such warrant, being herein referred to as a "Preferred Shareholder" and collectively with Mr. Bernstein, the "Shareholders"); and WHEREAS, the Stock Purchase Agreement provides that the Preferred Shareholders shall become parties to this Agreement by executing and delivering a signature page to this Agreement; NOW, THEREFORE, in consideration of the foregoing and the agreements set forth below, the parties hereby agree as follows: 1. CERTAIN DEFINED TERMS As used in this Agreement, the following terms shall have the following respective meanings: "Affiliate" shall mean (a) any Person directly or indirectly --------- controlling, controlled by or under common control with another Person; (b) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other Person; (c) any officer, director or partner of such Person; (d) any liquidating trust, trustee or other similar Person or entity for any Person; or (e) in case of an individual, any family member to whom such individual may transfer his or her shares pursuant to Section 2 hereof. "Charter" shall mean the Articles of Incorporation of the ------- Company, as amended from time to time. "Class B Common Stock" shall mean and include the Company's --------------------- Class B Common Stock, par value $.01 per share, as authorized on the date of this Agreement and any other securities into which or for which the Company's Class B Common Stock is converted or exchanged pursuant to a plan of reorganization, recapitalization, merger, sale of assets, the provisions of the Charter or otherwise. "Common Stock Conversion Shares" shall mean (a) those shares ------------------------ of Class A Common Stock, par value $.01 per share, of the Company issued or issuable upon the conversion of the Series A Preferred Stock or Class B Common Stock, as adjusted from time to time and (b) those shares of Class A Common Stock issuable upon the exercise of the Agent's Warrant. "Conversion Price" shall mean the price, as in effect from ----------------- time to time, at which shares of Series A Preferred Stock are convertible into Common Stock Conversion Shares as defined in, and pursuant to, the Charter. "Eligible Class B Stockholder" shall mean members of Steven E. ---------------------------- Bernstein's Immediate Family or their lineal descendants, spouses of lineal descendants or lineal descendants of spouses, whether alive as of the date hereof or born subsequently, any trusts or other estate planning vehicles for the benefit of any of the foregoing, whether existing as of the date hereof or created subsequently. "Immediate Family" of Mr. Bernstein shall include his spouse, parents, children, siblings, mother and father-in-law, sons and daughters-in-laws and brothers and sisters-in-law. "Person" shall mean any natural person, partnership, ------ corporation or other legal entity. "Qualified Public Offering" shall mean and include the closing ------------------------- of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering the offer and sale of Common Stock for the account of the Company from which the aggregate gross proceeds to the Company equal or exceed $20,000,000 at a per share issue price of at least 150% of the then applicable Conversion Price of Conversion Shares if such public offering occurs before June 30, 1998 or at a price share of at least 200% of the then applicable Conversion Price and Conversion Shares if such public offering occurs on or after June 30, 1998. "Shares" of a Shareholder shall mean and include all Stock now ------ owned or hereafter acquired by such Shareholder. "Stock" shall mean and include all shares of Class B Common ----- Stock, Conversion Shares, or Series A Preferred Stock, and all other securities of the Company that may be issued in exchange for or in respect of shares of Class B Common Stock, Conversion Shares, or Series A Preferred Stock, respectively (whether by way of stock split, stock dividend, combination, reclassification, reorganization or any other means). 2. PROHIBITED TRANSFERS Mr. Bernstein may not sell or transfer all or any of his shares of Class B Common Stock except to an Eligible Class B Stockholder or except in accordance with this Agreement, and no attempted transfer of any Class B Common Stock in violation of any provision of this Agreement shall be effective to pass any title or interest therein. 3. RIGHT OF PARTICIPATION IN SALES (a) If at any time Mr. Bernstein desires to sell or transfer all or any part of his shares of Class B Common Stock or Common Stock Conversion Shares to a Person (a "Purchaser"), Mr. Bernstein (the "Selling Shareholder") shall promptly give written notice (the "Offer" for the purposes of this Section 3) to the Preferred Shareholders. The Offer shall disclose the identity of the Purchaser, the 2 number of shares of Class B Common Stock or Common Stock Conversion Shares to be sold or transferred, the total number of shares of Class B Common Stock and Common Stock Conversion Shares owned by the Selling Shareholder, the terms and conditions, including price, (calculated in the case of shares of Class B Common Stock by treating such shares as then converted to Common Stock Conversion Shares) of the proposed sale, and any other material facts relating to the proposed sale. (b) Each Preferred Shareholder shall have the right to sell to the Purchaser, as a condition to such sale by such Selling Shareholder desiring to sell, at the same price per share (calculated in the case of shares of Series A Preferred Stock by treating such shares as then converted to Common Stock Conversion Shares and shares of the Company's Series B Preferred Stock, $.01 par value, per share (the "Series B Preferred Stock")) and on the same terms and conditions as involved in such sale by the Selling Shareholder, all or any part of that number of Common Stock Conversion Shares equal to the product obtained by multiplying (i) the aggregate number of Common Stock Conversion Shares covered by the Offer by (ii) a fraction the numerator of which is the number of Common Stock Conversion Shares held by such Preferred Shareholder at the time of the sale or transfer and the denominator of which is the total number of Common Stock Conversion Shares (calculated by treating such shares as then converted to Common Stock Conversion Shares) held at the time of the sale or transfer by the Selling Shareholder and all the Preferred Shareholders exercising their rights of participation hereunder (such Preferred Shareholder being herein called a "Participating Shareholder"); provided, however, that any Participating Shareholder shall not be required to deliver to the Purchaser any Series B Preferred Stock or any other property other than the Common Stock Conversion Shares in connection with the proposed purchase by the Purchaser. (c) If a Participating Shareholder wishes to so participate in any sale under this Section 3, he, she or it shall notify the Selling Shareholder in writing of such intention as soon as practicable after the Participating Shareholder's receipt of the Offer, and in any event within 30 days after the date the notice of the Offer was given. Such notification shall be delivered to the Selling Shareholder (with copies to the Company and the Preferred Shareholders). (d) The Selling Shareholder and other Participating Shareholders shall sell to the Purchaser all, or at the option of the Purchaser, any part of the Common Stock Conversion Shares proposed to be sold by them at not more than the price and upon other terms and conditions, if any, not more favorable to the Purchaser than those in the Offer; provided, however, that any purchase of less than all of such Shares by the Purchaser shall require the consent of each Participating Shareholder and shall be made from the Selling Shareholder and the Participating Shareholders pro rata based upon the relative amount of the Shares that the Selling Shareholder and the Participating Shareholders are otherwise entitled to sell pursuant to Section 3(b) hereof. (e) Each Participating Shareholder who is a holder of Series A Preferred Stock shall effect its participation in the sale by converting its Series A Preferred Stock into Series B Preferred Stock and Class A Common Stock and then promptly delivering to the Selling Shareholder for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the number of shares of Class A Common Stock which such Participating Shareholder elects to sell. The Company agrees to make any such conversion concurrent with the actual transfer of such shares to the Purchaser. The Participating Shareholders shall be under no obligation to transfer any shares of Series B Preferred Stock received upon such conversion as a result of the operation of this Section 3. 3 (f) The rights afforded by this Section 3 shall be inapplicable where Mr. Bernstein elects to transfer any or all of his Class B Common Stock to an Eligible Class B Stockholder. 4. EXPIRATION OF AGREEMENT Notwithstanding Section 8 hereof to the contrary, this Agreement shall expire and terminate on the consummation of a Qualified Public Offering. 5. SPECIFIC ENFORCEMENT Each Shareholder expressly agrees that he, she or it and the Company will be irreparably damaged if this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement by a Shareholder, the other Shareholders and the Company shall, in addition to all other remedies, each be entitled to a temporary or permanent injunction, without showing any actual damage, and/or a decree for specific performance, in accordance with the provisions hereof. 6. LEGEND Each certificate evidencing any of the shares of Class B Common Stock shall bear a legend substantially as follows: The shares represented by this certificate are subject to restrictions on transfer and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with and subject to all the terms and conditions of a certain Shareholders Agreement dated as of March 6, 1997, as amended from time to time, a copy of which the Company will furnish to the holder of this certificate upon request and without charge. 7. NOTICE Any notice required or permitted to be given hereunder shall be in writing and shall be deemed to be properly given when sent by registered or certified mail, return receipt requested, by guaranteed overnight delivery service or by facsimile transmission, addressed as follows: If to the Company: SBA Communications Corporation 6001 Broken Sound Parkway Boca Raton, Florida 33487 Attention: Steven E. Bernstein, President If to the Shareholders: At their respective addresses set forth on their signature pages hereto; 4 or, as to any of the foregoing, to such other address as any such party may give the others notice of pursuant to this Section 7, provided, however, that a change of address shall only be effective upon receipt. 8. BOARD OF DIRECTORS AND AUTHORITY OF THE BOARD (a) The Board of Directors of the Corporation (the "Board") shall be comprised initially of five (5) directors. The holders of the Series A Preferred Stock shall be entitled to designate two (2) directors as follows: ABS Capital Partners II, L.P. shall be entitled to designate one director and Advent VII, L.P. shall be entitled to designate one director. Steven E. Bernstein shall be entitled to designate two directors, one of which may be himself. The final director shall be an independent director designated by Mr. Bernstein who is reasonably acceptable to the directors designated by the holders of the Series A Preferred Stock. In the event of any vacancy on the Board arising for any reason, the Shareholders or class of Shareholders who designated the director whose office has become vacant shall be entitled to designate a successor director. If any Shareholder or class of Shareholders notifies the other stockholder(s) in writing that he wishes to remove a director whom he has designated, the other stockholders shall cooperate in taking all action necessary to effect the removal of such director as promptly as practicable. (b) All proposed acquisitions of stock or assets by the Company or any of its subsidiaries with a purchase price in excess of $1,000,000 must be approved by the Board. (c) The Board shall establish a Compensation Committee of three (3) members, consisting of the two (2) directors designated by the holders of the Series A Preferred Stock and one (1) director designated by Steven E. Bernstein, which may be himself. (d) Shareholders shall vote all of their Stock, execute and deliver such further documents, take such further action and use their best efforts to cause their representatives on the Board to vote in such a manner, as may be necessary or desirable to carry out the purpose and intent of this Section 8 and the other provisions of this Agreement. (e) If a Shareholder shall at any time fail or refuse to vote his Stock as provided in paragraphs (b) through (d) above, thereupon without further action by any person, such Shareholders shall be deemed to have irrevocably appointed, and hereby does irrevocably appoint, the other stockholders who are a party to this Agreement as his or her attorney and proxy to vote his Stock as provided in this Section 8. 9. GOVERNING LAW; SUCCESSORS AND ASSIGNS This Agreement shall be governed by the laws of the State of Florida and except as expressly provided herein shall be binding upon the heirs, personal representatives, executors, administrators, successors and assigns of the parties. The rights of the Preferred Shareholders hereunder are assignable to any assignee or transferee of all or a portion of the Shares held by such Preferred Shareholders. 5 10. RIGHTS AND OBLIGATIONS OF CERTAIN TRANSFEREES OF SHARES If Mr. Bernstein transfers any of his shares of Class B Common Stock to any Eligible Class B Stockholder, such transferee shall agree in writing, as a condition to such transfer, that any future sales or transfers of such shares of Class B Common Stock by the holder thereof (the "Transferring Holder") shall be subject to the restrictions on transfer set forth in Sections 2 and 3 hereof. 11. SEVERABILITY If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. 12. HEADINGS Headings in this Agreement are included for reference only and shall have no effect upon the construction or interpretation of any part of this Agreement. 13. COUNTERPARTS This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14. REPORTING REQUIREMENTS The Company will furnish the following to each Shareholder which is a holder of any Series A Preferred Stock, Series B Preferred Stock or any Common Stock Conversion Shares: a. as soon as available and in any event within ninety (90) days after the end of each fiscal year of the Company, a copy of the annual audit report for such year for the Company, including therein a balance sheet of the Company as of the end of such fiscal year and statements of operations, shareholders' equity and cash flows of the Company for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, if any, together with supporting notes thereto, all audited by the Company's Auditors, together with a summary prepared by Management concerning the Company's operations and financial condition; b. as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of the Company, an unaudited balance sheet of the Company as of the end of such quarter and unaudited statements of operations, shareholders' equity and cash flows of the Company for the period ending with such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the prior fiscal year duly certified by the chief financial officer of the Company as having been prepared in accordance with GAAP applied on a consistent basis (provided that such unaudited statements need not contain footnotes and will be subject to normal year-end adjustments); 6 c. promptly after sending, making available, or filing the same, all reports and financial statements that the Company sends or makes available to the Shareholders of the Company; and d. to each holder of at least 5.0% of the Series A Preferred Stock, Series B Preferred Stock and any Common Stock Conversion Shares (based on the total number of Series A Preferred Stock, Series B Preferred Stock and Common Stock Conversion Shares then outstanding), any other information respecting the business, properties or the condition or operations, financial or otherwise, of the Company that any Purchaser may from time to time reasonably request, including, but not limited to, (i) monthly unaudited financial statements; (ii) an annual operating plan and budget (including cash flow data) for the Company for each fiscal year, prepared in reasonable detail, as such operating plan and budget has been approved by the Board of Directors of the Company, and (iii) comparative information for any month, quarter or fiscal year relating to the Company's actual performance against the operating plan and budget for the corresponding period. 15. CONFIDENTIALITY Any confidential information obtained by any holder of the Purchased Shares pursuant to the Series A Convertible Preferred Stock Purchase Agreement of even date hereof, or any other information of a confidential nature (including, without limitation, the Company's business plans, intellectual property and other proprietary rights or information of the Company) or otherwise identified to such holder as being of a confidential nature, shall be treated as confidential and shall not be disclosed to a third party or used for any purpose other than evaluating such holder's investment in the Company without the prior written consent of the Company, except as required by applicable law or regulation; provided that any such confidential information may be disclosed to the beneficial owner of any equity or partnership interest in such holder, it being understood that such beneficial owner shall be informed of the confidential nature of such information. In the event of any breach of this Section 15, irreparable damage would occur to the Company and, accordingly, the Company shall be entitled to injunctive relief and the right to have specifically enforced the provisions hereof. 16. KEY MAN LIFE INSURANCE The Company will maintain key man life insurance in the following amounts: Steven E. Bernstein $3,000,000 Ronald G. Bizick, II $2,000,000 17. ENTIRE AGREEMENT AND AMENDMENTS This Agreement, together with the Stock Purchase Agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be waived, modified, amended or terminated except by a written agreement signed by (a) the Company, (b) Mr. Bernstein, and (c) the holders of not less than 662/3% percent of the Shares then held by the Preferred Shareholders (based on the number of shares of Common Stock Conversion Shares issued or issuable upon conversion of the Series A Preferred Stock). To the extent any term or other provision of any other agreement or instrument by which any party hereto is bound conflicts with this Agreement, this Agreement shall have precedence over such conflicting term or provision. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as an instrument under seal as of the 6th day of March, 1997. SBA COMMUNICATIONS CORPORATION /s/ Steven E. Bernstein By:_______________________________ Steven E. Bernstein, President Address: SBA Communications Corporation 6001 Broken Sound Parkway Fourth Floor Boca Raton, FL 33487 /s/ Steven E. Bernstein --------------------------------- Steven E. Bernstein, individually PURCHASERS [See Counterpart Signature Pages 8 EX-10.4 8 $3,500,000 PROMISSORY NOTE DATED AS OF MARCH 8, EXHIBIT 10.4 ------------ PROMISSORY NOTE --------------- $3,500,000.00 Freeport, Bahamas March 8, 1997 FOR VALUE RECEIVED, STEVEN E. BERNSTEIN, an individual ("Maker"), hereby promises to pay SBA COMMUNICATIONS CORPORATION, a Florida corporation ("Payee") the principal sum of Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00), together with accrued interest thereon at the Interest Rate (as defined below). The principal amount payable under this Note, together with all accrued interest thereon, shall be paid in full on the date (the "Maturity Date") which is the earlier to occur of (a) March 8, 2000, or (b) the date upon which an initial public offering of Payee's common stock is consummated. Notwithstanding anything set forth herein to the contrary, Maker may, in Maker's sole discretion, elect to pay Payee all principal and interest due and payable under this Note on the Maturity Date either in (i) lawful money of the United States of America, or (ii) common stock of Payee valued at the initial public offering price per share. It is understood and agreed that no principal or interest under this Note shall be payable until the Maturity Date. For purposes of this Note, the term "Interest Rate" shall mean an annual interest rate at all times equal to the applicable federal rate determined from time to time by the Internal Revenue Service. Interest shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. If Maker shall fail to pay any principal or interest due hereunder, then Payee shall be entitled to exercise any right or remedy available to Payee under the Security Agreement (as defined below), at law or in equity. This Note is secured by the Pledge and Security Agreement (the "Security Agreement"), dated as of the date hereof, between Maker, as debtor, and Payee, as secured party. The terms of the Security Agreement are hereby incorporated by this reference and shall be deemed to be a part of this Note. Maker may prepay this Note, in whole or in part, upon prior written notice to Payee, without premium or penalty, so long as Maker pays all accrued interest unpaid under this Note with respect to the amount prepaid. This Note shall be governed by and construed in accordance with the internal laws of the State of Florida, without regard to principles of conflicts of law. This Note may not be changed or terminated orally, but only by an agreement in writing signed by the party against whom enforcement of such change or termination is sought. The terms and provisions of this Note are severable. In the event of the unenforceability or invalidity of any one or more of the terms, covenants, conditions or provisions of this Note under federal, state or other applicable law, such unenforceability or invalidity shall not render any other term, covenant, condition or provision hereunder unenforceable or invalid. THIS NOTE IS WITHOUT ANY RECOURSE WHATSOEVER AGAINST MAKER. IN ANY ACTION BROUGHT TO ENFORCE THE OBLIGATIONS OF MAKER UNDER THIS NOTE OR UNDER THE SECURITY AGREEMENT, THE JUDGMENT OR DECREE SHALL BE ENFORCEABLE AGAINST MAKER ONLY TO THE EXTENT OF MAKER'S INTEREST IN THE "COLLATERAL" (AS DEFINED IN THE SECURITY AGREEMENT), AND ANY SUCH JUDGMENT OR DECREE SHALL NOT BE SUBJECT TO EXECUTION ON, OR BE A LIEN ON ASSETS OF, MAKER (OTHER THAN MAKER'S INTERESTS IN THE COLLATERAL). IN NO EVENT SHALL PAYEE SEEK OR OBTAIN A DEFICIENCY OR OTHER MONEY JUDGMENT AGAINST MAKER. THIS NOTE has been executed by Maker as of the date first set forth above. /s/ Steven E. Bernstein ------------------------------- STEVEN E. BERNSTEIN COMMONWEALTH ) ) SS: OF THE BAHAMAS ) The foregoing instrument was sworn to, subscribed and acknowledged before me this 8th day of March, 1997, by Steven E. Bernstein, |_| who is personally known to me or |x| who has produced passport # 92419425 as identification and who did take an oath. Print Name: Rev. Dr. Wellington Pinder ----------------------------- Commission Number: ------------------- Commission Expires: ------------------- (NOTARIAL SEAL) 2 EX-10.5 9 PLEDGE AND SECURITY AGREEMENT DATED AS OF MARCH 8, EXHIBIT 10.5 ------------ PLEDGE AND SECURITY AGREEMENT ----------------------------- THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is entered into as of March ___, 1997, between STEVEN E. BERNSTEIN, an individual ("Pledgor") and SBA COMMUNICATIONS CORPORATION, a Florida corporation ("Pledgee"). PRELIMINARY STATEMENT --------------------- A. Pledgor has executed that certain Promissory Note, of even date herewith (the "Note"), evidencing the obligation of Pledgor to pay to Pledgee $3,500,000.00 plus accrued interest thereon. B. To secure repayment of the Note, Pledgor has granted to Pledgee a security interest in the Collateral (as defined below), subject to the terms and conditions of this Agreement. C. In consideration of Ten Dollars ($10.00), and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows. 1. Pledge of Collateral. Pledgor hereby grants Pledgee a --------------------- security interest in the following property of Pledgor (collectively, the "Collateral"): (a) Eight Hundred Twenty Three Thousand Five Hundred and Thirty (823,530) shares of Class B common stock ($.01 par value per share) of Pledgee, which Pledgor has delivered to Pledgee in the form of stock certificate No. 2. Pledgee shall hold the Collateral under the terms and conditions of this Agreement. 2. Obligations Secured. The security interest in the --------------------- Collateral granted hereby secures payment and performance of all liabilities of Pledgor to Pledgee under the Note (all of Pledgor's liabilities and obligations under the Note being hereinafter referred to as the "Obligations"). 3. Rights of Pledgee with Respect to the Collateral. Pledgee ------------------------------------------------- shall have the right but not the obligation to (a) protect, preserve or assert any other rights of Pledgor or take any other action with respect to the Collateral, and (b) pay any taxes, liens, assessments, insurance premiums or other charges pertaining to the Collateral. Any expenses incurred by Pledgee under the preceding sentence shall be paid by Pledgor upon demand, become part of the Obligations secured by the Collateral and bear interest at the rate provided in the Note until paid. Pledgee shall use reasonable care in the custody and preservation of the Collateral, but Pledgee shall be relieved of all responsibility for the Collateral upon surrendering it to Pledgor. 4. Pledgor's Representations and Warranties. Pledgor ---------------------------------------------- represents and warrants that (a) Pledgor is and will be the lawful owner of the Collateral, (b) the Collateral is and will be fully paid and non-assessable, (c) the Collateral is and will remain free and clear of all liens, encumbrances and security interests other than the security interest granted by Pledgor hereunder, and (d) Pledgor has the sole right and lawful authority to pledge the Collateral and otherwise to comply with the provisions hereof. 5. Voting of Collateral. While Pledgor is not in default --------------------- hereunder or under the Note, Pledgor may vote the stock herein pledged as the Collateral. 6. Dividends and Other Distributions. While Pledgor is not in --------------------------------- default hereunder, Pledgor shall retain rights to (a) all dividends and other cash distributions payable to Pledgor as a result of Pledgor's record ownership of any of the Collateral, and (b) any stock dividends, stock splits or other distributions of securities in respect of the Collateral. Any such dividends, splits or distributions under clause (b) above shall become part of the Collateral. 7. Pledgor's Default. Pledgor shall be in default hereunder ------------------ upon the occurrence of any of the following events: (a) If any lien, encumbrance or adverse claim of any nature whatsoever (other than those created by Pledgee) is asserted with respect to any Collateral and is not dismissed, released or discharged within ninety (90) days; or (b) If Pledgor fails to pay or perform any of the Obligations by the date when such payment or performance is due. 8. Pledgee's Rights upon Default. Upon the occurrence of any ------------------------------ default as defined in the preceding section, Pledgee may, if Pledgee so elects in its sole discretion, exercise all rights available to a secured party under the Uniform Commercial Code as then in effect in the State of Florida and under any other applicable law. 9. Application of Sale Proceeds. In the event of a sale of the ---------------------------- Collateral upon a default, the proceeds shall first be applied to the payment of the reasonable expenses of the sale, including broker's commissions, reasonable attorneys' fees, any taxes or other charges imposed by law upon the Collateral or the transfer thereof and all other charges paid or incurred by Pledgee pertaining to the sale; second, to satisfy outstanding Obligations; and third, the surplus (if any) shall be paid to Pledgor. 10. Termination. Upon payment in full of the Obligations, any ----------- remaining Collateral shall be promptly returned to Pledgor. 11. Miscellaneous. ------------- (a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida, without regard to the principles of conflicts of laws. (b) All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective administrators, executors, other legal representatives, heirs and permitted assigns, whether so expressed or not. Any rights given or duties imposed upon the estate of a deceased shareholder shall inure to the benefit of and be binding upon the fiduciary of such decedent's estate in his fiduciary capacity. 2 (c) This Agreement may not be changed or terminated orally, but only by a writing signed by the party against whom enforcement of such change or termination is sought. (d) If any provision of this Agreement or any other agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. (e) THIS AGREEMENT IS WITHOUT ANY RECOURSE WHATSOEVER AGAINST PLEDGOR. IN ANY ACTION BROUGHT TO ENFORCE THE OBLIGATIONS OF PLEDGOR UNDER THIS AGREEMENT OR UNDER THE NOTE, THE JUDGMENT OR DECREE SHALL BE ENFORCEABLE AGAINST PLEDGOR ONLY TO THE EXTENT OF PLEDGOR'S INTEREST IN THE COLLATERAL, AND ANY SUCH JUDGMENT OR DECREE SHALL NOT BE SUBJECT TO EXECUTION ON, OR BE A LIEN ON ASSETS OF, PLEDGOR (OTHER THAN PLEDGOR'S INTERESTS IN THE COLLATERAL). IN NO EVENT SHALL PLEDGEE SEEK OR OBTAIN A DEFICIENCY OR OTHER MONEY JUDGMENT AGAINST PLEDGOR. This Agreement has been executed by Pledgor and Pledgee as of the date first set forth above. PLEDGOR: /s/ Steven E. Bernstein ---------------------------------- STEVEN E. BERNSTEIN PLEDGEE: SBA COMMUNICATIONS CORPORATION, a Florida corporation /s/ Steven E. Bernstein By:______________________________ Steven E. Bernstein, President 3 EX-10.6 10 WARRANT TO PURCHASE 402,500 SHARES OF CLASS A EXHIBIT 10.6 ------------ THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS. VOID AFTER 5:00 P.M. NEW YORK TIME, ON MARCH 6, 2002 WARRANT TO PURCHASE 402,500 SHARES OF CLASS A COMMON STOCK OF SBA COMMUNICATIONS CORPORATION This is to certify that, FOR VALUE RECEIVED, ALEX. BROWN & SONS INCORPORATED or its registered assigns pursuant to Section (d) hereof ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from SBA Communications Corporation, a Florida corporation (the "Company"), 402,500 fully paid, validly issued and nonassessable shares of Class A Common Stock, par value $.01 per share, of the Company ("Class A Common Stock"), at the exercise price of $3.726708075 per share, subject to adjustment, until March 6, 2002. The number of shares of Class A Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Class A Common Stock may be adjusted from time to time as contained in Section (h) hereof. The shares of Class A Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares," and the exercise price of a share of Class A Common Stock, as adjusted from time to time, is hereinafter sometimes referred to as the "Exercise Price." (a) EXERCISE OF WARRANT; NOTIFICATION OF EXPIRATION DATE OF WARRANT. The Warrant may be exercised as to a minimum of 100 Warrant Shares at any time or from time to time, until 5:00 P.M. New York time on March 6, 2002 (the "Expiration Date"), provided, however, that if such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. The Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed (with signature guaranteed if required by the Company or its stock transfer agent) and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form and any applicable taxes. The purchase price for any Warrant Shares purchased pursuant to the exercise of this Warrant shall be paid in full upon such exercise in cash or by certified or bank check or pursuant to a cashless exercise procedure whereby the Warrant Shares issued upon exercise of this Warrant will be sold with Holder receiving the difference between the Exercise Price and the sale price, in cash, and the Company receiving the Exercise Price for the Warrant Shares, in cash, or any combination of the foregoing methods of paying the Exercise Price. As soon as practicable after each such exercise of the Warrants, but not later than seven (7) business days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or the Holder's designee, except in the case of a cashless exercise. If the Warrant should be exercised in part only, the Company shall, upon surrender of the Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. In the event of a cash exercise, upon receipt by the Company of the Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, together with the exercise price thereof and taxes as aforesaid in cash or certified or bank check and the investment letter described below, the Holder shall be deemed to be the holder of record of the shares of Class A Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Class A Common Stock shall not then be physically delivered to the Holder. In order to assure the availability of an exemption from registration under the federal or applicable state securities laws, the Company may condition the exercise of the Warrant upon the Holder delivering to the Company an investment letter in the form as customarily used by the Company from time to time in connection with the exercise of non-registered options and warrants which are issued by the Company. It is further understood that certificates for the Warrant Shares, if any, to be issued upon exercise of the Warrant may contain a restrictive legend in accordance with Section (g) hereof. Notwithstanding anything herein to the contrary, the Company shall mail to the Holder, by certified mail, return receipt requested, notice of the Expiration Date of the Warrants, no later than 60 days prior to the Expiration Date. To the extent the Company shall fail to send the required notice at the time and in the manner set forth in the preceding sentence, the Expiration Date of the Warrants shall be extended to a date 60 days following the date that a written notice of the Expiration Date of the Warrants from the Company is received by the Holder. (b) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Class A Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. If the Class A Common Stock is or becomes listed on any national securities exchange or the Nasdaq National Market, the Company shall also list such shares on such exchange subject to notice of issuance or maintain the listing of its Class A Common Stock on the Nasdaq system, as the case may be. (c) FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Class A Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the current market value shall be the last reported sale price of the Class A Common Stock on such exchange or system on the last business day prior to the date of 2 exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or system; (2) If the Class A Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc., on the last business day prior to the date of the exercise of this Warrant; or (3) If the Class A Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than the book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. The Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Holder thereof to purchase in the aggregate the same number of shares of Class A Common Stock purchasable hereunder. Subject to Section (g) hereof, the Holder may transfer or assign the Warrant, in whole or in part and from time to time. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed (with signature guaranteed, if required by the Company or its stock transfer agent) and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee or assignees named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided by or combined with other Warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in the case of loss, theft or destruction, of reasonable satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor, date and amount. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the common stock of the Company, or (ii) if the Company shall offer to the holders of common stock for subscription or purchase by them any shares of any class or any other rights, or (iii) if any capital 3 reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder or any holder of a Warrant executed and/or delivered pursuant to Section (a) or Section (d), at least 15 days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of common stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (g) SECURITIES LAW COMPLIANCE. (1) The Holder of the Warrant, by acceptance hereof, acknowledges that the Warrant and the shares of Class A Common Stock to be issued upon exercise hereof or conversion thereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, transfer, assign or otherwise dispose of this Warrant or any shares of Class A Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the Act or any state securities laws. Upon exercise of the Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Class A Common Stock so purchased are being acquired solely for the Holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale. (2) If appropriate, the Warrant and any Warrants issued upon exercise or substitution or upon assignment or transfer pursuant to Section (a) or Section (d), as the case may be, and all shares of Class A Common Stock issued upon exercise hereof or conversion thereof shall be stamped or imprinted with legends setting forth the restrictions on transfer arising under applicable federal and state securities laws. (h) ADJUSTMENTS TO EXERCISE PRICE. (i) Subdivision, Combination or Reclassification of Class A ------------------------------------------------------- Common Stock. ------------ (A) If the Company shall effect a subdivision of its shares of Common Stock into a greater number of such shares or a combination of such shares into a lesser number of shares, whether by forward or reverse stock split, stock dividend (payable in shares of Common Stock) or otherwise, the Exercise Price shall be proportionally increased or 4 reduced, as the case may be, to reflect the effectuation of such subdivision or combination. (B) If the Company shall effect a capital reorganization or reclassification of the Common Stock or any distribution by the Company to holders of Class A Common Stock, whether in the form of stock, debt securities, or other assets or property of the Company, (each, an "Adjustment Event"), then, as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Warrant shall thereafter have the right to acquire and receive such shares of stock, securities, assets or property as would have been issuable or payable as a result of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received as if such Warrant were exercised immediately prior to the consummation of such Adjustment Event. (C) In the event that an Adjustment Event shall occur by means of a merger, consolidation, combination, share exchange, or sale or lease of all or substantially all the assets of the Company, then as a condition of such Adjustment Event, lawful and adequate provision shall be made whereby the holders of the Warrant shall thereafter have the rights to acquire and receive upon exercise of their Warrant, such shares of stock, securities or assets as would have been issuable or payable as part of such Adjustment Event with respect to or in exchange for such number of outstanding shares of the Class A Common Stock as would have been received upon exercise of the Warrant (in all instances) immediately before such Adjustment Event, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holders of the Warrant such that the provisions hereof (including without limitation provisions for adjustments of the Exercise Price and of the number of shares of Class A Common Stock acquirable and receivable upon the exercise of the Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of the Warrant (including an immediate adjustment, by reason of such Adjustment Event of the Warrant to the value for the Class A Common Stock reflected by the terms of such Adjustment Event if the value so reflected is less than the Exercise Price in effect immediately prior to such Adjustment Event). In the event of an Adjustment Event as a result of which a number of shares of Common Stock of the surviving or purchasing Company is greater or lesser than the number of shares of Common Stock of the Company outstanding immediately prior to such Adjustment Event, then the 5 Exercise Price in effect immediately prior to such Adjustment Event shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Class A Common Stock of the Company. The Company will not effect any such Adjustment Event unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the purchase or lease of such assets shall assume by written instrument mailed or delivered to the holders of the Warrant at the last address of each such holder appearing on the books of the Company, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled. (ii) Issuance of Common Stock. Except as provided herein, if and whenever the ------------------------ Company shall issue or sell, or shall be deemed to have issued or sold, any shares of its Class A Common Stock, or options, warrants or other rights to purchase Class A Common Stock or securities convertible into Class A Common Stock, for a consideration per share less than the Exercise Price in effect immediately prior to the time of such issuance or sale, then forthwith upon such issuance or sale, the Exercise Price shall, subject to subparagraphs (A) to (F) of Paragraph (h)(iii), be reduced to: (A) For issuances or sales on or before 18 months after the date of the issuance of this Warrant, the Exercise Price shall equal such issuance or sale price. (B) For issuances or sales after 18 months from the date of the issuance of this Warrant, the Exercise Price shall be determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction; the numerator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock, plus (2) the number of shares of Class A Common Stock which the net aggregate consideration, if any, received by the Company for the total number of such additional shares of Class A Common Stock so issued would purchase at the Exercise Price in effect immediately prior to such issuance, and; the denominator of which shall be (1) the number of shares of Class A Common Stock outstanding immediately prior to the issuance of such additional shares of Class A Common Stock plus (2) the number of such additional shares of Class A Common Stock so issued. 6 (iii) For purposes of determining the adjusted Exercise Price under Paragraph (h)(ii)(A) and (B), the following subsections (A) to (F), inclusive, shall be applicable: (A) Issuance of Rights or Options. Except as provided Paragraph ------------------------------- (h)(iv), in case at any time the Company shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of, Class A Common Stock or any stock or other securities convertible into or exchangeable for Class A Common Stock (such rights or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options) shall be less than the Exercise Price in effect immediately prior to the time of the granting of such Option, then the total maximum number of shares of Class A Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued by the Company for such price per share. No adjustment of the Exercise Price shall be made upon the actual issuance of such Convertible Securities except as otherwise provided in subsection (C) below. (B) Issuance of Convertible Securities. In case the Company shall in ---------------------------------- any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which such Class A Common Stock is issuable upon such conversion or exchange (determined by dividing (x) the total amount received or receivable by the Company as 7 consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (y) the total maximum number of shares of Class A Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Exercise Price in effect immediately prior to the time of such issuance or sale, then the total maximum number of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued and sold by the Company for such price per share, provided that, except as otherwise specified in subsection (C) below, no adjustment of the Exercise Price shall be made upon the actual issue of such Class A Common Stock upon exercise of any Options for which adjustments of the Exercise Price have been or are to be made pursuant to other provisions of this Paragraph (h) and no further adjustment of the Exercise Price shall be made by reason of such issuance or sale. (C) Change in Option Price or Conversion Rate. If the purchase price ----------------------------------------- provided for in any Option referred to in subparagraph (A), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraphs (A) or (B), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall change at any time (other than under or by reason of provisions designed to protect against dilution of the type set forth in paragraph (h), the Exercise Price in effect at the time of such change shall forthwith be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration, or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price provided for in any Option referred to in subsection (A), or the rate at which any Convertible Securities referred to in subparagraphs (A) or (B) are convertible into or exchangeable for Class A Common Stock, shall be reduced at any time under or by reason or provisions with respect thereto designed to protect against dilution, then in case of the delivery of Class A Common Stock upon the exercise of any such Option or upon conversion or exchange of any such Convertible Security, the Exercise Price then in effect hereunder shall forthwith be adjusted to such respective amount as would have been obtained had such Option or Convertible Security never been issued as to such Class A Common Stock and had adjustments been made upon the issuance of the shares of Class A 8 Common Stock delivered as aforesaid, but only if as a result of such adjustment the Exercise Price then in effect hereunder is hereby reduced. (D) Treatment of Expired Options and Unexercised Convertible -------------------------------------------------------- Securities. On the expiration of any Option or the termination of ---------- any right to convert or exchange any Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be increased to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. (E) Adjustment of Number of Shares. Upon each adjustment in the -------------------------------- Exercise Price, the number of shares of Class A Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter. (F) Integral Transaction. In case any Options shall be issued in --------------------- connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued without consideration. (G) Consideration for Stock. In case any shares of Class A Common ------------------------- Stock, Options or Convertible Securities shall be issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration. In case any shares of Class A Common Stock, Options, or Convertible Securities shall be issued in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as shall be attributable to such Class A Common Stock, Options, or Convertible Securities, as the case may be. In the event of any consolidation or merger of the Company in which the 9 Company is not the surviving corporation, or, in the event of any sale of all or substantially all of the assets of the Company for stock or other securities of any corporation, this subsection shall be applied in the same manner as if the Company had been the surviving corporation in such consolidation or merger, or the purchasing corporation in such sale of assets; and for purposes of this sentence the Company shall be deemed: (1) to have issued and sold a number of shares of its Class A Common Stock, Options, or Convertible Securities equal to the sum of (x) the number of shares of the Company's Class A Common Stock actually outstanding, (y) the number of shares of the Company's Class A Common Stock acquirable upon the exercise of all outstanding Options, and (z) the number of shares of the Company's Class A Common Stock acquirable upon conversion of all outstanding Convertible Securities, which those persons who were security holders of the surviving corporation immediately before the consummation of the transaction would have received in exchange for the common stock, options, and convertible securities of the surviving corporation held by them immediately after consummation of the transaction, based on the exchange ratio on which the transaction was consummated (i.e., the inverse of the ratio pursuant to which the Company's Class A Common Stock were exchangeable into the surviving corporation's securities) and assuming that Company had been the surviving corporation; and (2) to have received in exchange therefor a consideration equal to the fair market value (immediately before the consummation of such transaction) of the assets (less the liabilities) of the surviving corporation; and if the application of this sentence results in adjustment of the Exercise Price, then the determination of the Exercise Price immediately prior to such merger, consolidation, or sale shall be made after giving effect to the adjustment set forth herein. If the stock of the surviving or purchasing corporation in such a transaction is publicly traded, the market value of such corporation's outstanding stock immediately before consummation of the exchange shall be presumptive evidence of the fair market value of its assets (less liabilities). (iv) Notwithstanding anything in Paragraph (h) to the contrary, no adjustment shall be made to the Exercise Price upon (w) the issuance 10 of any shares of Class A Common Stock, options or Convertible Securities in connection with an acquisition by the Company or a merger in which the Company is the surviving corporation, calculated on a fully diluted basis and further provided such issuance is to the sellers of the acquired entity or assets or security of the merged entity and is made for fair value and the Board of Directors of the Company determines that the acquisition or merger is in the best interests of the Company and its stockholders; (x) the issuance of any shares of Class A Common Stock upon conversion of any shares of the Company's Series A Preferred Stock; (y) the issuance of Class A Common Stock upon the exercise of any options, warrants or other rights to purchase Class A Common Stock outstanding on the date of the first issuance of the Company's Series A Preferred Stock, including this Warrant or (z) the future issuance of Class A Common Stock or warrants, options or rights to purchase such Class A Common Stock to employees, consultants, directors or vendors directly or pursuant to plans approved by the Board of Directors so long as such options are granted at fair market value. (i) AMENDMENTS. Neither the Warrant nor any term hereof may be changed, waived, discharged or terminated without the prior written consent of the Holder. (j) NO IMPAIRMENT. The Company will not avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of any Holder. (k) GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Florida. (l) NOTICES. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by first class mail, postage prepaid, addressed (a) if to the Holder, to Alex. Brown & Sons Incorporated, One South Street, Baltimore, Maryland 21202, Attention: Donald D. Notman, Jr., or (b) if to the Company, to or at such other address as to the Company shall have furnished to the Holder in writing. IN WITNESS WHEREOF, SBA Communications Corporation has caused this Warrant to be executed by its officer hereunto duly authorized. Dated: March 6, 1997 SBA Communications Corporation By: /s/ Steven E. Bernstein ----------------------------- Name: Steven E. Bernstein Title: President 11 PURCHASE FORM ------------- Dated____________, 19_ The undersigned hereby irrevocably elects to exercise its rights pursuant to this Warrant to the extent of purchasing ________ shares of Class A Common Stock of SBA Communications Corporation, and hereby makes payment of $_________, in cash, in payment of the exercise price thereof. [The undersigned hereby irrevocably elects to exercise its rights pursuant to this Warrant to the extent of purchasing shares of Class A Common Stock and hereby authorizes you to deliver such shares of Class A Common Stock for sale to , and to retain from the proceeds of such sale $ , in cash, in payment of the exercise price thereof and to remit to the undersigned the balance of such proceeds.] INSTRUCTIONS FOR ISSUANCE OF STOCK Name________________________________________________________________ (Please typewrite or print in block letters) Address______________________________________________________________ Signature_____________________________________________________________ 12 ASSIGNMENT FORM --------------- FOR VALUE RECEIVED, hereby sells, assigns and transfers unto Name_____________________________________________________________________ (Please typewrite or print in block letters) Address__________________________________________________________________ the right to purchase Class A Common Stock of SBA Communications Corporation (the "Company"), represented by this Warrant to the extent of ___________ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ______________ as Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date _________, 1997 Signature ________________________ 13 EX-10.8 11 EMPLOYMENT AGREEMENT DATED AS OF JANUARY 1, 1997 EXHIBIT 10.8 ------------ EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT between SBA COMMUNICATIONS CORPORATION, a Florida corporation with its principal place of business at 6001 Broken Sound Parkway, Suite 400, Boca Raton, Florida (the "Company") and RONALD G. BIZICK, II (the "Executive"), is made and entered into as of this 1st day of January, 1997. W I T N E S S E T H: -------------------- WHEREAS, the Company and its subsidiaries engage in the business of developing, leasing and maintaining wireless telecommunications tower sites; and WHEREAS, the Executive and the Company wish to provide for the employment of the Executive by the Company on the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is hereby agreed by and between the parties as follows: 1. EMPLOYMENT. The Company hereby agrees to employ the Executive and ---------- the Executive hereby agrees to be employed by the Company on the terms and conditions set forth herein. 2. TERM. The initial term of employment of the Executive by the Company ---- hereunder shall commence as of January 1, 1997 and shall end December 31, 1999 (the "Term"), unless sooner terminated as hereinafter provided. At the end of such initial Term, this Agreement shall be extended automatically for successive one (1) year Terms of employment, unless either the Company or the Executive notifies the other party in writing at least ninety (90) days prior to the end of the incumbent Term of any intention not to renew this Agreement, in which case this Agreement will terminate at the end of such incumbent Term. All references herein to the Term shall refer to both such initial Term and any such successive Terms. 3. POSITION AND DUTIES. The Executive shall serve as the Executive Vice ------------------- President and Chief Operating Officer of the Company. The Executive shall perform the duties generally of an executive vice president and chief operating officer for the Company and shall have such specific responsibilities, duties and authorities as shall from time to time be assigned by the Chief Executive Officer or the Board of Directors of the Company. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries. 4. COMPENSATION AND RELATED MATTERS. -------------------------------- (a) Salary. During the period of the Executive's employment hereunder, the Executive shall be paid an annual salary at a rate determined by the Board of Directors of the Company of not less than $275,000 per annum (the "Base Salary"). The Base Salary shall be paid in monthly or semi-monthly installments as shall be the practice of the Company, and may be paid by the Company or any of its subsidiaries. Compensation of the Executive by payments of Base Salary shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company or its subsidiaries. The term "Base Salary" shall be deemed to include any and all regular installment amounts received by the Executive under this Agreement. The Board of Directors of the Company, in its sole discretion, may from time to time authorize increases in the Base Salary. (b) Bonuses. In addition to the Base Salary payable to the ------- Executive hereunder, the Executive shall be entitled to receive a bonus hereunder for each calendar year to the extent earned in accordance with performance targets, measurements and such other criteria as shall be established for such year by the Board of Directors of the Company on or before March 31 of such year. In no event shall the annual amount of bonus paid to the Executive pursuant to this Section 4(b) be an amount greater than the Base Salary paid to Executive for such year. (c) Expenses. During the Term of the Executive's employment -------- hereunder, the Executive shall be entitled to receive payment or reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or its subsidiaries; provided that such expenses are incurred and accounted for in accordance with the policies and procedures then presently established by the Company. (d) Other Benefits. The Executive shall be entitled to --------------- participate in or receive benefits under any employee benefit plan or arrangement made available by the Company or its subsidiaries in the future to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Any payments or benefits payable to the Executive hereunder in respect of any calendar year during which the Executive is employed by the Company for less than the entire such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. (e) Group Medical Coverage. The Company shall cause to be ------------------------ provided at its expense group medical insurance coverage to the Executive and his dependents under a plan for employees of the Company and such plan shall include reasonable coverage for medical, hospital, surgical and major medical expenses and shall be subject to such deductibles as applicable to other Company employees. 5. LEGAL REQUIREMENTS. Both the Executive and the Company agree that ------------------ all legal requirements shall be met with respect to United States Federal and foreign (if applicable) withholding tax requirements, compensation income and the like. 6. TERMINATION. Unless otherwise agreed to in writing by the Company and the Executive, the Executive's employment hereunder may be terminated under the following circumstances: - 2 - (a) Death. The Executive's death. ----- (b) Disability. If, as a result of the Executive's incapacity due to physical or mental illness (such incapacity being determined by the Company in its sole reasonable discretion), the Executive shall have been absent from his full-time duties as described hereunder for the entire period of six (6) consecutive months, the Company may terminate the Executive's employment hereunder. (c) Cause. ----- (i) The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, "Cause" shall mean that (i) the Executive is convicted of a felony which, in the sole determination of the Company, would have a material adverse effect on the Executive's ability to perform his duties hereunder or on the business or reputation of the Company; (ii) the Executive has exhibited gross misconduct resulting in material harm to the Company, its business or reputation; (iii) the Executive has willfully misappropriated Company assets or has otherwise willfully defrauded the Company, including without limitation by fraud, theft, embezzlement, or breach of a fiduciary duty involving personal profit; (iv) the Executive has intentionally failed to perform his duties hereunder; or (v) a breach of any provision of this Agreement. For the purposes of this Section 6(c)(i), no act or failure to act on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (ii) Notwithstanding the foregoing, any termination of the Executive shall not be considered a termination for Cause pursuant to this Section 6(c), and shall be considered a termination Without Cause pursuant to Section 6(d) hereof, if such termination is effected without: (1) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause; (2) an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors of the Company; and (3) delivery to the Executive of a Notice of Termination as provided for in Section 8 hereof from the Board of Directors of the Company finding that in the good faith opinion of the Board of Directors of the Company the Executive was guilty of conduct set forth above in the preceding sentence, and specifying the particulars thereof in detail. (d) Without Cause. Any termination of the Executive by the -------------- Company (including any action which is deemed a termination of the Executive pursuant to Section 6(f) hereof), other than a termination pursuant to Sections 6(a)-(c) hereof, shall be deemed a termination Without Cause. (e) Termination by the Executive. The Executive may terminate ---------------------------- this Agreement (i) due to the Executive's retirement; provided that the Executive provide the Company with thirty (30) days written notice, pursuant to Section 8(a), prior to the effective date of such retirement, as shall be stated in such notice, and (ii) for any reason other than the Executive's retirement; provided - 3 - that the Executive provide the Company with sixty (60) days written notice prior to the effective date of such termination, as shall be stated in such notice. (f) Other Events of Termination. The following circumstances shall specifically be deemed a termination Without Cause of the Executive's employment by the Company: (i) a vote by the Board of Directors to terminate the Executive Without Cause, as defined in Section 6(d) hereof; (ii) any termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 8(a) hereof; (iii) a breach by the Company of this Agreement, and a subsequent election by the Executive to terminate this Agreement pursuant to Section 6(e) above; (iv) the performance of any other act by the Company which is designed to prevent and does prevent the Executive from properly performing the authorities, duties and responsibilities of his employment hereunder, including without limitation a material change in the duties or position of the Executive within the Company; or (v) a Change in Control (as defined below) of the Company. (g) Change in Control. For purposes of this Agreement, "Change in Control" shall, unless the Board otherwise directs by resolution adopted prior thereto, be deemed to occur if (i) any "person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act), other than Steven E. Bernstein, is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of the voting stock; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period. Any merger, consolidation or corporate reorganization in which the owners of the Company's capital stock entitled to vote in the election of directors ("Voting Stock") prior to said combination own fifty percent (50%) or more of the resulting entity's Voting Stock shall not, by itself, be considered a Change in Control. 7. COMPENSATION UPON TERMINATION. ----------------------------- (a) If the Executive's employment is terminated for any reason pursuant to Section 6(d) hereof, the Company shall be obligated to pay to the Executive an amount equal to the product of (i) the Base Salary multiplied by (ii) 2.0, such payment to be made in a lump sum on or before the fifth day following the Date of Termination; provided, however, that if the lump sum -------- ------- severance payment under this Section 7(a), either alone or together with other payments which the Executive - 4 - has the right to receive from the Company, would constitute a "parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such lump sum severance payment shall be reduced to the largest amount as will result in no portion of the lump sum severance payment under this Section 7(a) being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum severance payment under this Section 7(a) pursuant to the foregoing provision shall be made by independent counsel to the Company in consultation with the independent certified public accountants of the Company. (b) If the Executive's employment is terminated pursuant to Sections 6(a), 6(b), 6(c) or 6(e) hereof, on and after the Date of Termination the Company shall no longer be obligated to pay the Executive any amounts payable hereunder for such period, whether in the form of Base Salary or otherwise, and the Executive shall have no right to compensation or other benefits hereunder for any such period. Notwithstanding the foregoing, the Company shall be obligated to pay to the Executive all amounts payable hereunder and otherwise, through and including the Date of Termination, whether suchamounts were payable prior to the date of termination or thereafter. In addition, the Executive shall be entitled to receive any extension of benefits beyond the Date of Termination, provided that (i) such benefits were received by the Executive prior to the Date of Termination and (ii) such extension is customarily offered by the Company to its employees or is otherwise required by applicable law. (c) Notwithstanding the foregoing or anything contained herein to the contrary, in no event shall the total amount of payments made under this Agreement on account of termination under Section 6(f)(v) hereof exceed three times the "base amount" minus one dollar. "Base amount" means the average annualized compensation income from the Company includible in the Executive's gross income for Federal income tax purposes over the five-year period preceding the year in which the Executive's employment is terminated. This paragraph, and the language therein, shall be interpreted consistently with Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder. 8. NOTICE OF TERMINATION AND EFFECTIVE DATE. ---------------------------------------- (a) Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to Section 6(a) hereof) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall (i) indicate the specific termination provision in this Agreement relied upon; (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) contain any other information required by this Agreement. (b) For purposes of this Agreement, "Date of Termination" shall mean: (i) if the Executive's employment is terminated by his death, the date of his death; (ii) if the Executive's employment is terminated pursuant to Section 6(b) hereof, the expiration of six (6) consecutive months of the Executive's incapacity due to physical or mental illness, as set forth in Section 6(b) - 5 - hereof (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such six (6) month period); (iii) if the Executive's employment is terminated pursuant to Sections 6(c) or 6(d) hereof, the date that the Notice of Termination is communicated to the Executive pursuant to Section 8(a) hereof; (iv) if the Executive's employment is terminated pursuant to Section 6(e) hereof, the termination date stated in the written notice received by the Company; or (v) if deemed terminated pursuant to Section 6(f) hereof, the date of such action which is deemed a termination of the Executive by the Company. 9. RESTRICTIVE COVENANT. Upon any cessation of employment hereunder --------------------- other than one pursuant to Sections 6(d) or 6(f), the Executive agrees that for the period commencing on the Consummation Date and ending on the date which is two (2) years from the date the Executive is no longer employed by the Company, the Executive will not, directly or indirectly: (i) engage in any trade or business directly competitive with that of any of the Company or any of its subsidiaries, anywhere in the United States or such other country or countries in which the Company actively engages in its trade or business as of the Date of Termination (the "Territory"); (ii) become associated as a manager, supervisor, employee, consultant, advisor, control shareholder (either individually or as part of an affiliated group), or otherwise of any person, corporation or entity engaging in any trade or business directly competitive with those of the Company or any of its subsidiaries anywhere in the Territory; (iii) call upon any client or clients of the Company or any of its subsidiaries for the purpose of selling or soliciting for any person, corporation or entity, other than any of the Company or its subsidiaries, sales of any products, processes, or services directly competitive with those of the Company within the Territory; (iv) divert, solicit or take away any such client or clients of the Company or any of its subsidiaries for the purpose of selling any products or services directly competitive with those of the Company or any of its subsidiaries; and service any contracts or accounts relating to any products or services directly competitive with those of the Company or any its subsidiaries for any person, corporation or entity other than the Company or any of its subsidiaries; or (v) induce, influence, combine or conspire with, or attempt to induce, influence, combine or conspire with, any of the officers or employees of the Company to terminate his or her employment with or to directly compete against the Company, any of its present or future subsidiaries, or any of the Company's present or future affiliates about which the Executive obtained any knowledge of the business or operation of such affiliate during the Term of this Agreement. The provisions of this Section 9 shall not apply to Employee in the event of a termination of employment hereunder pursuant to Sections 6(d) or 6(f). Should any of the time periods or the geographic area set forth in this Section 9 be held to be unreasonable by any court of competent - 6 - subject matter jurisdiction, the parties hereto agree to petition such court to reduce the time period or geographic area to the maximum permitted by governing law. 10. CONFIDENTIALITY. --------------- (a) In the course of this employment, the Company or any of its subsidiaries may disclose or make known to the Executive, and the Executive may be given access to or may become acquainted with, certain information, trade secrets or both, including but not limited to confidential information and trade secrets regarding tapes, computer programs, designs, skills, procedures, formulations, methods, documentation, drawings, facilities, customers, policies, marketing, pricing, customer lists and leads, and other information and know-how, all relating to or useful in the Company's business or the business of its subsidiaries and/or affiliates (collectively, the "Information"), and which the Company considers proprietary, desires to maintain confidential and is not in the public domain. During the Term of this Agreement and at all times thereafter, the Executive shall not in any manner, either directly or indirectly, divulge, disclose or communicate to any person or firm, except to or for the Company's benefit as directed by the Company, any of the Information which he may have acquired in the course of or as an incident to his employment by the Company, the parties agreeing that such information affects the successful and effective conduct of the Company's business and its goodwill, and that any breach of the terms of this Section 10 is a material breach of this Agreement. (b) All equipment, documents, memoranda, reports, records, files, materials, samples, books, correspondence, lists, other written and graphic records, and the like (collectively, the "Materials") affecting or relating to the business of the Company or of its subsidiaries and/or affiliates, which the Executive shall prepare, use, construct, observe, possess or control shall be and remain the Company's sole property or in the Company's exclusive custody, and must not be removed from the premises of the Company except as directed by the Company's Board of Directors in writing. Promptly upon termination of the Agreement or the Executive's employment hereunder for any reason, or otherwise upon request of the Chief Executive Officer of the Company, the Information, the Materials and all copies thereof in the custody or control of the Executive shall be delivered to the Company. 11. NOTICE. All notices, requests, consents and other communications ------ required or permitted under this Agreement shall be in writing (including electronic transmission) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, electronically transmitted, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to: If to the Executive: Ronald G. Bizick, II 822 Rambling Drive Circle West Palm Beach, Florida 33414 - 7 - If to the Company SBA Communications Corporation 6001 Broken Sound Parkway, Suite 400 Boca Raton, Florida 33487 Attention: Steven E. Bernstein, President or to such other address as any party may designate by notice complying with the provisions of this Section. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 12. AMENDMENTS. The provisions of this Agreement may not be amended, ---------- supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement. 13. ASSIGNMENTS. No party shall assign his or its rights and/or ----------- obligations under this Agreement without the prior written consent of each other party to this Agreement. 14. COUNTERPARTS. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 15. ENFORCEMENT COSTS. If any civil action, arbitration or other legal ----------------- proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees, sales and use taxes, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to any other relief to which such party or parties may be entitled. Attorneys' fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party. 16. EQUITABLE REMEDIES. The Executive acknowledges that the services to ------------------ be rendered by the Executive hereunder are extraordinary and unique and are vital to the success of the Company, and that damages at law would be an inadequate remedy for any breach or threatened breach of this Agreement by the Executive. Therefore, in the event of a breach or threatened breach by the Executive of any provision of this Agreement, the Company shall be entitled, in addition to all other rights or remedies, to an injunction restraining such breach, without the Company being required to show any actual damage or to post an injunction bond. - 8 - 17. GOVERNING LAW. This Agreement and all transactions contemplated by ------------- this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. 18. JURISDICTION AND VENUE. The parties acknowledge that a substantial ---------------------- portion of the negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Palm Beach County, Florida. Any civil action or legal proceeding arising out of or relating to this Agreement shall be brought in the courts of record of the State of Florida in Palm Beach County or the United States District Court, Southern District of Florida, West Palm Beach Division. Each party consents to the jurisdiction of such court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such court. Service of any court paper may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws, rules of procedure or local rules. 19. THIRD PARTIES. Unless expressly stated herein to the contrary, -------------- nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective administrators, executors, other legal representatives, heirs, successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 20. SEVERABILITY. If any provision of this Agreement or any other ------------ agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 21. SUCCESSION. This Agreement is intended to supersede and terminate ---------- any and all prior employment agreements, in their entirety, and all amendments thereto, between the Executive and the Company, SBA, Inc. and SBA Leasing, Inc. 22. ENTIRE AGREEMENT. This Agreement represents the entire ------------------ understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, understandings and representations (if any) made by and between such parties. - 9 - IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. SBA COMMUNICATIONS CORPORATION By: /s/ Steven E. Bernstein --------------------------------- Steven E. Bernstein, President /s/ Ronald G. Bizick, II --------------------------------- RONALD G. BIZICK, II - 10 - EX-10.9 12 EMPLOYMENT AGREEMENT -- ROBERT M. GROBSTEIN EXHIBIT 10.9 ------------ EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT between SBA COMMUNICATIONS CORPORATION, a Florida corporation with its principal place of business at 6001 Broken Sound Parkway, Suite 400, Boca Raton, Florida (the "Company") and ROBERT M. GROBSTEIN (the "Executive"), is made and entered into as of this 1st day of January, 1997. W I T N E S S E T H: -------------------- WHEREAS, the Company and its subsidiaries engage in the business of developing, leasing and maintaining wireless telecommunications tower sites; and WHEREAS, the Executive and the Company wish to provide for the employment of the Executive by the Company on the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is hereby agreed by and between the parties as follows: 1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the ---------- Executive hereby agrees to be employed by the Company on the terms and conditions set forth herein. 2. TERM. The initial term of employment of the Executive by the Company ----- hereunder shall commence as of January 1, 1997 and shall end December 31, 1999 (the "Term"), unless sooner terminated as hereinafter provided. At the end of such initial Term, this Agreement shall be extended automatically for successive one (1) year Terms of employment, unless either the Company or the Executive notifies the other party in writing at least ninety (90) days prior to the end of the incumbent Term of any intention not to renew this Agreement, in which case this Agreement will terminate at the end of such incumbent Term. All references herein to the Term shall refer to both such initial Term and any such successive Terms. 3. POSITION AND DUTIES. The Executive shall serve as the Chief ---------------------- Financial Officer of the Company. The Executive shall perform the duties generally of a chief financial officer for the Company and shall have such specific responsibilities, duties and authorities as shall from time to time be assigned by the Chief Executive Officer or the Board of Directors of the Company. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company and its subsidiaries. 4. COMPENSATION AND RELATED MATTERS. -------------------------------- (a) Salary. During the period of the Executive's employment ------ hereunder, the Executive shall be paid an annual salary at a rate determined by the Board of Directors of the Company of not less than $200,000 per annum (the "Base Salary"). The Base Salary shall be paid in monthly or semi-monthly installments as shall be the practice of the Company, and may be paid by the Company or any of its subsidiaries. Compensation of the Executive by payments of Base Salary shall not be deemed exclusive and shall not prevent the Executive from participating in any other compensation or benefit plan of the Company or its subsidiaries. The term "Base Salary" shall be deemed to include any and all regular installment amounts received by the Executive under this Agreement. The Board of Directors of the Company, in its sole discretion, may from time to time authorize increases in the Base Salary. (b) Bonuses. In addition to the Base Salary payable to the -------- Executive hereunder, the Executive shall be entitled to receive a bonus hereunder for each calendar year to the extent earned in accordance with performance targets, measurements and such other criteria as shall be established for such year by the Board of Directors of the Company on or before March 31 of such year. In no event shall the annual amount of bonus paid to the Executive pursuant to this Section 4(b) be an amount greater than the Base Salary paid to Executive for such year. (c) Expenses. During the Term of the Executive's employment --------- hereunder, the Executive shall be entitled to receive payment or reimbursement for all reasonable expenses incurred by the Executive in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or its subsidiaries and including dues and seminar fees (including, without limitation, the cost of seminars, educational courses and license fees not to exceed $5,000 per annum necessary for the Executive to maintain his active status as a Florida certified public accountant); provided that such expenses are incurred and accounted for in accordance with the policies and procedures then presently established by the Company. (d) Other Benefits. The Executive shall be entitled to --------------- participate in or receive benefits under any employee benefit plan or arrangement made available by the Company or its subsidiaries in the future to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Any payments or benefits payable to the Executive hereunder in respect of any calendar year during which the Executive is employed by the Company for less than the entire such year shall, unless otherwise provided in the applicable plan or arrangement, be prorated in accordance with the number of days in such calendar year during which he is so employed. (e) Group or Family Medical Coverage. The Company shall cause -------------------------------- to be provided at its expense group or family medical insurance coverage to the Executive and his dependents under a plan for employees of the Company and such plan shall include reasonable coverage for medical, hospital, surgical and major medical expenses and shall be subject to such deductibles as applicable to other Company employees. 5. LEGAL REQUIREMENTS. Both the Executive and the Company agree that ------------------ all legal requirements shall be met with respect to United States Federal and foreign (if applicable) withholding tax requirements, compensation income and the like. - 2 - 6. TERMINATION. Unless otherwise agreed to in writing by the Company and ----------- the Executive, the Executive's employment hereunder may be terminated under the following circumstances: (a) Death. The Executive's death. ----- (b) Disability. If, as a result of the Executive's incapacity ---------- due to physical or mental illness (such incapacity being determined by the Company in its sole reasonable discretion), the Executive shall have been absent from his full-time duties as described hereunder for the entire period of six (6) consecutive months, the Company may terminate the Executive's employment hereunder. (c) Cause. ----- (i) The Company may terminate the Executive's employment hereunder for Cause. For purposes of this Agreement, "Cause" shall mean that (i) the Executive is convicted of a felony which, in the sole determination of the Company, would have a material adverse effect on the Executive's ability to perform his duties hereunder or on the business or reputation of the Company; (ii) the Executive has exhibited gross misconduct resulting in material harm to the Company, its business or reputation; (iii) the Executive has willfully misappropriated Company assets or has otherwise willfully defrauded the Company, including without limitation by fraud, theft, embezzlement, or breach of a fiduciary duty involving personal profit; (iv) the Executive has intentionally failed to perform his duties hereunder; or (v) a breach of any provision of this Agreement. For the purposes of this Section 6(c)(i), no act or failure to act on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interests of the Company. (ii) Notwithstanding the foregoing, any termination of the Executive shall not be considered a termination for Cause pursuant to this Section 6(c), and shall be considered a termination Without Cause pursuant to Section 6(d) hereof, if such termination is effected without: (1) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause; (2) an opportunity for the Executive, together with his counsel, to be heard before the Board of Directors of the Company; and (3) delivery to the Executive of a Notice of Termination as provided for in Section 8 hereof from the Board of Directors of the Company finding that in the good faith opinion of the Board of Directors of the Company the Executive was guilty of conduct set forth above in the preceding sentence, and specifying the particulars thereof in detail. (d) Without Cause. Any termination of the Executive by the -------------- Company (including any action which is deemed a termination of the Executive pursuant to Section 6(f) hereof), other than a termination pursuant to Sections 6(a)-(c) hereof, shall be deemed a termination Without Cause. - 3 - (e) Termination by the Executive. The Executive may terminate ---------------------------- this Agreement (i) due to the Executive's retirement; provided that the Executive provide the Company with thirty (30) days written notice, pursuant to Section 8(a), prior to the effective date of such retirement, as shall be stated in such notice, and (ii) for any reason other than the Executive's retirement; provided that the Executive provide the Company with sixty (60) days written notice prior to the effective date of such termination, as shall be stated in such notice. (f) Other Events of Termination. The following circumstances --------------------------- shall specifically be deemed a termination Without Cause of the Executive's employment by the Company: (i) a vote by the Board of Directors to terminate the Executive Without Cause, as defined in Section 6(d) hereof; (ii) any termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 8(a) hereof; (iii) a breach by the Company of this Agreement, and a subsequent election by the Executive to terminate this Agreement pursuant to Section 6(e) above; (iv) the performance of any other act by the Company which is designed to prevent and does prevent the Executive from properly performing the authorities, duties and responsibilities of his employment hereunder, including without limitation a material change in the duties or position of the Executive within the Company; or (v) a Change in Control (as defined below) of the Company. (g) Change in Control. For purposes of this Agreement, "Change ----------------- in Control" shall, unless the Board otherwise directs by resolution adopted prior thereto, be deemed to occur if (i) any "person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act), other than Steven E. Bernstein, is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of the voting stock; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period. Any merger, consolidation or corporate reorganization in which the owners of the Company's capital stock entitled to vote in the election of directors ("Voting Stock") prior to said combination own fifty percent (50%) or more of the resulting entity's Voting Stock shall not, by itself, be considered a Change in Control. - 4 - 7. COMPENSATION UPON TERMINATION. ----------------------------- (a) If the Executive's employment is terminated for any reason pursuant to Section 6(d) hereof, the Company shall be obligated to pay to the Executive an amount equal to the of the product of (i) the Base Salary multiplied by (ii) 2.0, such payment to be made in a lump sum on or before the fifth day following the Date of Termination; provided, however, that if the lump sum severance payment under this Section 7(a), either alone or together with other payments which the Executive has the right to receive from the Company, would constitute a "parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code")), such lump sum severance payment shall be reduced to the largest amount as will result in no portion of the lump sum severance payment under this Section 7(a) being subject to the excise tax imposed by Section 4999 of the Code. The determination of any reduction in the lump sum severance payment under this Section 7(a) pursuant to the foregoing provision shall be made by independent counsel to the Company in consultation with the independent certified public accountants of the Company. (b) If the Executive's employment is terminated pursuant to Sections 6(a), 6(b), 6(c) or 6(e) hereof, on and after the Date of Termination the Company shall no longer be obligated to pay the Executive any amounts payable hereunder for such period, whether in the form of Base Salary or otherwise, and the Executive shall have no right to compensation or other benefits hereunder for any such period. Notwithstanding the foregoing, the Company shall be obligated to pay to the Executive all amounts payable hereunder and otherwise, through and including the Date of Termination, whether such amounts were payable prior to the date of termination or thereafter, and the Executive shall be entitled to receive any extension of benefits beyond the Date of Termination, provided that (i) such benefits were received by the Executive prior to the Date of Termination and (ii) such extension is customarily offered by the Company to its employees or is otherwise required by applicable law. (c) Notwithstanding the foregoing or anything contained herein to the contrary, in no event shall the total amount of payments made under this Agreement on account of termination under Section 6(f)(v) hereof exceed three times the "base amount" minus one dollar. "Base amount" means the average annualized compensation income from the Company includible in the Executive's gross income for Federal income tax purposes over the five-year period preceding the year in which the Executive's employment is terminated. This paragraph, and the language therein, shall be interpreted consistently with Section 280G of the Internal Revenue Code of 1986, as amended, and any regulations thereunder. 8. NOTICE OF TERMINATION AND EFFECTIVE DATE. ---------------------------------------- (a) Any termination of the Executive's employment by the Company or by the Executive (other than termination pursuant to Section 6(a) hereof) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall (i) indicate the specific termination provision in this Agreement relied upon; (ii) set forth in reasonable detail the facts and circumstances claimed to - 5 - provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) contain any other information required by this Agreement. (b) For purposes of this Agreement, "Date of Termination" shall mean: (i) if the Executive's employment is terminated by his death, the date of his death; (ii) if the Executive's employment is terminated pursuant to Section 6(b) hereof, the expiration of six (6) consecutive months of the Executive's incapacity due to physical or mental illness, as set forth in Section 6(b) hereof (provided that the Executive shall not have returned to the performance of his duties on a full-time basis during such six (6) month period); (iii) if the Executive's employment is terminated pursuant to Sections 6(c) or 6(d) hereof, the date that the Notice of Termination is communicated to the Executive pursuant to Section 8(a) hereof; (iv) if the Executive's employment is terminated pursuant to Section 6(e) hereof, the termination date stated in the written notice received by the Company; or (v) if deemed terminated pursuant to Section 6(f) hereof, the date of such action which is deemed a termination of the Executive by the Company. 9. RESTRICTIVE COVENANT. Upon any cessation of employment hereunder --------------------- other than one pursuant to Sections 6(d) or 6(f), the Executive agrees that for the period commencing on the Consummation Date and ending on the date which is two (2) years from the date the Executive is no longer employed by the Company, the Executive will not, directly or indirectly: (i) engage in any trade or business directly competitive with that of any of the Company or any of its subsidiaries, anywhere in the United States or such other country or countries in which the Company actively engages in its trade or business as of the Date of Termination (the "Territory"); (ii) become associated as a manager, supervisor, employee, consultant, advisor, control shareholder (either individually or as part of an affiliated group), or otherwise of any person, corporation or entity engaging in any trade or business directly competitive with those of the Company or any of its subsidiaries anywhere in the Territory; (iii) call upon any client or clients of the Company or any of its subsidiaries for the purpose of selling or soliciting for any person, corporation or entity, other than any of the Company or its subsidiaries, sales of any products, processes, or services directly competitive with those of the Company within the Territory; (iv) divert, solicit or take away any such client or clients of the Company or any of its subsidiaries for the purpose of selling any products or services directly competitive with those of the Company or any of its subsidiaries; and service any contracts or accounts relating to any products or services directly competitive with those of the Company or any its subsidiaries for any person, corporation or entity other than the Company or any of its subsidiaries; or (v) induce, influence, combine or conspire with, or attempt to induce, influence, combine or conspire with, any of the officers or employees of the Company to terminate - 6 - his or her employment with or to directly compete against the Company, any of its present or future subsidiaries, or any of the Company's present or future affiliates about which the Executive obtained any knowledge of the business or operation of such affiliate during the Term of this Agreement. The provisions of this Section 9 shall not apply to Employee in the event of a termination of employment hereunder pursuant to Sections 6(d) or 6(f). Should any of the time periods or the geographic area set forth in this Section 9 be held to be unreasonable by any court of competent subject matter jurisdiction, the parties hereto agree to petition such court to reduce the time period or geographic area to the maximum permitted by governing law. 10. CONFIDENTIALITY. --------------- (a) In the course of this employment, the Company or any of its subsidiaries may disclose or make known to the Executive, and the Executive may be given access to or may become acquainted with, certain information, trade secrets or both, including but not limited to confidential information and trade secrets regarding tapes, computer programs, designs, skills, procedures, formulations, methods, documentation, drawings, facilities, customers, policies, marketing, pricing, customer lists and leads, and other information and know-how, all relating to or useful in the Company's business or the business of its subsidiaries and/or affiliates (collectively, the "Information"), and which the Company considers proprietary, desires to maintain confidential and is not in the public domain. During the Term of this Agreement and at all times thereafter, the Executive shall not in any manner, either directly or indirectly, divulge, disclose or communicate to any person or firm, except to or for the Company's benefit as directed by the Company, any of the Information which he may have acquired in the course of or as an incident to his employment by the Company, the parties agreeing that such information affects the successful and effective conduct of the Company's business and its goodwill, and that any breach of the terms of this Section 10 is a material breach of this Agreement. (b) All equipment, documents, memoranda, reports, records, files, materials, samples, books, correspondence, lists, other written and graphic records, and the like (collectively, the "Materials") affecting or relating to the business of the Company or of its subsidiaries and/or affiliates, which the Executive shall prepare, use, construct, observe, possess or control shall be and remain the Company's sole property or in the Company's exclusive custody, and must not be removed from the premises of the Company except as directed by the Company's Board of Directors in writing. Promptly upon termination of the Agreement or the Executive's employment hereunder for any reason, or otherwise upon request of the Chief Executive Officer of the Company, the Information, the Materials and all copies thereof in the custody or control of the Executive shall be delivered to the Company. 11. NOTICE. All notices, requests, consents and other communications ------ required or permitted under this Agreement shall be in writing (including electronic transmission) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, - 7 - electronically transmitted, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to: If to the Executive: Robert M. Grobstein 18949 Treble Lane Boca Raton, FL 33498 If to the Company SBA Communications Corporation 6001 Broken Sound Parkway, Suite 400 Boca Raton, Florida 33487 Attention: Steven E. Bernstein, President or to such other address as any party may designate by notice complying with the provisions of this Section. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 12. AMENDMENTS. The provisions of this Agreement may not be amended, ---------- supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement. 13. ASSIGNMENTS. No party shall assign his or its rights and/or ----------- obligations under this Agreement without the prior written consent of each other party to this Agreement. 14. COUNTERPARTS. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Confirmation of execution by electronic transmission of a facsimile signature page shall be binding upon any party so confirming. 15. ENFORCEMENT COSTS. If any civil action, arbitration or other legal ----------------- proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees, sales and use taxes, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, taxes, costs and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to any other relief to which such party or parties may be entitled. Attorneys' fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party. - 8 - 16. EQUITABLE REMEDIES. The Executive acknowledges that the services to ------------------ be rendered by the Executive hereunder are extraordinary and unique and are vital to the success of the Company, and that damages at law would be an inadequate remedy for any breach or threatened breach of this Agreement by the Executive. Therefore, in the event of a breach or threatened breach by the Executive of any provision of this Agreement, the Company shall be entitled, in addition to all other rights or remedies, to an injunction restraining such breach, without the Company being required to show any actual damage or to post an injunction bond. 17. GOVERNING LAW. This Agreement and all transactions contemplated by this ------------- Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. 18. JURISDICTION AND VENUE. The parties acknowledge that a substantial ---------------------- portion of the negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Palm Beach County, Florida. Any civil action or legal proceeding arising out of or relating to this Agreement shall be brought in the courts of record of the State of Florida in Palm Beach County or the United States District Court, Southern District of Florida, West Palm Beach Division. Each party consents to the jurisdiction of such court in any such civil action or legal proceeding and waives any objection to the laying of venue of any such civil action or legal proceeding in such court. Service of any court paper may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws, rules of procedure or local rules. 19. THIRD PARTIES. Unless expressly stated herein to the contrary, -------------- nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective administrators, executors, other legal representatives, heirs, successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 20. SEVERABILITY. If any provision of this Agreement or any other ------------ agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 21. SUCCESSION. This Agreement is intended to supersede and terminate any ---------- and all prior employment agreements, in their entirety, and all amendments thereto, between the Executive and the Company, SBA, Inc. and SBA Leasing, Inc. - 9 - 22. ENTIRE AGREEMENT. This Agreement represents the entire ------------------ understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, understandings and representations (if any) made by and between such parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. SBA COMMUNICATIONS CORPORATION By: /s/ Steven E. Bernstein ------------------------------- Steven E. Bernstein, President /s/ Robert M. Grobstein ------------------------------- ROBERT M. GROBSTEIN - 10 - EX-10.11 13 STOCK OPTION AGREEMENT DATED AS OF MARCH 5, 1997 EXHIBIT 10.11 ------------- STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and entered into as of the 5th day of March, 1997, by and between SBA COMMUNICATIONS CORPORATION, a Florida corporation (the "Company"), and RONALD G. BIZICK, II (the "Optionee"); W I T N E S S E T H: WHEREAS, the Optionee has agreed to terminate all of his existing employment and incentive agreements and stock options with SBA, Inc., a Florida corporation, and SBA Leasing, Inc., a Florida corporation, both wholly-owned subsidiaries of the Company, and to accept employment with the Company pursuant to the terms and conditions of that certain Employment Agreement, dated as of January 1, 1997, between the Company and the Optionee (the "Employee Agreement"); and WHEREAS, in exchange for Optionee terminating his rights with respect to options entitling him to purchase shares of capital stock in SBA, Inc. and SBA Leasing, Inc., the Company desires to grant to the Optionee, in addition to 176,472 shares of the Company's Class A Common Stock $.01 par value per share (the "Class A Common Stock"), certain options to purchase additional Class A Common Stock, all as more particularly set forth herein; NOW, THEREFORE, in consideration of the mutual premises and covenants, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions --------------- set forth in this Agreement, the Company hereby grants to the Optionee options (the "Options") to purchase up to seven hundred seventy three thousand five hundred twenty eight (773,528) shares of the Class A Common Stock at an exercise price of $.05 per share. 2. Time of Exercise. The Options are immediately exercisable and ---------------- will expire and be of no further force or effect if unexercised by December 31, 2006. 3. No Transferability. The options may not be sold, conveyed, ------------------ pledged, hypothecated or otherwise transferred in any manner by the Optionee without the prior written consent of the Company; provided, however, that the options may be transferred pursuant to will or the laws of intestacy following Optionee's life or, during Optionee's life, to a person or entity who would be deemed an Eligible Class B Stockholder as such term is defined in the Company's Articles of Incorporation and substituting in such definition as appropriate Optionee for Steven M. Bernstein. No such sale, transfer or hypothecation may occur in any event except in compliance with federal and state securities laws, as determined to the satisfaction of the Company and its counsel in their sole discretion. 4. Partial Exercise. Exercise of the options up to the extent stated may be made in part at any time and from time to time within the limits of Section 2 hereof, except that the options may not be exercised for a fraction of a share. Any fractional share with respect to which an installment of the options cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to the options and shall be available for later purchase by the Optionee in accordance with the terms hereof. 5. Payment of Price. The option price of each option is payable in ----------------- lawful currency of the United States and must be paid in cash or by certified or cashier's check, or any combination of the foregoing, equal in amount to the option price. 6. Restricted Shares; Purchase for Investment. The Optionee agrees ------------------------------------------ that (i) his purchase of shares of Class A Common Stock of the Company (the "Shares") upon an exercise of an option hereunder will not be made with a view toward the "distribution" of such Shares, as defined in the Securities Act of 1933, as amended (the "1933 Act"); (ii) such Shares may not be transferred or hypothecated unless, in the opinion of counsel to the Company, such transfer or hypothecation would be in compliance with the registration provisions of the 1933 Act or pursuant to an exemption therefrom; and (iii) that the certificate for the Shares so purchased may be inscribed with a legend to ensure compliance with the 1933 Act. Optionee understands that the Shares will not be registered under the 1933 Act, or under the laws of any jurisdiction. Optionee hereby represents and warrants that Optionee, or through his advisers, is sophisticated and experienced in financial business and investment matters and, as a result, Optionee is in a position to evaluate the merits and risks of an investment in the Company. 7. Method of Exercising Option. Subject to the terms and conditions --------------------------- of this Agreement, the options may be exercised by providing the Company at the Consummation Time with payment of the full option price of such Shares, and the Company shall deliver a certificate or certificates representing such Shares as soon as practicable after such payment shall be received. The certificate or certificates for the Shares as to which an option shall have been so exercised shall be registered in the name of the Optionee or permitted assignee and shall be delivered to the Optionee or permitted assignee. All Shares that shall be purchased upon the exercise of an option as provided herein shall be fully paid and non-assessable. The Optionee shall not have the rights of a shareholder with respect to the Shares covered by the options hereunder until the date of issuance of a stock certificate to him for such Shares. No adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued. 8. No Obligation to Exercise Option. The grant and acceptance of the -------------------------------- options hereunder imposes no obligation on the Optionee to exercise the options. 9. Amendments. The provisions of this Agreement may not be amended, ---------- supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement. 2 10. Assignments. Except as otherwise provided herein, no party shall ----------- assign his or its rights and/or obligations hereunder without the prior written consent of each other party to this Agreement. 11. Further Assurances. The parties hereby agree from time to ------------------- time to execute and deliver such further and other transfers, assignments and documents and do all matters and things which may be convenient or necessary to more effectively and completely carry out the intentions of this Agreement. 12. Binding Effect. All of the terms and provisions of this -------------- Agreement, whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, successors and permitted assigns. 13. Notices. All notices, requests, consents and other ------- communications required or permitted under this Agreement shall be in writing (including telex and telegraphic communication) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, telecommunicated, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to: If to Optionee: Ronald G. Bizick, II 822 Rambling Drive Circle West Palm Beach, Florida 33414 Telephone: (561) 791-0548 If to the Company: SBA Communications Corporation Attention: Steven E. Bernstein, President 6001 Broken Sound Parkway, Suite 404 Boca Raton, Florida 33487 Telephone: (561) 995-7670 Telefax: (561) 995-7626 or to such other address as any party may designate by notice complying with the terms of this Section. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 3 14. Headings. The headings contained in this Agreement are for -------- convenience of reference only, and shall not limit or otherwise affect in any way the meaning or interpretation of this Agreement. 15. Severability. If any part of this Agreement or any other ------------ Agreement entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 16. Survival. All covenants, agreements, representations and -------- warranties made herein or otherwise made in writing by any party pursuant hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 17. Waivers. The failure or delay of any party at any time to require ------- performance by another party of any provision of this Agreement, even if known, shall not affect the right of such party to require performance of that provision or to exercise any right, power or remedy hereunder, and any waiver by any party of any breach of any provision of this Agreement should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Agreement. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances. 18. Jurisdiction and Venue. The parties acknowledge that a substantial ---------------------- portion of negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Palm Beach County, Florida, and that, therefore, without limiting the jurisdiction or venue of any other federal or state courts, each of the parties irrevocably and unconditionally (i) agrees that any suit, action or legal proceeding arising out of or relating to this Agreement may be brought in the courts of record of the State of Florida in Palm Beach County or the court of the United States, Southern District of Florida; (ii) consents to the jurisdiction of each such court in any suit, action or proceeding; (iii) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts; and (iv) agrees that service of any court paper may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws or court rules in said state. 19. Enforcement Costs. If any civil action, arbitration or other ----------------- legal proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees, sales and use taxes, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, taxes, 4 costs and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to any other relief to which such party or parties may be entitled. Attorneys' fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party. 20. Remedies Cumulative. No remedy herein conferred upon any party ------------------- is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. No single or partial exercise by any party of any right, power or remedy hereunder shall preclude any other or further exercise thereof. 21. Governing Law. This Agreement and all transactions contemplated ------------- by this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. 22. Entire Agreement. This Agreement represents the entire ---------------- understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, understandings and representations (if any) made by and between such parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SBA COMMUNICATIONS CORPORATION /s/ Steven E. Bernstein By:______________________________ Steven E. Bernstein, President /s/ Ronald G. Bizick, II --------------------------------- Ronald G. Bizick, II 5 EX-10.12 14 STOCK OPTION AGREEMENT DATED AS OF MARCH 5, 1997 EXHIBIT 10.12 ------------- STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and entered into as of the 5th day of March, 1997 by and between SBA COMMUNICATIONS CORPORATION, a Florida corporation (the "Company"), and ROBERT M. GROBSTEIN, (the "Optionee"); W I T N E S S E T H: WHEREAS, the Optionee has agreed to terminate all of his existing employment and incentive agreements and stock options with SBA, Inc., a Florida corporation, and SBA Leasing, Inc., a Florida corporation, both wholly-owned subsidiaries of the Company, and to accept employment with the Company pursuant to the terms and conditions of that certain Employment Agreement, dated as of January 1, 1997, between the Company and the Optionee (the "Employee Agreement"); and WHEREAS, in exchange for Optionee terminating his rights with respect to options entitling him to purchase shares of capital stock in SBA, Inc. and SBA Leasing, Inc., the Company desires to grant to the Optionee, in addition to 88,236 shares of the Company's Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), certain options to purchase additional Class A Common Stock, all as more particularly set forth herein; NOW, THEREFORE, in consideration of the mutual premises and covenants, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, it is hereby agreed as follows: 1. Grant of Option. Subject to and upon the terms and conditions set --------------- forth in this Agreement, the Company hereby grants to the Optionee options (the "Options") to purchase up to three hundred eighty six thousand seven hundred sixty four (386,764) shares of Class A Common Stock at an exercise price of $.05 per share. 2. Time of Exercise. The options are immediately exercisable and will ---------------- expire and be of no further force or effect if unexercised by December 31, 2006. 3. No Transferability. The options may not be sold, conveyed, pledged, ------------------ hypothecated or otherwise transferred in any manner by the Optionee without the prior written consent of the Company; provided, however, that the options may be transferred pursuant to will or the laws of intestacy following Optionee's life or, during Optionee's life, to a person or entity who would be deemed an Eligible Class B Stockholder as such term is defined in the Company's Articles of Incorporation and substituting in such definition as appropriate Optionee for Steven M. Bernstein. No such sale, transfer or hypothecation may occur in any event except in compliance with federal and state securities laws, as determined to the satisfaction of the Company and its counsel in their sole discretion. 4. Partial Exercise. Exercise of the options up to the extent stated ----------------- may be made in part at any time and from time to time within the limits of Section 2 hereof, except that the options may not be exercised for a fraction of a share. Any fractional share with respect to which an installment of the options cannot be exercised because of the limitation contained in the preceding sentence shall remain subject to the options and shall be available for later purchase by the Optionee in accordance with the terms hereof. 5. Payment of Price. The option price of each option is payable in ----------------- lawful currency of the United States and must be paid in cash or by certified or cashier's check, or any combination of the foregoing, equal in amount to the option price. 6. Restricted Shares; Purchase for Investment. The Optionee agrees that ------------------------------------------ (i) his purchase of shares of Common Stock of the Company (the "Shares") upon an exercise of an option hereunder will not be made with a view toward the "distribution" of such Shares, as defined in the Securities Act of 1933, as amended (the "1933 Act"); (ii) such Shares may not be transferred or hypothecated unless, in the opinion of counsel to the Company, such transfer or hypothecation would be in compliance with the registration provisions of the 1933 Act or pursuant to an exemption therefrom; and (iii) that the certificate for the Shares so purchased may be inscribed with a legend to ensure compliance with the 1933 Act. Optionee understands that the Shares will not be registered under the 1933 Act, or under the laws of any jurisdiction. Optionee hereby represents and warrants that Optionee, or through his advisers, is sophisticated and experienced in financial business and investment matters and, as a result, Optionee is in a position to evaluate the merits and risks of an investment in the Company. 7. Method of Exercising Option. Subject to the terms and conditions of --------------------------- this Agreement, the options may be exercised by providing the Company at the Consummation Time with payment of the full option price of such Shares, and the Company shall deliver a certificate or certificates representing such Shares as soon as practicable after such payment shall be received. The certificate or certificates for the Shares as to which an option shall have been so exercised shall be registered in the name of the Optionee or permitted assignee and shall be delivered to the Optionee or permitted assignee. All Shares that shall be purchased upon the exercise of an option as provided herein shall be fully paid and non-assessable. The Optionee shall not have the rights of a shareholder with respect to the Shares covered by the options hereunder until the date of issuance of a stock certificate to him for such Shares. No adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued. 8. No Obligation to Exercise Option. The grant and acceptance of the --------------------------------- options hereunder imposes no obligation on the Optionee to exercise the options. 9. Amendments. The provisions of this Agreement may not be amended, ---------- supplemented, waived or changed orally, but only by a writing signed by the party as to whom enforcement of any such amendment, supplement, waiver or modification is sought and making specific reference to this Agreement. 2 10. Assignments. Except as otherwise provided herein, no party shall ----------- assign his or its rights and/or obligations hereunder without the prior written consent of each other party to this Agreement. 11. Further Assurances. The parties hereby agree from time to time to ------------------- execute and deliver such further and other transfers, assignments and documents and do all matters and things which may be convenient or necessary to more effectively and completely carry out the intentions of this Agreement. 12. Binding Effect. All of the terms and provisions of this Agreement, -------------- whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, successors and permitted assigns. 13. Notices. All notices, requests, consents and other communications ------- required or permitted under this Agreement shall be in writing (including telex and telegraphic communication) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, telecommunicated, or mailed (airmail if international) by registered or certified mail (postage prepaid), return receipt requested, addressed to: If to Optionee: Robert M. Grobstein 18949 Treble Lane Boca Raton, Florida 33498 Telephone: (561) 852-8279 If to the Company: SBA Communications Corporation Attention: Steven E. Bernstein, President 6001 Broken Sound Parkway, Suite 404 Boca Raton, Florida 33487 Telephone: (561) 995-7670 Telefax: (561) 995-7626 or to such other address as any party may designate by notice complying with the terms of this Section. Each such notice shall be deemed delivered (a) on the date delivered if by personal delivery; (b) on the date of transmission with confirmed answer back if by electronic transmission; and (c) on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as not deliverable, as the case may be, if mailed. 3 14. Headings. The headings contained in this Agreement are for -------- convenience of reference only, and shall not limit or otherwise affect in any way the meaning or interpretation of this Agreement. 15. Severability. If any part of this Agreement or any other Agreement ------------ entered into pursuant hereto is contrary to, prohibited by or deemed invalid under applicable law or regulation, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given full force and effect so far as possible. If any provision of this Agreement may be construed in two or more ways, one of which would render the provision invalid or otherwise voidable or unenforceable and another of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. 16. Survival. All covenants, agreements, representations and warranties -------- made herein or otherwise made in writing by any party pursuant hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 17. Waivers. The failure or delay of any party at any time to require ------- performance by another party of any provision of this Agreement, even if known, shall not affect the right of such party to require performance of that provision or to exercise any right, power or remedy hereunder, and any waiver by any party of any breach of any provision of this Agreement should not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right, power or remedy under this Agreement. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances. 18. Jurisdiction and Venue. The parties acknowledge that a substantial ---------------------- portion of negotiations, anticipated performance and execution of this Agreement occurred or shall occur in Palm Beach County, Florida, and that, therefore, without limiting the jurisdiction or venue of any other federal or state courts, each of the parties irrevocably and unconditionally (i) agrees that any suit, action or legal proceeding arising out of or relating to this Agreement may be brought in the courts of record of the State of Florida in Palm Beach County or the court of the United States, Southern District of Florida; (ii) consents to the jurisdiction of each such court in any suit, action or proceeding; (iii) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts; and (iv) agrees that service of any court paper may be effected on such party by mail, as provided in this Agreement, or in such other manner as may be provided under applicable laws or court rules in said state. 19. Enforcement Costs. If any civil action, arbitration or other legal ----------------- proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees, sales and use taxes, court costs and all expenses even if not taxable as court costs (including, without limitation, all such fees, taxes, 4 costs and expenses incident to arbitration, appellate, bankruptcy and post-judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to any other relief to which such party or parties may be entitled. Attorneys' fees shall include, without limitation, paralegal fees, investigative fees, administrative costs, sales and use taxes and all other charges billed by the attorney to the prevailing party. 20. Remedies Cumulative. No remedy herein conferred upon any party is -------------------- intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. No single or partial exercise by any party of any right, power or remedy hereunder shall preclude any other or further exercise thereof. 21. Governing Law. This Agreement and all transactions contemplated by ------------- this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida. 22. Entire Agreement. This Agreement represents the entire ------------------ understanding and agreement between the parties with respect to the subject matter hereof, and supersedes all other negotiations, understandings and representations (if any) made by and between such parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SBA COMMUNICATIONS CORPORATION /s/ Steven E. Bernstein By:__________________________________ Steven E. Bernstein, President /s/ Robert M. Grobstein ---------------------------------- Robert M. Grobstein 5 EX-27.1 15 FINANCIAL DATA SCHEDULE
5 YEAR YEAR DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1996 DEC-31-1997 DEC-31-1996 6,109,418 310,936 0 0 11,439,306 17,118,079 (508,268) (1,024,100) 0 0 18,141,413 17,289,309 17,162,632 870,868 (717,624) (238,758) 44,797,404 18,060,446 18,124,703 17,929,872 0 0 0 0 30,983,333 0 80,750 1,615 0 0 44,797,404 18,060,446 0 0 54,999,805 64,806,312 0 0 36,826,363 43,459,722 11,449,029 18,396,895 163,416 451,349 406,934 139,056 6,797,914 2,365,933 5,595,998 0 1,201,916 2,365,933 0 0 0 0 0 0 1,201,916 2,365,933 0 0 0 0
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