-----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, Pz8+iIkGW76qFNlfrGRAD5Rb79h9GA8AIf15oVWLkf+TfyuZlsQ5Yq/H1gV5LOwX S9SMRrtEPN3cbjq0bsJBig== 0000940180-99-000693.txt : 19990616 0000940180-99-000693.hdr.sgml : 19990616 ACCESSION NUMBER: 0000940180-99-000693 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19990615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBA COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001034054 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION SPECIAL TRADE CONTRACTORS [1700] IRS NUMBER: 650716501 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-76547 FILM NUMBER: 99646479 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-1/A 1 AMENDMENT NO.2 TO FORM S-1 As filed with the Securities and Exchange Commission on June 15, 1999 Registration No. 333-76547 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- Amendment No. 2 to FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SBA Communications Corporation (Exact name of Registrant as specified in its charter) Florida 4899 65-0716501 (State or Other Jurisdiction of Incorporation or Organization) (Primary Standard Industrial Classification Number) (IRS Employer Identification No.) --------------- 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) --------------- Jeffrey A. Stoops Chief Financial 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. Rise B. Norman, Esq. Latham & Watkins Simpson Thacher & Bartlett 885 Third Avenue 425 Lexington Avenue New York, New York 10022 New York, New York 10017 (212) 906-1200 (212) 455-2000 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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(c) 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. [_] If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PROSPECTUS 11,538,462 Shares SBA Communications Corporation Class A Common Stock ------------------ This is our initial public offering of shares of Class A common stock. We are offering 11,538,462 shares. We expect the public offering price to be between $10 and $12 per share. No public market currently exists for our shares. We have applied to list the shares on the Nasdaq National Market under the symbol "SBAC." Investing in the shares involves risks. Risk Factors begin on page 8.
Per Share Total --------- ----- Public offering price........................................... $ $ Underwriting discount........................................... $ $ Proceeds to SBA................................................. $ $
We have granted the underwriters a 30-day option to purchase up to 1,730,769 additional shares of Class A common stock on the same terms and conditions as set forth above solely to cover over-allotments, if any. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on or about June 18, 1999. ------------------ Lehman Brothers Deutsche Banc Alex. Brown Donaldson, Lufkin & Jenrette Salomon Smith Barney June 15, 1999 [MAP OF CONTINENTAL UNITED STATES DEPICTING COMMUNICATION SITE FOOTPRINTS OF SBA COMMUNICATIONS CORPORATION] [PHOTOGRAPH OF A LATTICED TOWER OF SBA COMMUNICATIONS CORPORATION] TABLE OF CONTENTS
Page ---- Where You Can Find More Information........................ i Prospectus Summary.................. 1 Summary Unaudited Pro Forma Financial Data..................... 5 Summary Historical Financial Data... 6 Risk Factors........................ 8 Use of Proceeds..................... 17 Dividend Policy..................... 18 Dilution............................ 18 Capitalization...................... 19 Unaudited Pro Forma Condensed Consolidated Financial Statements.. 20 Selected Historical Financial Data.. 24 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 26
Page ---- Industry Overview.................. 36 Business........................... 41 Management......................... 52 Certain Transactions............... 61 Principal Shareholders............. 62 Description of Capital Stock....... 65 Description of Existing Debt....... 69 Shares Eligible for Future Sale.... 71 Certain United States Federal Income Tax Considerations to Non- U.S. Holders ..................... 73 Underwriting....................... 76 Legal Matters...................... 79 Independent Accountants............ 79 Index to Financial Statements...... F-1
WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports and other information with the Securities and Exchange Commission. You may read our SEC filings over the Internet at the SEC's website at http://www.sec.gov. You may also read and copy documents at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Full addresses: Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares of Class A common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information about us and our Class A common stock, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since the prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have included copies of these documents as exhibits to our registration statement. ---------------- You should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. Until July 10, 1999, all dealers selling shares of Class A common stock, whether or not participating in the offering, may be required to deliver a prospectus. 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. i PROSPECTUS SUMMARY This summary highlights selected information about us. It is not complete and may not contain all of the information that you should consider before investing in our Class A common stock. You should carefully read this entire document, including the "Risk Factors" section beginning on page 8 and the Consolidated Financial Statements and their related notes beginning on page F- 1. Unless otherwise indicated, all information in this prospectus assumes that the underwriters will not exercise their over-allotment option. The Company We are a leading independent owner and operator of wireless communications infrastructure in the United States. We generate revenues from our two primary businesses -- site leasing and site development services. Since our founding in 1989, we have participated in the development of more than 12,000 antenna sites in 49 of the 51 major wireless markets in the United States. In 1997, we began aggressively expanding our site leasing business by capitalizing on our nationally recognized site development experience and strong relationships with wireless service providers to take advantage of the trend toward colocation and independent tower ownership. As of April 30, 1999, we owned or controlled 642 towers, had 51 towers pending acquisition under letters of intent or definitive agreements and had non-binding mandates to build over 400 additional towers for anchor tenants. Our Annualized tower cash flow for the first quarter of 1999 was $11.1 million. Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts. We lease antenna space on: (1) the towers we construct through build-to-suit programs; (2) existing sites we acquire; (3) the towers we develop strategically; and (4) sites we lease, sublease and/or manage for third parties. Under a build-to-suit program, we build a tower for a wireless service provider who has entered into a long-term anchor tenant lease. We also retain ownership of the tower and the exclusive right to colocate additional tenants on the tower. We believe that many wireless service providers are choosing the build-to-suit option as an alternative to tower ownership and that this outsourcing trend is likely to continue. We have also grown through selective acquisitions from smaller independent tower owners. BellSouth Mobility DCS recently awarded us a non-binding mandate to execute all of its outsourced 1999 new tower build-out, which is concentrated mainly in North Carolina, South Carolina, eastern Tennessee and coastal Georgia. We expect this mandate to involve approximately 150 new towers. We also recently were awarded a non- binding mandate from Sprint PCS to build approximately 100 towers in Tennessee, North Carolina, South Carolina and the Midwest. Our site development business consists of site development consulting and site development construction. In our site development business, we provide a full range of end-to-end services which typically occur in five phases: (1) network pre-design; (2) communication site selection; (3) communication site acquisition; (4) local zoning and permitting; and (5) site construction and antenna installation. We have a diverse range of customers, including cellular, personal communications service, or PCS, paging, specialized mobile radio, or SMR, and enhanced specialized mobile radio, or ESMR, providers as well as other users of wireless transmission and reception equipment. Our customers currently include many of the major wireless communications companies, including AT&T Wireless, BellSouth Mobility DCS, Nextel, Omnipoint, Pac Bell, PrimeCo, Southwestern Bell and Sprint PCS. We have capitalized on our leadership position in the site development business, our existing national field organization and our strong relationships with wireless service providers to develop our build-to-suit programs. We will continue to use our site development expertise to complement our site leasing business and secure additional build-to-suit mandates. In 1998, we built 310 towers. We believe that as the site development industry matures, our revenues and gross profit from the consulting segment of that business will continue to decline substantially. We also believe that, over the longer term, our site leasing revenues will increase as carriers move to outsource ownership and management of towers and as the number of towers we own or control grows as a result. 1 Industry Overview We believe that the rapid growth in demand for wireless services will continue to increase the need for communication sites (which include towers, rooftops and other structures on which antennas are placed). The growth in demand for wireless services and communication sites is the result of several factors, including: . 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; . the need to expand services and fill-in and upgrade existing networks; . business and consumer preferences for higher quality voice and data transmission; . the emergence of new wireless technologies; . decreasing costs of wireless services to consumers; . increasing mobility of the U.S. population and the growing awareness of the benefits of mobile communications; . favorable changes in telecommunications regulations; and . the issuance of new wireless network licenses requiring the construction of new wireless networks. In addition, our site leasing business benefits from diversified recurring revenue and effective operating leverage as a result of several factors, including: . the long-term nature of lease contract revenues; . low customer churn rates due to the high direct and indirect costs of relocation; . low variable operating costs, which cause increases in revenues to generate disproportionately larger increases in tower cash flow; . low on-going maintenance capital expenditure requirements; . a customer base diversified across geographic markets, industry segments (PCS, cellular, paging, ESMR and SMR) and individual customers within these segments; and . 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 1995 the Personal Communications Industry Association, or PCIA, estimated that the number of antenna sites in the United States for both cellular and PCS providers would increase by an additional 100,000 antenna sites (more than one of which can be located on a single communication site) over the subsequent ten years as cellular systems expand coverage and PCS systems continue to be deployed. We believe that wireless service providers face greater competition today and are now focusing their capital and operations primarily on activities that build subscriber growth, such as marketing and distribution. Therefore, they will increasingly seek to outsource communication site ownership, construction, management and maintenance. Business Strategy Our strategy is to lease antenna space to multiple tenants on towers that we construct or acquire. We plan to enhance our position as a leading owner and operator of communication sites. Key elements of our strategy include: . Maximizing Use of Tower Capacity . Developing New Towers That We Will Own and Operate . Acquiring Existing Towers . Building on Strong Relationships with Major Wireless Service Providers . Maintaining our Expertise in Site Development Services .Capitalizing on Management Experience 2 Recent Events The Senior Credit Facility In the first quarter of 1999, SBA Telecommunications, Inc., our wholly-owned subsidiary, entered into a $175.0 million senior credit facility. Our use of the facility was limited to $125.0 million pending obtaining consents from the holders of our senior discount notes. Borrowings under the senior credit facility are being used to finance our business plan. The Consent Solicitation On March 8, 1999, we concluded a consent solicitation whereby holders of 99.98% of our senior discount notes consented to amend a portion of the indenture governing the notes, so that we would be permitted to borrow the full $175.0 million under our senior credit facility. In exchange for the consent, we offered holders an amount in cash equal to 1.25% of the accreted value, as of March 1, 1999, of each note for which a consent was tendered. The Com-Net Acquisition On April 30, 1999, we acquired Com-Net Construction Services, Inc. Com-Net constructs towers and terminal switches on a turn-key basis for wireless and other telecommunications companies, primarily through the midwestern, eastern and western United States. Since its inception in 1990, Com-Net has provided construction and other related services on over 2,000 tower sites, ranging from turn-key tower construction to the installation of antennas. Clients of Com-Net include AT&T, BellSouth Cellular Corp., GTE and Sprint. For the year ended December 31, 1998, Com-Net had revenues of over $20.0 million and gross profit of $2.2 million. Dan Eldridge, the founder and President of Com-Net, will continue as President of Com-Net subsequent to the acquisition. We intend for Com-Net to continue to provide construction services to wireless carriers and other telecommunications companies, and to build towers for our ownership. At closing, we issued 780,000 shares of our Class A common stock to the shareholders of Com-Net (480,000 of which were pledged to us and will be returned to us if certain earnings targets are not met) and assumed working capital debt of approximately $4.5 million. In addition, the shareholders of Com-Net may receive up to $2.5 million in cash and 320,000 additional shares of Class A common stock if certain 1999 earnings targets are met by the acquired entity, and up to an additional 400,000 shares of Class A common stock if certain 2000 earnings targets are met. In connection with the Com-Net acquisition, we acquired an affiliate of Com- Net that owns 15 completed towers located in Texas, Ohio and Tennessee and over 30 additional tower sites in various stages of development under build-to-suit programs for a purchase price of $1.0 million in cash and assumed debt of approximately $2.5 million. Principal Executive Offices Our principal executive offices are located at One Town Center Road, Third Floor, Boca Raton, Florida 33486, and our telephone number is (561) 995-7670. We were founded in 1989 and incorporated in Florida in 1997. 3 The Offering Class A common stock offered by SBA........ 11,538,462 shares ------- Common stock offered by SBA in the over-allotment 1,730,769 shares option................ Common stock to be outstanding after the offering.............. 22,545,533shares of Class A common stock (a) 7,723,482 shares of Class B common stock (b) 30,269,015 shares of common stock (a) ------- Voting rights............... The Class A common stock and the Class B common stock generally vote as a single class. The Class A common stock has one vote per share and the Class B common stock has ten votes per share. Florida corporate law and SBA's articles of incorporation require separate class votes on some matters. Through his beneficial ownership of Class B common stock, Steven E. Bernstein will control approximately 79.1% of the total voting power of both classes of the common stock after the offering assuming the exercise of the over- allotment option in full. See "Principal Shareholders." We use the term "common stock" to mean both of these classes. Each class of common stock has the same rights to Other rights................ dividends and upon liquidation. The Class B common stock is convertible into Class A common stock on a share-for-share basis. The Class B common stock cannot be sold or transferred, except (1) after conversion to Class A common stock or (2) to certain categories of persons specified in our articles of incorporation. The Class B common stock automatically converts into Class A common stock upon the occurrence of certain events. See "Description of Capital Stock--Class B Common Stock." Nasdaq National Market SBAC symbol...................... Use of proceeds............. We estimate that the net proceeds to SBA from the offering will be approximately $117.0 million. We expect to use these proceeds to finance the construction and acquisition of towers, for general working capital purposes, to finance future acquisitions of other tower companies or related businesses, to pay outstanding dividends on our Series A preferred stock, to redeem all outstanding shares of our Series B preferred stock and to repay revolving credit borrowings - -------- under our senior credit facility. (a) Includes shares of Class A common stock to be issued to the holders of Series A preferred stock upon the automatic conversion of Series A preferred stock that will occur at the closing of the offering. Also includes all shares of Class A common stock issuable upon exercise of outstanding vested options or warrants having an exercise price below the initial public offering price. Does not include shares reserved for issuance upon exercise of unvested options or options that may be issued in the future pursuant to stock option plans. See "Management." Includes 780,000 shares issued at the closing of the Com-Net acquisition, but does not include shares that may be issuable to the former shareholders of Com- Net if the agreed-upon 1999 and 2000 earnings targets are met. (b) Reflects surrender of 351,518 shares of Class B common stock as of May 31, 1999 to repay a shareholder note in the amount of approximately $3.8 million. 4 Summary Unaudited Pro Forma Financial Data The following table presents our summary unaudited pro forma financial and other data for the year ended December 31, 1998 and as of and for the three months ended March 31, 1999. The pro forma summary operating data for the year ended December 31, 1998 and the three months ended March 31, 1999 give effect to the SBA pro forma transactions, which are (1) all individually immaterial acquisitions completed during 1998 and the three months ended March 31, 1999 and (2) the issuance of Class A common stock and the application of the net proceeds as described under "Use of Proceeds" as if each had occurred at the beginning of the periods presented. The unaudited pro forma balance sheet data as of March 31, 1999 have been prepared as if the issuance of Class A common stock and the application of the net proceeds had occurred on that date. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The pro forma financial data are for informational purposes only and do not purport to present what our results of operations or financial position would actually have been had these transactions actually occurred on the date presented or to project our results of operations or financial position at any future period. You should read the information set forth below together with "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and their related notes included elsewhere in this prospectus.
Year Ended Three Months Ended December 31, 1998 March 31, 1999 ----------------- ------------------ (dollars in thousands except per Operating Data: share data) Revenues: Site development revenue............... $ 46,705 $ 8,575 Site leasing revenue................... 15,050 5,367 ----------- ----------- Total revenues........................... 61,755 13,941 ----------- ----------- Cost of revenues (exclusive of depreciation shown below) Cost of site development revenue....... 36,500 6,623 Cost of site leasing revenue........... 7,743 2,425 ----------- ----------- Total cost of revenues................... 44,243 9,048 ----------- ----------- Gross profit............................. 17,512 4,894 Selling, general and administrative (a)(b).................................. 18,302 4,078 Depreciation and amortization............ 7,773 3,302 ----------- ----------- Operating loss........................... (8,563) (2,486) Interest income.......................... 4,080 452 Interest expense......................... (2,180) (648) Non-cash amortization of original issue discount and debt issuance costs........ (14,550) (5,200) Other.................................... (37) 9 ----------- ----------- Loss before income taxes and extraordinary item...................... (21,250) (7,873) Benefit for income taxes................. 1,454 738 ----------- ----------- Loss before extraordinary item........... (19,796) (7,135) Extraordinary item....................... -- (1,150) ----------- ----------- Net loss................................. $ (19,796) $ (8,285) =========== =========== Basic and diluted loss per common share.. $ (0.71) $ (0.29) =========== =========== Basic and diluted weighted average number of shares of common stock............... 27,770,444 28,195,299 =========== =========== Other Data: Adjusted EBITDA (d)...................... $ (185) $ 841 Annualized tower cash flow (e)........... 8,588 11,768 As of March 31, 1999 Balance Sheet Data: ------------------ Property, plant and equipment (net)...... $ 184,825 Total assets............................. 297,457 Total debt (f)........................... 195,445 Common stockholders' equity.............. 79,830
- -------- (Footnotes on page 7) 5 Summary Historical Financial Data The following table sets forth summary historical financial data as of and for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and as of March 31, 1999, and for the three months ended March 31, 1998 and 1999. The financial data for each of the full fiscal years have been derived from, and are qualified by reference to, our audited financial statements, which Arthur Andersen LLP, our independent certified public accountants, have audited. The financial data as of March 31, 1999 and for the three months ended March 31, 1998 and 1999 have been derived from our unaudited consolidated financial statements. The financial statements for periods ending on or prior to December 31, 1996 are the combined financial statements of SBA, Inc. and SBA Leasing, Inc., two predecessor companies that we acquired during the first quarter of 1997. You should read the information set forth below in conjunction with "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and their related notes included elsewhere in this prospectus.
Year Ended December 31, Three Months Ended March 31, --------------------------------------------- ------------------------------- 1994 1995 1996 1997 1998 1998 1999 ------- ------- ------- ------- --------- ------- --------- (dollars in thousands except per share data) Operating Data: Revenues: Site development revenue............... $10,604 $22,700 $60,276 $48,241 $ 46,705 $12,531 $ 8,575 Site leasing revenue... 896 2,758 4,530 6,759 12,396 2,159 5,142 ------- ------- ------- ------- --------- ------- --------- Total revenues.......... 11,500 25,458 64,806 55,000 59,101 14,690 13,716 ------- ------- ------- ------- --------- ------- --------- Cost of revenues (exclusive of depreciation shown below): Cost of site development revenue... 7,358 13,993 39,822 31,470 36,500 8,989 6,623 Cost of site leasing revenue............... 647 2,121 3,638 5,356 7,281 1,507 2,378 ------- ------- ------- ------- --------- ------- --------- Total cost of revenues.. 8,005 16,114 43,460 36,826 43,781 10,496 9,001 ------- ------- ------- ------- --------- ------- --------- Gross profit............ 3,495 9,344 21,346 18,174 15,320 4,194 4,716 Selling, general and administrative(a)(b)... 1,627 5,968 17,754 12,033 18,302 3,942 4,078 Depreciation and amortization........... 5 73 160 514 5,802 507 3,131 ------- ------- ------- ------- --------- ------- --------- Operating income (loss)................. 1,863 3,303 3,432 5,627 (8,784) (256) (2,493) Interest income......... 2 6 7 644 4,303 764 507 Interest expense........ (19) (11) (139) (407) (2,357) (333) (815) Non cash amortization of original issue discount and debt issuance costs.................. -- -- -- -- (14,550) (1,547) (5,200) Other................... -- -- -- -- (37) -- 9 ------- ------- ------- ------- --------- ------- --------- Income (loss) before income taxes and extraordinary item..... 1,846 3,298 3,300 5,863 (21,425) (1,372) (7,993) (Provision) benefit for income taxes(c)........ (738) (1,319) (1,320) (5,596) 1,524 (87) 786 Extraordinary item...... -- -- -- -- -- -- (1,150) ------- ------- ------- ------- --------- ------- --------- Net income (loss)....... 1,108 1,979 1,980 267 (19,901) (1,458) (8,357) Dividends on preferred stock ................. -- -- -- (983) (2,575) (438) (713) ------- ------- ------- ------- --------- ------- --------- Net income (loss) available to common stockholders........... $ 1,108 $ 1,979 $ 1,980 $ (716) $ (22,476) $(1,896) $ (9,070) ======= ======= ======= ======= ========= ======= ========= Basic and diluted loss per common share....... $(2.64) $ (1.01) ========= ========= Basic and diluted weighted average number of shares of common stock.................. 8,526,052 8,955,922 ========= ========= Other Data: Adjusted EBITDA(d)...... $ 1,868 $ 3,376 $10,603 $ 7,155 $ (2,377) $ 300 $ 663 Annualized tower cash flow(e)................ 344 752 991 1,947 8,088 2,606 11,056 Capital expenditures.... (51) (660) (145) (17,676) (138,124) (11,070) (36,870) Net cash provided by (used in) operating activities............. 873 (533) 1,215 7,829 7,471 (6,057) (4,459) Net cash used in investing activities... (51) (660) (145) (17,676) (138,124) (11,070) (36,870) Net cash provided by (used in) financing activities............. (689) 1,298 (1,036) 15,645 151,286 134,628 16,863 Towers owned at the beginning of period.... -- -- -- -- 51 51 494 Towers constructed...... -- -- -- 15 310 16 54 Towers acquired......... -- -- -- 36 133 23 38 Total towers at the end of period.............. -- -- -- 51 494 90 586
- -------- (Footnotes on following page) 6
As of December 31, As of March 31, --------------------------------------- --------------- 1994 1995 1996 1997 1998 1999 ------ ------ ------- ------- -------- -------- (dollars in thousands) Balance Sheet Data (at end of period): Property, plant and equipment (net)........ $ 61 $ 647 $ 632 $17,829 $150,946 $184,825 Total assets............ 2,610 7,429 18,060 44,797 214,573 231,841 Total debt(f)........... 1 1,500 4,921 10,184 182,573 210,445 Redeemable preferred stock.................. -- -- -- 30,983 33,558 34,271 Common stockholders' equity (deficit)....... 1,745 4,793 102 (4,344) (26,095) (35,141)
- -------- (a) For the year ended December 31, 1995, selling, 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, selling, general and administrative expense includes non-cash compensation expense of $7.0 million incurred in connection with the consolidation of the predecessor companies 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. For the year ended December 31, 1997, selling, general and administrative expense includes non-cash compensation expense of $1.0 million incurred in the consolidation of the predecessor companies. For the year ended December 31, 1998, selling, general and administrative expense includes non-cash compensation expense of $0.6 million incurred in connection with the issuance of stock options and Class A common stock. (b) Selling, general and administrative expense includes corporate development expenses associated with our site leasing business that were incurred in connection with the acquisition or construction of owned towers. These expenses consist of compensation and overhead costs that are not directly related to the administration or management of existing towers. All of these costs are expensed as incurred. The amount of these corporate development expenses for the periods presented was as follows:
Three Months Ended Year Ended December 31, March 31, -------------------------------------------------- ------------------------- 1994 1995 1996 1997 1998 1998 1999 ---- ---- ---- ---- ---- ---- ---- (dollars in (dollars in thousands) thousands) ---------------------- ----------- $787 $2,627 $8,973 $6,668 $10,000 $2,168 $2,177
(c) Provision for income taxes represents a pro forma calculation (40%) for the years ended December 31, 1994, 1995 and 1996, when we were treated as an S Corporation under Subchapter S of the Internal Revenue Code of 1986, as amended. We converted to a C Corporation in 1997. Provision (benefit) for income taxes for the years ended December 31, 1997 and 1998 and for the three months ended March 31, 1998 and 1999 represents an actual provision (benefit). For 1997, the effective rate was in excess of the 40% rate used in the pro forma calculations due to the tax effect of our conversion to a C Corporation. (d) 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. Adjusted EBITDA excludes the effect of the non-cash compensation expense referred to in footnote (a) above. Adjusted 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 Adjusted EBITDA differently and, therefore, Adjusted EBITDA as presented for us may not be comparable to Adjusted EBITDA reported by other companies. See our Consolidated Statements of Cash Flows in our Consolidated Financial Statements contained elsewhere in this prospectus. (e) We define "tower cash flow" as site leasing revenue less cost of site leasing revenue (exclusive of depreciation). Tower cash flow includes deferred revenue attributable to certain leases. We believe tower cash flow is useful because it allows you to compare tower performance before the effect of expenses (selling, general and administrative) that do not relate directly to tower performance. We define "annualized tower cash flow" as tower cash flow for the last calendar quarter attributable to our site leasing business multiplied by four. Pro forma Annualized tower cash flow also includes the effect of fourth quarter acquisitions as if each had occurred at the beginning of the period presented. (f) Total debt does not include amounts owed to the shareholder of $0.1 million and $10.7 million as of December 31, 1995 and 1996, respectively. These amounts were paid in March 1997. 7 RISK FACTORS You should carefully consider the following risks as well as the other information contained in this prospectus before investing in shares of our Class A common stock. We expect the consulting segment of our site development revenues to decline substantially as we continue to expand our site leasing business. Our growth strategy is primarily focused on expanding our site leasing business, as opposed to our site development business. We believe that wireless service providers have begun to move away from the traditional build-out formula where those providers contract for site development services for a fee and invest the capital necessary to build and own their own network of communication towers. We believe that the use of build-to-suit programs is rapidly becoming the preferred method of wireless network expansion. The success of our site leasing business will depend on our ability to construct and acquire towers and profitably manage the leasing of antenna sites on those towers. In particular, the profitability of our site leasing business will depend on our ability to construct and acquire towers and secure additional tenants following initial tower construction or acquisition. We have only limited experience in the site leasing business and we cannot assure you that we will be successful in acquiring or constructing towers or securing additional tenants in accordance with our business plan. As wireless service providers have moved away from the traditional build-out formula, our site development revenue from the consulting segment declined in fiscal 1997, fiscal 1998 and the first quarter of fiscal 1999, and we expect a further substantial decline during the remainder of fiscal 1999. We expect this trend to continue for the forseeable future as our customers continue to move toward build-to-suit programs and other outsourcing alternatives and away from wireless service provider-funded site development and ownership. However, you should be aware that a substantial portion of our revenues has historically come from the consulting segment of our site development business. In addition, we anticipate that our operating expenses and cash needs will increase as we continue to focus primarily on our site leasing business and the construction and acquisition of tower assets. Our success in the site leasing business depends to a large extent on our management's expectations and assumptions concerning future demand for independently-owned communication sites and numerous other factors, many of which are beyond our control. Any material error in any of these expectations or assumptions could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. Because most of our towers are newly constructed, and because these towers have little or no positive cash flow at the time of their construction, the risks of lower tenant demand for tower space are much greater for us than for a tower company which has grown its portfolio by acquiring towers with existing cash flow. We cannot assure you that we will be successful in growing our site leasing business. The number of towers we build and our site development business revenues fluctuate from quarter to quarter. The number of towers we build and the demand for our site development services each fluctuates from period to period and within periods. Numerous factors cause these fluctuations, including the timing of our customers' capital expenditures, the number and significance of active customer engagements during a quarter, delays incurred in connection with a project, employee hiring, the use of consultants and the rate and volume of wireless service providers' tower build-outs. While this demand fluctuates, we incur significant fixed costs, such as maintaining a staff and office space in anticipation of future contracts, even when there is no current business. The timing of revenues is difficult to forecast as our 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 weather, 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 new tower builds and revenues and 8 could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. Consequently, the number of towers we build and operating results of our site development business for any particular period may vary significantly, and should not be considered as indicative of longer-term results. We face zoning and other restrictions on our ability to construct new towers. Our growth strategy depends on our ability to construct and operate towers in a timely and cost-effective manner. A number of factors beyond our control, including zoning and local permitting requirements, FAA considerations, availability of tower components and construction equipment, skilled construction personnel and bad weather conditions, can affect our ability to construct new towers. 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. We cannot assure you (1) of the number of mandates that we will be awarded or the number of mandates that will result in constructed towers; (2) that we will be able to overcome regulatory or other barriers to new construction; (3) that the number of towers planned for construction will be completed in accordance with the requirements of our customers; or (4) that there will be a significant need for the construction of new towers once existing wireless service providers complete their tower network infrastructure build-out. Certain of our anchor tenant leases contain penalty or forfeiture provisions in the event the towers are not completed within specified time periods. We face increasing competition for new tower opportunities and acquisitions of existing towers. We compete for new tower opportunities primarily with site developers, wireless carriers and other independent tower companies. We believe that competition for new tower 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 we do. Our growth strategy also depends on our ability to acquire and operate existing towers not built by us to augment our existing tower network. We compete with other independent tower owners and operators for acquisitions of towers, as well as site developers, and we expect that this competition will increase. Increased competition for acquisitions may result in fewer acquisition opportunities for us, as well as higher acquisition prices. We regularly explore acquisition opportunities, and we are currently actively negotiating to acquire additional towers. As of April 30, 1999, we had letters of intent or definitive agreements with respect to the acquisition of 51 additional towers. We cannot assure you that we will be able to identify towers or tower companies to acquire in the future on commercially reasonable terms or at all. We may also face challenges in integrating newly acquired towers or tower companies. We cannot assure you that we will be able to identify, finance and complete future acquisitions on acceptable terms or that we will be able to profitably manage and market available space on our towers. The extent to which we are unable to construct or acquire additional towers, or profitably manage such tower operations, may have a material adverse effect on our growth rate, 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. Our failure to move quickly and aggressively to obtain growth capital and capitalize on this infrastructure opportunity could have a material adverse effect on our growth rate, prospects, financial condition or results of operations with respect to both site development services and site leasing. We will need to seek additional financing to fund our business plan. Our business strategy contemplates substantial capital expenditures in connection with the expansion of our tower footprints by agreeing with wireless carriers to assume ownership or control of their existing towers, by pursuing build-to-suit opportunities and by exploring other tower acquisition opportunities. 9 We currently estimate that we will make at least $160.0 million of capital expenditures in 1999 for the construction and acquisition of communication sites, primarily towers, and the acquisition of Com-Net. Based on our current operations and anticipated revenue growth, we believe that, if our business strategy is successful, cash flow from operations and available cash, together with the proceeds of the offering and available borrowings under our senior credit facility, will be sufficient to fund our anticipated capital expenditures through the end of 1999. Thereafter, however, or in the event we exceed our currently anticipated capital expenditures by the end of 1999, or are unable to fully draw on our senior credit facility, we anticipate that we will need to seek additional equity or debt financing to fund our business plan. We cannot assure you that additional financing will be available, on commercially acceptable terms or at all, or that any additional debt financing will be permitted by the terms of our existing indebtedness, including our senior discount notes. Prior to March 1, 2003, interest expense on our outstanding senior discount notes will consist solely of non-cash accretion of original issue discount and the notes will not require cash interest payments. After that time, our outstanding senior discount notes will have accreted to $269.0 million and will require annual cash interest payments of approximately $32.3 million. If we are required to issue additional common equity, it could be dilutive to our existing equity investors. To the extent we are unable to finance future capital expenditures, we will be unable to achieve our currently contemplated business goals. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The development of our site leasing business may strain our resources. Expanding our site leasing business may impose significant strains on our management, operating systems and financial resources. In addition, we anticipate that our operating expenses may increase from their 1998 levels as we construct and acquire additional tower assets. Our failure to manage our growth or unexpected difficulties encountered during expansion could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. The pursuit and integration of new tower builds, acquisitions, investments, joint ventures and strategic alliances will require substantial attention from our senior management, which will limit the amount of time available to devote to our existing operations. From January 1, 1995 to March 31, 1999, our work force increased from 82 to 320 employees. This growth has placed, and will likely continue to place, a substantial strain on our administrative, operational and financial resources. Our executive officers generally have had no experience in managing companies this large. In addition, as part of our business strategy, we may acquire complementary businesses or expand into new businesses. We cannot assure you that we will be able to manage our growth successfully, or that our management, personnel or operational and financial control systems will be adequate to support expanded operations. Any such inabilities or inadequacies could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. We depend on demand for wireless communications for our revenues. Substantially all of our customers to date have been providers of wireless communications services and, therefore, our success is dependent on their success. Demand for our 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 these communication sites depends on a number of factors beyond our control, including the level of demand for wireless services, the financial condition and access to capital of wireless service 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 them to use one another's wireless communications facilities to accommodate customers who are out of range of their home provider's services. These roaming agreements may be viewed by wireless service providers as a superior alternative to leasing antenna space on communications sites owned or controlled by us. The proliferation of these roaming agreements could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. 10 The wireless communications industry has grown significantly 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, we anticipate that a significant amount of our revenues over the next several years will be generated from providers in the PCS market and thus we will be subject to downturns in PCS demand. Moreover, wireless service providers often operate with substantial leverage, and financial problems for our 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. We have many competitors for site leasing tenants. We compete for site leasing tenants with: (1) wireless service providers that own and operate their own tower footprints and lease, or may in the future decide to lease, antenna space to other providers; (2) site development companies that acquire antenna space on existing towers for wireless service providers, manage new tower construction and provide site development services; (3) other large independent tower companies; and (4) smaller 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 we do. Several other independent companies also have larger tower footprints and greater financial resources than we do. We believe 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. Because most of our towers are newly constructed, and because these towers have little or no positive cash flow at the time of their construction, the risks of lower tenant demand for tower space are much greater for us than for a tower company which has purchased most of its towers with existing cash flow. Our mandates may not yield binding agreements. As of April 30, 1999, we had non-binding mandates to build over 400 additional towers under build-to-suit programs for wireless service providers. Although we believe 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 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 us and our customers and finalization of other definitive documents between the parties. As a result, we cannot assure you as to the percentage of current and future non- binding mandates that will ultimately result in binding anchor tenant leases and constructed towers. We depend on a small number of customers for most of our revenues. We derive a significant portion of our revenues from a small number of customers. For example, during 1997 and 1998, our five largest customers accounted for approximately 89.9% and 91.4%, respectively, of our revenues from site development services. Four of the five largest site development customers were also among our five largest customers overall in 1998. Sprint PCS, our largest customer for the years ended December 31, 1997 and 1998, accounted for 53.6% and 41.3%, respectively, of our revenues from site development services during those years. Other large customers include Pacific Bell Mobile Systems, which accounted for 14.0% and 13.5% of our revenues from site development services for the years ended December 31, 1997 and 1998, respectively, and BellSouth Mobility DCS, which accounted for 23.8% of our revenues from site development services for 1998. PageNet, our largest site leasing customer, accounted for 33.4% of our site leasing revenue in 1998. Our site development customers engage us 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 we cannot assure you that we will be successful in establishing relationships with new clients. Moreover, we cannot assure you that our existing customers will continue to engage us for additional projects. We have experienced and expect to continue to experience a decline in overall demand for the consulting segment of our site development services. The substantial majority of our existing non-binding mandates are from BellSouth Mobility DCS and Sprint PCS. The loss of any significant customer could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. See "Business--Customers." 11 Substantial Leverage--Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our payment obligations. We have a significant amount of indebtedness. The following chart shows certain important credit information:
At March 31, 1999 ---------------------- (dollars in thousands) Total indebtedness................................. $210,445 Stockholders' equity (deficit)..................... $(35,141)
Our substantial indebtedness could have important consequences to you. For example, it could: . increase our vulnerability to general adverse economic and industry conditions; . limit our ability to fund future working capital, capital expenditures, research and development costs and other general corporate requirements; . require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; . limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; . place us at a competitive disadvantage compared to our competitors that are less leveraged; and . limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. And, failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. Our ability to service our debt obligations will depend on our future operating performance, which will be affected by prevailing economic conditions in the wireless communications industry, and financial, business and other factors, certain of which are beyond our control. If we are unable to generate sufficient cash flow from operations to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing, delaying or eliminating acquisitions, tower construction and other capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital. We cannot assure you that we can effect any of these alternative strategies on satisfactory terms, if at all. The implementation of any of these alternative strategies could have a negative impact on the value of our Class A common stock. Our senior credit facility and the indenture governing our senior discount notes each contains certain restrictive covenants. The senior credit facility also requires us to maintain specified financial ratios and satisfy certain financial condition tests. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will be able to meet those tests. A breach of any of these covenants could result in a default under the senior credit facility and the indenture governing our senior discount notes. If an event of default should occur under the senior credit facility, our lenders can elect to declare all amounts of principal outstanding under the senior credit facility, together with all accrued interest, to be immediately due and payable. This could also result in the triggering of cross-default or cross-acceleration provisions in other instruments, permitting acceleration of the maturity of additional indebtedness. If we were unable to repay amounts that become due under the senior credit facility, our lenders could proceed against the collateral granted to them to secure that indebtedness. If the indebtedness under the senior credit facility were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full such indebtedness. Substantially all of our assets are pledged as security under the senior credit facility. See "Description of Existing Debt." 12 Our earnings have been insufficient to cover our fixed charges since the issuance of our senior discount notes. We expect our earnings to continue to be insufficient to cover our fixed charges for the foreseeable future. We may be able to incur substantial additional indebtedness in the future. If new debt is added to our current debt levels, the related risks that we face could intensify. We must comply with a variety of extensive regulations. We are 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, lighting and marking of towers and may, depending on the characteristics of the tower, require prior approval or 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. 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. Construction or modification of such structures is also subject to the requirements of the National Environmental Policy Act, which requires additional review of any tower that may have a significant effect upon the quality of the human environment. 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 also bear the responsibility for notifying the FAA of any tower lighting failures. We generally indemnify our 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 our ability to respond to customers' demands. In addition, these regulations increase the costs associated with new tower construction. We cannot assure you 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 these delays or result in additional costs to us. These factors could have a material adverse effect on our growth rate, prospects, financial condition or results of operations and on our ability to implement and/or achieve our business objectives in the future. Our customers may also become subject to new regulations or regulatory policies that adversely affect the demand for communication sites. See "Business--Regulatory and Environmental Matters." In addition, our 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. Under certain of these environmental laws, we could be held strictly, jointly and severally liable for the remediation of hazardous substance contamination at our 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 we believe that we are in substantial compliance with and have no material liability under applicable environmental laws, the costs of compliance with existing or future environmental laws and liability related to those laws may have a material adverse effect on our growth rate, prospects, financial condition or results of operations. We and the wireless service providers that use our towers are also subject to government requirements and other guidelines relating to radio frequency, or 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 we have not been subject to any claims relating to RF emissions, we may be subject to such claims in the future. Our towers are subject to damage from natural disasters. Our towers are subject to risks associated with natural disasters such as tornadoes, hurricanes and earthquakes. We maintain insurance to cover the estimated cost of replacing damaged towers, but these 13 insurance policies are subject to caps and deductibles. We also maintain third party liability insurance to protect us in the event of an accident involving a tower. A tower accident for which we are uninsured or underinsured, or damage to a tower or group of towers, could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. New technologies may undermine the success of our operations. The emergence of new technologies could have a negative impact on our operations. For example, 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. These systems could reduce the demand for our infrastructure services. These events could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. Because of our holding company structure, we depend on our subsidiaries for cash flow. SBA's access to this cash flow is restricted. We are a holding company with no business operations of our own. Our only significant asset is and will be the outstanding capital stock of our subsidiaries. We conduct, and will conduct, all of our business operations through our subsidiaries. Accordingly, our only source of cash to pay our obligations is distributions from our subsidiaries of their net earnings and cash flow. We currently expect that the earnings and cash flow of our subsidiaries will be retained and used by them in their operations, including to service their debt obligations. Even if our subsidiaries determined to make a distribution in respect of their capital stock, we cannot assure you that applicable state law and contractual restrictions, including the dividend covenants contained in our senior credit facility, would permit such dividends or distributions. See "Description of Existing Debt." Steven E. Bernstein will control the outcome of shareholder votes. Steven E. Bernstein, our President and Chief Executive Officer, beneficially owns 100% of the outstanding shares of Class B common stock. Through his beneficial ownership of Class B common stock, Mr. Bernstein will control approximately 79.1% of the total voting power of both classes of the common stock after consummation of the offering (assuming the exercise of the over- allotment option in full). As a result, Mr. Bernstein will have the ability to control the outcome of all matters determined by a vote of our common shareholders, including the election of all of our directors. We depend on the services of our executive officers. Our success depends to a significant extent upon the continued services of Steven E. Bernstein, our President and Chief Executive Officer, Ronald G. Bizick, II, our Executive Vice President-Sales and Marketing, Robert M. Grobstein, our Chief Accounting Officer, Michael N. Simkin, our Chief Operating Officer, and Jeffrey A. Stoops, our Chief Financial Officer. Each of Messrs. Bizick, Grobstein, Simkin and Stoops has an employment agreement. We do not have an employment agreement with Mr. Bernstein. Mr. Bernstein's compensation and other terms of employment will be determined by the Board of Directors. Although we maintain key person life insurance on Mr. Bernstein, such insurance would not adequately compensate for the loss of his services. The loss of the services of any of Messrs. Bernstein, Bizick, Grobstein, Simkin, Stoops or other key managers or employees, could have a material adverse effect upon our growth rate, prospects, financial condition or results of operations. We need to attract, retain and manage skilled employees. Our business involves the delivery of professional services and is labor- intensive. Our success depends in large part upon our ability to attract, develop, motivate and retain skilled employees. We compete with other 14 wireless communications firms and other enterprises for employees with the skills required to perform our services. We cannot assure you that we will be able to attract and retain a sufficient number of highly-skilled employees in the future or that we will continue to be successful in training, retaining and motivating employees. The loss of a significant number of employees and/or our inability to hire a sufficient number of qualified employees could have a material adverse effect on our growth rate, prospects, financial condition or results of operations. If we or our existing shareholders sell additional shares of our Class A common stock after the offering, it could hurt the market price of our Class A common stock. If we sell a substantial number of shares of our Class A common stock after the offering, those sales could adversely affect the market price of our Class A common stock and could impair our ability to raise capital through the sale of equity securities. Upon completion of the offering, we will have 28,972,866 shares of common stock outstanding (including the 7,723,482 shares of Class B common stock to be outstanding after the offering, the 8,050,000 shares of Class A common stock to be issued upon the conversion of the Series A preferred stock and the 780,000 shares of Class A common stock issued at the closing of the Com-Net acquisition). In addition, we have reserved for issuance 4,151,383 shares of Class A common stock upon exercise of stock options and 402,500 shares of Class A common stock upon exercise of the outstanding warrant. The 11,538,462 shares (13,269,231 shares if the over-allotment option is exercised in full) sold in the offering will be freely transferable without restriction under the Securities Act, unless they are held by "affiliates" of ours as that term is used under the Securities Act. Of the remaining 17,434,404 shares (15,703,635 shares if the over-allotment option is exercised in full), 15,773,482 shares will be freely transferable without restriction under the Securities Act, unless they are held by our "affiliates" and will be available for public sale upon expiration of the "lock-up" agreements described below. The remaining 1,660,922 shares will be "restricted securities" as that term is defined in Rule 144 and subject to the volume restrictions of Rule 144. Substantially all of these restricted securities are entitled to demand and piggyback registration rights under certain circumstances. We intend to file a registration statement under the Securities Act after the offering to register shares of Class A common stock reserved for issuance under the 1996 Stock Option Plan and the 1999 Equity Participation Plan. This registration would permit the resale of such shares by non-affiliates upon issuance in the public market without restriction under the Securities Act. Such registration statement will automatically become effective immediately upon filing. See "Management." In connection with the offering and subject to certain exceptions, we, all of our executive officers and directors and holders of our Series A preferred stock have agreed not to sell any shares of Class A common stock, or any securities which may be converted into or exchanged for any such shares of Class A common stock or substantially similar securities, for a period of 180 days after the date of this prospectus without the prior written consent of Lehman Brothers Inc., subject to typical exceptions. In addition, our employees who will own 10,000 or more vested options during the 180-day period described above will execute similar "lock-up" agreements. See "Underwriting." The value of shares of Class A common stock purchased in the offering will be diluted. Persons purchasing shares of Class A common stock in the offering will incur immediate and substantial dilution in net tangible book value per share. In addition, to the extent that outstanding options and warrants to purchase Class A common stock are exercised, there could be substantial additional dilution. See "Dilution." There is no existing market for our Class A common stock. The share price for our Class A common stock may fluctuate significantly. Prior to the offering, there has been no public market for the Class A common stock. We cannot assure you that an active trading market will develop upon completion of the offering or, if it does develop, that it 15 will be sustained. The initial public offering price of the Class A common stock was determined by negotiation among us and the representatives of the underwriters, and may not be representative of the price that will prevail in the open market after the offering. See "Underwriting" for a discussion of the factors that were considered in determining the initial public offering price. The market price of the Class A common stock after the offering may be significantly affected by factors such as quarterly variations in our results of operations, changes in government regulations, the announcement of new contracts by us or our competitors, technological innovation of ours or of our competitors, general market conditions specific to our industry, changes in general economic conditions and volatility in the financial markets. These fluctuations may adversely affect the market price of the Class A common stock. Our articles of incorporation and by-laws include provisions that may discourage a change of control transaction which may affect the rights of holders of our Class A common stock. Upon consummation of the offering, our articles of incorporation will allow our Board of Directors to issue up to 30,000,000 shares of preferred stock and to fix the rights, privileges and preferences of these shares without any further vote or action by the shareholders. The rights of the holders of our Class A common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. While we have no present intention to issue shares of preferred stock, any such issuance could be used to discourage, delay or make more difficult a change in control of SBA. In addition, our articles of incorporation provide for a staggered Board of Directors and our by-laws impose restrictions on calling special meetings of shareholders and introducing shareholder proposals. Each of these features could also be used to discourage, delay or make more difficult a change in control of SBA. See "Description of Capital Stock." This prospectus contains forward-looking statements that may not be accurate indicators of our future performance. This prospectus contains forward-looking statements within the meaning of the federal securities laws. Discussions containing such forward-looking statements may be found in the material set forth in this section and under "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry Overview" and "Business," as well as in the prospectus generally. The words "believe," "estimate," "expect," "intend," "anticipate," "plan," and similar expressions and variations of such expressions identify certain of such forward-looking statements that speak only as of the dates on which they were made. Prospective investors are cautioned that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, the risk factors set forth above and the matters set forth in this prospectus generally. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 16 USE OF PROCEEDS We estimate that the net proceeds to SBA from the offering, after deduction of the underwriting discount and estimated offering expenses, will be approximately $117.0 million (assuming an offering price at the mid-point of the proposed range). Each share of Series A preferred stock will automatically convert into one share of Series B preferred stock and one share of Class A common stock upon consummation of the offering. We expect to use approximately $38.3 million of the net proceeds from the offering to finance the construction and acquisition of towers, and for general working capital purposes. We may also use such net proceeds to finance acquisitions of other tower companies or other related businesses. In addition, we expect to use approximately $32.7 million of these net proceeds to pay all outstanding dividends on all outstanding shares of our Series A preferred stock and to redeem all outstanding shares of our Series B preferred stock. We also expect to use approximately $46.0 million to repay revolving credit borrowings under our senior credit facility. An affiliate of Lehman Brothers, one of the underwriters in the offering, is a lender under the senior credit facility. We have used borrowings under the senior credit facility to finance our business plan. The weighted average interest rate of revolving credit loans outstanding under the senior credit facility was 8.437% at March 31, 1999. The revolving credit loans mature on December 31, 2004. See "Description of Existing Debt-- The Senior Credit Facility" for more information on the calculation of interest under the senior credit facility. Pending these uses, we will invest the net proceeds in short-term government obligations. 17 DIVIDEND POLICY We have never paid dividends on the common stock, and we do not anticipate paying dividends in the foreseeable future. Any determination to pay cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, contractual restrictions and other factors deemed relevant at that time by the Board of Directors. Our ability to pay dividends on the common stock is dependent upon the ability of our subsidiaries to pay dividends, or otherwise loan, advance or transfer funds, to us. The terms of our indebtedness impose limitations on our ability to pay dividends or make other distributions on our capital stock. See "Description of Existing Debt." DILUTION Dilution is the amount by which the offering price paid by the purchasers of the Class A common stock offered hereby will exceed the net tangible book value per share of Class A common stock after the offering. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date. Our net tangible book value as of March 31, 1999 was $(53.2) million or $(5.94) per share. After giving effect to the receipt of approximately $117.0 million of estimated net proceeds from the sale of shares of Class A common stock in the offering and to the conversion of our outstanding Series A preferred stock that will occur automatically upon consummation of the offering, our pro forma net tangible book value at March 31, 1999 would have been approximately $61.8 million or $2.19 per share. This represents an immediate increase in pro forma net tangible book value of $8.13 per share to existing shareholders and an immediate dilution of $8.81 per share to new investors purchasing shares of Class A common stock in the offering. The following table illustrates the substantial and immediate per share dilution to new investors (assuming an offering price at the mid-point of the proposed range):
Per Share --------- Initial public offering price per share..................... $11.0 Pro forma net tangible book value before the offering..... (5.94) Increase per share attributable to new investors.......... 8.13 ----- Pro forma net tangible book value after the offering........ 2.19 ----- Dilution per share to new investors......................... $8.81
The following table summarizes the difference among existing shareholders (determined as if the offering had occurred on March 31, 1999) and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share (assuming an offering price at the mid-point of the anticipated price range):
Shares Purchased Total Consideration --------------------- ----------------------- Average Price Number Percentage Amount Percentage Per Share ---------- ---------- ------------ ---------- ------------- New investors........... 11,538,462 57% $126,923,082 99.9% $11.00 Existing stockholders... 8,606,837 43% 122,335 0.1% $ 0.01 ---------- --- ------------ ---- Total................. 20,145,299 100% $127,045,417 100% ========== === ============ ====
The above tables assume no exercise of options outstanding as of March 31, 1999 and no exercise of the warrant to purchase shares of our Class A common stock issued at the time of the offering of the Series A preferred stock. It also excludes the conversion of Series A preferred stock into 8,050,000 shares of Class A common stock. As of March 31, 1999, there were 1,656,783 shares of Class A common stock reserved for issuance pursuant to outstanding stock options and 402,500 shares of Class A common stock issuable upon the exercise of the outstanding warrant at exercise prices ranging from $0.05 to $4.00 per share. To the extent that any of such shares are issued, there will be further dilution to new investors. See "Description of Capital Stock." 18 CAPITALIZATION The following table sets forth our consolidated capitalization as of March 31, 1999 on an historical basis and as adjusted for the offering and the application of the net proceeds. You should read this table in conjunction with "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements included elsewhere in this prospectus and their related notes.
As of March 31, 1999 --------------------- Actual As Adjusted -------- ----------- (in thousands) Cash and cash equivalents................................ $ 2,278 $ 71,733 ======== ======== Long-term debt (less current maturities): Senior Credit Facility(a).............................. $ 40,000 $ 25,000 12% Senior Discount Notes due 2008..................... 170,445 170,445 -------- -------- Total long-term debt................................. 210,445 195,445 -------- -------- Preferred stock (30,000,000 shares authorized; 8,050,000 shares issued; 0 shares issued as adjusted)(b) Series A preferred stock............................... 34,271 -- Stockholders' equity (deficit): Class A common stock (32,000,000 shares authorized; 100,000,000 shares authorized as adjusted; 880,922 shares issued; 20,469,384 shares issued as adjusted)(c)(d)....................................... 9 205 Class B common stock (8,100,000 shares authorized; 8,075,000 shares issued; 7,725,915 shares issued as adjusted)(e).......................................... 81 77 Warrants to purchase Class A common stock(c)........... -- -- Paid-in capital(e)..................................... 741 113,732 Accumulated deficit.................................... (35,971) (34,184) -------- -------- Total stockholders' equity (deficit)................. (35,141) 79,830 -------- -------- Total capitalization $209,575 $275,275 ======== ========
- -------- (a) As of March 31, 1999, we had $40.0 million of borrowings outstanding under our senior credit facility, of which $15.0 million were revolving credit borrowings. We expect the actual amount of revolving credit borrowings outstanding at the closing of the offering to be higher as we continue to borrow to finance our business plan. (b) Each share of Series A preferred stock is convertible into one share of Series B preferred stock and one share of Class A common stock. "As adjusted" assumes redemption of the Series B preferred stock. (c) The "as adjusted" number does not include (1) 2,556,783 shares of Class A common stock that have been reserved for issuance pursuant to outstanding options, (2) 1,600,000 shares of Class A common stock that are reserved for issuance upon exercise of options that may be issued in the future under our 1999 Equity Participation Plan, (3) 402,500 shares of Class A common stock that are reserved for issuance upon exercise of the warrant that we granted to BT Alex. Brown in connection with the offering of our Series A preferred stock. See "Management--1996 Stock Option Plan" and "--1999 Equity Participation Plan." (d) The "as adjusted" number also does not include the 780,000 shares of Class A common stock that we issued upon the acquisition of Com-Net. We may have to issue additional shares of Class A common stock to the former shareholders of Com-Net if certain agreed-upon 1999 and 2000 earnings targets are achieved. These additional shares are not included in the "as adjusted" number. See "Business--Company Services--Site Development Business--The Com-Net Acquisition." (e) Reflects the surrender as of March 31, 1999 to SBA of 349,085 shares of Class B common stock by Mr. Bernstein to repay a loan made to him in 1997. 19 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements are based on our historical financial statements during the periods presented. The unaudited pro forma consolidated statements of operations give effect to the SBA pro forma transactions, which are (1) all individually immaterial acquisitions completed during 1998 and the three months ended March 31, 1999 and (2) the issuance of Class A common stock and the application of the net proceeds as described under "Use of Proceeds," as if each had occurred as of the beginning of the periods presented. The unaudited pro forma consolidated balance sheet as of March 31, 1999 gives pro forma effect to the issuance of the Class A common stock and the application of the net proceeds as described under "Use of Proceeds," as if each had occurred as of March 31, 1999. The pro forma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that we believe are reasonable. These pro forma financial statements are for informational purposes only and do not purport to present what our results of operations or financial condition would actually have been had these transactions actually occurred on such dates or to project our results of operations or financial condition for any future date or period. You should read the pro forma financial statements and their related notes together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and their related notes included elsewhere in this prospectus. 20 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 1998
Adjustments Pro Forma Adjustments for Completed for for Pro Forma Historical Acquisitions(a) Acquisitions Offering as Adjusted ---------- --------------- ------------ ----------- ----------- (dollars in thousands except per share data) Revenues: Site development....... $ 46,705 $ -- $ 46,705 $ -- $ 46,705 Site leasing........... 12,396 2,654 15,050 -- 15,050 ---------- ------ -------- ------ ----------- Total revenues....... 59,101 2,654 61,755 -- 61,755 ---------- ------ -------- ------ ----------- Cost of revenues (exclusive of depreciation shown below): Site development....... 36,500 -- 36,500 -- 36,500 Site leasing........... 7,281 462 7,743 -- 7,743 ---------- ------ -------- ------ ----------- Total cost of revenues............ 43,781 462 44,243 -- 44,243 ---------- ------ -------- ------ ----------- Gross profit....... 15,320 2,192 17,512 -- 17,512 ---------- ------ -------- ------ ----------- Operating expenses: Selling, general and administrative......... 18,302 -- 18,302 -- 18,302 Depreciation and amortization........... 5,802 1,971 7,773 -- 7,773 ---------- ------ -------- ------ ----------- Total operating expenses............ 24,104 1,971 26,075 -- 26,075 ---------- ------ -------- ------ ----------- Operating income (loss)............ (8,784) 221 (8,563) -- (8,563) Other income (expenses): Interest income........ 4,303 -- 4,303 (223)(b) 4,080 Interest expense....... (2,357) -- (2,357) 177 (c) (2,180) Non-cash amortization.......... (14,550) -- (14,550) -- (14,550) Other.................. (37) -- (37) -- (37) ---------- ------ -------- ------ ----------- Total other income (expense)........... (12,641) -- (12,641) (46) (12,687) ---------- ------ -------- ------ ----------- Income (loss) before provision for income taxes................. (21,425) 221 (21,204) (46) (21,250) (Provision) benefit for income taxes........... 1,524 (88) 1,436 18 1,454 ---------- ------ -------- ------ ----------- Net income (loss)...... (19,901) 133 (19,768) (28) (19,796) Dividends on preferred stock.................. (2,575) -- (2,575) 2,575 (d) -- ---------- ------ -------- ------ ----------- Net income (loss) available to common stockholders.......... $ (22,476) $ 133 $(22,343) $2,547 $ (19,796) ========== ====== ======== ====== =========== Basic and diluted loss per common share...... $ (2.64) $ (0.71) ========== =========== Basic and diluted weighted average number of shares of common stock.......... 8,526,052 27,770,444 ========== ===========
- -------- (a) Reflects the historical, pre-acquisition results of operations (in the aggregate) for all individually immaterial acquisitions completed by us during 1998 and the increase in pro forma depreciation on tower assets acquired resulting from our application of purchase accounting. (b) Reflects a reduction of interest income of $0.2 million related to the repayment of a shareholder loan. (c) Reflects a reduction of pro forma interest expense resulting from the use of a portion of the net proceeds from the offering to repay all amounts outstanding under our previous credit facility assuming such transaction was completed as of January 1, 1998. (d) Reflects elimination of dividends on preferred stock as a result of the conversion of the Series A preferred stock into Class A common stock. 21 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 1999
Adjustments Pro Forma Adjustments Pro Forma for Completed for for as Historical Acquisitions(a) Acquisitions Offering Adjusted ---------- --------------- ------------ ----------- ---------- (dollars in thousands except per share data) Revenues: Site development....... $ 8,575 $-- $ 8,575 $ -- $ 8,575 Site leasing........... 5,142 225 5,367 -- 5,367 --------- ---- ------- ----- ---------- Total revenues....... 13,716 225 13,941 -- 13,941 --------- ---- ------- ----- ---------- Cost of revenues (exclusive of depreciation shown below): Site development....... 6,623 -- 6,623 -- 6,623 Site leasing........... 2,378 47 2,425 -- 2,425 --------- ---- ------- ----- ---------- Total cost of revenues............ 9,001 47 9,048 -- 9,048 --------- ---- ------- ----- ---------- Gross profit....... 4,716 178 4,894 -- 4,894 --------- ---- ------- ----- ---------- Operating expenses: Selling, general and administrative......... 4,078 -- 4,078 -- 4,078 Depreciation and amortization........... 3,131 171 3,302 -- 3,302 --------- ---- ------- ----- ---------- Total operating expenses............ 7,209 171 7,380 -- 7,380 --------- ---- ------- ----- ---------- Operating income (loss)............ (2,493) 7 (2,486) -- (2,486) Other income (expenses): Interest income........ 507 -- 507 (55)(a) 452 Interest expense....... (815) -- (816) 168 (b) (648) Non-cash amortization.......... (5,200) -- (5,200) -- (5,200) Other.................. 9 -- 9 -- 9 --------- ---- ------- ----- ---------- Total other income (expense)........... (5,500) -- (5,500) 113 (5,387) --------- ---- ------- ----- ---------- Income (loss) before provision for income taxes and extraordinary item.... (7,993) 7 (7,986) 113 (7,873) (Provision) benefit for income taxes........... 786 (3) 783 (45) 738 --------- ---- ------- ----- ---------- Net income (loss) before extraordinary item.................. (7,207) 4 (7,203) 68 (7,135) Extraordinary item..... (1,150) -- (1,150) -- (1,150) --------- ---- ------- ----- ---------- Net loss............... (8,357) 4 (8,353) 68 (8,285) Dividends on preferred stock.................. (713) -- (713) 713 (d) -- --------- ---- ------- ----- ---------- Net income (loss) available to common stockholders.......... $ (9,070) $ 4 $(9,066) $ 781 $ (8,285) ========= ==== ======= ===== ========== Basic and diluted loss per common share...... $ (1.01) $ (0.29) ========= ========== Basic and diluted weighted average number of shares of common stock.......... 8,955,922 28,195,299 ========= ==========
- -------- (a) Reflects the historical, pre-acquisition results of operations (in the aggregate) for all individually immaterial acquisitions completed by us during 1999 and the increase in pro forma depreciation on tower assets acquired resulting from our application of purchase accounting. (b) Reflects a reduction of interest income of $0.1 million related to the repayment of a shareholder loan. (c) Reflects a reduction of pro forma interest expense resulting from the use of a portion of the net proceeds from the offering to repay all amounts outstanding under our senior credit facility assuming such transaction was completed as of January 1, 1999. (d) Reflects elimination of dividends on preferred stock as a result of the conversion of the Series A preferred stock into Class A common stock. 22 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of March 31, 1999
Adjustments for Pro Forma Historical Offering as Adjusted ---------- --------------- ----------- (dollars in thousands) ASSETS Current assets: Cash and cash equivalents....... $ 2,278 $69,455 (a)(b)(d) $ 71,733 Accounts receivable............. 14,164 -- 14,164 Prepaid and other current assets......................... 7,606 -- 7,606 Cost and estimated earnings in excess of billings on uncompleted contracts.......... 360 -- 360 -------- ------- -------- Total current assets.......... 24,407 69,455 93,862 -------- ------- -------- Property and equipment, net...... 184,825 -- 184,825 Note receivable-stockholder...... 3,840 (3,840)(c) -- Intangible assets, net........... 6,798 -- 6,798 Deferred financing fees, net..... 11,222 -- 11,222 Other assets..................... 750 -- 750 -------- ------- -------- Total assets.................. $231,841 $65,615 $297,457 ======== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable................ $ 12,116 -- $ 12,116 Accrued expenses................ 3,098 -- 3,098 Accrued salaries and payroll taxes.......................... 1,141 -- 1,141 Billings in excess of costs and estimated earnings on uncompleted contracts.......... 126 -- 126 Other current liabilities....... 1,968 (84)(d) 1,884 -------- ------- -------- Total current liabilities..... 18,450 (84) 18,366 -------- ------- -------- Other liabilities: Deferred tax liabilities........ 3,370 -- 3,370 Senior discount notes payable... 170,445 -- 170,445 Notes payable................... 40,000 (15,000)(d) 25,000 Other long-term liabilities..... 446 -- 446 -------- ------- -------- Total long-term liabilities... 214,261 (15,000) 199,261 -------- ------- -------- Redeemable preferred stock....... 34,271 (34,271)(b) -- Stockholders' deficit: Common stock--Class A............ 9 196 (a)(b)(c) 205 Class B..................... 81 (4)(c) 77 Additional paid in capital...... 741 112,991 (a)(b)(c) 113,732 Accumulated deficit............. (35,971) 1,787 (34,184) -------- ------- -------- Total stockholders' equity (deficit).................... (35,141) 114,971 79,830 -------- ------- -------- Total liabilities and stockholders' equity (deficit).................... $231,841 $65,615 $297,457 ======== ======= ========
- -------- (a) Reflects the estimated net proceeds from the offering of approximately $117.0 million, which is net of the estimated underwriting discounts and offering expenses totaling approximately $9.9 million. (b) Reflects use of proceeds from the offering to pay all accrued dividends on outstanding shares of Series A preferred stock and to redeem all outstanding shares of Series B preferred stock for a total of $32.5 million. Also reflects the issuance of 8,050,000 shares of Class A common stock as a result of the Series A preferred stock conversion that will occur automatically upon the consummation of the offering. (c) Reflects receipt of a shareholder note in the amount of approximately $3.8 million. Upon consummation of the offering, Steven E. Bernstein will repay a loan made to him in 1997 by surrendering to SBA 349,085 shares (as of March 31, 1999) of his Class B common stock valued at the midpoint of the range of the initial public offering price. (d) Reflects use of proceeds from the offering to repay approximately $15.0 million of revolving credit loans and accrued interest thereon, which represents all amounts then outstanding under our senior credit facility. We expect the actual amount of revolving credit loans outstanding at the closing of the offering to be higher as we continue to borrow to finance our business plans. 23 SELECTED HISTORICAL FINANCIAL DATA The following table sets forth selected historical financial data as of and for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and as of March 31, 1999 and for the three months ended March 31, 1998 and 1999. The financial data for each of the full fiscal years have been derived from, and are qualified by reference to, our audited financial statements, which Arthur Andersen LLP, our independent certified public accountants, have audited. The financial data set forth below as of March 31, 1999 and for the three months ended March 31, 1998 and 1999, have been derived from our unaudited consolidated financial statements. The financial statements for periods ending on or prior to December 31, 1996 are the combined financial statements of SBA, Inc. and SBA Leasing, Inc., two predecessor companies that we acquired during the first quarter of 1997. You should read the information set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and their related notes included elsewhere in this prospectus.
Three Months Ended Year Ended December 31, March 31, ----------------------------------------------- ------------------- 1994 1995 1996 1997 1998 1998 1999 ------- ------- ------- -------- ---------- ------- ---------- (dollars in thousands except per share data) Operating Data: Revenues: Site development revenue............... $10,604 $22,700 $60,276 $ 48,241 $ 46,705 $12,531 $ 8,575 Site leasing revenue... 896 2,758 4,530 6,759 12,396 2,159 5,142 ------- ------- ------- -------- ---------- ------- ---------- Total revenues.......... 11,500 25,458 64,806 55,000 59,101 14,690 13,716 ------- ------- ------- -------- ---------- ------- ---------- Cost of revenues (exclusive of depreciation shown below): Cost of site development revenue... 7,358 13,993 39,822 31,470 36,500 8,989 6,623 Cost of site leasing revenue............... 647 2,121 3,638 5,356 7,281 1,507 2,378 ------- ------- ------- -------- ---------- ------- ---------- Total cost of revenues.. 8,005 16,114 43,460 36,826 43,781 10,496 9,001 ------- ------- ------- -------- ---------- ------- ---------- Gross profit............ 3,495 9,344 21,346 18,174 15,320 4,194 4,716 Selling, general and administrative(a)(b)... 1,627 5,968 17,754 12,033 18,302 3,942 4,078 Depreciation and amortization........... 5 73 160 514 5,802 507 3,131 ------- ------- ------- -------- ---------- ------- ---------- Operating income (loss)................. 1,863 3,303 3,432 5,627 (8,784) (256) (2,493) Interest income......... 2 6 7 644 4,303 764 507 Interest expense........ (19) (11) (139) (407) (2,357) (333) (815) Non cash amortization of original issue discount and debt issuance costs.................. -- -- -- -- (14,550) (1,547) (5,200) Other................... -- -- -- -- (37) -- 9 ------- ------- ------- -------- ---------- ------- ---------- Income (loss) before income taxes and extraordinary item..... 1,846 3,298 3,300 5,863 (21,425) (1,372) (7,993) (Provision) benefit for income taxes(c)........ (738) (1,319) (1,320) (5,596) 1,524 (87) 786 Extraordinary item...... -- -- -- -- -- -- (1,150) ------- ------- ------- -------- ---------- ------- ---------- Net income (loss)....... 1,108 1,979 1,980 267 (19,901) (1,458) (8,357) Dividends on preferred stock.................. -- -- -- (983) (2,575) (438) (713) ------- ------- ------- -------- ---------- ------- ---------- Net income (loss) available to common stockholders........... $ 1,108 $ 1,979 $ 1,980 $ (716) $ (22,476) $(1,896) $ (9,070) ======= ======= ======= ======== ========== ======= ========== Basic and diluted loss per common share....... $ (2.64) $ (1.01) ========== ========== Basic and diluted weighted average number of shares of common stock.................. 8,526,052 8,955,922 ========== ========== Other Data: Adjusted EBITDA(d)...... $ 1,868 $ 3,376 $10,603 $ 7,155 $ (2,377) 300 663 Annualized tower cash flow(e)................ 344 752 991 1,947 8,088 2,606 11,056 Capital expenditures.... (51) (660) (145) (17,676) (138,124) (11,070) (36,870) Net cash provided by (used in) operating activities............. 873 (533) 1,215 7,829 7,471 (6,057) (4,459) Net cash used in investing activities... (51) (660) (145) (17,676) (138,124) (11,070) (36,870) Net cash provided by (used in) financing activities............. (689) 1,298 (1,036) 15,645 151,286 134,628 16,863 Towers owned at the beginning of period.... -- -- -- -- 51 51 494 Towers constructed...... -- -- -- 15 310 16 54 Towers acquired......... -- -- -- 36 133 23 38 Total towers at the end of period.............. -- -- -- 51 494 90 586 As of December 31, ----------------------------------------------- As of March 31, 1994 1995 1996 1997 1998 1999 ------- ------- ------- -------- ---------- ------------------- (dollars in thousands) Balance Sheet Data (at end of period): Property, plant and equipment (net)........ $ 61 $ 647 $ 632 $ 17,829 $ 150,946 $184,825 Total assets............ 2,610 7,429 18,060 44,797 214,573 231,841 Total debt(f)........... 1 1,500 4,921 10,184 182,573 210,445 Redeemable preferred stock.................. -- -- -- 30,983 33,558 34,271 Common stockholders' equity (deficit)....... 1,745 4,793 102 (4,344) (26,095) (35,141)
(Footnotes on following page) 24 - -------- (a) For the year ended December 31, 1995, selling, 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, selling, general and administrative expense includes non-cash compensation expense of $7.0 million incurred in connection with the consolidation of the predecessor companies 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. For the year ended December 31, 1997, selling, general and administrative expense includes non-cash compensation expense of $1.0 million incurred in the consolidation of the predecessor companies. For the year ended December 31, 1998, selling, general and administrative expense includes non-cash compensation expense of $0.6 million incurred in connection with the issuance of stock options and Class A common stock. (b) Selling, general and administrative expense includes corporate development expenses associated with our site leasing business that were incurred in connection with the acquisition or construction of owned towers. These expenses consist of compensation and overhead costs that are not directly related to the administration or management of existing towers. All of these costs are expensed as incurred. The amount of these corporate development expenses for the periods presented was as follows:
Three Months Ended Year Ended December 31, March 31, ---------------------------------------- ------------------------- 1994 1995 1996 1997 1998 1998 1999 ---- ------ ------ ------ ------- ----------- ----------- (dollars in thousands) (dollars in thousands) $787 $2,627 $8,973 $6,668 $10,000 $ 2,168 $ 2,177
(c) Provision for income taxes represents a pro forma calculation (40%) for the years ended December 31, 1994, 1995 and 1996, when we were treated as an S Corporation under Subchapter S of the Internal Revenue Code of 1986, as amended. We converted to a C Corporation in 1997. Provision (benefit) for income taxes for the years ended December 31, 1997 and 1998 and for the three months ended March 31, 1998 and 1999 represents an actual provision (benefit). For 1997, the effective rate was in excess of the 40% rate used in the pro forma calculations due to the tax effect of our conversion to a C Corporation. (d) 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. Adjusted EBITDA excludes the effect of the non-cash compensation expense referred to in footnote (a) above. Adjusted 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 Adjusted EBITDA differently and, therefore, Adjusted EBITDA as presented for us may not be comparable to Adjusted EBITDA reported by other companies. See our Consolidated Statements of Cash Flows in our Consolidated Financial Statements contained elsewhere in this prospectus. (e) We define "tower cash flow" as site leasing revenue less cost of site leasing revenue (exclusive of depreciation). Tower cash flow includes deferred revenue attributable to certain leases. We believe tower cash flow is useful because it allows you to compare tower performance before the effect of expenses (selling, general and administrative) that do not relate directly to tower performance. We define "annualized tower cash flow" as tower cash flow for the last calendar quarter attributable to our site leasing business multiplied by four. Pro forma Annualized tower cash flow also includes the effect of fourth quarter acquisitions as if each had occurred at the beginning of the period presented. (f) Total debt does not include amounts owed to the shareholder of $0.1 million and $10.7 million as of December 31, 1995 and 1996, respectively. These amounts were paid in March 1997. 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a leading independent owner and operator of wireless communications infrastructure in the United States. Our strategy is to use our historical leadership position in the site development business, a project revenue business, to expand our ownership and leasing of communication towers, a recurring revenue business. We are transitioning our revenue stream from project driven revenues to recurring revenues through the leasing of antenna space at or on communications facilities. While we intend to continue to offer site development services to wireless carriers where demand and profitable opportunities exist, we will emphasize our site leasing business through the construction of owned towers for lease to wireless service providers, the acquisition of existing sites and the leasing, subleasing and management of other antenna sites. We believe that as the site development industry matures, our revenues and gross profit from the consulting segment of that business will continue to decline substantially 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. We also believe that, over the longer term, our site leasing revenue will increase as carriers move to outsource ownership and management of towers and as the number of towers we own grows. As a result of these trends and the shift in focus of our business, our earnings and EBITDA declined in 1997 and 1998 from prior periods and capital expenditures increased sharply as we accumulated towers. We expect capital expenditures to increase even more in 1999. In addition, we anticipate that our operating expenses may remain at or above 1998 levels as we continue to construct and acquire tower assets. We derive our revenues from two businesses--site development and site leasing. Our site development business consists of site development consulting and site development construction. We provide site development services, both consulting and construction, on a contract basis which is usually customer and project specific. We generally charge for site development services on either a fixed price basis or a time and materials basis. Approximately 80%, 61% and 35% of site development services were performed on a time and materials basis in 1996, 1997 and 1998, respectively, and approximately 31% and 13% of site development services were performed on a time and materials basis in the three months ended March 31, 1998 and 1999, respectively. We also provide site leasing services on a contract basis. Revenue from our site development business may fluctuate from period to period depending on construction schedules, which are a function of our clients' build-out schedules, weather and other factors. Our antenna 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. We are in the process of acquiring and constructing towers to be owned by us and leased to wireless service providers. We intend to continue to make strategic acquisitions in the fragmented and rapidly consolidating tower owner and operator industry. We completed our first tower acquisition in June 1997 and spent $17.7 million on capital expenditures in 1997 and $138.1 million in 1998 to acquire and construct tower assets and acquire a tower construction company. Of the 642 towers we owned or controlled as of April 30, 1999, 418 were new builds. At that date, we had non-binding mandates to build over 400 additional towers under build-to-suit programs (the majority of which we expect will result in binding anchor tenant lease agreements). We believe we have one of the largest number of non-binding build-to-suit mandates from wireless service providers in the industry. In addition, we are currently actively negotiating to acquire additional towers. At April 30, 1999, we had letters of intent or definitive agreements to acquire 51 additional towers in a number of separate transactions for an aggregate purchase price of approximately $12.6 million. We cannot assure you that we will be able to close these transactions, or identify towers or tower companies to acquire in the future. 26 Tower Economics We intend to increase the site leasing portion of our 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 and tower companies. We evaluate 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, based upon capacity, geographic location and other factors. 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 we are responsible for the zoning of a site prior to construction (which is often the case), the cost associated with obtaining the necessary zoning may also be material. We estimate that the average cost of constructing a multi-tenant lattice tower is approximately $225,000 exclusive of land costs, although this estimate may vary from site to site. While we may purchase the underlying property, we typically lease any necessary real estate pursuant to a long-term lease. The typical property lease has a term of five years, usually provides for annual or periodic price increase and gives us the option to renew the lease for up to four or five additional five-year terms. New Tower Builds As part of our new build strategy, we generally begin construction of a new tower only if an anchor tenant (which is typically a PCS, cellular or ESMR provider) has signed an antenna site lease agreement with us. In some cases we may build towers before we have obtained a tenant, although we do not expect to do this very often. The tower site is marketed to other wireless service providers whose monthly rents vary based usually on location, the different antenna 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 from the rent paid by 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. Our objective is to construct towers for identified anchor tenants in locations where we believe we can secure other wireless providers as additional tenants. Through the addition of new tenants, we seek to achieve a target multiple of tower-level cash flow to the cost of construction by the end of a specified period following construction. We believe that our targeted multiple, which we constantly evaluate 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 revenues 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. We build towers for our ownership on locations selected by us or, in the case of carrier build-to suit programs, by the carrier. Build-to-suit projects typically originate from a proposal we submit in response to a request from a wireless service provider. If the wireless service provider accepts the terms of our proposal, the provider will award us a non-binding mandate to pursue: (1) specific sites: (2) search rings: or (3) general areas. Based on the status of the site we have been given a mandate to pursue, we will perform due diligence investigations for a designated period, during which time we 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. In some cases we must build a tower for the carrier if no suitable colocation site is available, regardless of the results of our due diligence and marketability analysis. If we conclude that it is economically feasible to construct the tower after our due diligence investigation during the mandate, we will enter into an antenna site lease agreement with the provider. The antenna site lease agreement typically provides that the lessees' obligations are conditioned on our receipt of all necessary zoning 27 approvals where zoning remains to be obtained. We have negotiated several master build-to-suit programs with PCS, cellular and ESMR carriers. Some antenna site lease agreements contain penalty or forfeiture provisions in the event the tower is not completed within specified time periods. Com-Net Acquisition We recently acquired Com-Net and an affiliated entity for $1.0 million in cash, $7.0 million of assumed debt and 780,000 shares of our Class A common stock (480,000 of which were pledged to us and will be returned to us if certain earnings targets are not met). In addition, the shareholders of Com-Net may receive up to $2.5 million in cash and 320,000 additional shares of Class A common stock if certain 1999 earnings targets are met, and up to an additional 400,000 shares of Class A common stock if certain 2000 earnings targets are met. Substantially all of Com-Net's revenues have been derived from site development activities, primarily construction services. Future Acquisitions We also regularly explore tower acquisition opportunities as part of our growth strategy. While we evaluate potential tower acquisitions on an individual basis, our acquisition criteria is similar to our construction criteria. In general, we seek to acquire towers in locations where we believe we 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. In making this determination, we evaluate several factors, including: 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 we use projections of future tower cash flows when evaluating potential tower builds or acquisitions, we cannot assure you that our projections will prove to be accurate nor can we assure you that we will be able to successfully market a tower to other tenants or implement our build-out strategy on the timetable currently contemplated or at all. Numerous factors affect the economics of each tower, many of which are beyond our control. We cannot assure you that any particular tower will generate the revenues projected at the time it is first constructed or acquired by us. Future Compensation Charges Related to Stock Option Grants In April 1999, we granted options to employees for the purchase of 900,000 shares of our Class A common stock at an exercise price of $8.00 per share pursuant to our 1999 Equity Participation Plan. These options will vest over the next three years, commencing on December 31, 1999 and ending in April 2002. Since the exercise price of these options is substantially below the anticipated price to the public in the offering, we will record non-cash compensation charges in each quarter during the vesting period beginning with the second quarter of this year. The amount of these charges is a function of the price to the public in the offering. Based upon the midpoint of the anticipated price range in the offering, these charges will total approximately $1.7 million over the next three years. Results of Operations As we continue our transition into site leasing, operating results in prior periods may not be meaningful predictors of future prospects. You should be aware of the dramatic changes in the nature and scope of our business when reviewing the ensuing discussion of comparative historical results. We expect that the acquisitions consummated to date and any future acquisitions, as well as our new tower builds, will have a material impact on future revenues, expenses and net income. In particular, depreciation and amortization and interest expense increased significantly in 1998 and in the three months ended March 31, 1999 over the prior periods, and will continue to increase significantly in future periods. We believe that our construction programs will have a material adverse effect on future results of operations, until such time, if ever, as the newly constructed towers attain higher levels of tenant use. First Quarter 1999 Compared to First Quarter 1998 Total revenues decreased 6.6% to $13.7 million for the first quarter of 1999 from $14.7 million for the first quarter of 1998. We derive our revenues from two businesses--site development and site leasing. Our site 28 development business consists of site development consulting and site development construction. Site development revenue decreased 31.6% to $8.6 million in the first quarter of 1999 from $12.5 million in the first quarter of 1998 due to a substantial decline in site development consulting revenue, which was partially offset by a substantial increase in site development construction revenue. Site development consulting revenue decreased 59.7% to $3.9 million in the first quarter of 1999 from $9.7 million in the first quarter of 1998, due primarily to the decreased demand for site acquisition and zoning services from PCS licensees, as well as the increasing acceptance by wireless carriers of outsourced communication site infrastructure through build-to-suit programs. Site development construction revenue increased 66.2% to $4.7 million for the first quarter of 1999 from $2.8 million for the first quarter of 1998, due to the expanded customer base of our construction company and the number of projects on which services were rendered. We expect our site development construction revenue to continue to increase substantially as a result of the recently completed Com-Net acquisition. Site leasing revenue increased 138.2% to $5.1 million for the first quarter of 1999 from $2.2 million for the first quarter of 1998, due to the substantially greater number of towers in our portfolio during the 1999 period compared to 1998. Total cost of revenues decreased 14.2% to $9.0 million for the first quarter of 1999 from $10.5 million for the first quarter of 1998. Site development cost of revenue decreased 26.3% to $6.6 million for the 1999 period from $9.0 million for the 1998 period due to the decrease in the site development consulting cost of revenue, which was partially offset by an increase in the site development construction cost of revenue. Site development consulting cost of revenue decreased 58.1% to $3.0 million for the first quarter of 1999 from $7.2 million for the first quarter of 1998 due primarily to the lower level of activity. Site development construction cost of revenue increased to $3.6 million for the 1999 period from $1.7 million for the 1998 period, due primarily to the increased level of activity. Site leasing cost of revenue increased 57.8% to $2.4 million for the 1999 period from $1.5 million for the 1998 period, due primarily to the increased number of owned or controlled towers resulting in an increased amount of lease payments to land owners. Gross profit increased 12.5% to $4.7 million for the first quarter of 1999 from $4.2 million for the first quarter of 1998 due to the increase in high margin site leasing revenue which was offset by a decrease in gross profit in our site development business. Gross profit from site development decreased 44.9% to $2.0 million in the 1999 period from $3.5 million in the 1998 period, due to the decline in site development consulting activity and a slight decline in that segment's gross profit in the 1999 period to 22.7% from 25.5% in the 1998 period. Gross profit from site development construction remained flat at $1.1 million in each of the periods. Gross profit margin on site development construction dropped in the 1999 period to 22.8% from 37.7% in the 1998 period, reflecting the increased use of subcontractor labor in 1999. In the future, we believe our gross profit margin on site development construction may be lower than that experienced in the first quarter of 1999 as we integrate Com-Net's business, which has historically had gross profit margins in the 15% to 20% range. Gross profit for the site leasing business increased 324.2% to $2.8 million in the first quarter of 1999 from $0.7 million in the first quarter of 1998, and site leasing gross profit margin improved to 53.8% in the 1999 period from 30.2% in the 1998 period. The increased gross profit and improved margin were both due to the substantially greater number of towers owned or controlled in the 1999 period. As a percentage of total revenues, total gross profit increased to 34.4% in the 1999 period from 28.5% in the 1998 period due to increased levels of higher margin site leasing gross profit. Selling, general and administrative expenses increased 3.4% to $4.1 million for the first quarter of 1999 from $3.9 million for the first quarter of 1998. As a percentage of total revenues, selling, general and administrative expenses increased to 29.7% for the 1999 period from 26.8% in the 1998 period. Depreciation and amortization increased to $3.1 million for the first quarter of 1999 as compared to $0.5 million for the first quarter of 1998. This increase is directly related to the increased amount of fixed assets (primarily towers) we owned or controlled in the 1999 period as compared to the 1998 period. Operating loss increased to $(2.5) million for the first quarter of 1999 from $(0.3) million for the first quarter of 1998 as a result of the increased depreciation and amortization expenses in 1999 associated with the increase in tower ownership. Other income (expense) increased to $(5.5) million for the first quarter of 1999 from $(1.1) million for the first quarter of 1998. This increase resulted primarily from the interest expense associated with our senior discount notes. The extraordinary item in the first quarter of 1999 of $1.1 million relates to the write-off of deferred financing fees associated with our prior bank credit agreement. Net loss was $(8.4) million for the 1999 period as compared to net loss of $(1.5) million for the 1998 period. 29 1998 Compared to 1997 Total revenues increased 7.5% to $59.1 million for 1998 from $55.0 million for 1997. Total site development revenue decreased 3.2% to $46.7 million in 1998 from $48.2 million in 1997 due to a substantial decline in site development consulting revenue, which was largely offset by a substantial increase in site development construction revenue. Site development consulting revenue decreased 41.6% to $27.4 million for 1998 from $47.0 million for 1997, due primarily to the decreased demand for site acquisition and zoning services from PCS licensees, as well as the increasing acceptance by wireless carriers of outsourced communication site infrastructure through build-to-suit programs. Site development construction revenue increased to $19.3 million for 1998 from $1.2 million for 1997, due to the acquisition of CSSI, our construction subsidiary, in September 1997 and higher levels of activity. Site leasing revenue increased 83.4% to $12.4 million for 1998 from $6.8 million for 1997, due to a substantial number of revenue producing towers added during the period through new builds and acquisitions. Total cost of revenues increased 18.9% to $43.8 million for 1998 from $36.8 million for 1997. Site development cost of revenue increased 16.0% to $36.5 million in 1998 from $31.5 million in 1997 due to a substantial increase in site development construction cost of revenue, which was partially offset by a decrease in site development consulting cost of revenue. Site development consulting cost of revenue decreased 28.5% to $21.9 million for 1998 from $30.6 million for 1997, due to lower revenue. Site development construction cost of revenue increased to $14.6 million for 1998 from $0.8 million for 1997, due again to the inclusion of the construction subsidiary for a full twelve months in 1998 versus three months in 1997. Site leasing cost of revenue increased 35.9% to $7.3 million for 1998 from $5.4 million for 1997, due primarily to the increased volume of towers owned resulting in an increased amount of lease payments to land owners. Gross profit decreased 15.7% to $15.3 million for 1998 from $18.2 million for 1997, due to the decrease in site development consulting revenue and lower margins earned on such revenue, which more than offset gross profits from increased site development construction and site leasing. Gross profit for site development consulting services decreased 66.1% to $5.6 million for 1998 from $16.4 million for 1997. The lower gross profit margins experienced in 1998 were due to more work being performed on a fixed fee basis and the completion of a number of large projects on which we experienced proportionately higher expenses than in the earlier stages of a project. Gross profit for site development construction services increased to $4.7 million for 1998 from $0.4 million for 1997 due to higher revenue. Gross profit for the site leasing business increased 264.6% to $5.1 million for 1998 from $1.4 million for 1997 due primarily to higher revenue but also due to higher gross profit margins earned on towers owned as opposed to the margins earned on our lease/sublease business which contributed most of our 1997 site leasing revenue. As a percentage of total revenues, gross profit decreased to 25.9% for 1998 as compared to 33.0% for 1997 due to significantly lower site development consulting gross profit. Selling, general and administrative expenses increased 52.1% to $18.3 million for 1998 from $12.0 million for 1997 primarily due to the addition of personnel, the expansion of office space and overall increases in operating expenses attributable to the growth in the organization and building of our tower development infrastructure. We also incurred $1.0 million of direct expenses on acquisitions or proposed new tower builds which were not completed. As a percentage of total revenues, selling, general and administrative expenses increased to 31.0% for 1998 from 21.9% in 1997. Depreciation and amortization increased to $5.8 million for 1998 as compared to $0.5 million for 1997. This increase is directly related to the increased amount of fixed assets (primarily towers) we owned in 1998 as compared to 1997. Operating income (loss) decreased to $(8.8) million for 1998 from $5.6 million for 1997 as a result of the factors discussed above. Other income (expense) decreased to $(12.6) million for 1998 from $0.2 million for 1997. This decrease resulted primarily from the interest expense associated with the senior discount notes offset by interest income that was earned on cash balances. Net income (loss) was $(19.9) million for 1998 as compared to net income of $0.3 million for 1997. 1997 Compared to 1996 Total revenues decreased 15.1% to $55.0 million for 1997 from $64.8 million for 1996. Total site development revenue decreased 20.0% to $48.2 million in 1997 from $60.3 million in 1996 due to a substantial 30 decline in site development consulting revenue. Site development consulting revenue decreased 22.0% to $47.0 million for 1997 from $60.3 million for 1996, due primarily to the decreased demand for site development services from A- and B- block broadband PCS licensees, partially offset by the increased demand for services from D-, E-, and F- block broadband PCS licensees and ESMR providers. This decreased demand from A- and B- block licensees resulted from their initial markets nearing build-out completion and not yet having commenced anticipated build out of secondary or tertiary markets, as well as the increasing acceptance by these providers of outsourced communication site infrastructure through build-to-suit programs. Site development construction revenue were $1.2 million for 1997. There was no site development construction revenue in 1996 because we did not acquire CSSI, our construction subsidiary, until September 1997. Site leasing revenue increased 49.2% to $6.8 million for 1997 from $4.5 million for 1996, due primarily to the continued growth of lease/sublease business from new and existing paging clients, and also to our ownership of 51 revenue producing towers at year end 1997. Total cost of revenues decreased 15.3% to $36.8 million for 1997 from $43.5 million for 1996. Site development cost of revenue decreased 21.0% to $31.5 million in 1997 from $39.8 million in 1996 due to a decrease in site development consulting cost of revenue. Site development consulting cost of revenue decreased 23.0% to $30.6 million for 1997 from $39.8 million for 1996 due primarily to decreased site development consulting revenue. Site development construction cost of revenue was $0.8 million for 1997. Because we did not purchase CSSI until September 1997, there was no site development construction cost of revenue in 1996. Site leasing cost of revenue increased 47.2% to $5.4 million in 1997 from $3.6 million in 1996, due primarily to the higher revenue. Gross profit decreased 14.9% to $18.2 million for 1997 from $21.3 million for 1996, due primarily to the decrease in site development revenue. Gross profit for site development consulting services decreased 19.9% to $16.4 million for 1997 from $20.5 million for 1996. This decrease was related to the decrease in revenue. Gross margin percentages were constant at 34%. Gross profit for site development construction was $0.4 million for 1997. Gross profit for the site leasing business increased 57.3% to $1.4 million for 1997 from $0.9 million for 1996. These increases were attributable to the growth of the lease/sublease business. As a percentage of total revenues, gross profit remained constant at 33% for 1997 and 1996. Selling, general and administrative expenses decreased 32.2% to $12.0 million for 1997 from $17.8 million for 1996, primarily due to a reduction in executive compensation and increased 1996 expenses associated with a bonus paid to Mr. Bernstein, our Chief Executive Officer, and non-cash compensation expense of $7.0 million relating to the granting of options to our other officers. The bonus was $4.0 million in 1996. Non-cash compensation expense recorded in 1997 was $1.0 million. As a percentage of total revenues, selling, general and administrative expenses decreased to 21.9% for 1997 from 27.4% for 1996. Excluding the effect of the above mentioned bonus and non-cash compensation expense, selling, general and administrative expenses as a percentage of revenue would have increased to 20.1% for 1997 from 10% for 1996. This increase is attributable to the addition of personnel and increased operating expenses we incurred to grow the site leasing business. Depreciation and amortization increased to $0.5 million for 1997 as compared to $0.2 million for 1996. This increase is directly related to the increased amount of fixed assets (primarily towers) we owned in 1997 as compared to 1996. Operating income increased 63.9% to $5.6 million for 1997 from $3.4 million for 1996. Other income (expense) was not material in either period. Actual net income decreased 91.9% to $0.3 million for 1997 from $3.3 million for 1996. On a pro forma basis, assuming SBA had been a C corporation for both periods, net income decreased 86.5% to $0.3 million for 1997 from $2.0 million for 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, we were not subject to tax at the corporate level. 31 Liquidity and Capital Resources SBA Communications Corporation is a holding company with no business operations of its own. Its only significant asset is the outstanding capital stock of its subsidiaries. It conducts all its business operations through its subsidiaries. Accordingly, its only source of cash to pay its obligations is distributions from its subsidiaries from their net earnings and cash flow. Even if our subsidiaries determined to pay a dividend on or make a distribution in respect of their capital stock, we cannot assure you that our subsidiaries will generate sufficient cash flow to pay such a dividend or distribute such funds or that they will be permitted to pay dividends by the terms of our senior credit facility. Net cash used in operations during the three months ended March 31, 1999 was $4.5 million compared to net cash used in operations of $6.1 million in the three months ended March 31, 1998. Net cash used in investing activities for the three months ended March 31, 1999 was $36.9 million compared to $11.1 million for the three months ended March 31, 1998. This increase is attributable to a higher level of tower acquisition and new build activity in 1999 versus 1998. Net cash provided by financing activities for the three months ended March 31, 1999 was $16.9 million compared to $134.6 million for the three months ended March 31, 1998. The 1998 amount includes the proceeds of the notes. Net cash provided by operations during 1998 and 1997 was relatively constant at $7.5 million and $7.8 million, respectively. Net cash used in investing activities for 1998 was $138.1 million compared to $17.7 million for 1997. The increase in cash used in investing activities results from the acquisition and construction of 443 towers during 1998. Net cash provided by financing activities for 1998 was $151.3 million compared to $15.6 million for 1997. This increase is attributable to the proceeds of our senior discount notes. Net cash provided by operations during 1997 was $7.8 million compared to $1.2 million 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 1997 was $17.7 million compared to $0.1 million for 1996. The increase in cash used for investing activities resulted from the acquisition of towers and CSSI, a tower construction company. Net cash provided by financing activities for 1997 was $15.6 million compared to net cash used in financing activities of $1 million for 1996. The increase in net cash provided by financing activities was primarily attributable to the proceeds from the sale of our Series A preferred stock. Our balance sheet reflected positive working capital of $6.0 million and $8.1 million as of March 31, 1999 and December 31, 1998, respectively. As a result of a preferred stock offering in March 1997, we received 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. On March 2, 1998 we issued $269.0 million in aggregate principal amount at maturity of 12% senior discount notes due 2008. This offering provided approximately $150.2 million of gross proceeds to us. From these gross proceeds, we repaid approximately $20.2 million of existing indebtedness and paid approximately $5.7 million of fees and expenses. The remaining proceeds were used primarily for the acquisition and construction of communications towers. Prior to March 1, 2003, interest expense on the senior discount notes will consist solely of non-cash accretion of original issue discount and the senior discount notes will not require cash interest payments. After such time, the senior discount notes will have accreted to $269.0 million and will require annual cash interest payments of approximately $32.3 million. In addition, the senior discount notes mature on March 1, 2008. In February 1999, we entered into a senior credit facility through our Telecommunications subsidiary with a group of lenders. This $175.0 million senior credit facility, which replaced our prior $55.0 million credit 32 facility, consists of a $25.0 million term loan and a $150.0 million revolving line of credit. The term loan was fully funded at closing. Availability under the senior credit facility is determined by a number of factors including number of towers built by us with anchor tenants on the date of completion, the financial performance of our other towers, site development and construction segments, as well as by other financial covenants, financial ratios and other conditions. The senior credit facility, matures December 31, 2004 and, pursuant to a schedule, amortization and reduced availability begins March 31, 2001. Borrowings under the senior credit facility bear interest at the eurodollar rate plus a margin ranging from 2.25% to 3.50% (determined by a leverage ratio) or a "base rate" (as defined in the senior credit facility) plus a margin ranging from 1.25% to 2.50% (determined by a leverage ratio). The senior credit facility is secured by substantially all of the assets of our Telecommunications subsidiary and its direct and indirect subsidiaries, requires our Telecommunications subsidiary to maintain certain financial covenants and places restrictions on, among other things, the payment of dividends to SBA, the incurrence of debt and liens, disposition of assets, transactions with affiliates and certain investments. In connection with the termination of the previous credit agreement, we recorded an extraordinary charge of approximately $1.1 million representing the write-off of previously capitalized deferred financing fees related to the previous bank credit agreement. Deferred financing fees related to obtaining the new senior credit facility were approximately $3.9 million. Additionally, on March 8, 1999, after receiving the requisite consents from the holders of our senior discount notes, we amended the indenture governing the notes to increase one of the categories of permitted indebtedness from $125.0 million to $175.0 million. In connection therewith, we paid $2.1 million to the holders of the notes. The amount is also reflected in deferred financing fees. In the event that the business acquired in the Com-Net acquisition achieves certain EBITDA targets in 1999 and 2000, we may be obligated to issue up to 720,000 additional shares of Class A common stock and to pay up to $2.5 million to the former shareholders of Com-Net. If the business acquired does not achieve certain EBITDA targets in 1999, the former shareholders of Com-Net will return to us up to 480,000 of the shares we issued to them at the closing of the Com-Net acquisition. We currently estimate that we will make at least $160.0 million of capital expenditures during 1999 for the construction and acquisition of communication sites, primarily towers, and the acquisition of Com-Net. We currently expect that capital expenditures will be at the same or higher levels in 2000. We expect to use cash from operations together with the proceeds of the offering and availability under our senior credit facility to fund these capital expenditures. These expected capital expenditures will substantially exhaust our availability under our senior credit facility. However, the exact amount of our future capital expenditures will depend on a number of factors. In 1999, we currently anticipate building a significant number of towers for which we have non-binding mandates pursuant to our build-to-suit program. We also intend to continue to explore opportunities to acquire additional towers, tower companies and/or related businesses. Our capital expenditures in 1999 will depend in part upon acquisition opportunities that become available during the period, the needs of our primary build-to-suit customers and the availability to us of additional debt or equity capital on acceptable terms. In the event that borrowings under the senior credit facility have otherwise been used when an acquisition or construction opportunity arises, we would be required to seek additional debt or equity financing. We cannot assure you 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 our existing indebtedness. Our ability to make scheduled payments of principal of, or to pay interest on, our debt obligations, and our ability to refinance any such debt obligations, or to fund planned capital expenditures, will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our business strategy contemplates substantial capital expenditures in connection with our planned tower build-out and acquisitions. Based on our current operations and anticipated revenue growth, we believe that, if our business strategy is successful, cash flow from operations and the proceeds of the offering and available borrowings under the senior credit facility will be sufficient to fund our anticipated capital expenditures in 1999. Thereafter, however, or in the event we exceed our currently anticipated capital expenditures for 1999, we anticipate that we will need to seek additional equity 33 or debt financing to fund our business plan. Failure to obtain any such financing could require us to significantly reduce our planned capital expenditures and scale back the scope of our tower build-out or acquisitions, either of which could have a material adverse effect on our projected financial condition or results of operations. In addition, we may need to refinance all or a portion of our indebtedness (including the senior discount notes and/or the senior credit facility) on or prior to its scheduled maturity. We cannot assure you that we 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 our indebtedness and make anticipated capital expenditures. In addition, we cannot assure you that we will be able to effect any required refinancing of our indebtedness (including the senior discount notes) on commercially reasonable terms or at all. See "Risk Factors." Market Risk We are exposed to certain market risks which are inherent in our financial instruments. These instruments arise from transactions entered into in the normal course of business, and in some cases, relate to our acquisition of related businesses. We are subject to interest rate risk on our senior credit facility and any future financing requirements. Our fixed rate debt consists primarily of the accreted balance of the notes. Our variable rate debt consists of borrowings made under the senior credit facility. The following table presents the future principal payment obligations and weighted average interest rates associated with our existing long-term debt instruments assuming our actual level of long-term indebtedness:
1999 2000 2001 2002 2003 Thereafter ---- ---- --------- --------- --------- ----------- Liabilities: Long-term debt............ -- -- -- -- -- 269,000,000 Fixed rate (12.0%) Term Loan................. -- -- 2,500,000 2,500,000 7,500,000 12,500,000 Variable rate (8.437% at March 31, 1999) Revolving Loan............ -- -- 1,500,000 3,000,000 4,500,000 6,000,000 Variable rate (8.437% at March 31, 1999)
Our primary market risk exposure relates to (1) the interest rate risk on long-term and short-term borrowings, (2) our ability to refinance our senior discount notes at maturity at market rates, (3) the impact of interest rate movements on our ability to meet interest expense requirements and exceed financial covenants and (4) the impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions. We manage the interest rate risk on our outstanding long-term and short-term debt through our use of fixed and variable rate debt and interest rate swaps. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis. Year 2000 During 1998 we continued our review of the installation of new systems hardware and software and determined that the installation is on schedule for completion before the year 2000. There are five phases that describe our process in becoming Year 2000 compliant. The awareness phase encompasses developing a budget and project plan. The assessment phase identifies mission-critical systems to check for compliance. Both of these phases have been completed. We are at various stages in the three remaining phases: renovation, validation and implementation. Renovation is the design of the systems to be Year 2000 compliant. Validation is testing the systems followed by implementation. We have begun implementation of a new financial system. The system is certified by the vendor as Year 2000 compliant. In conjunction with this implementation, we have undertaken the renovation of our operational systems. The testing and implementation of these systems is scheduled for completion in 1999. The cost of the new financial system and renovation of our operational systems is expected to be approximately $750,000. 34 Management is reviewing the state of Year 2000 readiness of third parties with whom we share a material relationship, such as banks and vendors used by us. At this time, we are unaware of any third party Year 2000 issues that would materially effect these relationships or our financial condition. We expect to be Year 2000 compliant in 1999 for all major systems. We are assessing our risks and the full impact on operations if the worst case Year 2000 scenario were to occur. In conjunction with this, we are developing a contingency plan and expect to complete the development of this plan in 1999. Inflation The impact of inflation on our operations has not been significant to date. However, we cannot assure you that a high rate of inflation in the future will not adversely affect our operating results. Recent Accounting Pronouncements Comprehensive Income In June 1997, the Financial Accounting Standards Board, or FASB, issued SFAS No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that an enterprise classify items of other comprehensive income separately from accumulated deficit and additional paid-in capital in the equity section of the balance sheet. Comprehensive income is defined as the change in equity during the financial reporting period of a business enterprise resulting from non-owner sources. During the year ended December 31, 1998, 1997 and 1996 and for the three months ended March 31, 1999 and 1998, we did not have any changes in our equity resulting from such non-owner sources and accordingly, comprehensive income as set forth by SFAS No. 130 was equal to the net loss amounts presented for the respective periods in our Consolidated Financial Statements. Segment Reporting In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which is required to be adopted in fiscal 1998. SFAS No. 131 requires us to report financial and other descriptive information about our reportable operating segments. Required disclosures include, among other things, a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. We have implemented SFAS No. 131 during 1998. Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 will require that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. Management believes that adopting this statement will not have a material impact upon our results of operations or financial position. 35 INDUSTRY OVERVIEW General We are a leading independent owner and operator of wireless communications infrastructure in the United States. In order to capitalize on the trend toward colocation and independent tower ownership in this industry, we have aggressively expanded our site leasing business by using our nationally recognized site development experience and strong relationships with wireless service providers to source opportunities to build and acquire communication sites. The wireless communications industry continues to grow rapidly 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, 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. This demand for higher quality service and coverage 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. We believe that, as the wireless communications industry has become more competitive, wireless service providers have outsourced certain network services and build-out activities and colocated transmission equipment with other providers on multi-tenant towers, in order to maximize their operating and capital efficiencies. 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 us to develop and own communication sites, lease antenna space on such sites and provide related network infrastructure and support services. Development of the Tower Industry The U.S. wireless communications industry was transformed in the 1970s through the issuance of licenses by the FCC to provide high quality communications services to vehicle-mounted and hand-held portable telephones, pagers and other devices. The licensees built and began operating wireless networks that were supported by communication sites, transmission equipment and other infrastructure. In the early 1980s, the number of towers began to expand significantly with the development of more advanced wireless communications systems, particularly cellular and paging. Nevertheless, as additional towers were built by the wireless carriers, they often were built for a single purpose rather than as multiple tenant towers. In addition, these towers were generally owned and maintained by carriers and were treated as corporate cost centers operated primarily for the purpose of transmitting or receiving such carriers' signals. During the mid-to-late 1980s, a number of independent operators of towers began to emerge. These independent tower operators focused on owning and managing towers with multiple tenants by adding lessees to existing and reconstructed towers. We believe the majority of these operators were small business owners with a small number of local towers and few services other than site leasing. In the last five years, however, several larger independent tower operators have emerged as demand for wireless services has continued to grow and as additional high frequency licenses have been awarded for new wireless services (including PCS, narrowband paging and wireless local loop), each requiring networks with extensive tower infrastructure. These independent tower operators have sought to acquire smaller operators as well as clusters of towers formerly owned by carriers and broadcasters. Today, a variety of companies, including wireless carriers, local and long distance telecommunications companies, broadcasting companies, independent tower operators, utilities and railroad companies, own towers. Despite the increasing demand for towers, the tower industry in the United States remains highly fragmented, with only a few independent tower operators owning a large number of towers. The pace of consolidation has begun to accelerate, however, as the larger independent operators continue to acquire small local operators and purchase towers from wireless communications companies. In addition, wireless carriers are building out new, 36 or filling in existing, tower footprints for new and existing wireless services. Independent operators have also expanded into a number of associated network and communication site services, including the design of communication sites and networks, the selection and acquisition of tower and rooftop sites (including the resolution of zoning and permitting issues) and the construction of towers. Previously, carriers typically handled such services through in- house departments, and local nonintegrated service contractors focused on specific segments such as site acquisition. 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 antennas 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 antenna installations, or antenna 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 antennas that it can support. Set forth below is a diagram illustrating the basic functions of each of the primary components of a "wireless network." Communication sites consist of towers, rooftops and other structures upon which antennas are placed. A typical tower usually 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. 37 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 antennas. 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. Antennas may also be installed on structures such as 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 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 our 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. Each separate transmitter can reuse the same frequency, 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 Paul Kagan Associates, Inc.'s industry estimates regarding projected subscriber growth for certain types of wireless communications services.
1998-2002 2002-2008 Compounded Compounded Estimated Projected Projected Annual Annual 1998 2002 2008 Growth Growth Subscribers Subscribers Subscribers Rate Rate ----------- ----------- ----------- ---------- ---------- (In millions except percentages) Cellular(1).......... 60.0 80.7 81.1 7.7% 0.1% PCS(1)............... 7.2 46.0 86.6 59.0% 11.1% ESMR(1).............. 2.8 10.1 17.0 37.8% 9.1%
- -------- (1) Data is from January 1999. 38 Although Paul Kagan Associates, Inc. is a leading industry analyst, we cannot assure you that their projections of industry growth will be realized. Projections are inherently uncertain and actual results will likely differ from these projections, possibly materially. We believe that more communication sites will be required in the future to accommodate the expected increase in demand for wireless communications services. In addition, we see additional opportunities with the development of higher frequency technologies (such as PCS), which have a reduced cell range as a result of signal propagation characteristics that require a more dense network of towers. Also, network services may be required to service the network build-outs of new carriers and the network upgrades and expansion of existing carriers. 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. 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, or CTIA, estimates that, as of June 30, 1998, there were 57,674 antenna sites in the United States. In October 1995, the PCIA, estimated that the number of antenna sites in the United States for both cellular and PCS providers would increase by an additional 100,000 antenna sites (more than one of which can be located on a single communication site) over the subsequent 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 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 potential applications include the auction of licenses that occurred in 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 BellSouth Wireless 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, we believe that other trends influencing the wireless communications industry have important implications for independent tower operators. In this increasingly competitive wireless industry environment, we believe that many providers are dedicating their capital and operations primarily to those activities that directly contribute to subscriber growth, such as marketing and distribution. Many providers have, therefore, sought 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. We also believe that, in addition to the favorable growth and outsourcing trends in the wireless communications industry and barriers to entry as a result of local zoning restrictions associated with new tower 39 sites, tower operators benefit from several favorable characteristics. The ability of tower operators to provide antenna sites to customers on multiple tenant towers protects 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. We believe 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. We believe that 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 if it were to relocate an antenna to another site and consequently be forced to re-engineer its network. Moving a single antenna may alter the pre-engineered maximum signal coverage, requiring a reconfigured network at significant cost to maintain the same coverage. Municipal approvals are increasingly difficult to obtain and may also affect the provider's decision to relocate. We believe that the costs associated with network reconfiguration and municipal approval and the time required to complete these activities are not generally justified by any potential savings in reduced site leasing expense. 40 BUSINESS General We are a leading independent owner and operator of wireless communications infrastructure in the United States. We generate revenues from our two primary businesses--site leasing and site development services. Since our founding in 1989, we have participated in the development of more than 12,000 antenna sites in 49 of the 51 major wireless markets in the United States. In 1997, we began aggressively expanding our site leasing business by capitalizing on our nationally recognized site development experience and strong relationships with wireless service providers to take advantage of the trend toward colocation and independent tower ownership. As of April 30, 1999, we owned or controlled 642 towers, had 51 towers pending acquisition under letters of intent or definitive agreements and had non-binding mandates to build over 400 additional towers for anchor tenants. Our Annualized tower cash flow for the first quarter of 1999 was $11.1 million. As a result of our extensive existing tower base, we believe we are well- positioned to continue to capitalize on the growth opportunities available in the rapidly consolidating and highly fragmented tower leasing industry. We have used our leadership position in the site development services business, our existing national field organization and our strong relationships with wireless service providers to expand into the ownership and leasing of communication sites. We have added build-to-suit programs and other antenna site leasing options to our service offerings and have acquired attractive communication sites. Our build-to-suit programs provide an integrated 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. Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts. We lease antenna space on: (1) the towers we construct through build-to-suit programs; (2) existing sites we acquire; (3) the towers we develop strategically; and (4) sites we lease, sublease and/or manage for third parties. Under a build-to-suit program, we build a tower for a wireless service provider who has entered into a long-term anchor tenant lease. We retain ownership of the tower and the exclusive right to colocate additional tenants on the tower. We also develop towers strategically, identifying an attractive location and completing all pre-construction procedures (such as zoning) necessary to secure the site. We then market the tower site to potential customers. Our site development business consists of site development consulting and site development construction. Our site development services business is an "end-to-end" service offering design, construction and operating expertise to a range of wireless service providers. Our site development services consist of: (1) network pre-design; (2) communication site selection; (3) communication site acquisition; (4) local zoning and permitting; and (5) site construction and antenna installation. We have a diverse range of customers, including cellular, PCS, paging, SMR and ESMR providers, as well as other users of wireless transmission and reception equipment. Our customers currently include many of the major wireless communications companies, including AT&T Wireless, BellSouth Mobility DCS, Nextel, Omnipoint, Pac Bell, PrimeCo, Southwestern Bell and Sprint PCS. We will continue to use our site development expertise to complement our site leasing business, secure additional build-to-suit mandates and choose acquisitions and strategic sites that we believe will be attractive for future tenants. We believe that as the site development industry matures, our revenues and gross profit from the consulting segment of that business will continue to decline substantially. We also believe that, over the longer term, our site leasing revenues will increase as carriers move to outsource ownership and management of towers and as the number of towers we own or control grows as a result. 41 Business Strategy Our strategy is to lease antenna space to multiple tenants on towers that we construct or acquire. We plan to enhance our position as a leading owner and operator of communication sites. Key elements of our strategy include: . Maximizing Use of Tower Capacity. We believe that many of our towers have or will have significant capacity available for antenna space leasing and that increased use of our owned towers can be achieved at low incremental cost. We generally construct our towers to accommodate multiple tenants in addition to the anchor tenant, and a substantial majority of our towers are lattice or guyed towers. We actively market space on our own towers through our internal sales force. . Developing New Towers That We Will Own and Operate. As wireless service providers increasingly outsource their investment in, and ownership of, towers, we can meet their outsourcing needs by using our expertise and relationships in the site development business to construct towers with anchor tenants through build-to-suit programs. We can also independently identify attractive locations for new towers and strategically complete pre-construction procedures necessary to secure tower sites in advance of customer demand. We believe that we have one of the largest number of non-binding build-to-suit mandates from wireless service providers in the industry. As of April 30, 1999, we had non-binding mandates to build over 400 additional towers under build-to-suit programs for carriers including BellSouth Mobility DCS and Sprint PCS. Furthermore, we have in varying stages of development over 150 additional sites which we believe will be attractive locations for new tower construction. In 1998, we built 310 towers. . Acquiring Existing Towers. We believe that our existing national field organization gives us a competitive advantage in identifying opportunities for the acquisition of existing towers. Our strategy is to acquire towers that can service multiple tenants and are attractive to wireless service providers based on their location, height and available capacity. While we generally target smaller acquisitions, we believe that there are many potential acquisition candidates and that the number of available towers will grow as large cellular, PCS and other wireless service providers divest their tower holdings. We have strict valuation criteria and believe that certain tower properties can be purchased at reasonable price levels. In 1998, we acquired 135 towers. As of April 30, 1999, we had letters of intent or definitive agreements with respect to pending acquisitions for 51 towers. . Building on Strong Relationships with Major Wireless Service Providers. We are well-positioned to be a preferred partner in build-to- suit programs because of our strong relationships with wireless service providers and proven operating experience. 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. We continually market our build-to-suit programs to our site development service customers. Our build-to-suit customers include AT&T Wireless, BellSouth Mobility DCS, Nextel, PrimeCo PCS, Southwestern Bell, Sprint PCS and Western Wireless. . Maintaining our Expertise in Site Development Services. We continue to perform an array of site development services for wireless service providers across the United States, including AT&T Wireless, BellSouth Mobility DCS, Nextel, Pacific Bell Mobile Services, PrimeCo PCS, Southwestern Bell, Sprint PCS and Western Wireless. We have a broad national field organization that allows us to identify and participate in site development projects across the country and that gives us a knowledge of local markets and strong customer relationships with wireless service providers. . Capitalizing on Management Experience. Our management team has extensive experience in site leasing and site development services. Management believes that its industry expertise and strong relationships with wireless carriers will allow us to continue to build and acquire a high quality 42 portfolio of towers. Steven E. Bernstein, our President and Chief Executive Officer, has more than 12 years of experience in the wireless communications industry and our other executive officers have an average of approximately five years of experience in this industry. In addition, management is highly motivated to produce strong operating results based on their approximately 52.5% ownership of our common stock equivalents currently outstanding. Company Services We are a leading independent provider of communication sites and services, offering an array of site leasing and site development services to the wireless communications industry. We offer our customers the flexibility of choosing between the provision of a full ready-to-operate site or any of the component services involved in the operation of a full ready-to-operate site. The site leasing services we provide include owning, leasing or managing communication sites and leasing antenna space on communication sites to wireless service providers. The site development services we provide, directly or through subcontractors, include all activities associated with the selection, acquisition and construction of communication sites for wireless service providers. Site Leasing Business The site leasing business consists of: . the ownership of communication sites pursuant to build-to-suit programs, strategic builds and acquisitions; . the leasing or subleasing of antenna space on communication sites to wireless service providers; and . the maintenance and management of communication sites. We lease and sublease antenna space on our communication sites to a variety of wireless service providers. We own or lease the ground under such communication sites from third parties, and in some cases manage communication sites for third parties in exchange for a percentage of the revenues or tower cash flow. We determine tower cash flow 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. The substantial majority of our owned or controlled towers are the result of build-to-suit programs. In our build-to-suit programs, we use some or all of the five phases of our site development business as we would when providing site development services to a third party. After a tower has been constructed, we lease antenna space on the tower. We generally receive monthly lease payments from customers payable under written antenna site leases. The majority of our outstanding customer leases, and the new leases we typically enter into, 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 antenna 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. We also provide a lease/sublease service as part of our site leasing business whereby we lease space on a communication site and sublease the space to a wireless service provider. Management believes that the site leasing portion of our business has significant potential for growth and we intend to expand our site leasing business through increasing activity from our new tower builds and selective acquisitions. We recently were awarded a non-binding mandate from BellSouth Mobility DCS to execute all of its outsourced 1999 new tower build-out (currently expected to be approximately 150 new towers) and also recently were awarded a non-binding mandate from Sprint PCS to build approximately 100 towers in 1999. 43 In 1998, total capital expenditures associated with the acquisition and construction of 443 towers were approximately $138.1 million. The following table indicates the total number of our built and acquired towers as of April 30, 1999:
New Location of Towers Acquired Builds Total % of Total ------------------ -------- ------ ----- ---------- South Carolina........................... 1 85 86 13% Georgia.................................. 5 74 79 12% Tennessee................................ 18 46 64 10% Florida.................................. 42 10 52 8% Texas.................................... 16 29 45 7% New York................................. 33 10 43 7% Wisconsin................................ 8 27 35 5% Alabama.................................. 1 29 30 5% Pennsylvania............................. 17 10 27 4% Michigan................................. 0 20 20 3% Minnesota................................ 16 3 19 3% Ohio..................................... 8 8 16 3% Oklahoma................................. 0 15 15 2% Louisiana................................ 11 0 11 2% North Carolina........................... 2 9 11 2% Connecticut.............................. 1 9 10 2% Iowa..................................... 8 2 10 2% Kentucky................................. 4 5 9 1% Delaware................................. 0 7 7 1% Missouri................................. 1 5 6 * New Mexico............................... 6 0 6 * Virginia................................. 2 4 6 * Nebraska................................. 1 4 5 * Colorado................................. 4 0 4 * Indiana.................................. 3 1 4 * Maine.................................... 3 1 4 * Maryland................................. 0 4 4 * Mississippi.............................. 4 0 4 * South Dakota............................. 3 0 3 * California............................... 2 0 2 * Illinois................................. 2 0 2 * Kansas................................... 1 0 1 * New Jersey............................... 0 1 1 * North Dakota............................. 1 0 1 * --- --- --- Total.................................. 224 418 642 === === ===
-------- * less than 1% Build-to-Suit Programs Under our build-to-suit programs, we generally construct towers only after having signed an antenna site lease agreement with an anchor tenant and having made the determination that the initial or planned capital investment for those towers would not exceed a targeted multiple of expected tower cash flow from those towers after a certain period of time. In selling our build-to-suit programs, our sales representatives use their existing relationships in the wireless communications industry to target wireless service providers interested in outsourcing their network buildout. Our sales representatives make proposals for build-to-suit towers in 44 response to competitive bids or specific requests and in circumstances where we believe the provider would have an interest in build-to-suit towers. Although the terms vary from proposal to proposal, we typically sign a five-year lease agreement with an anchor tenant, with four or five additional five-year renewal periods at the option of the lessee. 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 some 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 us, the provider will award us a non-binding mandate to pursue specific sites. Based on the status of the geographic areas we have been given a mandate to pursue, we will perform due diligence investigations for a designated period during which time we 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 our due diligence investigation during the mandate, we conclude that it is economically feasible to construct the towers requested by the wireless service provider, we will enter into an antenna site lease agreement with the provider. In certain limited circumstances we are contractually obligated to build a tower for the carrier regardless of the outcome of our due diligence investigation. We have negotiated several master build-to-suit agreements, including antenna site lease terms, with providers in specific markets that we believe will facilitate our obtaining build-to-suit programs from such providers in those markets. The antenna site lease agreements typically provide that all obligations are conditioned on our receiving all necessary zoning approvals where zoning remains to be obtained. Certain of the antenna site lease agreements contain penalty or forfeiture provisions in the event the tower is not completed within specified time periods. Strategic Siting Our strategic siting activities focus on developing new towers in locations chosen by us, instead of by an anchor tenant in a build-to-suit program. We try to identify attractive locations for new towers and strategically complete pre- construction procedures necessary to secure the site in advance of demand from a specific customer. We may invest in the zoning and permitting of these strategic sites (and even the construction of the towers) when we have not yet obtained an anchor tenant if we believe that demand for the site will exist in the near term, or that a competitor of ours may acquire the site if we wait until an anchor tenant is secured. However, we generally will not build a tower on a strategic site until we have signed a lease with a tenant. Acquisitions We actively pursue acquisitions of communication sites. Our acquisition strategy, like our new build strategy, is financially-oriented as opposed to geographically or customer-oriented. Our goal is to acquire towers that have an initial or planned capital investment not exceeding a targeted multiple of expected tower cash flow from the acquired towers after a certain period of time. We determine tower cash flow 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. Our dedicated mergers and acquisitions personnel direct our acquisition activities and 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 us from time to time in connection with acquisitions. In addition to our mergers and acquisitions personnel, we rely on our national field representatives to identify potential acquisitions. Our field representatives identify generally smaller acquisition prospects, involving one to ten towers, and often provide us with the exclusive opportunity to structure and consummate a transaction with the potential seller. We believe that our field representatives and knowledge of potential acquisition candidates gained through our substantial site development business experience provide us with a competitive advantage. This information will permit us to identify and 45 consummate acquisitions on more favorable terms than would be available to us through competitively-bid or brokered acquisition prospects. As is the case with our new tower builds, our focus is to acquire multi-tenant communication sites with under-used capacity in locations that we believe will be attractive to wireless service providers that have not yet built out their service in such locations. Lease/Sublease Under our lease/sublease program, we lease antenna space on a communication site and then sublease the space to wireless service providers. When these lease/subleases were first signed, these providers chose 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 antenna sites from us. The subleases generally have original terms of five years, with four or five renewal periods of five years each at the option of the lessee, and usually provide for annual or periodic price increases. Maintenance and Management Once acquired or constructed, we maintain and manage our communication sites through a combination of in-house personnel and independent contractors. We also manage communication sites for third parties. 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. We hire independent contractors locally to perform routine maintenance functions such as landscaping, pest control, snow removal, vehicular access, site access and equipment installation oversight. We engage independent contractors on a fixed fee or time and materials basis or, in a few limited circumstances where such contractors were sellers of towers to us, for a percentage of tower cash flow. Our network operations center in Boca Raton, Florida centrally monitors security access and lighting for our towers, as well as other functions. As the number of communication sites we own and manage increases, we anticipate incurring greater expenditures to expand our maintenance infrastructure, including expenditures for personnel and computer hardware and software. We expect these expenditures to be marginal compared to the anticipated increased revenues. Site Development Business We offer each phase of our site development services to our customers. These services and phases are the same ones we employ for our own benefit when we build towers for our ownership. During Phase I, network pre-design, we perform pre-design analysis by investigating those geographic areas that are designated as a priority by our customer. We will then identify, to the extent possible, all sites that meet the customer's RF requirements in those areas. Mapping 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. Typically, we conduct preliminary zoning analysis and determine those areas where zoning approval is likely, along with a possible time frame for approval. We use Phase I services to eliminate costly redesigns once a project is started, which can result in significant savings of both time and money. In Phase II, site selection, we determine: . which sites most closely meet the RF engineering requirements of the customer; . which sites are leasable or can be purchased; . which sites have the potential to be zoned for site construction or colocation based on the then current zoning requirements; and . which sites are most suitable for construction and installation of antennas. 46 Mapping specialists select the most suitable sites based on demographics, traffic patterns and signal characteristics. Typically, we 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. We also seek FAA approval at this time. In Phase III, site acquisition, we secure 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 we believe will best suit the needs of the customer, we will negotiate and enter into on behalf of the customer: . a contract of sale pursuant to which the customer acquires fee title to the property; . 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); . an easement agreement pursuant to which the customer acquires an easement over the property; or . an option to purchase or lease the property pursuant to which the customer has a future right to acquire fee simple title to the property or acquire a leasehold interest. It is during this phase of the site development service that we generally obtain a title report on the site, conduct a survey of the site, perform soil analysis of the site and obtain 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. We also obtain 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 us. During Phase V, we prepare a construction budget, install or monitor the installation of equipment and antennas, hire sub-contractors to perform the actual construction of the tower or equipment installation when not performed by us, prepare a construction schedule, monitor all vendors' delivery and installation of equipment and monitor the completion of all construction and landscaping of the site. The acquisition of CSSI, our construction subsidiary, in 1997 provided us with in-house tower construction and antenna installation capability. CSSI had extensive experience in the development and construction of tower sites and the installation of antennas, microwave dishes and electrical and telecommunications lines, primarily in the southeastern region of the United States. 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 our towers in the future. Through CSSI, we 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 antenna installation. CSSI maintains a varied inventory of heavy construction equipment and materials at its five-acre equipment storage and handling facility in Ocala, Florida, which is used as a staging area for projects in the southeastern region of the United States. Our site development business is headquartered in Boca Raton, Florida. Once we are awarded a site development project, we dispatch a site development team from headquarters to the project site and establish a temporary field office for the duration of the project. The site development team is typically composed of our permanent 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 of our permanent employees are either relocated to another project or directed to return to headquarters. 47 We generally set prices for each site development service separately. Customers are billed for these services on a fixed price or time and materials basis and we may negotiate fees on individual sites or for groups of sites. The Com-Net Acquisition On April 30, 1999, we acquired Com-Net Construction Services, Inc. Com-Net constructs towers and terminal switches on a turn-key basis for wireless and other telecommunications companies, primarily through the midwestern, eastern and western United States. Since its inception in 1990, Com-Net has provided construction and other related services on over 2,000 tower sites, ranging from turn-key tower construction to the installation of antennas. Clients of Com-Net include AT&T, BellSouth Cellular Corp., GTE and Sprint. For the year ended December 31, 1998, Com-Net had revenues of over $20.0 million and gross profit of $2.2 million. Dan Eldridge, the founder and President of Com-Net, will continue as President of Com-Net subsequent to the acquisition. We intend for Com-Net to continue to provide construction services to wireless carriers and other telecommunications companies, and to build towers for our ownership. At closing, we issued 780,000 shares of our Class A common stock to the shareholders of Com-Net (480,000 of which were pledged to us and will be returned to us if certain earnings targets are not met) and assumed working capital debt of approximately $4.5 million. In addition, the shareholders of Com-Net may receive up to $2.5 million in cash and 320,000 additional shares of Class A common stock if certain 1999 earnings targets are met by the acquired entity, and up to an additional 400,000 shares of Class A common stock if certain 2000 earnings targets are met. In connection with the Com-Net acquisition, we acquired an affiliate of Com- Net that owns 15 completed towers located in Texas, Ohio and Tennessee and over 30 additional tower sites in various stages of development under build-to-suit programs for a purchase price of $1.0 million in cash and assumed debt of approximately $2.5 million. Customers Since commencing operations, we have performed site leasing and site development services for many of the largest wireless service providers. The majority of our contracts have been for PCS broadband, ESMR, cellular and paging customers. We also serve PCS narrowband, SMR, multichannel multipoint distribution service, or MMDS, and multipoint distribution service, or MDS, wireless providers. In both our site development and site leasing businesses, we work with large national providers and smaller local, regional or private operators. In 1998, our largest site development customers were Sprint PCS, BellSouth Mobility DCS and Pacific Bell Mobile Services, representing 41.3%, 23.8% and 13.5%, respectively, of our 1998 site development revenue. PageNet represented 33.4% of our site leasing revenue. These revenues come primarily from our lease/sublease component of our site leasing business. Our other major site leasing customers were Sprint PCS, BellSouth Mobility DCS and AT&T, representing 6.3%, 2.6% and 1.4%, respectively, of our 1998 site leasing revenue. No other customer represented more than 10.0% of our revenues. In 1997 or 1998, we provided services for a number of customers, including: Alltel Omnipoint A+ Network Pacific Bell Mobile Services Aerial Communications PageNet AT&T Wireless Services Powertel Bell Atlantic NYNEX Mobile Systems PrimeCo PCS BellSouth Mobility DCS Sprint PCS CellNet Data Systems 360 Communications Company Comnet Cellular, Inc. US West Communication Nextel WinStar
48 Sales and Marketing Our sales and marketing goals are: . to continue to grow our site leasing business; . to further cultivate existing customers to obtain mandates for build-to- suit programs as well as to sell site development services; . to use our contacts and industry knowledge to better identify attractive locations for new tower builds; . to use existing relationships and develop new relationships with wireless service providers to lease antenna space on our owned or managed communication sites; . to form affiliations with select communications systems vendors who use end-to-end services, including those provided by us, which will enable us to market our services and product offerings through additional channels of distribution; and . to sustain a market leadership position in the site development business. Historically, we have capitalized on the strength of our experience, performance and relationships with wireless service providers to position ourselves for additional site development business. We have leveraged these attributes to obtain build-to-suit mandates, and we expect to continue to do so in the future. We also use these attributes to identify attractive locations to build towers on strategic sites. We have a dedicated sales force which is supplemented by members of our executive management team. Our salespeople are based regionally as well as in the corporate office. Our senior management focuses on maintaining and cultivating relationships with wireless service providers. Our strategy is to delegate sales efforts to those employees of ours who have the best relationships with the wireless service providers. We assign our representatives specific accounts based on historical experience with a provider and the quality of the relationship between our representative and the provider. Most wireless service providers have national corporate headquarters with regional offices. We believe that most decisions for site development and site leasing services are made by providers at the regional level with input from their corporate headquarters. Our sales representatives work with provider representatives at the local level and at the national level when appropriate. Our sales staff compensation is heavily weighted to incentive-based goals and measurements. In addition to our marketing and sales staff, we rely upon our executive and operations personnel on the national and field office levels to identify sales opportunities within existing customer accounts, as well as acquisition opportunities. Our primary marketing and sales support is centralized and directed from our headquarters office in Boca Raton, Florida and is supplemented by our regional offices. We have a full-time staff dedicated to our marketing efforts. The marketing and sales support staff are charged with implementing our marketing strategies, prospecting and producing sales presentation materials and proposals. Competition We compete for site leasing tenants with: . wireless service providers that own and operate their own tower footprints and lease, or may in the future decide to lease, antenna space to other providers; . site development companies that acquire antenna space on existing towers for wireless service providers, manage new tower construction and provide site development services; . other large independent tower companies; and . smaller local independent tower operators. 49 Wireless service providers that own and operate their own tower networks generally are substantially larger and have greater financial resources than we do. We believe 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. We also compete for development and new tower construction opportunities with wireless service providers, site developers and other independent tower operating companies and believe 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 we do. The following is a list of our primary competitors for build-to-suit mandates and tower acquisitions: American Tower Corporation, Crown Castle International Corp., LCC International, Lodestar Communications, Motorola, Pinnacle Tower, SpectraSite, Unisite and WesTower. We believe that the majority of our competitors in the site development business operate within local market areas exclusively, while some firms appear to offer their services nationally, including American Tower Corporation, Bechtel, Black & Veach, Mastec, NLS, Pyramid, SpectraSite and WesTower. 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. We believe that providers base their decisions on site development services on a number of criteria, including a company's experience, track record, local reputation, price and time for completion of a project. We believe that we compete favorably in these areas. Employees As of March 31, 1999, we had 320 employees, none of whom is represented by a collective bargaining agreement. We consider our employee relations to be good. Due to the nature of our business, we experience a "run-up" and "run-down" in the number of employees as contracts are completed in one area of the country and are commenced in a different area. Properties We are headquartered in Boca Raton, Florida, where we currently lease approximately 32,000 square feet of space. We open and close project offices from time to time in connection with our site development business, which offices are generally leased for periods not to exceed 18 months. We have entered into longer leases in Atlanta, Boston and Milwaukee, which are regional office locations. Legal Proceedings From time to time, we are involved in various legal proceedings relating to claims arising in the ordinary course of business. We are not a party to any such legal proceeding, the adverse outcome of which, individually or taken together with all other legal proceedings, is expected to have a material adverse effect on our prospects, financial condition or results of operations. Regulatory and Environmental Matters Federal Regulations. Both the FCC and FAA regulate towers used for wireless communications transmitters and receivers. These regulations control the siting and marking of towers and may, depending on the characteristics of particular towers, require prior approval and 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, the FCC, in conjunction with the FAA, has developed standards to consider proposals for new or modified antennas. These standards mandate that the 50 FCC and the FAA consider the height of proposed antennas, the relationship of the structure to existing natural or man-made obstructions and the proximity of the antennas to runways and airports. Proposals to construct or to modify existing antennas 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 also bear the responsibility of notifying the FAA of any tower lighting outage. We generally indemnify our customers against any failure to comply with applicable regulatory standards. Failure to comply with the applicable requirements may lead to civil penalties. The Telecommunications Act of 1996 amended the Communications Act of 1934 by preserving state and local zoning authorities jurisdiction over the construction, modification and placement of towers. The new law, however, limits local zoning authority by prohibiting any action that would (1) discriminate between different providers of personal wireless services or (2) 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 antennas 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, which requires federal agencies to evaluate the environmental impacts of their decisions under certain circumstances. The FCC has issued regulations implementing the National Environmental Policy Act. These 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, we are subject to certain environmental laws that impose strict, joint and several liability for the cleanup of on-site or off-site contamination and related personal or property damages. We are 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 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. We believe that we are in substantial compliance with and we have no material liability under all applicable environmental laws. These costs of compliance with existing or future environmental laws and liability related thereto may have a material adverse effect on our 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, we conduct the site acquisition portions of our site development services business through licensed real estate brokers or agents, who may be our employees 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. 51 MANAGEMENT Executive Officers and Directors Our executive officers and directors are as follows:
Name Age Position ------------------------ --- -------- Steven E. Bernstein..... 38 Chairman of the Board, President and Chief Executive Officer Ronald G. Bizick, II.... 31 Executive Vice President Sales and Marketing Robert M. Grobstein..... 40 Chief Accounting Officer Michael N. Simkin....... 46 Chief Operating Officer Jeffrey A. Stoops....... 40 Chief Financial Officer Donald B. Hebb, Jr...... 56 Director C. Kevin Landry......... 55 Director Robert S. Picow......... 43 Director Richard W. Miller....... 58 Director
Steven E. Bernstein, our founder, has been our President, Chief Executive Officer and a director since our inception in 1989. From 1986 to 1989, Mr. Bernstein was employed by McCaw Cellular Communications. 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, Executive Vice President Sales and Marketing, has been an executive officer with us since 1993. He is responsible for sales and marketing of our site development and site leasing services. Prior to joining us 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, Chief Accounting Officer, has been an executive officer with us since December 1993. He is responsible for risk management, financial reporting, and accounting. From January 1990 to March 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 us in April 1998. From July 1997 to February 1998, he was Chief Executive Officer of Centennial Communications Corporation, an international 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. From April 1993 to April 1995, Mr. Simkin was Executive Director of Corporate Strategy for Airtouch Communications. He has an A.B. in Economics and an MBA from the University of California at Berkeley. Jeffrey A. Stoops, Chief Financial Officer, joined us in April 1997. Mr. Stoops is responsible for all finance, mergers and acquisitions, capital market activities and legal matters for us. Prior to joining us, Mr. Stoops was a partner with Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., a South Florida law firm, where he practiced for 13 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 and also serves as our General Counsel. 52 Donald B. Hebb, Jr. was elected as a director of ours in February 1997. Mr. Hebb also has been a Managing Member of the general partner of ABS Capital Partners II, L.P., a private equity fund, and related entities, since March 1993. Prior to that time, he was a Managing Director of Alex. Brown, investing private equity funds. Prior to that time, Mr. Hebb served as President and Chief Executive Officer of Alex. Brown 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 ours in March 1997. Mr. Landry has been a Managing Director and Chief Executive Officer of TA Associates, Inc. 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. Mr. Landry was the nominee of TA Associates for election as director. Robert S. Picow was elected as a director of ours in November 1998. Mr. Picow founded Allied Communications, a distributor of communications equipment, in 1982. He served as the Chief Executive Officer of Allied until its sale in 1996 to Brightpoint, Inc., a publicly traded communications equipment company. Mr. Picow also served as a director of Brightpoint from June 1996 to August 1997. Mr. Picow is a private investor. Richard W. Miller was elected as a director of ours in April 1999. Mr. Miller has previously served on our Board of Directors from May 1997 to August 1998. 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. Mr. Miller is a private investor. Pursuant to an amendment to our articles of incorporation that will become effective upon consummation of the offering, our Board of Directors will be classified into three classes of directors, denoted as Class I, Class II and Class III. Messrs. Picow and Landry will be Class I directors, Mr. Miller will be a Class II director, and Messrs. Bernstein and Hebb will be Class III directors. See "Description of Capital Stock." Board Committees In 1999, our Board of Directors approved the creation of a compensation committee and an audit committee. The compensation committee, composed of Messrs. Hebb, Landry and Miller, will establish salaries, incentives and other forms of compensation for executive officers and will administer incentive compensation and benefit plans provided for employees. The audit committee, composed of Messrs. Bernstein, Picow and Miller, will review our audit policies and will oversee the engagement of our independent auditors, as well as develop financing strategies for us and approving outside auditors. 53 Executive Compensation The following table sets forth the cash and non-cash compensation paid by or incurred on behalf of SBA to our Chief Executive Officer and four other most highly compensated executive officers for each of the years ended December 31, 1996, 1997 and 1998. Summary Compensation Table
Long Term Compensation Awards ------------ Number of Annual Compensation Securities All ---------------------- Underlying Other Name and Principal Options/ Compen- Position Year Salary ($) Bonus ($) SARs (#) sation ($)(a) ------------------ ---- ---------- --------- ------------ ------------- --- --- Steven E. Bernstein..... 1998 354,822 283,850(b) -- 13,066(d) Chairman of the Board, President and 1997 354,822 100,000(c) -- 15,669(d) Chief Executive Officer 1996 195,000 3,995,000 -- 23,172(d) Ronald G. Bizick, II.... 1998 275,000 151,250 -- 1,000 Executive Vice President-- 1997 275,000 100,000 773,528(e) 1,000 Sales and Marketing 1996 75,000 1,629,000 -- 1,000 Robert M. Grobstein..... 1998 204,815 108,000 -- 1,000 Chief Accounting Officer 1997 204,815 100,000 386,764 1,000 1996 104,980 560,020 -- 1,000 Michael N. Simkin....... 1998 254,815(f) 145,981(g) 200,000 1,000 Chief Operating Officer 1997 -- -- -- -- 1996 -- -- -- -- Jeffrey A. Stoops....... 1998 304,798 165,000 -- 1,000 Chief Financial Officer............... 1997 304,798(h) 100,000 100,000(i) 1,000 1996 -- -- -- --
- -------- (a) These numbers include matching payments made under our 401(k) plan. (b) This number represents the value of 51,609 shares of Class A common stock issued to Mr. Bernstein on December 31, 1998. (c) This number represents the value of 26,810 shares of Class A common stock issued to Mr. Bernstein in the first quarter of 1998. (d) This number includes the provision of a car allowance to Mr. Bernstein. (e) These options were exercised by Mr. Bizick in June 1998. (f) This number represents Mr. Simkin's annual compensation. Mr. Simkin began his employment with us on April 13, 1998. (g) This number represents the value of 26,542 shares of Class A common stock issued to Mr. Simkin on December 31, 1998. (h) This number represents Mr. Stoops' annual compensation. Mr. Stoops began his employment with us on April 1, 1997. (i) Does not include options to purchase shares of Class B common stock granted by Mr. Bernstein to Mr. Stoops. On March 14, 1997, Mr. Bernstein granted Mr. Stoops options to purchase 1,369,863 shares of Class B common stock at an exercise price of $2.19 per share. 54 Options/SAR Grants in Last Fiscal Year
Individual Grants ---------------------------------------------- Potential Realizable Value At Assumed Annual Rate of Stock Number of % of Total Price Securities Options/SARs Appreciation Underlying Granted to Exercise for Option Term Options/SARs Employees in Price Expiration --------------- Name Granted 1998 Per Share Date 5%($) 10%($) ---- ------------ ------------ --------- ---------- ------- ------- Steven E. Bernstein..... -- -- -- -- -- -- Ronald G. Bizick, II.... -- -- -- -- -- -- Robert M. Grobstein..... -- -- -- -- -- -- Michael N. Simkin....... 200,000(a) 25% $2.63 6/15/08 330,799 838,309 Jeffrey A. Stoops....... -- -- -- -- -- --
- -------- (a) These options were granted to Mr. Simkin in 1998 as part of his employment package. These options vest over three years from the date of grant. Aggregated Option/SAR Exercises in Last Fiscal Year and Year-end Option/SAR Values
Number of Securities Underlying Unexercised Value of Unexercised In- Shares Options/SARs the-Money Options/SARs Acquired at December 31, 1998 at December 31, 1998($) on Value -------------------------- ------------------------- Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- --------- ---------- ----------- ------------- ----------- ------------- Steven E. Bernstein..... -- -- -- -- -- -- Ronald G. Bizick, II.... 773,528(a) $1,372,239 -- -- -- -- Robert M. Grobstein..... -- -- 386,764(b) -- 2,107,864 -- Michael N. Simkin....... -- -- 66,667 133,333 191,334 382,666 Jeffrey A. Stoops....... -- -- 66,667(c) 33,333(d) 191,334 95,666
- -------- (a) These options were exercised by Mr. Bizick in June 1998. The shares of Class A common stock acquired upon exercise of these options have not been sold. (b) These options were granted to Mr. Grobstein in connection with our corporate reorganization in 1997. (c) This does not include exercisable options to acquire 913,242 shares of Class B common stock that Mr. Bernstein granted to Mr. Stoops. (d) This does not include unexercisable options to acquire 456,621 shares of Class B common stock that Mr. Bernstein granted to Mr. Stoops. Employment Agreements Steven E. Bernstein. We do not have an employment agreement with Steven E. Bernstein, our President and Chief Executive Officer. 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 1998 and an annual cash bonus based on achievement of performance criteria established by the Board. Mr. Bernstein's compensation and other terms of employment are determined by our Board of Directors. Ronald G. Bizick, II. Mr. Bizick is party to an employment agreement with us dated as of January 1, 1997. Under his employment agreement, Mr. Bizick receives an initial base salary of $275,000 per year and an annual cash bonus based on achievement of performance criteria established by the Board of Directors. Mr. Bizick's bonus is not permitted to exceed his 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 SBA 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 us without cause, we will pay an amount equal to the aggregate present value of the product of the base annual salary paid to Mr. Bizick by us multiplied by 2.0. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. 55 Robert M. Grobstein. Mr. Grobstein is party to an employment agreement with us dated as of January 1, 1997. Under his employment agreement, Mr. Grobstein received an initial base salary of $200,000 per year and an annual cash bonus based on achievement of performance criteria established by the Board of Directors. Mr. Grobstein's bonus 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 SBA 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 us without cause we will pay an amount equal to the aggregate present value of the base annual salary paid to Mr. Grobstein by us, multiplied by 2.0. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. Michael N. Simkin. Mr. Simkin is party to an employment agreement with us dated as of June 15, 1998. Under his employment agreement, Mr. Simkin receives an initial base salary of $250,000 per year and an annual cash bonus based on achievement of performance criteria established by the Board of Directors. This bonus is not permitted to exceed Mr. Simkin's pro-rated base salary then in effect. For calendar year 1998, Mr. Simkin's pro-rated period is the period from April 13, 1998 to December 31, 1998. Mr. Simkin's employment agreement is for an initial 34-month term, and automatically renews for an additional one- year term, unless either Mr. Simkin or SBA provides written notice to the other party at least 90 days prior to renewal. Mr. Simkin's employment agreement provides that upon termination of employment by us without cause we will pay an amount equal to Mr. Simkin's aggregate annual compensation. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. Jeffrey A. Stoops. Mr. Stoops is party to an employment agreement with us 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. Mr. Stoops' bonus is not permitted to exceed Mr. Stoops' base annual salary. Mr. Stoops' employment agreement is for an initial 33-month term, and automatically renews for an additional one-year term, unless either Mr. Stoops or SBA 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 us without cause we will pay an amount equal to Mr. Stoops' base annual salary. The agreement also provides for noncompetition, nonsolicitation and nondisclosure covenants. Compensation of Directors We reimburse our four outside directors for expenses incidental to attendance at meetings of the Board of Directors. Prior to the offering, each of Messrs. Miller and Picow received options to purchase 100,000 shares of Class A common stock, at an exercise price of $2.63 per share upon their election to the Board of Directors, and those options vest over three years from the date of grant. After the consummation of the offering, any new directors will be compensated under the 1999 Equity Participation Plan. See "1999 Equity Participation Plan-- Independent Directors." In addition, Richard W. Miller and Robert S. Picow each receives compensation for his services as our director and consultant. Mr. Miller and Mr. Picow each receives $1,000 per Board meeting for attendance at such meetings, and $1,000 per day for consulting, plus expenses. 1996 Stock Option Plan Pursuant to the 1996 Stock Option Plan, options to purchase an aggregate of 1,272,452 shares of Class A common stock in the form of both nonqualified stock options and incentive stock options, were granted to our directors, key employees and consultants. A total of 1,800,000 shares of Class A common stock was reserved for issuance under this option plan. As of March 31, 1999, options to acquire 1,164,300 shares were issued and outstanding, with an exercise price of $2.63 per share and options to acquire 105,719 shares were issued and outstanding with an exercise price of $4.00 per share. These options generally vest over three-year periods from the date of grant. Pursuant to a resolution by our board of directors, no new options may be granted under this option plan. 56 1999 Equity Participation Plan In 1999, our Board of Directors approved the creation of the 1999 Equity Participation Plan of SBA Communications Corporation, which we also refer to as the Equity Plan. A total of 2,500,000 shares of Class A common stock are reserved for issuance under this option plan. The principal purposes of the Equity Plan are to provide incentives for our officers, employees and consultants through granting of options, restricted stock and other awards, thereby stimulating their personal and active interest in our development and financial success, and inducing them to remain in our employ. The Equity Plan is also intended to assist us in attracting and retaining qualified independent directors (that is, directors who are not employed by us), by providing for the automatic grant of options to independent directors. In April 1999, we granted to our executive officers and other employees options to purchase an aggregate of approximately 900,000 shares of Class A common stock at an exercise price of $8.00 per share, which vest in three installments commencing December 31, 1999 and ending on April 19, 2002. Under the Equity Plan, not more than 2,500,000 shares of Class A common stock (subject to antidilution and other adjustment provisions) are authorized for issuance upon exercise of options, stock appreciation rights (which we also refer to as SARs), and other awards, or upon vesting of restricted or deferred stock awards. Furthermore, the maximum number of shares which may be subject to options, SARs, restricted stock or other awards granted under the Equity Plan to any individual in any calendar year cannot exceed 500,000 (subject to antidilution and other adjustment provisions). The principal features of the Equity Plan are summarized below, but the summary is qualified in its entirety by reference to the Equity Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part. Administration Prior to our initial registration of Class A common stock under Section 12 of the Exchange Act, our Board of Directors will administer the Equity Plan. Following such registration, the compensation committee or another committee or subcommittee appointed under the terms of the Equity Plan (which we refer to as the Committee) which other committee or subcommittee consists solely of two or more members of the Board, each of whom is both a "non-employee director" for purposes of Rule 16b-3 under the Exchange Act and an "outside director" for the purposes of Section 162(m) of the Code, will administer the Equity Plan with respect to grants to our employees or consultants and the full Board will administer the Equity Plan with respect to options granted to independent directors. Notwithstanding the foregoing, the full Board may administer the Equity Plan with respect to grants to our employees or consultants, except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined by the Committee. Subject to the terms and conditions of the Equity Plan, the Committee has the authority to select the employees and consultants, if any, to whom awards are to be made, to determine the number of shares to be subject thereto and the terms and conditions thereof, and to make all other determinations and to take all other actions necessary or advisable for the administration of the Equity Plan with respect to grants or awards made to employees or consultants. The Committee (and the Board) is also authorized to adopt, amend and rescind rules relating to the administration of the Equity Plan. Notwithstanding the foregoing, the Board shall conduct the general administration of the Equity Plan with respect to options granted to independent directors. Eligibility Options, SARs, restricted stock and other awards under the Equity Plan may be granted to individuals who are our employees or consultants (or employees or consultants of any current or future subsidiaries of SBA) selected by the Committee for participation in the Equity Plan. In addition, the Equity Plan provides for certain automatic grants of non-qualified stock options to independent directors. 57 Independent Directors The Equity Plan provides for automatic grants of non-qualified stock options to purchase 50,000 shares of Class A common stock to each independent director who is initially elected to the Board after April 19, 1999, with a per share exercise price equal to the fair market value per share at the date of grant. Each such option will become exercisable in cumulative annual installments of one-fifth each on each of the first five anniversaries of the date of the grant so long as the independent director continues to serve as our director; provided, however, to the extent permitted by Rule 16b-3, the Board of Directors may accelerate the exercisability of options upon the occurrence of certain specified extraordinary corporate transactions or events. No portion of an option granted to any independent director shall be exercisable after the tenth anniversary of the date of grant or after the termination of the independent director's services as our director. In addition to providing for automatic option grants to independent directors first elected to the Board after April 19, 1999, the Equity Plan provides that the Board may, in its discretion, make additional option grants to independent directors from time to time. The terms of each option granted to independent directors will be set forth in a written agreement between us and the independent director. Awards under the Equity Plan The Equity Plan provides that the Committee may grant or issue stock options, SARs, restricted stock, deferred stock, dividend equivalents, performance awards, stock payments, and other stock related benefits, or any combination thereof to any eligible employee or consultant. Each such award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award. Nonqualified Stock Options, which we also refer to as NQSOs, will provide for the right to purchase Class A common stock at a specified price which, except with respect to NQSOs intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code, may be less than fair market value on the date of grant (but not less than par value), and usually will become exercisable (in the discretion of the Committee) in one or more installments after the grant date, subject to the participant's continued employment with us and/or subject to the satisfaction of individual performance targets established by the Committee. NQSOs may be granted for any term specified by the Committee. Notwithstanding the foregoing, NQSOs granted to independent directors shall be subject to the terms described above. Incentive Stock Options, which we also refer to as ISOs, will be designed to comply with certain restrictions contained in the Internal Revenue Code. Among such restrictions, ISOs: (1) must have an exercise price not less than the fair market value of a share of Class A common stock on the date of grant, (2) may only be granted to employees, (3) must expire within a specified period of time following the optionee's termination of employment, and (4) must be exercised within ten years after the date of grant; but may be subsequently modified to disqualify them for treatment as ISOs. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all of our classes of stock, the Equity Plan provides that the exercise price must be at least 110% of the fair market value of a share of Class A common stock on the date of grant and the ISO must expire upon the fifth anniversary of the date of its grant. Restricted Stock may be sold to participants at various prices (but not below par value) and made subject to such restrictions as may be determined by the Committee. Restricted stock, typically, may be repurchased by us at the original purchase price if the conditions or restrictions are not met. In general, restricted stock may not be sold, or otherwise transferred, until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will receive dividends prior to the time when the restrictions lapse. Deferred Stock may be awarded to participants, subject to vesting conditions based on continued employment or on performance criteria established by the Committee. Like restricted stock, deferred stock may not be sold, or otherwise transferred, until vesting conditions are removed or expire. Unlike restricted stock, deferred stock will not be issued until the deferred stock award has vested, and recipients of deferred stock generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied. 58 Stock Appreciation Rights may be granted in connection with stock options or other awards, or separately. SARs granted by the Committee in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of Class A common stock over the exercise price of the related option or other awards. Except as required by Section 162(m) of the Internal Revenue Code with respect to any SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Internal Revenue Code, there are no restrictions specified in the Equity Plan on the amount of gain realizable from the exercise of SARs, although restrictions may be imposed by the Committee in the SAR agreements. The Committee may elect to pay SARs in cash or in Class A common stock or in a combination of both. Dividend Equivalents represent the value of the dividends per share paid by us, calculated with reference to the number of shares covered by the stock options, SARs or other awards held by the participant. These dividend equivalents may be paid in cash or in shares of Class A common stock or in a combination of both. Performance Awards may be granted by the Committee on an individual or group basis. Generally, these awards will be based upon specific performance targets and may be paid in cash or in shares of Class A common stock or in a combination of both. Performance Awards may include "phantom" stock awards that provide for payments based upon increases in the price of our Class A common stock over a predetermined period. Performance Awards may also include bonuses which may be granted by the Committee on an individual or group basis and which may be payable in cash or in Class A common stock or in a combination of both. Stock Payments may be authorized by the Committee in the form of shares of Class A common stock or an option or other right to purchase Class A common stock as part of a deferred compensation arrangement or otherwise in lieu of or in addition to all or any party of compensation, including bonuses, that would otherwise be payable in cash to the employee or consultant. Securities Laws and Federal Income Taxes Securities Laws. The Equity Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the SEC thereunder, including, without limitation, Rule 16b-3. To the extent permitted by applicable law, the Equity Plan and options or other awards granted thereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. General Federal Tax Consequences. Under current federal laws, in general, recipients of awards and grants of nonqualified stock options, stock appreciation rights, restricted stock, deferred stock, dividend equivalents, performance awards, and stock payments under the Equity Plan are generally not taxable at the time of grant but are taxable under Section 83 of the Internal Revenue Code upon their receipt of Class A common stock or cash with respect to the exercise or vesting of such awards or grants and, subject to Section 162(m) of the Internal Revenue Code, we will be entitled to an income tax deduction with respect to the amounts taxable to these recipients. Under Sections 421 and 422 of the Internal Revenue Code, recipients of ISOs are generally not taxable at the time of grant or on their receipt of Class A common stock upon their exercises of ISOs if the ISOs and option stock are held for certain minimum holding periods and, in such event, we are not entitled to income tax deductions with respect to such exercises. Section 162(m) Limitation. In general, under Section 162(m) of the Internal Revenue Code, income tax deductions of publicly-held corporations may be limited to the extent total compensation (including base salary, annual bonus, stock option exercises and non-qualified benefits paid) for certain executive officers exceeds $1 million in any one year. However, under Section 162(m), the deduction limit does not apply to certain "performance-based compensation" established by an independent compensation committee which is adequately disclosed to, and approved by, stockholders. In particular, stock options and SARs will satisfy the "performance-based compensation" exception if the awards are made by a qualifying compensation 59 committee, the plan sets the maximum number of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date (that is, the option exercise price is equal to or greater than the fair market value of the stock subject to the award on the grant date). Under an Internal Revenue Code Section 162(m) transition rule for compensation plans of corporations which are privately held and which become publicly held in an initial public offering, the Equity Plan will not be subject to Section 162(m) until the transition date, which is the earliest of (1) the material modification of the Equity Plan; (2) the issuance of all common stock and other compensation that has been allocated under the Equity Plan; or (3) the first meeting of shareholders at which directors are to be elected that occurs after December 31, 2002. After this transition date, rights and awards granted under the Equity Plan, other than options and SARs, will not qualify as "performance-based compensation" for purposes of Section 162(m) unless such rights and awards are granted or vest upon preestablished objective performance goals, the material terms of which are disclosed to and approved by our shareholders. We have attempted to structure the Equity Plan in such a manner that, after the transition date discussed above, subject to obtaining shareholder approval of the Equity Plan, the remuneration attributable to stock options and SARs which meet the other requirements of Section 162(m) will not be subject to the $1,000,000 limitation. We have not, however, requested a ruling from the IRS or an opinion of counsel regarding this issue. 1999 Stock Purchase Plan In 1999, our Board of Directors adopted the 1999 Stock Purchase Plan, or the Purchase Plan. The Purchase Plan is intended to be an "employee stock purchase plan" as described in Section 423 of the Code. The Purchase Plan is administered by the compensation committee of our Board of Directors. A total of 500,000 shares of Class A common stock are reserved and available for purchase under the Purchase Plan, subject to antidilution and other adjustment provisions. The Purchase Plan permits eligible employee participants to purchase Class A common stock through payroll deductions at a price per share which is equal to the lesser of eighty-five percent (85%) of the fair market value of the Class A common stock on the first or the last day of an offering period. The Purchase Plan provides for two offering periods each calendar year. The first is January 1 through June 30 and the second is July 31 through December 31, except that the first offering period under the Purchase Plan will begin on September 1, 1999. On the last day of each offering period, each participant's accrued payroll deductions are automatically applied to the purchase of Class A common stock. Employees eligible to participate in the Purchase Plan consist of all persons employed for at least 90 days by us or by certain of our subsidiaries described in the Purchase Plan, except that the Purchase Plan excludes from participation any employee whose customary employment is for less than 20 hours per week or for not more than 5 months during a calendar year and any employee who owns stock representing 5% or more of the total combined voting power or value of all classes of our stock or the stock of our subsidiaries. No participant may purchase shares of Class A common stock in any calendar year under the Purchase Plan with an aggregate fair market value (generally determined as of the beginning of the plan year) in excess of $25,000. 60 CERTAIN TRANSACTIONS Steven M. Bernstein, our President and Chief Executive Officer, is indebted to us in the amount of $3,839,930, including accrued interest as of March 31, 1999. The indebtedness was incurred in March 1997 in the principal amount of $3.5 million, accrues interest at 4.67% per annum and is secured by 823,530 shares of Mr. Bernstein's Class B common stock. The debt matures on the earlier of March 2001 or the completion of an initial public offering of our common stock. Upon the consummation of the offering, Mr. Bernstein will surrender shares of Class B common stock to SBA, valued at the initial offering price for Class A common stock, in order to repay the loan and all accrued interest on the loan. We, on occasion, have employed the services of Traveleze, a travel agent that uses the services of Skylink, a corporation owned by the wife of Ronald G. Bizick II, our Executive Vice President--Sales and Marketing. Traveleze paid commissions to Skylink during 1998 as a result of such transactions based on terms that are customary in the industry aggregating less than $100,000. 61 PRINCIPAL SHAREHOLDERS The table below sets forth, as of March 31, 1999, certain information with respect to the beneficial ownership of our capital stock by (1) each person who we know to be a beneficial owner of more than 5% of any class or series of our capital stock; (2) each of the directors and executive officers individually; and (3) all directors and executive officers as a group. At March 31, 1999, we had outstanding the following shares of capital stock: Class A common stock-- 880,922 shares; Class B common stock--8,075,000 shares; Series A preferred stock--8,050,000 shares. At March 31, 1999 no other classes or series of capital stock had any shares issued and outstanding. 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, 1999, except as described in footnote (b).
Beneficial Ownership ---------------------------------- Percentage Percentage of Total of Total Voting Voting Power of Power of Class A Class A Common Common Stock Stock Executive Officers Number of Prior to After and Directors(a) Title of Class Shares (b) Offering (b) Offering - ------------------ ------------------------- ---------- ------------ ---------- Steven E. Bernstein(c).. Class B Common Stock 8,075,000 49.8% 79.1% Class A Common Stock 78,419 * * Ronald G. Bizick, II(d).................. Class A Common Stock 773,528 * * Robert M. Grobstein(e).. Class A Common Stock 386,764 -- -- Michael N. Simkin(f).... Class A Common Stock 93,208 * * Jeffrey A. Stoops(g).... Class A Common Stock 979,908 -- -- Donald B. Hebb, Jr.(h).. Series A Preferred Stock+ 3,220,000 19.9 3.3% C. Kevin Landry(i)...... Series A Preferred Stock+ 2,736,997 16.9 2.8% Richard W. Miller(j).... Class A Common Stock 33,333 -- -- Robert S. Picow(k)...... Class A Common Stock -- -- -- All executive officers and directors as a group (9 persons)............ 15,463,915 87.1 86.0% Beneficial Owners of 5% or More of Capital Stock - ------------------------ ABS Capital Partners II, L.P.(l)................ Series A Preferred Stock+ 3,220,000 19.9% 3.3% TA Associates, Inc.(m).. Series A Preferred Stock+ 2,736,997 16.9 2.8% The Hillman Company(n).. Series A Preferred Stock+ 1,169,808 7.2 1.2%
- -------- + Each share of Series A preferred stock will automatically convert into one share of Class A common stock and one share of Series B preferred stock upon the consummation of the offering. The Series B preferred stock will be redeemed with a portion of the proceeds of the offering. See "Description of Capital Stock." (a) Except as otherwise indicated, the address of each person named in this table is c/o SBA Communications Corporation, One Town Center Road, Third Floor, Boca Raton, Florida 33486. (b) 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, 1999 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 shareholders. To our knowledge, except as otherwise indicated, beneficial ownership includes sole voting and dispositive power with respect to all shares. We have 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 1,273,252 shares were issued and outstanding at March 31, 1999. Of these options, 532,886 will be exercisable within 60 days after March 31, 1999. (c) All shares are owned of record by Bernstein Limited Partnership II. 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. As of March 31, 1999, options to purchase 913,242 of such shares were 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. This number does not include options to purchase 175,000 shares of Class A common stock at an exercise price of $8.00 per share, which options vest in three annual installments commencing December 31, 1999. 62 (d) This number does not include options to purchase 137,500 shares of Class A common stock at an exercise price of $8.00 per share, which options vest in three annual installments commencing December 31, 1999. (e) All shares are in the form of an immediately exercisable option to purchase Class A common stock at $.05 per share. This number does not include options to purchase 100,000 shares of Class A common stock at an exercise price of $8.00 per share, which options vest in three annual installments commencing December 31, 1999. (f) This number includes currently exercisable options to purchase 66,666 shares of Class A common stock for $2.63 per share granted under the 1996 Stock Option Plan. This number does not include unvested options to purchase 133,334 shares of our Class A common stock at an exercise price of $2.63 per share. This number also does not include options to purchase 125,000 shares of Class A common stock at an exercise price of $8.00 per share, which options vest in three annual installments commencing December 31, 1999. (g) This number includes currently exercisable options granted by Mr. Bernstein to Mr. Stoops for 913,242 shares at $2.19 per share and options granted under the 1996 Stock Option Plan for 66,666 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. This number does not include options to purchase an additional 456,621 shares of common stock for $2.19 per share granted by Mr. Bernstein to Mr. Stoops, which vest on December 31, 1999. This number does not include additional options to purchase 33,333 shares of Class A common stock at $2.63 per share granted under the 1996 Option Plan, which vest on December 31, 1999. This number also does not include options to purchase 150,000 shares of Class A common stock at an exercise price of $8.00 per share, which options vest in three annual installments commencing December 31, 1999. (h) This number 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. (i) This number includes (1) 1,610,000 shares owned by Advent VII L.P., (2) 1,102,850 shares owned by Advent Atlantic & Pacific III L.P., and (3) 24,147 shares owned by TA Venture Investors L.P. Advent VII L.P., Advent Atlantic & Pacific L.P. and TA Venture Investors L.P. are part of an affiliated group of investment partnerships referred to collectively as the TA Associates Group. The general partner of Advent VII L.P. is TA Associates VII L.P. The general partner of Advent Atlantic & Pacific III L.P. is TA Associates AAP III Partners L.P. The general partner of TA Associates VII L.P. and TA Associates AAP III Partners L.P. is TA Associates, Inc. In such capacity, TA Associates, Inc. exercises sole voting and investment power with respect to all shares held of record by the named investment partnerships, with the exception of TA Venture Investors L.P.; individually, no stockholder, director or officer of TA Associates, Inc. is deemed to have or share such voting or investment power. Principals and employees of TA Associates, Inc. (including Mr. Landry, a director of ours) comprise the general partners of TA Venture Investors L.P. In such capacity Mr. Landry may be deemed to share voting and investment power with respect to the 24,147 shares held of record by TA Venture Investors L.P. Mr. Landry disclaims beneficial ownership of all shares, except to the extent of 2,212.93 shares as to which he holds a pecuniary interest. (j) This number includes currently exercisable options to purchase 33,333 shares of Class A common stock for $2.63 per share under the 1996 Stock Option Plan. This number does not include options to purchase an additional 66,667 shares of Class A common stock at $2.63 per share, of which options to purchase 33,333 shares of Class A common stock vest on May 22, 1999 and of which options to purchase 33,334 shares of Class A common stock vest on May 22, 2000. (k) This number does not include options to purchase 100,000 shares of Class A common stock at $2.63 per share, which vest in three equal annual installments beginning November 12, 1999. (l) The principal business address of ABS Capital Partners, II, L.P. is One South Street, Baltimore, MD 21202. (m) This number includes (1) 1,610,000 shares owned by Advent VII L.P., (2) 1,102,850 shares owned by Advent Atlantic & Pacific III L.P., and (3) 24,147 shares owned by TA Venture Investors L.P. Advent VII L.P., Advent Atlantic & Pacific L.P. and TA Venture Investors L.P. are part of an affiliated group of investment partnerships referred to collectively as the TA Associates Group. The general partner of Advent VII L.P. is TA Associates VII L.P. The general partner of Advent Atlantic & Pacific III L.P. is TA 63 Associates AAP III Partners L.P. The general partner of TA Associates VII L.P. and TA Associates AAP III Partners L.P. is TA Associates, Inc. In such capacity, TA Associates, Inc. exercises sole voting and investment power with respect to all shares held of record by the named investment partnerships, with the exception of TA Venture Investors L.P.; individually, no stockholder, director or officer of TA Associates, Inc. is deemed to have or share such voting or investment power. The principal business address of TA Associates, Inc. is 125 High Street, Boston, MA 02110. (n) This number 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. 64 DESCRIPTION OF CAPITAL STOCK The following summary of the terms and provisions of our capital stock is not complete and is qualified in its entirety by reference to our Amended and Restated Articles of Incorporation, which have been filed as an exhibit to the registration statement of which this prospectus is a part. As of April 1, 1999, our outstanding capital stock consisted of 880,922 shares of Class A common stock, 8,075,000 shares of Class B common stock, and 8,050,000 shares of Series A preferred stock. No other shares of any class or series were issued and outstanding as of April 1, 1999. In addition, (1) 1,800,000 shares of Class A common stock were reserved for issuance upon the exercise of outstanding stock options that were granted under the 1996 Stock Option Plan, (2) 2,500,000 shares of Class A common stock were reserved for issuance upon the exercise of stock options granted or to be granted under the 1999 Equity Participation Plan, (3) 8,050,000 shares of Series B preferred stock were reserved for issuance upon conversion of the outstanding shares of Series A preferred stock, (4) 8,050,000 shares of Class A common stock were reserved for issuance upon conversion of outstanding shares of Series A preferred stock, (5) 402,500 shares were reserved for issuance upon exercise of an outstanding warrant granted to BT Alex. Brown in connection with the offering of Series A preferred stock, (6) 500,000 shares of Class A common stock were reserved for issuance under the 1999 Employee Stock Purchase Plan and (7) 386,764 shares of Class A common stock were reserved for issuance upon the exercise of stock options held by Mr. Grobstein. In connection with the offering, each share of Series A preferred stock will be automatically converted into one share of Class A common stock, which will remain outstanding, and one share of Series B preferred stock, which will be redeemed with a portion of the proceeds from the offering. See "Use of Proceeds." Also in connection with the offering, we are amending and restating our articles of incorporation and by-laws. The description that follows gives effect to these amendments. Upon consummation of the offering, our authorized capital stock will consist of 100,000,000 shares of Class A common stock, par value $.01 per share, 8,100,000 shares of Class B common stock, par value $.01 per share, and 30,000,000 shares of preferred stock, par value $.01 per share. These shares of preferred stock will not have been designated as to series and will be available for issuance from time to time in one or more series at the discretion of our Board of Directors. While we have no present intention to issue additional shares of preferred stock, any such issuance could be used to discourage, delay or make more difficult a change in control of SBA. We have 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 validly issued, fully paid and nonassessable. As of March 31, 1999, there were five holders of all of our Class A common stock and there was one holder of all of our Class B common stock. Except as otherwise required by law or in our articles of incorporation, owners of the Class A common stock and Class B common stock will vote together as a single class on all matters, including the election of directors. Our articles of incorporation provide, upon the consummation of this offering, for a separate class vote of each class of common stock in the event of any amendment that alters the terms of the Class B common stock. Pursuant to our articles of incorporation and by-laws, our Board of Directors will be classified into three classes of directors, denoted as Class I, Class II and Class III. Messrs. Picow and Landry will be Class I directors, Mr. Miller will be a Class II director, and Messrs. Bernstein and Hebb will be Class III directors. Class A Common Stock Voting Rights Each share of Class A common stock is entitled to one vote. Except as noted above, and except as provided under the Florida Business Corporation Act, the holders of shares of Class A common stock and Class B common stock vote together as a single class on all matters on which shareholders are permitted or 65 entitled to vote. All the outstanding shares of Class A common stock are held by directors, executive officers, other employees and affiliates of ours or our subsidiaries. Dividends Each share of Class A common stock is entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available for that purpose, subject to preferences that may apply to any preferred stock that we may issue in the future. No dividends may be declared and paid to holders of shares of Class A common stock unless the Board of Directors at the same time also declares and pays to the holders of Class B common stock a per share dividend equal to the dividend declared and paid to the holders of shares of Class A common stock. See "Dividend Policy." Liquidation Rights In the event of our dissolution or liquidation, after satisfaction of all our debts and liabilities and distributions to the holders of any preferred stock that we may issue in the future, if any, of amounts to which they are preferentially entitled, holders of Class A common stock will be entitled to share ratably with holders of common stock in the distribution of assets to the shareholders. Other Provisions There are no cumulative, subscription or preemptive rights to subscribe for any additional securities which we may issue, and there are no redemption provisions, conversion provisions or sinking fund provisions applicable to the Class A common stock. Class B Common Stock Voting Rights Each share of Class B common stock is entitled to ten votes for each share on all matters presented to the shareholders. Except as provided under the Florida Business Corporation Act, the holders of the shares of Class B common stock and Class A common stock vote together as a single class on all matters on which shareholders are permitted or entitled to vote. Dividends Each share of Class B common stock is entitled to receive dividends if, as and when declared by the Board of Directors out of funds legally available for that purpose, subject to preferences that may apply to any preferred stock that we may issue in the future. No dividends may be declared and paid to holders of shares of Class B common stock unless the Board of Directors at the same time also declares and pays to holders of Class A common stock a per share dividend equal to the dividend declared and paid to holders of shares of Class B common stock. Liquidation Rights In the event of our dissolution or liquidation, after satisfaction of all our debts and liabilities to creditors and distributions to the holders of any preferred stock that we may issue in the future, if any, of amounts to which they are preferentially entitled, holders of Class B common stock will be entitled to share ratably with holders of common stock in the distribution of assets available for distribution to the shareholders. Convertibility 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. Each share of outstanding 66 Class B common stock shall convert into one fully paid and non-assessable share of Class A common stock immediately upon transfer to any holder other than any one or more of the following (an "Eligible Class B Shareholder"): (1) Steven E. Bernstein; (2) other members of his immediate family or their lineal descendants; (3) spouses of lineal descendants or lineal descendants of spouses, whether alive as of the date of the articles of incorporation or born subsequently; (4) any trusts or other estate planning vehicles for the benefit of any of the foregoing, whether existing as of the date of the articles of incorporation or subsequently created; or (5) 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 Shareholders in the aggregate constitute 10% or less of the outstanding shares of our common stock, 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. Each share of outstanding Class B common stock which is held by any Eligible Class B Shareholder shall immediately convert into one share of Class A common stock at such time as such holder is no longer an Eligible Class B Shareholder. Other Provisions There are no cumulative, subscription or preemptive rights to subscribe for any additional securities that we may issue, and there are no redemption provisions or sinking fund provisions applicable to the Class B common stock. The rights and preferences of holders of both classes of common stock are subject to the rights of any series of preferred stock which we may issue in the future. Warrant In connection with the sale of our Series A preferred stock in March 1997, we issued a warrant to acquire shares of Class A common stock to BT Alex. Brown. The warrant, (which represents 1.3% of our common stock on a fully diluted basis as of the closing of the offering, and assuming the exercise of the over- allotment option in full) when exercised, entitles its holder to receive 402,500 fully paid and non-assessable shares of Class A common stock at an exercise price of $3.73 per share. The warrant is exercisable at any time on or before March 2002. The exercise and transfer of the warrant is subject to applicable federal and state securities laws. Registration Rights If at any time, the holders of not less than 25% of the Class A common stock issued or issuable upon conversion of our outstanding Series A preferred stock request that we 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), we will use our best efforts to cause such shares to be registered, subject to certain cut-back provisions; provided, however, that we may delay any such registration for a period of up to three months for a valid business reason. We 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 us 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. Each of Messrs. Bernstein, Bizick, Grobstein and Stoops also has certain rights to have his shares of common stock registered under the Securities Act. Mr. Bernstein has the right to have 8,075,000 shares of Class B common stock registered under the Securities Act. Mr. Bizick has the right to have 773,528 shares of Class A common stock registered under the Securities Act. Mr. Grobstein has the right to have 386,764 shares of Class A common stock registered under the Securities Act. Mr. Stoops has the right to have 1,369,863 shares of Class A common stock registered under the Securities Act. 67 If at any time, Mr. Bernstein, Mr. Bizick, Mr. Grobstein or Mr. Stoops, individually or as a group, request that we file a registration statement on Form S-3 for these shares, we will use our best efforts to cause such shares to be registered subject to certain cut-back provisions; provided, however, that we may delay any such registration for a period of up to three months for a valid business reason. We will not be required to file the registration statement on Form S-3 more frequently than twice a year. 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 SBA or our shareholders, subject to certain cut-back provisions. Except as otherwise agreed, 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. Preferred Stock All shares of our currently outstanding preferred stock will be retired upon consummation of the offering. Our board of directors will be authorized by our articles of incorporation to provide for the issuance of new shares of preferred stock, in one or more series, to establish the number of shares to be included in each series, to fix the designation, rights, preferences, privileges and restrictions of the shares of each series and to increase or decrease the number of shares of any series of preferred stock, all without any further vote or action by our shareholders. 68 DESCRIPTION OF EXISTING DEBT The Senior Credit Facility On February 5, 1999, our wholly owned subsidiary, Telecommunications, entered into a senior credit facility with a group of banks and other financial institutions led by Lehman Commercial Paper Inc., as administrative agent, and Lehman Brothers Inc. and General Electric Capital Corporation, as co-arrangers. Lehman Brothers Inc. is an underwriter in this offering. The following is a summary of certain provisions of the senior credit facility, but you should refer to the actual credit agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part. The senior credit facility provides for revolving credit loans of up to $150.0 million. The senior credit facility also provides for a term loan in the amount of $25.0 million. Telecommunications borrowed the full $25.0 million of this term loan on February 5, 1999. We plan to use some of the proceeds of the offering to repay outstanding revolving credit loans. The senior credit facility is secured by a lien on substantially all of our assets and the assets of our domestic subsidiaries and a pledge of all of the outstanding capital stock of each of our domestic subsidiaries. We, and each of our domestic subsidiaries (other than Telecommunications) have guaranteed the obligations of Telecommunications under the senior credit facility. The revolving credit commitments are required to be reduced and the term loans are required to be amortized in quarterly installments beginning on March 31, 2001 until December 31, 2004, when the senior credit facility matures. In addition, the senior credit facility provides for the mandatory prepayment of the revolving credit loans and the term loan with the net cash proceeds of (1) any issuance of equity or incurrence of debt by us or any of our subsidiaries, subject to certain exceptions, (2) any asset sale by us or any of our subsidiaries, subject to certain exceptions, (3) any payment received by us or any of our subsidiaries in respect to any property or casualty insurance claim and (4) 75% of excess cash flow of Telecommunications commencing with the fiscal year of Telecommunications ending December 31, 1999. The loans under the senior credit facility bear interest, at the option of Telecommunications, at either (1) a "base rate" equal to the greater of (a) the rate of interest announced by Bankers Trust Company as its prime rate at its New York office, (b) the secondary market rate for three-month certificates of deposit, as adjusted for statutory reserve requirements plus 1.0%, or (c) the sum of 0.5% plus the federal funds effective rate plus, in each case, a margin ranging from 1.25% to 2.50% (determined by a leverage ratio), or (2) the rate at which eurodollar deposits for one, two, three or six months (as selected by Telecommunications) are offered in the interbank eurodollar market plus a margin ranging from 2.25% to 3.50% (determined by a leverage ratio). If all or any portion of the principal amount of any loan is not paid when due, the applicable interest rate on the overdue amount will increase by 2.0% per year. If all or any portion of any interest, fees or other amounts is not paid when due, the overdue amount shall bear interest at 2.0% above the rate applicable to the base rate loans. The senior credit facility contains a number of covenants that, among other things, restrict our ability, and the availability of each of our subsidiaries, to dispose of assets, incur additional indebtedness, incur guaranty obligations, pay dividends or make capital distributions, create liens on assets, make investments, make acquisitions, engage in mergers or consolidations, engage in certain transactions with subsidiaries and affiliates and otherwise restrict corporate activities. In addition, the senior credit facility requires compliance with certain financial covenants and restricts the number of towers that may be constructed in advance of securing an anchor tenant. Prior to August 5, 2001, Telecommunications and its subsidiaries must maintain a minimum annualized adjusted EBITDA, a minimum ratio of annualized adjusted EBITDA to interest expense and a minimum amount of revenues from towers and cannot exceed a maximum amount of total debt per tower, a maximum ratio of total debt to total capitalization, a maximum amount of total debt to annualized adjusted EBITDA and a maximum amount of capital expenditures. From and after August 5, 2001, Telecommunications 69 and its subsidiaries must maintain a minimum ratio of consolidated EBITDA to interest expense, a minimum ratio of fixed charges and a minimum ratio of debt service coverage and cannot exceed a maximum ratio of total debt to EBITDA and maximum amount of capital expenditures. We do not expect that such covenants will materially impact our ability to operate our respective businesses. The senior credit facility contains customary events of default, including (1) the failure to pay principal when due, (2) the failure to pay any interest or any other amount within five days after it becomes due, (3) the material inaccuracy of any representation or warranty being made by us or any of our domestic subsidiaries on or as of the date made or deemed made, (4) a default in the performance of any negative covenant (including any financial covenant), (5) a default in the performance of other covenants or agreements subject, in certain cases, to a 30 day grace period, (6) default in certain of our other indebtedness, (7) certain insolvency events and (8) certain change of control events. In addition, a default under the indenture governing our senior discount notes will result in a default under the senior credit facility. The 12% Senior Discount Notes Due 2008 On March 2, 1998, we privately placed $269.0 million in aggregate principal amount at maturity of our 12% senior discount notes due 2008. This description summarizes certain terms of those notes, but does not describe all of the terms. You should refer to the indenture governing the notes, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. The senior discount notes are unsecured senior obligations of SBA, and will rank equal in right of payment with all existing and future unsecured senior indebtedness of SBA and will be senior in right of payment to future subordinated indebtedness of SBA. Our subsidiaries are not guarantors of the notes. The notes will mature on March 1, 2008. The notes will accrete in value until March 1, 2003. After that date, cash interest will accrue on the notes at the rate of 12% per year and will be payable semi-annually, commencing on September 1, 2003. Except as stated below, the notes are not redeemable at our option prior to March 1, 2004. Thereafter, the notes are redeemable at our option, in whole or in part, at any time, at a premium which is at a fixed percentage that declines to par on or after March 1, 2007, in each case together with accrued and unpaid interest, if any, to the date of redemption. In the event we consummate a public equity offering or certain strategic equity investments prior to March 1, 2001, we may, at our option, use all or a portion of the proceeds from such offering to redeem up to 20% of the original aggregate principal amount at maturity of the notes at a redemption price equal to 112% of the accreted value of the notes to be redeemed, plus accrued and unpaid interest, if any, thereon to the redemption date, if at least 80% of the original aggregate principal amount at maturity of the notes remains outstanding after each such redemption. Upon the occurrence of certain change of control events, each holder of notes has the right to require us to purchase all or a portion of such holder's notes at a price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of purchase or, if the notes are purchased prior to March 1, 2003, at a purchase price equal to 101% of the accreted value of the notes on the date of purchase. The indenture contains certain covenants, including covenants that limit (1) the incurrence of certain additional indebtedness and issuance of preferred stock, (2) restricted payments, (3) distributions from restricted subsidiaries, (4) transactions with affiliates, (5) sales of assets and subsidiary stock (including sale and leaseback transactions), (6) dividend and other payment restrictions affecting restricted subsidiaries, and (7) mergers or consolidations. 70 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the offering, we will have 28,972,866 shares of common stock outstanding (including the 7,723,482 shares of Class B common stock to be outstanding after the offering, the 8,050,000 shares of Class A common stock to be issued upon the conversion of the Series A preferred stock and the 780,000 shares of Class A common stock issued at the closing of the Com-Net acquisition). In addition, we have reserved for issuance 4,151,383 shares of Class A common stock upon exercise of stock options and 402,500 shares of Class A common stock upon exercise of the outstanding warrant. The 11,538,462 shares (13,269,231 shares if the over-allotment option is exercised in full) sold in the offering will be freely transferable without restriction under the Securities Act, unless they are held by "affiliates" of ours as that term is used under the Securities Act. Of the remaining 17,434,404 shares (15,703,635 shares if the over-allotment option is exercised in full), 15,773,482 shares will be freely transferable without restriction under the Securities Act, unless they are held by our "affiliates" and will be available for public sale upon expiration of the "lock-up" agreements described below. The remaining 1,660,922 shares will be "restricted securities" as that term is defined in Rule 144 and subject to the volume restrictions of Rule 144. Substantially all of these restricted securities are entitled to demand and piggyback registration rights under certain circumstances. We intend to file a registration statement under the Securities Act after the offering to register shares of Class A common stock reserved for issuance under the 1996 Stock Option Plan and the 1999 Equity Participation Plan. This registration would permit the resale of such shares by non-affiliates upon issuance in the public market without restriction under the Securities Act. Such registration statement will automatically become effective immediately upon filing. See "Management." In connection with the offering and subject to certain exceptions, we, all of our executive officers and directors and holders of our Series A preferred stock have agreed not to sell any shares of Class A common stock, or any securities which may be converted into or exchanged for any such shares of Class A common stock or substantially similar securities, for a period of 180 days after the date of this prospectus without the prior written consent of Lehman Brothers Inc., subject to typical exceptions. In addition, our employees who will own 10,000 or more vested options during the 180-day period described above will execute similar "lock-up" agreements. See "Underwriting." In general, under Rule 144 as currently in effect, a shareholder, including an "affiliate," who has beneficially owned his or her restricted securities (as that term is defined in Rule 144) for at least one year from the later of the date such securities were acquired from us or, if applicable, the date they were acquired from an affiliate, is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of the then outstanding shares of Class A common stock (which will equal approximately 290,269 shares or the average weekly trading volume in the Class A common stock during the four calendar weeks before the date on which notice of such sale was filed under Rule 144, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, under Rule 144(k), if a period of at least two years has elapsed from the later of the date restricted securities were acquired from us or, if applicable, the date they were acquired from an affiliate of ours, a shareholder who is not an affiliate of ours at the time of sale and has not been an affiliate of ours for at least three months prior to the sale is entitled to sell the shares immediately without compliance with the foregoing requirements under Rule 144. Subject to certain limitations on the aggregate offering price of a transaction and other conditions, Rule 701 may be relied upon with respect to the resale of securities originally purchased from us by our employees, directors, officers, consultants or advisors prior to the date we become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to written compensatory benefit plans or written contracts relating to the compensation of these persons. In addition, the SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of these options (including exercises, after the date of this offering). Securities issued in reliance on Rule 701 are restricted 71 securities and commencing 90 days after we become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, subject to the contractual restrictions described above, may be sold (1) by persons other than affiliates, subject only to the manner of sale provisions of Rule 144, and (2) by affiliates, under Rule 144 without compliance with its one-year minimum holding period requirements. Except as indicated above, we are unable to estimate the amount, timing and nature of future sales of outstanding Class A common stock. Prior to this offering, there has been no public market for the Class A common stock, and no prediction can be made as to the effect, if any, that market sales of shares of Class A common stock or the availability of shares of sale will have on the market price of the Class A common stock prevailing at any given time. Nevertheless, sales of significant numbers of shares of Class A common stock in the public market could adversely affect the market price of the Class A common stock and could impair our ability to raise capital through an offering of our equity securities. See "Risk Factors" and "Underwriting". Registration Rights The holders of our outstanding preferred stock, as well as Messrs. Bernstein, Bizick, Grobstein and Stoops, have certain rights to have their shares of common stock registered under the Securities Act. See "Description of Capital Stock --Registration Rights." 72 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS The following is a general summary of the material United States Federal income and estate tax considerations to a Non-U.S. Holder (as defined below) relevant to the ownership and disposition of shares of Class A common stock. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), final, temporary and proposed United States Treasury regulations promulgated thereunder, Internal Revenue Service (the "IRS") rulings, official pronouncements and judicial decisions, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or different interpretations. This summary does not discuss all the tax consequences that may be relevant to a particular Non-U.S. Holder in light of the holder's particular circumstances and it is not intended to be applicable in all respects to all categories of Non-U.S. Holders, some of whom may be subject to special rules not discussed below. In addition, this summary does not address any state, local or foreign tax considerations that may be relevant to a Non-U.S. Holder's decision to purchase shares of Class A common stock. For purposes of this discussion, a "Non-U.S. Holder" means a beneficial owner of common stock that is not (1) a citizen or resident of the United States, (2) a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof, (3) an estate the income of which is subject to United States federal income taxation regardless of its source and (4) a trust (a) that is subject to the supervision of a court within the United States and the control of one or more United States persons as described in section 7701(a)(30) of the Code or (b) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. An individual may be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States on at least 31 days during the calendar year and for an aggregate of at least 183 days during the calendar year and the two preceding calendar years (counting, for such purposes all the days present in the current year, one-third of the days present in the immediately preceding year and one sixth of the days present in the second preceding year). In addition to the "substantial presence test" described in the immediately preceding sentence, an individual may be treated as a resident alien if he or she (1) meets the lawful permanent residence test (a so-called "green card" test) or (2) elects to be treated as a U.S. resident and meets the "substantial presence test" in the immediately following year. Generally, resident aliens are subject to U.S. Federal income and estate tax in the same manner as U.S. citizens and residents. ALL NON-U.S. HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SHARES OF CLASS A COMMON STOCK IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. Dividends on Common Stock Generally, any dividends paid to a Non-U.S. Holder of common stock will be subject to United States Federal withholding tax at a rate of 30% of the amount of the dividend, or at a lower applicable income tax treaty rate. However, if the dividend is effectively connected with the conduct of a United States trade or business of a Non-U.S. Holder (and is attributable to a U.S. permanent establishment of such Non-U.S. Holder, if an applicable income tax treaty so requires as a condition for the Non-U.S. Holder to be subject to U.S. income tax on a net income basis in respect of such dividends) it will be subject to United States Federal income tax on a net income basis at ordinary Federal income tax rates (in which case the "branch profits tax" at 30% (or such lower rate as may be specified in an applicable income tax treaty) may also apply if such Non-U.S. Holder is a foreign corporation), and assuming certain certification requirements are met, will not be subject to the 30% withholding tax. Certain certification and disclosure requirements must be complied with in order to be exempt from withholding under such effectively connected income exemption. Under current Treasury regulations, a holder's status as a Non-U.S. Holder and eligibility for a tax treaty reduced rate of withholding will be determined by reference to the holder's address and to any outstanding certificates or statements concerning eligibility for a reduced rate of withholding, unless facts and 73 circumstances indicate that reliance on such address, certificates or statements is not warranted. However, subject to certain transitional rules, recently issued Treasury regulations require a Non-U.S. Holder to provide certifications under penalties of perjury in order to obtain treaty benefits for payments made after December 31, 2000. A Non-U.S. Holder of common stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. Disposition of Common Stock Subject to the discussion of backup withholding below, any capital gain realized upon a sale or other disposition of common stock by a Non-U.S. Holder ordinarily will not be subject to United States Federal income tax unless (1) such gain is effectively connected with a trade or business conducted by such Non-U.S. Holder within the United States (and is attributable to a U.S. permanent establishment of such holder, if an applicable income tax treaty so requires as a condition for the Non-U.S. Holder to be subject to U.S. income tax on a net income basis in respect of such gain) (in which case the branch profits tax at 30% of the Non-U.S. Holder's effectively connected earnings and profits within the meaning of the Code for the taxable year, as adjusted for certain items, (or such lower rate as may be specified in an applicable income tax treaty) may also apply, in addition to tax on the net gain derived from the sale under regular graduated United States federal income tax rates, if the Non-U.S. Holder is a foreign corporation), (2) in the case of a Non-U.S. Holder that is an individual who holds the common stock as a capital asset, such Non- U.S. Holder is present in the United States for a period or periods aggregating 183 days or more in the taxable year of the sale or other disposition and either (a) has a "tax home" for Federal income tax purposes in the United States or (b) has an office or other fixed place of business in the United States to which the gain is attributable (in which case such holder will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States source capital losses (even though the individual is not considered a resident of the United States)), or (3) we are or have been a "United States real property holding corporation" (a "USRPHC") for Federal income tax purposes within the lesser of (a) the five-year period ending on the date of the sale or other disposition and (b) the Non-U.S. Holder's holding period, and, in each case, no income tax treaty exception is applicable. We believe that we are currently a USRPHC. However, any gain recognized by a Non- U.S. Holder on the disposition of the common stock still would not be subject to U.S. tax if the common stock were to be "regularly traded" (within the meaning of applicable Treasury regulations) on an established securities market (such as, for example, the Nasdaq Stock Market) and the Non-U.S. Holder did not own, directly or constructively, more than 5% of the outstanding common stock at any time during the shorter of (a) the five-year period ending on the date of the sale or other disposition and (b) the Non-U.S. Holder's holding period. We believe that upon the consummation of the offering the common stock will be "regularly traded" (within the meaning of applicable Treasury regulations) on an established securities market. Non-U.S. Holders should consult their tax advisors to determine whether an income tax treaty is applicable. Special rules may apply to certain Non-U.S. Holders, such as "controlled foreign corporations", "passive foreign investment companies" and "foreign personal holding companies", that are subject to special treatment under the Code. Such entities should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. Federal Estate Taxes Common stock that is beneficially owned by an individual Non-U.S. Holder at the time of death will be included in such individual's gross estate for United States Federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. Backup Withholding and Information Reporting Under current law, dividends on common stock paid to a Non-U.S. Holder at an address outside the United States will generally be exempt from backup withholding tax (unless the payer has knowledge that the payee is a U.S. person). Under United States Treasury regulations, however, backup withholding of United 74 States Federal income tax at a rate of 31% may apply to dividends paid with respect to common stock to Non-U.S. Holders that fail to provide certain information (including the holder's taxpayer identification number) in the manner required by United States law and applicable regulations. Payments of the proceeds from the sale by a Non-U.S. Holder of shares of common stock made by or through a foreign office of a broker will not be subject to information reporting or backup withholding except that if the broker is, for United States tax purposes, a United States person, a controlled foreign corporation or a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale of shares of common stock by or through the United States office of a broker will be subject to information reporting and backup withholding unless the Non-U.S. Holder certifies under penalties of perjury that it is a Non-U.S. Holder or otherwise establishes an exemption from information reporting and backup withholding. Subject to certain transitional rules, recently adopted Treasury regulations change information reporting requirements for Non-U.S. Holders for payments made after December 31, 2000. Accordingly, a Non-U.S. Holder should consult its tax advisor regarding the effects on it, if any, of these new regulations. Any amounts withhold under the backup withholding rules may be allowed as a refund or a credit against such Non-U.S. Holder's U.S. federal income tax liability provided the required information is furnished to the IRS. 75 UNDERWRITING Subject to the terms and conditions stated in the underwriting agreement dated the date hereof, the underwriters of the offering named below, for whom Lehman Brothers Inc., Deutsche Bank Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Smith Barney Inc. are acting as representatives, severally agreed to purchase, and we have agreed to sell to the underwriters, the number of shares of Class A common stock set forth opposite the name of each underwriter.
Number of Name Shares ---- ---------- Underwriters: Lehman Brothers Inc.............................................. 3,834,462 Deutsche Bank Securities Inc..................................... 1,918,000 Donaldson, Lufkin & Jenrette Securities Corporation.............. 1,918,000 Salomon Smith Barney Inc......................................... 1,918,000 BancBoston Robertson Stephens Inc................................ 150,000 Bear, Stearns & Co. Inc.......................................... 150,000 Credit Suisse First Boston Corporation........................... 150,000 Dresdner Kleinwort Benson North America LLC...................... 150,000 Goldman, Sachs & Co.............................................. 150,000 Morgan Stanley & Co. Incorporated................................ 150,000 PaineWebber Incorporated......................................... 150,000 RBC Dominion Securities Corporation.............................. 150,000 Raymond James & Associates Inc................................... 150,000 Legg Mason Wood Walker, Incorporated............................. 100,000 Needham & Company, Inc........................................... 100,000 Sands Brothers & Co. Ltd......................................... 100,000 SunTrust Equitable Securities Corporation........................ 100,000 Sutro & Co. Incorporated......................................... 100,000 Wachovia Securities, Inc......................................... 100,000 ---------- Total........................................................... 11,538,462 ==========
The underwriting agreement provides that the obligations of the several underwriters to purchase the shares included in the offering are subject to approval of legal matters by counsel as well as to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares. The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the shares to certain dealers at the public offering price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share on sales to certain other dealers. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms. The representatives have advised us that the underwriters do not intend to confirm any sales to any accounts over which they exercise discretionary authority without the prior written approval of the customer. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 1,730,769 additional shares of our Class A common stock at the public offering price less the underwriting discount. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, in connection with the offering. To the extent this option is exercised, each underwriter will be obligated, subject to various conditions, to purchase a number of additional shares approximately proportionate to its initial purchase commitment. 76 We, our executive officers and directors and, with certain limited exceptions, all of our other existing shareholders have agreed not to do any of the following, whether any transaction described in clause (1), (2) or (3) below is to be settled by delivery of Class A common stock or other securities, in cash or otherwise, in each case without the prior written consent of Lehman Brothers Inc., on behalf of the underwriters, for a period of 180 days after the date of this prospectus: (1) offer, sell, pledge, or otherwise dispose of, or enter into any transaction or device which is designed or could be expected to, result in the disposition by any person at any time in the future of, any shares of Class A common stock or securities convertible into or exchangeable for Class A common stock or substantially similar securities, other than any of the following: .the Class A common stock sold under this prospectus and . shares of Class A common stock we issue pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date of this prospectus or pursuant to currently outstanding options, warrants or rights; (2) sell or grant options, rights or warrants with respect to any shares of our Class A common stock or securities convertible into or exchangeable for our Class A common stock or substantially similar securities, other than the grant of options pursuant to option plans existing on the date hereof; and (3) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks or ownership of shares of Class A common stock. These lock up arrangements will be subject to the following exceptions: .transfers of common stock in private transactions or .transfers of common stock for estate planning purposes; in each case, provided that the transferees agree to be bound by the restrictions described above. Prior to the offering, there has been no public market for the shares of Class A common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of the Class A common stock, the representatives will consider, among other things and in addition to prevailing market conditions, our historical performance and capital structure, estimates of our business potential and earnings prospects, an overall assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses. We have applied to list our Class A common stock on the Nasdaq National Market under the symbol "SBAC". Any offer of the shares of Class A common stock in Canada will be made only pursuant to an exemption from the prospectus filing requirement and an exemption from the dealer registration requirement (where such an exemption is not available, offers shall be made only by a registered dealer) in the relevant Canadian jurisdiction where any such offer is made. In connection with the offering, Lehman Brothers, on behalf of the underwriters, may purchase and sell shares of our Class A common stock in the open market. These transaction may include over-allotment, syndicate covering transactions and stabilizing transactions. Over-allotment involves syndicate sales of Class A common stock in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. Syndicate covering transactions involve purchases of our Class A common stock in the open market after the distribution has been completed in order to cover syndicate short positions. Stabilizing transactions consist of certain bids or purchases of our Class A common stock made for the purpose of preventing or retarding a decline in the market price of our Class A common stock while the offering is in progress. 77 The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when Lehman Brothers, in covering syndicate short positions or making stabilizing purchases, repurchases shares originally sold by that syndicate member. Any of these activities may cause the price of our Class A common stock to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be affected in the over- the-counter market or otherwise and, if commenced, may be discontinued at any time. Purchasers of the shares of Class A common stock offered in this prospectus may be required to pay stamp taxes and other charges in accordances with the laws and practices of the country of purchase, in addition to the offering price set forth on the cover of this prospectus. We have agreed to indemnify the underwriters against liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make in respect of any of those liabilities. Certain of the representatives have from time to time provided investment banking, financial advisory and other services to us for which such representatives received customary fees and commissions. Lehman Brothers acted as co-arranger of our senior credit facility and its affiliate, Lehman Commercial Paper Inc., is the administrative agent of the senior credit facility. Lehman Commercial Paper Inc. will receive a portion of the proceeds of the offering in repayment of indebtedness outstanding under the senior credit facility. Lehman Brothers and BT Alex. Brown were also the initial purchasers of our senior discount notes. In addition, BT Alex. Brown acted as placement agent in connection with the private placement of shares of our Series A preferred stock in March 1997. We granted BT Alex. Brown (which is now referred to as "Deutsche Bank Securities") a warrant to purchase up to 402,500 shares of Class A common stock, subject to certain anti-dilution rights. An affiliate of BT Alex. Brown is also a limited partner in ABS Capital Partners, II, L.P. ABS Capital Partners, II, L.P. owns shares of our Series A preferred stock. Certain officers and employees of BT Alex. Brown are direct and indirect holders of Series A preferred stock. See "Principal Shareholders." Under Rule 2720 of the Conduct Rules of the NASD, BT Alex. Brown may be deemed to have a "conflict of interest" with us. The offering is being conducted in accordance with Rule 2720, which provides that, among other things, when a NASD member participates in the underwriting of the equity securities of a company with which it has a deemed "conflict of interest," the public offering price per share can be no higher than that recommended by a "qualified independent underwriter," or QIU, meeting certain standards. In accordance with this requirement, Lehman Brothers has assumed the responsibilities of acting as QIU. In its role as QIU, Lehman Brothers has performed a due diligence investigation and reviewed and participated in the preparation of this prospectus and the registration statement of which this prospectus in a part. We and the other underwriters have agreed to indemnify Lehman Brothers in its capacity as QIU against certain liabilities, including liabilities under the Securities Act, or to contribute to payments Lehman Brothers in its capacity as QIU may be required to make in respect of any of those liabilities. 78 LEGAL MATTERS Certain legal matters relating to the offering will be passed upon for us by Latham & Watkins, New York, New York, and Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., West Palm Beach, Florida. Certain legal matters relating to the Class A common stock will be passed upon for the underwriters by Simpson Thacher & Bartlett, New York, New York. INDEPENDENT ACCOUNTANTS The consolidated financial statements and schedule of SBA Communications Corporation as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998, financial statements of Caddo Tower Company Inc. for the fiscal year ended July 31, 1998, financial statements of PrimeCo Tower Operations for the year ended December 31, 1997, financial statements of Northwest Tower Service, Inc. for the year ended December 31, 1997 and financial statements of General Communications Properties, Inc. Tower Operations for the year ended December 31, 1997, included in this prospectus and elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent certified public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of Transmission Facilities, Inc. for the year ended December 31, 1997, included in this prospectus and elsewhere in the registration statement, have been audited by Peter C. Cosmas Co., Certified Public Accountants as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of Long Island Waves, Inc. for the ten months ended September 30, 1998, included in this prospectus and elsewhere in the registration statement, have been audited by John A. Criscuola, Certified Public Accountant as indicated in his report with respect thereto, and are included herein in reliance upon his authority as an expert in giving said report. The financial statements of Quad States Towers and Communications for the year ended June 30, 1998, included in this prospectus and elsewhere in the registration statement, have been audited by Turbes Drealan Kvilhaug & Co. PA, Certified Public Accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 79 INDEX TO FINANCIAL STATEMENTS SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES UNAUDITED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999.. F-3 Consolidated Statements of Operations for the three months ended March 31, 1998 and March 31, 1999............................................ F-4 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and March 31, 1999............................................ F-5 Condensed Notes to Consolidated Financial Statements.................... F-6 AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants...................... F-12 Consolidated Balance Sheets as of December 31, 1998 and December 31, 1997................................................................... F-13 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996.......................................................... F-14 Consolidated Statements of Stockholders' Deficit for the years ended December 31, 1998, 1997 and 1996.......................................................... F-15 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.......................................................... F-16 Notes to Consolidated Financial Statements.............................. F-18 Report of Independent Certified Public Accountants on Schedule.......... F-33 Schedule of Valuation and Qualifying Accounts........................... F-34 CADDO TOWER COMPANY INC. AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants...................... F-35 Statement of Operations and Retained Earnings for the year ended July 31, 1998............................................................... F-36 Statement of Cash Flows for the year ended July 31, 1998................ F-37 Notes to Financial Statements........................................... F-38 PRIMECO TOWER OPERATIONS AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants...................... F-40 Statement of Operations and Retained Earnings for the year ended December 31, 1997...................................................... F-41 Statement of Cash Flows for the year ended December 31, 1997............ F-42 Notes to Financial Statements........................................... F-43 NORTHWEST TOWER SERVICE, INC. AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants...................... F-45 Statement of Operations and Retained Earnings for the year ended December 31, 1997...................................................... F-46 Statement of Cash Flows for the year ended December 31, 1997............ F-47 Notes to Financial Statements........................................... F-48
F-1 GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants...................... F-50 Statement of Operations and Retained Earnings for the year ended December 31, 1997...................................................... F-51 Statement of Cash Flows for the year ended December 31, 1997............ F-52 Notes to Financial Statements........................................... F-53 TRANSMISSION FACILITIES, INC. AUDITED FINANCIAL STATEMENTS: Independent Auditors' Report............................................ F-55 Statement of Income and Retained Earnings for the year ended December 31, 1997............................................................... F-56 Statement of Cash Flows for the year ended December 31, 1997............ F-57 Notes to Financial Statements........................................... F-58
LONG ISLAND WAVES, INC. AUDITED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants ..................... F-59 Statement of Income and Retained Earnings for the period from December 1, 1997 through September 30, 1998..................................... F-60 Statement of Cash Flows for the period from December 1, 1997 through September 30, 1998..................................................... F-61 Notes to Financial Statements........................................... F-62 QUAD STATES TOWERS AND COMMUNICATIONS AUDITED FINANCIAL STATEMENTS: Independent Auditors' Report............................................ F-65 Statement of Income for the year ended June 30, 1998.................... F-66 Statement of Cash Flows for the year ended June 30, 1998................ F-67 Notes to Financial Statements........................................... F-68
F-2 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, March 31, 1998 1999 ------------ ------------ ASSETS Current assets: Cash and cash equivalents, includes interest bearing amounts of $26,227,973 and $1,811,140 in 1998 and 1999................................... $ 26,743,270 $ 2,277,530 Accounts receivable, net of allowances of $436,671 and $538,494 in 1998 and 1999.......... 12,512,574 14,164,266 Prepaid and other current assets................. 5,981,134 7,605,903 Costs and estimated earnings in excess of billings on uncompleted contracts............... 598,971 359,529 ------------ ------------ Total current assets........................... 45,835,949 24,407,228 Property and equipment, net...................... 150,946,480 184,824,539 Note receivable-stockholder...................... 3,784,768 3,839,930 Intangible assets, net........................... 6,932,486 6,797,787 Deferred financing fees, net..................... 6,563,772 11,221,890 Other assets..................................... 509,871 750,009 ------------ ------------ Total assets................................... $214,573,326 $231,841,383 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable................................. $ 14,447,384 $ 12,115,877 Accrued expenses................................. 2,247,282 3,098,326 Accrued salaries and payroll taxes............... 1,841,392 1,141,040 Notes payable.................................... 17,001,000 -- Billings in excess of costs and estimated earnings on uncompleted contracts............... 166,526 126,333 Other current liabilities........................ 2,049,058 1,968,397 ------------ ------------ Total current liabilities...................... 37,752,642 18,449,973 ------------ ------------ Other liabilities: Senior discount notes payable.................... 165,572,133 170,444,840 Notes payable.................................... -- 40,000,000 Deferred tax liabilities......................... 3,370,439 3,370,439 Other long-term liabilities...................... 415,201 445,880 ------------ ------------ Total long-term liabilities 169,357,773 214,261,159 ------------ ------------ Commitments and contingencies (see Note 8) Redeemable preferred stock......................... 33,558,333 34,270,833 Stockholders' deficit: Common stock: Class A (32,000,000 shares authorized) 880,922 shares issued and outstanding in 1998 and 1999.. 8,809 8,809 Class B (8,100,000 shares authorized) 8,075,000 shares issued and outstanding in 1998 and 1999.. 80,750 80,750 Additional paid in capital....................... 716,131 740,693 Accumulated deficit.............................. (26,901,112) (35,970,834) ------------ ------------ Total stockholders' deficit (26,095,422) (35,140,582) ------------ ------------ Total liabilities and stockholders' deficit $214,573,326 $231,841,383 ============ ============
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets F-3 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, ------------------------ 1998 1999 ----------- ----------- Revenues: Site development revenue........................... $12,531,250 $ 8,574,687 Site leasing revenue............................... 2,158,539 5,141,614 ----------- ----------- Total revenues................................... 14,689,789 13,716,301 ----------- ----------- Cost of revenues (exclusive of depreciation shown be- low) Cost of site development revenue................... 8,989,385 6,623,195 Cost of site leasing revenue....................... 1,506,871 2,377,506 ----------- ----------- Total cost of revenues........................... 10,496,256 9,000,701 ----------- ----------- Gross profit..................................... 4,193,533 4,715,600 Operating expenses: Selling, general and administrative................ 3,942,048 4,077,573 Depreciation and amortization...................... 507,245 3,131,301 ----------- ----------- Total operating expenses......................... 4,449,293 7,208,874 ----------- ----------- Operating loss................................... (255,760) (2,493,274) Other income (expense): Interest income.................................... 764,158 506,943 Interest expense................................... (332,575) (815,490) Non-cash amortization of original issue discount and debt issuance costs........................... (1,547,352) (5,200,244) Other.............................................. -- 9,215 ----------- ----------- Total other income (expense)..................... (1,115,769) (5,499,576) ----------- ----------- Loss before provision for income taxes and ex- traordinary item................................ (1,371,529) (7,992,850) (Provision) benefit for income taxes................. (86,584) 785,582 ----------- ----------- Net loss before extraordinary item............... (1,458,113) (7,207,268) Extraordinary item................................... -- (1,149,954) ----------- ----------- Net loss......................................... (1,458,113) (8,357,222) Dividends on preferred stock......................... (437,500) (712,500) ----------- ----------- Net loss to common stockholders.................. $(1,895,613) $(9,069,722) =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements F-4 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, -------------------------- 1998 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................... $ (1,458,113) $ (8,357,222) Adjustments to reconcile net income to net cash provided by (used in) operating activities-- Depreciation and amortization.................... 507,245 3,131,301 Provision for doubtful accounts.................. 41,370 101,822 Non cash compensation expense.................... 48,125 24,562 Amortization of original issue discount and debt issue costs..................................... 1,575,418 5,200,244 Interest on shareholder note..................... (56,466) (55,162) Write-off of deferred financing fees............. -- 1,149,954 Changes in operating assets and liabilities: (Increase) decrease in-- Accounts receivable.......................... (2,704,107) (1,753,515) Prepaid and other current assets............. (603,850) (1,624,769) Costs and estimated earnings in excess of billings on uncompleted contracts........... 27,219 239,442 Other assets................................. (172,397) (240,138) Deferred tax asset........................... 63,744 -- Intangible assets............................ (1,663,766) (5,000) Increase (decrease) in-- Accounts payable............................. (364,364) (2,331,507) Accrued expenses............................. (308,623) 851,044 Accrued salaries and payroll taxes........... (771,345) (700,352) Other liabilities............................ 45,193 (80,661) Deferred tax liabilities..................... (493,083) -- Other long-term liabilities.................. 386,554 30,679 Billings in excess of costs and estimated earnings on uncompleted contracts........... (155,774) (40,192) ------------ ------------ Total adjustments........................... (4,598,907) 3,897,752 ------------ ------------ Net cash used in operating activities....... (6,057,020) (4,459,470) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Tower and other capital expenditures............. (11,070,221) (36,869,661) ------------ ------------ Net cash used in investing activities.......... (11,070,221) (36,869,661) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from senior discount notes payable.. 150,191,513 -- Proceeds from notes payable...................... 12,486,767 40,000,000 Repayment of notes payable....................... (22,669,821) (17,001,000) Deferred financing fees.......................... (5,380,668) (6,135,609) ------------ ------------ Net cash provided by financing activities...... 134,627,791 16,863,391 ------------ ------------ Net increase (decrease) in cash and cash equivalents................................... 117,500,550 (24,465,740) CASH AND CASH EQUIVALENTS: Beginning of period.............................. 6,109,418 26,743,270 ------------ ------------ End of period.................................... $123,609,968 $ 2,277,530 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION: Cash paid during the period for: Interest....................................... $ 235,865 $ 813,682 Taxes.......................................... 469,385 182,496 NON-CASH ACTIVITIES: Dividends on preferred stock..................... 437,500 712,500 Interest on bonds payable........................ 1,502,365 4,872,707
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-5 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying unaudited condensed consolidated financial statements include the accounts of SBA Communications Corporation and its subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated. Certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. These unaudited condensed consolidated financial statements reflect, in the opinion of management, all material adjustments (which included only normal recurring adjustments) necessary to fairly state the financial position and the results of operations for the periods presented and the disclosures herein are adequate to make the information presented not misleading. Operating results for interim periods are not necessarily indicative of the results that can be expected for a full year. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto. Certain reclassifications have been made to the 1998 financial statements to conform to the 1999 presentation. 2. Current Accounting Pronouncements Comprehensive Income In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that an enterprise classify items of other comprehensive income separately from accumulated deficit and additional paid-in-capital in the equity section of the balance sheet. Comprehensive income is defined as the change in equity during the financial reporting period of a business enterprise resulting from non- owner sources. During the three months ended March 31, 1998 and 1999, the Company did not have any changes in its equity resulting from such non-owner sources and accordingly, comprehensive income as set forth by SFAS No. 130 was equal to the net loss amounts presented for the respective periods in the accompanying Consolidated Statements of Operations. Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. Management believes adopting this statement will not have a material impact upon the Company's results of operations or financial position. 3. Acquisitions During the three months ended March 31, 1999, the Company completed five acquisitions consisting of 38 towers and related assets from various sellers, all of which were individually insignificant to the Company. The aggregate purchase price was approximately $19,100,000 and was paid with proceeds from long-term borrowings. The Company accounted for the above acquisitions using the purchase method of accounting. The results of operations of the acquired assets are included with those of the Company from the dates of the respective F-6 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) acquisitions. The following unaudited pro forma summary for the three months ended March 31, 1998 and 1999 presents the consolidated results of operations as if the acquisitions had occurred as of the beginning of each of the periods presented, after giving effect to certain adjustments such as depreciation. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of the beginning of the periods presented or of results which may occur in the future.
For the three months ended March 31, -------------------------- 1998 1999 ------------ ------------ Unaudited Pro-forma Revenues................... $ 16,239,549 $ 13,941,607 ============ ============ Unaudited Pro-forma Net Loss................... $ (1,344,828) $ (8,350,587) ============ ============
4. Property and Equipment Property and equipment, net consists of the following:
December 31, March 31, 1998 1999 ------------ ------------ Land........................................... $ 5,307,754 $ 6,073,413 Towers......................................... 141,755,358 175,193,991 Buildings and improvements..................... 506,120 506,120 Vehicles....................................... 442,496 424,950 Furniture and equipment........................ 1,708,132 2,224,352 Construction in process........................ 7,736,769 10,287,435 ------------ ------------ 157,456,629 194,710,261 Less: Depreciation and amortization............ (6,510,149) (9,885,722) ------------ ------------ Property and equipment, net.................... $150,946,480 $184,824,539 ============ ============
Construction in process represents costs incurred related to towers which are under development and will be used in the Company's operations. 5. Costs and Estimated Earnings on Uncompleted Contracts
December 31, March 31, 1998 1999 ------------ ----------- Costs incurred on uncompleted contracts......... $ 4,633,768 $ 3,598,976 Estimated earnings.............................. 1,357,134 1,121,229 Billings to date................................ (5,558,457) (4,487,009) ----------- ----------- $ 432,445 $ 233,196 =========== ===========
This amount is included in the accompanying balance sheet under the following captions:
December 31, March 31, 1998 1999 ------------ --------- Costs and estimated earnings in excess of billing......................................... $ 598,971 $ 359,529 Billings in excess of costs and estimated earnings........................................ (166,526) (126,333) --------- --------- $ 432,445 $ 233,196 ========= =========
F-7 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. Current and Long Term Debt Current and long term debt consists of the following:
December 31, March 31, 1998 1999 ------------ ------------ Senior credit facility term loan, interest at 8.437% at March 31, 1999 quarterly installments based on reduced availability beginning March 31, 2001, maturing December 31, 2004......................... -- $ 25,000,000 Senior credit facility revolving credit loan, interest at 8.437% at March 31, 1999 quarterly installments based on reduced availability beginning March 31, 2001, maturing December 31, 2004............................................... -- 15,000,000 Bank Credit Agreement............................... 17,001,000 -- 12% Senior discount notes, net of unamortized original issue discount of $98,555,160 at March 31, 1999, unsecured, cash interest payable semi- annually in arrears beginning March 1, 2003, balloon principal payment of $269,000,000 due at maturity on March 1, 2008.......................... 165,572,133 170,444,840 ----------- ------------ 182,573,133 210,444,840 Less: current maturities.......................... 17,001,000 -- Long term debt...................................... 165,572,133 $210,444,840 =========== ============
Senior Credit Facility On February 5, 1999 the Company, through its subsidiary, SBA Telecommunications Inc., ("Telecommunications") entered into a new senior credit facility with a syndicate of lenders which replaced and superseded in its entirety its previous credit agreement. The senior credit facility consists of a $25 million term loan, which was fully funded at closing, and a $100 million revolving line of credit, on which the Company had the option to increase to $150 million under certain conditions. Proceeds from the term loan were used to repay the previous bank credit agreement. The senior credit facility also provides for letter of credit availability. Availability under the senior credit facility is determined by a number of factors, including number of towers built by the Company with anchor tenants on the date of completion, the financial performance of the Company's towers, site development and construction segments, as well as by other financial covenants, financial ratios and other conditions. The senior credit facility matures December 31, 2004 and amortization pursuant to a schedule and reduced availability begins March 31, 2001. Borrowings under the senior credit facility bear interest at the eurodollar rate plus a margin ranging from 2.25% to 3.50% (determined by a leverage ratio) or "base rate" (as defined in the senior credit facility) plus a margin ranging from 1.25% to 2.50% (determined by a leverage rate). The senior credit facility is secured by substantially all of the assets of Telecommunications and its direct and indirect subsidiaries, requires Telecommunications to maintain certain financial ratios, and places restrictions on, among other things, the incurrence of debt and liens, dispositions of assets, transactions with affiliates and certain investments. In connection with the termination of the previous credit agreement, the Company recorded an extraordinary charge of approximately $1,150,000 representing the write-off of previously capitalized deferred financing fees related to the previous bank credit agreement. Deferred financing fees related to obtaining the new senior credit facility were approximately $3.9 million. Additionally, on March 8, 1999, after receiving the requisite consents from the holders of our senior discount notes, we amended the indenture governing the notes to increase one of the categories of permitted indebtedness from $125.0 million to $175.0 million. In connection therewith, we paid $2.1 million to the holders of the notes. The amount is also reflected in deferred financing fees. Simultaneously, Telecommunications exercised its option to increase the revolving line of credit portion of the senior credit facility from $100 million to $150 million. F-8 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Income Taxes Income taxes have been provided for based upon the Company's annual effective income tax rate. A reconciliation of the statutory U.S. Federal tax rate (34%) and the effective income tax rate for the period is as follows:
For the three months ended March 31, ---------------------- 1998 1999 --------- ----------- Federal income tax................................ $(480,035) $(2,717,569) State income tax.................................. 86,584 140,034 Foreign tax....................................... -- 230,998 Change in valuation allowance..................... 480,035 1,560,955 --------- ----------- $ 86,584 $ (785,582) ========= ===========
The Company has recorded a benefit in the first quarter of 1999 as a result of net operating loss carrybacks available. The amount recorded as a benefit represents the entire carryback amount available If the Company generates taxable losses in the future, net operating loss carryforwards will be generated. 8. Commitments and Contingencies 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-9 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Segment Data The Company operates principally in three business segments: site development consulting, site development construction, and site leasing. The Company's reportable segments are strategic business units that offer different services. They are managed separately based on the fundamental differences in their operations. 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 three months ended March 31 ------------------------- 1998 1999 ------------ ------------ Revenue: Site development--consulting....................... $ 9,731,091 $ 3,921,229 Site development--construction..................... 2,800,159 4,653,458 Site leasing....................................... 2,158,539 5,141,614 ------------ ------------ $ 14,689,789 $ 13,716,301 ============ ============ Gross Profit: Site development-- consulting...................... $ 2,486,279 $ 888,369 Site development-- construction.................... 1,055,586 1,063,123 Site leasing....................................... 651,668 2,764,108 ------------ ------------ $ 4,193,533 $ 4,715,600 ============ ============ Capital expenditures: Site development-- consulting...................... $ 5,561,848 $ 2,427,225 Site development-- construction.................... 31,795 1,006 Site leasing....................................... 5,212,626 33,928,913 Assets not identified by segment................... 263,952 512,517 ------------ ------------ $ 11,070,221 $ 36,869,661 ============ ============ As of As of December 31, March 31, 1998 1999 ------------ ------------ Assets: Site development--consulting....................... $ 14,516,752 $ 16,027,326 Site development--construction..................... 9,690,197 10,834,906 Site leasing....................................... 173,075,271 182,011,550 Assets not identified by segment................... 17,291,106 22,967,601 ------------ ------------ $214,573,326 $231,841,383 ============ ============
10. Subsequent Events In April 1999, the Company adopted the 1999 Equity Participation Plan. A total of 2,500,000 shares of Class A common stock are reserved for issuance under this plan. In April, 1999, the Company granted options to employees for the purchase of approximately an aggregate of 900,000 shares of Class A common stock at an exercise price of $8.00 per share. The options will vest in three installments commencing December 31, 1999 and ending April 19, 2002. Since the exercise price range of these options is substantially below the midpoint of the anticipated price range in the proposed initial public offering of Class A common stock, the Company will record a non-cash compensation charge over the vesting period of approximately $3.3 million. On April 19, 1999, the Company filed a Registration Statement on Form S-1 to register shares of its Class A common stock in an initial public offering. The Company filed for an offering of gross proceeds of $150.0 F-10 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) million, which is anticipated to produce net proceeds after deduction of the underwriting discount and estimated offering expenses of $138.5 million. The Company expects to use approximately $32.7 million of these net proceeds to pay all outstanding dividends on all outstanding shares of the Company's Series A preferred stock and to redeem all outstanding shares of the Company's Series B preferred stock. The Company also expects to use $50.0 million to repay all revolving credit loans under the senior credit facility. Remaining proceeds will be used for the construction and acquisition of towers, the acquisition of tower companies or related businesses, and for general working capital purposes. There can be no assurance that the Company's planned initial public offering of Class A common stock will be successfully consummated or, if consummated, of the final terms of such initial public offering. On April 30, 1999, the Company acquired through merger all of the issued and outstanding stock of Com-Net Construction Services, Inc. ("Com-Net"). The Company issued 780,000 shares of its Class A common stock to the shareholders of Com-Net, of which 480,000 shares have been pledged back to the Company and are subject to forfeiture if certain 1999 earnings targets are not achieved by the acquired company. The Company also assumed working capital debt of approximately $4.5 million. In addition, the shareholders of Com-Net may receive up to $2.5 million in cash and 320,000 additional shares of Class A common stock if certain 1999 earnings targets are met by the acquired company, and up to an additional 400,000 shares of Class A common stock if certain 2000 earnings targets are met. On the same date the Company acquired all of the issued and outstanding capital stock of an affiliate of Com-Net, Com-Net Development Group, LLC ("Development Group"). Development Group owns 15 completed towers located in Texas, Ohio and Tennessee and over 30 additional tower sites in various stages of development under build-to-suit programs. The Company paid $1.0 million in cash and assumed debt of approximately $2.5 million for Development Group. The Company will account for each of the above acquisitions as a purchase. F-11 Report of Independent Certified Public Accountants To 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, 1998 and 1997, and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SBA Communications Corporation and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 11, 1999 F-12 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, December 31, 1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents, includes interest bearing amounts of $26,227,973 and $1,397,047 in 1998 and 1997.................................... $ 26,743,270 $ 6,109,418 Accounts receivable, net of allowances of $436,671 and $508,268 in 1998 and 1997.................... 12,512,574 10,931,038 Prepaid and other current assets.................. 5,981,134 982,722 Costs and estimated earnings in excess of billings on uncompleted contracts......................... 598,971 118,235 ------------ ----------- Total current assets............................ 45,835,949 18,141,413 ------------ ----------- Property and equipment, net......................... 150,946,480 17,829,062 Note receivable-stockholder......................... 3,784,768 3,561,306 Intangible assets, net.............................. 6,932,486 2,115,938 Deferred financing fees, net........................ 6,563,772 740,338 Deferred tax assets................................. -- 2,257,462 Other assets........................................ 509,871 151,885 ------------ ----------- Total assets.................................... $214,573,326 $44,797,404 ============ =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable.................................. $ 14,447,384 $ 2,182,447 Accrued expenses.................................. 2,247,282 919,563 Accrued salaries and payroll taxes................ 1,841,392 1,729,273 Notes payable..................................... 17,001,000 10,184,054 Deferred tax liabilities.......................... -- 1,621,714 Billings in excess of costs and estimated earnings on uncompleted contracts......................... 166,526 956,688 Other current liabilities......................... 2,049,058 530,964 ------------ ----------- Total current liabilities....................... 37,752,642 18,124,703 ------------ ----------- Other liabilities: Deferred tax liabilities.......................... 3,370,439 -- Senior discount notes payable..................... 165,572,133 -- Other long-term liabilities....................... 415,201 33,635 ------------ ----------- Total long-term liabilities..................... 169,357,773 33,635 ------------ ----------- Commitments and contingencies (see Note 12)......... Redeemable preferred stock.......................... 33,558,333 30,983,333 Stockholders' deficit: Common stock-Class A (32,000,000 shares authorized), 880,922 shares issued and outstanding in 1998, none in 1997................ 8,809 -- Class B (8,100,000 shares authorized), 8,075,000 shares issued and outstanding in 1998 and 1997... 80,750 80,750 Additional paid in capital........................ 716,131 -- Accumulated deficit............................... (26,901,112) (4,425,017) ------------ ----------- Total stockholders' deficit..................... (26,095,422) (4,344,267) ------------ ----------- Total liabilities and stockholders' deficit..... $214,573,326 $44,797,404 ============ ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. F-13 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, --------------------------------------- 1998 1997 1996 ------------- ----------- ----------- Revenues: Site development revenue............ $ 46,704,641 $48,240,443 $60,276,160 Site leasing revenue................ 12,396,268 6,759,362 4,530,152 ------------- ----------- ----------- Total revenues.................... 59,100,909 54,999,805 64,806,312 ------------- ----------- ----------- Cost of revenues (exclusive of depreciation shown below) Cost of site development revenue.... 36,499,980 31,470,203 39,821,589 Cost of site leasing revenue........ 7,280,786 5,356,160 3,638,133 ------------- ----------- ----------- Total cost of revenues............ 43,780,766 36,826,363 43,459,722 ------------- ----------- ----------- Gross profit...................... 15,320,143 18,173,442 21,346,590 Operating expenses: Selling, general and administrative..................... 18,302,226 12,032,915 17,753,775 Depreciation and amortization....... 5,802,090 513,949 160,050 ------------- ----------- ----------- Total operating expenses.......... 24,104,316 12,546,864 17,913,825 ------------- ----------- ----------- Operating income (loss)........... (8,784,173) 5,626,578 3,432,765 Other income (expense): Interest income..................... 4,303,277 643,851 6,643 Interest expense.................... (2,357,413) (406,934) (139,056) Non cash amortization of original issue discount and debt issuance costs.............................. (14,549,501) -- -- Other............................... (37,591) -- -- ------------- ----------- ----------- Total other income (expense)...... (12,641,228) 236,917 (132,413) ------------- ----------- ----------- Income (loss) before provision for income taxes..................... (21,425,401) 5,863,495 3,300,352 Provision (benefit) for income taxes.. (1,524,306) 5,595,998 -- ------------- ----------- ----------- Net income (loss)................. (19,901,095) 267,497 3,300,352 Pro forma income tax provision (see note 2).............................. 1,320,141 ----------- Pro forma net income.............. 1,980,211 Dividends on preferred stock.......... 2,575,000 983,333 -- ------------- ----------- ----------- Net income (loss) available to common stockholders'..................... $(22,476,095) $ (715,836) $ 1,980,211 ============= =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-14 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT For the Years Ended December 31, 1998, 1997 and 1996
Common Stock ----------------------------------- Class A Class B ---------------- ----------------- Number Amount Number Amount BALANCE, December 31, 1995................. 200 $ 200 -- $ -- Issuance of common stock................. 1,415 1,415 -- -- Non-cash compensation adjustment......... -- -- -- -- Net income............................... -- -- -- -- Stockholder distribution................. -- -- -- -- ------- ------- --------- ------- BALANCE, December 31, 1996................. 1,615 1,615 -- -- Corporate reorganization................. (1,615) (1,615) 8,075,000 80,750 Costs incurred for Series A Redeemable Preferred stock offering................ -- -- -- -- Non-cash compensation adjustment......... -- -- -- -- Stock option redemption.................. -- -- -- -- Net income............................... -- -- -- -- Preferred stock dividends................ -- -- -- -- ------- ------- --------- ------- BALANCE , December 31,1997................. -- -- 8,075,000 80,750 Exercise of stock options................ 775,961 7,760 -- -- Issuance of common stock as executive compensation............................ 104,961 1,049 -- -- Non-cash compensation adjustment......... -- -- -- -- Net loss................................. -- -- -- -- Preferred stock dividends................ -- -- -- -- ------- ------- --------- ------- BALANCE, December 31, 1998................. 880,922 $ 8,809 8,075,000 $80,750 ======= ======= ========= =======
Additional Retained Paid In Earnings Capital (Deficit) Total ---------- ------------ ------------ BALANCE, December 31, 1995.............. $ -- $ 4,792,584 $ 4,792,784 Issuance of common stock.............. -- 1,415 Non-cash compensation adjustment...... -- 7,011,000 7,011,000 Net income............................ -- 3,300,352 3,300,352 Stockholder distribution.............. -- (15,003,936) (15,003,936) -------- ------------ ------------ BALANCE, December 31, 1996.............. -- 100,000 101,615 Corporate reorganization.............. -- (79,135) -- Costs incurred for Series A Redeemable Preferred stock offering............. -- (2,427,683) (2,427,683) Non-cash compensation adjustment...... -- 934,419 934,419 Stock option redemption............... -- (2,236,782) (2,236,782) Net income............................ -- 267,497 267,497 Preferred stock dividends............... -- (983,333) (983,333) -------- ------------ ------------ BALANCE , December 31,1997.............. -- (4,425,017) (4,344,267) Exercise of stock options............. 37,316 -- 45,076 Issuance of common stock as executive compensation......................... 504,005 -- 505,054 Non-cash compensation adjustment...... 174,810 -- 174,810 Net loss.............................. -- (19,901,095) (19,901,095) Preferred stock dividends............. -- (2,575,000) (2,575,000) -------- ------------ ------------ BALANCE, December 31, 1998.............. $716,131 $(26,901,112) $(26,095,422) ======== ============ ============
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-15 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, ---------------------------------------- 1998 1997 1996 ------------- ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................ $ (19,901,095) $ 267,497 $ 3,300,352 Adjustments to reconcile net income to net cash provided by (used in) operating activities- Depreciation and amortization....... 5,921,180 562,653 160,050 Provision for doubtful accounts..... 282,463 163,416 451,349 Deferred taxes...................... 4,006,187 (2,257,462) -- Amortization of original issue discount and debt issuance costs... 15,710,370 -- -- Non cash compensation expense....... 174,810 934,419 7,011,000 Interest on shareholder notes....... (223,462) (61,306) -- Changes in operating assets and liabilities: (Increase) decrease in- Accounts receivable............... (1,863,999) 4,999,525 (10,445,316) Prepaid and other current assets.. (4,998,412) (98,328) (539,713) Costs and estimated earnings in excess of Billings on uncompleted contracts........................ (480,736) (118,235) -- Intangible assets................. (5,612,272) (2,152,866) -- Other assets...................... (357,986) (12,858) (78,770) Increase (decrease) in- Accounts payable.................. 12,264,937 979,474 892,851 Accrued expenses.................. 1,327,717 237,080 398,010 Accrued salaries and payroll taxes............................ 112,119 1,338,172 90,617 Current deferred tax liability.... -- 1,621,714 -- Other liabilities................. 1,518,096 464,787 (25,442) Other long-term liabilities....... 381,567 4,676 -- Billings in excess of costs and estimated earnings............... (790,162) 956,688 -- ------------- ------------ ----------- Total adjustments................. 27,372,417 7,561,549 (2,085,364) ------------- ------------ ----------- Net cash provided by operating activities....................... 7,471,322 7,829,046 1,214,988 ------------- ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Tower acquisitions and other capital expenditures............. (138,123,784) (17,675,818) (144,942) ------------- ------------ ----------- Net cash used in investing activities....................... (138,123,784) (17,675,818) (144,942) ------------- ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable......... 178,726,500 23,875,872 22,185,291 Repayment on notes payable.......... (21,583,054) (18,613,168) (18,763,941) Deferred financing fee.............. (6,407,261) (787,197) -- Issuance of common stock............ 505,054 -- 1,415 Exercise of options................. 45,075 -- -- Proceeds from stockholder loans..... -- -- 11,177,157 Repayment of stockholder loans...... -- (10,665,788) (632,129) Shareholder distribution............ -- -- (15,003,936) Advances to stockholder............. -- (3,500,000) -- Proceeds from Series A redeemable preferred stock offering........... -- 30,000,000 -- Stock option redemption............. -- (2,236,782) -- Costs incurred for Series A redeemable preferred stock offering........................... -- (2,427,683) -- ------------- ------------ ----------- Net cash provided by (used in) financing activities............. 151,286,314 15,645,254 (1,036,143) ------------- ------------ ----------- Net increase in cash and cash equivalents...................... 20,633,852 5,798,482 33,903 CASH AND CASH EQUIVALENTS: Beginning of year................... 6,109,418 310,936 277,033 ------------- ------------ ----------- End of year......................... $ 26,743,270 $ 6,109,418 $ 310,936 ============= ============ ===========
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. F-16 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the years ended December 31, ------------------------------ 1998 1997 1996 ---------- ---------- -------- SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION: Cash paid during the year for: Interest..................................... $ 423,302 $ 193,269 $139,056 Taxes........................................ 2,378,510 6,070,423 -- NON-CASH ACTIVITIES Liabilities assumed in acquisition of assets...................................... -- 2,559,505 -- Dividends on preferred stock................. 2,575,000 983,333 --
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements F-17 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 holds all of the outstanding capital stock of SBA Telecommunications, Inc. ("Telecommunications"). Telecommunications holds all of the capital stock of SBA Towers, Inc. ("Towers"), SBA, Inc. ("SBA" ), SBA Leasing, Inc. ("Leasing"), and Communication Site Services, Inc ("CSSI"). Towers and its subsidiaries own and operate transmission towers in various parts of the country. Space on these towers is leased primarily to wireless communications carriers. 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. CSSI is engaged in the erection and repair of, and construction associated with, 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 and all of its subsidiaries. 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 financial statements reflect the combining of these two companies rather than a consolidation. Historical net income (loss) per share has not been presented because it would not be meaningful. 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. The more significant estimates made by management include the allowance for doubtful accounts receivable, the costs and revenues relating to the Company's site development and construction contracts and the economic useful lives of towers. 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. F-18 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) d. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over their estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. Maintenance and repairs are expensed as incurred. Interest is capitalized in connection with the construction of towers. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. As the Company significantly expanded its construction activities in 1998, $1,160,869 of interest cost was capitalized in 1998. No interest was capitalized in 1997 or 1996. e. Intangible Assets Intangible assets are comprised of costs paid in excess of the fair value of assets acquired ("Goodwill") and amounts paid related to covenants not to compete. Goodwill is being amortized over periods which range from 7-15 years. The covenants not to compete are being amortized over the terms of the contracts, which range from 7 to 10 years. Accumulated amortization totaled approximately $340,000 at December 31, 1998. f. 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. g. Deferred Financing Fees Financing fees have been deferred and are being amortized using the straight- line method over the length of indebtedness to which they relate. This method approximates the effective interest rate method. h. Revenue Recognition Revenue from tower leasing services is recorded on a monthly basis. Revenue for Leasing is generated on a monthly basis from subleases entered into for periods of time equivalent to the Company's original lease obligation. Current lease terms range from one to five years. Revenue received in advance is recorded in other liabilities. Site development projects in which the Company performs consulting services include contracts on a time and materials basis or a fixed price basis. Time and materials based contracts are billed as the services are rendered. For those site development contracts in which the Company performs work on a fixed price basis, site development billing (and revenue recognition) is based on the completion of agreed upon phases of the project on a per site basis. Upon the completion of each phase on a per site basis, the Company recognizes the revenue related to that phase. Revenue related to services performed on uncompleted phases of site development projects was not recorded by the Company at the end of the reporting periods presented as it was not material to the Company's results of operations. Any losses on a particular phase of completion are recognized in the period in which the loss becomes evident. Site development projects generally take from 3 to 12 months to complete. F-19 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. All costs related to site development projects and construction projects are recognized as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable. i. 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 pro-forma provision for income taxes for the year ended December 31, 1996 represents a pro-forma calculation (40%) as if the Company was a 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 the 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. j. Selling, General and Administrative Expenses Selling, general and administrative costs represents those costs incurred which are related to the administration or management of the Company. Also included in this category are corporate development expenses which represent costs incurred in connection with acquisitions, construction activities and expansion of the customer base. These expenses consist of compensation and overhead costs that are not directly related to the administration or management of existing towers. The above costs are expensed as incurred. k. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, prepaid expenses, notes receivable, accounts payable, accrued expenses and notes payable, approximates fair value. The market value and carrying value of the Senior Discount Notes Payable is $156.0 million and $165.6 million at December 31, 1998, respectively. l. Reclassifications Certain reclassifications have been made to the 1997 and 1996 financial statements to conform to the 1998 presentation. F-20 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. CURRENT ACCOUNTING PRONOUNCEMENTS Comprehensive Income In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that an enterprise classify items of other comprehensive income separately from accumulated deficit and additional paid-in capital in the equity section of the balance sheets. Comprehensive income is defined as the change in equity during the financial reporting period of a business enterprise resulting from non- owner sources. During the year ended December 31, 1998, 1997, and 1996, the Company did not have any changes in its equity resulting from such non-owner sources and accordingly, comprehensive income as set forth by SFAS No. 130 was equal to the net loss amounts presented for the respective periods in the accompanying Consolidated Statements of Operations. Segment Reporting In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which is required to be adopted in fiscal 1998. SFAS No. 131 requires the Company to report financial and other descriptive information about its reportable operating segments. Required disclosures include, among other things, a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. The Company has implemented SFAS No. 131 during 1998. Derivative Instruments and Hedging Activities In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities. "This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 will require that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. Management believes the impact of adopting this statement will not have a material impact upon the Company's results of operations or financial position. 4. ACQUISITIONS 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 an additional $2.6 million as a contingent payment to the sellers, which was based on certain tenant leasing goals being 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 $2.1 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. Additionally, in 1997, the Company acquired 30 towers in five separate transactions for an aggregate initial investment of $5.9 million. These acquisitions were paid for in cash. During 1998, the Company completed 39 acquisitions consisting of 135 towers and related assets from various sellers, all of which were individually insignificant to the Company. The aggregate purchase price for these acquisitions for the year ended December 31, 1998 was $55.3 million, which was paid from cash on hand. F-21 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company accounted for the above acquisitions using the purchase method of accounting. The results of operations of the acquired assets are included with those of the Company from the dates of the respective acquisitions. The pro- forma results of operations listed below reflect purchase accounting and pro- forma adjustments as if the transactions occurred as of the beginning of the period presented. 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 period in which CSSI was an S Corporation 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.
For the year ended December 31, --------------------------------- 1998 1997 ---------------- --------------- Unaudited Pro Forma Revenues.......... $ 61,754,775 $ 65,679,788 ================ =============== Unaudited Pro Forma Net Income (loss)............................... $ (19,768,191) $ 775,002 ================ ===============
5. 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 and the percentage of total revenue derived from such customers:
For the years ended December 31, -------------------------------- 1998 1997 1996 ---------- ---------- ---------- (% of Revenue) Sprint................................... 34.0 47.0 50.4 Bell South............................... 19.3 6.6 .4 Pacific Bell Mobile Systems.............. 10.7 12.3 18.8 Nextel................................... 8.8 7.8 -- Page Net................................. 7.0 7.6 9.0 AT&T Wireless............................ 2.7 5.3 11.6
6. PROPERTY AND EQUIPMENT Property and equipment, net consists of the following:
Estimated Useful Lives December 31, ------------ ------------------------- 1998 1997 (years) ------------ ----------- Land................................... $ 5,307,754 $ 414,770 Towers................................. 25 141,755,358 13,525,482 Buildings and improvements............. 5 -- 26 506,120 107,931 Vehicles 2 -- 5 442,496 358,569 Furniture and equipment................ 2 -- 7 1,708,132 1,299,341 Construction in process................ 7,736,769 2,840,593 ------------ ----------- 157,456,629 18,546,686 Less: Depreciation and Amortization.... (6,510,149) (717,624) ------------ ----------- Property and equipment, net............ $150,946,480 $17,829,062 ============ ===========
F-22 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Construction in process represents costs incurred related to towers which are under development and will be used in the Company's operations. 7. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings on uncompleted contracts consist of the following:
December 31, ---------------------- 1998 1997 ---------- ---------- Costs incurred on uncompleted contracts.......... $4,633,768 $ 862,660 Estimated earnings............................... 1,357,134 280,438 Billings to date................................. (5,558,457) (1,981,551) ---------- ---------- $ 432,445 $ (838,453) ========== ==========
This amount is included in the accompanying balance sheet under the following captions:
December 31, --------------------- 1998 1997 --------- ---------- Costs and estimated earnings in excess of billing........................................ $ 598,971 $ 118,235 Billings in excess of costs and estimated earning........................................ (166,526) (956,688) --------- ---------- $ 432,445 $(838,453) ========= ==========
8. CURRENT AND LONG TERM DEBT Current and long term debt consists of the following:
December 31, ------------------------- 1998 1997 ------------ ----------- Bank Credit Agreement, interest at variable rates (6.9125% to 7.75% at December 31, 1998) quarterly installments, based on reduced availability, beginning March 31, 2001, maturing on June 29, 2005............ $ 17,001,000 $ 8,800,000 Installment note payable, interest at 6%.... -- 1,384,054 Senior 12% discount notes, net of unamortized original issue discount of $118,763,500, unsecured, cash interest payable semi-annually in arrears beginning March 1, 2003, balloon principal payment of $269,000,000 due at maturity on March 1, 2008....................................... 165,572,133 -- ------------ ----------- 182,573,133 10,184,054 Less current maturities of debt............. (17,001,000) (10,184,054) ------------ ----------- Long-term debt.............................. $165,572,133 $ -- ============ ===========
Bank Credit Agreement On August 8, 1997, the Company entered into a credit agreement with a syndicate of banks (the "Credit Agreement"). The original Credit Agreement consisted of a secured revolving line of credit in the amount of F-23 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) $10,000,000 and term debt in an amount up to $65,000,000. Under this Agreement funds were generally borrowed at the EURO rate at the time of borrowing plus 1.25%. On June 29, 1998, the Company amended and restated the Credit Agreement. The amended Credit Agreement provides for revolving credit loans of $55,000,000. Availability was limited based on a minimum number of owned, leased or managed towers and at all times by certain financial conditions and covenants and ratios, and other conditions. The Credit Agreement matures on June 29, 2005. The borrowings under the Credit Agreement will bear interest at the EURO rate plus a margin ranging from 1.0% to 3.25% (determined based on a leverage ratio) or an "alternate base rate" as defined by the lender. The term facility provided $50,000,000 availability to the Company to be used to secure letters of credit. As of December 31, 1998, there were no outstanding 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. This credit agreement was replaced by a new credit facility in February, 1999 (See Note 16). Senior Discount Notes Payable 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 Notes will accrete in value until March 1, 2003 at which time they will have an aggregate principal 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. Proceeds from the Notes are being used to acquire and construct telecommunications towers as well as for general working capital purposes. After the issuance of the Notes, the Company became highly leveraged which could have important consequences to holders of the Notes and common and preferred stockholders of the Company, 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. The ability of the Company to comply with the covenants and other F-24 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) terms of 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 Notes it would be in default thereunder, and in any such case, the maturity of substantially all of its long-term indebtedness could be accelerated. 9. NOTE RECEIVABLE--STOCKHOLDER The amount due from stockholder as of December 31, 1998 and 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 5.83%. 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. 10. REDEEMABLE PREFERRED STOCK In 1997, the Company sold 8,050,000 shares of 4% Series A Preferred Stock, convertible 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 has a conversion price of $3.73 and net proceeds received by the Company from the sale of the shares was approximately $27,600,000 (net of approximately $2,400,000 of issuance costs charged to retained earnings). 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 pro-ration 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, 1998, such accrued and unpaid dividends amounted to $3,558,333. 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. The Company accretes for preferred stock dividends on the effective interest rate method over the period from issuance to scheduled redemption. F-25 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. 11. INCOME TAXES The provision for income taxes in the consolidated statements of operations consists of the following components:
For the Years Ended December 31 --------------------------------- 1998 1997 ---------------- --------------- Federal income taxes Current............................... $ (1,663,653) $ 5,033,333 Deferred.............................. (123,429) (556,280) ---------------- -------------- $(1,787,082) $ 4,477,053 ================ ============== State income taxes Current............................... $ 280,408 $ 1,198,413 Deferred.............................. (17,632) (79,468) ---------------- -------------- $ 262,776 $ 1,118,945 ---------------- -------------- Total................................... $ (1,524,306) $ 5,595,998 ================ ==============
F-26 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A reconciliation of the statutory U.S. Federal tax rate (34%) and the effective income tax rate is as follows:
For the Years Ended December 31 --------------------------------- 1998 1997 ---------------- --------------- Federal income tax (benefit)......... $ (7,284,636) $ 1,993,588 State income tax..................... (784,569) 224,311 Corporate reorganization............. -- 3,248,649 Other................................ 221,704 129,450 Valuation allowance.................. 6,323,195 -- ---------------- --------------- $(1,524,306) $ 5,595,998 ================ =============== The components of the net deferred income tax asset (liability) accounts are as follows: As of December 31 --------------------------------- 1998 1997 ---------------- --------------- Cash to accrual Section 481(a) adjustment.......................... $ -- $ (2,087,966) Allowance for doubtful accounts...... 174,668 203,307 Deferred revenue..................... 340,464 127,723 Other................................ 120,201 135,222 Valuation allowance.................. (635,333) -- ---------------- --------------- Current deferred tax liabilities..... $ -- $ (1,621,714) ================ =============== Original issue discount.............. $ 5,552,286 $ -- Employee stock compensation.......... 1,864,841 2,278,161 Book vs. tax depreciation............ (5,193,422) (154,143) Other................................ 93,718 133,444 Valuation allowance.................. (5,687,862) -- ---------------- --------------- Non-current deferred tax assets (liabilities)....................... $ (3,370,439) $ 2,257,462 ================ ===============
In connection with the acquisition of certain towers during 1998, the Company recorded deferred tax liabilities and goodwill of $4.2 million related to the book/tax basis differences in the acquired towers. The Company has recorded a valuation allowance for deferred tax assets as management believes that it is not "more likely than not" that the Company will be able to generate sufficient taxable income in future periods to recognize the assets. F-27 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. COMMITMENTS AND CONTINGENCIES a. Operating Leases The Company is obligated under several non-cancelable operating leases for office space, vehicles and equipment, and site leases that expire at various times through June, 2044. The annual minimum lease payments under non- cancelable operating leases as of December 31, 1998 are as follow: 1999............................................................. $ 7,497,510 2000............................................................. 5,625,577 2001............................................................. 4,626,198 2002............................................................. 3,557,578 2003............................................................. 2,321,144 Thereafter....................................................... 4,951,829 ----------- Total............................................................ $28,579,836 =========== Principally, all of the leases provide for renewal at varying escalations. Leases providing for fixed rate escalations have been reflected above. Rent expense for operating leases was $10,834,234, $6,134,045, and $5,417,233 for the years ended December 31, 1998, 1997 and 1996, respectively. b. Tenant Leases The annual minimum tower space income to be received for tower space and antenna rental under non-cancelable operating leases as of December 31, 1998 are as follows: 1999............................................................. $13,352,986 2000............................................................. 11,034,692 2001............................................................. 9,336,839 2002............................................................. 7,301,439 2003............................................................. 4,154,998 Thereafter....................................................... 2,767,701 ----------- Total............................................................ $47,948,655 ===========
Principally, all of the leases provide for renewal at varying escalations. Leases providing for fixed rate escalations have been reflected above. c. Employment Agreements The Company currently has employment contracts with the Chief Operating Officer, the Chief Accounting Officer, the Chief Financial Officer, and the Executive Vice President--Sales and Marketing. These employment contracts are for a three year period and provide for minimum annual compensation of $1,025,000. Additionally, these contracts provide for incentive bonuses of annual amounts up to $1,025,000. d. 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 F-28 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 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. 13. HEALTH AND RETIREMENT 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 $123,981, $126,101, and $98,052 for the years ended December 31, 1998, 1997, and 1996 respectively. 14. STOCK OPTIONS AND WARRANTS As of December 31, 1996, certain of the Company's senior executives terminated existing employment, incentive and option agreements in exchange for new employment agreements and, immediately exercisable options to purchase 1,425,000 shares of Class A Common Stock. All of the options are exercisable at $.05 per share. The Company accounted for the grant of options in accordance with APB No. 25 and, accordingly, recognized a nonrecurring compensation expense of $7,011,000 in 1996 as a result of the grant of the options. The expense represents the difference between the exercise price of the options and the estimated fair value of the underlying common stock. During March 1997, immediately following the consummation of the Series A Preferred Stock offering, options to purchase 264,708 shares of Class A Common Stock were redeemed by the Company for $8.50 per share. Accordingly, the Company recognized compensation expense totaling $934,419 which represented the difference between the redemption value and the fair value of the common stock at the date of grant. The Company also 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. A total of 1,800,000 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. The Company accounts for this plan under APB Opinion No. 25, under which compensation cost is not recognized on those issuances where the exercise price exceeds the market price of the underlying stock on the grant date. 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. The fair value of the warrants at issuance was not material. During 1998, 208,419 options to purchase Class A Common Stock were issued at exercise prices which the Company believed were at below market value. Accordingly, the Company recorded compensation expense in the amount of $174,810. Additional compensation related to these options of approximately $278,518 will be recorded by the Company over the remaining vesting period of the options. Also during 1998, the Company granted 104,961 shares of Class A Common Stock to two executives and recorded non-cash compensation expense of $505,167 which represents the fair value of the shares on the date of grant. As required by FASB Statement No. 123 ("FASB 123"), for those options which the Company granted at or above fair market value, the Company has determined the pro-forma effect of the options granted had the Company accounted for stock options granted under the fair value method of FASB 123. The Black-Scholes option pricing model was used with the following assumptions for 1998 and 1997; risk free interest rate of F-29 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12%, dividend yield of 0%; expected volatility of .001% and expected lives of 3 years. Had compensation cost for the stock option plan been determined based on fair value at the date of grant in accordance with FASB 123, the Company's pro- forma net income (loss) would have totaled $(20,156,126) and $162,111 for the years ended December 31, 1998 and 1997, respectively. The effect of applying FASB 123 in this pro-forma disclosure are not necessarily indicative of future results. A summary of the status of the Company's stock option plans including their weighted average exercise price is as follows:
1998 1997 1996 ---------------- ---------------- ---------------- Shares Price Shares Price Shares Price --------- ----- --------- ----- ---------- ----- Outstanding at beginning of year...................... 1,797,292 $0.96 1,425,000 $0.05 -- $ -- Granted.................... 799,019 2.81 810,500 2.63 1,425,000 0.05 Exercised/redeemed......... (775,961) 0.05 (264,708) 0.05 -- -- Forfeited/canceled......... (160,334) 2.63 (173,500) 2.63 -- -- --------- ----- --------- ----- ---------- ----- Outstanding at end of year...................... 1,660,016 $2.12 1,797,292 $0.96 $1,425,000 $0.05 ========= ===== ========= ===== ========== ===== Options exercisable at end of year................... 723,883 $1.45 1,193,625 $ .12 $1,425,000 $0.05 ========= ===== ========= ===== ========== ===== Weighted average fair value of options granted during the year.................. $1.81 $ .96 $0.05 ===== ===== =====
Option groups outstanding at December 31, 1998 and related weighted average exercise price and life information are as follows:
Wtd. Avg Remaining Exercise Price Outstanding Contractual Life (Years) Exercisable -------------- ----------- ----------------------- ----------- $ .05 386,764 8.2 386,764 $2.63 1,167,533 9 231,400 $4.00 105,719 10 105,719 --------- ------- 1,660,016 723,883 ========= =======
F-30 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. SEGMENT DATA The Company operates principally in three business segments: site development consulting, site development construction, and site leasing. The Company's reportable segments are strategic business units that offer different services. They are managed separately based on the fundamental differences in their operations. 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 ------------------------------------ 1998 1997 1996 ------------ ----------- ----------- Revenue: Site development--consulting............. $ 27,448,910 $47,032,197 $60,276,160 Site development--construction........... 19,255,731 1,208,246 -- Site leasing............................. 12,396,268 6,759,362 4,530,152 ------------ ----------- ----------- $59,100,909 $54,999,805 $64,806,312 ============ =========== =========== Gross profit: Site development--consulting............. $ 5,552,140 $16,386,901 $20,454,571 Site development--construction........... 4,652,521 383,339 -- Site leasing............................. 5,115,482 1,403,202 892,019 ------------ ----------- ----------- $15,320,143 $18,173,442 $21,346,590 ============ =========== =========== Assets: Site development--consulting............. $ 14,516,752 $15,847,931 $17,423,131 Site development--construction........... 9,690,197 6,488,626 -- Site leasing............................. 173,075,271 12,891,213 637,315 Assets not identified by segment......... 17,291,106 9,569,634 -- ------------ ----------- ----------- $214,573,326 $44,797,404 $18,060,446 ============ =========== =========== Capital expenditures: Site development--consulting............. $ 21,565 $ 58,474 $ 39,058 Site development--construction........... 119,285 63,863 -- Site leasing............................. 137,274,109 16,425,061 -- Assets not identified by segment......... 708,825 328,420 105,884 ------------ ----------- ----------- $138,123,784 $17,675,818 $ 144,942 ============ =========== ===========
16. SUBSEQUENT EVENTS On February 5, 1999 the Company, through its subsidiary, Telecommunications, entered into a new senior credit facility (the "New Facility") with a syndicate of lenders which replaced and superceded in its entirety the Credit Agreement described in Note 8. The New Facility consists of a $25 million term, loan, which was fully funded at closing, and a $100 million revolving line of credit, on which the Company has the option to increase to $150 million under certain conditions. The New Facility also provides for letter of credit availability. Availability under the New Facility is determined by a number of factors, including number of towers built by the Company with anchor tenants on the date of completion, the financial performance of the Company's towers, site development and construction segments, as well as by other financial covenants, financial ratios and other conditions. The New Facility matures December 31, 2004 and amortization pursuant F-31 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) to a schedule and reduced availability begins March 31, 2001. Borrowings under the New Facility will bear interest at the EURO rate plus a margin ranging from 2.25% to 3.50% (determined by a leverage ratio) or "base rate" (as defined in the New Facility) plus a margin ranging from 1.25% to 2.50% (determined by a leverage rate). The New Facility is secured by substantially all of the assets of Telecommunications and its direct and indirect subsidiaries, requires Telecommunications to maintain certain financial covenants, and places restrictions on, among other things, the incurrence of debt and liens, dispositions of assets, transactions with affiliates and certain investments. In connection with the termination of the previous Credit Agreement during the first quarter of 1999, the Company recorded an extraordinary charge of approximately $950,000 representing the write-off of previously capitalized deferred financing fees related to the previous Credit Agreement . On March 8, 1999, after receiving the requisite consents from the holders of the Notes, the Company amended the indenture governing the Notes to increase one of the categories of permitted indebtedness from $125 million to $175 million. Simultaneously, Telecommunications exercised its option to increase the revolving line of credit portion of the New Facility from $100 million to $150 million. F-32 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen llp West Palm Beach, Florida, March 11, 1999. F-33 SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at Charged to Deduction Beginning of Costs and From Balance at Period Expenses Reserves End of Period ------------ ---------- --------- ------------- Allowance for Doubtful Accounts: December 31, 1996............ $ 572,751 $451,349 $ -- $1,024,100 December 31, 1997............ $1,024,100 $163,416 $679,248 $ 508,268 December 31, 1998............ $ 508,268 $282,463 $354,060 $ 436,671
F-34 Report of Independent Certified Public Accountants To SBA Communications Corporation: We have audited the accompanying statements of operations and retained earnings and cash flows of Caddo Tower Company, Inc. (a Florida corporation) for the fiscal year ended July 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects the results of operations and cash flows of Caddo Tower Company, Inc., for the fiscal year ended July 31, 1998, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 26, 1999 F-35 CADDO TOWER COMPANY, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the Year Ended July 31, 1998 Revenues............................................................. $ 406,193 Operating expenses (exclusive of depreciation shown below)........... 112,593 --------- Gross margin....................................................... 293,600 Expenses: General and administrative......................................... 229,012 Depreciation....................................................... 24,799 --------- Total expenses................................................... 253,811 Income from continuing operations before income taxes................ 39,789 Provision for income taxes........................................... 7,958 --------- Income from continuing operations.................................... 31,831 Loss from discontinued operations net of taxes of $971............... (3,884) --------- Net income........................................................... 27,947 --------- Retained earnings at July 31, 1997................................... 497,682 Distribution to shareholders......................................... (148,700) --------- Retained earnings at July 31, 1998................................... $ 376,929 =========
The accompanying notes to financial statements are an integral part of this financial statement. F-36 CADDO TOWER COMPANY, INC. STATEMENT OF CASH FLOWS For the Year Ended July 31, 1998 Operating activities: Net income.......................................................... $ 27,947 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization..................................... 24,799 Deferred income taxes............................................. 564 Changes in assets and liabilities: Increase in accounts receivable................................... (16,507) Increase in prepaid income taxes.................................. (3,146) -------- Net cash provided by operating activities....................... 33,657 Investing activities: Purchase of equipment............................................. (58,296) -------- Net cash used in investing activities........................... (58,296) Financing activities: Borrowings from stockholder....................................... 50,000 -------- Net cash provided by financing activities....................... 50,000 Net increase in cash and cash equivalents............................. 25,361 Cash and cash equivalents at beginning of year........................ (6,479) -------- Cash and cash equivalents at end of year.............................. $ 18,882 ========
The accompanying notes to financial statements are an integral part of this financial statement. F-37 CADDO TOWER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS For the Year Ended July 31, 1998 1. Nature of Business and Basis of Presentation Nature of Business On October 8, 1998, SBA Towers, Inc. ("SBA") acquired all of the outstanding stock of Caddo Tower Company, Inc. ("Caddo" or "the Company")--see Note 5. Caddo owns telecommunications towers and leases space on these towers to customers in the wireless communications industries in Louisiana. The Company also has operations in the commercial real estate business in Shreveport, Louisiana. Basis of Presentation The accompanying statements of operations and retained earnings, and cash flows of Caddo have been prepared in accordance with generally accepted accounting principles. Certain of the Company's activities have been treated as discontinued operations and are presented as such in the accompanying statement of operations and retained earnings. See Note 4. 2. Summary of Significant Accounting Policies 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. Property and Equipment Caddo owns fixed assets used in the tower and commercial real estate businesses. All assets are recorded at cost. Tower assets consist of towers, portable buildings and related attachments which are depreciated using the straight-line method over the estimated useful life of the assets of 15 years. Improvements, renewals and extraordinary repairs which increase the value or extend the life of the asset are capitalized. Repairs and maintenance costs are expensed as incurred. Impairment of Long-lived Assets The Company evaluates the recoverability of its long-lived assets whenever the adverse events or changes in business climate indicate that the expected undiscounted cash flows from the related asset may be less than previously anticipated. If the net book value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying amount would be reduced to the present value of its expected future cash flows and an impairment loss would be recognized. As of July 31, 1998, the Company does not believe that an impairment is necessary. Revenue Recognition Rental revenue is recognized on a straight-line basis over the life of the related lease agreements. Revenue is recorded in the month in which it is due. F-38 CADDO TOWER COMPANY, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) For the Year Ended July 31, 1998 Income Taxes The Company accounts for income taxes using the liability method as required by Statement on Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The significant difference between the tax bases of assets and liabilities and the bases used for financial accounting and reporting is due to differences in the methods used to compute depreciation expense. The effective tax rate approximates the statutory federal and state rates on a historical basis as only immaterial permanent differences exist for the Company. 3. Tenant Leases and Commitments The following is a schedule of total future minimum rentals to be received from tower space under non-cancelable lease agreements as of July 31, 1998:
Year ended July 31, ------------------- 1999................................................................ $210,989 2000................................................................ 148,726 2001................................................................ 62,631 2002................................................................ 25,205 2003................................................................ 3,268 -------- $450,819 ========
In addition, the Company made payments of approximately $38,000 during the current fiscal year under lease commitments. 4. Discontinued Operations Subsequent to July 31, 1998, but prior to October 8, 1998, the Company transferred all of its assets and liabilities related to the commercial real estate business to a newly created company that was not sold to SBA. The newly- created company is owned by the same owners of Caddo Tower Company, Inc. The results of the non-tower operations for the fiscal year ended July 31, 1998, have thus been treated as discontinued operations in the accompanying statement of operations and retained earnings for the fiscal year ended July 31, 1998. Revenues and expenses of the discontinued operations for the fiscal year ended July 31, 1998, were $72,850 and $77,705, respectively. 5. Subsequent Event On October 8, 1998, SBA acquired all of the outstanding common stock of the Company for approximately $4,925,000. In anticipation of this sale but subsequent to July 31, 1998, the Company transferred all of its non-tower assets and liabilities to another company created to receive these non-tower assets and liabilities. See Note 4. F-39 Report of Independent Certified Public Accountants To SBA Communications Corporation: We have audited the accompanying statements of operations and retained earnings and cash flows of the tower assets acquired from PrimeCo Personal Communications L.P. (see Note 1) for the year 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 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the tower assets acquired from PrimeCo Personal Communications L.P., for the year ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 24, 1999 F-40 PRIMECO TOWER OPERATIONS (A carve-out entity of PrimeCo Personal Communications, L.P.) STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the Year Ended December 31, 1997 Revenues.......................................................... $ -- Tower operating expenses.......................................... 20,157 -------- Net loss........................................................ (20,157) Retained earnings at December 31, 1996.......................... -- -------- Retained earnings at December 31, 1997.......................... $(20,157) ========
The accompanying Notes to Financial Statements are an integral part of this financial statements. F-41 PRIMECO TOWER OPERATIONS (A carve-out entity of PrimeCo Personal Communications, L.P.) STATEMENT OF CASH FLOWS For the Year Ended December 31, 1997 Cash flows from operating activities: Net loss........................................................ $(20,157) -------- Net cash used in operating activities........................... (20,157) Cash flows from investing activities: Capital expenditures............................................ (783,082) -------- Net cash used in investing activities........................... (783,082) Cash flows from financing activities: Financing provided by Parent.................................... 803,239 -------- Net cash provided by financing activities....................... 803,239 Net increase in cash............................................ -- -------- Cash at December 31, 1996....................................... -- -------- Cash at December 31, 1997....................................... $ -- ========
The accompanying Notes to Financial Statements are an integral part of this financial statements F-42 PRIMECO TOWER OPERATIONS (A carve-out entity of PrimeCo Personal Communications, L.P.) NOTES TO FINANCIAL STATEMENTS 1. Natures of Business and Basis of Presentation Nature of Business On April 15, 1998 SBA Towers, Inc. acquired certain of the assets and business operations of PrimeCo Personal Communications, L.P. (the "Parent"). See Note 5. Collectively, the acquired assets and related operations are referred to hereafter as PrimeCo-Wisconsin. PrimeCo-Wisconsin owns telecommunications towers and leases space on these towers to customers in the wireless communications industries in Wisconsin. Basis of Presentation PrimeCo-Wisconsin is not a separate subsidiary, division or segment of the Parent. The accompanying statement of operations and cash flows have been derived from the accounting records of the Parent and have been prepared to present the result of operations and cash flows on a stand-alone basis. All revenues and expenses specifically identifiable to tower ownership are included. PrimeCo-Wisconsin began construction on the eight towers, subsequently sold to SBA Towers, Inc. (see Note 5), in the latter half of 1997. As of December 31, 1997, construction on all eight towers was still in progress. As such, no revenue had been earned, nor did the Parent record any depreciation expense or allocate any general and administrative expenses to these towers. All costs incurred and presented in the accompanying financial statements represent direct costs incurred by the tower operations. It is the Parent's policy not to allocate overhead or other costs to towers until construction is complete and the towers have been placed into service. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results may vary from those estimates. Tower Assets Tower assets consist of towers, buildings, and related attachments which are recorded at cost and will be depreciated using the straight-line method over the estimated useful life of the assets of 15 years. Depreciation of the asset begins at the time the asset is placed in service. Improvements, renewals and extraordinary repairs which increase the value or extend the life of the asset are capitalized. Repairs and maintenance costs are expensed as incurred. Impairment of Long-lived Assets PrimeCo-Wisconsin evaluates the recoverability of its long-lived assets whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related asset may be less than previously anticipated. If the net book value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying amount would be reduced to the present value of its expected future cash flows and an impairment loss would be recognized. As of December 31, 1997, management does not believe that an impairment reserve is required. F-43 Revenue Recognition Rental revenue is recognized on a straight-line basis over the life of the related lease agreements. Revenue is recorded in the month in which it is due. Income Taxes PrimeCo-Wisconsin generated a net loss for the year ended December 31, 1997. Accordingly, no benefit has been recorded in the statement of operations and retained earnings. 3. Commitments and Contingencies The Company is obligated under eight non-cancelable leases for land which expire between July 23, 2001 and June 16, 2003. The future minimum lease commitments under these leases are as follows: Year ended December 31, 1998................................................................... $ 80,070 1999................................................................... 133,130 2000................................................................... 138,455 2001................................................................... 143,993 2002................................................................... 149,753 Thereafter............................................................. 66,623 -------- $712,024 ========
Rental expense for 1997 was $20,157. 4. Related party Transactions The Parent paid all costs related to the site development and construction of these eight towers. In addition, the Parent also paid all tower operating expenses related to PrimeCo-Wisconsin. For the year ended December 31, 1997, PrimeCo-Wisconsin incurred tower operating expenses of $20,157, which were directly attributable to PrimeCo-Wisconsin. 5. Subsequent Event On April 15, 1998, eight towers and related assets were sold to SBA Towers, Inc. In accordance with the purchase and sale agreement, PrimeCo Personal Communications, L.P. received approximately $1,353,325 for these eight towers and related assets. F-44 Report of Independent Certified Public Accountants To SBA Communications Corporation: We have audited the accompanying statements of operations and retained earnings and cash flows of Northwest Tower Service, Inc. as of 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 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Northwest Tower Service, Inc. for the year ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 19, 1999 F-45 NORTHWEST TOWER SERVICE, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the Year Ended December 31, 1997 Revenue............................................................. $ 391,579 Tower operating expenses (exclusive of depreciation shown below).... 33,667 --------- Gross margin.................................................... 357,912 --------- Expenses: General and administrative........................................ 20,729 Depreciation...................................................... 12,864 --------- Total other..................................................... 33,593 --------- Net income...................................................... 324,319 Pro forma income taxes.............................................. 123,241 --------- Pro forma net income............................................ $ 201,078 ========= Retained earnings, December 31, 1996................................ $ 280,794 Net income.......................................................... 324,319 Distribution to shareholders........................................ (416,920) --------- Retained earnings, December 31, 1997................................ $ 188,193 =========
The accompanying Notes to Financial Statements are an integral part of this financial statement. F-46 NORTHWEST TOWER SERVICE, INC. STATEMENT OF CASH FLOWS For the Year Ended December 31, 1997 Cash flows from operating activities: Net income.......................................................... $324,319 Adjustments to reconcile net income to net cash cash provided by operating activities Depreciation........................................................ 12,864 Decrease in liabilities............................................. (800) -------- Total adjustments................................................. 12,064 -------- Net cash provided by operating activities......................... 336,383 Cash flows from investing activities: Proceeds from sale of equipment..................................... 200 -------- Net cash provided by investing activities......................... 200 -------- Cash flows from investing activities: Dividends paid to shareholders...................................... (216,920) Distributions to shareholders....................................... (200,000) -------- Net cash used in investing activities............................. (416,920) -------- Net decrease in cash and cash equivalents............................. (80,337) Cash and cash equivalents: Beginning of year................................................... 151,612 -------- End of year......................................................... $ 71,275 ========
The accompanying Notes to Financial Statements are an integral part of this financial statement. F-47 NORTHWEST TOWER SERVICE, INC. NOTES TO FINANCIAL STATEMENTS 1. Natures of Business and Basis of Presentation Nature of Business On June 29, 1998, SBA Towers, Inc. acquired the assets and business operations of Northwest Tower Service, Inc., a Minnesota Corporation (the "Company"). The Company owns telecommunications towers and leases space on these towers to customers in the wireless communications industries in Virginia and Minnesota. Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results may vary from those estimates. Tower Assets Tower assets consist of towers, buildings, and related attachments which are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets of 15 years. Improvements, renewals and extraordinary repairs which increase the value or extend the life of the asset are capitalized. Repairs and maintenance costs are expensed as incurred. Impairment of Long-lived Assets The Company evaluates the recoverability of its long-lived assets whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related asset may be less than previously anticipated. If the net book value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying amount would be reduced to the present value of its expected future cash flows and an impairment loss would be recognized. As of December 31, 1997, management does not believe that an impairment reserve is required. Revenue Recognition Rental revenue is recognized on a straight-line basis over the life of the related lease agreements. Revenue is recorded in the month in which it is due. Income Taxes The Company consisted of certain assets of an S Corporation. The statement of operations and retained earnings reflects a tax provision for the operations of Northwest Tower Service, Inc. at December 31, 1997 on a pro-forma basis as if the Company were treated as a C Corporation. F-48 NORTHWEST TOWER SERVICE, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 3. Tenant Leases The following is a schedule by year of total future minimum rentals to be received from tower space under non-cancelable lease agreements as of December 31, 1997.
Year ended December 31, ----------------------- 1998............................................................ $ 307,457 1999............................................................ 311,480 2000............................................................ 202,769 2001............................................................ 124,887 2002............................................................ 70,282 Thereafter...................................................... 55,119 ---------- $1,071,994 ==========
4. Subsequent Events On June 29, 1998, the Company sold significantly all of its assets to SBA Towers, Inc. In accordance with the purchase and sale agreement, Northwest Tower Service, Inc., received approximately $4,900,000 for three towers, related assets and land. F-49 Report of Independent Certified Public Accountants To SBA Communications Corporation: We have audited the accompanying statements of operations and retained earnings and cash flows of the tower assets acquired from General Communications Properties, Inc. (see Note 1) for the year 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 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the tower assets acquired from General Communications Properties, Inc., for the year ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP West Palm Beach, Florida, March 19, 1999 F-50 GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS (A carve-out entity of General Communication Properties, Inc.) STATEMENT OF OPERATIONS AND RETAINED EARNINGS For the Year Ended December 31, 1997 Revenues............................................................. $ 96,297 Tower operating expenses (exclusive of depreciation shown below)..... 24,268 -------- Gross margin..................................................... 72,029 Other expenses: General and administrative......................................... 6,715 Depreciation....................................................... 9,199 -------- Total other...................................................... 15,914 -------- Net income........................................................... 56,115 Pro forma income taxes........................................... 20,763 -------- Pro forma net income............................................. $ 35,352 ======== Retained earnings, December 31, 1996................................. $ 23,704 Net income........................................................... 56,115 Distribution to shareholders......................................... (92,640) -------- Retained deficit, December 31, 1997.................................. $(12,821) ========
The accompanying Notes to Financial Statements are an integral part of this financial statement. F-51 GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS (A carve-out entity of General Communication Properties, Inc.) STATEMENT OF CASH FLOWS For the Year Ended December 31, 1997 Cash flows from operating activities: Net income.......................................................... $ 56,115 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................................................ 9,199 Decrease in liabilities............................................. (8,736) -------- Total adjustments................................................... 463 -------- Net cash provided by operating activities......................... 56,578 -------- Cash flows from investing activities: Capital expenditures................................................ (7,277) -------- Net cash used in investing activities............................. (7,277) -------- Cash flows from financing activities: Distribution to shareholders........................................ (92,640) -------- Net cash used in financing activities............................. (92,640) -------- Net decrease in cash and cash equivalents (43,339) Cash at December 31, 1996............................................. 52,631 -------- Cash at December 31, 1997............................................. $ 9,292 ========
The accompanying Notes to Financial Statements are an integral part of this financial statement. F-52 GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS (A carve-out entity of General Communication Properties, Inc.) NOTES TO FINANCIAL STATEMENTS 1. Natures of Business and Basis of Presentation Nature of Business On August 31, 1998, SBA Towers, Inc. acquired certain of the assets and business operations of General Communications, Properties, Inc., a Kansas corporation (the "Parent"). Collectively, the acquired assets and related operations are referred to hereafter as General Communications. General Communications owns one telecommunications tower and leases space on this tower to customers in the wireless communications industries in Kansas. Basis of Presentation General Communications is not a separate subsidiary, division or segment of the Parent. The accompanying statements of operations and retained earnings and cash flows of General Communications have been derived from the accounting records of General Communications, Inc., and have been prepared to present the results of operations and cash flows on a stand-alone basis. All revenues and expenses specifically identifiable to tower ownership are included. Additionally, the accompanying statement of operations and cash flows include certain costs and expenses that have been allocated to the tower business from the Parent. These costs have been allocated on a carve-out basis described in Note 2. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results may vary from those estimates. Tower Assets Tower assets consist of a tower, buildings, and related attachments which are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets of 15 years. Improvements, renewals and extraordinary repairs which increase the value or extend the life of the asset are capitalized. Repairs and maintenance costs are expensed as incurred. Impairment of Long-lived Assets General Communications evaluates the recoverability of its long-lived assets whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related asset may be less than previously anticipated. If the net book value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying amount would be reduced to the present value of its expected future cash flows and an impairment loss would be recognized. As of December 31, 1998, management does not believe that an impairment reserve is required. Revenue Recognition Rental revenue is recognized on a straight-line basis over the life of the related lease agreements. Revenue is recorded in the month in which it is due. F-53 GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS (A carve-out entity of General Communication Properties, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) Allocation of Expenses The accompanying financial statements include certain costs and expenses that have been allocated to the tower business from the Parent. Of approximately $130,000 in expenses incurred by General Communications Properties, Inc., on behalf of all of its businesses, $26,166 has been allocated to the tower operations on a pro rata basis primarily on revenues. Management believes this allocation is reasonable. Income Taxes General Communications consisted of certain assets of an S Corporation. As such, net income was not subject to income taxes as the income is taxed directly to their owners. The statement of operations and retained earnings reflects a tax provision for the operations of General Communications at December 31, 1997 on a pro forma basis as if General Communications were treated as a C corporation. 3. Tenant Leases The following is a schedule by year of total future minimum rentals to be received from tower space under non-cancelable lease agreements as of December 31, 1998. Year ended December 31, 1998............................................................... $ 85,818 1999............................................................... 91,214 2000............................................................... 37,015 2001............................................................... 6,018 2002............................................................... 1,545 -------- $221,610 ========
4. Subsequent Events On August 31, 1998 a tower and related assets were sold to SBA Towers, Inc. In accordance with the purchase and sale agreement, the owners of General Communications received approximately $1,400,000 for the tower, related assets and land. F-54 Independent Auditors' Report To the Board of Directors of Transmission Facilities, Inc. We have audited the accompanying statements of income and retained earnings and cash flows of Transmission Facilities, Inc. for the year 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 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, the results of operations and cash flows of Transmission Facilities, Inc. for the year ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Peter C. Cosmas Co., CPAs February 3, 1998 F-55 TRANSMISSION FACILITIES, INC. STATEMENT OF INCOME AND RETAINED EARNINGS For the Year Ended December 31, 1997 Sales................................................................ $ 759,952 Cost of sales........................................................ 239,430 --------- Gross profit..................................................... 520,522 Selling, general and administrative expenses......................... 480,064 --------- Operating income................................................. 40,458 Other income (expense) Interest income.................................................... 104 Interest expense................................................... (20,423) --------- Total other expense.............................................. (20,319) --------- Income before income taxes....................................... 20,139 Income taxes......................................................... 650 --------- Net income....................................................... 19,489 Retained earnings: beginning......................................... 164,764 --------- Retained earnings: ending............................................ $ 184,253 ---------
The accompanying notes are an integral part of these financial statements. F-56 TRANSMISSION FACILITIES, INC. STATEMENT OF CASH FLOWS For the Year Ended December 31, 1997 Cash flows from operating activities Net income.......................................................... $ 19,489 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................... 30,979 Increase in accounts receivable................................... (22,038) Increase in escrow account........................................ (2,032) Increase in accrued expenses...................................... 63,230 -------- Total Adjustments............................................... 70,139 -------- Net cash provided by operating activities....................... 89,628 -------- Cash flows used in investing activities Capital expenditures................................................ (58,136) -------- Cash flows from financing activities Repayments of long-term debt........................................ (52,055) Advances from loans payable, officers............................... 26,000 Repayment of loans payable, officers................................ (5,000) -------- Net cash used in financing activities........................... (31,055) -------- Net increase in cash............................................ 437 Cash--beginning of year............................................. 28,188 -------- Cash--end of year................................................... $ 28,625 ======== Supplemental disclosures of cash flow information Cash paid during the year for: Interest.......................................................... $ 20,423 Income taxes...................................................... $ 325 Noncash investing and financing activities:
During the year ended December 31, 1997, long-term debt of $17,510 was incurred for the purchase of property and equipment. The accompanying notes are an integral part of these financial statements. F-57 TRANSMISSION FACILITIES, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1--Summary of Significant Accounting Policies Nature of Business Transmission Facilities, Inc. (the "Company") is in the business of operating facilities for the transmission of television, radio and other communication by wire or airwave. Depreciation Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred; costs of major additions and betterments are capitalized. The Company provides for depreciation over the estimated useful life of the asset based upon accelerated methods. Leasehold improvements are amortized using the straight-line method over the estimated useful life of the related improvements. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an "S" corporation. This election provides that, in lieu of federal corporate income taxes, the stockholders are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes is reflected in the accompanying financial statements. Use of Estimates in the Financial Statements The preparation of the 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 amounts could differ from these amounts. NOTE 2--Pension Plan The Company has a non-contributory pension plan for all eligible employees. Contributions are made at the discretion of management and totaled $35,791 for the year ended December 31, 1997. NOTE 3--Commitments and Related Party Transactions Related Party Transactions/Land Lease The Company rented the land that the tower is located on without a formal lease agreement from the stockholders of the Company through July 1997. During the year ended December 31, 1997, rent expense amounted to $91,800. NOTE 3--Commitments and Related Party Transactions, continued Operating Lease The Company also rents office space on a month-to-month basis from an unrelated entity. Rent expense amounted to $15,730 for the year ended December 31, 1997. NOTE 4--Subsequent Event On May 7, 1998, the Company sold certain assets in the amount of $7,250,000 to an unrelated company. Pursuant to the agreement, the purchase price of the assets can not exceed $8,500,000 based on the subsequent payments as per the agreement. F-58 Report of Independent Certified Public Accountant To the Stockholders of Long Island Waves, Inc.: I have audited the accompanying Statements of income and retained earnings Long Island Waves, Inc. (a New York corporation) and Cash Flow for the period from December 1, 1997 through September 30, 1998. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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 overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements of Long Island Waves, Inc. referred to above present fairly, in all material respects, the results of the operations and cash flows for the ten month period ending September 30, 1998 in conformity with generally accepted accounting principles. /s/ John A. Criscuola, C.P.A. Port Jefferson Station, New York March 17, 1999 F-59 LONG ISLAND WAVES, INC. STATEMENT OF INCOME AND RETAINED EARNINGS For the Period From December 1, 1997 Through September 30, 1998 Revenue.............................................................. $254,274 Tower operating expenses, exclusive of depreciation.................. 47,064 -------- Gross Margin....................................................... 207,210 Other Expenses: General and administrative......................................... 248,460 Depreciation and amortization...................................... 7,239 -------- Total Other Expenses................................................. 255,699 -------- Net Loss from operations............................................. (48,489) Other Income (Loss): Loss on sale of fixed assets....................................... (2,666) -------- Net Loss........................................................... (51,155) Retained Earnings December 1, 1998................................. 105,673 -------- Retained Earnings September 30, 1998............................... $ 54,518 ========
The accompanying notes are an integral part of the financial statements presented. F-60 LONG ISLAND WAVES, INC. STATEMENT OF CASH FLOWS For the Period From December 1, 1997 Through September 30, 1998 Cash flows from operating activities: Net loss.......................................................... ($ 51,155) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................... 8,907 Re-classification of stockholder loans to common stock............ 140,251 Re-classification of officer's loan (Other current liabilities) to common stock..................................................... 53,821 (Increase) decrease in: Prepaid expenses................................................ 10,926 Accounts receivable............................................. (1,800) Other current assets............................................ 10,000 Increase (decrease) in: Accounts payable................................................ (2,202) Deferred rents.................................................. (89,098) Stockholder loans............................................... (140,251) Other current liabilities....................................... (62,056) --------- Total adjustments............................................. (71,502) --------- Net cash used in operating activities............................... (122,657) Cash at beginning of period......................................... 122,740 --------- Cash at September 30, 1998.......................................... $ 83 =========
The accompanying notes are an integral part of the financial statements presented. F-61 LONG ISLAND WAVES, INC. NOTES TO FINANCIAL STATEMENTS September 30, 1998 1. Nature of Business and Basis of Presentation Nature of Business Long Island Waves, Inc., a New York Corporation, hereinafter referred to as L.I. Waves owns a telecommunication tower in the State of New York and leases space on this tower to customers in the wireless communications industries in New York. On September 30, 1998 SBA TOWERS NEW YORK, INC., Inc. a Florida Corporation, acquired all of the outstanding common stock of L.I. Waves. Basis of Presentation The financial statements of L.I. Waves have been developed from the accounting records of L.I. Waves, Inc. and represent a short accounting period covering from December 1, 1997 to September 30, 1998. L.I. Waves normal fiscal year usually commenced on December 1st and ended on November 30th in all prior years. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results may vary from those estimates. Tower Assets Tower assets consist of towers, buildings, and related attachments which are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets, which range from five (5) to thirty-nine (39) years. Improvements, renewals, and extraordinary repairs which increase the value or extend the life of the asset are capitalized. Repairs and maintenance costs are expensed as incurred. Impairment of Long-lived Assets L.I. Waves evaluates the recoverability of its long-lived assets whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related asset may be less than previously anticipated. If the net book value of the related asset exceeds the undiscounted future cash flows of the asset, the carrying amount would be reduced to the present value of its expected future cash flows and an impairment loss would be recognized. As of September 30, 1998, management does not believe that an impairment reserve is required. Fair Value of Financial Instruments The carrying amount of L.I. Waves financial instruments as at September 30, 1998 which include accounts receivable, prepaid expenses and short term debt, approximates fair value due to the short maturity of those investments. Revenue Recognition Rental revenue is recognized on a straight line basis over the life of the related lease agreements. Revenue is recorded in the month in which it is due. F-62 LONG ISLAND WAVES, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) September 30, 1998 Direct Tower Costs The accompanying financial statements include certain costs and expenses that have been directly charged to tower operating costs in arriving at Gross Margin. (See Note 6) Income Taxes L.I. Waves accounts for income taxes using the liability method as required by Statement No. 109, Accounting for Income Taxes, issued by the Financial Accounting Standards Board. Deferred income taxes are provided for temporary differences between the basis of assets and liabilities for financial reporting and income tax reporting. As a result of the acquisition of L.I. Waves by SBA Towers of New York, Inc., L.I. Waves taxable year terminated on the date of the acquisition, creating a short taxable year ending September 30, 1998 (IRC Reg. Sec. 1.1502-76(b)(2)(i)). The applicable Federal and NYS tax returns were filed and SBA Towers New York, Inc. has been furnished copies thereof which include prepaid income taxes, carryforward losses and contributions. (See Note 8) 3. Commitments and Contingencies The Company is obligated under two non-cancelable leases for land which expire March 14, 2008 and September 30, 2006. The leases have no renewal options. The future minimum lease commitments under these leases are as follows: Period from September 30, 1998 through December 31, 1998 $ 10,517 Year ended December 31, 1999............................................................. 42,069 2000............................................................. 42,069 2001............................................................. 42,069 2002............................................................. 42,069 2003............................................................. 42,069 2004 and after................................................... 140,122 -------- $360,984 ========
Rental expense for the period from December 1, 1997 through September 30, 1998 was $19,300. 4. Tenant Leases The following is a schedule by year of total future rentals to be received from tower space under non-cancelable lease agreements remitted to SBA Towers New York, Inc. as of September 30, 1998. Period from September 30, 1998 through December 31, 1998 $ 93,900 Year ended December 31, 1999........................................................... 375,600 2000........................................................... 375,600 2001........................................................... 375,600 2002........................................................... 375,600 2003........................................................... 375,600 2004 and thereafter............................................ 1,851,883 ---------- $5,607,883 ==========
F-63 LONG ISLAND WAVES, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) September 30, 1998 5. Subsequent Events On September 30, 1998, the shareholders of L.I. Waves sold all (100 shares) of their no par value common stock to SBA Towers, Inc. for approximately $3,650,000. Deferred revenues as of September 30, 1998 reflect rent received and disbursed by L.I. Waves, Inc. which resulted in an adjustment at the closing. F-64 Independent Auditors' Report To the Board of Directors Quad States Towers and Communications (A carve-out entity of Quad States Towers and Communications, Inc.) Luverne, Minnesota We have audited the accompanying statements of income and cash flows of Quad States Towers and Communications (A carve-out entity of Quad States Towers and Communications, Inc.) for the year ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 statements of income and cash flows are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statements of income and cash flows. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statements of income and cash flows. We believe that our audit of the statements of income and cash flows provides a reasonable basis for our opinion. In our opinion, the statements of income and cash flows referred to above present fairly, in all material respects, the results of the operations and its cash flows of Quad States Towers and Communications (A carve-out entity of Quad States Towers and Communications, Inc.) for the year ended June 30, 1988, in conformity with generally accepted accounting principles. /s/ Turbes Drealan Kvilhaug & Co. PA CPA Worthington, Minnesota December 11, 1998 F-65 QUAD STATES TOWERS AND COMMUNICATIONS (A carve-out entity of Quad States Towers and Communications, Inc.) STATEMENT OF INCOME For the Year Ended June 30, 1998 Revenue from operations: Towers rental income................................................ $181,790 -------- Total revenue from operations..................................... 181,790 -------- Operating expenses.................................................... 147,628 -------- Operating income.................................................. 34,162 Non-operating income (expense): Loss on sale of investments......................................... (2,245) -------- Income before income taxes........................................ 31,917 Provision for income taxes............................................ 8,703 -------- Net income for the year........................................... $ 23,214 ========
The accompanying notes are an integral part of this financial statement. F-66 QUAD STATES TOWERS AND COMMUNICATIONS INC. (A carve-out entity of Quad States Towers and Communications, Inc.) STATEMENT OF CASH FLOWS For The Year Ended June 30, 1998 Cash flows from operating activities: Net income.......................................................... $23,214 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation...................................................... 27,188 Loss on sale of investments....................................... 2,245 (Increase) decrease in-accounts receivable........................ (133) Income tax refund receivable...................................... (18,696) Prepaid expenses.................................................. 578 Increase (decrease) in-accounts payable........................... 3,806 Income taxes payable.............................................. (7,572) Deferred revenue.................................................. (13,421) ------- Net cash provided by operating activities....................... 17,209 ------- Cash flows from investing activities: Proceeds from sale of investments................................... 4,713 ------- Net cash provided by investing activities....................... 4,713 ------- Cash flows from financing activities: Decrease in cash overdraft.......................................... (20,535) Principal payments on short-term borrowing.......................... (10,000) Proceeds on short-term borrowing.................................... 20,000 Notes receivable from stockholder................................... (2,087) Principal payments on long-term borrowing........................... (6,367) ------- Net cash (used) by financing activities......................... (18,989) ------- Increase in cash and cash equivalents........................... 2,933 Cash and cash equivalents at beginning of year.................. -- ------- Cash and cash equivalents at end of year........................ $ 2,933 ======= Supplemental disclosure of cash flow information: Cash paid during the year for- Interest.......................................................... $ 3,880 Income taxes...................................................... $27,472
The accompanying notes are an integral part of this financial statement. F-67 QUAD STATES TOWERS AND COMMUNICATIONS (A carve-out entity of Quad States Towers and Communications, Inc.) NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies: a. Business Activity Quad States Towers and Communications (A carve-out entity of Quad States Towers and Communications, Inc.) is incorporated in Minnesota primarily to lease tower and equipment usage from towers located in Minnesota, Iowa, South Dakota and Nebraska. b. Basis of Accounting The Company uses the accrual method of accounting for financial statements and income tax purposes. c. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. d. Cash Cash equivalents are included in cash. The Company considers interest bearing investments due on demand as cash equivalents. e. Depreciation Depreciation is computed by using both the straight-line and accelerated methods at statutory rates which approximate their estimated useful lives. f. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. 2. Rental Income Under Operating Leases: The Company is a lessor of certain tower and equipment usage over terms ranging from one to twenty-five years. Some leases contain option renewal periods. These leases are accounted for as operating leases under which rental revenues are recognized ratably over the life of the lease and the related towers and equipment are depreciated over their estimated useful lives. Following is a schedule of future rental income to be received under operating leases, without the benefit of contractual consumer price index increases as these percentages are not determinable, in effect as of June 30, 1998:
Fiscal Year Ending June 30 Amount -------------------------- -------- 1999............................................................ $149,872 2000............................................................ 106,031 2001............................................................ 94,817 2002............................................................ 54,557 2003............................................................ 18,354 Thereafter (2004-2019).......................................... 118,278 -------- $541,909 ========
F-68 QUAD STATES TOWERS AND COMMUNICATIONS (A carve-out entity of Quad States Towers and Communications, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) Deferred income related to annual payments recognized ratably over the lease term amounted to $11,662 at June 30, 1998. 3. Income Taxes: Income tax expense for the year ended June 30, 1998, consists of the following: Current Federal.......................................................... $4,788 State............................................................ 3,915 ------ Income tax expense............................................. $8,703 ======
The Company incurred a capital loss of $2,245 for the year ended June 30, 1998, which is available to carry forward and offset future capital gains. Due to the immaterial amount, no deferred tax asset benefit has been recorded. Income tax expense is reconciled to federal statutory rates as follows: Federal tax expense at statutory rates............................ $4,788 State income tax.................................................. 3,128 Rate differentials and miscellaneous.............................. 787 ------ $8,703 ======
4. Major Customers: The Company generates a significant amount of its tower rental income from a small number of companies totaling approximately sixteen. While one individual customer accounts for approximately 22% of rental revenues which is significant to total revenues, due to the limited number of companies serviced any particular combination or group of accounts provide a significant portion of revenues. 5. Concentrations: The Company derives the majority of its revenues from businesses requiring internal communications transmissions or reselling communications access. The Company grants credit to these customers in the normal course of business. F-69 QUAD STATES TOWERS AND COMMUNICATIONS (A carve-out entity of Quad States Towers and Communications, Inc.) NOTES TO FINANCIAL STATEMENTS--(Continued) 6. Lease Commitments: The Company leases certain property and equipment related to their tower locations under agreements which are classified as operating leases over terms which range from five to fifty years. Some leases contain option renewal periods. Rent expenses incurred under these leases were approximately $8,636 for the year ended June 30, 1998. As of June 30, 1998, future minimum lease payments due under operating leases are as follows:
Fiscal Year Ending June 30 Amount -------------------------- ------- 1999.............................................................. $8,885 2000.............................................................. 7,895 2001.............................................................. 4,925 2002.............................................................. 4,925 2003.............................................................. 3,875 Thereafter (2004-2023)............................................ 65,500 ------- $96,005 =======
7. Related Party Transactions: The Company leases office space from its shareholder on a month to month basis. Total building rent expense for the year ended June 30, 1998, was $24,000. 8. Subsequent Events: Sale of Corporation The stockholder has listed the corporation for sale with a brokerage firm which specializes in the sale of communications towers and equipment. The broker is authorized to negotiate, execute a letter of intent and a purchase and sale agreement, with a responsible buyer. F-70 [COLLAGE DEPICTING A VARIETY OF COMMUNICATION SITES OF SBA COMMUNICATIONS CORPORATION.] 11,538,462 Shares [SBA LOGO] SBA Communications Corporation Class A Common Stock -------------------------- PROSPECTUS June 15, 1999 -------------------------- Lehman Brothers Deutsche Banc Alex. Brown Donaldson, Lufkin & Jenrette Salomon Smith Barney PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 13. Other Expenses of Issuance and Distribution Set forth below is a table of the registration fee for the Securities and Exchange Commission, the filing fee for the National Association of Securities Dealers, Inc., the listing fee for the Nasdaq National Market and estimates of all other expenses to be incurred in connection with the issuance and distribution of the securities described in the Registration Statement, other than underwriting discounts and commissions: SEC registration fee......................................... $ 47,955 ---------- NASD filing fee.............................................. 17,750 ---------- Nasdaq listing fee........................................... 90,000 ---------- Printing and engraving expenses.............................. 200,000 ---------- Legal fees and expenses...................................... 400,000 ---------- Accounting fees and expenses................................. 200,000 ---------- Transfer agent and registrar fees............................ 10,000 ---------- Miscellaneous................................................ 50,000 ---------- Total...................................................... $1,015,705 ==========
- -------- * To be completed by amendments. Item 14. 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 regarding corporate management or policy unless (1) the director breached or failed to perform his duties as a director and (2) the director's breach of, or failure to perform, those duties constitutes: (a) 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, (b) a transaction from which the director derived an improper personal benefit, either directly or indirectly, (c) a circumstance under which an unlawful distribution is made, (d) 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 shareholder, conscious disregard for the best interest of the corporation, or willful misconduct, or (e) in a proceeding by or in the right of someone other than the corporation or a shareholder, 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. Under the FBCA, a corporation has power to indemnify any person who was or is a party to any proceeding (other than an action by, or in the right of the corporation), by reason of the fact that he 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, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liability incurred in connection with such proceeding, including any appeal thereof, if he 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 proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the 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, has reasonable cause to believe that his conduct was unlawful. II-1 However, indemnification or advancement of expenses shall not be made to or on behalf of any director, officer, employee or agent if a judgment or other final adjudication establishes that his actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (a) a violation of the criminal law, unless the director, officer, employee or agent had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (b) a transaction from which the director, officer, employee or agent derived an improper personal benefit; (c) in the case of a director, a circumstance under which the above liability provisions are applicable; or (d) willful misconduct or a conscious disregard for the best interests of the corporation in a proceeding by or in the right of the corporation to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. The articles of incorporation of the Company provide that the Company shall, to the fullest extent permitted by applicable law and its by-laws, 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. Item 15. Recent Sales of Unregistered Securities In each of the sales described below, unless otherwise indicated, the Company (or the relevant predecessor) relied on Section 4(2) of the Securities Act of 1933 for exemption from registration. No brokers or underwriters were used in connection with any of such sales. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates, warrants and notes issued in such transactions. All recipients had adequate access, through their relationship with the Company, to information about the Company. Through March 31, 1999, the Company had raised approximately $180.2 million through private sales of debt and equity securities in a series of private placements with various institutional and other accredited investors and certain employees of the Company as described below. The 1997 Corporate Reorganization. In March 1997, Steven E. Bernstein, at that time the sole shareholder of SBA, Inc. and SBA Leasing, Inc., as well as the Chief Executive Officer of SBA, contributed all of the outstanding stock of SBA Inc. and SBA Leasing, Inc. to SBA in exchange for 8,075,000 shares of SBA's Class B common stock. Also in March 1997, Ronald G. Bizick, II, at that time SBA's Executive Vice President-Sales and Marketing, voluntarily terminated options he owned in SBA Inc. and SBA Leasing, Inc., (along with existing employment and incentive agreements) in exchange for 176,472 shares of Class A common stock of SBA and immediately exercisable options to purchase an additional 773,528 shares of Class A common stock of SBA. Also in March 1997, Robert M. Grobstein, at that time SBA's Chief Financial Officer, voluntarily terminated options he owned in SBA Inc. and SBA Leasing, Inc., (along with existing employment and incentive agreements) in exchange for 88,236 shares of Class A common stock of SBA and immediately exercisable options to purchase an additional 386,764 shares of Class A common stock. On March 7, 1997, SBA redeemed the outstanding shares of its Class A common stock from Messrs. Bizick and Grobstein for $8.50 per share. As a result of these transactions, SBA, Inc. and SBA Leasing, Inc., became wholly-owned subsidiaries of SBA. The Series A Preferred Stock Investment. In March 1997, the Company sold 8,050,000 shares of 4% 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 who were accredited investors, (as such term is defined in Rule 501(a) of Regulation D of the Securities Act) including ABS and TA Associates. BT Alex. Brown Incorporated acted as the exclusive agent of the Company in connection with the preferred stock offering. The Series A preferred stock had a conversion price of $3.73. In II-2 connection with the preferred stock offering, the Company also agreed to issue to BT Alex. Brown a warrant to purchase 402,500 shares of its Class A common stock, exercisable at $3.73 per share at any time up to March, 2002. An affiliate of BT Alex. Brown is a limited partner in ABS. Certain officers and employees of BT Alex. Brown are direct and indirect holders of Series A preferred stock. The 12% Senior Discount Notes due 2008. On March 2, 1998, the Company privately placed, under Rule 144A of the Securities Act, $269 million aggregate principal amount at maturity ($150,236,500 initial accreted value) of its 12% Senior Discount Notes due 2008, yielding net proceeds to the Company of approximately $144.5 million after deducting discounts and estimated transaction fees and expenses. BT Alex. Brown and Lehman Brothers Inc. were the initial purchasers of such securities. Pursuant to an effective registration statement, on September 11, 1998, the Company exchanged $269 million aggregate principal amount at maturity of its registered 12% Senior Discount Notes due 2008 for all of its outstanding unregistered 12% Senior Discount Notes due 2008. Class A Common Stock Grant to Executive Officers. On December 31, 1998, the Company granted to Mr. Bernstein, as his bonus compensation for 1998, 51,609 shares of its Class A common stock. On December 31, 1998, the Company also granted to Mr. Simkin, its Chief Operating Officer, as his bonus compensation for 1998, 26,542 shares of its Class A common stock. Option Exercise of Executive Officer. In June 1998, Ronald G. Bizick, II exercised his options to purchase 773,528 shares of Class A common stock at $0.05 per share, and the Company issued these shares to Mr. Bizick in exchange for $38,676.40. Option Exercises of Employees under 1996 Stock Option Plan. As of December 31, 1998, options to purchase 2,433 shares of our Class A common stock granted under the 1996 Stock Option Plan had been exercised by two employees of the Company. Item 16. Exhibits and Financial Statement Schedule (a) Exhibits
Exhibit No. Description of Exhibits ------- ----------------------- 1.1 --Form of Underwriting Agreement. 3.4 --Fourth Amended and Restated Articles of Incorporation of SBA Communications Corporation. 3.5 --Amended and Restated By-Laws of SBA Communications Corporation. 3.6 --Second Amended and Restated Statement of Designation 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 Class A Common Stock. **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 Gunster, Yoakley, Valdes-Fauli & Stewart, P.A., regarding the validity of the Class A Common Stock. **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.
II-3
Exhibit No. Description of Exhibits -------- ----------------------- **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 --Amended and Restated Credit Agreement, dated as of February 5, 1999, among the Company, Telecommunications, the several lenders from time to time parties thereto and Lehman Commercial Paper Inc., as administrative agent. +10.71 --Amendment and Waiver, dated as of May 7, 1999, to the Amended and Restated Credit Agreement among the Company, Telecommunications, the several lenders from time to time parties thereto and Lehman Commercial Paper, Inc., as administrative agent. +10.8 --Agreement and Plan of Merger, dated as of March 31, 1999, between the Company, Com-Net Construction Services, Inc., Daniel J. Eldridge and Eldridge Family Limited Partnership. +10.81 --First Amendment to Agreement and Plan of Merger, dated as of April 30, 1999 between the Company, Com-Net Construction Services Inc., Daniel J. Eldridge and Eldridge Family Limited Partnership. +10.9 --Purchase Agreement dated as of March 31, 1999, between the Company, Com-Net Development Group, LLC., Daniel J. Eldridge and Tammy W. Eldridge. +10.91 --First Amendment to Purchase Agreement, dated as of April 30, 1999, between the Company, Com-Net Development Group, LLC., Daniel J. Eldridge and Tammy W. Eldridge. **10.10 --Employment Agreement dated as of January 1, 1997, between the Company and Ronald G. Bizick, II. **10.11 --Employment Agreement dated as of January 1, 1997, between the Company and Robert M. Grobstein. **10.12 --Employment Agreement dated as of March 14, 1997, between the Company and Jeffrey A. Stoops. +10.13 --Stock Option Agreement--Revised dated March 14, 1997 by and between Steven E. Bernstein and Jeffrey A. Stoops. +10.14 --Pledge and Security Agreement--Revised dated March 14, 1997 by and between Steven E. Bernstein and Jeffrey A. Stoops. **10.15 --Employment Agreement dated as of June 15, 1998, between the Company and Michael N. Simkin. **10.16 --Stock Option Agreement dated as of March 5, 1997, between the Company and Ronald G. Bizick, II. **10.17 --Stock Option Agreement dated as of March 5, 1997, between the Company and Robert M. Grobstein. **10.18 --Incentive Stock Option Agreement dated as of June 15, 1998 between the Company and Michael N. Simkin. **10.19 --Nonqualified Stock Option Agreement-Revised dated March 14, 1997, between the Company and Jeffrey A. Stoops. **10.20 --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. **10.21 --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. 10.22 --Agreement to Build to Suit and to Lease, dated as of October 30, 1998, by and among BellSouth Personal Communications, Inc., for itself and as general partner of BellSouth Carolinas PCS, L.P., SBA Towers, Inc. and SBA, Inc. 10.23 --1996 Stock Option Plan.
II-4
Exhibit No. Description of Exhibits ------- ----------------------- 10.24 --1999 Equity Participation Plan. 10.25 --1999 Stock Purchase Plan. +11 --Computation of net loss per common share. 21.1 --Subsidiaries of SBA Communications Corporation. 23.1 --Consent of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A. (included in their opinion filed as Exhibit 5.1 hereto) 23.2 --Consent of Arthur Andersen LLP. 23.3 --Consent of Peter C. Cosmas Co., CPA. 23.4 --Consent of John A. Criscuola, CPA. 23.5 --Consent of Turbes Drealan Kvilhaug & Co. PA, CPA. +24.1 --Power of Attorney of SBA Communications Corporation (included on signature page to this Registration Statement on Form S-1). +27 --Financial Data Schedule.
- -------- + Previously Filed * To be filed by amendment ** Incorporated by reference to the exhibits in the Registration Statement on Form S-4 previously filed by the Registrant (Registration no. 333-50219) *** Incorporated by reference to exhibit 99.2 in the report on Form 8-K previously filed by the Registrant on February 24, 1999 (b) Financial Statement Schedules: Schedule I--Condensed Financial Information of Registrant All other schedules are omitted because they are not applicable or because the required information is contained in the financial statements or notes thereto included in this Registration Statement. Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, 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 and is, therefore, unenforceable. In the event that a claim for 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 or proceeding) is asserted 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 whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issues. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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-5 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 June 15, 1999. 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 person whose signature appears below constitutes and appoints each of Jeffrey A. Stoops and Robert Grobstein, or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities, in connection with the Registrant's Registration Statement on Form S-1 under the Securities Act of 1933, including to sign the Registration Statement in the name and on behalf of the Registrant or on behalf of the undersigned as a director or officer of the Registrant, and any and all amendments or supplements to the Registration Statement, including any and all stickers and post-effective amendments to the Registration Statement and to sign any and all additional registration statements relating to the same offerings of securities as those that are covered by the Registration Statement that are filed 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 and any applicable securities exchange or securities self- regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, 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 said attorneys-in-fact and agents, or their substitutes or substitute, may lawfully do or cause to be done by virtue hereof. II-6 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on this 15th day of June, 1999.
Signature Title Date --------- ----- ---- /s/ Steven E. Bernstein Chairman of the Board of June 15, 1999 Steven E. Bernstein Directors, President and Chief ______________________________ Executive Officer (Principal Executive Officer) /s/ Jeffrey A. Stoops Chief Financial Officer June 15, 1999 Jeffrey A. Stoops (Principal Financial Officer) ______________________________ /s/ Robert M. Grobstein Chief Accounting Officer June 15, 1999 Robert M. Grobstein (Principal Accounting Officer) ______________________________ /s/ Donald B. Hebb, Jr. Donald B. Hebb, Jr. Director June 15, 1999 ______________________________ /s/ C. Kevin Landry Director June 15, 1999 C. Kevin Landry ______________________________ /s/ Richard W. Miller Director June 15, 1999 Richard W. Miller ______________________________ /s/ Robert S. Picow Director June 15, 1999 Robert S. Picow ______________________________
II-7 EX-1.1 2 FORM OF UNDERWRITING AGREEMENT EXHIBIT 1.1 11,538,462 Shares SBA Communications Corporation Class A Common Stock UNDERWRITING AGREEMENT ---------------------- June 15, 1999 Lehman Brothers Inc. Deutsche Bank Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation Salomon Smith Barney Inc., As Representatives of the several Underwriters named in Schedule 1 hereto, c/o Lehman Brothers Inc. Three World Financial Center New York New York 10285 Dear Sirs: SBA Communications Corporation, a Florida corporation (the "Company"), proposes to sell to the underwriters named in Schedule 1 hereto (the "Underwriters"), for whom Lehman Brothers Inc., Deutsche Bank Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Smith Barney Inc. are acting as representatives (the "Representatives"), an aggregate of 11,538,462 shares (the "Firm Stock") of the Company's Class A Common Stock, par value $0.01 per share (the "Common Stock"). In addition, the Company proposes to grant to the Underwriters an option to purchase up to an aggregate of 1,730,769 additional shares of the Common Stock on the terms and for the purposes set forth in Section 3 (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the "Stock." This is to confirm the agreement concerning the purchase of the Stock from the Company by the Underwriters. SECTION 1. Representations, Warranties and Agreements of the Company and the Principal Subsidiary. Each of the Company and SBA Telecommunications, Inc., its principal operating subsidiary (the "Principal Subsidiary") represent, warrant and agree that: (a) A registration statement on Form S-1 with respect to the Stock has (i) been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations (the "Rules and Regulations") of 2 the Securities and Exchange Commission (the "Commission") thereunder, (ii) been filed with the Commission under the Securities Act and (iii) become effective under the Securities Act. Copies of such registration statement and each of the amendments thereto have been delivered by the Company to you. As used in this Agreement, "Effective Time" means the date and the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such registration statement, or amendments thereof, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company with the consent of the Representatives pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statement, as amended at the Effective Time, including all information contained in the final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations and deemed to be a part of the registration statement as of the Effective Time pursuant to Rule 430A of the Rules and Regulations; and "Prospectus" means such final prospectus as first used to confirm sales of Stock. If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. (b) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable effective date (as to the Registration Statement and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. (c) The Company and each of its subsidiaries (as defined in Section 17) have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged; and none of the subsidiaries of the Company other than the Principal Subsidiary is a "significant subsidiary", as such term is defined in Rule 405 of the Rules and Regulations. (d) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform in all material respects to 3 the description thereof contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and (except for directors' qualifying shares and except as set forth in the Registration Statement with respect to shares subject to liens under the Credit Agreement, dated as of February 5, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among the Company, the Principal Subsidiary, the several lenders from time to time parties thereto, Lehman Brothers Inc., as co-arranger, General Electric Capital Corporation, as co-arranger and syndication agent, Toronto Dominion (Texas), Inc., as documentation agent, Barclays Bank PLC, as co-documentation agent, and Lehman Commercial Paper Inc., as administrative agent) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) The shares of the Stock to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein will be duly and validly issued, fully paid and non-assessable; and the Stock will conform to the description thereof contained in the Prospectus. (f) This Agreement has been duly authorized, executed and delivered by each of the Company and the Principal Subsidiary. (g) Each of the Company and the Principal Subsidiary has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. (h) The execution, delivery and performance of this Agreement by each of the Company and the Principal Subsidiary and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and applicable state or foreign securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby other than such consents, approvals, authorizations, orders, filings or registrations the failure of which to make or obtain would not have a material adverse effect on the general affairs, management, consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). 4 (i) Except as described in the Registration Statement, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act. (j) The Company has not sold or issued any shares of Common Stock during the six-month period preceding the date of the Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act other than shares issued pursuant to employee benefit plans, qualified stock options plans or other employee compensation plans or pursuant to outstanding options, rights or warrants. (k) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since such date, there has not been any change in the capital stock or long-term debt of the Company on a consolidated basis or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Prospectus. (l) The financial statements (including the related notes and supporting schedules) filed as part of the Registration Statement or included in the Prospectus present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The other financial information and data filed as part of the Registration Statement or included in the Prospectus is fairly presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (m) Arthur Andersen LLP, who have certified certain financial statements of the Company, whose report appears in the Prospectus and who have delivered the initial letter referred to in Section 9(f) hereof, are independent public accountants as required by the Securities Act and the Rules and Regulations; and Peter C. Cosmos Co., CPA, John A. Criscuola, CPA and Turbes Drealan Kvilhaug & Co., PA, CPA, each of whose reports appears in the Prospectus, were each independent accountants as required by the Securities Act and the Rules and Regulations during the periods covered by the financial statements on which they reported contained in the Prospectus. (n) The Company and each of its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such as are 5 described in the Prospectus or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; all assets held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries taken as a whole; and the present and contemplated use of the assets owned or leased by the Company or any of its subsidiaries for the operation of towers is in compliance in all material respects with all applicable zoning ordinances and regulations and other laws and regulations where failure so to comply would result, or create reasonable risk of resulting, in a Material Adverse Effect. (o) The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. (p) The Company and each of its subsidiaries own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others, in each case except as could not reasonably be expected to have a Material Adverse Effect. (q) There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, might have a Material Adverse Effect; and to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (r) There are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described in the Prospectus or filed as exhibits to the Registration Statement. (s) No material relationship, direct or indirect, exists between or among the Company or the Principal Subsidiary on the one hand, and the directors, officers, shareholders, customers or suppliers of the Company or the Principal Subsidiary on the other hand, which is required to be described in the Prospectus which is not so described. (t) No labor disturbance by the employees of the Company exists or, to the knowledge of the Company, is imminent, which might be expected to have a Material Adverse Effect. 6 (u) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (v) The Company has filed all federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes due thereon, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, might have) a Material Adverse Effect. (w) Since the date as of which information is given in the Prospectus through the date hereof, and except as may otherwise be disclosed in the Prospectus, the Company has not (i) issued or granted any securities, (ii) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations which were incurred in the ordinary course of business, (iii) entered into any material transaction not in the ordinary course of business or (iv) declared or paid any dividend on its capital stock. (x) The Company (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. (y) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business. 7 (z) Neither the Company nor any of its subsidiaries, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (aa) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not be reasonably likely to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. (bb) Neither the Company nor any subsidiary is, or upon application of the net proceeds from the sale of the Stock as set forth in the Prospectus, will be, an "investment company" as defined in the Investment Company Act of 1940, as amended. (cc) Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the Company's computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Company's systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by September 30, 1999. The cost to the Company of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Company (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Company and its subsidiaries are and, with ordinary course upgrading and maintenance, will continue to be, sufficient to permit the Company to conduct its business without a Material Adverse Effect. 8 (dd) The Company (i) has duly and timely filed all material reports, registrations and other material filings, if any, which are required to be filed by it or any of its subsidiaries under the Communications Act of 1934, any similar or successor federal statute, and the rules of the Federal Communications Commission ("FCC") thereunder or any other applicable law, rule or regulation of any governmental authority, including the FCC and the Federal Aviation Authority ("FAA"), the non-filing of which would not result, or be reasonably likely to result, in a Material Adverse Effect and (ii) is in compliance with all such laws, rules, regulations and ordinances, including those promulgated by the FCC and the FAA, to the extent the non-compliance with which would result, or be reasonably likely to result, in a Material Adverse Effect. All information provided by or on behalf of the Company or any affiliate in any material filing, if any, with the FCC and the FAA relating to the business of the Company and its subsidiaries was, to the knowledge of such person at the time of filing, complete and correct in all material respects when made, and the FCC and the FAA have been notified of any substantial or significant changes in such information as may be required in accordance with applicable requirements of law. (ee) The industry-related and tower-related data and estimates included in the Prospectus are based on or derived from sources which the Company believes to be reliable and accurate. (ff) For each existing tower of the Company (or of its subsidiaries) not yet registered with the FCC where registration will be required, the FCC's grant of an application for registration of such tower will not have a significant environmental effect as defined under Section 1.1307(a) of the FCC's rules. (gg) Neither the Company, nor to its knowledge, any of its affiliates, has taken, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock (including the Stock) to facilitate the sale or resale of such shares. (hh) Except as set forth in the Registration Statement, there are no affiliations or associations between any member of the National Association of Securities Dealers, Inc. ("NASD") and any of the Company's officers or directors or shareholders that own at least five percent of the aggregate number of outstanding shares of Common Stock. SECTION 2. [Reserved]. SECTION 3. Purchase of the Stock by the Underwriters. On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell 11,538,462 shares of the Firm Stock to the several Underwriters and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock set forth opposite that Underwriter's name in Schedule 1 hereto. The respective purchase obligations of the Underwriters with respect to the Firm Stock shall be rounded among the Underwriters to avoid fractional shares, as the Representatives may determine. 9 In addition, the Company grants to the Underwriters an option to purchase up to 1,730,769 shares of the Option Stock. Such options are granted for the purpose of covering over-allotments in the sale of Firm Stock and are exercisable as provided in Section 5 hereof. Shares of Option Stock shall be purchased severally for the account of the Underwriters in proportion to the number of shares of Firm Stock set forth opposite the name of such Underwriters in Schedule 1 hereto. The respective purchase obligations of each Underwriter with respect to the Option Stock shall be adjusted by the Representatives so that no Underwriter shall be obligated to purchase Option Stock other than in 100 share amounts. The price of both the Firm Stock and any Option Stock shall be $[ ] per share. The Company shall not be obligated to deliver any of the Stock to be delivered on any Delivery Date (as hereinafter defined), except upon payment for all the Stock to be purchased on such Delivery Date as provided herein. SECTION 4. Offering of Stock by the Underwriters. Upon authorization by the Representatives of the release of the Firm Stock, the several Underwriters propose to offer the Firm Stock for sale upon the terms and conditions set forth in the Prospectus. SECTION 5. Delivery of and Payment for the Stock. Delivery of and payment for the Firm Stock shall be made at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York New York 10017, at 10:00 A.M., New York City time, on the third full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the "First Delivery Date." On the First Delivery Date, the Company shall deliver or cause to be delivered certificates representing the Firm Stock to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer in immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in such names and in such denominations as the Representatives shall request in writing not less than two full business days prior to the First Delivery Date. For the purpose of expediting the checking and packaging of the certificates for the Firm Stock the Company shall make the certificates representing the Firm Stock available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to the First Delivery Date. The option granted in Section 3 will expire 30 days after the date of this Agreement and may be exercised in whole or in part from time to time by written notice being given to the Company by the Representatives. Such notice shall set forth the aggregate number of shares of Option Stock as to which the option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Representatives, when the shares of Option Stock are to be delivered; provided, however, that this date and time shall not be earlier than the First Delivery Date nor earlier than the second business day after the date on 10 which the option shall have been exercised nor later than the fifth business day after the date on which the option shall have been exercised. The date and time the shares of Option Stock are delivered are sometimes referred to as a "Second Delivery Date" and the First Delivery Date and any Second Delivery Date are sometimes each referred to as a "Delivery Date". Delivery of and payment for the Option Stock shall be made at the place specified in the first sentence of the first paragraph of this Section 5 (or at such other place as shall be determined by agreement between the Representatives and the Company) at 10:00 A.M., New York City time, on such Second Delivery Date. On such Second Delivery Date, the Company shall deliver or cause to be delivered the certificates representing the Option Stock owned by it to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer in immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall be registered in such names and in such denominations as the Representatives shall request in the aforesaid written notice. For the purpose of expediting the checking and packaging of the certificates for the Option Stock, the Company shall make the certificates representing the Option Stock owned by it available for inspection by the Representatives in New York, New York, not later than 2:00 P.M., New York City time, on the business day prior to such Second Delivery Date. SECTION 6. Further Agreements of the Company. The Company agrees: (a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to make no further amendment or any supplement to the Registration Statement or to the Prospectus except as permitted herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; (b) To furnish promptly to each of the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith; 11 (c) To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits) and (ii) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if the delivery of a prospectus is required at any time after the Effective Time in connection with the offering or sale of the Stock or any other securities relating thereto and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus which will correct such statement or omission or effect such compliance; (d) To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the reasonable judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission; (e) Prior to filing with the Commission any amendment to the Registration Statement or supplement to the Prospectus or any Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing (which consent may not be unreasonably withheld); (f) As soon as practicable after the Effective Date, to make generally available to the Company's security holders and to deliver to the Representatives an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 1l(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158); (g) Until completion of the distribution contemplated hereby, to furnish to the Representatives copies of all materials furnished by the Company to its shareholders and all public reports and all reports and financial statements furnished by the Company to the principal national securities exchange upon which the Common Stock may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder; (h) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Stock; provided that in connection therewith the Company shall 12 not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (i) For a period of 180 days from the date of the Prospectus, not to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Commission and shares of Common Stock that may be issued upon exercise of any option or warrant) or securities convertible into or exchangeable for Common Stock (other than the Stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights) or substantially similar securities, or sell or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock or substantially similar securities (other than the grant of options pursuant to option plans existing on the date hereof), or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case without the prior written consent of Lehman Brothers Inc. on behalf of the Underwriters (it being understood that (x) gifts and other private transfers of Common Stock solely for the purpose of estate planning and (y) transfers of Common Stock in private transactions shall each be permitted; provided, that in the case of any transfer pursuant to the foregoing clauses (x) - -------- and (y), the transferee agrees to be bound by all of the foregoing terms and provisions of this Section 6(i)); and to cause each officer, director and shareholder (other than those named on Schedule 2 hereto) of the Company to furnish to the Representatives, prior to the First Delivery Date, a letter or letters, substantially in the form of Exhibit A hereto; (j) To apply for the listing of the Stock on the National Market System, and to use its best efforts to complete that listing, subject only to official notice of issuance, prior to the First Delivery Date; (k) To apply the net proceeds from the sale of the Stock as set forth in the Prospectus; (l) To take such steps as shall be necessary to ensure that neither the Company nor any subsidiary shall become an "investment company" as defined in the Investment Company Act of 1940, as amended; and (m) Not to take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock (including the Stock) to facilitate the sale or resale of such shares. SECTION 7. [Reserved]. 13 SECTION 8. Expenses. The Company agrees to pay (a) the costs incident to the authorization, issuance, sale and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration Statement as originally filed and each amendment thereto and any post-effective amendments thereof (including, in each case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus, all as provided in this Agreement; (d) the filing fees incident to securing the review by the NASD of the terms of sale of the Stock; (e) any applicable listing or other fees; (f) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 6(h) and preparing, printing and distributing a Blue Sky Memorandum (including related fees and expenses of counsel to the Underwriters not to exceed $7500); and (g) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided that, except as provided in this Section 8 and in Section 13, the Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the Stock made by the Underwriters. Notwithstanding the foregoing, the Underwriters agree to pay the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Stock, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show. SECTION 9. Conditions of Underwriters' Obligations. The respective obligations of the Underwriters hereunder are subject (x) to the accuracy when made and on each Delivery Date, of the representations and warranties of the Company and the Principal Subsidiary contained herein (provided, that in the -------- case of this clause (x), the obligations of the Underwriters hereunder shall be subject to the accuracy in all material respects of those representations and warranties that are not qualified by material adverse effect), (y) to the performance in all material respects by the Company of its obligations hereunder and (z) to each of the following additional terms and conditions: (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 6(a); no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. (b) No Underwriter shall have discovered and disclosed to the Company on or prior to the First Delivery date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of fact which, in the opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, is material or omits to state a fact 14 which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) Latham & Watkins shall have furnished to the Representatives its written opinion, as counsel to the Company, addressed to the Underwriters and dated the First Delivery Date, in substantially the form attached hereto as Exhibit B. (e) Gunster, Yoakley, Valdes-Fauli & Stewart P.A. shall have furnished to the Representatives its written opinion, as Florida counsel to the Company, addressed to the Underwriters and dated the First Delivery Date, in substantially the form attached hereto as Exhibit C. (f) The Representatives shall have received from Simpson Thacher & Bartlett, counsel for the Underwriters, such opinion or opinions substantially in the form attached hereto as Exhibit D, dated such Delivery Date, with respect to the issuance and sale of the Stock, the Registration Statement, the Prospectus and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (g) At the time of execution of this Agreement, the Representatives shall have received from Arthur Andersen LLP a letter, in form and substance satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings. (h) With respect to the letter of Arthur Andersen LLP referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement (the "initial letter"), the Company shall have furnished to the Representatives a letter (the "bring-down letter") of such accountants, addressed to the Underwriters and dated such Delivery Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or 15 developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter. (i) The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of its Chairman of the Board or its President and its chief financial officer stating that: (i) The representations, warranties and agreements of the Company and the Principal Subsidiary in Section 1 are true and correct as of such Delivery Date (provided, that such representations, warranties and -------- agreements that are not qualified by material adverse effect shall be true and correct in all material respects); the Company has complied in all material respects with all its agreements contained herein; and the conditions set forth in Sections 9(a), 9(j) and 9(k) have been fulfilled; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion (A) as of the Effective Date, the Registration Statement and the Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (B) since the Effective Date no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus. (j) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus (i) any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company on a consolidated basis or any material adverse change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (k) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities. 16 (l) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the public offering or delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (m) The National Market System shall have approved the Stock for listing, subject only to official notice of issuance and evidence of satisfactory distribution. (n) The Representatives shall have received from each officer, director and shareholder of the Company owning at least 10,000 shares of Common Stock or common stock equivalents or options exercisable within 180 days of the date of the final Prospectus to acquire at least 10,000 shares of Common Stock an executed letter in the form of Exhibit E pursuant to Section 6(i) hereto. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. SECTION 10. Indemnification and Contribution. (a) The Company and the Principal Subsidiary, jointly and severally, shall indemnify and hold harmless each Underwriter (including any Underwriter in its role as a qualified independent underwriter pursuant to the rules of the National Association of Securities Dealers, Inc.), its officers and employees and each person, if any, who controls any Underwriter within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Stock), to which that Underwriter, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky application, any material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to 17 act by any Underwriter in connection with, or relating in any manner to, the Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (provided that the Company and the Principal Subsidiary shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct), and shall reimburse each Underwriter and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Principal Subsidiary shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any such amendment or supplement, in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein which information consists solely of the information specified in Section 10(e). The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Underwriter or to any officer, employee or controlling person of that Underwriter. (b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers and employees, each of its directors, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Underwriter may otherwise have to the Company or any such director, officer, employee or controlling person. 18 (c) Promptly after receipt by an indemnified party under this Section 10 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 10, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 10 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 10. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 10 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Representatives shall have the right to employ counsel to represent jointly the Representatives and those other Underwriters and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Underwriters against the Company or the Principal Subsidiary under this Section 10 if, in the reasonable judgment of the Representatives, it is advisable for the Representatives and those Underwriters, officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Company or the Principal Subsidiary. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 10 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 10(a) or 10(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Principal Subsidiary on the one hand and the Underwriters on the other from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is 19 appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company or the Principal Subsidiary on the one hand and the Underwriters on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Principal Subsidiary on the one hand and the Underwriters on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company and the Principal Subsidiary, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Stock purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the shares of the Stock under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to 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, the Principal Subsidiary, or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding two sentences, the net proceeds deemed to be received by the Company shall be deemed to be also for the benefit of the Principal Subsidiary and information supplied by the Company shall also be deemed to have been supplied by the Principal Subsidiary. The Company, the Principal Subsidiary and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 10(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 10(d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 1l(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section 10(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Underwriters severally confirm and the Company acknowledges that the statements with respect to the public offering of the Stock by the Underwriters set forth on the cover page of and the concession and reallowance figures and the statements concerning over-allotments appearing under the caption "Underwriting" in, the Prospectus are correct and constitute the only information concerning such Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically for inclusion in the Registration Statement and the Prospectus. 20 SECTION 11. Defaulting Underwriters. If, on either Delivery Date, any Underwriter defaults in the performance of its obligations under this Agreement, the remaining non- defaulting Underwriters shall be obligated to purchase the Stock which the defaulting Underwriter agreed but failed to purchase on such Delivery Date in the respective proportions which the number of shares of the Firm Stock set opposite the name of each remaining non-defaulting Underwriter in Schedule 1 hereto bears to the total number of shares of the Firm Stock set opposite the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto; provided, however, that the remaining non-defaulting Underwriters shall not be obligated to purchase any of the Stock on such Delivery Date if the total number of shares of the Stock which the defaulting Underwriter or Underwriters agreed but failed to purchase on such date exceeds 9.09% of the total number of shares of the Stock to be purchased on such Delivery Date, and any remaining non- defaulting Underwriter shall not be obligated to purchase more than 110% of the number of shares of the Stock which it agreed to purchase on such Delivery Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or those other underwriters satisfactory to the Representatives who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the Stock to be purchased on such Delivery Date. If the remaining Underwriters or other underwriters satisfactory to the Representatives do not elect to purchase the shares which the defaulting Underwriter or Underwriters agreed but failed to purchase on such Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the obligation of the Underwriters to purchase, and of the Company to sell, the Option Stock) shall terminate without liability on the part of any non-defaulting Underwriter or the Company except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 13. As used in this Agreement, the term "Underwriter" includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 11, purchases Firm Stock which a defaulting Underwriter agreed but failed to purchase. Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company for damages caused by its default. If other underwriters are obligated or agree to purchase the Stock of a defaulting or withdrawing Underwriter, either the Representatives or the Company may postpone the Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement. SECTION 12. Termination. The obligations of the Underwriters hereunder may be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 9(j), 9(k) or 9(l), shall have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement. SECTION 13. Reimbursement of Underwriters' Expense. If the Company shall fail to tender the Stock for delivery to the Underwriters by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or 21 because any other condition of the Underwriters' obligations hereunder required to be fulfilled by the Company is not fulfilled (other than pursuant to Section 9(l)(iv)), the Company will reimburse the Underwriters for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Stock and upon demand the Company shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 11 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses. SECTION 14. Notices, Etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Underwriters, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York New York 10285, Attention: Syndicate Department (Fax: 212-526-6588), with a copy, in the case of any notice pursuant to Section 10(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., Three World Financial Center, 10th Floor, New York, New York 10285; (b) if to the Company or to the Principal Subsidiary, shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Jeffrey A. Stoops (Fax: 561-997-0343) with a copy to Kirk A. Davenport, Latham & Watkins, 885 Third Avenue, New York, New York 10022 (Fax: 212-751-4864); provided, however, that any notice to an Underwriter pursuant to Section 10(c) shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its acceptance telex to the Representatives, which address will be supplied to any other party hereto by the Representatives upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf of the Representatives. SECTION 15. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company and their respective representatives and successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representations, warranties, indemnities and agreements of the Company and the Principal Subsidiary contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of the Underwriters contained in Section 10(b) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 15, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 22 SECTION 16. Survival. The respective indemnities, representations, warranties and agreements of the Company, the Principal Subsidiary and the Underwriters contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. SECTION 17. Definition of the Terms "Business Day" and "Subsidiary". For purposes of this Agreement, (a) "business day" means each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. SECTION 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of New York. SECTION 19. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. SECTION 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 23 If the foregoing correctly sets forth the agreement among the Company, the Principal Subsidiary, and the Underwriters, please indicate your acceptance in the space provided for that purpose below. Very truly yours, SBA Communications Corporation By_________________________________ Name: Title: SBA Telecommunications, Inc., The Principal Subsidiary By_________________________________ Name: Title: 24 Accepted: Lehman Brothers Inc. Deutsche Bank Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation Salomon Smith Barney Inc. For themselves and as Representatives of the several Underwriters named in Schedule 1 hereto By Lehman Brothers Inc. By______________________________ Authorized Representative 25 SCHEDULE 1
Number of Shares of Firm Underwriters Stock to be Purchased - ------------ ------------------------ Lehman Brothers Inc.................................... 3,834,462 Deutsche Bank Securities Inc........................... 1,918,000 Donaldson, Lufkin & Jenrette Securities Corporation.... 1,918,000 Salomon Smith Barney Inc............................... 1,918,000 BancBoston Robertson Stephens Inc...................... 150,000 Bear, Stearns & Co. Inc................................ 150,000 Credit Suisse First Boston Corporation................. 150,000 Dresdner Kleinwort Benson North America LLC............ 150,000 Goldman, Sachs & Co.................................... 150,000 Morgan Stanley & Co. Incorporated...................... 150,000 PaineWebber Incorporated............................... 150,000 RBC Dominion Securities Corporation.................... 150,000 Raymond James & Associates Inc......................... 150,000 Legg Mason Wood Walker, Incorporated................... 100,000 Needham & Company, Inc................................. 100,000 Sands Brothers & Co. Ltd............................... 100,000 SunTrust Equitable Securities Corporation.............. 100,000 Sutro & Co. Incorporated............................... 100,000 Wachovia Securities, Inc............................... 100,000 ---------- Total.................................................. 11,538,462 ==========
26 SCHEDULE 2 ---------- Name and Address of Shareholders Not Subject to Lock-Up Agreement - ----------------------------------------------------------------- [List Shareholders] 27 EXHIBIT A LOCK-UP LETTER AGREEMENT Lehman Brothers Inc. Deutsche Bank Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation Salomon Smith Barney Inc. As Representatives of the several Underwriters named in Schedule 1, c/o Lehman Brothers Inc. Three World Financial Center New York New York 10285 Dear Sirs: The undersigned understands that you and certain other firms propose to enter into an Underwriting Agreement (the "Underwriting Agreement") providing for the purchase by you and such other firms (the "U.S. Underwriters") of shares (the "Shares") of Class A common stock, par value $0.01 per share (the "Common Stock"), of SBA Communications Corporation, a Florida corporation (the "Company"), and that the U.S. Underwriters propose to reoffer the Shares to the public (the "U.S. Offering"). In consideration of the execution of the Underwriting Agreement by the U.S. Underwriters, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Lehman Brothers Inc., on behalf of the U.S. Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any option or warrant) or securities convertible into or exchangeable for Common Stock (other than the Shares and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights) or substantially similar securities owned by the undersigned on the date of execution of this Lock-Up Letter Agreement or on the date of the completion of the U.S. Offering, or sell or grant options, rights or warrants with respect to any shares of Common Stock or substantially similar securities (other than the grant of options pursuant to option plans existing on the date hereof) or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, for a period of 180 days after the date of the final Prospectus relating to the U.S. Offering. Notwithstanding the foregoing, the undersigned shall be permitted to make (i) gifts and other private transfers of Common Stock solely for the purpose of estate planning and (ii) transfers of Common Stock in private transactions; provided, that in the case of any transfer pursuant to the foregoing clauses (i) - -------- and (ii), the transferee agrees to be bound by all of the terms and provisions of this Lock-Up Letter Agreement. In furtherance of the foregoing, the Company is hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement. It is understood that, if the Company notifies you that it does not intend to proceed with the U.S. Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares, we will be released from our obligations under this Lock-Up Letter Agreement. The undersigned understands that the Company and the U.S. Underwriters will proceed with the U.S. Offering in reliance on this Lock-Up Letter Agreement. Whether or not the U.S. Offering actually occurs depends on a number of factors, including market conditions. Any U.S. Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the U.S. Underwriters. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Very truly yours, By:_________________________________ Name: Title: Dated:____________ EXHIBIT B [FORM OF OPINION OF LATHAM & WATKINS] EXHIBIT C [FORM OF OPINION OF GUNSTER, YOAKLEY, VALDES-FAULI & STEWART P.A.] EXHIBIT D [FORM OF OPINION OF SIMPSON THACHER & BARTLETT] EX-3.4 3 FOURTH AMENDED AND RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.4 FOURTH 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, and were amended at various times thereafter. 2. The Amended and Restated Articles of Incorporation set forth herein have been duly approved by written consent dated June 7, 1999 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 Registered Agent and Office The name of the Corporation is SBA Communications Corporation. The principal place of business of this Corporation shall be One Town Center Road, Third Floor, c/o General Counsel, Boca Raton, Florida 33486. The mailing address of this Corporation shall be One Town Center Road, Third Floor, Boca Raton, Florida 33486, Attention: Legal Department. The street address of the registered office of this Corporation is 1201 Hays Street, Tallahassee, Florida 32301. The name of the registered agent of this Corporation at such address is Corporation Service Company. 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 One Hundred Thirty Eight Million One Hundred Thousand (138,100,000) shares, of which Thirty Million (30,000,000) shares shall be Preferred Stock, having a par value of $0.01 per share ("Preferred Stock"), One Hundred Million (100,000,000) shares shall be classified as Class A Common Stock, par value $0.01 per share ("Class A Common Stock") and Eight Million One Hundred Thousand (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. 2 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 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 3 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 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 4 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 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. 8. Amendment of Terms of a Class of Common Stock. Notwithstanding any other provision of these Articles of Incorporation, any amendment to these Articles of Incorporation implemented on or after the date of consummation of an initial public offering of shares of Class A Common Stock that alters or changes the powers, preferences or special rights of Class B Common Stock will require both a separate class vote of the Class A Common Stock as to such amendment and a separate class vote of the Class B Common Stock as to such amendment. 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; 5 (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 (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. 6 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. 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. CLASSIFICATION OF BOARD The Board of Directors shall be and is divided into three classes, Class I, Class II and Class III, with the number of directors in each class being as nearly equal as possible. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors assigned to -------- ------- Class I shall serve for a term ending on the date of the first annual meeting next following May 31, 1999, the directors assigned to Class II shall serve for a term ending on the date of the second annual meeting next following May 31, 1999, and the directors assigned to Class III shall serve for a term ending on the date of the third annual meeting next following May 31, 1999. Any increase or decrease in the number of directors shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. Notwithstanding any of the foregoing provisions of this Article, each director shall serve until his successor is elected and qualified or until his death, retirement, resignation or removal. Should a vacancy occur or be created, the remaining directors (even though less than a quorum) may fill the vacancy for the full term of the class in which the vacancy occurs or is created. C. 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 7 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, Section 607.0850(7) 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. 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. 8 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 ____ day of June, 1999. /s/ Steven E. Bernstein ------------------------------------- Steven E. Bernstein President and Chief Executive Officer 9 EX-3.5 4 AMENDED AND RESTATED ARTICLES OF INC OF SBA EXHIBIT 3.5 AMENDED AND RESTATED BYLAWS OF SBA COMMUNICATIONS CORPORATION As adopted by the Board of Directors on the 7th day of June 1999. 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. 2 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. 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. 3 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, 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. 4 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. 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 5 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 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. Section 19. Notifications of Nominations and Proposed Business. -------------------------------------------------- (a) General. Subject to the rights of holders of any class or series ------- of stock having a preference over the Common Stock as to dividends or upon liquidation, (i) nominations for the election of directors, and (ii) business proposed to be brought before any shareholder meeting may be made by the Board of Directors or proxy committee appointed by the Board of Directors or by any shareholder entitled to vote in the election of directors generally. However, any such shareholder may nominate one or more persons for election as directors at a meeting or propose business to be brought before a meeting, or both, only if such shareholder has given timely notice 6 in proper written form of his intent to make such nomination or nominations or to propose such business. To be timely, a shareholder's notice must be delivered to or mailed and received by the Secretary of the Corporation as set forth in paragraph (b) with respect to an annual meeting or as set forth in paragraph (c) with respect to a special meeting. To be in proper written form, a shareholder's notice to the Secretary shall set forth: (i) the name and address of the shareholder who intends to make the nominations or propose the business and, as the case may be, of the person or persons to be nominated or of the business to be proposed; (ii) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a representation as to whether the shareholder or the beneficial owner, if any, intends or is part of a group which intends to (a) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise solicit proxies from shareholders in support of such proposal or nomination; (iv) if applicable, a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (v) such other information regarding each nominee or each matter of business to be proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated or the matter been proposed or intended to be proposed by the Board of Directors; and (vi) if applicable, the consent of each nominee to serve as director of the corporation if so elected. (b) Annual Meetings. For nominations or other business to be properly --------------- brought before an annual meeting by a shareholder pursuant to this Section 19, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the one hundred twentieth day nor earlier than the close of business on the one hundred fiftieth day prior to the date of the Corporation's proxy statement released to shareholders in connection with the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than seventy days after the first anniversary of the preceding year's annual meeting, notice by the shareholder 7 must be so delivered not earlier than the close of business on the one hundred fiftieth day prior to such annual meeting and not later than the close of business on the later of the one hundred twentieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a shareholder's notice as described above. Notwithstanding anything in the second sentence of this paragraph (b) to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred thirty days prior to the date of the Corporation's proxy statement released to shareholders in connection with the preceding year's annual meeting, a shareholder's notice required by this Section 19 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (c) Special Meetings. Only such business shall be conducted at a special ---------------- meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board of Directors or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any shareholder of the Corporation who is a shareholder of record at the time the notice provided for in this Section 19 is delivered to the Secretary of the Corporation, who shall be entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 19. In the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any such shareholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting, if the shareholder's notice required by paragraph (a) of this Section 19 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred fiftieth day prior to such special meeting and not later than the close of business on the one hundred twentieth day prior to such special meeting, or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a shareholder's notice as described above. (d) Public Announcement. For purposes of this Section 19, "public ------------------- announcement" shall mean disclosure in a press release reported by Business Wire, the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act (the "Exchange Act"). 8 (e) Exchange Act Compliance. Notwithstanding the foregoing provisions ----------------------- of this Section 19, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 19. Nothing in this Section 19 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances. The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. 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. 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 9 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. 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. 10 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 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 11 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. 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 12 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. (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. 13 (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. (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. 14 (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 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. 15 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 canceled 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 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 16 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. 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. 17 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 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. 18 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 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. 19 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. 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 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. 20 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 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. 21 EX-3.6 5 SECOND AMENDED AND RESTATED STATEMENT EXHIBIT 3.6 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF SBA COMMUNICATIONS CORPORATION SECOND 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 June 7, 1999, 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 Convertible Preferred Stock, $.01 par value per share, consisting of 8,050,000 shares issued and authorized (the "Series A Preferred Stock"), the 4% Series B Redeemable Preferred Stock, $.01 par value per share, consisting of 8,050,000 shares authorized, no shares issued (the "Series B Preferred Stock"), the 4% Series C Convertible Preferred Stock, par value $.01 per share, consisting of up to 4,472,272 shares authorized, no shares issued (the "Series C Preferred Stock"), 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 (the "Series D Preferred Stock"), shall be amended and restated as set forth in this Second 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 therefor, 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 2 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 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 662/3% 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 3 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 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 4 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 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 5 designated by notice to the holders of Series A Preferred Stock and each surrendered certificate shall be canceled and retired. (g) All shares of Series A Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be returned to the status of authorized, unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. (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 Second 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 6 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. (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. 7 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 2/3%) 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 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. 8 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 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 9 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 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: 10 (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. (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 11 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 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 12 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 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 13 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 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 14 (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 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 15 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. ----------------------- 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 therefor 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. 16 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 therefor, 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. 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 17 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, 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 18 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. (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). 19 (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 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, 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 20 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) All shares of Series B Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be returned to the status of authorized, unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. (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. 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 therefor, 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 21 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 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 22 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. 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 23 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 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 24 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. (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. 25 (g) All shares of Series C Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be returned to the status of authorized, unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. In addition, upon the occurrence of (a) the redemption, purchase or conversion of all outstanding shares of Series A Preferred Stock together with (b) the redemption, purchase or conversion of all outstanding shares of Series B Preferred Stock, all shares of Series C Preferred Stock of the Corporation shall be returned to the status of authorized, unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. (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 Second 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 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. 26 (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. (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. 27 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. ------------------------------- (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 28 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 Series C 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 C 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 C Preferred Stock) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of the Series C Preferred Stock (including an immediate adjustment, by reason of such Adjustment Event of the Series C Preferred Stock to the value for 29 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 30 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. (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 31 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 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 32 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 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 33 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 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 34 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 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 35 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 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 therefor 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 36 legally available therefor, 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 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. 37 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. 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 38 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. (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 39 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 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. (h) All shares of Series D Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be returned to the status of authorized, 40 unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. In addition, upon the occurrence of (a) the redemption, purchase or conversion of all outstanding shares of Series A Preferred Stock together with (b) the redemption, purchase or conversion of all outstanding shares of Series B Preferred Stock, all shares of Series D Preferred Stock of the Corporation shall be deemed to be authorized, unissued and undesignated shares of the Corporation's preferred stock, and all such shares shall no longer be governed by this Statement of Designation, Preferences, Rights and Limitations. (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 2/3% 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. F. HEADINGS. -------- The section headings in this Second Amended and Restated Statement of Designation, Preferences, Rights and Limitations have been inserted as a matter of convenience of reference and shall not be deemed to be part of this Second Amended and Restated Statement of Designation, Preferences, Rights and Limitations. 41 G. DUE APPROVAL. ------------ This Second Amended and Restated Statement of Designation, Preferences, Rights and Limitations has been duly approved by written consent dated June __, 1999 of all the Directors and the holders of over 66 2/3% of outstanding voting shares of the Corporation in accordance with Sections 607.0821 and 607.0704 of the Florida Business Corporation Act, and the number of votes cast were sufficient for approval. 42 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 ___ day of June __, 1999. (CORPORATE SEAL) ___________________________________________ Steven E. Bernstein, President ___________________________________________ Robert M. Grobstein, Secretary 43 IN WITNESS WHEREOF, the undersigned hereby affix their hands and seals effective as of June ___, 1999. ABS Capital Partners II, L.P. By: ABS Partners II, L.L.C., its General Partner /s/ Donald Hebb, Jr. ----------------------------------------- By: Donald Hebb, Jr. Managing Member Advent Atlantic & Pacific III, L.P. By: TA Associates AAP III Partners L.P., its General Partner By: TA Associates, Inc., its General Partner /s/ C. Kevin Landry ----------------------------------------- By: C. Kevin Landry, Managing Director Advent VII, L.P. By: TA Associates VII L.P., its General Partner By: TA Associates, Inc., its General Partner /s/ C. Kevin Landry ----------------------------------------- By: C. Kevin Landry, Managing Director TA Venture Investors Limited Partnership /s/ C. Kevin Landry ----------------------------------------- By: C. Kevin Landry General Partner TA Associates, Inc. Advent VII, L.P. Advent Atlantic & Pacific IV, L.P. TA Venture Investors L.P. By: TA Associates VII L.P., General Partner By: TA Associates, Inc., General Partner /s/ C. Kevin Landry ----------------------------------------- By: C. Kevin Landry Managing Director EX-4.2 6 SPECIMEN CERTIFICATE OF CLASS A COMMON STOCK EXHIBIT 4.2 COMMON STOCK COMMON STOCK NUMBER SHARES [LOGO OF SBA APPEARS HERE] SEE REVERSE SIDE FOR SBA COMMUNICATIONS CORPORATION CUSIP 78388J 10 6 CERTAIN DESTINATIONS INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA This Certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK PAR VALUE $.01 PER SHARE OF SBA COMMUNICATIONS CORPORATION transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Corporation has caused this certificate to be signed by its duly authorized officers and to be sealed with the Seal of the Corporation. Date /s/ Robert M. Grosstein /s/ Steven E. Bernstein ROBERT M. GROSSTEIN STEVEN E. BERNSTEIN SECRETARY CHAIRMAN OF THE BOARD [SEAL OF SBA COMMUNICATIONS CORPORATIONS APPEARS HERE] COUNTERSIGNED AND REGISTERED: FIRST CHICAGO TRUST COMPANY OF NEW YORK TRANSFER AGENT AND REGISTRAR BY: Authorized Signature EXHIBIT 4.2 The Corporation will furnish to the holder of this certificate upon request and without charge a full statement describing the Corporation's authority to issue different classes of shares of stock and different series within a class, the designations, relative rights, preferences, and limitations applicable to each class and limitations determined for each series, and the authority of the Board of Directors to determine variations for future series. The following abbreviations, when used in the description on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. Additional abbreviations may also be used though not in the list. TEN COM. as tenants in common UNIT GIFT MIN ACT. _____________ Custodian ___________________ (Cust) (Minor) TEN ENT. as tenants by the entireties under Uniform Gifts to Minor JT TEN. as joint tenants with act ___________________________________ right of ownership and (Cust) not as tenants in common UNIT TRF MIN ACT. ________________ Custodian (Until age ______) (Cust) _____________________ under Uniform Transfers (Minor) to Minor Act ________________________________ (State)
For votes received, the undersigned hereby sells, assigns and transfers unto ___________________________________________________ PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE _______________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ _________________________________________________________________________ Shares represented by the within Certificate, and hereby irrevocably constitutes and appoints ______________________________________________________________________. Attorney to transfer the said shares on the books of the within-named Corporation with full power of substitution in the premises. Dated _____________________________ X _________________________________ In presence of X _________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement, or any change whatever. EX-5.1 7 OPINION OF GUNSTER, YOAKLEY, VALDES-FAULI & STEWART EXHIBIT 5.1 Our File Number: 17323.00096 Writer's Direct Dial Number: (561) 650-0577 Writer's e-mail Address: sserling@gunster.com -------------------- June __, 1999 SBA COMMUNICATIONS CORPORATION One Town Center Road Third Floor Boca Raton, FL 33486 Re: Registration Statement No. 333-76547; 13,269,231 shares of ---------------------------------------------------------- Class A Common Stock, Par Value $.01 Per Share ---------------------------------------------- Ladies and Gentlemen: In connection with the registration of shares of Class A Common Stock of the company, par value $.01 per share (the "Shares"), consisting of 13,269,231 Shares offered by the Company under the Securities Act of 1933, as amended (the "Act"), by SBA Communications Corporation, a Florida corporation (the "Company"), on Form S-1 filed with the Securities and Exchange Commission (the "Commission") on April 19, 1999 (File No. 333-76547), as amended by Amendment No. 1 filed with the Commission on May 7, 1999 (collectively, the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. In our capacity as your special Florida counsel in connection with such registration, we are familiar with the proceedings taking and proposed to be taken by the Company in connection with the authorization, issuance and sale of the Shares, and for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. We are opining herein as to the effect on the subject transaction only of the internal laws of the State of Florida, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state. Subject to the foregoing, it is our opinion that the Shares have been duly authorized and upon issuance, delivery and payment therefor in the manner contemplated by the Registration Statement, will be, validly issued, fully paid and nonassessable. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters." Very truly yours, GUNSTER, YOAKLEY, VALDES-FAULI & STEWART, P.A. By: /s/ Steven J. Serling ----------------------------------------------- Steven J. Serling, For the Firm EX-10.22 8 AGREEMENT TO BUILD TO SUIT AND TO LEASE, DATED EXHIBIT 10.22 [Letterhead of SBA COMMUNICATIONS CORPORATION] November 24, 1998 BellSouth Personal Communications, Inc. 3353 Peachtree Road, N.E., Suite 400 Atlanta, Georgia 30326 First Amendment of Build to Suit Agreement and Master Lease Gentlemen: Reference is made to that certain (i) Agreement to Build to Suit and to Lease (the "Build to Suit Agreement"), dated October 30, 1998, by and among BellSouth Personal Communications, Inc. ("BellSouth") for itself and as general partner of BellSouth Carolinas PCS, L.P., SBA Towers, Inc. and SBA, Inc., and (ii) Master Lease (the "Master Lease"), dated October 30,1998, by and among BellSouth, SBA Towers, Inc. and SBA Sites, Inc. Capitalized terms not otherwise defined in this letter will have the meaning provided in the Build to Suit Agreement and the Master Lease. This letter will amend the Master Lease effective as of the date of this letter by replacing the definition of Rent used in the Master Lease with the rental set forth on Exhibit A attached to this letter with respect to the Sites listed on Exhibit B attached to this letter only, which Sites have been awarded to Vendor pursuant to the Build to Suit Agreement, and which Sites will be identified and constructed in accordance with the terms and conditions of the Build to Suit Agreement. Except as modified or amended above, the Build to Suit Agreement and the Master Lease are hereby ratified and confirmed in all respects, are in full force and effect, and have not otherwise been amended, modified, extended or renewed, whether verbally or in writing. Please confirm BellSouth's agreement with the terms of this letter by signing below. Faxed signatures will be binding. Thank you for your attention to this matter. Very truly yours, SBA Towers, Inc. By: /s/ Jeffrey A. Stoops -------------------------- Names: Jeffrey A. Stoops Title: Sr. Vice President SBA Sites. Inc. By: /s/ Jeffrey A. Stoops -------------------------- Names: Jeffrey A. Stoops Title: Sr. Vice President Acknowledged and Agreed this 30th day of November, 1998 BELLSOUTH PERSONAL COMMUNICATIONS, INC. By: /s/ Stephen A. Brake --------------------------- Name: Stephen A. Brake Title: Vice President - Finance THE CAROLINAS PARTNERSHIP: BELLSOUTH CAROLINAS PCS, L.P., by BELLSOUTH PERSONAL COMMUNICATIONS, INC., its general partner By: /s/ Stephen A. Brake --------------------------- Name: Stephen A. Brake Title: Vice President - Finance EXHIBIT A INITIAL MONTHLY AMOUNT Year Amount Per Month - ---- ---------------- 1 $1,145.00 Thereafter, the Amount Per Month shall be increased 4% annually for the initial Term and any Extension Terms. EXHIBIT B ADDITIONAL SITES Region 1 Sorted by General Manager by Commercial Service Date Cluster Cluster # Priority Location Sites - -------- -------- ----- Ral31 Hwy [ILLEGIBLE] 4 Ral37 Camp LaJeune 3 Ral35 195 Roanoke Rapids to VA 2 Ral33 Hwy 15/501 Pittsboro to Sanford 2 Ral30 Hwy 64 Tarboro to Outer Banks 15 Ral26 Hwy 24 Fayetteville to Clinton/140 7 Ral25 I85 Henderson to VA 2 Ral15 Hwy 64 Rocky Mount to Tarboro 4 Ral10 I95 Rocky Mount to Roanoke Rapids 4 43 GB9 Connecting Asheboro to Sier City 4 GB8 NE Greensboro/Lake Townsend 1 GB7 SW Greensboro 2 GB26 Danbury 1 GB25 Tobaccoville 1 GB24 Route 62 Connector 2 GB21 Route 158 Connector 2 GB19 Interstate 77 Connector 4 GB18 Route 87 2 GB17 Summerfield and Route 150 1 GB4 Boone/Blowing Rock 12 GB23 Route 16 Connector 1 GB13 Pleasant Garden 1 GB20 Route 601 Connector from Yadkinville to 2 Mocksville GB22 Route 49 Connector to Charlotte 5 41 Cha9 Hwy 24/27 Hwy 601 7 Cha8 Belmont Lowell 1 Cha7 Weddington Waxhaw 2 Cha6 Lincolnton/Hwy. 16/Stanley 4 Cha31 Concord hwy. 73 2 Cha30 New 321 By-pass 2 Cha3 L77 Highway 16 1 Cha17 Salisbury/StatesvilleMooresville 7 Cha14 Monroe to Waxhaw (Hwy.75) 2 Cha10 South Lenoir (Bypass area) 1 Cha35 Hwy 401 (Bennettsville to BTA 147) 2 Cha34 Hwy. 220/73 and Hwy.1 Rockingham to 3 Candor Cha32 Mount Pleasant 2 Cha29 Monroe to Concord (Hwy.200) 4 Cha28 Rutherfordton to BTA 20 4 Cha26 Wadesboro to Albemarle (Hwy. 52) 4 Cha25 York to Chester 2 Cha24 Mooresville Northeast 1 Cha23 Lenoir to Blowing Rock 5 Cha19 Taylorsville to Lenoir/Hickory 10 Cha18 Monroe to Lancaster (Hwy. 200 S) 3 Cha16 Lancaster, SC to Pageland, SC (Hwy.9) 3 Cha15 Hwy 49/274 (York, SC to Gaston Co.) 3 75 Total 1999 Region 1 Sites 159 and any additional sites that are approved by SBA Towers, Inc. pursuant to Section 3.09 of the Agreement to Build to Suit and to Lease (the "BTS Agreement"), dated October 30, 1998, among BellSouth, for itself, and as general partner of BellSouth Carolinas PCS, L.P., SBA Towers, Inc. and SBA, Inc., and are not otherwise listed on Annex A to the BTS Agreement. - -------------------------------------------------------------------------------- EXECUTION COPY AGREEMENT TO BUILD TO SUIT AND TO LEASE By and Among BELLSOUTH PERSONAL COMMUNICATIONS, INC., for itself, and as general partner of BELLSOUTH CAROLINAS PCS, L.P., SBA TOWERS, INC. and SBA, INC. OCTOBER 30, 1998 - -------------------------------------------------------------------------------- (C)BellSouth Personal Communications, Inc. 1998 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. TABLE OF CONTENTS ARTICLE 1 ................................................................... 2 1.01 Definitions ......................................................... 2 1.O2 Use of Words and Phrases ............................................ 8 ARTICLE 2 ................................................................... 9 ARTICLE 3 ................................................................... 10 3.01 Engagement of Vendor ................................................ 10 3.02 Term ................................................................ 10 3.03 Time for Commencement and Completion ................................ 10 3.04 Relationship ........................................................ 11 3.05 Project Personnel ................................................... 11 3.06 Familiarity with Project and Sites .................................. 12 3.07 Quality Standard .................................................... 12 3.08 Books and Records of Vendor; Right of Inspection by BellSouth ....... 12 3.09 Expansion in Scope of Project ....................................... 12 3.10 Available Sites in Event of Condemnation ............................ 13 ARTICLE 4 ................................................................... 14 4.01 Vendor's Undertakings ............................................... 14 4.02 Governmental Requirements and Permits................................ 14 ARTICLES 5 .................................................................. 16 5.01 Development Plan .................................................... 16 5.02 Due Diligence ....................................................... 17 5.03 Proposal of Cell Sites .............................................. 17 5.04 Utilities ........................................................... 17
(C)BellSouth Personal Communications, Inc. 1998 2 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 6 ................................................................... 18 6.01 General ............................................................. 18 6.02 Performance of the Work ............................................. 19 6.04 Site and Project Schedules .......................................... 19 6.05 Quality Review ...................................................... 20 6.06 Compliance with Requirements, Permits, Bonds and Insurance during Construction ....................................... 20 6.07 Work Permits ........................................................ 20 6.08 Construction ........................................................ 20 6.09. Project Tools ...................................................... 21 6.10 Warranty ............................................................ 21 6.11 Access Inspection ................................................... 21 6.12 Completion .......................................................... 23 ARTICLE 7 ................................................................... 23 7.01 Identification of Colocation Sites .................................. 23 7.02 Other Colocation Services ........................................... 24 ARTICLE 8 ................................................................... 24 8.01 Site Acquisition .................................................... 24 8.02 Vendor's Access to Site Prior to Scheduled Commencement Date......... 24 8.03 Hazardous Waste and Contamination Investigation ..................... 25 8.04 Geotechnical Subsurface and Soil Investigation ...................... 25 8.05 Additional Environmental Requirements ............................... 25 ARTICLE 9 ................................................................... 26 9.02 Assignment to the Bankruptcy Remote Entity .......................... 26 9.01 Right to Lease ...................................................... 26 9.03 Recordation of Ground Leases and Site Leases ........................ 26
(C)BellSouth Personal Communications, Inc. 1998 3 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 9.04 Effect of Master Lease and Site Lease ............................... 26 ARTICLE 10 .................................................................. 27 10.01 Vendor's Insurance Requirements .................................... 27 10.02 Evidence of Insurance .............................................. 28 10.03 Waiver of Subrogation .............................................. 28 ARTICLE 11 .................................................................. 28 11.01 Liquidated Damages ................................................. 28 11.02 Indemnity of BellSouth ............................................. 29 11.03 Relationship to Insurance .......................................... 29 ARTICLE 12 .................................................................. 30 12.01 BellSouth's Representations and Warranties ......................... 30 12.02 Vendor's Representations and Warranties ............................ 30 ARTICLE 13 .................................................................. 31 13.01 Default ............................................................ 31 ARTICLE 14 .................................................................. 34 14.01 Force Majeure ...................................................... 34 14.02 Effect of Force Majeure ............................................ 35 ARTICLE 15 .................................................................. 35 15.01 Obligation to Reconstruct; Use of Insurance Proceeds ............... 35 15.02 Condemnation of the Tower or Site; Application of Compensation ..... 35 ARTICLE 16 .................................................................. 35 16.02 Notices ............................................................ 35 16.03 Assignment; Binding Effect ......................................... 37 16.04 Authorized Representatives ......................................... 37
(C)BellSouth Personal Communications, Inc. 1998 4 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 16.05 Headings .............................................................. 37 16.06 Annexes and Exhibits .................................................. 37 16.08 Publicity ............................................................. 37 16.09 Severability .......................................................... 37 16.10 Waiver ................................................................ 38 16.11 Rights Cumulative ..................................................... 38 16.12 Time of Essence; Prompt Responses ..................................... 38 16.13 Applicable Law ........................................................ 38 16.14 Dispute Resolution Procedure .......................................... 38 16.15 Entire Agreement ...................................................... 39 16.16 Modifications ......................................................... 39 16.17 Counterparts .......................................................... 40 16.18 No Brokers ............................................................ 40
LIST OF ANNEXES AND EXHIBITS Annex A Original Sites; Additional Sites Annex B Scope of Work Annex C Specifications Annex D Vendor Responsibility Matrix Annex E Disaster Recovery Plan Annex F Project Data Requirements Annex G Project Schedule Annex H Authorized Representatives Annex I Colocation Services Annex J Form of Candidate Sheet/NTP Annex K Bankruptcy Remote Entity Requirements Annex L Form of Final Punchlist/Acceptance Confirmation Annex M Form of Certificate of Completion Annex N Form of Site Data Package Annex O Project Dispute Resolution Procedures Exhibit A Form of Master Lease Exhibit B Form of Site Lease Exhibit C Form of Ground Lease (C)BellSouth Personal Communications, Inc. 1998 5 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. AGREEMENT TO BUILD TO SUIT AND TO LEASE THIS AGREEMENT, made and entered into as of this 30 day of October, 1998 by and among BELLSOUTH PERSONAL COMMUNICATIONS, INC. ("BellSouth") for itself, and as general partner of BellSouth Carolinas PCS, L.P., a Delaware limited partnership (the "Carolinas Partnership"), SBA TOWERS, INC., a Florida corporation ("SBA Towers") and SBA, INC., a Florida Corporation ("SBA", and together with SBA Towers, "Vendor"), W I T N E S S E T H: WHEREAS, BellSouth desires Vendor to identify potential cell site locations within specified search areas and to cause each such cell site selected by BellSouth to be acquired or leased by Vendor and to be developed, among other things, causing a tower and other improvements to be designed, constructed and installed thereon, for lease to, and use and occupancy by, BellSouth or the Carolinas Partnership; and WHEREAS, BellSouth and the Carolinas Partnership also desire to engage Vendor as an independent contractor, upon the terms and conditions set forth herein, to provide, or cause the provision of, among other things, ongoing services related to each such selected cell site and Vendor desires to perform such services for BellSouth; and WHEREAS, BellSouth and the Carolinas Partnership and Vendor desire to enter into this Agreement to set forth their respective duties and responsibilities pertaining to such construction; and WHEREAS, the parties acknowledge and agree that in order to implement such construction and installation, SBA Towers shall acquire either fee simple title to, or a leasehold interest in each cell site by executing a ground lease for such site and SBA shall perform any Services (as defined in Section 1.01) related to each site, including, without limitation, development of such site, construction and installation of a tower and improvements on such site and any other Services to be provided by Vendor under this Agreement; and WHEREAS, contemporaneously with the execution of this Agreement, the parties and the Bankruptcy Remote Entity (as defined in Section 1.01) have executed a Master Lease (as defined in Section 9.01), pursuant to which the Bankruptcy Remote Entity will lease each such selected cell site and the tower and other improvements thereon to BellSouth or the Carolinas Partnership, on terms and conditions set forth in the Master Lease and the Site Lease (as defined in Section 1.01) for such cell site; (C)BellSouth Personal Communications, Inc. 1998 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. NOW, THEREFORE, for and in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLES 1 DEFINITIONS 1.01 Definitions. (a) The following capitalized terms shall have the following respective meanings for purposes of this Agreement: "Additional Sites" has the meaning ascribed to such term in Section 3.09. "Acquisition" means the acquisition by Vendor of fee simple title to or a leasehold interest in each Site, all investigations, examinations, tests and inspections, and other due diligence activities incidental thereto, and all legal activities incident thereto. "Acquisition Date" means, with respect to a Site, the date on which SBA Towers acquires either fee simple title to or a leasehold interest in such Site. "Affiliate" means with respect to either party, any individual or firm, corporation, partnership, association, trust or other entity which, whether directly or indirectly, Controls, is Controlled by, or is under common Control with the subject party. "Agreement" means this Agreement, including any Annexes, Exhibits and any amendments hereto or thereto. "Anchor Tenant" has the meaning ascribed to such term in the Master Lease. "Bankruptcy Remote Entity" means a bankruptcy-remote, 100%-owned subsidiary of SBA Towers, formed and structured by SBA Towers in compliance with the requirements set forth in Annex K and engaged exclusively in the business of owning (through fee simple title or a leasehold interest), operating and managing Sites and Improvements thereon and leasing such Sites and Improvements to BellSouth or the Carolinas Partnership and Other Tenants pursuant to the terms of the Master Lease and the applicable Site Leases. "BellSouth Indemnitee" means BellSouth, the Carolinas Partnership, their respective Affiliates, and the respective directors, officers, employees, agents, contractors, subcontractors, advisors and consultants of BellSouth, the Carolinas Partnership and their respective Affiliates. "BellSouth's Improvements" has the meaning ascribed to the term "Anchor Tenant's Improvements" in the Master Lease. (C)BellSouth Personal Communications, Inc. 1998 2 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close in Atlanta, Georgia. "Change of Control" has the meaning ascribed to such term in the Master Lease. "Claim" has the meaning ascribed to such term in Section 11.02. "Cluster" means a cluster, string or other group of Sites and identified as such in Annex A. "Cluster Completion Date" means, as to any Cluster, the first date as of which all Sites in such Cluster are Completed, other than Sites in such Cluster as to which an Excusable Delay has occurred. "Colocation Services" shall mean the services to be performed by Vendor for BellSouth as described in Annex I. "Completion," "Complete" or "Completed" means or refers to (i) Vendor's receipt of all FAA and zoning approvals and other Permits in accordance with all Governmental Requirements, (ii) Vendor's completion of all items of construction in accordance with the Specifications and the requirements of all Governmental Authorities applicable to Vendor or the Improvements so that BellSouth can use the Tower and Improvements for the Intended Use without interference in BellSouth's conduct of its ordinary business activities, except for customary punch list items relating to minor nonconformities with the Specifications, the failure of any one or more of which to remedy would not have an adverse impact on the Intended Use, and any other defects or other items that BellSouth has waived in writing; (iii) Vendor's securing a certificate of occupancy or any other final municipal approval from the applicable Governmental Authority, if applicable; (iv) the issuance by BellSouth of the Completion Certificate in accordance with Section 6.12; (v) BellSouth, its employees, agents and invitees, have ready access to the areas around the Tower and Improvements; (vi) all the fixtures and equipment to be installed by Vendor are installed and in good operating order; (vii) the Tower and the Improvements are ready for the installation of BellSouth's Improvements; and (viii) the Site is broom clean. "Completion Certificate" means the certificate of completion issued by BellSouth with respect to each Site to the effect that the Work is Completed, which certificate shall be issued in accordance with Section 6.12 and Annex M attached hereto. "Completion Date" means the date on which the Tower and Improvements are Completed with respect to each Site, pursuant to the Project Schedule and the applicable Site Schedule. (C)BellSouth Personal Communications, Inc. 1998 3 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Control" means the ownership, directly or indirectly, of sufficient voting shares of an entity, or otherwise the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, or the power to veto major policy decisions of any such entity, whether through the ownership of voting securities, by contract or otherwise. "Development of Site" means and includes with respect to each Site (i) preparation of the Site Schedule for the Site, (ii) the Acquisition of the Site, (iii) the performance of the Work on the Site, and (iv) the Completion of the Site. "Effective Date" means the date first above written, being the date on which the parties have executed and delivered this Agreement. "Environmental Assessment" means the "Phase I" environmental assessment of each Site, performed in accordance with the American Society for Testing and Materials (ASTM) Standard E1527-97, Standard Practice for Environmental Site Assessment: Phase I Environmental Site Process, and such further investigations as are reasonably indicated by the results thereof, to be obtained by Vendor pursuant to Section 8.03 hereof. "Environment, Health and Safety Requirements" means all of the terms and conditions of all permits, licenses and other authorizations which are required under, and all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables which are contained in all federal, state and local laws (including rules, regulations, codes, judgments, orders, decrees, stipulations, injunctions and demand letters issued, entered, promulgated or approved thereunder) relating to public health and safety, worker health and safety or pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of Hazardous Materials into ambient air, surface water, ground water or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Excusable Delay" means as to any Site, (i) a Force Majeure event as to such Site, (ii) an extension or adjustment of the Site Schedule, the Project Schedule, the Scheduled Commencement Date or the Project Completion Date, each only as they apply to the affected Site, as provided for and expressly permitted under the terms of this Agreement, including without limitation, Section 4.02 and (iii) the period of time Vendor is waiting for BellSouth to give an approval under this Agreement or take an action under this Agreement, in respect of any Site, in excess of any time period specifically designated by this Agreement for such approval or action, provided that Vendor has performed any and all obligations hereunder required to have been performed in respect of such Site as of such time. "FAA" means the Federal Aviation Administration. "FCC" means the Federal Communications Commission. (C)BellSouth Personal Communications, Inc. 1998 4 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Force Majeure" means those events constituting excuse from timely performance by Vendor of any duty or obligation hereunder to which it is subject, as such events are described in Article 14 hereof. "Governmental Authority" means any federal, state, county or municipal governmental authority, including all executive, legislative, judicial and administrative bodies thereof. "Governmental Requirements" means (i) all federal, state and local laws, ordinances, and regulations and all orders and decrees of bodies or all Governmental Authorities, which in any manner affect the Services provided under this Agreement, Vendor's performance of its obligations hereunder or the ownership, use or operation of the Sites, and (ii) all Environment, Health and Safety Requirements. "Ground Lease" means a ground lease of a Site entered into by SBA Towers and assigned to the Bankruptcy Remote Entity, substantially in the form of Exhibit C. "Hazardous Materials" means any hazardous or toxic substance, material, pollutant, contaminant or waste, including, without limitation, any material or substance which is (i) petroleum or a petroleum derivative, a battery or a liquid solvent or a similar chemical, (ii) asbestos or an asbestos-containing material, (iii) radioactive material or waste, (iv) a polychlorinated biphenyl (PCB), (v) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. ss.. 1321), (vi) defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act (42 U.S.C. ss. 6903), or determined to be a "hazardous waste" under applicable federal or state law, (vii) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601), (viii) regulated under the Toxic Substances Control Act (15 U.S.C ss. 2601, et seq.), or (ix) any other substance or material similarly classified by any other federal, state or local statute or ordinance or by any rule or regulation promulgated or adopted pursuant thereto, whether now existing or hereinafter enacted. "Improvements" means with respect to each Site, (i) a concrete equipment pad or raised platform capable of accommodating exterior cabinets, electrical service and access for the placement and servicing of BellSouth's Improvements, (ii) a grounding ring, (iii) fencing, (iv) signage, (v) connections for service in accordance with Section 5.04 and (vi) hardware constituting a tower platform to hold BellSouth's Improvements, as more particularly described in Annex C. Improvements shall not include the BellSouth Improvements or equipment for Other Tenants. "Inspections" has the meaning ascribed to such term in Section 8.02. "Intended Use" has the meaning ascribed to such term in the Master Lease. (C)BellSouth Personal Communications, Inc. 1998 5 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Liens" has the meaning ascribed to such term in the Master Lease. "Liquidated Damages" has the meaning ascribed to such term in Section 11.01. "Master Lease" means the Master Lease of even date herewith among BellSouth, Vendor and the Bankruptcy Remote Entity. "Material Adverse Effect" means a material adverse effect on (i) Vendor's ability to perform its obligations hereunder, including without limitation construction of the Improvements in accordance with the terms hereof, (ii) the Improvements or the compliance thereof with the Specifications or (iii) the Intended Use. "Notice to Proceed" means a Notice to Proceed, substantially in the form of the Notice to Proceed included in Annex J, given by BellSouth to Vendor pursuant to Section 5.03. "Original Sites" means those potential cell site locations, as set forth in Part I of Annex A, which BellSouth approves to be Sites, pursuant to Section 5.03 hereunder. "Other Tenants" means, as to any Site, any Person other than an Anchor Tenant, which leases ground space and/or Tower space on such Site from Vendor. "Permits" means any and all certificates, licenses, permits, authorizations, consents, special use permits and other approvals by the applicable Governmental Authorities having jurisdiction in such matters required to be obtained, issued, granted or received for the performance of the Work and Completion or the Intended Use (other than as to installation of BellSouth's Improvements), including without limitation any and all Permits to be issued by all Governmental Authorities that are required for the construction of the Tower and Improvements related thereto. "Permitted Liens" has the meaning ascribed to such term in the Master Lease. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, unincorporated business association or Governmental Authority. "Potential Colocation Sites" has the meaning ascribed to such term in Section 7.01. "Premises" has the meaning ascribed to such term in Section 9.02. "Project" means Vendor's Acquisition of all the Sites and performance of the Work to be performed on all Sites and its other obligations set forth herein, as more particularly described in this Agreement, including the Annexes, subject to expansion pursuant to Section 3.09. (C)BellSouth Personal Communications, Inc. 1998 6 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Project Completion Date" means December 31, 1998, subject to extension as to Additional Sites pursuant to Section 3.09 and for Excusable Delays as to specific Sites pursuant to Section 6.04(b). "Project Schedule" means a timetable for the Project consisting of all material components and events for the Completion of the Project, and the time periods necessary for the various aspects thereof, including revisions and adjustments thereto provided for and expressly permitted by the terms of this Agreement, including for Excusable Delays as to specific Sites pursuant to Section 6.04(b), as set forth in Annex G. "Rent" has the meaning ascribed to such term in the Master Lease. "Scheduled Commencement Date" means, with respect to each Site, the date on which the Work on such Site is scheduled to commence, as set forth in the applicable Notice to Proceed, subject to revisions and adjustments pursuant to Section 6.04(b) for Excusable Delays or pursuant to Section 5.03. "Services" means all services required to be performed or procured by Vendor pursuant to the terms and conditions of this Agreement, including, without limitation, (i) provision of cell site searching services in search areas designated by BellSouth; (ii) identification of potential new locations for Sites within each designated search area and presentation of such preliminary identified potential Sites to BellSouth for final selection; (iii) acquisition by Vendor of rights to the Sites by either entering into a Ground Lease or acquisition of fee simple title to each Site in accordance with the Master Lease, (iv) construction and installation of a Tower and Improvements on each of the Sites, and (v) Colocation Services; all as more particularly described in this Agreement, including the Annexes. "Site" means any Original Site that becomes part of the Project pursuant to Section 5.03 or any Additional Site that becomes part of the Project pursuant to Sections 3.09 and 5.03. "Site Lease" means as to any Site, the lease or sublease, in the form of Exhibit B, pursuant to which the Bankruptcy Remote Entity leases or subleases space on the Site to BellSouth or the Carolinas Partnership, in accordance with the Master Lease. "Site Schedule" means a timetable prepared by Vendor and approved in writing by BellSouth with respect to each Site that graphically describes the time periods and completion dates for each of the activities necessary to complete the Work with respect to such Site and the other Sites in the applicable Cluster, consistent with Annex G, subject to revisions or adjustments for an Excusable Delay respecting such Site pursuant to Section 6.04(b). "Specifications" means the drawings and technical specifications for the Towers and Improvements, as set forth in Annex C. (C)BellSouth Personal Communications, Inc. 1998 7 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. "Tax Code" means the Internal Revenue Code of 1986, as amended, and any regulations and rulings thereunder. "Tower" means a radio tower structure constructed and installed by Vendor pursuant to this Agreement. "Vendor Indemnitees" means SBA Towers and SBA, their respective Affiliates, and the respective directors, officers, employees, agents, contractors, subcontractors, advisors and consultants of SBA Towers and SBA and their respective Affiliates. "Work" means SBA's construction and installation of the Tower and Improvements in accordance with the Specifications, and includes labor necessary to Complete such construction and installation, and materials and equipment for such construction and installation, as required by this Agreement, to be furnished by Vendor or any subcontractor, for the construction and installation of the Tower. (b) Any other capitalized terms used in this Agreement shall have the respective meanings given to them elsewhere in this Agreement. 1.02 Use of Words and Phrases. (a) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, the singular shall include the plural as well as the singular number. "Herein," "hereby," "hereunder," "hereof," "herein before," "hereinafter," and other equivalent words refer to this Agreement and not solely to the particular portion thereof in which any such word is used. (b) Whenever in this Agreement either of the words "day" or "days" is used it means a calendar day unless specifically stated to be a Business Day. (c) BellSouth and Vendor agree that any defined term used herein constituting a document, instrument, drawing, survey, map, plan, technical description or other writing, and any other reference herein to a writing, shall include originals of such writing and any and all amendments, supplements, modifications, renewals, extensions, restatements or replacements of or to the same from time to time. (C)BellSouth Personal Communications, Inc. 1998 8 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 2 AGREEMENT DOCUMENTS This Agreement shall consist of the following documents, as amended from time to time as provided herein: (a) this Agreement document; (b) the following Annexes, which are incorporated herein by this reference: Annex A Original Sites; Additional Sites Annex B Scope of Work Annex C Specifications Annex D Vendor Responsibility Matrix Annex E Disaster Recovery Plan Annex F Project Data Requirements Annex G Project Schedule Annex H Authorized Representatives Annex I Colocation Services Annex J Form of Candidate Sheet/NTP Annex K Bankruptcy Remote Entity Requirements Annex L Form of Final Punchlist/Acceptance Confirmation Annex M Form of Certificate of Completion Annex N Form of Site Data Package Annex 0 Project Dispute Resolution Procedures (c) the following Exhibits, which are incorporated herein by this reference: Exhibit A Form of Master Lease Exhibit B Form of Site Lease Exhibit C Form of Ground Lease; and (d) such additional documents as are incorporated by reference. If any of the foregoing are inconsistent, this Agreement shall prevail over Annexes, Exhibits and additional incorporated documents. (C)BellSouth Personal Communications, Inc. 1998 9 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 3 SCOPE OF WORK; NATURE OF THE ENGAGEMENT 3.01 Engagement of Vendor. (a) Subject to the provisions of Article 9, BellSouth hereby engages Vendor to acquire the Sites, construct and install the Towers and Improvements thereon, and perform the Services in connection with each Site, all as required by this Agreement. Vendor hereby accepts such engagement in accordance with the terms and conditions of this Agreement. Vendor shall construct Sites in Clusters according to the applicable Site Schedule and applicable Project Schedule. Vendor shall perform and be responsible for all responsibilities assigned to Vendor in the Vendor Responsibility Matrix attached as Annex D. (b) Except as set forth in the following sentence and in Article 7, Vendor's entire compensation for the Project or any part thereof will be derived solely from the payments of rent by BellSouth for each Site, pursuant to the terms of the Master Lease and the applicable Site Lease. In the event that BellSouth withdraws a Site from this Agreement for any reason except in connection with Section 4.02(e) or 13.05(a), BellSouth shall pay Vendor for all of Vendor's reasonable out-of-pocket costs directly incurred, to the date of withdrawal, in connection with such Site ("Withdrawal Costs"), including, without limitation, reasonable third party vendor costs plus a fee to cover overhead and employee time equal to ten percent (10%) of the amount of any Withdrawal Costs; provided that Vendor has provided BellSouth with substantiation of such Withdrawal Costs in reasonable detail. 3.02 Term. (a) The term of this Agreement shall commence on the Effective Date, and shall continue until the Project Completion Date, unless sooner terminated as provided herein; provided that if the Project has not been Completed as of that date, BellSouth, in its sole discretion, may extend the term hereof as to all or any of the Sites that have not been Completed, until the Completion thereof. (b) Notwithstanding anything to the contrary contained herein, the parties acknowledge and agree that, upon Completion of any Site and the execution of a Site Lease therefor, those provisions of this Agreement which survive the expiration or termination hereof, Article 9, Annex D, the Master Lease, the applicable Site Lease and related documents shall govern the respective rights and obligations of the parties with respect to each such Site. 3.03 Time for Commencement and Completion. Vendor and BellSouth acknowledge that the time for Scheduled Commencement Date and Completion of the Project will be determined by the Project Schedule. Vendor's unexcused failure to Complete any Site in accordance therewith or to Complete the Project by the Project Completion Date, as the case may be, shall subject Vendor to the Liquidated Damages pursuant to Section 11.01. (C)BellSouth Personal Communications, Inc. 1998 10 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 3.04 Relationship. Vendor agrees to furnish its best skill and judgment in performing its obligations hereunder, and the parties agree to cooperate with each other in Completing the Project in accordance with this Agreement. BellSouth and Vendor, in the performance of this Agreement, will be acting in their respective individual capacities and not as employees, partners, joint venturers, agents or associates of one another. In the performance of this Agreement, Vendor is, and shall at all times during the term of this Agreement be, an independent contractor. Nothing contained in this Agreement creates the relationship of a joint venture, partnership, association or agency between the parties. No party shall have any authority to bind or otherwise obligate the other. Persons retained by either party as employees or agents shall not, solely by reason thereof, be deemed to be employees or agents of the other party. 3.05 Project Personnel. (a) Vendor shall, at its own cost and expense, employ only personnel Vendor believes to be competent and able for the performance of Vendor's obligations under this Agreement, and Vendor shall require all contractors and subcontractors engaged in the performance of Work or otherwise engaged in the Project to be properly licensed and legally qualified to construct the Towers and Improvements and complete the Work on each Site. Vendor shall, at all times during the term of this Agreement, keep a sufficient number of qualified personnel to the extent required to Complete the Project by the Project Completion Date pursuant to the Site Schedules and Project Schedule. Subject to Section 3.05(d), Vendor shall have exclusive control of and direction over the Persons engaged in the performance of Vendor's obligations under this Agreement. (b) If reasonably requested by BellSouth, Vendor shall make available additional suitable experts in the areas of engineering, design, construction, installation, management, performance enhancement and other operational specialties applicable to the Project. (c) Vendor and BellSouth will each be solely responsible for the actions and conduct of all its employees, agents, consultants, advisors, contractors and subcontractors. Vendor and BellSouth will each ensure that anything related to its employees, agents, consultants, advisors, contractors or subcontractors shall be in strict compliance with Governmental Requirements, except for noncompliances which would not have a Material Adverse Effect. (d) BellSouth reserves the right to require from Vendor the immediate removal from or to exclude any Person or entity employed by or working for Vendor from any Site, in BellSouth's judgment, but only if the exercise thereof is a commercially reasonable procedure under the circumstances, who in BellSouth's opinion (i) engages in any misconduct, (ii) is incompetant or (iii) is negligent in the performance of its, his or her duties. Vendor shall be responsible for any additional labor costs arising in connection with the removal requested pursuant to this Section 3.05(d). (C)BellSouth Personal Communications, Inc. 1998 11 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (e) Vendor hereby assigns to the Project the key managers and personnel ("Key Employees") listed in Annex D. Unless BellSouth otherwise consents in writing, (i) each Key Employee shall devote his or her full time and attention to the Project and the duties associated with the positions set forth opposite their respective names in Annex D, except that BellSouth acknowledges and agrees that Neil Wiser, as General Manager of Vendor's Mid-Atlantic Region, will devote time and attention to matters not related to the Project, and (ii) Vendor shall not remove any Key Employee from any such position or reassign any such Key Employee, either within the Project or to another project, without the prior written consent of BellSouth, such consent not to be unreasonably withheld. 3.06 Familiarity with Project and Sites. Vendor represents and warrants that Vendor is familiar with the Project and Specifications applicable to the Towers and Improvements, has visited and examined, or will visit and examine, each Site and the surrounding locale, and knows or will know the working conditions in and around each Site. 3.07 Quality Standard. Vendor agrees to perform its obligations and furnish its Services hereunder properly, diligently, and in good faith, in accordance with the standards of its profession, and in accordance with all applicable Governmental Requirements. Vendor shall implement quality control procedures sufficient to ensure compliance with the Specifications, including without limitation, procedures set forth in Annex C and shall otherwise maintain quality standards for the Services at least equal to the normal quality standards applied by Vendor prior to the date of this Agreement. 3.08 Books and Records of Vendor; Right of Inspection by BellSouth. Vendor shall keep such accounts as may be necessary for its proper financial management of the Project under this Agreement. The system of accounting employed by Vendor shall be such as is reasonably satisfactory to BellSouth. BellSouth shall be afforded access to all of Vendor's records, books, correspondence, instructions, drawings, plans, blueprints, specifications, receipts, vouchers, memoranda and similar data relating to the Project and this Agreement to the extent relating to BellSouth's Intended Use, Vendor's compliance with the terms hereof, the structural integrity of the Improvements, or if BellSouth otherwise provides reasonable justification therefor, except for privileged documents or where disclosure is prohibited by law. Such books and records shall be open for inspection and copying upon reasonable written notice by BellSouth, at its cost, and its authorized representatives at reasonable hours at Vendor's principal office and shall be retained by Vendor for a period of three (3) years after the expiration of the Master Lease. 3.09 Expansion in Scope of Project. BellSouth will have the right and option, exercisable in its sole discretion, to cause the Sites in the Project to include up to 238 additional cell sites not included in the Original Sites, if such cell sites are set forth in Part II of Annex A or are otherwise agreed to by Vendor in accordance with this Section 3.09 (the "Additional Sites"), on the same terms and conditions as are applicable to the Original Sites, by giving Vendor written notice to such effect from time to time; provided however, that Vendor shall not (i) be (C)BellSouth Personal Communications, Inc. 1998 12 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. obligated to accept any Additional Site listed as a part of Region One on Part II of Annex A (the "Rejected Additional Site"), and (ii) be obligated to perform any Services with respect to such Rejected Additional Site. Such notice shall specify those potential cell sites which, upon BellSouth's selection pursuant to Section 5.03, would constitute Additional Sites for purposes of this Agreement. If the sites are not set forth in Part II of Annex A, Vendor shall have thirty (30) days from receipt of such written notice to provide a written approval or rejection of such sites. Vendor's failure to respond within such thirty (30) day period as to any such sites shall be deemed a rejection by Vendor of such sites. If Vendor rejects any such sites or is deemed to have rejected any such sites, such sites shall not be Additional Sites and shall not be part of the Project. Upon BellSouth's giving of such written notice, Vendor shall extend the performance of its obligations hereunder to any sites that become the Additional Sites. The parties shall adopt a Project Schedule as to such Additional Sites, so as to facilitate Completion of all Additional Sites, without affecting the Project Schedule as to the Original Sites. Vendor acknowledges and agrees that if it constructs a tower and improvements similar to Towers and Improvements hereunder on any site, after Vendor has received notice that such Site is in a search area designated by BellSouth on any site, prior to an election by BellSouth pursuant to this Section 3.09 for Vendor to include such site in the Project, such site shall, at BellSouth's election, be subject to the terms of this Agreement for all purposes. If BellSouth makes any such election as to any such site, Vendor shall make such site available to BellSouth as though it were an Additional Site, on the same terms and conditions as are set forth herein and in the Master Lease, it being understood and agreed that BellSouth or other Anchor Tenant shall be the anchor tenant of such site, notwithstanding any agreement Vendor may have entered into with any Other Tenant. Vendor shall cause any such tower and improvements to comply with all the requirements hereunder for Towers and Improvements. 3.10 Available Sites in Event of Condemnation. If, prior to the execution of a Site Lease for a Site, any condemnation occurs as to any Site as contemplated by Section 20(b) of the Master Lease, Vendor shall, at the request of BellSouth or the applicable Anchor Tenant, perform all its obligations hereunder in respect of a replacement site for such condemned Site, satisfactory to BellSouth, as if such replacement site were an Original Site hereunder, including without limitation the proposal of potential cell site locations pursuant to Section 5.03, the construction of a Tower and Improvements on any selected Site pursuant to and in accordance with Article 6 and the leasing of such Site to the applicable Anchor Tenant pursuant to the Master Lease and a Site Lease, provided that the monthly rent payable in respect of such replacement Site shall be the monthly Rent that would have been payable in respect of the replaced Site. The Site Schedule, Scheduled Commencement Date and Scheduled Completion Date for any such replacement site shall be determined by Vendor and BellSouth consistently with the construction schedules set forth in this Agreement. This Agreement shall survive the completion of the Project indefinitely to the extent necessary to give effect to this Section 3.10. (C)BellSouth Personal Communications, Inc. 1998 13 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 4 VENDOR'S UNDERTAKINGS 4.01 Vendor's Undertakings. (a) Commencing on the Effective Date of this Agreement, Vendor agrees to furnish the Services, for and on behalf of BellSouth and to perform such Services in an expeditious manner consistent with the interests of BellSouth. In the performance of the Services hereunder, Vendor shall furnish its best skill and judgment (i) in accordance with the standards established by the industry, (ii) consistent with good development and construction practices and efficient business practices, (iii) utilizing skill and judgment available throughout its organization in the performance of this Agreement to provide its professional knowledge, ideas, experience and abilities relating to the design, scheduling, development and construction of the Towers and Improvements, and (iv) in a competent, professional and efficient manner. (b) Vendor shall promptly notify BellSouth in writing of any part of the Project that does not comply with any Governmental Requirements to the extent Vendor is or becomes aware of such noncompliance and such noncompliance has had or is reasonably likely to have a Material Adverse Effect. (c) In addition to the Services described in this Agreement, including without limitation the Vendor Responsibility Matrix, Vendor shall have such other duties and responsibilities reasonably and customarily required for developments similar to the Development of each Site and the Project in its entirety as may be required or necessary from time to time during the design, development, construction, equipping and Completion of the Project, which other duties and responsibilities shall be deemed to be Services hereunder; provided, however, that BellSouth shall not incur any costs or expenses for or in connection with any such Services. 4.02 Governmental Requirements and Permits. (a) Vendor shall obtain, or cause to be obtained, the consent or approval of all Governmental Authorities, and all Permits necessary for the Development of each Site and the Project. Vendor shall advise BellSouth in writing of any potential significant adverse issues or problems, including without limitation any delays (i) that could adversely affect the applicable Scheduled Commencement Date, Site Schedule or the Project Schedule, or Vendor's ability to meet the Project Completion Date, or (ii) of the type of which the Project Manager would, in accordance with good industry practices, customarily receive notice, in connection with obtaining any approvals from any Governmental Authority. (b) Except where prohibited by applicable laws, Vendor shall be the applicant for any and all necessary Permits. Vendor shall coordinate and manage all professional and technical services required in connection with the preparation and filing of applications for and obtaining all Permits. Vendor shall be responsible for diligently preparing and filing all applications for, and pursuing and obtaining, the Permits. (C)BellSouth Personal Communications, Inc. 1998 14 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (c) At BellSouth's option, BellSouth may assist Vendor in securing the Permits. BellSouth may elect, in its sole discretion, to join Vendor as co-applicant for any of the Permits, provided, however, that absent such election, Vendor shall not use BellSouth's name or any variation thereof in any such Permit or application therefor. Without BellSouth's prior written approval, Vendor shall not disclose to any Governmental Authority that BellSouth is involved in or has any relationship to any Site or the Project. In the event that Vendor believes in good faith that disclosing BellSouth's relationship to any Site is required by applicable law, Vendor shall provide BellSouth with written notice setting forth such belief and requesting BellSouth's approval of such disclosure to any Governmental Authority specified therein, and BellSouth shall provide Vendor with its approval or disapproval of such disclosure within five (5) Business Days of BellSouth's receipt of Vendor's notice. If BellSouth fails to respond within such five (5) Business Day period, BellSouth will be deemed to have rejected Vendor's request. In such event or if BellSouth provides its disapproval within such five (5) Business Day period, Vendor shall be prohibited from disclosing BellSouth's relationship to such Site or the Project to any Governmental Authority, provided, however, that the Scheduled Commencement Date, the Project Completion Date, the Site Schedule and the Project Schedule, in each case only with respect to the applicable Site, shall be adjusted by Vendor and BellSouth to the extent of any delays caused by the failure of BellSouth to permit such disclosure. (d) Vendor shall use its best efforts to obtain any Permits necessary to commence construction of the Towers and the Improvements on or before the Scheduled Commencement Date with respect to each Site, including without limitation the approval of any necessary rezoning of such Site, grant of any variance, vacating of any right-of-way, issuance of any order or other action that may be necessary, or approve any other land use approval necessary, to commence construction of the Tower and Improvements on such Site. If, despite such efforts, any Permits required to be obtained before commencement of construction have not been obtained or could not have been obtained as of the Scheduled Commencement Date, then Vendor shall continue to exercise its best efforts to obtain any such Permits as promptly as possible, and the Scheduled Commencement Date, the Site Schedule, the Project Schedule and the Project Completion Date, in each case as it applies to such Site, shall be adjusted by Vendor and BellSouth, as may be commercially reasonable to reflect any additional time period necessary for obtaining such Permits, and such additional time shall be deemed to be an Excusable Delay. Notwithstanding the foregoing, if (i) Vendor (x) fails to obtain any such Permits within six (6) months after the applicable Scheduled Commencement Date without giving effect to any adjustment or (y) spends more than $25,000 in costs, fees and expenses (including reasonable attorneys' fees and expenses) in pursuing Permits for any Site, and (ii) BellSouth has not exercised its rights under Section 4.02(e), then Vendor will have the right to cease using its best efforts to obtain such Permits, exercisable by giving BellSouth written notice thereof. Not later than ten (10) days after receiving such notice, BellSouth shall give Vendor notice of its election of a right under clause (i), (ii) or (iii) of Section 4.02(e) in respect of such Site. If BellSouth fails to give notice as to any such election, such Site shall be deemed to be (C)BellSouth Personal Communications, Inc. 1998 15 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. rejected by BellSouth pursuant to Section 4.02(e)(iii), and Vendor shall propose to BellSouth an alternative cell site pursuant to Section 5.03. (e) If Vendor has not obtained any Permit required for the Construction of the Tower or any Site and Improvements or Intended Use thereof (other than as to installation of BellSouth's Improvements), by the applicable Scheduled Commencement Date, then, at any time after such Scheduled Commencement Date, BellSouth's sole remedy shall be, at BellSouth's sole option, to (i) assume responsibility for obtaining such Permit by written notice to Vendor, and Vendor shall reimburse BellSouth for any costs, fees, or expenses (including reasonable attorneys' fees and expenses) incurred in pursuing and obtaining such Permit, to the extent such costs and expenses (including amounts spent by Vendor in pursuing Permits for such Site) do not exceed $25,000; provided that any costs, fees and expenses in excess of $25,000 may be incurred upon mutual agreement of the parties, in which case BellSouth and Vendor shall each pay 50% of such excess, (ii) reject the Site at no cost or expense to BellSouth, whereupon such Site shall no longer be a part of the Project or (iii) reject the Site and cause Vendor to propose additional potential cell sites as alternatives, in accordance with Section 5.03. (f) Vendor shall comply with all Governmental Requirements in performing its obligations under this Agreement, the Master Lease and each Site Lease, except where the failure to comply could not have a Material Adverse Effect. Vendor shall indemnify, and hold harmless, each BellSouth Indemnitee from and against any Claims (including without limitation any fine, penalty or damage) arising out of Vendor's failure to comply with any Governmental Requirements including, without limitation, zoning laws and FAA regulations, unless such failure arises from BellSouth's willful or negligent conduct. (g) In the event that (i) BellSouth elects to exercise its rights under Section 4.02(e)(i) or (iii) above, or (ii) any Site is deemed to be rejected by BellSouth pursuant to the last sentence of Section 4.02(d), the Scheduled Commencement Date, the Site Schedule, the Project Schedule and the Project Completion Date, in each case as it applies to such Site, shall be adjusted by Vendor and BellSouth, as may be commercially reasonable to reflect any additional time period necessary for obtaining Permits or acquisition of a new Site. ARTICLE 5 PRE-CONSTRUCTION PHASE 5.01 Development Plan. Vendor shall prepare a plan for the Development of each Site which shall include, but not be limited to, the provision of searching services in the designated search areas listed in Annex A, identification of three (3) potential cell site locations within each designated search area and a schedule for presenting such candidate cell sites to BellSouth for final selection of cell site locations in accordance with Section 5.03, the facilitation of the Acquisition of such Site for the Project, the Acquisition, design services, development plan and coordination of construction activities. Each such plan for a Site shall be (C)BellSouth Personal Communications, Inc. 1998 16 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (i) reflected in the implementation of the Project Schedule for such Site, (ii) coordinated with the implementation of the Project Schedule for the other Sites in its Cluster and (iii) consistent with the Project Schedule. 5.02 Due Diligence. Vendor shall, through one or more qualified consultants: (i) compile and review all existing data with respect to each Site from a seller or lessor of such Site and any and all Governmental Authorities having jurisdiction thereof, and any other Persons who may have relevant information necessary to develop each Site; (ii) cause to be performed any and all analyses, examinations, investigations, tests and inspections of each Site, including, but not limited to, environmental studies, surveys, geo-technical studies, soil borings and the like and cause to be accurately completed and returned to BellSouth with respect to each Site, the Site Data Package attached hereto as Annex N; (iii) make, or cause to be made, inquiries of all Governmental Authorities and Persons who will furnish electric power, telephone service or any other utility to each Site as to any matters which may affect or be necessary to the Development of each Site; (iv) determine all Governmental Requirements necessary for the Development of each Site, including, but not limited to, the Tower and Improvements, zoning laws or regulations. Vendor shall perform or supervise the activities described in items (i) through (iv) above, and, upon BellSouth's request, shall deliver to BellSouth copies of written reports, memoranda or material correspondence prepared for Vendor with respect to the foregoing. 5.03 Proposal of Cell Sites. Subject to Section 5.01, from time to time Vendor shall propose to BellSouth three (3) potential cell site locations for a Site within each search area set forth in Annex A, in accordance with the Project Schedule, unless Vendor can demonstrate to BellSouth's reasonable satisfaction that three (3) such potential sites do not exist in such area, gives BellSouth an officer's certificate to such effect, duly executed by an authorized officer of Vendor, and proposes as many potential cell site locations as comply with the requirements of the next succeeding sentence. Vendor shall not propose any such potential cell site unless it reasonably believes that such site meets the requirements of this Agreement for a Site in all material respects. If none of the sites proposed by Vendor for any search area meets such requirements, Vendor shall continue proposing additional potential cell sites, until one becomes a Site hereunder, unless Vendor can demonstrate to BellSouth's reasonable satisfaction that no such site is available and gives BellSouth an officer's certificate to such effect, duly executed by an authorized officer of Vendor. Not later than five (5) Business Days after receipt of any such proposal as to any potential cell site, BellSouth shall notify Vendor as to which (if any) of such proposed cell sites it views in its judgment as acceptable, whereupon such cell sites shall become Sites for all purposes of this Agreement. BellSouth's selection of any proposed cell site as a Site shall not relieve or release Vendor from performing any of its obligations hereunder in respect of such Site, or otherwise affect any of Vendor's obligations hereunder. Promptly following BellSouth's selection of any such Site, BellSouth shall deliver to Vendor a Notice to Proceed for such Site. 5.04 Utilities. Vendor shall negotiate with the electric utility company servicing each Site a plan for the provision of service to such Site required for the Intended Use of the Site. (C)BellSouth Personal Communications, Inc. 1998 17 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. Vendor shall make application for such electric utility company to furnish service to such Site as may be adequate for the Intended Use and the use and enjoyment of the Site by all Other Tenants that may exist from time to time. Vendor shall cause such electric utility company to provide connection to such Site. In the case of telephone company connection facilities, all obligations remain with the Vendor to effect connections required for the Intended Use of the Site, with the exception that the Vendor shall utilize BellSouth as their agent to work with the local telephone company on the development of the servicing plan. Annex C sets forth additional details of electric utility and telephone company connections. ARTICLE 6 CONSTRUCTION PHASE 6.01 General. (a) The parties shall hold progress meetings, and Vendor shall submit progress reports to BellSouth, in accordance with the implementation of the Project Schedule or otherwise on a weekly, bi-weekly or monthly basis as may be agreed between parties. Progress reports will show for each Site, at a minimum, and not by way of limitation, all dates and schedules referred to in the Project Schedule and the applicable Site Schedule, any anticipated delays, other relevant information, and the corresponding activity period. The progress reports shall also show the progress of all Sites included in each Cluster. In addition, BellSouth may request and Vendor shall facilitate progress meetings with Vendor's key managers and subcontractors, including the establishment of oversight committees to monitor specific work in progress on Sites at times and locations agreed upon by BellSouth and Vendor in writing no less than seven days prior to such meetings. Progress reports shall be for planning purposes and monitoring compliance with this Agreement. (b) Should any information or approval be required from BellSouth as Work progresses, Vendor shall request such information or approval in writing. Said requests shall be submitted sufficiently in advance of the date upon which the information or approval is needed, but in no event less than five (5) days in advance of such date unless Vendor becomes aware of such required information or approval in less than such 5-day period, to permit BellSouth to act without affecting the progress or sequence of the Work. Such request shall provide a reasonable time for a response by BellSouth. (c) Vendor shall, on a periodic basis (but not less frequently than weekly), review the progress of the construction, evaluate the percentage of completion of each Site and its Cluster as indicated in the Project Schedule and the applicable Site Schedule and review such percentages with BellSouth. The construction schedule report shall be distributed not less than weekly during the construction phase of the Project, indicating the actual progress compared to the scheduled progress of the Work in accordance with the applicable Site Schedule, the schedules for all Sites in the applicable Cluster and the Project Schedule. The reports shall compare the actual construction dates to scheduled construction dates for each Site and the Cluster. (C)BellSouth Personal Communications, Inc. 1998 18 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (d) Notwithstanding anything to the contrary in this Agreement, Vendor's obligation to keep BellSouth informed on the status of the Project under this Agreement, including, without limitation, progress meetings, progress reports, establishment of oversight committees and construction schedule reports, shall be managed to the extent directed by the BellSouth local market. 6.02 Performance of the Work. Vendor shall have the responsibility and obligation to perform the Work in accordance with Annex D. Vendor shall provide a management team or a representative on each Site to provide supervision and administration of the Completion of the Work for each such Site. Vendor shall establish and implement coordination and communication procedures between Vendor and BellSouth. Vendor shall establish and implement procedures for reviewing and processing requests for clarifications and interpretations of the Specifications, including, without limitation, drawings and technical specifications, schedule adjustments; and such other procedures as may be required to Complete the Project. 6.03 [reserved] 6.04 Site and Project Schedules. (a) To enable the Towers and the Improvements to be planned, scheduled and Completed in an orderly and expeditious manner, Vendor acknowledges and agrees that each Site Schedule shall be consistent with the Specifications and the implementation of each stage of the Project Schedule. (b) Upon the occurrence of an Excusable Delay, the Site Schedule for any affected Site, the Project Schedule, the Scheduled Commencement Date and the Project Completion Date, each only as they apply to the affected Site, shall be adjusted to reflect any additional time which will be required for the performance of any of the duties or obligations of Vendor under this Agreement as a result of such event, provided that the extent of such adjustment shall be subject to the prior written approval of BellSouth, which approval shall not be unreasonably withheld or delayed. (c) Except as set forth in Section 6.04(b) as to an individual Site, neither the Site Schedule for any Site nor the Project Schedule shall change, and Vendor will have no right to cause any such change, without prior written approval by BellSouth. Within five (5) Business Days per Site after the receipt of any request from Vendor for a change to any Site Schedule or the Project Schedule, BellSouth shall notify Vendor in writing of its approval or disapproval of such proposed change. Failure of BellSouth to respond within said five (5) Business Day period shall constitute and be deemed an approval of such requested change unless the change is, or results in, an extension of the Scheduled Completion Date with respect to any Site, any other Site in the Cluster in which such Site is located, or the Project, in which case BellSouth's failure to respond within such five (5) Business Day period shall constitute and be deemed a disapproval. (C)BellSouth Personal Communications, Inc. 1998 19 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (d) Vendor acknowledges and agrees that it has an affirmative obligation and responsibility promptly to notify BellSouth of any circumstance which affects or may affect any Site Schedule in any material respect or the Project Schedule and the extent to which it is anticipated such Site Schedule or the Project Schedule may be affected as a result of such circumstance. 6.05 Quality Review. Vendor shall establish and implement a program to monitor the quality of the construction during the implementation of the Project Schedule. The purpose of the program shall be to assist in guarding against defects and deficiency in the Work. At any time and from time to time BellSouth may in its discretion, and without need to demonstrate cause, conduct an independent program to monitor the quality of the construction and Vendor's compliance with its obligations hereunder. 6.06 Compliance with Requirements, Permits, Bonds and Insurance during Construction. Vendor shall comply with all Environmental, Health and Safety Requirements as they relate to the construction of the Towers and the Improvements in connection with the Project, except for noncompliances that have not had and are not reasonably likely to have a Material Adverse Effect. Vendor shall, at its own cost and expense, procure and maintain all licenses and Permits required by local, state or federal regulatory agencies and authorities with respect to the construction, and shall comply with all local, state and federal laws, ordinances, rules and regulations applicable to this Agreement, except for failures that have not had and are not reasonably likely to have a Material Adverse Effect. If, notwithstanding Vendor's diligent efforts, Vendor experiences any delays in obtaining any license or Permit related to the construction phase of the Project on time, such delay shall constitute an Excusable Delay and shall be subject to Section 6.04(b). Vendor shall indemnify and hold harmless each of the BellSouth Indemnitees from and against any fine, penalty or damage arising out of the failure by Vendor, its Affiliates or any of their respective employees, agents, contractors, subcontractors, advisors or consultants to comply with any such laws, ordinances, rules or regulations including, without limitation, zoning laws and FAA regulations, unless such failure arises from BellSouth's or the Carolina Partnership's willful or negligent conduct. Vendor shall obtain, or cause to be obtained, all bonds and insurance, including without limitation the insurance required under Article 10, which are consistent with sound commercial practices in Vendor's industry for the commencement of construction and Completion of the Work with respect to each Site. 6.07 Work Permits. Vendor shall be the applicant for any and all necessary work Permits, except as BellSouth may otherwise consent pursuant to Section 4.02(c). Vendor shall coordinate and manage all professional and technical services required in connection with the preparation and filing of applications for and obtaining all Permits. Vendor shall be responsible for ensuring that all applications for the Permits are diligently prepared and filed, and pursued and obtained. 6.08 Construction. (a) Vendor, at Vendor's sole cost and expense, shall cause the Towers and the Improvements to be constructed and installed diligently and in a timely fashion, (C)BellSouth Personal Communications, Inc. 1998 20 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. with the industry standard workmanship and materials, in accordance with the Specifications, the implementation of the Project Schedule for each Site and all applicable laws. BellSouth will have the right to approve or reject the quality of all materials, equipment and systems to be used in the Completion of the Towers and Improvements if such materials, equipment or systems do not comply with the Specifications or are not commercially suitable for the Intended Use. Vendor shall supervise the work and activities of the contractors, subcontractors, engineers and other Persons engaged in the design, development, construction and installation of the Towers and Improvements. Vendor shall obtain, or cause to be obtained, all warranties. Vendor shall cause (i) the construction of a Tower and other Improvements on each Site in accordance with the applicable Site Schedule subject to Vendor's rights under Section 7.01 and (ii) the Completion of the Project to occur on or before the Project Completion Date. (b) If BellSouth requests changes to any Specifications, Vendor shall promptly make such changes to the Specifications and, the parties shall adjust the Scheduled Commencement Date, the Site Schedule, the Project Schedule and the Project Completion Date, in each case as it applies to the affected Site, as may be necessary or required, and such adjustment shall be an Excusable Delay, subject to BellSouth's reimbursement of Vendor for all reasonable out-of-pocket costs incurred by Vendor in making such changes, and subject to such changes not reducing the multi-tenant colocation capability of the Tower. 6.09 Project Data. In performing Services hereunder, Vendor shall compile data concerning the Project and furnish such data to BellSouth, all in accordance with the procedures set forth in Annex F. 6.10 Warranty. Vendor does hereby warrant and guarantee that the Tower and Improvements on each Site and all workmanship and materials incorporated therein will be constructed in accordance with the Specifications and will be free from defects in workmanship for a period of twelve (12) months commencing on the Completion Date for such Site (the "Warranty Period"). At BellSouth's request, Vendor shall assign to BellSouth a non-exclusive right to enforce all warranties respecting materials used by Vendor in Completing the Project and shall secure any and all consents from the suppliers of such materials to make such assignment effective or enforce any such warranties on behalf of BellSouth. If any defect or deviation should exist, develop, be discovered or appear within the Warranty Period, Vendor, at its sole cost and expense, immediately upon demand, shall fully and completely repair, correct and eliminate such defect or deviation. The foregoing warranties and guarantees are cumulative of and in addition to, and not restrictive of or in lieu of, any and all other warranties and guarantees provided for or required by the Specifications, any other provision of this Agreement or applicable laws, and shall survive the expiration or termination of this Agreement. 6.11 Access and Inspection. (a) The construction shall be performed in such a manner as will permit BellSouth to inspect each Site. BellSouth may, at its election, conduct such inspections as it deems necessary at each Site, upon reasonable notice to Vendor, and provided that BellSouth shall not delay, hinder or interfere with performance of construction. If (C)BellSouth Personal Communications, Inc. 1998 21 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. BellSouth notifies Vendor of any observed defects or nonconformities with the Specifications, Vendor shall promptly correct any defect or nonconformity in such time and manner as will permit Completion of each Site or Sites in accordance with the Site Schedule and the Project Schedule. The failure of BellSouth to inspect any Site or Sites, however, will not in any way limit, waive, or otherwise affect the rights of BellSouth with respect to any of Vendor's warranties or obligations under this Agreement. (b) BellSouth will, upon reasonable notice to Vendor, have access to any Site during all working hours, and will have the right to observe the Work performed; provided, however, that BellSouth shall not delay, hinder or interfere with the performance of the Work. BellSouth's inspection of any Work will not relieve Vendor of any of its obligations to perform the Work in accordance with this Agreement, including without limitation the Specifications, except to the extent a specific deviation from the Specifications at any Site is or has been accepted in writing by BellSouth. Work found not to be in accordance with the Specifications shall be replaced or re-performed by Vendor, except to the extent a specific deviation from the Specifications is or has been accepted in writing by BellSouth. BellSouth will have the right to reject materials and workmanship which are defective or not in conformance with the Specifications. Rejected Work at any Site must be promptly removed from such Site. Failure on the part of BellSouth to reject defective or nonconforming Work will not be construed to imply an acceptance of such Work; provided, however, to the extent a specific deviation from the Specifications is or has been accepted in writing by BellSouth, such deviation shall not be deemed to be defective or nonconforming Work. (c) Should BellSouth consider it necessary or advisable at any time before Completion to examine Work already completed therein, Vendor shall, on request of BellSouth, promptly furnish all necessary facilities, labor, and material for that purpose. If such Work is found to be defective in any material respect, Vendor shall pay all expenses of such examination. If, however, such Work is not found to be defective in any material respect, BellSouth shall pay all expenses of such examination and restoration of the Work. Any delays caused by BellSouth's incorrect assessment that any Work is defective shall constitute an Excusable Delay and be subject to Section 6.04(b). (d) BellSouth shall have a non-exclusive right and easement to access each Site on a twenty-four (24) hour, seven (7) day per week basis, on foot or motor vehicles, for the purposes of inspecting the construction on such Site. BellSouth may, upon written notice to Vendor at least twenty-four (24) hours before entering any Site, access such Site and climb the Tower, provided that if such entry is necessary, required or advisable in respect of an emergency, no prior written notice shall be required. Only authorized employees, contractors, subcontractors, engineers, agents or representatives of BellSouth will be permitted to enter any Site. BellSouth agrees that any employee, contractor, subcontractor, engineer, representative or agent directed or permitted by BellSouth to enter any Site will be covered by the insurance described in Article 10. (C)BellSouth Personal Communications, Inc. 1998 22 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 6.12 Completion. (a) Promptly following the Completion of the Work at any Site in accordance with the requirements of the Specifications and the requirements of this Agreement, including without limitation the construction of the Tower and the Improvements on such Site and the performance of the final cleanup thereon, Vendor shall notify BellSouth in writing of its good faith belief that such Site is Completed. The parties shall execute a Completion Certificate with respect to such Site as soon as reasonably practicable after BellSouth receives such notification, provided, that BellSouth shall not unreasonably withhold or delay execution of the Completion Certificate with respect to such Site. (b) In addition to any right BellSouth may have under Section 6.11, BellSouth will have the right to (i) inspect any Site at any time after BellSouth receives the notification under Section 6.12(a) and prior to any date on which the Completion Certificate is executed and (ii) notify Vendor in writing if such inspection by BellSouth reveals that Completion has not occurred with respect to any Site or Sites. Promptly after receipt of any such notification, Vendor shall promptly cause any unperformed Work to be performed. ARTICLE 7 COLOCATION 7.01 Identification of Colocation Sites. For those Sites in respect of which Vendor has not entered into a Ground Lease as of the date of this Agreement, BellSouth shall notify SBA within five (5) business days after the date of this Agreement or simultaneously with the submission of an Additional Site, of any known existing cell sites in such search area that would be suitable for the colocation of BellSouth's Improvements, consistent with the requirements of Annex I ("Potential Colocation Sites"), including without limitation sites that would be available by virtue of existing contractual arrangements to which BellSouth is a party ("Existing Colocation Arrangements"). BellSouth shall identify the location of such Potential Colocation Site and specify whether or not the lessor of such Potential Colocation Site is a party to an Existing Colocation Arrangement. BellSouth acknowledges that Vendor maintains a preference to fulfill BellSouth's needs for wireless communications towers as to the Sites via suitable colocation sites that may be available within the search areas, and consequently, Vendor shall use good faith efforts to maximize colocation opportunities. BellSouth agrees to accept any colocation opportunity (including Potential Colocation Sites and Existing Colocation Arrangements) presented by Vendor so long as the rent is consistent with the rent payable for BellSouth's other colocations for similar sites and such opportunity will permit BellSouth to lease space on commercially reasonable terms and conditions, consistent with BellSouth's requirements as set forth herein. BellSouth shall pay for Vendor's Colocation Services in accordance with Annex I to the extent performed at BellSouth's request, for Potential Colocation Sites or any other colocation sites. Vendor shall comply with the requirements of Section 8.05 as to any Potential Colocation Sites or other colocation sites, and BellSouth's obligations under this Section 7.01 are subject to Vendor's performance of such obligations. (C)BellSouth Personal Communications, Inc. 1998 23 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 7.02 Other Colocation Services. If any Potential Colocation Site or other colocation sites identified by Vendor (and approved by BellSouth) or BellSouth is available for colocation, Vendor at BellSouth's written direction, shall commence negotiating a space lease for such Site. If the terms and conditions of the lease and the proposed colocation for any Potential Colocation Site are acceptable to BellSouth, upon approval of such terms and conditions by BellSouth, as evidenced by BellSouth's execution of a site lease therefor, such Potential Colocation Site shall become a Site for purposes of this Agreement, shall be added to the scope of the Project and shall be covered by the Project Schedule. Thereafter Vendor shall perform such other Colocation Services (as defined in Annex I) as BellSouth may direct, in accordance with this Agreement. BellSouth agrees to pay Vendor the applicable fees for any such Colocation Services in the respective amounts set forth in Annex I. ARTICLE 8 SITE MATTERS 8.01 Site Acquisition. In order to permit the construction and installation of the Tower and the Improvements on each Site, SBA Towers shall acquire either fee simple title to, or a leasehold interest in, each Site. Each Site in which SBA Towers acquires either a fee simple title or a leasehold interest shall be free and clear of all Liens other than Permitted Liens. Except as set forth in Schedule 8.01, the Ground Lease for each Site in which SBA Towers acquires a leasehold interest shall be substantially in the form attached hereto as Exhibit C, except for Colocation Sites; provided that Ground Leases for Colocation Sites shall be subject to BellSouth's prior written approval, not to be unreasonably withheld, prior to such site becoming a Colocation Site. 8.02 Vendor's Inspection of Site Prior to Scheduled Commencement Date. Vendor shall not effect the Acquisition of any Site unless, prior to the Acquisition Date, Vendor and its agents, employees, consultants, contractors and subcontractors, have entered such Site and conducted such due diligence, examinations, investigations, tests and inspections ("Inspections") with respect to such Site as are customary in the industry, together with such other Inspections as Vendor customarily performs or are necessary or advisable under the circumstances and Vendor finds the results of such Inspections to be satisfactory. In the event that Vendor determines, in Vendor's reasonable judgment, that the results of such Inspections are not satisfactory, Vendor shall give BellSouth notice to such effect and thereafter such site shall no longer be a Site hereunder and Vendor shall identify and propose to BellSouth a new potential cell site location for a Site pursuant to and subject to Sections 5.01 and 5.03 hereof, and the Site Schedule, the Scheduled Commencement Date, the Project Schedule and the Project Completion Date, each as they apply to the applicable Site, shall be adjusted to reflect any additional time which will be required for the performance of any of the duties or obligations of Vendor under this Agreement as a result of such event, as an Excusable Delay. (C)BellSouth Personal Communications, Inc. 1998 24 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 8.03 Hazardous Waste and Contamination Investigation. (a) Prior to the Acquisition Date for any Site, Vendor shall cause the Environmental Assessment on such Site to be performed. Upon BellSouth's request, Vendor shall provide BellSouth with copies of all such Environmental Assessments. (b) Within five (5) Business Days after discovery of any environmental condition on any Site not disclosed by, or in excess of the conditions disclosed by, the Environmental Assessment, Vendor shall advise BellSouth in writing of such condition and its effect upon the Site Schedule and the Project Schedule. All costs and expenses incurred by Vendor arising out of or by reason of the discovery of any such condition on the Site (including, without limitation, costs and expenses paid or incurred to rectify such condition) shall be borne by Vendor. The applicable Site Schedule, the Project Schedule, the Scheduled Commencement Date and the Project Completion Date, each only as they apply to the affected Site, shall be adjusted pursuant to Section 6.04(b) to reflect all additional time which will be required for the performance of any of the duties or obligations of Vendor under this Agreement as a result of any such condition, and the adjustment shall be deemed an Excusable Delay. 8.04 Geotechnical Subsurface and Soil Investigation. (a) Vendor shall obtain, perform and analyze all reasonably appropriate geotechnical data, soil and subsurface tests and other soil engineering tests and reports necessary to the design, engineering, permitting, and construction of the Tower and the Improvements (except that the provisions of this Section 8.04 shall not apply to the Environmental Assessment). (b) If Vendor shall have timely obtained all reasonably appropriate tests, but, nonetheless, concealed and unknown conditions that affect the performance of the Work are encountered below ground or in an existing structure other than the Work, then (i) Vendor shall bear all costs and expenses arising out of or by reason of the existence of any such condition on the Site and (ii) the Scheduled Commencement Date, the Site Schedule, the Project Schedule and the Project Completion Date, in each case as it applies to such Site, shall be adjusted to reflect all additional time which will be required for the performance of any of the duties or obligations of Vendor under this Agreement as to such Site as a result of any such condition. Notwithstanding anything to the contrary in this Agreement, Vendor's obligation to pay all losses and expenses relative to an environmental conditions under Section 8.03(b) or a concealed, unknown condition under Section 8.04(b) is limited to $10,000 per Site in the aggregate. If such costs are more than $10,000 for a Site, Vendor may elect to reject such Site and such Site shall no longer be part of the Project or subject to this Agreement. 8.05 Additional Environmental Requirements. Prior to commencement of construction in respect of any Site (except as to any Potential Colocation Sites or other colocation sites, prior to obtaining any Permit), and as a condition to any Anchor Tenant's obligation to accept any Site, Proposed Colocation Site or other colocation site or opportunity from Vendor, Vendor shall perform an analysis to determine whether (i) the proposed site is in a historical district, (ii) there is any endangered species that may be affected by the proposed site, (C)BellSouth Personal Communications, Inc. 1998 25 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (iii) there are Resource Conservation and Recovery Act issues respecting the proposed site, including without limitation diesel fuel spills or similar conditions or (iv) the potential site is located in a floodplain (as defined by the FCC). Vendor shall deliver the results of each such analysis to BellSouth upon completion of such analysis, together with a written certification based on the consulting reports received by Vendor, to the results thereof, including Vendor's certification that there is no condition of the type described in clause (i), (ii), (iii) or (iv). All costs and expenses incurred by Vendor arising out of or by reason of compliance with the requirements of this Section 8.05 shall be borne by Vendor. ARTICLE 9 AGREEMENT TO LEASE 9.01 Assignment to the Bankruptcy Remote Entity. Upon issuance of the Completion Certificate with respect to a Site, SBA Towers shall convey, transfer and assign to the Bankruptcy Remote Entity all of its right, title and interest in and to such Site (being fee simple title to or a leasehold interest in such Site), free and clear of all Liens, except Permitted Liens, and the Bankruptcy Remote Entity shall own, operate, and manage such Site. 9.02 Right to Lease. Immediately following the Acquisition Date of any Site effected by Section 9.01, the Bankruptcy Remote Entity shall lease an exclusive space on the Tower and Improvements of such Site (the "Premises") to the applicable Anchor Tenant, and BellSouth or such designee shall accept and rent such Premises from the Bankruptcy Remote Entity, all pursuant to and in accordance with the terms and conditions set forth in the Master Lease and a Site Lease for such Site, provided that no Rent is payable for any Site unless and until the earlier of (i) Completion of all Sites in the applicable Cluster, except to the extent of an Excusable Delay or (ii) installation of BellSouth's Improvements on such Site. 9.03 Recordation of Ground Leases and Site Leases. Each Ground Lease or a memorandum of Ground Lease and each Site Lease shall be in recordable form. SBA Towers and the Bankruptcy Remote Entity shall (i) submit to the appropriate recording office the memorandum of Ground Lease for any Site in which the Bankruptcy Remote Entity has a leasehold interest prior to the execution and recordation of a Site Lease for such Site and (ii) submit to the appropriate recording office each Site Lease not later than seven (7) days after the execution thereof, and cause such memorandum or Site Lease, as the case may be, to be so recorded in such recording office. 9.04 Effect of Master Lease and Site Lease. The parties acknowledge and agree that upon the Completion of a Site, in addition to any obligations of Vendor hereunder that survive the Completion of such Site, the respective duties and responsibilities of the parties pertaining to the lease of such Site shall be set forth and governed by the Master Lease and a Site Lease for such Site. (C)BellSouth Personal Communications, Inc. 1998 26 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 10 INSURANCE 10.01 Vendor's Insurance Requirements. Throughout the term of this Agreement, Vendor shall carry and maintain in force the following insurance: (a) Commercial General Liability Insurance (including protective liability coverage on operations of independent contractors engaged in construction, blanket contractual liability coverage, products liability coverage, and explosion, collapse and underground hazards coverage) for the benefit of Vendor, against claims for personal injury, bodily injury and property damage, with a limit of not less than $5,000,000 in the event of personal injury or bodily injury to any number of persons or of damage to property arising out of any one occurrence, and not less than $5,000,000 in the aggregate applicable to this Project. Such insurance (which may be furnished under a primary policy or an "umbrella" policy or policies) shall also include coverage against liability for bodily injury or property damage arising out of use by or on behalf of Vendor of any owned, non-owned or hired automotive equipment for a limit not less than that specified above. Such insurance shall include a cross-liability/severability of interest provision and shall otherwise comply with the requirements applicable to such insurance. (b) Worker's compensation and related insurance covering all employees of Vendor employed in, on or about the Project in order to provide statutory benefits as required by the applicable laws and otherwise in compliance with the requirements applicable to such insurance. (c) Comprehensive automobile liability insurance with limits of not less than $1,000,000 per occurrence and in the aggregate for bodily injury, including death and property damage and otherwise in compliance with the requirements applicable to such insurance. (d) Employer's liability insurance with limits of not less than $5,000,000 each accident/$5,000,000 each employee by decease/$5,000,000 policy limits and otherwise in compliance with the requirements applicable to such insurance. (e) Vendor's all risk insurance policy with limits of not less than full replacement cost of each Tower and the Improvements of each Site. (C)BellSouth Personal Communications, Inc. 1998 27 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 10.02 Evidence of Insurance. Vendor shall furnish BellSouth with appropriate certificates evidencing the insurance required to be maintained by Vendor hereunder. If Vendor for any reason fails to obtain and/or maintain in force any of the insurance required under Section 10.01, then Vendor shall, and Vendor does hereby agree to, indemnify each BellSouth Indemnitee against, and hold, save, and defend each BellSouth Indemnitee harmless from, any and all claims, demands, actions, causes of action, suits, liabilities, damages, losses, costs and expenses of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees and court costs incurred in enforcing this indemnity and otherwise) which such BellSouth Indemnitee may suffer or incur, or which may be asserted against such BellSouth Indemnitee, whether meritorious or not, against which such BellSouth Indemnitee would or should have been insured under any required insurance which Vendor does not for any reason obtain or maintain in force. 10.03 Waiver of Subrogation. Each insurance policy maintained by Vendor with respect to the Project shall contain a waiver of subrogation clause, so that no insurer shall have any claim over or against BellSouth, by way of subrogation or otherwise, with respect to any claims which are insured under any such policy, except for workers compensation insurance. ARTICLE 11 LIABILITY; INDEMNITY 11.01 Liquidated Damages. (a) Except as expressly provided in this Agreement, if Vendor delays in performing any of its obligations pursuant to any Site Schedule or the Project Schedule, then BellSouth will have the option, exercisable in its sole discretion, to adjust any Site Schedule or the Project Schedule so as to allow Vendor to perform the obligations which Vendor could not perform due to Vendor's delay to a later time; provided that no such adjustment shall be effective unless evidenced by a writing executed by BellSouth. (b) Except as provided in Section 14.02, if Vendor fails to meet its obligation to Complete any Site or the Project or any phase or milestone thereof in accordance with the applicable Site Schedule or the Project Schedule (subject to any extensions thereof in respect of Excusable Delays pursuant to Section 6.04(b)), BellSouth will have the right to liquidated damages in respect of each Site that has not been Completed in an amount equal to $5,000 per month for each month that such failure continues (the "Liquidated Damages") (subject to proration). If Vendor owes Liquidated Damages in respect of any Site, and such Site is Completed by the date that is thirty (30) days after the Scheduled Completion Date therefor, BellSouth shall receive credits in the aggregate amount of such Liquidated Damages against the next succeeding monthly rent payments owed under the applicable Site Lease. If such Site is not Completed by such date, Liquidated Damages shall be payable by Vendor in cash, on demand, made by BellSouth at any time after such date. (C)BellSouth Personal Communications, Inc. 1998 28 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (c) The payment of the Liquidated Damages shall not relieve Vendor from its obligations to construct and install the Towers and Improvements, and perform its other obligations hereunder in accordance with the respective Site Schedules and the Project Schedule. The parties hereto acknowledge that the amount of the Liquidated Damages payable by Vendor to BellSouth under this Section 11.01 constitute liquidated damages and not penalties, that the injuries to BellSouth caused by Vendor's delays described above are difficult or impossible to estimate accurately, and that the sums payable herein are reasonable estimates of the probable losses associated with such injuries. The parties further acknowledge that BellSouth may not assert other damages separate from and in addition to the Liquidated Damages and this shall be BellSouth's sole remedy with respect to Vendor's failure to fulfill its obligation asserted in Section 11.01(b). 11.02 Indemnity of BellSouth. Vendor shall, and Vendor does hereby agree to, indemnify and hold harmless each BellSouth Indemnitee from and against any loss, damage, liability, cost, expense, action or claim, including reasonable attorneys' fees and amounts paid in settlement ("Claims"), by reason of or arising out of: (a) personal injury, death, and damage to tangible property resulting from the intentional or negligent acts or omissions of Vendor's directors, officers, employees, agents, consultants, contractors or subcontractors in connection with the Completion of the Project and performance of this Agreement; (b) Vendor's breach of its obligations under this Agreement, including without limitation in respect of any Services; and (c) Vendor's breach of any representation or warranty in this Agreement, including without limitation its warranty pursuant to Section 6.10. 11.03 Indemnity of Vendor. BellSouth shall, and BellSouth does hereby agree to, indemnify and hold harmless each Vendor Indemnitee from and against any Claim, by reason of or arising out of (a) a personal injury, death, and damage to tangible property resulting from the intentional or negligent acts or omissions of BellSouth's directors, officers, employees, agents, consultants, contractors or subcontractors in connection with BellSouth's performance of this Agreement, and (b) BellSouth's breach of its obligations under this Agreement. 11.04 Consequential Damages. Notwithstanding anything to the contrary contained herein, neither party shall be liable to the other party under this Agreement for loss of profits, loss of business, or any special, exemplary, consequential or incidental damages of any kind or nature or for any reason, including, without limitation, the breach of this Agreement, or any termination of this Agreement, whether such liability is asserted on the basis of contract, tort (including negligence or a strict liability) or otherwise, even if the party has been advised of the possibility of such damages. 11.05 Relationship to Insurance. In no event shall the indemnification provisions of Section 11.01 above diminish, affect, impede or impair, in any manner whatsoever, the benefits to which any BellSouth Indemnitee may be entitled under any insurance policy required by this Agreement or otherwise with respect to the Project, or under the terms of any waiver of any subrogation contained therein. (C)BellSouth Personal Communications, Inc. 1998 29 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 11.06 No Third-Party Beneficiaries. None of the duties and obligations of Vendor under this Agreement shall in any way or in any manner be deemed to create any liability of Vendor to, or any rights in, any person or entity other than the BellSouth Indemnitees and the Vendor Indemnitees. ARTICLE 12 ADDITIONAL REPRESENTATIONS AND WARRANTIES 12.01 BellSouth's Representations and Warranties. BellSouth represents and warrants to Vendor that (i) BellSouth is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) the Carolinas Partnership is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of Delaware, (iii) BellSouth is the sole general partner of the Carolinas Partnership, and (iv) each of BellSouth and the Carolinas Partnership has the full and complete right, power and authority to enter into this Agreement and perform their respective duties and obligations under this Agreement in accordance with the terms and conditions of this Agreement. 12.02 Vendor's Representations and Warranties. (a) SBA Towers represents and warrants that SBA Towers is a corporation, duly organized, validly existing and in good standing under the laws of the State of Florida, and has the full and complete right, power and authority to enter into this Agreement and perform SBA Towers' duties and obligations under this Agreement in accordance with the terms and conditions of this Agreement. (b) SBA represents and warrants that SBA is a corporation, duly organized, validly existing and in good standing under the laws of the State of Florida, and has the full and complete right, power and authority to enter into this Agreement and perform SBA's duties and obligations under this Agreement in accordance with the terms and conditions of this Agreement. (c) Each of SBA Towers and SBA represents and warrants to BellSouth that at all times during the term of this Agreement, SBA Towers and SBA shall have sufficient funds available to Complete the Project in accordance with the Site Schedules and Project Schedule. (C)BellSouth Personal Communications, Inc. 1998 30 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. ARTICLE 13 DEFAULT AND TERMINATION 13.01 Default. (a) A party shall be in default under this Agreement if such party fails to perform any of its duties and obligations under this Agreement and does not cure or remedy such failure to perform within ten (10) days after receipt of written notice from the other party with respect thereto; provided, however, that, if such failure to perform shall necessitate longer to cure than such ten (10) day period, then such cure period shall be extended for such period of time as is reasonably necessary to cure such failure to perform, provided, further, that a defaulting party commences such cure within ten (10) days after receipt of written notice from a non-defaulting party and thereafter proceeds diligently and in good faith to cure the default. (b) Upon the occurrence of a default by either party under this Agreement, a non-defaulting party may pursue any and all remedies available under applicable law and any one or more of the remedies provided in this Agreement, separately or concurrently or in any combination, without further notice or demand whatsoever; provided, however, that, except as set forth Sections 13.02, 13.03 or 13.04, a non-defaulting party may terminate this Agreement only with respect to a particular Site in accordance with Section 13.05 and only in accordance with Sections 13.02, 13.03 and 13.04. 13.02 Termination of the Agreement by BellSouth. (a) Notwithstanding anything to the contrary contained herein, (i) if Vendor breaches any of its obligations under this Agreement and such breach continues for at least thirty (30) days with respect to at least twenty (20) Sites not yet Completed, including without limitation, obligations set forth in Articles 5 and 8, and as a result of such breach, BellSouth has the right to liquidated damages pursuant to Section 11.01, or (ii) if there is any change that results in Vendor's Change of Control and BellSouth exercises its right to purchase all the Sites in the Project or all the capital stock of the Bankruptcy Remote Entity pursuant to Section 25 of the Master Lease, then BellSouth may, in its sole discretion, terminate this Agreement with respect to all Sites on ten (10) days' written notice to Vendor. (b) If BellSouth elects, at any time during the term of this Agreement, in its sole discretion to terminate this Agreement pursuant to Section 13.02(a), Vendor shall (i) cease searching for attempting to acquire any additional Sites, and (ii) at BellSouth's option as to any Site which has not been Completed, either (x) continue performing its obligations hereunder as to such Site until the Completion of such Site, including, without limitation, any Site with respect of which Vendor is in breach, or (y) cease performing Work on such Site. If any Site is terminated pursuant to clause (ii)(y) above, BellSouth shall have no further obligation in respect of such Site. (c) The termination of this Agreement by BellSouth pursuant to Section 13.02 shall not relieve Vendor or BellSouth of any of its duties and obligations theretofore accrued under this Agreement prior to the effective date of such termination. (C)BellSouth Personal Communications, Inc. 1998 31 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 13.03 Termination of the Agreement by BellSouth in Respect of Vendor's Bankruptcy. BellSouth may terminate this Agreement with respect to all Sites for cause in the event of occurrence of any of the following, after which Vendor shall continue performing its duties and obligations hereunder accrued prior to the effective date of such termination, but shall cease searching for or attempting to acquire any additional cell sites: (a) A trustee or receiver is appointed to take possession or control of all or substantially all of Vendor's assets, and such receiver or trustee shall fail, within sixty (60) days of appointment, to affirm or assume this Agreement, to provide adequate assurance as to its ability to perform all of the terms and conditions of this Agreement as a receiver or trustee of Vendor, to cure all other events of default, and to pay all damages incurred by BellSouth as a result of all events of default. (b) Vendor shall commence any voluntary proceeding under present or future Federal bankruptcy laws or under any other bankruptcy, insolvency or other laws respecting debtor's rights. (c) An "order for relief" or other judgment or decree by any court of competent jurisdiction is entered against Vendor in any involuntary proceeding against Vendor under present or future Federal bankruptcy laws or under any other bankruptcy, insolvency or other laws respecting debtor's rights, or any such involuntary proceeding shall be commenced against Vendor and shall continue for a period of forty-five (45) days after commencement without dismissal. 13.04 Termination of Agreement by Vendor in Respect of BellSouth's Bankruptcy. Vendor may terminate this Agreement with respect to all Sites for cause in the event of occurrence of any of the following, after which after which Vendor shall continue performing its duties and obligations hereunder accrued prior to the effective date of such termination, but shall cease searching for or attempting to acquire any additional cell sites: (a) A trustee or receiver is appointed to take possession or control of all or substantially all of BellSouth's assets, and such receiver or trustee shall fail, within sixty (60) days of appointment, to affirm or assume this Agreement, to provide adequate assurance as to its ability to perform all of the terms and conditions of this Agreement as a receiver or trustee of BellSouth, to cure all other events of default, and to pay all damages incurred by Vendor as a result of all events of default. (b) BellSouth shall commence any voluntary proceeding under present or future Federal bankruptcy laws or under any other bankruptcy, insolvency or other laws respecting debtor's rights. (C)BellSouth Personal Communications, Inc. 1998 32 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (c) An "order for relief" or other judgment or decree by any court of competent jurisdiction is entered against BellSouth in any involuntary proceeding against BellSouth under present or future Federal bankruptcy laws or under any other bankruptcy, insolvency or other laws respecting debtor's rights, or any such involuntary proceeding shall be commenced against BellSouth and shall continue for a period of forty-five (45) days after commencement without dismissal. 13.05 Termination as to Specific Sites by Either Party. (a) As set forth below, a party may terminate this Agreement with respect to a Site which has not been Completed in the event of occurrence of any of the following by the other party, after which termination neither Vendor nor BellSouth shall have any further obligations to each other with respect to such Site only, but Vendor shall continue performing its other obligations hereunder (except as such obligations relate to such terminated Sites), including without limitation continuing to (i) perform the Work as to any other Sites, until the Completion of such Sites and (ii) searching for or attempting to acquire any additional cell sites: (i) Upon the occurrence of a default by a party under this Agreement arising in respect of a particular Site, where such default is not cured within the applicable grace period. (ii) If such Site, in its entirety, is taken by the exercise of the power of eminent domain by a Governmental Authority or a Person entitled to exercise such power or benefiting therefrom or such part of the Site is taken by the power of eminent domain so as to render the Tower unusable for its Intended Use, as contemplated by this Agreement. (iii) If, pursuant to Section 4.02(e), if BellSouth elects to construct, or cause Vendor to construct, Improvements on an alternative Site. (b) If BellSouth terminates this Agreement pursuant to Section 13.05(a)(i), Vendor shall promptly: (i) Upon request by BellSouth, deliver to BellSouth or such other Person as BellSouth may designate, all materials, supplies, equipment, keys, contracts and documents, all books of account and records maintained pursuant to this Agreement pertaining to the applicable Site. (ii) Upon BellSouth's request, assign all existing contracts relating to the specific Site to BellSouth or such other Person as BellSouth shall designate and BellSouth shall reimburse Vendor for reasonable and necessary out-of-pocket costs incurred by Vendor in connection with the construction of such Site, within thirty (30) days after receipt of written statement from Vendor (C)BellSouth Personal Communications, Inc. 1998 33 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. specifying in reasonable detail the nature and necessity of each such cost; provided that no such costs shall exceed ordinary and customary costs incurred by similarly situated vendors in the industry for similar construction services. Vendor hereby grants BellSouth an irrevocable power of attorney, exercisable from and after the termination of this Agreement pursuant to this Section 13.05, at BellSouth's option to either (A) effect the transfer of the interest of the Bankruptcy Remote Entity under each Ground Lease to BellSouth or its designee, and assignment of Vendor's rights under all such contracts to BellSouth or its designee or (B) effect the transfer by Vendor of all rights, interest and title in the applicable Site to BellSouth or its designee. The irrevocable power of attorney granted hereby is coupled with interest. (iii) Furnish all such information, take all such other action, and cooperate with BellSouth as BellSouth shall reasonably require in order to effectuate an orderly and systematic termination of Development Services and Vendor's other, duties, obligations and activities hereunder. (c) The termination of this Agreement by either party by reason of a default shall not relieve the other party of any of its duties and obligations theretofore accrued under this Agreement prior to the effective date of such termination. ARTICLE 14 FORCE MAJEURE 14.01 Force Majeure. An event of "Force Majeure" shall mean the following events or circumstances, to the extent that they delay the Completion of any Site or the performance of Vendor of its other duties and obligations under this Agreement in respect of a Site. (a) condemnation or other exercise of the power of eminent domain; (b) changes in Governmental Requirements applicable to the construction of the Towers and Improvements and Completion of the Site effective after the Effective Date, and the orders of any Governmental Authority having jurisdiction over a party; (c) acts of God, including, without limitation, tornadoes, hurricanes, floods, sinkholes, landslides, earthquakes, epidemics, quarantine and pestilence; (d) fire and other casualties, such as explosions and accidents; and (e) acts of a public enemy, acts of war, terrorism, effects of nuclear radiation, blockades, insurrections, riots, civil disturbances or national or international calamities. (C)BellSouth Personal Communications, Inc. 1998 34 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 14.02 Effect of Force Majeure. Vendor shall be entitled to an adjustment of the Scheduled Commencement Date, the Site Schedule, the Project Schedule and the Project Completion Date, in each case as its applies to a Site affected by Force Majeure, but only for the number of days due to such causes and only to the extent that such occurrences actually delay the Completion of such Site. The extent of any such adjustment is subject to the prior written approval of BellSouth, not to be unreasonably withheld or delayed. Under no circumstances shall a Force Majeure event effect any extension of the Project Completion Date, except as required for any Site whose Site Schedule is adjusted. ARTICLE 15 FIRE OR OTHER CASUALTY; CONDEMNATION 15.01 Obligation to Reconstruct; Use of Insurance Proceeds. In the event of destruction or damage to any Tower or other Improvements by fire or other casualty prior to Completion, Vendor shall restore, reconstruct and repair any such destruction or damage by fire or other casualty such that the Tower and the Improvements shall be in accordance with the Specifications. Vendor shall use all available insurance proceeds for restoration, reconstruction or repair, as required by this Agreement, and BellSouth shall consent to such use of insurance proceeds as required. The parties agree to adjust the Site Schedule, the Project Schedule, Scheduled Commencement Date and the Project Completion Date, in each case only with respect to the affected Site, in order to extend the timetable for the Completion of Work with respect to any destroyed or damaged Towers or Improvements. 15.02 Condemnation of the Tower or Site; Application of Compensation. In the event that a Tower or a Site, or both, or any part thereof, is damaged or taken by the exercise of the power of eminent domain at any time prior to the Completion Date, the compensation awarded to and received by Vendor shall be applied to restoration, reconstruction and repair of the Tower, provided, that the Tower can (i) be restored, reconstructed or repaired, and (ii) be commercially feasible for its Intended Use as contemplated by this Agreement after the taking. The parties agree to adjust the Site Schedule, the Project Schedule, Scheduled Commencement Date and the Project Completion Date, in each case only with respect to the affected Site, in order to extend the timetable for the Completion of Work with respect to the taken Tower or Site. ARTICLE 16 MISCELLANEOUS 16.01 Notices. Whenever any notice, demand, request, advice or other communication is required or permitted under this Agreement, such notice, demand or request shall be in writing and shall be sent by registered or certified mail, postage prepaid, return receipt requested, or be sent by nationally recognized commercial courier for next Business Day delivery so long as such (C)BellSouth Personal Communications, Inc. 1998 35 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. commercial courier requires the recipient to sign a receipt evidencing delivery, to the addresses set forth below or to such other addresses as are specified by written notice given in accordance herewith: BELLSOUTH: BellSouth Personal Communications, Inc. 3353 Peachtree Road, N.E., Suite 400 Atlanta, Georgia 30326 Attention: President Telecopier No.: (404) 841-2025 with a copy to: BellSouth Personal Communications, Inc. 3353 Peachtree Road, N.E., Suite 400 Atlanta, Georgia 30326 Attention: General Counsel Telecopier No.: (404) 841-4415 VENDOR: SBA Towers, Inc. SBA, Inc. One Town Center Road, 3rd floor Boca Raton, Florida 33486 Attention: Chief Operating Officer Telecopier No.: (561) 995-7626 with a copy to; SBA Towers, Inc. SBA, Inc. One Town Center Road, 3rd Floor Boca Raton, Florida 33486 Attention: Jeffrey A. Stoops, Esq. Telecopier No.: (561) 997-0343 All notices, demands, requests, advice or communications given by mailing shall be deemed given on the date of receipt in the United States Mail; those given by commercial courier shall be deemed given on the date such notice, demand, request, advice or communication is delivered to the recipients address set forth above or to such other address as is specified by written notice given in accordance herewith. Any notice, demand, request, advice or communication not received because of changed address or facsimile number of which no notice was given or because of refusal to accept delivery shall be deemed received by the party to whom addressed on the date of hand delivery, on the date of facsimile transmittal, on the first calendar day after deposit with commercial courier, or on the third calendar day following deposit in the United States Mail, as the case may be. (C)BellSouth Personal Communications, Inc. 1998 36 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 16.02 Assignment; Binding Effect. The rights of the parties under this Agreement are personal to the parties and may not be assigned without the prior written consent of the other party, except (i) for collateral assignments given to lenders providing financing and (ii) that BellSouth may assign all or any of its rights and delegate all or any of its duties hereunder to the Carolinas Partnership, as to any Sites that are located in the Carolinas Partnership's service territory, without the prior written consent of Vendor. This Agreement shall be binding upon and enforceable against, and shall inure to the benefit of, the parties hereto and their respective legal representatives, successors and permitted assigns. 16.03 Joint and Several Liability. Each of SBA Towers and SBA acknowledges and represents to BellSouth that all the obligations of Vendor to perform or observe fully any and all covenants, agreements or provisions to be performed or observed pursuant to this Agreement shall be joint and several obligations of SBA Towers and SBA. 16.04 Authorized Representatives. Any consent, approval, authorization or other action required or permitted to be given or taken under this Agreement by BellSouth or Vendor, as the case may be, shall be given or taken by one or more of the authorized representatives of each, whose names as of the date hereof are set forth in Annex H, subject to change from time to time by notice given by BellSouth or Vendor pursuant to Section 16.02 and Annex H. The written statements and representations of any authorized representative of BellSouth or Vendor shall be binding upon the party for whom such person is an authorized representative, and the other party hereto shall have no obligation or duty whatsoever to inquire into the authority of any such representative to take any action which he proposes to take. 16.05 Headings. The use of headings, captions and numbers in this Agreement is solely for the convenience of identifying and indexing the various provisions in this Agreement and shall in no event be considered otherwise in construing or interpreting any provision in this Agreement. 16.06 Annexes and Exhibits. Each and every annex and exhibit referred to or otherwise mentioned in this Agreement is attached to this Agreement and is and shall be construed to be made a part of this Agreement by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each annex and exhibit were set forth in full and at length every time it is referred to or otherwise mentioned. 16.08 Publicity. Neither party will advertise or publish any information related to this Agreement without the prior written approval of the other party. 16.09 Severability. If any term, covenant, condition or provision of this Agreement, or the application thereof to any person or circumstance, shall be held to be invalid or unenforceable, then in each such event the remainder of this Agreement or the application of (C)BellSouth Personal Communications, Inc. 1998 37 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. such term, covenant, condition or provision to any other person or any other circumstance (other than those as to which it shall be invalid or unenforceable) shall not be thereby affected, and each term, covenant, condition and provision hereof shall remain valid and enforceable to the fullest extent permitted by law. 16.10 Waiver. Failure by either party to complain of any action, non-action or default of the other party shall not constitute a waiver of any aggrieved party's rights hereunder. Waiver by either party of any right arising from any default of the other party shall not constitute a waiver of any other right arising from a subsequent default of the same obligation or for any other default, past, present or future. 16.11 Rights Cumulative. All rights, remedies, powers and privileges conferred under this Agreement on the parties shall be cumulative of and in addition to, but not restrictive of or in lieu of, those conferred by law or equity. 16.12 Time of Essence; Prompt Responses. Time is of the essence of this Agreement. Anywhere a day certain is stated for payment or for performance of any obligation, the day certain so stated enters into and becomes a part of the consideration for this Agreement. The parties recognize and agree that the time limits and time periods provided herein are of the essence of this Agreement. The parties mutually agree to exercise their mutual and separate good faith, reasonable efforts to consider and respond promptly and as expeditiously as is reasonably possible notwithstanding any time period provided in this Agreement. 16.13 Applicable Law. This Agreement shall be governed by, construed under and interpreted and enforced in accordance with the laws of the State of Georgia, without regard to its conflicts of laws provisions. 16.14 Dispute Resolution Procedures. (a) Any dispute between the parties relating to any problem with respect to a specific Site, including without limitation, any dispute of the type more particularly described in Annex O, shall be resolved in accordance with the procedures specified in Annex 0. (b) Any dispute between the parties other than dispute referred to in Section 16.14(a), including without limitation, any dispute with respect to the interpretation of any provision of this Agreement or with respect to the performance of either party, shall be resolved as specified below: (i) Upon the written request of either party, each of the parties will appoint a designated representative who does not devote substantially all of his or her time to performance under this agreement, whose task it will be to meet with the purpose of endeavoring to resolve such dispute; (C)BellSouth Personal Communications, Inc. 1998 38 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. (ii) The designated representatives shall meet as often as necessary during a thirty (30) day period (or such other time as the parties may agree) to gather and furnish to the other all information with respect to the matter in issue which is appropriate and germane to its resolution; (iii) Such representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding relating thereto; (iv) The specific format for such discussions will be left to the discretion of the designated representatives, but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party; (v) If the designated representatives cannot resolve the dispute, then the dispute shall be referred to the presidents of each party, for their review and resolution. If the dispute cannot be resolved by such officers, then the parties may initiate formal proceedings; however, formal proceedings for the resolution of any such dispute may not be commenced until the earlier of: (A) The designated representatives concluding in good faith that amicable resolution through continued negotiation of the matter in issue does not appear likely; or (B) Thirty (30) days after the initial request to negotiate such dispute (unless preliminary or temporary relief of an emergency nature is sought by one of the parties); or (C) Thirty (30) days before the statute of limitations governing any cause of action relating to such dispute would expire. (c) BellSouth and Vendor agree that any litigation arising out of any dispute not resolved pursuant to Section 16.14(b) shall be litigated in any state or Federal court located in Fulton County, Georgia, and BellSouth and Vendor hereby expressly consent to the jurisdiction of any such courts and to the venue therein. 16.15 Entire Agreement. This Agreement and the letter agreement of even date herewith between BellSouth and Vendor contain the entire agreement of BellSouth and Vendor with respect to the engagement of Vendor as the Vendor for the Project, and all representations, warranties, inducements, promises or agreements, oral or otherwise, between the parties not embodied in this Agreement shall be of no force or effect. 16.16 Modifications. This Agreement shall not be modified or amended in any respect except by a written agreement executed by both parties. (C)BellSouth Personal Communications, Inc. 1998 39 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. 16.17 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of such counterparts together shall constitute one and the same instrument. 16.18 No Brokers. BellSouth and Vendor hereby represent, agree and acknowledge that no real estate broker or other person is entitled to claim or to be paid a commission as a result of the execution and delivery of this Agreement, including any of the Exhibits, or any proposed improvement, use, disposition or lease of any or all of the Site. [Remainder of page intentionally left blank] (C)BellSouth Personal Communications, Inc. 1998 40 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals. IN WITNESS WHEREOF, BellSouth, SBA Towers and SBA have caused their respective duly authorized representatives to execute, seal and deliver this Agreement, all as of the day and year first above written. BELLSOUTH: BELLSOUTH PERSONAL COMMUNICATIONS, INC. By: - ---------------------------- ---------------------------- Witness Name: ----------------------- Title: ---------------------- - ---------------------------- Witness Attest: ------------------------ Name: ----------------------- Title: ---------------------- VENDOR: SBA TOWERS, INC. /s/ [ILLEGIBLE] By: /s/ Steven E. Bernstein - ---------------------------- ---------------------------- Witness Name: Steven E. Bernstein ----------------------- Title: President ---------------------- /s/ [ILLEGIBLE] - ---------------------------- Witness Attest: /s/ Jeffrey A.Stoops ------------------------ Name: Jeffrey A.Stoops ----------------------- Title: Secretary ---------------------- SBA, INC. /s/ [ILLEGIBLE] By: /s/ Steven E. Bernstein - ---------------------------- ---------------------------- Witness Name: Steven E. Bernstein ----------------------- Title: President ---------------------- /s/ [ILLEGIBLE] - ---------------------------- Witness Attest: /s/ Jeffrey A.Stoops ------------------------ Name: Jeffrey A.Stoops ----------------------- Title: Asst. Secretary ---------------------- (C)BellSouth Personal Communications, Inc. 1998 41 RESTRICTED: Contains Private and/or Proprietary Information. May only be used for Authorized BellSouth Business Purposes and only by Authorized Individuals IN WITNESS WHEREOF, BellSouth, and Vendor have caused their respective duly authorized representatives to execute, seal and deliver this Agreement, all as of the day and year first above written. BELLSOUTH: BELLSOUTH PERSONAL COMMUNICATIONS, INC. /s/ Elizabeth Martin By: /s/ [ILLEGIBLE] - ---------------------------- ---------------------------- Witness Name: [ILLEGIBLE] ----------------------- Title: President ---------------------- /s/ [ILLEGIBLE] - ---------------------------- Witness Attest: /s/ [ILLEGIBLE] ------------------------ Name: [ILLEGIBLE] ----------------------- Title: Asst. Secretary ---------------------- (CORPORATE SEAL) VENDOR: SBA, INC./ SBA TOWERS, INC. By: ---------------------------- Name: - ---------------------------- ----------------------- Witness Title: ---------------------- Attest: - ---------------------------- ------------------------- Witness Name: ----------------------- Title: ---------------------- (CORPORATE SEAL) EX-10.23 9 1996 STOCK OPTION PLAN EXHIBIT 10.23 SBA COMMUNICATIONS CORPORATION AMENDED AND RESTATED 1996 STOCK OPTION PLAN 1. Purpose. The purpose of the 1996 Stock Option Plan ("Plan") of SBA ------- Communications Corporation ("Company") is to provide a means through which the Company and its Subsidiaries may attract able persons to enter and remain in the employ or other service of the Company and its Subsidiaries, including as directors, and to provide a means whereby those key persons upon whom the responsibilities of the successful administration and management of the Company rest, and whose present and potential contributions to the welfare of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their commitment to the welfare of the Company and promoting an identity of interest between shareholders and these key persons. A further purpose of the Plan is to provide such key persons with additional incentive and reward opportunities designed to enhance the profitable growth of the Company. The Plan provides for granting Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units, or any combination of the foregoing. 2. Definitions. The following definitions shall be applicable throughout ----------- the Plan. (1) "Appreciation Date" shall mean the date designated by a Holder of Stock Appreciation Rights for measurement of the appreciation in the value of rights awarded to him, which date shall be the date notice of such designation is received by the Committee, or its designee. (2) "Award" shall mean, individually or collectively, any Incentive Stock Option, Non-Qualified Stock Option, Stock Appreciation Right, Restricted Stock Award, Phantom Stock Unit Award or Performance Share Unit Award. (3) "Award Period" shall mean a period of time within which performance is measured for the purpose of determining whether an award of Performance Share Units has been earned. (4) "Board" shall mean the Board of Directors of the Company. (5) "Cause" shall mean the Company or a Subsidiary having cause to terminate a Participant's employment under any existing employment agreement between the Participant and the Company or a Subsidiary or, in the absence of such an employment agreement, upon (i) the determination by the Committee that the Participant has failed to perform his duties to the Company or a Subsidiary (other than as a result of his incapacity due to physical or mental illness or injury), which failure amounts to an intentional and extended neglect of his duties to such party, (ii) the Committee's determination that the Participant has engaged or is about to engage in conduct materially injurious to the Company or a Subsidiary, or (iii) the Participant having been convicted of a felony. (6) "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) "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. (8) "Committee" shall mean the Compensation Committee of the Board, or such other committee as may be appointed by the Board, each member of which shall be a Non-Employee Director, which shall be the administrative committee for the Plan. In the absence of such committee, the Board shall serve as the Committee. (9) "Common Stock" shall mean the Class A Common Stock of the Company, $0.01 par value per share. (10) "Company" shall mean SBA Communications Corporation, a Florida corporation. (11) "Date of Grant" shall mean the date on which the granting of an Award is authorized or such other date as may be specified in such authorization. (12) "Disability" shall be as defined in any existing employment agreement between the Participant and the Company or a Subsidiary or, in the absence of such an employment agreement, shall mean the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at 2 which a Participant was employed when such disability commenced or, if the Participant was retired when such disability commenced, the inability to engage in any substantial gainful activity, as determined by the Committee based upon medical evidence acceptable to it. (13) "Eligible Employee" shall mean any person regularly employed by the Company or a Subsidiary on a full-time salaried basis who satisfies all of the requirements of Section 6 hereof. (14) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (15) "Fair Market Value" shall mean (i) the average of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded for the ten (10) trading days immediately preceding the date of determination, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price of the Common Stock on the Nasdaq National Market for the ten (10) trading days immediately preceding the date of determination, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted by an established quotation service for over-the-counter securities for the ten (10) trading days immediately preceding the date of determination, if the Common Stock is not reported on the Nasdaq National Market. However, if the Common Stock is not publicly-traded at the time an option is granted under the Plan, "Fair Market Value" shall be deemed to be the fair value of the Common Stock as determined by the Compensation Committee of the Board of the Company (the "Committee") after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length. (16) "Holder" shall mean a Participant who has been granted an Option, a Stock Appreciation Right, a Restricted Stock Award, a Phantom Stock Unit Award or a Performance Share Unit Award. (17) "Incentive Stock Option" shall mean an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an Incentive Stock Option pursuant to Section 422 of the Code. (18) "Non-Employee Director" shall mean a director of the Company who: (i) Is not currently an officer of the Company or any of its parents or Subsidiaries, or otherwise is not currently employed by the Company or any of its parents or Subsidiaries; 3 (ii) Does not receive compensation, either directly or indirectly, from the Company or any of its parents or Subsidiaries, for services rendered as a consultant or in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which disclosure would be required pursuant to Item 404(a) of Regulation S-K promulgated under the Exchange Act. (iii) Does not possess an interest in any other transaction for which disclosure would be required pursuant to Item 404(a) of Regulation S-K promulgated under the Exchange Act; and (iv) Is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K promulgated under the Exchange Act. (19) "Non-Qualified Stock Option" shall mean an Option granted by the Committee to a Participant under the Plan which is not designated by the Committee as an Incentive Stock Option. (20) "Normal Termination" shall mean termination: (1) With respect to the Company or a Subsidiary, at retirement (excluding early retirement) pursuant to the Company retirement plan then in effect; (2) On account of Disability; (3) With the written approval of the Committee; or (4) By the Company or a Subsidiary without cause. (21) "Option" shall mean an Award granted under Section 7 of the Plan. (22) "Option Period" shall mean the period described in Section 7(d). (23) "Participant" shall mean a person who has been selected to participate in the Plan and to receive an Award pursuant to Section 6. Participants are limited to Eligible Employees and Non-Employee Directors. (24) "Performance Goals" shall mean the performance objectives of the Company during an Award Period or Restricted Period established for the purpose of determining whether, and to what extent, Awards will be earned for an Award Period or Restricted Period. (25) "Performance Share Unit" shall mean a hypothetical investment equivalent equal to one share of Stock granted in connection with an Award made under Section 9 of the Plan. 4 (26) "Phantom Stock Unit" shall mean a hypothetical investment equivalent equal to one Share of Stock granted in connection with an Award made under Section 10 of the Plan, or credited with respect to Awards of Performance Share Units which have been deferred under Section 9. (27) "Plan" shall mean the 1996 Stock Option Plan of SBA Communications Corporation. (28) "Restricted Period" shall mean, with respect to any share of Restricted Stock, the period of time determined by the Committee during which such share of Restricted Stock is subject to the restrictions set forth in Section 10. (29) "Restricted Stock" shall mean shares of Common Stock issued or transferred to a Participant subject to the restrictions set forth in Section 10 and any new, additional or different securities a Participant may become entitled to receive as a result of adjustments made pursuant to Section 12. (30) "Restricted Stock Award" shall mean an Award granted under Section 10 of the Plan. (31) "Securities Act" shall mean the Securities Act of 1933, as amended. (32) "Stock" shall mean the Class A Common Stock or such other authorized shares of stock of the Company as the Committee may from time to time authorize for use under the Plan. (33) "Stock Appreciation Right" or "SAR" shall mean an Award granted under Section 8 of the Plan. (34) "Subsidiary" shall mean any corporation which is a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code. (35) "Valuation Date" shall mean the last day of an Award Period or the date of death of a Participant, as applicable. 3. Effective Date, Duration and Shareholder Approval. Subject to the ------------------------------------------------- approval of this Plan by the shareholders of the Company, the Plan shall become effective on the date of approval by the Board, and no further Awards may be made after November 30, 2006. The Plan shall continue in effect until all matters relating to the payment of Awards and administration of the Plan have been settled. 4. Administration. The Committee shall administer the Plan. The -------------- Committee shall consist of at least two (2) members. A 5 majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. Subject to the provisions of the Plan, the Committee shall have exclusive power to: (1) Select the persons to be Participants in the Plan; (2) Determine the nature and extent of the Awards to be made to each Participant; (3) Determine the time or times when Awards will be made; (4) Determine the duration of each Award Period; (5) Determine the conditions to which the payment of Awards may be subject; (6) Establish the Performance Goals for each Award Period; (7) Prescribe the form or forms evidencing Awards; and (8) Cause records to be established in which there shall be entered, from time to time as Awards are made to Participants, the date of each Award, the number of Incentive Stock Options, Non-Qualified Stock Options, SARs, Phantom Stock Units, Performance Share Units and Shares of Restricted Stock awarded by the Committee to each Participant, the expiration date, the Award Period and the duration of any applicable Restricted Period. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee's interpretation of the Plan or any Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board. 5. Grant of Options, Stock Appreciation Rights, Restricted Stock Awards, --------------------------------------------------------------------- Phantom Stock Awards and Performance Share Units; Shares Subject to the Plan. - ----------------------------------------------------------------------------- The Committee may, from time to time, grant Awards of Options, Stock Appreciation Rights, Restricted Stock, Phantom Stock Units and/or Performance Share Units to one or more Participants; provided, however, that: 6 (1) Subject to Section 12, the aggregate number of shares of Stock made subject to Awards may not exceed one million eight hundred thousand (1,800,000); (2) Such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash. In the event any Option, SAR not attached to an Option, Restricted Stock, Phantom Stock Unit or Performance Share Unit shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan to the fullest extent permitted by the Exchange Act (if applicable at the time); and (3) Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase at prices no higher than the Fair Market Value at the time of purchase. 6. Eligibility. Participants shall be limited to officers and employees ----------- of the Company and its Subsidiaries and to Directors, in each case who have received written notification from the Committee or from a person designated by the Committee that they have been selected to participate in the Plan. 7. Stock Options. One or more Incentive Stock Options or Non-Qualified ------------- Stock Options can be granted to any Participant; provided, however, that Incentive Stock Options may be granted only to Eligible Employees. Each Option so granted shall be subject to the following conditions. (1) Option Price. The option price ("Option Price") per share of Stock shall be set by the Committee at the time of grant but shall not be less than (i) in the case of an Incentive Stock Option, the Fair Market Value of a share of Stock at the Date of Grant, and (ii) in the case of a Non-Qualified Stock Option, the par value per share of Stock. (2) Manner of Exercise and Form of Payment. Options which have become exercisable may be exercised by delivery of written notice of exercise to the Committee accompanied by payment of the Option Price, subject to the following terms and conditions. (1) The minimum number of shares for an exercise of any Option shall be the lesser of fifty (50) shares or the number of shares exercisable under the Option immediately prior to such exercise. (2) The Option Price shall be payable in cash and/or shares of Stock valued at the Fair 7 Market Value at the time the Option is exercised, or, in the discretion of the Committee, either (i) in other property having a Fair Market Value on the date of exercise equal to the Option Price, or (ii) by delivering to the Company a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the Option Price. (3) Stock Option Agreement. Each Option granted under the Plan shall be evidenced by a "Stock Option Agreement" between the Company and the Holder of the Option containing such provisions as may be determined by the Committee, but shall be subject to the following terms and conditions. (1) Each Option or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof, except as otherwise determined by the terms of the Stock Option Agreement. (2) Each share of Stock purchased through the exercise of an Option shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or exercises a related SAR or when the Option lapses. (3) Options shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder's lifetime only by him or her. (4) Each Option shall become exercisable by the Holder in accordance with the vesting schedule (if any) established by the Committee for the Award. (5) Each Stock Option Agreement may contain an agreement that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the 8 delivery of any shares issued upon exercise of an Option shall be a condition precedent to the right of the Holder or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws. (4) Other Terms and Conditions. An Option granted pursuant to the Plan shall become exercisable and shall lapse in such manner and within such period or periods ("Option Period"), not to exceed ten (10) years from its Date of Grant (or such shorter time period as may be otherwise specified herein), as set forth in the Stock Option Agreement to be entered into in connection with the grant of such Option. (5) Grants to 10% Holders of Company Voting Stock. Notwithstanding Section 7(a), if an Incentive Stock Option is granted to a Holder who owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or of the Company and its Subsidiaries, the period specified in the Stock Option Agreement for which the Option thereunder is granted and at the end of which such Option shall expire shall not exceed five (5) years from the Date of Grant of such Option and the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option. (6) Limitation. To the extent the aggregate Fair Market Value (as determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds One Hundred Thousand Dollars ($100,000), such excess Incentive Stock Options shall be treated as Non-Qualified Stock Options. (7) Voluntary Surrender. The Committee may permit the voluntary surrender of all or any portion of any Non-Qualified Stock Option and its corresponding SAR, if any, granted under the Plan to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at the Option Price, during the exercise period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is 9 granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, exercise period, or any other terms and conditions of the Non-Qualified Stock Option surrendered. (8) Order of Exercise. Options granted under the Plan may be exercised in any order, regardless of the Date of Grant or the existence of any other outstanding Option. (9) Notice of Disposition. Participants shall give prompt notice to the Company of any disposition of Stock acquired upon exercise of an Incentive Stock Option if such disposition occurs within either two (2) years after the Date of Grant of such Option and/or one (1) year after the receipt of such Stock by the Holder. (10) Termination of Employment. If the Participant's employment by the Company or any of its subsidiaries is terminated for any reason other than death, only that portion of the Option exercisable at the time of such termination of employment may thereafter be exercised, and it may not be exercised more than three months after such termination nor after the expiration date of the option, whichever date is earlier, unless such termination is by reason of the Participant's permanent and total disability, in which case such period of three months shall be extended to one year. Except as otherwise set forth in the Stock Option Agreement, in all other respects, the Option shall terminate upon such termination of employment. 8. Stock Appreciation Rights. Any Option granted under the Plan may ------------------------- include an SAR, either at the time of grant or by amendment except that in the case of an Incentive Stock Option, such SAR shall be granted only at the time of grant of the related Option. The Committee may also award to Participants SARs independent of any Option. An SAR shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose, including, but not limited to, the following: (1) Vesting. An SAR granted in connection with an Option shall become exercisable, be transferable and shall lapse according to the same vesting schedule, transferability and lapse rules that are established by the Committee for the Option. An SAR granted independent of an Option shall become exercisable, be transferable and shall lapse in accordance with a vesting schedule, transferability and lapse rules established by the Committee. Notwithstanding the above, an SAR shall not be exercisable by a person subject to Section 16(b) of the Exchange Act for at least six (6) months following the Date of Grant. (2) Failure to Exercise. If on the last day of the Option Period (or in the case of an SAR independent of an Option, the SAR period established by the Committee), the Fair Market Value of the Stock exceeds the Option Price, the Holder has not exercised the Option or SAR, and neither the Option nor the SAR has lapsed, such SAR shall be deemed to have been exercised by the Holder on 10 such last day and the Company shall make the appropriate payment therefor. (3) Payment. The amount of additional compensation which may be received pursuant to the award of one SAR is the excess, if any, of the Fair Market Value of one share of Stock on the Appreciation Date over the Option Price, in the case of an SAR granted in connection with an Option, or the Fair Market Value of one (1) share of Stock on the Date of Grant, in the case of an SAR granted independent of an Option. The Company shall pay such excess in cash, in shares of Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Fractional shares shall be settled in cash. (4) Designation of Appreciation Date. A Participant may designate an Appreciation Date at such time or times as may be determined by the Committee at the time of grant by filing an irrevocable written notice with the Committee or its designee, specifying the number of SARs to which the Appreciation Date relates, and the date on which such SARs were awarded. Such time or times determined by the Committee may take into account any applicable "window periods" required by Rule 16b-3 under the Exchange Act. (5) Expiration. Except as otherwise provided in the case of SARs granted in connection with Options, the SARs shall expire on a date designated by the Committee which is not later than ten (10) years after the date on which the SAR was awarded. 9. Performance Shares, ------------------ (1) Award Grants. The Committee is authorized to establish Performance Share programs to be effective over designated Award Periods of not less than one (1) year nor more than five (5) years. At the beginning of each Award Period, the Committee will establish in writing Performance Goals based upon financial or other objectives for the Company for such Award Period and a schedule relating the accomplishment of the Performance Goals to the Awards to be earned by Participants. Performance Goals may include absolute or relative growth in earnings per share or rate of return on shareholders' equity or other measurement of corporate performance and may be determined on an individual basis or by categories of Participants. The Committee may adjust Performance Goals or performance measurement standards as it deems equitable in recognition of extraordinary or non-recurring events experienced during an Award Period by the Company, a Subsidiary or by any other corporation whose performance is relevant to the determination of whether Performance Goals have been attained. The Committee shall determine the number of Performance Share Units to be awarded, if any, to each Participant who is selected to receive an Award. The Committee may add new Participants to a Performance Share program after its commencement by making pro rata grants. 11 (2) Determination of Award. At the completion of a Performance Share program, or at other times as specified by the Committee, the Committee shall calculate the amount earned with respect to each Participant's award by multiplying the Fair Market Value on the Valuation Date by the number of Performance Share Units granted to the Participant and multiplying the amount so determined by a performance factor representing the degree of attainment of the Performance Goals. (3) Partial Awards. A Participant for less than a full Award Period, whether by reason of commencement or termination of employment or otherwise, shall receive such portion of an Award, if any, for that Award Period as the Committee shall determine. (4) Payment of Non-deferred Awards. The amount earned with respect to an Award shall be fully payable in shares of Stock based on the Fair Market Value on the Valuation Date; provided, however, that, at its discretion, the Committee may vary such form of payment as to any Participant upon the specific request of such Participant. Except as provided in subparagraph 9(e), payments of Awards shall be made as soon as practicable after the completion of an Award Period. (5) Deferral of Payment. A Participant may file a written election with the Committee to defer the payment of any amount otherwise payable pursuant to subparagraph 9(d) on account of an Award to a period commencing at such future date as specified in the election. Such election must be filed with the Committee no later than the last day of the month which is two-thirds of the way through the Award Period during which the Award is earned, unless the Committee specifies an earlier filing date. (6) Separate Accounts. At the conclusion of each Award Period, the Committee shall cause a separate account to be maintained in the name of each Participant with respect to whom all or a portion of an Award of Performance Share Units earned under the Plan has been deferred. All amounts credited to such account shall be fully vested at all times. (7) Election of Form of Investment. Within sixty (60) days from the end of each Award Period, and at such time or times, if any, as the Committee may permit, a Participant may file a written election with the Committee of the percentage of the deferred portion of any Award of Performance Share Units which is to be expressed in the form of dollars and credited with interest, the percentage of such Award which is to be expressed in the form of Phantom Stock Units and the percentage of such Award which is to be deemed invested in any other hypothetical investment equivalent from time to time made available under the Plan by the Committee. In the event a Participant fails to file an election within the time prescribed, one hundred percent (100%) of the deferred portion 12 of such Participant's Award shall be expressed in the form of Phantom Stock Units. (8) Interest Portion. The amount of interest credited with respect to the portion of an Award credited to the Participant's account which is deferred and credited with interest (the "Interest Portion") shall be equal to the amount such portion would have earned had it been credited with interest from the last day of the Award Period with respect to which the Award was made until the seventh (7th) business day preceding the date as of which payment is made, compounded annually, at the Company's rate of return on shareholders' equity for each fiscal year that payment is deferred, or at such other rate as the Committee may from time to time determine. The Committee may, in its sole discretion, credit interest on amounts payable prior to the date on which the Company's rate of return on shareholders' equity becomes ascertainable at the rate applicable to deferred amounts during the year immediately preceding the year of payment. (9) Phantom Stock Unit Portion. With respect to the portion of an Award credited to the Participant's account which is deferred and expressed in the form of Phantom Stock Units (the "Phantom Stock Unit Portion"), the number of Phantom Stock Units so credited shall be equal to the result of dividing (i) the Phantom Stock Unit Portion by (ii) the Fair Market Value on the date the Award Period ended. (10) Dividend Equivalents. Within thirty (30) days from the payment of a dividend by the Company on its Stock, the Phantom Stock Unit Portion of each Participant's account shall be credited with additional Phantom Stock Units the number of which shall be determined by (i) multiplying the dividend per share paid on the Company's Stock by the number of Phantom Stock Units credited to his account at the time such dividend was declared, then (ii) dividing such amount by the Fair Market Value on the payment date for such dividend. (11) Payment of Deferred Awards. Payment with respect to amounts credited to the account of a Participant shall be made in a series of annual installments over a period of ten (10) years, or such other period as the Committee may direct, or as the Committee may allow the Participant to elect, in either case at the time of the original deferral election. Except as otherwise provided by the Committee, each installment shall be withdrawn proportionately from the Interest Portion and from the Phantom Stock Unit Portion of a Participant's account based on the percentage of the Participant's account which he originally elected to be credited with interest and with Phantom Stock Units, or, if a later election has been permitted by the Committee and is then in effect, based on the percentage specified in such later election. Payments shall commence on the date specified by the Participant in his deferral election, unless the Committee in its sole discretion determines that payment shall be made over a shorter period or in more 13 frequent installments, or commence on an earlier date, or any or all of the above. If a Participant dies prior to the date on which payment with respect to all amounts credited to his account shall have been completed, payment with respect to such amounts shall be made to the Participant's beneficiary in a series of annual installments over a period of five (5) years, unless the Committee in its sole discretion determines that payment shall be made over a shorter period or in more frequent installments, or both. To the extent practicable, each installment payable hereunder shall approximate that part of the amount then credited to the Participant's or beneficiary's account which, if multiplied by the number of installments remaining to be paid would be equal to the entire amount then credited to the Participant's account. (12) Composition of Payment. The Committee shall cause all payments with respect to deferred Awards to be made in a manner such that not more than one-half of the value of each installment shall consist of Stock. To that end, payment with respect to the Interest Portion and the Phantom Stock Unit Portion of a Participant's account shall be paid in cash and Stock as the Committee shall determine in its sole discretion. The determination of any amount to be paid in cash for Phantom Stock Units shall be made by multiplying (i) the Fair Market Value of one share of Stock on the date as of which payment is made, by (ii) the number of Phantom Stock Units for which payment is being made. The determination of the number of shares of Stock, if any, to be distributed with respect to the Interest Portion of a Participant's account shall be made by dividing (i) one-half of the value of such portion on the date as of which payment is made, by (ii) the Fair Market Value of one (1) share of Stock on such date. Fractional shares shall be paid in cash. (13) Alternative Investment Equivalents. If the Committee shall have permitted Participants to elect to have deferred Awards of Performance Share Units invested in one or more hypothetical investment equivalents other than interest or Phantom Stock Units, such deferred Awards shall be credited with hypothetical investment earnings at such rate, manner and time as the Committee shall determine. At the end of the deferral period, payment shall be made in respect of such hypothetical investment equivalents in such manner and at such time as the Committee shall determine. (14) Adjustment of Performance Goals. The Committee may, during the Award Period, make such adjustments to Performance Goals as it may deem appropriate, to compensate for, or reflect, any significant changes that may have occurred during such Award Period in (i) applicable accounting rules or principles or changes in the Company's method of accounting or in that of any other corporation whose performance is relevant to the determination of whether an Award has been earned or (ii) tax laws or other laws or regulations that alter or affect the computation of the measures of Performance Goals used for the calculation of Awards. 14 10. Restricted Stock Awards and Phantom Stock Units. ----------------------------------------------- (1) Award of Restricted Stock and Phantom Stock Units. (1) The Committee shall have the authority (1) to grant Restricted Stock and Phantom Stock Unit Awards, (2) to issue or transfer Restricted Stock to Participants, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock and Phantom Stock Units, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock or Phantom Stock Units shall be granted or become vested and the number of shares or units to be covered by each grant. (2) The Holder of a Restricted Stock Award shall execute and deliver to the Secretary of the Company an agreement with respect to Restricted Stock and escrow agreement satisfactory to the Committee and the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements and shall pay to the Company, as the purchase price of the shares of Stock subject to such Award, the aggregate par value of such shares of Stock within sixty (60) days following the making of such Award. If a Participant shall fail to execute the agreement, escrow agreement and stock powers or shall fail to pay such purchase price within such period, the Award shall be null and void. Subject to the restrictions set forth in Section 10(b), the Holder shall generally have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Committee, cash and stock dividends with respect to the Restricted Stock may be either currently paid or withheld by the Company for the Holder's account, and interest may be paid on the amount of cash dividends withheld at a rate and subject to such terms as determined by the Committee. Cash or stock dividends so withheld by the Committee shall not be subject to forfeiture. (3) In the case of a Restricted Stock Award, the Committee shall then cause stock certificates registered in the name of the Holder to be 15 issued and deposited together with the stock powers with an escrow agent to be designated by the Committee. The Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any stock certificate held by it registered in the name of the Holder. (4) In the case of a Phantom Stock Units Award, no shares of Stock shall be issued at the time the Award is made, and the Company will not be required to set aside a fund for the payment of any such Award. The Committee shall, in its sole discretion, determine whether to credit to the account of, or to currently pay to, each Holder of an Award of Phantom Stock Units an amount equal to the cash dividends paid by the Company upon one share of Stock for each Phantom Stock Unit then credited to such Holder's account ("Dividend Equivalents"). Dividend Equivalents credited to Holder's account shall be subject to forfeiture and may bear interest at a rate and subject to such terms as determined by the Committee. (2) Restrictions. (1) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period: (1) the Holder shall not be entitled to delivery of the stock certificate; (2) the shares shall be subject to the restrictions on transferability set forth in the grant; (3) the shares shall be subject to forfeiture to the extent provided in subparagraph (d) and, to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Holder to such shares and as a shareholder shall terminate without further obligation on the part of the Company. (2) Phantom Stock Units awarded to any Participant shall be subject to the following restrictions until the expiration of the Restricted Period: (1) the units shall be subject to forfeiture to the extent provided in subparagraph (d), and to the extent such units are forfeited, all rights of the Holder to such units shall terminate without further obligation on the part of the Company and (2) any other 16 restrictions which the Committee may determine in advance are necessary or appropriate. (3) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Phantom Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award or Phantom Stock Award, such action is appropriate. (3) Restricted Period. The Restricted Period of Restricted Stock and Phantom Stock Units shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock and Phantom Stock Units indicated in a schedule established by the Committee with respect to the Award. (4) Forfeiture Provisions. In the event a Holder terminates employment or service as a director during a Restricted Period, that portion of the Award with respect to which restrictions have not expired ("Non-Vested Portion") shall be treated as follows. (1) Resignation or discharge: -- The Non-Vested Portion of the Award shall be completely forfeited. (2) Normal Termination: -- The Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and shall be received as soon as practicable following termination. (3) Death: -- The Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and paid to the Participant's beneficiary as soon as practicable following death. (5) Delivery of Restricted Stock and Settlement of Phantom Stock Units. Upon the expiration of the Restricted Period with respect to any shares of Stock covered by a Restricted Stock Award, a stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) shall be delivered without charge to the Holder, or his beneficiary, free of all restrictions under the Plan. 17 Upon the expiration of the Restricted Period with respect to any Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall deliver to the Holder or his beneficiary without any charge one share of Stock for each Phantom Stock Unit which has not then been forfeited and with respect to which the Restricted Period has expired ("vested unit") and cash equal to any Dividend Equivalents credited with respect to each such vested unit and the interest thereon, if any; provided, however, that the Committee may, in its sole discretion, elect to pay cash or part cash and part Stock in lieu of delivering only Stock for vested units. If cash payment is made in lieu of delivering Stock, the amount of such payment shall be equal to the Fair Market Value for the date on which the Restricted Period lapsed with respect to such vested unit. (6) Payment for Restricted Stock. Except as provided in subparagraph 10(a)(ii), a Holder shall not be required to make any payment for Stock received pursuant to a Restricted Stock Award. 11. General. ------- (1) Additional Provisions of an Award. The award of any benefit under the Plan may also be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Common Stock through the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares acquired under any form of benefit, provisions giving the Company the right to repurchase shares acquired under any form of benefit in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state income tax withholding requirements. (2) Privileges of Stock Ownership. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of stock which are subject to Options or Restricted Stock Awards, Performance Share Unit Awards or Phantom Stock Unit Awards hereunder until such shares have been issued to that person upon exercise of an Option according to its terms or upon sale or grant of those shares in accordance with a Restricted Stock Award, Performance Share Unit Award or Phantom Stock Unit Award. (3) Government and Other Regulations. The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. The Company shall be under no obligation to register under the Securities Act any of the shares of Stock issued under the Plan. 18 If the shares issued under the Plan may in certain circumstances be exempt from registration under the Securities Act, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. (4) Tax Withholding. Notwithstanding any other provision of the Plan, the Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards, to the extent paid in cash, all federal, state or local taxes as required by law to be withheld with respect to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary, as appropriate prior to delivery of such Stock, the amount of any such taxes which the Company or Subsidiary is required to withhold, if any, with respect to such Stock. Subject in particular cases to the disapproval of the Committee, the Company may accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner at least six months prior to the date such tax obligation is determined. (5) Claim to Awards and Employment Rights. No employee or other person shall have any claim or right to be granted an Award under the Plan nor, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or a Subsidiary. (6) Conditions. Each Participant to whom Awards are granted under the Plan shall be required to enter into an Incentive Plan Agreement in a form authorized by the Committee, which may include provisions that the Participant shall not disclose any confidential information of the Company or any of its Subsidiaries acquired during the course of such Participant's employment. (7) Designation and Change of Beneficiary. Each Participant shall file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the amounts payable with respect to an Award of Performance Share Units, Phantom Share Units or Restricted Stock, if any, due under the Plan upon his death. A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, -------- ------- that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. (8) Payments to Persons Other than Participants. If the Committee shall find that any person to whom any amount is payable 19 under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative), may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. (9) No Liability of Committee Members. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or bad faith; provided, however, that approval of the Board shall be -------- ------- required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. (10) Governing Law. The Plan will be administered in accordance with federal laws, or in the absence thereof, the laws of the State of Florida. (11) Funding. Except as provided under Section 10, no provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records, or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. (12) Nontransferability. A person's rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated or transferred or otherwise disposed of, 20 mortgaged, pledged or encumbered except, in the event of a Holder's death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution. (13) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself. (14) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided. (15) Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries. (16) Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women. (17) Titles and Headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. 12. Changes in Capital Structure. Options, Stock Unit Awards, Performance ---------------------------- Share Unit Awards, and any agreements evidencing such Awards, and Performance Goals, shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company, or of any other corporation whose performance is relevant to the attainment of Performance Goals hereunder, by reason of stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. In addition, in the event of any such adjustments or substitution, the aggregate number of shares of Stock available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. Any 21 adjustment in Incentive Stock Options under this Section 13 shall be made only to the extent not constituting a "modification" within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 13 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes. 13. Effect of Change in Control. --------------------------- (1) In the event of a Change in Control, notwithstanding any vesting schedule provided for hereunder or by the Committee with respect to an Award of Options, Director Awards, SARs, Phantom Stock Units or Restricted Stock, such Option or SAR shall become immediately exercisable for such period of time specified in the Optionee's Stock Option Agreement with respect to one hundred percent (100%) of the shares subject to such Option or SAR, and the Restricted Period shall expire immediately with respect to one hundred percent (100%) of the Phantom Stock Units or shares of Restricted Stock subject to Restrictions. (2) In the event of a Change in Control, all incomplete Award Periods in effect on the date the Change in Control occurs shall end on the date of such change, and the Committee shall, (i) determine the extent to which Performance Goals with respect to each such Award Period have been met based upon such audited or unaudited financial information then available as it deems relevant, (ii) cause to be paid to each Participant partial or full Awards with respect to Performance Goals for each such Award Period based upon the Committee's determination of the degree of attainment of Performance Goals, and (iii) cause all previously deferred Awards to be settled in full as soon as possible. (3) The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. The Company agrees that it will make appropriate provisions for the preservation of Participant's rights under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets. 14. Nonexclusivity of the Plan. Neither the adoption of this Plan by the -------------------------- Board nor the submission of this Plan to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. 22 15. Amendments and Termination. The Board may at any time terminate the -------------------------- Plan. With the express written consent of an individual Participant, the Board may cancel or reduce or otherwise alter the outstanding Awards thereunder if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part; provided, however, that the Board shall not, without further shareholder approval: (1) Increase the maximum number of shares of Stock which may be issued on exercise of Options, SARs, or pursuant to Restricted Stock Awards, Phantom Stock Unit Awards, or Performance Share Unit Awards, except as provided in Section 12; (2) Change the maximum Option Price; (3) Extend the maximum Option Term; (4) Extend the termination date of the Plan; or (5) Change the class of persons eligible to receive Awards under the Plan. * * * As adopted by the Board of Directors and shareholders of SBA Communications Corporation as of December 24, 1996, and as amended and restated as of June __, 1998. 23 EX-10.24 10 THE 1999 EQUITY PARTICIPATION PLAN EXHIBIT 10.24 THE 1999 EQUITY PARTICIPATION PLAN OF SBA COMMUNICATIONS CORPORATION SBA Communications Corporation, a Florida corporation, has adopted The 1999 Equity Participation Plan of SBA Communications Corporation (the "Plan"), effective April ___, 1999, for the benefit of its eligible employees, consultants and directors. The purposes of the Plan are as follows: (1) To provide an additional incentive for directors, key Employees and Consultants (as such terms are defined below) to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company stock and/or rights which recognize such growth, development and financial success. (2) To enable the Company to obtain and retain the services of directors, key Employees and Consultants considered essential to the long range success of the Company by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. ARTICLE I. DEFINITIONS 1.1. General. Wherever the following terms are used in the Plan they ------- shall have the meanings specified below, unless the context clearly indicates otherwise. 1.2. Administrator. "Administrator" shall mean the entity that ------------- conducts the general administration of the Plan as provided herein. With reference to the administration of the Plan with respect to Options granted to Independent Directors, the term "Administrator" shall refer to the Board. With reference to the administration of the Plan with respect to any other Award, the term "Administrator" shall refer to the Committee unless the Board has assumed the authority for administration of the Plan generally as provided in Section 10.1. 1.3. Award. "Award" shall mean an Option, a Restricted Stock award, a ----- Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Stock Payment award or a Stock Appreciation Right which may be awarded or granted under the Plan (collectively, "Awards"). 1.4. Award Agreement. "Award Agreement" shall mean a written --------------- agreement executed by an authorized officer of the Company and the Holder which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. 1.5. Award Limit. "Award Limit" shall mean 500,000 shares of Class A ----------- Common Stock, as adjusted pursuant to Section 11.3 of the Plan. 1.6. Board. "Board" shall mean the Board of Directors of the Company. ----- 1.7. Change in Control. "Change in Control" shall mean a change in ----------------- ownership or control of the transactions: (a) any person or related group of persons (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept; or (b) there is a change in the composition of the Board over a period of twenty four (24) consecutive months (or less) such that a majority of the Board members (rounded up to the nearest whole number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (i) have been Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board; or (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 25% of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 1.8. Class A Common Stock. "Class A Common Stock" shall mean the -------------------- Class A common stock of the Company, par value $0.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any preferred stock and any warrants, options or other rights to purchase Common Stock. 2 1.9. Code. "Code" shall mean the Internal Revenue Code of 1986, as ----- amended. 1.10. Committee. "Committee" shall mean the Compensation Committee --------- of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 10.1 . 1.11. Company. "Company" shall mean SBA Communications Corporation, ------- a Florida corporation. 1.12. Consultant. "Consultant" shall mean any consultant or adviser ---------- if: (a) the consultant or adviser renders bona fide services to the Company; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities; and (c) the consultant or adviser is a natural person. 1.13. Deferred Stock. "Deferred Stock" shall mean Class A Common -------------- Stock awarded under Article VIII of the Plan. 1.14. Director. "Director" shall mean a member of the Board. -------- 1.15. Dividend Equivalent. "Dividend Equivalent" shall mean a right ------------------- to receive the equivalent value (in cash or Class A Common Stock) of dividends paid on Class A Common Stock, awarded under Article VIII of the Plan. 1.16. DRO. "DRO" shall mean a domestic relations order as defined by --- the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. 1.17. Employee. "Employee" shall mean any officer or other employee -------- (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a Subsidiary. 1.18. Exchange Act. "Exchange Act" shall mean the Securities ------------ Exchange Act of 1934, as amended. 1.19. Fair Market Value. "Fair Market Value" of a share of Class A ----------------- Common Stock as of a given date shall be (a) the closing price of a share of Class A Common Stock on the principal exchange on which shares of Class A Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on the trading day previous to such date, or if shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred, or (b) if Class A Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean 3 between the closing representative bid and asked prices for the Class A Common Stock on the trading day previous to such date as reported by NASDAQ or such successor quotation system; or (c) if Class A Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a share of Class A Common Stock as established by the Administrator acting in good faith. 1.20. Holder. "Holder" shall mean a person who has been granted or ------ awarded an Award. 1.21. Incentive Stock Option. "Incentive Stock Option" shall mean an ---------------------- option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. 1.22. Independent Director. "Independent Director" shall mean a -------------------- member of the Board who is not an Employee of the Company. 1.23. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall -------------------------- mean an Option which is not designated as an Incentive Stock Option by the Administrator. 1.24. Option. "Option" shall mean a stock option granted under ------ Article IV of the Plan. An Option granted under the Plan shall, as determined by the Administrator, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Independent Directors and -------- ------- Consultants shall be Non-Qualified Stock Options. 1.25. Performance Award. "Performance Award" shall mean a cash ----------------- bonus, stock bonus or other performance or incentive award that is paid in cash, Class A Common Stock or a combination of both, awarded under Article VIII of the Plan. 1.26. Performance Criteria. "Performance Criteria" shall mean the -------------------- following business criteria with respect to the Company, any Subsidiary or any division or operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return on invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j) appreciation in the fair market value of Class A Common Stock and (k) earnings before any one or more of the following items: interest, taxes, depreciation or amortization. 1.27. Plan. "Plan" shall mean The 1999 Equity Participation Plan of ---- SBA Communications Corporation. 1.28. Restricted Stock. "Restricted Stock" shall mean Class A Common ---------------- Stock awarded under Article VII of the Plan. 1.29. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 ---------- under the Exchange Act, as such Rule may be amended from time to time. 1.30. Section 162(m) Participant. "Section 162(m) Participant" shall -------------------------- mean any 4 key Employee designated by the Administrator as a key Employee whose compensation for the fiscal year in which the key Employee is so designated or a future fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 1.31. Securities Act. "Securities Act" shall mean the Securities Act -------------- of 1933, as amended. 1.32. Stock Appreciation Right. "Stock Appreciation Right" shall ------------------------ mean a stock appreciation right granted under Article IX of the Plan. 1.33. Stock Payment. "Stock Payment" shall mean (a) a payment in the ------------- form of shares of Class A Common Stock, or (b) an option or other right to purchase shares of Class A Common Stock, as part of a deferred compensation arrangement, made in lieu of all or any portion of the compensation, including without limitation, salary, bonuses and commissions, that would otherwise become payable to a key Employee or Consultant in cash, awarded under Article VIII of the Plan. 1.34. Subsidiary. "Subsidiary" shall mean any corporation in an ---------- unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 1.35. Substitute Award. "Substitute Award" shall mean an Option ---------------- granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no -------- ------- event shall the term "Substitute Award" be construed to refer to an award made in connection with the cancellation and repricing of an Option. 1.36. Termination of Consultancy. "Termination of Consultancy" shall -------------------------- mean the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement; but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. 1.37. Termination of Directorship. "Termination of Directorship" --------------------------- shall mean the time when a Holder who is an Independent Director ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all 5 matters and questions relating to Termination of Directorship with respect to Independent Directors. 1.38. Termination of Employment. "Termination of Employment" shall ------------------------- mean the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (a) terminations where there is a simultaneous reemployment or continuing employment of a Holder by the Company or any Subsidiary, (b) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect -------- ------- to Incentive Stock Options, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. ARTICLE II. SHARES SUBJECT TO PLAN 2.1. Shares Subject to Plan ---------------------- (a) The shares of stock subject to Awards shall be Class A Common Stock, initially shares of the Company's Class A Common Stock, par value $0.01 per share. The aggregate number of such shares which may be issued upon exercise of such Options or rights or upon any such awards under the Plan shall not exceed two million five hundred thousand (2,500,000). The shares of Class A Common Stock issuable upon exercise of such Options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares. (b) The maximum number of shares which may be subject to Awards, granted under the Plan to any individual in any calendar year shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares subject to Options which are canceled continue to be counted against the Award Limit. 2.2. Add-back of Options and Other Rights. If any Option, or other ------------------------------------ right to acquire shares of Class A Common Stock under any other Award under the Plan, expires or is canceled without having been fully exercised, or is exercised in whole or in part for cash as permitted by the Plan, the number of shares subject to such Option or other right but as to which 6 such Option or other right was not exercised prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to Section 11.3 and become exercisable with respect to shares of stock of another corporation shall be considered canceled and may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Shares of Class A Common Stock which are delivered by the Holder or withheld by the Company upon the exercise of any Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. If any shares of Restricted Stock are surrendered by the Holder or repurchased by the Company pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of Class A Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. ARTICLE III. GRANTING OF AWARDS 3.1. Award Agreement. Each Award shall be evidenced by an Award --------------- Agreement. Award Agreements evidencing Awards intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 3.2. Provisions Applicable to Section 162(m) Participants ---------------------------------------------------- (a) The Committee, in its discretion, may determine whether an Award is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code. (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Section 162(m) Participant, including Restricted Stock the restrictions with respect to which lapse upon the attainment of performance goals which are related to one or more of the Performance Criteria and any performance or incentive award described in Article VIII that vests or becomes exercisable or payable upon the attainment of performance goals which are related to one or more of the Performance Criteria. (c) To the extent necessary to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles VII and VIII which may be granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the 7 Committee shall, in writing, (i) designate one or more Section 162(m) Participants, (ii) select the Performance Criteria applicable to the fiscal year or other designated fiscal period or period of service, (iii) establish the various performance targets, in terms of an objective formula or standard, and amounts of such Awards, as applicable, which may be earned for such fiscal year or other designated fiscal period or period of service and (iv) specify the relationship between Performance Criteria and the performance targets and the amounts of such Awards, as applicable, to be earned by each Section 162(m) Participant for such fiscal year or other designated fiscal period or period of service. Following the completion of each fiscal year or other designated fiscal period or period of service, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period or period of service. In determining the amount earned by a Section 162(m) Participant, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period or period of service. (d) Furthermore, notwithstanding any other provision of the Plan or any Award which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance- based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 3.3. Limitations Applicable to Section 16 Persons. Notwithstanding -------------------------------------------- any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 3.4. Consideration. In consideration of the granting of an Award ------------- under the Plan, the Holder shall agree, in the Award Agreement, to remain in the employ of (or to consult for or to serve as an Independent Director of, as applicable) the Company or any Subsidiary for a period of at least one year (or such shorter period as may be fixed in the Award Agreement or by action of the Administrator following grant of the Award) after the Award is granted (or, in the case of an Independent Director, until the next annual meeting of stockholders of the Company). 3.5. At-Will Employment. Nothing in the Plan or in any Award ------------------ Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Consultant for, the Company or any Subsidiary, or as a director of the Company, or shall interfere with or 8 restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written employment agreement between the Holder and the Company and any Subsidiary. ARTICLE IV. GRANTING OF OPTIONS TO EMPLOYEES, CONSULTANTS AND INDEPENDENT DIRECTORS 4.1. Eligibility. Any Employee or Consultant selected by the ----------- Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each Independent Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Section 4.5. 4.2. Disqualification for Stock Ownership. No person may be granted ------------------------------------ an Incentive Stock Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. 4.3. Qualification of Incentive Stock Options. No Incentive Stock ---------------------------------------- Option shall be granted to any person who is not an Employee. 4.4. Granting of Options to Employees and Consultants ------------------------------------------------ (a) The Committee shall from time to time, in its sole discretion, and subject to applicable limitations of the Plan: (i) Determine which Employees are key Employees and select from among the key Employees or Consultants (including Employees or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be granted Options; (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected key Employees or Consultants; (iii) Subject to Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code; and (iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and -------- ------- 9 conditins of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. (b) Upon the selection of a key Employee or Consultant to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. (c) Any Incentive Stock Option granted under the Plan may be modified by the Committee, with the consent of the Holder, to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. 4.5. Granting of Options to Independent Directors -------------------------------------------- (a) During the term of the Plan, each person who is initially elected to the Board after the consummation of the initial public offering of Class A Common Stock and who is an Independent Director at the time of such initial election automatically shall be granted an Option to purchase fifty thousand (50,000) shares of Class A Common Stock (subject to adjustment as provided in Section 11.3) on the date of such initial election. (a) In addition to any grants made to Independent Directors pursuant to Section 4.5(a), the Board may from time to time, in its sole discretion, and subject to the applicable limitations of the Plan: (i) Select from among the Independent Directors (including Independent Directors who have previously received options to purchase shares of Class A Common Stock under the Plan otherwise) such of them as in its opinion should be granted Options; (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Independent Directors; and (iii) Subject to the provisions of Article V, determine the terms and conditions of such options, consistent with the Plan. All the foregoing Option grants authorized by this Section 4.5 are subject to stockholder approval of the Plan. 4.6. Options in Lieu of Cash Compensation. Options may be granted ------------------------------------ under the Plan to Employees and Consultants in lieu of cash bonuses which would otherwise be payable to such Employees and Consultants and to Independent Directors in lieu of directors' fees which would otherwise be payable to such Independent Directors, pursuant to such policies which may 10 be adopted by the Administrator from time to time. ARTICLE V. TERMS OF OPTIONS 5.1. Option Price. The price per share of the shares subject to each ------------ Option granted to Employees and Consultants shall be set by the Committee; provided, however, that such price shall be no less than the par value of a - -------- ------- share of Class A Common Stock, unless otherwise permitted by applicable state law, and: (a) in the case of Options intended to qualify as performance- based compensation as described in Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Class A Common Stock on the date the Option is granted; (b) in the case of Incentive Stock Options such price shall not be less than 100% of the Fair Market Value of a share of Class A Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code); (c) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Class A Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). 5.2. Option Term. The term of an Option granted to an Employee or ----------- consultant shall be set by the Committee in its discretion; provided, however, -------- ------- that, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from the date the Incentive Stock Option is granted if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any Termination of Employment or Termination of Consultancy of the Holder, or amend any other term or condition of such Option relating to such a termination. 11 5.3. Option Vesting -------------- (a) The period during which the right to exercise, in whole or in part, an Option granted to an Employee or a Consultant vests in the Holder shall be set by the Committee and the Committee may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. At any time after grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option granted to an Employee or Consultant vests. (b) No portion of an Option granted to an Employee or Consultant which is unexercisable at Termination of Employment or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Award Agreement or by action of the Committee following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year (under the Plan and all other incentive stock option plans of the Company and any parent or subsidiary corporation, within the meaning of Section 422 of the Code) of the Company, exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 5.3(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. 5.4. Terms of Options Granted to Independent Directors ------------------------------------------------- (a) The price per share of the shares subject to each Option granted to an Independent Director shall equal 100% of the Fair Market Value of a share of Class A Common Stock on the date the Option is granted. (b) Subject to Section 5.4(d): (i) Any Option granted to an Independent Director pursuant to Section 4.5(a) shall become exercisable in cumulative annual installments of 20% each on the first, second, third, fourth, and fifth anniversaries of the date of Option grant, and (ii) Any Option granted to an Independent Director pursuant to Section 4.5(b) shall become exercisable on such date or dates as determined by the Board in its sole discretion and set forth in the applicable Award Agreement; provided, that any Option granted to an Independent Director may in -------- the sole 12 discretion of the Board become immediately exercisable in full upon the retirement of the Independent Director in accordance with the Company's retirement policy applicable to directors. (c) Subject to Section 6.6, the term of each Option granted to an Independent Director shall be ten (10) years from the date the Option is granted. (d) No portion of an Option which is unexercisable at Termination of Directorship shall thereafter become exercisable. 5.5. Substitute Awards ----------------- Notwithstanding the foregoing provisions of this Article V to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant, provided, that the excess of: -------- (a) The aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award; over (b) The aggregate exercise price thereof; does not exceed the excess of: (c) The aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company; over (d) The aggregate exercise price of such shares. ARTICLE VI. EXERCISE OF OPTIONS 6.1. Partial Exercise. An exercisable Option may be exercised in whole ---------------- or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 6.2. Manner of Exercise. All or a portion of an exercisable Option ------------------ shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such 13 portion of the Option; (b) Such representations and documents as the Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; (c) In the event that the Option shall be exercised pursuant to Section 11.1 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option; and (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Administrator, may in its discretion (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Class A Common Stock which have been owned by the Holder for at least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of Class A Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Administrator; (vi) allow payment, in whole or in part, through the delivery of a notice that the Holder has placed a market sell order with a broker with respect to shares of Class A Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided that payment of such -------- proceeds is then made to the Company upon settlement of such sale; or (vii) allow payment through any combination of the consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the Administrator may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. 6.3. Conditions to Issuance of Stock Certificates. The Company shall -------------------------------------------- not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 14 (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its sole discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its sole discretion, determine to be necessary or advisable; (d) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which in the discretion of the Administrator may be in the form of consideration used by the Holder to pay for such shares under Section 6.2(d). 6.4. Rights as Stockholders. Holders shall not be, nor have any of the ---------------------- rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such Holders. 6.5. Ownership and Transfer Restrictions. The Administrator, in its ----------------------------------- sole discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Award Agreement and may be referred to on the certificates evidencing such shares. The Holder shall give the Company prompt notice of any disposition of shares of Class A Common Stock acquired by exercise of an Incentive Stock Option within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder or (b) one year after the transfer of such shares to such Holder. 6.6. Limitations on Exercise of Options Granted to Independent --------------------------------------------------------- Directors. No Option granted to an Independent Director may be exercised to any - --------- extent by anyone after the first to occur of the following events: (a) The expiration of twelve (12) months from the date of the Holder's death; (b) The expiration of twelve (12) months from the date of the Holder's Termination of Directorship by reason of his permanent and total disability (within the meaning of Section 22(e)(3) of the Code); 15 (c) The expiration of three (3) months from the date of the Holder's Termination of Directorship for any reason other than such Holder's death or his permanent and total disability, unless the Holder dies within said three-month period; or (d) The expiration of ten (10) years from the date the Option was granted. 6.7. Additional Limitations on Exercise of Options. Holders may be --------------------------------------------- required to comply with any timing or other restrictions with respect to the settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. ARTICLE VII. AWARD OF RESTRICTED STOCK 7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be ----------- awarded to any Employee who the Committee determines is a key Employee or any Consultant who the Committee determines should receive such an Award. 7.2. Award of Restricted Stock ------------------------- (a) The Committee may from time to time, in its sole discretion: (i) Determine which Employees are key Employees and select from among the key Employees or Consultants (including Employees or Consultants who have previously received other awards under the Plan) such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with the Plan. (b) The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such -------- ------- purchase price shall be no less than the par value of the Class A Common Stock to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock. (c) Upon the selection of a key Employee or Consultant to be awarded Restricted Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 16 7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of ---------------------- the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in his Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that -------- ------- in the discretion of the Committee, any extraordinary distributions with respect to the Class A Common Stock shall be subject to the restrictions set forth in Section 7.4. 7.4. Restriction. All shares of Restricted Stock issued under the Plan ----------- (including any shares received by holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, -------- ------- that, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, by action taken after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. If no consideration was paid by the Holder upon issuance, a Holder's rights in unvested Restricted Stock shall lapse, and such Restricted Stock shall be surrendered to the Company without consideration, upon Termination of Employment or, if applicable, upon Termination of Consultancy with the Company; provided, however, that the -------- ------- Committee in its sole and absolute discretion may provide that such rights shall not lapse in the event of a Termination of Employment following a "change of ownership or control" (within the meaning of Treasury Regulation Section 1.162- 27(e)(2)(v) or any successor regulation thereto) of the Company or because of the Holder's death or disability; provided, further, except with respect to -------- ------- shares of Restricted Stock granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that no such lapse or surrender shall occur in the event of a Termination of Employment, or a Termination of Consultancy, without cause or following any Change in Control of the Company or because of the Holder's retirement, or otherwise. 7.5. Repurchase of Restricted Stock. The Committee shall provide in ------------------------------ the terms of each individual Award Agreement that the Company shall have the right to repurchase from the Holder the Restricted Stock then subject to restrictions under the Award Agreement immediately upon a Termination of Employment or, if applicable, upon a Termination of Consultancy between the Holder and the Company, at a cash price per share equal to the price paid by the Holder for such Restricted Stock; provided, however, that the Committee in its -------- ------- sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment following a "change of ownership or control" (within the meaning of Treasury Regulation Section 1.162- 27(e)(2)(v) or any successor regulation thereto) of the Company or because of the Holder's death or disability; provided, further, that, except with respect -------- ------- to shares of Restricted Stock granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment or a Termination of Consultancy without cause or following 17 any Change in Control of the Company or because of the Holder's retirement, or otherwise. 7.6. Escrow. The Secretary of the Company or such other escrow holder ------ as the Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Award Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. 7.7. Legend. In order to enforce the restrictions imposed upon shares ------ of Restricted Stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Award Agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby. 7.8. Section 83(b) Election. If a Holder makes an election under ---------------------- Section 83(b) of the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. ARTICLE VIII. PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS 8.1. Eligibility. Subject to the Award Limit, one or more Performance ----------- Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock Payments may be granted to any Employee whom the Committee determines is a key Employee or any Consultant whom the Committee determines should receive such an Award. 8.2. Performance Awards. Any key Employee or Consultant selected by ------------------ the Committee may be granted one or more Performance Awards. The value of such Performance Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular key Employee or Consultant. 8.3. Dividend Equivalents -------------------- (a) Any key Employee or Consultant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on Class A Common Stock, to be credited as of dividend payment dates, during the period between the date a Stock Appreciation Right, Deferred Stock or Performance Award is granted, and the date such Stock Appreciation Right, Deferred Stock or Performance Award is exercised, vests 18 or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Class A Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. (b) Any Holder of an Option who is an Employee or Consultant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on Class A Common Stock, to be credited as of dividend payment dates, during the period between the date an Option is granted, and the date such Option is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Class A Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. (c) Any Holder of an Option who is an Independent Director selected by the Board may be granted Dividend Equivalents based on the dividends declared on Class A Common Stock, to be credited as of dividend payment dates, during the period between the date an Option is granted, and the date such Option is exercised, vests or expires, as determined by the Board. Such Dividend Equivalents shall be converted to cash or additional shares of Class A Common Stock by such formula and at such time and subject to such limitations as may be determined by the Board. (d) Dividend Equivalents granted with respect to Options intended to be qualified performance-based compensation for purposes of Section 162(m) of the Code shall be payable, with respect to pre-exercise periods, regardless of whether such Option is subsequently exercised. 8.4. Stock Payments. Any key Employee or Consultant selected by the -------------- Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. 8.5. Deferred Stock. Any key Employee or Consultant selected by the -------------- Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Class A Common Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Holder of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and the Class A Common Stock underlying the Award has been issued. 8.6. Term. The term of a Performance Award, Dividend Equivalent,award ---- of Deferred Stock and/or Stock Payment shall be set by the Committee in its discretion. 19 8.7. Exercise or Purchase Price. The Committee may establish the -------------------------- exercise or purchase price of a Performance Award, shares of Deferred Stock, or shares received as a Stock Payment; provided, however, that such price shall not -------- ------- be less than the par value for a share of Class A Common Stock, unless otherwise permitted by applicable state law. 8.8. Exercise Upon Termination of Employment, Termination of ------------------------------------------------------- Consultancy or Termination of Directorship. A Performance Award, Dividend - ------------------------------------------ Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or payable only while the Holder is an Employee, Consultant or Independent Director, as applicable; provided, however, that the Administrator in its sole -------- ------- and absolute discretion may provide that the Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or paid subsequent to a Termination of Employment following a "change of control or ownership" (within the meaning of Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company; provided, further, that except with respect -------- ------- to Performance Awards granted to Section 162(m) Participants, the Administrator in its sole and absolute discretion may provide that Performance Awards may be exercised or paid following a Termination of Employment or a Termination of Consultancy without cause, or following a Change in Control of the Company, or because of the Holder's retirement, death or disability, or otherwise. 8.9. Form of Payment. Payment of the amount determined under Section --------------- 8.2 or 8.3 above shall be in cash, in Class A Common Stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VIII is effected in Class A Common Stock, it shall be made subject to satisfaction of all provisions of Section 6.3. ARTICLE IX. STOCK APPRECIATION RIGHTS 9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right ---------------------------------- may be granted to any key Employee or Consultant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement. 9.2. Coupled Stock Appreciation Rights --------------------------------- (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable. (b) A CSAR may be granted to the Holder erfor no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled. 20 (c) A CSAR shall entitle the Holder (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Class A Common Stock on the date of exercise of the CSAR by the number of shares of Class A Common Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose. 9.3. Independent Stock Appreciation Rights ------------------------------------- (a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Class A Common Stock as the Committee may determine. The exercise price per share of Class A Common Stock subject to each ISAR shall be set by the Committee. An ISAR is exercisable only while the Holder is an Employee or Consultant; provided that the Committee may determine that the ISAR may be exercised subsequent to Termination of Employment or Termination of Consultancy without cause, or following a Change in Control of the Company, or because of the Holder's retirement, death or disability, or otherwise. (b) An ISAR shall entitle the Holder (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Class A Common Stock on the date of exercise of the ISAR by the number of shares of Class A Common Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose. 9.4. Payment and Limitations on Exercise ----------------------------------- (a) Payment of the amounts determined under Section 9.2(c) and 9.3(b) above shall be in cash, in Class A Common Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee. To the extent such payment is effected in Class A Common Stock it shall be made subject to satisfaction of all provisions of Section 6.3 above pertaining to Options. (b) Holders of Stock Appreciation Rights may be required to comply with any timing or other restrictions with respect to the settlement or exercise of a Stock Appreciation Right, including a window-period limitation, as may be imposed in the 21 discretion of the Committee. ARTICLE X. ADMINISTRATION 10.1. Compensation Committee. Prior to the Company's initial ---------------------- registration of Class A Common Stock under Section 12 of the Exchange Act, the Compensation Committee shall consist of the entire Board. Following such registration, The Compensation Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 10.2. Duties and Powers of Committee. It shall be the duty of the ------------------------------ Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Award Agreements, and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith, to interpret, amend or revoke any such rules and to amend any Award Agreement provided that the rights or obligations of the Holder of the Award that is the subject of any such Award Agreement are not affected adversely. Any such grant or award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Options and Dividend Equivalents granted to Independent Directors. 10.3. Majority Rule; Unanimous Written Consent. The Committee shall ---------------------------------------- act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 10.4. Compensation; Professional Assistance; Good Faith Actions. --------------------------------------------------------- Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Holders, the Company and all other interested 22 persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation. 10.5. Delegation of Authority to Grant Awards. The Committee may, --------------------------------------- but need not, delegate from time to time some or all of its authority to grant Awards under the Plan to a committee consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority to grant Awards to individuals (i) who are subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 10.5 shall serve in such capacity at the pleasure of the Committee. ARTICLE XI. MISCELLANEOUS PROVISIONS 11.1. Not Transferable. No Award under the Plan may be sold, pledged, ---------------- assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed. No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. Notwithstanding the foregoing provisions of this Section 11.1, the Administrator, in its sole discretion, may determine to grant to any Holder a Non-Qualified Stock Option which, by its terms as set forth in the applicable Award Agreement, may be transferred by the Holder, in writing and with prior written notice to the Administrator, by gift, without the receipt of any consideration, to any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Holder's household (other than a tenant or employee), a trust in which such persons have more than fifty percent of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets, and any other entity in which such persons (or the Holder) own more than fifty percent of the voting interests, provided, that a Non-Qualified Stock Option that has been so transferred shall - -------- continue to be subject to all of the terms and conditions of the Non-Qualified 23 Stock Option as applicable to the original Holder, and the transferee shall execute any and all such documents requested by the Administrator in connection with the transfer, including without limitation to evidence the transfer and to satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws. 11.2. Amendment, Suspension or Termination of the Plan. Except as ------------------------------------------------ otherwise provided in this Section 11.2, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator. However, without approval of the Company's stockholders given within twelve months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 11.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under the Plan. No amendment, suspension or termination of the Plan shall, without the consent of the Holder alter or impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and in no event may any Incentive Stock Option be granted under the Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 11.4. 11.3. Changes in Class A Common Stock or Assets of the Company, --------------------------------------------------------- Acquisition or Liquidation of the Company and Other Corporate Events - -------------------------------------------------------------------- (a) Subject to Section 11.3 (d), in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Class A Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Class A Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Class A Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Administrator's sole discretion, affects the Class A Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Class A Common Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares 24 which may be issued and adjustments of the Award Limit), (ii) the number and kind of shares of Class A Common Stock (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award. (b) Subject to Section 11.3(d), in the event of any transaction or event described in Section 11.3(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including, without limitation, any Change in Control), or of changes in applicable laws, regulations, or accounting principles, the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder's request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: (i) To provide for either the purchase of any such Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Holder's rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; (ii) To provide that the Award cannot vest, be exercised or become payable after such event; (iii) To provide that such Award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 5.3 or 5.4 or the provisions of such Award; (iv) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (v) To make adjustments in the number and type of shares of Class A Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding 25 Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; and (vi) To provide that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of Restricted Stock or Deferred Stock may be terminated, and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after such event. (c) Subject to Sections 11.3(d), 3.2 and 3.3, the Administrator may, in its discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company. (d) With respect to Awards which are granted to Section 162(m) Participants and are intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 11.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this Section 11.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b- 3 unless the Administrator determines that the Award is not to comply with such exemptive conditions. The number of shares of Class A Common Stock subject to any Award shall always be rounded to the next whole number. (e) Notwithstanding the foregoing, in the event that the Company becomes a party to a transaction that is intended to qualify for "pooling of interests" accounting treatment and, but for one or more of the provisions of this Plan or any Award Agreement would so qualify, then this Plan and any Award Agreement shall be interpreted so as to preserve such accounting treatment, and to the extent that any provision of the Plan or any Award Agreement would disqualify the transaction from pooling of interests accounting treatment (including, if applicable, an entire Award Agreement), then such provision shall be null and void. All determinations to be made in connection with the preceding sentence shall be made by the independent accounting firm whose opinion with respect to "pooling of interests" treatment is required as a condition to the Company's consummation of such transaction. (f) The existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, 26 recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Class A Common Stock or the rights thereof or which are convertible into or exchangeable for Class A Common Stock, or the dissolution or liquidation of the company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 11.4. Approval of Plan by Stockholders. The Plan will be submitted -------------------------------- for the approval of the Company's stockholders within twelve months after the date of the Board's initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval, provided that such Awards shall not be exercisable nor shall such Awards vest prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted or awarded under the Plan shall thereupon be canceled and become null and void. In addition, if the Board determines that Awards other than Options or Stock Appreciation Rights which may be granted to Section 162(m) Participants should continue to be eligible to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and approved by the Company's stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the Company's stockholders previously approved the Performance Criteria. 11.5. Tax Withholding. The Company shall be entitled to require --------------- payment in cash or deduction from other compensation payable to each Holder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or payment of any Award. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow such Holder to elect to have the Company withhold shares of Class A Common Stock otherwise issuable under such Award (or allow the return of shares of Class A Common Stock) having a Fair Market Value equal to the sums required to be withheld. 11.6. Loans. The Committee may, in its discretion, extend one or more ----- loans to key Employees in connection with the exercise or receipt of an Award granted or awarded under the Plan, or the issuance of Restricted Stock or Deferred Stock awarded under the Plan. The terms and conditions of any such loan shall be set by the Committee. 11.7. Forfeiture Provisions. Pursuant to its general authority to --------------------- determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Holder to agree by separate written instrument, that (a) (i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Class A Common Stock underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of Employment, Termination of Consultancy or Termination of Directorship occurs prior to a specified date, or within a specified 27 time period following receipt or exercise of the Award, or (ii) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (iii) the Holder incurs a Termination of Employment, Termination of Consultancy or Termination of Directorship for cause. 11.8. Effect of Plan Upon Options and Compensation Plans. The -------------------------------------------------- adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. 11.9. Compliance with Laws. The Plan, the granting and vesting of -------------------- Awards under the Plan and the issuance and delivery of shares of Class A Common Stock and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 11.10. Titles. Titles are provided herein for convenience only and ------ are not to serve as a basis for interpretation or construction of the Plan. 11.11. Governing Law. The Plan and any agreements hereunder shall be ------------- administered, interpreted and enforced under the internal laws of the State of Florida without regard to conflicts of laws thereof. 28 * * * I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of SBA Communications Corporation on April __, 1999. Executed on this ____ day of April __, 1999. /s/ Robert Grobstein ______________________________ Secretary 29 EX-10.25 11 1999 STOCK PURCHASE PLAN EXHIBIT 10.25 SBA COMMUNICATIONS CORPORATION 1999 EMPLOYEE STOCK PURCHASE PLAN ARTICLE I. PURPOSE, SCOPE AND ADMINISTRATION OF THE PLAN 1.1. Purpose and Scope ----------------- The purpose of the SBA Communications Corporation Employee Stock Purchase Plan is to assist employees of SBA Communications Corporation and its subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. 1.2. Administration of Plan ---------------------- The Plan shall be administered by the Committee. The Committee shall have the power to make, amend and repeal rules and regulations for the interpretation and administration of the Plan consistent with the qualification of the plan under Section 423 of the Code, and the Committee also is authorized to change the Option Periods, Offering Dates and Exercise Dates under the Plan by providing written notice to all Employees at least 15 days prior to the date following which such changes will take effect. The Committee may delegate administrative tasks under the Plan to one or more agents. The Committee's interpretation and decisions in respect to the Plan shall be final and conclusive. ARTICLE II. DEFINITIONS Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates. 2.1. "Board" shall mean the Board of Directors of the Company. ----- 2.2. "Class A Common Stock" shall mean shares of Class A common stock of the -------------------- Company, par value $0.01 per share. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- 2.4. "Committee" shall mean the Compensation Committee of the Board, which --------- Committee shall administer the Plan as provided in Section 1.2 hereof. 2.5. "Company" shall mean SBA Communications Corporation, a Florida ------- corporation. 2.6. "Compensation" shall mean the base salary, bonuses, overtime and ------------ commissions paid to an Employee by the Company or a Subsidiary in accordance with established payroll procedures. 2.7. "Eligible Employee" shall mean an Employee who (a) has been continuously ----------------- employed by the Company or Subsidiary for at least 90 consecutive days, (b) is customarily scheduled to work at least 20 hours per week, and (c) whose customary employment is more than five (5) months in a calendar year. 2.8. "Employee" shall mean any employee of the Company or a Subsidiary. -------- 2.9. "Exercise Date" shall mean each June 30 and December 31. ------------- 2.10. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. 2.11. "Fair Market Value" of a share of Class A Common Stock as of a given date ----------------- shall mean (i) the average of the closing prices of the sales of Class A Common Stock on the trading date previous to such date on all national securities exchanges on which such securities may at the time be listed, or, if there have been no sales on any such exchange on the trading date previous to such date, the average of the highest bid and lowest asked prices on all such exchanges at the close of business on the trading day previous to such date, or (ii) if on any date no such shares of Class A Common Stock are so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time on the trading date previous to such date, or (iii) if on any date such securities are not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on the trading date previous to such date in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, or (iv) if Class A Common Stock is not publicly traded or quoted or sold in the over-the-counter market, the fair market value of a share of Class A Common Stock as established by the Committee acting in good faith. 2.12. "IPO Date" shall mean the effective date of the initial public offering -------- of Class A Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission. 2.13. "Offering Date" shall mean each January 1 and July 1; provided, however, ------------- that the first Offering Date under the Plan shall be the IPO Date. 2.14. "Option Period" shall mean the period beginning on an Offering Date and ------------- ending on the next succeeding Exercise Date. 2.15. "Option Price" shall mean the purchase price of a share of Class A Common ------------ Stock hereunder as provided in Section 4.1 hereof. 2.16. "Participant" shall mean any Eligible Employee who elects to participate. ----------- 2.17. "Plan" shall mean this SBA Communications Corporation Employee Stock ---- Purchase Plan, as the same may be amended from time to time. 2.18. "Plan Account" shall mean a bookkeeping account established and ------------ maintained by the 2 Company in the name of each Participant. 2.19. "Subsidiary" shall mean any corporation in an unbroken chain of ---------- corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. ARTICLE III. PARTICIPATION 3.1. Eligibility ----------- An Eligible Employee may participate in the Plan if immediately after the applicable Offering Date, such Employee would not be deemed for purposes of Section 423(b)(3) of the Code to possess 5% or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary. 3.2. Election to Participate; Payroll Deductions ------------------------------------------- An Eligible Employee may participate in the Plan only by means of payroll deduction. An Eligible Employee may elect to participate in the Plan during an Option Period by delivering to the Company in the calendar month preceding the Offering Date on which such Option Period commences a written payroll deduction authorization on a form prescribed by the Company; provided, however that for the Option Period commencing on the IPO Date, an Eligible Employee may elect to participate in the Plan at any time on or prior to the IPO Date. Payroll deductions (a) shall be equal to at least 1%, but not more than 15%, of the Participant's Compensation as of the Offering Date; (b) must equal at least five dollars ($5.00) per pay period; and (c) may be expressed either as (i) a whole number percentage or (ii) a fixed dollar amount, subject to the provisions of Sections 4.2 and 4.3 hereof. Amounts deducted from a Participant's Compensation pursuant to this Section 3.2 shall be credited to the Participant's Plan Account. 3.3. Leave of Absence ---------------- During leaves of absence approved by the Company and meeting the requirements of Regulation Section 1.421-7(h)(2) under the Code, a Participant may continue participation in the Plan by making cash payments to the Company on his or her normal payday equal to his or her authorized payroll deduction. ARTICLE IV. PURCHASE OF SHARES 4.1. Option Price ------------ The Option Price per share of the Class A Common Stock sold to Participants hereunder shall be 85% of the Fair Market Value of such share on either the Offering Date or the Exercise Date of the Option Period, whichever is lower, but in no event shall the Option Price per share be less than the par value per share of the Class A Common Stock. 3 4.2. Purchase of Shares ------------------ (a) On each Exercise Date on which he or she is employed, each Participant will automatically and without any action on his or her part be deemed to have exercised his or her option to purchase at the Option Price the largest number of whole shares of Class A Common Stock which can be purchased with the amount in the Participant's Plan Account. The balance, if any, remaining in the Participant's Plan Account (after exercise of his or her option) as of an Exercise Date shall be carried forward to the next Option Period, unless the Participant has elected to withdraw from the Plan pursuant to Section 6.1 hereof. (b) As soon as practicable following each Exercise Date, the Company will deliver to the Participant a certificate issued in his or her name for such number of shares purchased by such Participant pursuant to subsection (a) above. In the event the Company is required to obtain from any commission or agency authority to issue any such certificate, the Company will seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such certificate shall relieve the Company from liability to any Participant except to refund to him or her the amount withheld. 4.3. Limitations on Purchase ----------------------- No Employee shall be granted an option under the Plan which permits his or her rights to purchase Class A Common Stock under the Plan or any other employee stock purchase plan of the Company or any of its Subsidiaries to accrue at a rate which exceeds $25,000 (as measured by the Fair Market Value of such Class A Common Stock at the time the option is granted) for each calendar year such option is outstanding. For purposes of this Section 4.3, the right to purchase Class A Common Stock under an option accrues when the option (or any portion thereof) becomes exercisable, and the right to purchase Class A Common Stock which has accrued under one option under the Plan may not be carried over to any other option. 4.4. Transferability of Rights ------------------------- An option granted under the Plan shall not be transferable and is exercisable only by the Participant. No option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempt at disposition thereof shall be null and void and of no effect. 4 ARTICLE V. PROVISIONS RELATING TO CLASS A COMMON STOCK 5.1. Class A Common Stock Reserved ----------------------------- There shall be 500,000 authorized but unissued or reacquired shares of Class A Common Stock reserved for issuance pursuant to this Plan, subject to adjustment in accordance with Section 5.2 hereof. 5.2. Adjustment for Changes in Class A Common Stock ---------------------------------------------- In the event that adjustments are made in the number of outstanding shares of Class A Common Stock or the shares are exchanged for a different class of stock of the Company by reason of stock dividend, stock split or other subdivision, the Committee shall make appropriate adjustments in (a) the number and class of shares or other securities that may be reserved for purchase hereunder and (b) the Option Price of outstanding options. 5.3. Merger, Acquisition or Liquidation ---------------------------------- In the event of the merger or consolidation of the Company into another corporation, the acquisition by another corporation of all or substantially all of the Company's assets or 80% or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company, the date of exercise with respect to outstanding options shall be the business day immediately preceding the effective date of such merger, consolidation, acquisition, liquidation or dissolution unless the Committee shall, in its sole discretion, provide for the assumption or substitution of such options in a manner complying with Section 424(a) of the Code. 5.4. Insufficient Shares ------------------- If the aggregate funds available for the purchase of Class A Common Stock on any Exercise Date would cause an issuance of shares in excess of the number provided for in Section 5.1 hereof, (a) the Committee shall proportionately reduce the number of shares that would otherwise be purchased by each Participant in order to eliminate such excess, and (b) the Plan shall automatically terminate immediately after such Exercise Date. 5.5. Rights as Stockholders ---------------------- With respect to shares of Class A Common Stock subject to an option, a Participant shall not be deemed to be a stockholder and shall not have any of the rights or privileges of a stockholder. A Participant shall have the rights and privileges of a stockholder when, but not until, a certificate for shares has been issued to him or her following exercise of his or her option. 5 ARTICLE VI. TERMINATION OF PARTICIPATION 6.1. Cessation of Contributions; Voluntary Withdrawal ------------------------------------------------ (a) A Participant may cease payroll deductions during an Option Period by delivering written notice of such cessation to the Company. Upon any such cessation, such Participant may elect either to withdraw from the Plan pursuant to subsection (b) below or to have amounts credited to his or her Plan Account held in the Plan for the purchase of Class A Common Stock pursuant to Section 4.2. A Participant who ceases contributions to the Plan during any Option Period shall not be permitted to resume contributions to the Plan during such Option Period. (b) A Participant may withdraw from the Plan at any time by written notice to the Company prior to the close of business on an Exercise Date. Within 21 days after the notice of withdrawal is delivered, the Company shall refund the entire amount, if any, in a Participant's Plan Account to him or her, and thereupon, the Participant's payroll deduction authorization, his or her interest in the Plan and his or her option under the Plan shall terminate. Any Eligible Employee who withdraws from the Plan may again become a Participant in accordance with Section 3.2 hereof. 6.2. Termination of Eligibility -------------------------- (a) If a Participant ceases to be eligible under Section 3.1 hereof for any reason, the amount in such Participant's Plan Account will be refunded to the Participant or his or her designated beneficiary or estate within 21 days of his or her termination of employment or other cessation of eligibility. (b) Upon payment by the Company to the Participant or his or her beneficiary or estate of the remaining balance, if any, in Participant's Plan Account, the Participant's interest in the Plan and the Participant's option under the Plan shall terminate. ARTICLE VII. GENERAL PROVISIONS 7.1. Condition of Employment ----------------------- Neither the creation of the Plan nor an Employee's participation therein shall be deemed to create any right of continued employment or in any way affect the right of the Company or a Subsidiary to terminate an Employee at any time with or without cause. 6 7.2. Amendment of the Plan --------------------- (a) The Board may amend, suspend or terminate the Plan at any time and from time to time; provided, however, that without approval of the Company's stockholders given within 12 months before or after action by the Board, the Plan may not be amended to increase the maximum number of shares subject to the Plan or change the designation or class of Eligible Employees. (b) Upon termination of the Plan, the balance in each Participant's Plan Account shall be refunded within 21 days of such termination. 7.3. Use of Funds; No Interest Paid ------------------------------ All funds received by the Company by reason of purchase of Class A Common Stock hereunder will be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose. No interest will be paid to any Participant or credited under the Plan. 7.4. Term; Approval by Stockholders ------------------------------ The Plan shall terminate on the tenth anniversary of the date of its initial approval by the stockholders of the Company, unless earlier terminated by action of the Board. No option may be granted during any period of suspension of the Plan nor after termination of the Plan. The Plan will be submitted for the approval of the Company's stockholders within 12 months after the date of the Board's initial adoption of the Plan. Options may be granted prior to such stockholder approval; provided, however, that such options shall not be exercisable prior to the time when the Plan is approved by the stockholders; provided further that if such approval has not been obtained by the end of said 12-month period, all options previously granted under the Plan shall thereupon be canceled and become null and void. 7.5. Effect Upon Other Plans ----------------------- The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company or any Subsidiary (a) to establish any other forms of incentives or compensation for employees of the Company or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. 7.6. Conformity to Securities Laws ----------------------------- Notwithstanding any other provision of this Plan, this Plan and the participation in this Plan by any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are 7 requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 7.7. Governing Law ------------- The Plan and all rights and obligations thereunder shall be construed and enforced in accordance with the laws of the State of Delaware. * * * * * * I hereby certify that the foregoing SBA Communications Corporation Employee Stock Purchase Plan was duly approved by the Board of Directors of SBA Communications Corporation on April ___, 1999. I hereby certify that the foregoing SBA Communications Corporation Employee Stock Purchase Plan was duly approved by the stockholders of SBA Communications Corporation on April ___, 1999. Executed on this ___ day of April, 1999. /s/ Robert Grobstein ___________________________ Secretary 8 EX-21.1 12 SUBSIDIARIES OF SBA COMMUNICATIONS CORP. EXHIBIT 21.1 Subsidiaries of SBA Communications Corporation ---------------------------------------------- Corporations I. SBA Communications Corporation (Florida) owns 100% of SBA Telecommunications, Inc. (Florida) A. SBA Telecommunications, Inc. owns 100% of the following entities: 1. SBA Subsidiary Holdings, Inc. (Florida) 2. SBA Communications International (Florida) 3. SBA, Inc. (Florida) 4. SBA Leasing, Inc. (Florida) 5. Com-Net Construction Services, Inc. (Florida) 6. SBA Towers, Inc. (Florida) a) SBA Towers, Inc. owns 100% of the following entities: 1) SBA Towers New York, Inc. (Florida) (a) SBA Towers New York, Inc. owns 100% of the following entity: (1) L.I. Waves, Inc. (New York) 2) SBA Towers Louisiana, Inc. (Florida) (a) SBA Towers Louisiana, Inc. owns 100% of the following entity: (1) CADDO Tower Company, Inc. (Louisiana) 3) SBA Towers Minnesota, Inc. (Florida) (a) SBA Towers Minnesota, Inc. owns 100% of the following entity: (1) Quad States Towers and Communications, Inc. (Minnesota) 4) SBA Towers Florida, Inc. (Florida) (a) SBA Towers Florida, Inc. owns 100% of the following entity: (1) Tampa Towers, Inc. 5) SBA Towers Tennessee, Inc. (Florida) 6) SBA Sites, Inc. (Florida) 7. Communication Site Services, Inc. (Florida) Limited Liability Companies I. Com-Net Development Group L.L.C., a Tennessee Limited Liability Company, has two members, SBA Towers, Inc. and SBA Towers Tennessee, Inc. II. SBA/Site Tech, L.C. , a Florida Limited Liability Company, has two members, SBA Towers New York, Inc. and Site Tech Venture, LLC. Site Tech Venture, LLC is an independent third party that is not affiliated with any of the SBA entities. EX-23.2 13 CONSENT OF ARTHUR ANDERSEN LLP. EXHIBIT 23.2 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. ARTHUR ANDERSEN LLP West Palm Beach, Florida, June 15, 1999 EX-23.3 14 CONSENT OF PETER C. COSMAS CO., CPA. EXHIBIT 23.3 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accounts, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this registration statement. Peter C. Cosmas Co. CPA June 15, 1999 EX-23.4 15 CONSENT OF JOHN A. CRISCUOLA, CPA EXHIBIT 23.4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT As independent certified public accountant, I hereby consent to the use of my report (and to all references to my Firm) included in or made a part of this registration statement. John A. Criscuola, CPA Port Jefferson Station, New York June 15, 1999 EX-23.5 16 CONSENT OF TURBES DREALAN KVILHAUG & CO.PA, CPA EXHIBIT 23.5 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this registration statement. Turbes Drealan Kvilhaug & Co. PA June 15, 1999 -----END PRIVACY-ENHANCED MESSAGE-----